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Energy Summary for May 26, 2016

2016-05-26 18:56 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for July delivery edged over $50 for the first time since October before settling at $49.48, down eight cents, on the New York Merc (all figures in this para U.S.). Brent for July crossed $50 for the first time since November before settling down 15 cents to $49.59. Western Canadian Select traded at a discount of $11.90 to WTI ($37.58), up from a discount of $12.00. Natural gas for June lost 2.9 cents to $1.963. The TSX energy index lost a fraction to close at 188.56.

Alberta producer Cardinal Energy Ltd. (CJ) added 13 cents to $9.80 on 1.78 million shares. Yesterday after the close, it announced a $50-million bought deal, which it boosted to $60.77-million this morning. It plans to sell 6.5 million shares at $9.65 each. The proceeds will be used to pay down debt, which will then be redrawn for various purposes, including drill programs at Bantry and Mitsue, two of Cardinal's three core areas (the other is Wainwright). The Mitsue is a fairly new core area; Cardinal entered it in October by buying assets from Penn West Petroleum Ltd. (PWT: $0.91) for $192-million. As for Bantry, Cardinal has been there since September, 2013, when it closed a $21.8-million acquisition of assets producing about 450 barrels of oil equivalent a day. It has since boosted its Bantry production to about 4,400 barrels a day, mainly through acquisitions, its preferred method of expansion in general. Including the above-mentioned Mitsue and Bantry buys, Cardinal has spent nearly $825-million since the fall of 2013 on assets producing nearly 13,000 barrels a day. This, not drilling, is the main reason why Cardinal's production was 14,245 barrels a day in the most recent quarter. If Cardinal wants to keep boosting production, it will have to buy more assets, according TD Securities analyst Aaron Bilkoski, who wrote a research note last week pointing out that Cardinal's wells are generally too low in productivity to make a real dent in output (three-quarters of them produce less than 10 barrels a day). The $60.77-million bought deal should certainly help support a shopping spree. Cardinal is well aware of that and says, not particularly eloquently, that the proceeds will allow it to be "opportunistic with potential acquisition opportunities."

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