MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, FEBRUARY 10, 1998 (2)
FEATURE STORY
Oil Price Fears
Dan Healing - Sun Media
If Alberta Treasurer Stockwell Day wants to improve his record as an oil price low-baller, he'll have to lower his assumptions, industry spokesmen say.
"We're just developing our view now, but it's clearly going to be lower than last year," said Judith Darkin, an economist for the Canadian Energy Research Institute.
"I've seen forecasts from $16.50 to $21 US for WTI (West Texas Intermediate crude oil). We're more toward the bottom of that."
Carol Crowfoot, energy economist for Gilbert Laustsen Jung Associates Ltd., said she pegged the 1998 oil price at $19 US in a December forecast -- but that's probably too high.
"It certainly so far is proving a lot weaker that I thought in December," she said. "There's more downside to the $19 than upside."
In his provincial budget Thursday, Day is expected to replace his department's current WTI price estimate of $19.43 US per barrel -- revised in November from $19 US in the budget a year ago -- and natural gas assumption of $1.70 per thousand cubic feet (mcf) --bumped from $1.55.
Each $1 US drop in the average annual oil price means $190 million less to the Alberta Treasury, officials say. A lower price could also affect the viability of $17.2-billion worth of energy projects proposed in Alberta.
Hibernia Completes Another Well, Off-loads Supertanker
St. Johns Evening Telegram
Hibernia has hit bottom on its third well, drilled to within 130 metres of target on a fourth and has successfully completed the inaugural off-loading of the 850,000-barrel supertanker Mattea, the largest vessel in Canada.
Ho-hum, another weekend at Canada's only producing offshore oil well.
After reaching a Canadian record production rate of 60,000 barrels a day last December - one month ahead of schedule - subsequent milestones have gone almost unnoticed.
The third production well, labelled B-16-3, reached its target depth of 4,157 metres late last week, on schedule to begin producing another 20,000 barrels a day by the end of the month.
The well hole is located almost four kilometres straight down, and 1,100 metres horizontally from the platform, spokesman Brian Crawley said Monday.
Well B-16-4 will also begin producing by the end of the month, Crawley said.
On Saturday night, the Mattea was successfully loaded with an estimated $1.4 million worth of crude and sent to refineries in the eastern U.S. It is the fourth tanker-load sold from Hibernia but the first for the Mattea. Others were shipped in its sister vessel, the Komatik.
Production from Hibernia's first two wells has levelled off to about 55,000 barrels per day, but should increase back to 60,000 when two injector wells are completed later this spring, Crawley said.
FEATURE STORY
Abacan Resources Says It's Near Partnership Deals
Ian McKinnon Financial Post
Abacan Resource Corp. is continuing its search for partners and it expects to announce one or two major deals within six weeks.
The Calgary-based junior, which reported a $45-million working capital deficiency last year, expects to conclude one or two joint ventures by the end of the first quarter, said Jim Harvie, vice-chairman and chief operating officer.
Abacan is negotiating with a number of multinational companies, primarily for four million acres it holds in the West African country of Benin.
"I think they're progressing at a nice pace," Harvie said. "When you're talking about a major joint venture it takes time, especially when it involves majors."
Terms are nearly set for a sale and leaseback arrangement for production facilities at its Ima field, off the coast of Nigeria. The deal will substantially improve the firm's financial position, Harvie said.
Production testing has begun on the Ima 9 well. It tested at 2,335 barrels per day of light oil and condensate in an upper zone and additional work at a lower level could boost daily volumes by several hundred barrels, he said.
The welI also tested a deeper target and encountered a high pressure zone that resulted in an underground blowout. The problem was controlled and the zone blocked off for safety.
Abacan said the deep zone, at almost 13,000 feet, found hydrocarbons but further drilling is needed to determine its commercial potential.
The firm is now drilling Ima 10. After securing equipment to handle the higher pressure, Ima 11 should begin drilling by early June to test the new zone, Harvie said.
"On balance we're quite excited about it because we believe we've encountered a new reservoir."
Positive drilling results and climbing production from the Ima field are encouraging, said Richard Oddy, an analyst at Pacific International Securities Inc. in Vancouver.
He said the firm disappointed the market when production from the Ima field came in lower than forecast.
"They seem to have gone back to where they should have been, to develop the field properly and get some cash flow," he said.
Abacan is also expected to name Tim Stephens as president and chief executive. Its former president, Wade Cherwayko, will become non-executive chairman.
According to a recent Ontario Securities Commission filing, Cherwayko sold 606,900 common shares on Dec. 11 at $1.89 each, leaving him with 689,214 shares.
FEATURE STORY
Drilling Forecast
The Korner
The Petroleum Services Association of Canada (PSAC) rcently revised their 1998 drilling forecast downward. PSAC anticipates drilling to be down 3.125% compared to 1977. In total, 16,000 wells is the current 1998 estimate compared to 16,500 in 1997 and 12,600 in 1996.
As evidenced by recent news releases of several large producers, the industry will see reduced spending in 1998. The current operating environment of low oil and natural gas prices, along with widening heavy oil differentials, are the major contributors to this situation.
With over 1 Bcf/d of new pipeline capacity expected by year end, the industry is anticipated to accelerate gas drilling in the 2nd half of the year. Crude oil prices are also expected to strengthen as we progress through the year. With this scenario, the 4th quarter of drilling activity may reach historic high levels. The year 1998 may not be shaping up to benefit the producers, but the drillers and service companies near term future appears bright. Increased profit margins can offset the decline in wells drilled. |
