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Energy Summary for June 24, 2016

2016-06-24 20:41 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for August delivery lost $2.47 to $47.64 on the New York Merc, while Brent for August lost $2.50 to $48.41 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.40 to WTI ($34.24), unchanged. Natural gas for July lost 3.6 cents to $2.662. The TSX energy index lost 6.01 points to close at 184.53.

Global markets reeled from British voters' surprise decision to leave the European Union. Though the race had been close, polls had generally predicted a win for the Remain side. The financial markets did not expect "Brexit" any more than the polls did, leading to steep corrections today in equity and currency trading. The race to safe havens like the U.S. dollar took a toll on commodities such as oil; a rising U.S. dollar makes dollar-priced commodities more expensive in other currencies and thus blunts demand for them.

Heavy oil producer Twin Butte Energy Ltd. (TBE) lost one cent to five cents on 15.5 million shares, after proposing an unpopular solution to its financial woes. The solution's name is Reignwood Resources, which is linked to China's Reignwood Group. Reignwood is offering six cents for each of Twin Butte's shares and an astounding 14 cents on the dollar for its debentures. That means over $21-million will go to shareholders and less than $12-million will go to debentureholders. The face value of the debentures is $85-million, making up a significant percentage of Twin Butte's total net debt of $294-million, most of the rest of which is about $209-million drawn on credit facilities. For weeks now the company's lenders have been extending the facilities' expiry dates (sometimes by just one day at a time) in order to give Twin Butte more time to complete its nearly seven-month-old "strategic review," meaning its hunt for a suitor. Now it has a suitor, but investors are not at all happy. A six-cent offer is a poor outcome for a stock that four years ago traded above $3. It also means that only those shareholders who bought within the last two weeks or so have any chance of making money. As for debentureholders, they must feel that shareholders should not get any money, and certainly not twice the money that debentureholders are getting. Twin Butte's board says it has unanimously determined that the offer is fair to both shareholders and debentureholders. It may be worth noting at this point that the seven members of Twin Butte's board own 9.25 million shares and absolutely no debentures. Management members also own plenty of shares and virtually no debentures (one of them does control $720 in debentures, according to SEDI). The management members will also be fortunate enough to keep their jobs following the takeover.

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