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Energy Summary for June 16, 2017

2017-06-16 20:09 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for July delivery added 28 cents to $44.74 on the New York Merc, while Brent for August added 45 cents to $47.37 (all figures in this para U.S.). Western Canadian Select traded at a discount of $10.35 to WTI ($34.39), unchanged. Natural gas for July lost two cents to $3.04. The TSX energy index added 1.58 points to close at 175.49.

Cenovus Energy Inc. (CVE) added four cents to $10.51 on 12.4 million shares, after falling below $10.50 yesterday for the first time ever. A mere 11 weeks ago, it was trading at nearly $17.50. It has slid almost non-stop since announcing its $17.7-billion asset acquisition from ConocoPhillips in late March. Management will try to reverse the slide at an investor day to be held in Toronto this Tuesday, June 20.

Canaccord Genuity analyst Dennis Fong has been peering into his crystal ball to see what Tuesday might bring. "All eyes on the Deep basin," he declared in a research note yesterday, referring to the assets that have caused the most consternation among investors. Of the 290,000 barrels of oil equivalent a day bought from ConocoPhillips, over one-third comes from conventional assets in the Deep basin of Alberta and British Columbia, representing new territory for Cenovus. (The rest of the production is from familiar ground in the oil sands.) Mr. Fong predicted that Cenovus will spend much of Tuesday touting the Deep basin's "upside potential." He obligingly provided a head start: According to his research, wells that offset Cenovus's new Deep basin assets have shown production rates that are a full 60 per cent higher than the models provided by Cenovus at the time of the acquisition. "We believe the company may look at showing the upside potential from offsetting producers," wrote Mr. Fong. Of course, Cenovus has already given some indication of its hopes for the Deep basin assets -- for example, when it announced the acquisition, it forecast a 40-per-cent production increase from these assets over two years -- and investors were unmoved.

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