34 cents | Market Cap $146 million
Questerre (QEC, TSX) is a stock to keep an eye on during the coming week for an attractive entry point on a short-term correction that appears to be underway. Support should be strong in the upper 20’s, key resistance in late 2020 and early 2021.
Do you find it weird how Quebec is considered a “go” for exploration and metals mining but a “no go” for Oil and Natural Gas? In established mining camps, at least, Quebec is considered a top/safe jurisdiction. Are we expecting that mining-friendly sentiment to continue for some years to come? I think so. And we’ve been smartly speculating as such. Murchison (MUR, TSX-V) and Stelmine(STH, TSX-V) being 2 recent examples, among others. Amex Exploration (AMX, TSX-V), which was a 10-bagger for us in 2019/2020, just announced a $43 million bought deal with no warrants.
Oil and Gas are different. Quebec is sitting on 1 of North America’s Top 10 largest untapped Gas reserves. Questerre owns it – the giant Utica shale play, St. Lawrence Lowlands.
Upon Questerre discovering it last decade (with hope that Gas would be produced there), QEC was a 10–20 bagger, trading up to nearly $5.
Since then then Oil and Gas prices have boomed and busted. Now prices are booming again. The 1 constant has been government resistance to developing the Utica. Canadians should be outraged at this incredible stupidity which undermines our energy independence.
Why would someone speculate on QEC now?
Speculation has increased as per how much it will cost for Quebec to pay off Questerre. I think it’s common knowledge they’ve been working toward picking a number.
Maybe some numbers are floating around because between December and January QEC went from 15 to 45 cents, big volume (even bigger volume in Norway where Questerre is also listed).
So there’s a legal/arbitration aspect as it relates to near-term catalysts for Questerre. Will there be a payoff? When? And how much?
As of today I’m thinking the payoff/buyout/go away price to NOT DEVELOP (Utica) 1 of the Top 10 largest Gas reserves in North America went up!
Why’s that you ask?
Because Questerre just signed a joint economic development agreement with The Council of the First Nation of the Abenakis of Wolinak in Quebec.
Interpret that information as you wish.
To me it sounds like an interesting twist to the story (last minute?). Varying interests of environmental groups might now be running headfirst into those of the Abenakis of Wolinak. In between might be whatever political interests are catering for 1 or both sides.
Not only is Quebec (and Canada for that matter) undermining its energy independence – it’s also undermining economic opportunities for First Nations!
Almost like a legal clash of the titans – interests of government, Questerre, environmentalists, and First Nations all coming to a head.
Keep in mind that Natural Gas is a “clean and relatively green” energy source, but there’s a constituency in Quebec (and elsewhere in Canada) that doesn’t seem to grasp this.
23 Trillion cubic feet of Gas.
Utica is 1 of the 10 largest in North America.
Questerre also has a strong legal argument (plus technology proving it?) a “circular economy” can be built around their significant discovery with zero or near-zero net emissions. They also hold exclusive rights to permanently store carbon dioxide.
So Utica’s the big prize and flagship for Questerre. Volume and price are suggesting some big development(s) are about to happen and/or have happened. Toward an ultimate payoff for Utica or a cleaner more palatable path of development.
Underpinning Utica and this legal back-and-forth Questerre actually generates positive cash flow from Oil and Gas operations in Alberta (Montney). Additionally Questerre has Oil and Gas holdings in Saskatchewan, the state of Utah, and the Kingdom of Jordan.
The Globe and Mail reports in its Friday edition that Questerre Energy has struck an economic development pact with an indigenous group in Quebec to develop a zero-emissions natural gas hub on traditional first nations territory, a move that kicks against Quebec’s ban on any future Oil and Gas development. The Globe’s Nicolas Van Praet writes that Questerrehas signed a preliminary agreement with the Council of the Abenakis of Wolinak focused on developing what it called a “net-zero emissions energy hub” in the Becancour region, Calgary-based Questerre said in a news release Thursday. The effort will centre on several pilot projects that produce clean energy, including Natural Gas. The Abenakis will be given a share in profits from the development on their land, and they will also have an opportunity to acquire a working interest in Questerre’s exploration licences and participate in future development. The deal is a potentially prickly one for Quebec Premier Francois Legault because it flies in the face of the province’s official position on Oil and Gas exploration and extraction. Mr. Legault and his government have been working on how best to compensate the companies holding 180active exploration permits.
“This is setting up an interesting showdown with the government,” Questerre Chief Executive Michael Binnion said in an interview, adding that the Abenakis of Wolinak have a long history in Quebec that predates the arrival of French colonists. “Our view is that they should let us go ahead.” Quebec has enough Natural Gas to meet its own needs for an estimated 100 years or more, most of it concentrated in the province’s portion of the Utica shale formation along the southern flank of the St. Lawrence River, including the Bécancour region. But it remains untapped after significant public opposition to early drilling efforts, forcing Quebec to buy its Gas from producers in Western Canada.
Bottom Line: A bargain basement price from (Quebec) Francois Legault would be close to $160 million, which is about what Questerre has invested into the St. Lawrence Lowlands Utica Shale Project to date. $146 million is about the market cap for QEC at 34 cents, Friday’s close. I believe there’s some legal precedent suggesting any buyout via government should be closer to “fair value”. With the Abenakis of Wolinak as development partner the odds of Questerre getting something closer to fair value just went up – fair value could be closer to $1 billion.
Or they move forward with the “net-zero emissions hub” and QEC gets re-rated at something closer to fair market value.