04:29:56 EDT Wed 24 Jul 2024
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Energy Summary for July 8, 2024

2024-07-08 18:51 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for August delivery lost 83 cents to $82.33 on the New York Merc, while Brent for September lost 79 cents to $85.75 (all figures in this para U.S.). Western Canadian Select traded at a discount of $14.80 to WTI, up from a discount of $14.90. Natural gas for August added five cents to $2.37. The TSX energy index added a fraction of a point to close at 283.61.

The bandwagon of U.S. energy megadeals trundled on. This morning, the NYSE-listed Devon Energy agreed to buy the Williston basin assets of the EnCap-backed Grayson Mill, in a cash-and-share deal worth $5-billion (U.S.). The deal adds to a sector-wide shopping spree that has seen over $200-billion (U.S.) in dealmaking since October. Devon, having reportedly tried but failed to acquire CrownRock and Enerplus (which opted for Occidental and Chord Energy, respectively), is surely pleased to have finally nailed a target.

The target is not going down cheaply. In January, when rumours swirled that EnCap wanted to cash out of Grayson Mill at a proposed valuation of $5-billion (U.S.), analysts viewed this a steep price tag, reckoning that fair value was around $3.5-billion (U.S.) to $4.5-billion (U.S.). The range reflected uncertainty about Grayson Mill's production. The company got its start in the Bakken by buying $900-million (U.S.) worth of assets from Norway's Equinor in 2021, followed by a $825-million (U.S.) acquisition from Ovintiv Inc. (OVV: $63.72) in 2023, which brought in a collective 85,000 barrels of oil equivalent a day. The assumption of analysts in January was that Grayson Mill's output was somewhere between 80,000 and 100,000 barrels a day. Today's announcement confirmed the figure at "approximately 100,000." Evidently, it also confirmed that EnCap was holding fast to its $5-billion (U.S.) price tag, take it or leave it.

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