Donnycreek Energy (DCK:TSXV) was one of a handful of high-flying TSX Venture-listed oil and gas companies that had been outperforming the market, until recently.
Donnycreek has been on an epic run over the last two years – rising from below $0.50 cents to a high above $3 per share. The stock had recently increased exactly 100% from its 2013 low of $1.60 as it appeared to have timed the natural gas sector revival almost perfectly.
Its assets fall in the Deep Basin area of west-central Alberta, famous for its liquid natural gas which has produced a number of company making discoveries in recent years. After hitting $3.20 per share in mid-February Donnycreek’s stock, along with natural gas prices, has been tanking and many are wondering if the bottom is within sight.
The downtrend in the stock began days after topping out at $3.20 and looks bearish from a technical standpoint, having dropped below its 50 and 100 day moving averages.
Investors should gain confidence in the fact that one legendary oil and gas investor is staying put. That investor is Clayton Riddell, President and CEO of Paramount Resources, an oil-tycoon based out of Calgary.
Alberta Oil Magazine reported that Clayton’s family of companies had a combined market cap in excess of $6 billion in 2013.
Clayton Riddell has been involved with Donnycreek for some time and didn’t mind paying up for shares in the company recently.
On March 10th Riddell picked up 123,100 shares at $2.20 – exactly $1 off the company’s recent 52-week high. He picked up another 3,400 shares between $2.14 and $2.20 for a grand total of 126,500 bought in the month of March.
The company was down 18% to a low of $1.83 per share today.
Donnycreek Energy – 3 Month Chart
On October 15th 2012, Treherne Resources Ltd., a private company controlled by Mr. Clayton H. Riddell, announced it had acquired ownership and control of 1,052,600 common shares of Donnycreek Energy Inc., issued on a “flow-through” basis, and Mr. Riddell personally acquired ownership and control of 1,562,500 common shares of Donnycreek.
The flow through was done at $1.90 per share, while the hard dollars were done at $1.60.
This purchase took Riddell’s ownership up to roughly 4.5 million shares or 11% of the company’s outstanding common shares.
On March 3rd the stock gave up 15% on heavy volume of 2.6 million shares traded. Investors hit the door in droves as close to 1,500 individual trades took place on the day.
After averaging between 200,000 and 300,000 shares traded per day in recent weeks, volume has spiked again as more than 2.4 million had traded on March 31st by 1 PM EST in Toronto.
Donnycreek put out a press release late Friday afternoon on March 28th, after market. 8:22 PM EST is not a typical time to release news for a public company. The press release was titled, Donnycreek Announces Second Quarter Results & Provides Kakwa and Wapiti Field Operations Update.
Below is an excerpt from the bottom of the press release:
“Potential Transportation Disruptions
Donnycreek produces natural gas that is delivered to the Cutbank River receipt point which the Company has been advised is expected to be affected by the National Energy Board’s order SG-N081-001-2014 issued on March 4, 2014 (the “Order”) to Nova Gas Transmission Ltd., a wholly owned subsidiary of TransCanada PipeLines Limited.
At this time, Donnycreek is unaware of volumes or timing of any disruption to its production. Future drilling and completion operations budgeted in fiscal 2014 are not anticipated to be affected as a result of the Order.”
Click here to read the entire press release from March 28th.
Natural Gas Prices
Natural gas prices have fallen from a 5-year high of $6.49 per million Btu – hit on February 24th. The May 14th contract for natural gas delivery was down 2.5% Monday to $4.37 per million Btu.
This winter saw natural gas inventories fall at the fastest rate since 1995, dropping by 2.92 trillion cubic feet from the end of October to 896 billion cubic feet by late March, according to data from the U.S. Energy Information Administration.
Wave after wave of violent, economically debilitating ‘polar vortex’ style winter storms will soon be coming to an end. This has investors betting natural gas inventories will be sufficiently replenished by next winter.
Falling natural gas prices have clearly added to downward pressure on Donnycreek Energy in recent weeks.
In the company’s most recent presentation, dated February 2014, current production of approximately 1,400 boe/day (49% condensate; 51% natural gas) was reported.
Donnycreek owns significant, contiguous land position of approximately 394 gross / 280 net sections of Montney lands, primarily focused in the greater Kakwa. Its main play and success has been derived from its Kakwa region.
