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Energy Summary for Jan. 23, 2020

2020-01-23 19:36 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for March delivery lost $1.15 to $55.59 on the New York Merc, while Brent for March lost $1.17 to $62.04 (all figures in this para U.S.). Western Canadian Select traded at a discount of $22.75 to WTI, up from a discount of $23.75. Natural gas for February added two cents to $1.93. The TSX energy index lost a fraction to close at 139.00.

Jeff Tonken's Alberta Montney gas producer, Birchcliff Energy Ltd. (BIR), plunged 26 cents to $1.79 on 21.7 million shares, dismaying investors with yet another uncomfortably high budget. The company announced that it will spend $340-million to $360-million this year. By comparison, the preliminary 2020 budget that it released in November was just $250-million to $350-million. Investors were not much impressed with the November numbers either, despite Birchcliff's insistence that they would be equal to or below its (self-calculated) cash flow. Shareholders sent the stock down to $2.18 from $2.23. For Birchcliff, the pattern has become a familiar one. It goes back to August, when it hiked its 2019 budget by $38-million -- sending its stock below $2 for what was, at that point, the first time in its 14-year history. The company claimed that it would still be spending within its means, but this is true only as long as "spending" does not include dividends or any other outlays beyond exploration and development. (Birchcliff pays dividends on its common and preferred shares. The common share dividend is 2.625 cents quarterly, for a yield of 5.9 per cent.) Using this method allows Birchcliff to claim that it enjoyed $54-million in free cash flow in the first nine months of 2019. If one adds up the total expenditures over this period, however, they surpassed cash flow by over $15-million.

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