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Energy Summary for Dec. 22, 2014

2014-12-22 20:03 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for February delivery, the benchmark in North America, lost $1.26 to $55.26 on the New York Merc (all figures in this para U.S.), after Saudi Arabia's oil minister said bluntly that OPEC will not cut production whatever the oil price. Brent for February, the international benchmark, lost $1.27 to $60.11. Western Canadian Select, Canada's heavy oil benchmark, traded at a discount of $15.95 to WTI ($39.31), up from a discount of $16.25. Natural gas for January, the international benchmark, lost 32 cents to $3.14, its lowest level since January, 2013. Unseasonably warm December weather has allowed stockpiles to recover to where they were last year. Traders have taken that as a cue to sell, even though the forecast calls for a colder-than-normal January and February. The TSX energy index lost 4.14 points to close at 222.16.

Alex Verge's Journey Energy Inc. (JOY), down 12 cents to $5.02, and Craig Hansen's Zargon Oil & Gas Ltd. (ZAR), down 26 cents to $3.40, have become the latest energy companies to chop both their dividends and their 2015 budgets. Journey had an unlucky start on the TSX. It closed its IPO on June 19, just three days after the TSX energy index hit its highest level in over three years. Investors who bought at the IPO price of $12 are not pleased. President and CEO Verge has remained confident, buying over 361,000 shares since mid-September, including 131,400 this month. He now holds nearly 2.3 million of Journey's 43.3 million shares. This support, along with a boosterish conference presentation by Mr. Verge in mid-November, helped send the stock back to $7.99 on Nov. 25 from a low of $7.07 on Nov. 17, but the rally did not last. Mr. Verge said during his presentation that the six-cent monthly dividend took up 21 per cent of cash flow. The goal in 2015 was for it to take up 20 to 25 per cent of cash flow. That is not doable anymore, so Journey has slashed the payout to 2.5 cents, for a yield of 5.9 per cent. It has also lowered its 2015 budget to $70-million from $90-million. The 2015 production target, which was 11,200 to 11,500 barrels of oil equivalent a day, is now 11,000 to 11,300 barrels a day, all from low-decline assets in Alberta. These are currently producing 11,000 to 11,300 barrels a day, says Journey. The lack of a specific number suggests that the company will be at the low end, or will miss, its fourth quarter 2014 target of 11,200 to 11,400 barrels a day.

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