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Energy Summary for Aug. 20, 2014

2014-08-20 20:01 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for September delivery added $1.59 to $96.07 on the New York Merc, while Brent for October added 72 cents to $102.28 (all figures in this para U.S.). Western Canadian Select traded at a discount of $18.40 to WTI ($77.67), down from a discount of $18.30. Natural gas for September lost 5.4 cents to $3.82. The TSX energy index added 2.21 points to close at 317.73.

Mickey Dunn's Bellatrix Exploration Ltd. (BXE) lost 21 cents to $8.52 on 4.17 million shares. As mentioned in yesterday's Energy Summary, the stock added $1.23 over the previous two trading days thanks mainly to Orange Capital, a New York-based activist hedge fund that has just acquired over 10 million of Bellatrix's 191 million shares. Orange wants Bellatrix to arrange a sale, joint venture or initial public offering of its mid-stream assets, the jewel of which is a gas plant that should be able to process 110 million cubic feet a day when it opens in July, 2015, and 220 million after an expansion in 2016. Investors hoped for a reaction to Orange during chief operating officer Brent Eshleman's presentation this morning at the EnerCom Oil & Gas Conference in Denver, Colo. He had none. He did talk a lot about the gas plant, ticking off the various positive effects it should have. First, it will ease production constraints. Bellatrix is currently producing over 42,000 barrels of oil equivalent a day, but has over 7,500 barrels a day behind pipe because the third party plants it uses are full. As well, those plants are a few decades old and do not have much liquids-handling capacity. They recover about 45 million barrels of liquids per million cubic feet of gas. Bellatrix's plant will be able to recover 87 barrels per million. Assuming Bellatrix puts 60 per cent of its production through its own plant, calculated Mr. Eshleman, it will get an extra 5,200 barrels a day of liquids, working out to $75-million a year. As well, processing costs will be two-thirds lower when Bellatrix uses its own plant, saving $25-million a year. The plant will cost about $200-million to build. Mr. Eshleman also noted that once the plant is built, Bellatrix plans to expand its joint ventures, of which it has three in its core Cardium and Notikewin/Fahler plays in Alberta. All the parties in those joint ventures are asking for new deals, but Bellatrix wants to hold them off until the infrastructure problems are resolved.

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