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Energy Summary for Sept. 26, 2016

2016-09-26 19:50 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for November delivery added $1.14 to $45.62 on the New York Merc, while Brent for November added 90 cents to $46.97 (all figures in this para U.S.). Western Canadian Select traded at a discount of $14.35 to WTI ($30.13), unchanged. Natural gas for October added five cents to $3.01. The TSX energy index lost a fraction to close at 189.05.

Clay Riddell's Paramount Resources Ltd. (POU) added 75 cents to $14.89 on 1.04 million shares, more than regaining the 43 cents it lost on Friday after deciding to put a fresh $735-million in the bank. The money is coming from the sale of 24.7 million of the 33.5 million shares of Seven Generations Energy Ltd. (VII: $30.30). The shares were acquired last month, when Paramount sold its Musreau/Kakwa assets in the Alberta Montney to Seven Generations for $500-million cash, about $1-billion in shares and the assumption of $600-million in debt. Paramount is wasting no time applying the proceeds of this "transformational event" to its new core area in the Alberta Montney, Karr/Gold Creek. This area was producing 4,700 barrels of oil equivalent a day as of July. Earlier this month, president and chief executive officer Jim Riddell told an industry conference in Toronto that Paramount is aiming to quintuple this production to 25,000 barrels a day by mid-2017, and recently began a 20- to 25-well program with that goal in mind. An update on the program was provided on Friday. For one thing, the program now calls firmly for 25 wells, and for another, the first well has been completed. The well flowed at seven million cubic feet of gas a day, with a condensate-to-gas ratio of 184 barrels per million cubic feet, over its first two weeks. For perspective, the Karr/Gold Creek well model provided on Paramount's website forecasts production of 6.2 million cubic feet a day, with 135 barrels per million cubic feet, over the first 30 days. Neighbouring producers such as NuVista Energy Ltd. (NVA: $6.42) have enjoyed similar or superior results, and Paramount is no doubt expecting improvements as it continues its program, which it expects to complete over the next nine to 12 months. Beyond that, it has provided almost no guidance for 2017. Analysts have their predictions anyway. Scotia Capital analyst Cameron Bean, in a research note after the close on Friday, forecast that Paramount will spend $300-million and produce 20,800 barrels of oil equivalent a day in 2017 (compared with about 10,500 barrels a day currently). This could change if Paramount pursues acquisitions; Mr. Bean sees the company as "well positioned to potentially add to its asset base." He boosted his price target on the stock to $18 from $16 and kept his rating at "sector outperform."

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