MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING THURSDAY APRIL 23, 1998 (5)
TOP STORIES, Con't
Noranda Outlook Uncertain After Weak First Quarter
Reuters
Noranda Inc. Chief Executive David Kerr said on Thursday the short term outlook for the natural resources conglomerate would be mixed if world metal prices remained subdued.
Low prices for forest products, base metals and oil and gas all contributed to a lower operating profit for the Toronto based company in the first quarter after an extraordinary one-time gain.
With the recent reorganization of Noranda as a heavily weighted mining concern, the company will now be even more dependent upon a rebound in metal prices.
Noranda recently decided to spin off its majority stake in pulp and paper producer Noranda Forest Inc. and oil and gas subsidiary Canadian Hunter Exploration Ltd. to Noranda shareholders.
"All in all, 1998 is likely to be a mixed year for Noranda," Kerr told shareholders at the company's annual meeting in Toronto.
"In areas that can be managed by us, I can tell you we are on the right track to improve results. However, metal prices will be an important factor in determining our bottom line," said Kerr, who added the outlook for metal prices was unclear.
The Toronto based company said earlier on Thursday that it earned C$610 million, or C$2.54 a share, in the first quarter ended March 31, 1998, a profit that included a one time gain of C$583 million on the recent sale of Noranda's stake in Norcen Energy Resources Ltd.
Excluding the gain, Noranda earned C$27 million, or C$0.09 a share, in the quarter, compared with a profit of C$59 million, or C$0.22 a share, in the same period last year.
Cash-heavy Noranda, however, is somewhat more shielded from weak metal prices than many of its competitors.
The company's war chest has ballooned to almost C$2.3 billion on the recent sale of Norcen, most of which will be reinvested in the company's mining business, Kerr said.
U.S. Oil, Natural Gas Well Drilling Up 13 pct in Q1
The number of U.S. completed wells drilled in search of oil and natural gas totaled 7,059 during the first quarter, up 13 percent or 804 wells, from the same period a year ago, the American Petroleum Institute said Thursday.
Natural gas well completions jumped 23 percent to 3,169, oil wells increased 10 percent to 2,661 and dry holes were down 2 percent at 1,228, the API said in its latest quarterly drilling statistics report.
''These increases in completions reflect the fact that drilling rig activity last year was up 21 percent from 1996,'' the API said.
Separately, the amount of well footage drilled during the quarter increased by 4 million feet, or 12 percent, from last year to 38.4 million feet, according to the trade group.
NARO Hits Report Lauding Cheap Oil; Warns of Implications For Trade Deficit, National Security
(reference yesterday's Top Stories)
'Saying the American economy will benefit over the long haul by falling crude oil prices, as noted in an analysis released yesterday by John S. Herold, Inc. out of Stamford, Connecticut, is akin to saying our future is better if it is in the hands of the unstable governments of the oil producing countries around the world,'' said James L. Stafford, president of the Ada, Oklahoma-based National Association of Royalty Owners (NARO).
''Comparing the price of a gallon of oil ($15.25) to a gallon of milk ($126) or a gallon of Budweiser ($342.72) is ludicrous and extremely misleading because the price of these items will never be controlled by a foreign country. In truth, this country would be better off if the price of oil was high enough to encourage domestic production and the price of milk was lower,'' Stafford pointed out.
''This ill-conceived report fails to note that more than half of our oil is imported,'' said Stafford. ''If the pump prices remain low and there is no help for marginal or 'stripper' well production in this country -- which provides the bulk of production in many states -- we could see oil imports jump to 60 or 70 percent, creating havoc with our trade deficit. At the same time, we would see many more of our nation's 500,000 marginal wells abandoned forever, threatening our national security in times of crisis. The result could quickly become a complete dependence on violence-prone countries that could totally control our economy for years to come.''
Stafford said, ''Those who take the advice of the Herold analysis and 'fill up every tank available to take advantage of the situation,' may find that this is their last chance for cheap gas. As soon as we get hooked on cheap foreign oil, the producing countries can once again pull the rug out from under us just as they did in 1973 when we had short supplies and escalating prices and gridlock at the gasoline lines.
''The better alternative is to support measures, such as the effort here in Oklahoma through tax incentives, to preserve marginal and stripper wells which are the backbone of the oil and gas industry. In fact, nearly four out of five Oklahoma oil wells are marginal wells and nearly half of Oklahoma's gas wells are marginal.
''There is further economic fall-out in areas of the country dependent in part on royalty payments from these wells,'' Stafford said, pointing out that NARO serves as the voice of this nation's 4.5 million owners of private ro alty interests. ''While few royalty owners are fat cats -- most royalty checks are well under $200 per month -- when you add it all up, that money is a major shot in the arm for virtually every small town in the oil patch, paying local doctors, local grocers and local taxes plus supporting many endangered farms and ranch operations.
''We are playing economic roulette and studies, such as the one released yesterday by John S. Herold, look at the winners of a rigged wheel,'' Stafford concluded. ''If we continue to lose production to foreign interests, the comparisons with other commodities a year or two from now will show clearly the folly of our gambling addiction.
''The nation is playing economic roulette with a rigged wheel. Unless our addiction to cheap oil is broken, most of the nation's consumers will be hitchhiking home from the casino.''
NARO was founded in 1980 as a watchdog organization pledged to fight the Carter Administration's Windfall Profits Tax. Since then, the group has not only maintained Washington representation and statehouse watchdog activities in producing states, but also expanded into self help education and, through ties with colleges and universities, a far flung network of seminars.
Peoples Energy Invests In Oil/Gas Ventures
Reuters
Peoples Energy Corp. said Thursday that it will invest up to $30 million in a $91 million partnership to acquire to portfolio of U.S. and Canadian oil and gas producing properties.
The partnership is being formed by EnerVest Energy Investments. Other investors include affiliates of Koch Industries, Deutsche Morgan Grenfell, Pacific Life, Wells Fargo and EnerVest Management L.P.
Peoples Energy, which owns two natural gas utilities, also said in a statement it is purchasing a portfolio of six Gulf Coast oil and gas properties of KN Energy Inc. .
"Two of the properties are producing with proven reserves of 4.3 billion cubic feet equivalent. The other properties show promise for additional reserves through exploration," the company said in a statement.
Chairman and chief executive officer Richard Terry said that by investing in energy-related projects it was taking a step toward diversifying its income sources.
He noted the company hopes to achieve 25 percent of its earnings from nonregulated activities by the year 2002.
IN THE NEWS
Upton Resources Inc. (URC/TSE) announced its' successful first quarter, 1998 capital program which resulted in 14 successful wells of 15 drilled. Upton was 4 for 5 in exploration wells including three very promising light oil finds at Tracey Mountain, North Dakota; Sinkhole, Montana and Portal, Saskatchewan. Two development wells, in the Frobisher at Midale, Saskatchewan brought the success rate to nine for nine for this prospect.
Tracey Mountain, North Dakota
The company participated in Tracey Mountain 13X-2 with a 35.5% working
interest. After initial production rates of 250 barrels per day the well is expected to settle in at 150 to 200 barrels per day. The producing zone is the Fryburg which now makes Uptons' 10,000 acre land position prospective for both the Tyler and Fryburg formations. Upton plans to follow up this summer with both Tyler and Fryburg tests.
Sinkhole, Montana
The Krogedal #21-21 well was completed in the Nisku formation at initial production rates of 600 barrels per day and 330 mcf of gas per day. Current production is in excess of 500 barrels per day. A 3-D seismic program is planned to highgrade follow up locations. Upton has a 40.2% working interest in the well and 1680 acres prospective for further development.
Portal, Saskatchewan
Upton's discovery well at Portal 7-4 (100% working interest) is producing light oil at a rate of 9O to 100 barrels per day. The company has 2800 acres surrounding the discovery. A 3-D seismic program is underway and a second well is scheduled for early summer.
Midale, Saskatchewan
Upton completed two wells to bring the total producing wells to nine. Production is stable at over 400 barrels per day and the company has numerous drilling locations to follow up on. Upton will own this production 100% following the purchase of an additional 50% working interest scheduled to close in late April.
Success at these locations and an active development program at Wilmar, Cantal, Parkman and Gainsborough added 1.3 million barrels proved and probable reserves at a finding and development cost of approximately $7.00 per barrel. Development and stepout drilling at Portal, Tracey Mountain and Krogedal has potential to add significantly to Uptons reserve base and further reduce total finding and development costs for 1998.
Canadian 88 Energy Corp. (EEE/TSE) of Calgary, Alberta, announced a new natural gas discovery in the Lone Pine Creek area of Central Alberta. The Company said today in Calgary that it has successfully completed the drilling and testing of its L.S.D. 7 of Sec. 26, Twp. 30, Rge. 29 W4M Wabamun test well (100 percent Canadian 88). The well was drilled to a total vertical depth of 2,533 meters (8,317 feet) with an 1,193 meter (3,914 feet) horizontal leg drilled thereafter into the Wabamun formation. Extensive testing of the well indicates that the well should produce in excess of 9 mmcf/d of natural gas and 150 barrels/day of natural gas liquids. Construction operations are currently underway to tie the discovery into Canadian 88's 100 percent owned Olds/Crossfield plant.
In addition, Canadian 88 announces today that it is preparing to spud new pool wildcat well at L.S.D. 7 of Sec. 15, Twp. 37, Rge. 5 W5M in the Willesden Green area of West Central Alberta. The new deep pool test will be drilled into the Leduc formation to a total depth of 3,400 meters (11,155 feet). The well which is being drilled 100 percent by Canadian 88 in association with its Rocky Mountain Exploration (RMX) Fund is the first of a multi-well drilling program planned for the area by Canadian 88 targeting reserve accumulations of 20 to 50 Bcf/well. Canadian 88 has significant holdings in the area and successfully acquired Section 15-37-5 W5M at the April 15, 1998 Alberta Government Land Sale for a record price of $1.1 million for an average of $4,297 per hectare based on 110 square miles of high resolution 3-D seismic recently shot in the area by Canadian 88 Energy Corp., RMX and Western Geophysical Company.
Canadian 88 has budgeted $175 million of capital spending in Western Canada during 1998 alongside its $150 million Rocky Mountain Exploration (RMX) Fund focusing on deep foothills natural gas exploration and development.
Westfort Energy, Ltd. (WT/TSE), announced that the company has begun drilling its first 17,000 ft. Norphlet test. Thewell was spudded at 8:00 A.M. this date and will be drilled to a depth sufficient to set 80 ft. of 16'' conductor pipe. Nabors Drilling Company is scheduled to move its Rig No.544 to the prepared drill site location starting Monday, April 27th. It is estimated moving in and rigging up will take 3 to 5 days, with the next phase of drilling expected to start by Friday, May 1, 1998. Plans are to drill a 12-1/4'' hole to 5,100 ft. in order to set the next string of 9-5/8'' casing. Following that procedure, a 8-3/4'' hole will be drilled to the next casing point which has been picked at 15,700-800 ft. It is anticipated that the complete drilling process to 17,000 ft. will take an estimated 90 days. Progress reports will be forthcoming.
Anvil Resources Ltd. (ANV/ASE) announced drilling commenced at 5:00 am Central Standard April 21/98 on the natural gas prospect in Webb County, Texas. The initial test well will be drilled to a depth of 8,800 ft to test the Wilcox sands. Anvil has the right to earn a 75 percent working interest on two leases totaling 1126.9 acres by financing 100 percent of the drilling and completion costs.
Renco Resources (RNRS/CDN) announced successful completion of the first well drilled on the Renco 2 property in Oklahoma. The well was drilled and completed to the Wayside Formation to a depth of 560 feet, and is currently producing approximately 25 barrels of oil per day. The second well on the property, also drilled to the Wayside Formation, is undergoing completion and expected to be in production shortly. These wells are the first of a 12-well development program expected to be completed by July, 1998, and are the first new wells drilled and completed by the Company.
PanAtlas Energy Inc. (PA/TSE) updated their Meekwap 4-21 test results. The 4-21-66-15 W5M Meekwap D-2A Unit development well (news release April 8, 1998) has been producing since April 6, 1998. Over a 14 day test interval ending April 21, 1998 production from this well averaged 1,791 Boepd (313 Boepd net) consisting of 1,608 Bopd and 1.83 Mmcf/day. The well flowed water free oil throughout the test on a 28/64 inch choke with an average flowing tubing pressure of 1,091 Psi. Construction is in progress to tie this well into the existing Unit facilities.
The 4-21 discovery was positioned on the basis of 3-D seismic data. Several followup wells are being planned. The Unit operator has proposed the first follow-up location in the southeast quarter of section 20-66-15 W5M and expects to spud May 15, 1998, with approval of the Unit participants.
PanAtlas has a 16.73 percent working interest and an 0.87 percent net profits interest in the Meekwap D-2A Unit containing this well and follow-up locations.
Best Pacific Resources (BPG/ASE) looks forward to an active second quarter with eleven wells (net 4.2) budgeted for drilling, three existing wells (net 0.9) scheduled for re-completion and four wells (net 1.7) planned for tie-in. Wells scheduled for drilling include one exploration and seven low risk, low cost gas development wells in the
Company's Gadsby core area. In addition, the Company will be drilling a development location adjacent to its initial successful exploration gas well at Okotoks, an exploration well in the Shouldice area and a dual-leg horizontal oil well in the Weir Hill area of southeast Saskatchewan. Operational activities for the second quarter are comprised of the re-completion of three wells and the tie-in of two high working interest, high productivity Glauconite wells all in the Gadsby area. Two shut-in gas wells at Richdale and Turin are also expected to be brought on production this quarter. The expected incremental production to Best Pacific in the second quarter is 650 barrels of oil equivalent per day (boepd), comprised of approximately 70 percent natural gas.
In the first quarter of 1998, Best Pacific participated in four successful wells and one dry hole for total incremental production of 120 boepd. Two successful dual-leg horizontal oil wells in the Weir Hill area were placed on production in the first quarter while two successful gas wells at Cessford and Farrell Lake will come on production in the second quarter.
Commonwealth Energy Corp. announce by way of information received from Energas Resources Inc., the operator, that the drilling rig is now being moved onto the 2,100 acre Sapphire Prospect in Campbell County, Wyoming. The construction of the location has been completed and drilling of the Armstrong No. 1-21 well will begin as soon as the rig is assembled. The Sapphire Prospect offsets the 22 million barrel Buck Draw Field located in the Powder River Basin, Wyoming. Wells in the Buck Draw Field have produced at rates approaching 3,000 barrels of oil per day and 5 million cubic feet of gas per day. This initial test well on the Sapphire Prospect will be located approximately one mile from the nearest well in the Buck Draw Field and is designed to drill to a depth of 12,500 feet. The Corporation will own a 20% working interest in this prospect and will pay its proportionate costs out of existing funds. The Corporation expects it to take 16 days to reach total depth. Further announcements will be forthcoming.
The Corporation announced that location construction has begun on the Muddy Channel Prospect. The Muddy Channel Prospect consists of 3864.33 acres in Natrona County, Wyoming. Drilling of this prospect is planned to commence as soon as the Sapphire Prospect is completed. Commonwealth's participation will be a 15% working interest.
The Corporation plans to drill a new well, the Finley State No. 3 on their Rusty Creek Prospect in June, 1998. Commonwealth has a 15% working interest in this prospect.
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