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Energy Summary for June 16, 2016

2016-06-16 19:52 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for July delivery lost $1.80 to $46.21 on the New York Merc, while Brent for August lost $1.78 to $47.19 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.10 to WTI ($34.11), up from a discount of $12.20. Natural gas for July lost 1.5 cents to $2.58. The TSX energy index lost 2.13 points to close at 181.07.

Alberta oil producer Cardinal Energy Ltd. (CJ) lost 11 cents to $9.54 on 1.01 million shares, giving back some of the 23 cents it added yesterday after closing a $67-million bought deal of $9.35 shares. It now has 73 million shares outstanding. The proceeds will be used for drilling and to allow Cardinal to be "opportunistic with potential acquisition opportunities." But will those opportunities be opportune? Yes, says Scotia Capital analyst Patrick Bryden. He wrote this morning that the company is "positioned for growth" and will likely try to consolidate within its core areas. These are Bantry, Slave Lake and Wainwright, which together are producing about 14,300 barrels of oil equivalent a day. Most of that production came from acquisitions. In less than three years, Cardinal has spent nearly $825-million buying assets with production of about 13,000 barrels a day. Many of its wells are tricklers rather than gushers -- three-quarters of them produce less than 10 barrels a day, calculated a TD Securities analyst last month -- so acquisitions are a good way to bulk up. The bought deal provides a healthy chunk of change to pursue them. Cardinal also has room on its credit facility. It said yesterday that its lenders have completed their review of the facility and have left it unchanged at $150-million, though they have reduced the theoretical borrowing base to $250-million from $325-million. (Cardinal deliberately keeps its facility below the borrowing base in order to reduce standby fees. It can request a higher facility if it wants one.) The company figures that the facility will be just $25-million drawn following the bought deal.

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