The Syria effect
Also: could Lightstream Resources become a target of activist investors?
When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at email@example.com
by Max Fawcett
The world’s attention is focused squarely on what’s transpiring – or, more precisely, what may be about to transpire – in Syria. Not surprisingly, that’s having a knock-on effect on global crude prices. Alastair Newton, a senior political analyst with Nomura, noted that it could push Brent crude to levels it hasn’t seen in a while. “With Brent already at around $111 per barrel, this reinforces our existing view that perceived political risk in the MENA [Middle East-North Africa] region is likely to see a price move through [third- and fourth-quarter 2013] into the upper end of the $105–120 per barrel range where it has been for most of the past two-and-a-half years since civil war first broke out in Libya.” Notwithstanding the effect that action might have on the ongoing human tragedy in the region, it appears that it could be a positive short-term catalyst for Alberta energy stocks with exposure to Brent pricing like Bankers Petroleum (TSE:BNK) and Vermilion Energy (TSE:VET).
Those with exposure to Canadian natural gas prices, on the other hand, may be facing a more negative near-term pricing environment. As AltaCorp Capital pointed out in its daily note today, the latest data on Western Canadian natural gas storage levels show a marked uptick, surpassing both the five-year average and last year’s August figure. “Moderate weather, increased pipeline tolls, and over-production have aided in the build-up of storage. Natural gas prices have reflected this with AECO at US$2.40/mcf, a US$1.10 differential to Henry Hub. We believe prices are most likely to stay at these levels until a development in the natural gas story materializes.” Obviously, that could be bad news for gas-weighted producers in Alberta.
And Jim Byrne, an analyst with BMO Nesbitt Burns, thinks that Lightstream Resources (TSE:LTE) – formerly PetroBakken Energy – could be a target for an activist investor group. “With a long history of poor share price performance, it seems like an opportunity that activists typically look for,” he said in a note to clients on Monday. “We believe that without a shift in the company’s strategy, investor interest in the name will remain weak.” The company continues to stick to its guns, though, despite an over-leveraged balance sheet and a dividend that many analysts believe is simply too rich for it to continue paying out to investors.