MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING FRIDAY DECEMBER 19, 1997 (4)
INDEXES
The Toronto Stock Exchange 300 benchmark fell 0.9% or 59.60 to 6535.34.
In comparison, the Oil & Gas Composite Index fell 0.2% or 14.52 to 6484.83. Of the sub-components, the Integrated Oils reflected its strength once again, gaining 0.5% or 44.72 to 8935.75. The Oil & Gas Producers fell 0.2% or 8.60 to 5684.22 and the Oil & Gas Services took a deep hit, falling 3.4% or 102.34 to 2903.41.
For the week, the TSE 300 fell 1.6% or 106.55.
In comparison, the Oil & Gas Composite Index lost 1.5% or 99.99 points. Among the sub-components, the Intgrated Oils gained 0.6% or 57.40. The Oil & Gas Producers fell 2.0% or 114.43 and the Oil & Gas Services fell 5.3% or 163.72 points.
INDEX CHARTS
TSE 300.............. chart.canada-stockwatch.com
O&G Composite. chart.canada-stockwatch.com
Integrated Oil's.... chart.canada-stockwatch.com
O&G Producers.. chart.canada-stockwatch.com
O&G Services..... chart.canada-stockwatch.com
MARKET ACTIVITY
Petro-Canada, Black Sea Petroleum, Ranger Oil, Talisman Energy, Newport Petroleum, Renaissance Energy, Canadian 88 Energy, Canadian Occidental Petroleum and Elk Point Resources were among the top 50 most active traded issues on the TSE.
Tri Link Resources gained $1.50 to $20.25, Chauvco Resources $1.00 to $22.00, Suncor Energy $0.75 to $50.25 and Canrise Resources $0.55 to $5.75.
Percentage gainers included Tethys Energy 20.9% to $2.60, Black Sea Energy 14.3% to $2.00, Canrise Resources 10.6% to $5.75, Tri Link Resources 8.0% to $20.25, Upton Resources 7.0% to $3.80, Comstate Resources 5.7 % to $2.80, Richland Petroleum 4.9% to $4.25, Chauvco Resources 4.8% to $22.00 and Merit Energy 4.5% to $4.60.
On the downside, Startech Energy fell $0.85 to $11.15 and Seven Seas Petroleum $0.50 to $18.00.
Percentsge losers included TransGlobe Energy 16.7% to $1.00, Black Rock Venture 10.0% to $1.35, Optima Petroleum 8.6% to $1.60, Renata Resources 7.7% to $1.20, Startech Energy 7.1% to $11.15, Bow Valley Energy 6.7% to $1.40 and Encal Energy 6.4% to $4.40.
No new 52-week highs.
Black Sea Energy, Calibre Energy, Optima Petroleum, Pan East Petroleum, Tarragon Oil & Gas and TransGlobe Energy reached new 52-week lows.
In the service sector and also companies with close ties to the industry, none were listed among the top 50 most actice traded issues on the TSE, and none were listed among the top net and percentage gainers.
On the downside, Precision Drilling fell $2.20 to $31.75, Ensign Resource Service $1.00 to $32.50, Ryan Energy $0.90 to $10.10 and Canadian Fracmaster $0.70 to $19.00.
Percentage losers included Badger Daylighting 8.3% to $5.50, Ryan Energy 8.2% to $10.10 and Precision Drilling 6.5% to $31.75.
No new 52-week highs.
Anadime and Geophsical Micro reached new 52-week lows.
Over on the Alberta Stock Exchange, NTI Resources, Colt Energy, Ayrex Resources, Bearcat Exploration, Wild Horse Resources, Commonwealth Energy, Stellarton Energy, Red Sea Oil. Tessex Energy, Stampede Oils, Oilexco and Storm Energy were among the top 30 most active traded issues.
Oils and service companies were very active on the ASE, both on the upside and downside.
Rider Resources gained $0.50 to $4.50, Solid Resources $0.25 to $8.50, Underbalanced Drilling $0.25 to $2.75, Belfast Petroleum $0.20 to $2.80, Draig Energy $0.18 to $1.48, Clayoquot Resources $0.15 to $1.30, Syner-Seis Tech $0.15 to $2.40, Petro-Field Industries $0.15 to $0.30, Request Seismic $0.13 to $1.18, Newbridge Resources $0.12 to $0.50, Alberta oil & Gas $0.10 to $0.90, Global Link Int'l $0.10 to $1.30 and Pason Systems $0.10 to $6.40.
Percentage gainers included Petro-Field Industries 93.5% to $0.30, Newbridge Resources 31.6% to $0.50, Canop Worldwide 25.4% to $0.89, Tribute Resources 22.5% to $0.49, BXL Energy 18.0% to $0.59, Enterprise Development 16.7% to $0.35 and Draig Energy 13.8% to $1.48.
On the downside, Tier One Energy fell $0.50 to $2.75, Kensington Energy $0.40 to $1.10, Jett Investment $0.25 to $0.75, Blue Power Energy $0.21 to $0.29, Petro-Reef Resources $0.20 to $0.40, Golden Trend Petroleum $0.15 to $0.85, Red Sea Oil $0.15 to $2.40, Colony Energy $0.10 to $1.90, High Plains Energy $0.10 to $0.40, Diversity Corp $0.10 to $0.18, Niko Resources $0.10 to 44.45 and Tessex Energy $0.10 to $0.40.
Percentage losers included Blue Power Energy 42.0% to $0.29, Diversity Corp. 35.7% to $0.18, PetroReef Resources 33.35 to $0.40, Kensington Energy 26.7% to $1.10, Jett Investment 25.0% to $0.75, High Plains Energy 20.0% to $0.40, Tessex Energy 20.0% to $0.40, Kroes Energy 16.0% to $0.21, Para-Tech Energy 15.8% to $0.32, Tier One Energy 15.4% to $2.75, Golden Trend Petroleum 15.0% to $0.85, International Hydrocarbons 14.3% to $0.30, Bridgetown Energy 12.5% to $0.35, Carpatsky Petroleum 12.0% to $0.22 and Onward Energy 12.0% to $0.22.
Lodestar Energy reached a neew 52-week high.
Carpatsky Petroleum, Blackpool Exploration, Jett Investment and Signature Energy reached new 52-week lows.
KERM'S TOP 20 - SPEC 12 - SERV 7 COMPANIES IN THE NEWS
PETRO CANADA EYES EXPANSION eyes expansion. Despite growing unease in the oilpatch over a widening gap between the prices of light and heavy crude, Petro-Canada yesterday became the latest Calgary firm to consider expanding its holdings in the sector.
The company is looking at an oilsands development on a 22,300 hectare parcel of land in Northern Alberta in the MacKay River area, near Fort MacKay.
Petro-Canada, one of Canada's largest integrated oil and gas firms, also holds a 12% stake in the massive Syncrude Canada Ltd. plant at nearby Mildred Lake.
Syncrude is the largest producer of synthetic crude in the world -- turning out 240,000 barrels per day -- by mining and separating oil-laden bitumen, then refining it. Nearby, neighbor Suncor Energy Inc. of Calgary operates the world's second largest plant.
Petro-Canada's McKay River Oilsands Development is still in a very preliminary stage, said spokesman John Percic.
The company is in the midst of a winter drilling program on the property that will involve about 100 wells.
A decision on whether to go ahead on the project will likely be made when the program is completed, which is expected in the middle of next year.
"All we are doing right now is evaluating the economic viability of a project," said Percic. "We're drilling some holes and looking at the cores. No decision has been made. It's not a given," he added.
Unlike the Syncrude and Suncor plants, Petro-Canada -- if it decides to go ahead -- would employ an in-situ, or in-place, method of extracting the bitumen.
Percic said Petro-Canada would likely use the so-called Steam Assisted Gravity Drainage or SAGD method, which uses steam to soften the bitumen sufficiently to pump it to the surface.
No dollar value for the project was available, but if the project goes ahead, the plant's production will be about 20,000 barrels per day, said Percic.
Petro-Canada's plan comes to light a day after rival Suncor said it was expanding its heavy oil holdings in the Firebag area, which is east of Fort McMurray.
MORE ON SAME FROM LOCAL VIEWPOINT
Petro-Canada Working On In-Situ Project
Irene Thomas - Ft McMurray Today
Petro-Canada is in the preliminary stages of evaluating the commercial viability of an in-situ oilsands development north of Fort McMurray.
The oil and gas giant, which has a 12-per-cent interest in Syncrude Canada, has a 22,300-hectare oilsands lease southwest of Fort McKay. The company is in the middle of a 100-well winter drilling program on the lease. The core drilling and seismic work follows similar activity Petro-Canada conducted last winter. Petro-Canada spokesperson John Percic said once the drilling is completed, the company will know more about the future direction of the project.
"We don't have a full-scale project yet," he said. "All we are doing is some preliminary work and trying to scope out the economic viability of this project." A decision as to whether Petro-Canada will proceed with the McKay River Oil Sands Development will likely be made by the middle of next year, he added.
Decisions on infrastructure and the facility size will likely be made then. No dollar value for the project was available.
If the project is given the green light, Percic said the plant's production will be about 20,000 barrels per day.
The oil will be retrieved using a recovery system called steam assisted gravity drainage (SAGD). Surface mining techniques aren't an option because the bitumen is too located too deep. SAGD currently is being used north of Fort McMurray at the Underground Test Facility (UTF). Petro-Canada has been a participant in the UTF project since its inception in the late 1980s.
The process uses a pair of closed spaced horizontal wells first drilled into the reservoir. Steam is then injected into the upper well, causing the thick-tar like bitumen to loosen and flow with gravity down to the lower, producing well where it's pumped to the surface. A series of horizontal wells gather and then bring the heated oil to the surface where it's processed. Gulf Canada currently has an SAGD pilot plant 60 kilometres southeast of the city.
UPTON RESOURCES (URC -TSE) announced Friday that they have fulfilled all terms and conditions of the Asset Exchange Agreement with Berkley Petroleum Corp., Westminster Resources Ltd. and Paramount Resources Ltd. Effective October 1, 1997, Upton exchanged its RedRiver oil production and undeveloped rights below the Frobisher-Alida Beds in the Midale/Weyburn area for an increased interest in the
Frobisher-Alida Beds production, undeveloped lands and cash consideration of $25 million. Upton will be taking a $21 million after-tax write down in 1997, due to the current weakness in oil prices and the exchange of the Midale Assets.
Fueled by excellent November and December drilling results, Upton's current production ,volume, between 5600 and 5700 BOPD, is at its highest level ever. This is well ahead of targeted year end volume of 5100 BOPD. New development wells in the Frobisher Alida Beds at Midale, Star Valley and Cantal are all producing at rates better than forecast. A successful Nisku well at our Palomino prospect in Montana should be completed for production by year end in the 200-300 BOPD (50-75 BOPD net) range.
Drilling at Tracey Mountain, North Dakota (37.5%), Palmyra, Montana (50%) and Willmar, Saskatchewan (62.5%) is ongoing with results available early in the new year.
Upton's current 1998 forecast of 5500 BOPD average for 1998 includes 43 development wells and 15 to 20 exploration tests. Upton has not included exploration volumes in the average and is reviewing the forecast with respect to recent volume additions. The company will not be raising its forecast until production levels stabilize.
Upton also disclosed it has made available to all employees, one year interest free loans to a maximum of 15% of salary to purchase Upton's common stock on the market.
CARMANAH RESOURCES LTD. (CKM/TSE) announced it has secured a Cdn. $50 million credit facility with a major Canadian chartered bank and its merchant banking affiliate. Definitive term sheets have been executed and formal documentation will be completed during January, 1998. In the interim, a Cdn. $20 million bridge loan has been arranged with the chartered bank. The available funds will assist Carmanah in financing its previously announced Cdn. $84 million capital spending program on the development of the Camar and Langsa Fields in Indonesia and the Onado Field in Venezuela. The balance of the program will be funded from a portion of Carmanah's projected 1998 cash flow from a target production level averaging 9,400 BOPD in 1998.
Arrangement of the credit facility is a significant occurrence for Carmanah, as it provides required development capital with minimal equity dilution. It also provides new financial flexibility previously unavailable to the Company.
In addition to its aggressive development drilling and completion programs, during 1998 Carmanah will also operate and retain a significant carried equity interest in one and possibly two high potential exploratory wells on its Northeast Natuna PSC in Indonesia. The cost of these wells will be financed by a major international oil company pursuant to an Option/Farmout Agreement announced earlier this year.
KERM'S WATCHLIST COMPANIES IN THE NEWS
Sands' Sharholders Approve Issuance of New Series B Shares Pursuant to Sands/INTERNATIONAL PETROLEUM CORP. Offer; Drillstem Tests to Commence in Liby A Shortly
Sands Petroleum AB ("Sands") is announced that Shareholders approved, at an Extraordinary General Meeting held in Stockholm on December 18, 1997, proposals made by the Board to increase the authorized share capital and to issue Series B shares to shareholders of International Petroleum Corporation ("IPC") pursuant to Sands' offer to purchase all of the outstanding shares of IPC on the basis of one Series B share of Sands for every 1.15 shares of IPC. The maximum number of new Sands Series B shares to be issued is 37,650,000. The Board was granted authorization to issue additional shares of Sands Series B pursuant to the offer in order to carry through the compulsory purchase of remaining IPC shares. The acceptance period of the offer expires on December 23,1997.
In Libya, the exploration well, B1-NC177 on Block NC177 has reached total depth of 8,750 feet. Oil and gas shows, which have been confirmed by logging, have been obtained from three formations, Facha, Zelten and Beda. Preparations are now being carried out in order to conduct four drill stem tests which will commence shortly. Testing is expected to take approximately 20 days. Sands Petroleum AB has a 40 percent interest in Block NC177. Red Sea Oil Corporation has the remaining 60 percent and is the operator. Sands Petroleum AB owns approximately 8.5 percent of the outstanding shares of Red Sea Oil Corporation.
OTHER COMPANY BITS AND PIECES
For further detail of the below comments, check ou the news releases of this past week at the Korner.
NEWSTAR RESOURCES INC. (NASDAQ: NERIF and TSE/NER) announced that it has drilled 67 wells since May 1, 1997 of which 12 have been dry holes. Newstar anticipates that its 1997 exit production rate will exceed 5,000 BOED.
Production at the BLACKROCK VENTURE INC. (TSE: BVI) Steam Assisted Gravity Drainage (SAGD) bitumen pilot project near Cold Lake, Alberta, has averaged more than 450 barrels per day (bpd) during December, after averaging approximately 235 bpd during the month of November. "We are steadily approaching our target rate of 600 bpd," said Mr. David Crombie, Chairman, BlackRock Ventures Inc. "Although a month-long construction delay caused by an unusually damp spring put BlackRock off its original schedule, this fall's earlier than expected production has now put us ahead."
BlackRock' management is preparing for expansion of the project by adding two SAGD well pairs. Drilling is expected to commence in the first half of 1998. A modest expansion of the surface facilities will be required to facilitate production increases. The additional well pairs will provide further information regarding the uniformity of the Clearwater bitumen formation and may make the pilot project profitable.
PACIFIC TIGER ENERGY INC. (PTE/MSE) announced the production start-up of the Si Thep-1 well. After the first 17 hours of production, the well had produced 148 barrels of oil and four barrels of water. The Company anticipates that production will stabilize at a 'steady state' rate of 80 barrels of oil per day.
The commissioning of this well is the first of several operational measures aimed at rapidly boosting overall daily production from Pacific Tiger's SW1 Petroleum Concession. The concession covers 85 square kilometers and is located in the central plains area of onshore Thailand, approximately 250 miles north of Bangkok. Later this month, the Company intends to undertake the recompletion of the Na Sanun-1 well, which, according to Pacific Tiger geoscientists, could add an additional 150 to 200 barrels of oil per day. With the successful completion of this work, all three fields in the SW1 Concession will have become productive.
Early in 1998, the company expects to begin its exploitation drilling program in the Wichian Buri Field, where the Wichian Buri-1 well has produced over 200,000 barrels of oil. The Company's short-term objective is to raise production to around 1300 barrels per day.
INTERCAP RESOURCE MANAGEMENT CORP. (IRC/VSE) announced the start of crude oil production from the Kharir field in the East Shabwa permit, approximately 500 kilometres east of Sana'a in the Republic of Yemen. It is anticipated that gross production will increase to 20,000 barrels per day (2,350 net to Intercap) in January 1998.
Intercap's interest in the East Shabwa permit is held via a wholly owned group company's 41.25% shareholding in COMECO Petroleum, Inc. (COMECO). COMECO holds a 28.57% working interest in the project. Other participants include TOTAL Yemen, S.A. as operator with a 28.57% interest, Unocal Yemen, Ltd. also with a 28.57% interest and Kuwait Foreign Petroleum Exploration Co. with a 14.29% interest.
Oil production is scheduled to come from three commercial fields - Kharir, Atuf Northwest and Wadi Taribah - which were discovered in the East Shabwa permit. A second phase of development on the permit will be decided in late 1998, after accumulation of production statistics from the Kharir field and additional data are obtained on the reservoirs.
TETONKA DRILLING INC. (TSE/TDI) announced it has completed its initial public offering through Peters & Co. Ltd., as agent, of 7,894,737 Common Shares at CDN$1.90 per share providing to Tetonka net proceeds of approximately $13,800,000 after commissions, fees and other expenses of the offering. Trading in Tetonka's shares commenced today on The Toronto Stock Exchange under the symbol ''TDI''. The net proceeds from the offering will be used to reduce existing bank indebtedness and to finance the construction of additional drilling rigs.
ANALYSTS / RESEARCH
Nisker Associates' Buy & Sell
Value seen in good management
Toronto-based Nisker Associates Inc.'s chairman Neil Nisker and managing partner Bruce Campbell are finding opportunities in the Canadian equity market since its recent correction. "There are now a greater number of stocks trading at price-earnings multiples significantly below the companies' future earnings growth prospects," said Nisker. Nisker and Campbell are emphasizing undervalued stocks. The firm's strategy is to buy and hold stocks. Its approach is to buy into businesses, which dictates a careful assessment of management.
Among Campbell's stock picks is Poco Petroleums Ltd. (POC/TSE) $11.40 ($15.50-$10.50). The Calgary-based company explores for and develops crude oil and natural gas in Western Canada. "It has one of the best exposures to natural gas of the senior producers," said Campbell. The company has hedged 300 million cubic feet of gas at a price far higher than current prices. It has had good recent exploration and development success, which ensures above average cash flow growth. He estimates Poco will produce cash flow per share of $2.45 in 1997 and $2.80 in 1998. The one-year price target on the stock is $16.
Roche Securities Limited of Edmonton, Alberta has published a research report dated December 15, 1997. The report analyzes the operations of Master Downhole Canada Inc. and compares the Company to others in the industry as a whole. The report states "We recommend Master Downhole Canada Inc. Class A Common as a STRONG BUY . . . Our 12-month target for Master Downhole Canada Inc. Class A Common is $3.00." Copies of the report can be obtained from Master Downhole.
BADGER DAYLIGHTING (BAD/TSE - $5.50) has been recommended for medium to long term growth by Gordon Capital. With recent acquisitions, latest being Delta Oilfield Construction on October 23 for $23 million, Badger has become a vertically integrated industrial technology service company with significant growth potential over the next one to three years.
The company should earn $0.17 for 1997 and Gordan is forecasting $0.40 for 1998. 12 month price objective is $7.20 based upon a P/E multiple of 18X.
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