MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING THURS., JANUARY 8, 1998 (4)
KERM'S WATCHLIST COMPANIES IN THE NEWS
CANADIAN OCCIDENTAL PETROLEUM LTD. (CXY-TSE, ME,AMEX) announced today that its wholly owned subsidiary Canadian Petroleum Australia Limited has entered into an agreement with BHP Petroleum Ltd., a subsidiary of Broken Hill Proprietary Company Limited, to acquire a 50% interest in Block WA-260-P, located in the Bonaparte Basin off the northwest coast of Australia.
Several oil discoveries have been made in the Basin recently, including the Buffalo field on the newly acquired Block WA-260-P. Under the terms of the agreement, Canadian Petroleum will participate in the development of this field, which is estimated to contain approximately 25 million barrels of oil reserves. The Buffalo field was discovered in October 1996 and a successful delineation well was drilled in May 1997. Subject to approvals, a four-well development program is planned to commence in November 1998, with production start-up in 1999.
A number of exploration prospects in Middle Jurassic and Cretaceous horizons have been identified on Block WA-260-P from 2D and 3D seismic information. CanadianOxy will participate in six exploration wells, the first of which commenced drilling during the third week of December. BHP Petroleum is the operator of the block and the Buffalo field development project.
Commenting on the acquisition, Victor Zaleschuk, President and CEO said, ''Block WA-260-P is in a highly prospective area of the Australian Northwest Shelf. This area is part of the Eastern Indonesian Mesozoic play fairway, which has the potential for giant fields and where CanadianOxy has been exploring for three years. The fact that there is proven oil in the basin and we're participating in the development of a new field on the block greatly reduces both the exploration and financial risk of this project.''
OTHER COMPANIES IN THE NEWS
Nearly 75% of ORBIT OIL & GAS shares have been tendered under a $100-million takeover bid by Sunoma Energy Corp. Sunoma announced Thursday that 32.4 million Orbit shares - about 74 per cent of the company - have been tendered under Sunoma's takeover bid deadline late Wednesday.
Sunoma already owned a minority stake in the Calgary junior energy producer and reached a takeover deal Wednesday with Orbit's major shareholder and chief executive, Robert Lamond, after sweetening its bid. Last month, Sunoma Energy offered to buy Orbit for $1.77 a common share in a deal worth just under $100 million.
Sunoma first announced its hostile takeover bid for Orbit on Nov. 27, offering $1.70 for each Orbit share. At the time, Sunoma president Rick MacDermott noted the offer was significantly higher than the $1.10 a share offered for Orbit by Gulf Canada Resources two years ago, and represented a 23 per cent premium to Orbit's highest trading price in the previous 52 weeks.
Orbit produces about 40 million cubic feet of gas and 1,100 barrels of oil a day, about the same as Sunoma, a privately owned company also based in Calgary.
INTERACTION RESOURCES LTD. is pleased to announced that it has closed its previously announced acquisition of producing and non-producing oil and gas assets located in the Tangent and Cecil areas. The assets are located within Interaction's Peace River Arch focus area, and have extensive infrastructure, year-round access, multi-zone production potential and will become new core areas of operations for Interaction. These strategic acquisitions provide Interaction with a core land, seismic and facilities position that will allow its technical team to expand Interaction's production base effectively for many years to come. Interaction has identified numerous re-completion, exploitation and exploration drilling opportunities associated with these acquisitions which it will pursue throughout 1998. The purchase price for this acquisition was $10.6-million.
The assets acquired currently produce 250 boepd net (135 bbls/day of light oil and 1.2 mmcf/day of natural gas), which represents an immediate increase of 20 percent from Interaction's current production levels of approximately 1300 boepd. Production will increase by a further 350 boes/day in the second quarter of 1998 with the start-up of a new gas plant in which Interaction will have ownership, and into which capped gas wells will be tied-in. The assets include varying working interests in seventy-eight oil and gas wells, a working interest in two gas plants and associate gathering systems, and three oil batteries. Third party engineers have assigned net proven and probable oil and gas reserves of 1,688,700 boes (11.64 Bcf natural gas, 524,700 bbls oil and ngls) to this acquisition, which is a 40 percent increase in Interaction's total reserve base. The acquisition also includes an interest in 34,720 gross acres of land (15,700 net acres), of which 13,400 net acres are undeveloped. In addition, it will provide Interaction with access to more than 1000 kms of 2D and 150 km2 of 3D seismic data.
The Company has also issued, by way of private placement, 294,790 flow-through common shares at a price of $0.85 per share for total proceeds of $250,573. The proceeds will be used to assist in the funding of the Company's ongoing drilling program for 1998. The common shares are subject to a one-year hold period.
INTERNATIONAL ACTIVITY
COMPANY NOTES
British oil company Hunting Plc said on Friday it had bought Canadian oil and gas services company CHASE MANUFACTURING INC. for 4.7 million pounds in cash. Chase provides machine shop services and makes couplings for tabular goods used by the oil and gas industry in Calgary in Canada.
HURRICANE HYDROCARBONS LTD. a Calgary based company with extensive oil reserves and operations in the Republic of Kazakhstan, ended 1997 by successfully bringing the South Kumkol field into production. South Kumkol has estimated proven and probable reserves of 33 million barrels of oil. Three wells are currently producing at a rate totaling more than 5,000 barrels of oil per day (bopd). Four wells are in the process of being tied in and additional delineation wells will be drilled in 1998.
The company's production exit rate for 1997 was approximately 58,600 bopd. Hurricane targets a 1998 exit rate of 90,000 bopd with an average of 72,600 bopd. The domestic Kazakhstani selling price for crude remained firm in 1997 and the company expects the same in 1998.
The product sold in Kazakhstan is independent of world oil pricing.
Hurricane's fiscal year end has been changed from June 30 to December 31, starting December 31, 1997. The company's estimated capital budget for 1998 is US $169 million. The focus will be on field and infrastructure development to increase reserves and production with a continued commitment to occupational health and safety, and employee training.
Hurricane is an international exploration and development company focused on Kazakhstan, a resource rich country in Central Asia. Hurricane's oil reserves have been estimated at 389 million barrels by McDaniel & Associates Consultants Ltd., as at September 1, 1997.
COUNTRY NOTES
The COLUMBIA Cano Limon Pipeline has been repaired and is pumping oil. Repairs were completed to Colombia's crippled Cano Limon-Covenas pipeline and pumping restarted about 0100 local time/0600 GMT Thursday, sources at state-run oil company Ecopetrol said.
The pipeline, the second largest in Colombia, had been out of action since back-to-back rebel dynamite attacks Sunday and Wednesday. An Ecopetrol spokesman said the newly-repaired pipeline was currently pumping at a rate of 150,000 barrels per day.
The spokesman was unable to say what quantity of crude had been spilled in the two blasts, which were the first of the year.
Last year the Cuban-inspired National Liberation Army (ELN) blew upthe pipeline a record 66 times and twice forced Occidental Petroleum Corp (NYSE:OXY) to declare force majeure in the Cano Limon oil field it operates in northeast Arauca province.
Ecopetrol also declared force majeure on shipments twice last year.
Texaco is optimistic over SOUTH CHINA SEA oil prospects. Seismic tests have revealed numerous opportunities in an oil producing area of the South China Sea where a Sino-foreign consortium is operating, a senior Texaco Inc (NYSE:TX - news) executive said on Thursday.
The U.S. oil giant is one of three foreign partners in the CACT consortium that is 51 percent owned by the China National Offshore Oil Corp (CNOOC).
The other two partners are Italy's Agip SpA (AGIS.CN) and Chevron Corp (NYSE:CHV - news) of the United States.
Robert Black, Texaco's Senior Vice President, said the area in the mouth of the Pearl River was now producing around 100,000 barrels of oil per day. Oil started flowing in 1990.
In October last year, the consortium announced a new oil field had been discovered in the 16/08 block.
Black said surveys had identified ''numerous other smaller opportunities that could be tied in to existing infrastructure.''
''Our strategy and objective there is to keep the production level at about 100,000 barrels a day over the next few years and develop and explore the resources that are in the vicinity,'' he told Reuters.
''As existing fields begin to decline, then we can bring in another smaller field.''
EIA REPORT ON OMAN
An updated Country Analysis Brief on Oman is now available. To access this report, the World Wide Web address is: eia.doe.gov
Included in the report are estimates of 1997 energy and economic statistics, as well as an up-to-date analysis of Oman's energy industry, including information on Oman's plans to increase oil production and a graph depicting Omani oil production from 1986-1997.
PIPELINES
TRANSCANADA PIPELINES AIMS TO EXPAND EXPORTS TO U.S.
TransCanada PipeLines Ltd. outlined plans yesterday to expand its pipeline system to increase natural gas exports to the U.S.
The expansion would compete with the controversial Alliance pipeline project. The National Energy Board began hearings this week on whether to approve the $3.7-billion high-speed line from Western Canada to Chicago.
TCPL said it intends to file an application this winter with the NEB to seek approval to add more capacity in Saskatchewan and Manitoba.
The proposed TCPL expansion, which would link to Nova Corp.'s network within Alberta and with the proposed Viking-Voyageur pipeline in the U.S., would be completed by November 1999.
It's an attractive alternative to the Alliance plan, TCPL spokesman Gary Davis said yesterday. "We feel strongly we have a very good project. With all the issues facing Alliance, this is the system people are going to turn to, particularly if Alliance starts to stall out in the regulatory process."
TCPL would not comment on rumors it's in discussions to take over Nova, the petrochemicals and pipelines giant. Both companies are based in Calgary.
TCPL shares (TRP/TSE) closed at $32.50, up 50›. Nova's (NVA/TSE) closed at $13.85, up 10›.
The TCPL expansion, at a cost of $1 billion, replaces the TransVoyageur project that was proposed earlier. It offered participation to other companies, including producers.
"We found that companies, particularly producers, weren't interested in ownership," said Davis. "We came to the conclusion we could best accommodate service to Viking Voyageur through an expansion of the
existing system."
The TCPL expansion would have about the same capacity as Alliance -- 1.4 billion cubic feet daily.
Unlike Alliance, which would transport gas directly to the Chicago market, the TCPL-Viking-Voyageur line would serve markets along the way.
It's unlikely both systems will go ahead by the turn of the century.
Another pipeline, Foothills Pipe Lines Ltd., said this week there's not enough natural gas in Western Canada to support Alliance. Foothills is in the process of expanding its own facilities to transport natural gas to Chicago. The new capacity will come on stream in November.
ALLIANCE PIPELINE LTD. FACES EARLY CHALLENGE IN HEARINGS
Alliance Pipeline Ltd. finally returned to the National Energy Board yesterday armed with new information and renewed shipper support and it needed both right away.
The producer-motivated enterprise had to rely on its two primary pipeline partners to rescue the hearing from further delays when Alliance's list of shippers and their contracted capacities came under fire for lack of project specific supply information. The company had submitted the information in compliance with a Nov. 24 NEB ruling.
Environmentalist Mike Sawyer, president of the Rocky Mountain Ecosystem Coalition, said more than 30% of the shippers did not reveal the source of their supply and therefore did not satisfy the NEB order.
"How can we proceed to test the evidence when according to their own admission, no evidence exists?" he asked the board.
Sawyer's contention was backed by NOVA Gas Transmission Ltd., which also appealed for more detailed supply information.
Project specific gas supply should not be a dominant factor in determining approval, IPL Energy Inc. and Westcoast Energy Inc., who both admitted they did not have the required information, told the board in urging continuation of the hearing.
"IPL's position is that the National Energy Board should regard financial commitment to the pipeline as the strongest possible evidence that supply will be available to utilize IPL's contracted demand," Vice-President of Gas Transmission Brian Vaasjo said in an earlier statement to the board.
Westcoast, with an approximate 11% equity interest in the project and a firm commitment of 145 mmcf a day, said although the company did not have gas available at the moment, it does plan to fulfill its contractual obligations.
In its submission to the board, Westcoast also noted project specific supply information has not been a necessity to gaining approval in past facility applications and in this case the attempt to break a historical monopoly deserved special flexibility.
The Alliance pipeline, scheduled to travel from northeastern British Columbia and northwestern Alberta to the Midwest United States by November 1999, would be the first to breach NOVA's hold over Alberta.
While the three-member board agreed with IPL and Westcoast's appeal, Chairman Ken Vollman said the issue of adequate supply would remain a consideration throughout the hearing.
The Alliance list of 37 shippers, representing 98% of the proposed pipeline's capacity, provides a transportation commitment of 1.3 bcf per day |
