MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, FEBRUARY 18, 1998 (5)
KERMS TOP 21 - SPEC 15 - SERV 9 COMPANIES IN THE NEWS,
Alberta Energy Company Ltd. (AEC/TSE) reported record Cash Flow From Operations of $544.7 million in 1997, up 32 percent. Fully diluted Cash Flow Per Share was $4.67, up 22 percent. Cash Flow is the key financial performance indicator for the oil and gas industry.
The Company also reported 1997 Net Earnings of $200 million, or $1.73 on a fully diluted, per-share basis. Net Earnings this year include non-recurring items totaling $104 million, associated with the initial public offering of AEC Pipelines, L.P. and adjustments to the book value of the Company's pipelines and international exploration and production assets. The prior year's Net Earnings of $68 million also included a $15 million non-recurring gain related to the sale of the Company's Forest Products business.
''Excluding non-recurring items, AEC's Net Earnings in 1997 were $96 million, or 81 percent higher than the comparable $53 million in 1996,'' said Gwyn Morgan, President and Chief Executive Officer.
AEC's revenues, net of royalties, increased to $1.7 billion from $1.1billion.
''AEC has achieved record operating and financial performance while our capital programs have created growth in underlying asset value. In the last two years, AEC has invested more than $3 billion and our balance sheet ha remained very strong, giving the Company the muscle and flexibility to continue to pursue our broad range of investment opportunities at a time of weakening commodity prices,'' said Mr. Morgan.
AEC invested a total of $984 million during 1997, representing 181% of Cash Flow from Operations. Despite this significant investment program, the Company maintained its strong financial ratios, with long-term debt increasing less than $50 million. Net corporate debt-to-equity improved to 29:71. The exploration and production segment continued with a healthy 20:80 debt-to-equity ratio. The net debt-to-cash flow ratio of the exploration and production segment remained low at 1.1 times.
As well, with the successful closure of the Express project financing on February 6 1998, the Company extended the average term to maturity of its debt to 7.4 years. With over 75 percent of its debt at fixed rates, the Company is shielded from interest rate fluctuations and the average interest rate on borrowing is 6.7 percent.
$800 million capital program for 1998
''We expect natural gas prices to recover more rapidly than oil prices. Consequently, our growth thrust for 1998 and 1999 will be gas, gas and gas. Additional gas export pipeline capacity to the U.S. later this year will provide a continental energy market for Canadian gas producers. AEC's position as a major natural gas producer will help the Company benefit substantially from that recovery. We intend to invest half of our $800 million capital budget on natural gas exploration, production, storage and transportation to put us in the strongest possible position to respond to these new market opportunities,'' said Mr. Morgan. He added that AEC's cash flow rises $22 million for every ten-cent increase per thousand cubic feet in price, excluding additional revenues from expected 1999 sales growth.
Building Value for Growth
AEC earlier reported 1997 operating results which were highlighted by the following:
- Conventional Reserves additions of 1.2 trillion cubic feet equivalent, which is 28 percent of AEC's conventional reserve base and larger than the individual reserves base of the vast majority of companies in the Canadian oil and gas industry;
- Reserve additions replaced 1997 production by 362 percent, further extending the Company's Reserve Life Indices -- natural gas to 17 years and conventional liquids to 11 years;
- Drilling of 477 wells, with an average working interest of 82 percent and success rate of 89 percent;
- Land in Western Canada increased 1.9 million net acres, to total 6.1 million, third largest in Canada; plus 3.0 million internationally for a total 1997 year-end exploration land base of 9.1 million acres;
- Sales of produced gas of 575 million cubic feet per day (MMcf/d), and liquids of 58,940 barrels per day. Gas production was 588 MMcf/d, with 13 MMcf/d placed in storage;
- The AECO C Hub gas storage and trading facility achieved record throughput, and progress was made in developing California's first independent storage facility and trading Hub.
- The new Express oil pipeline was commissioned and AEC Pipelines completed the issuance of one of Canada's first pipeline limited partnerships.
Improving Cost Performance
The Company also achieved important cost performance improvements:
- Reducing conventional Exploration and Production general & administrative costs per barrel of oil equivalent by 33 percent;
- Reducing Finding and Development costs by 11 percent, on a proven and probable basis, to $5.81 per barrel of oil equivalent including land assembly costs of $1.54 per barrel of oil equivalent;
- These cost reductions were achieved at a time of industry wide increases in land, supply and service costs.
''In challenging times, relative strengths become more evident and more important. AEC's vision is to build a Company with a solid foundation of capable people and long-life reserves, and to be a leader in grassroots exploration. Our large, concentrated land and reserves base enable us to dominate in our operating areas. AEC will continue to own a large interest in Syncrude. We also have a unique growing midstream business. This vision is underpinned by a very solid balance sheet. As 1998 progresses, we believe the fundamental value, performance and growth potential will become even better recognized by investors,'' said Mr. Morgan.
Focused and growing, Alberta Energy Company Ltd. is one of Canada's largest oil and gas exploration and production companies. Profitable midstream investments in pipeline transportation, as well as natural gas storage and gas liquids processing provide an additional solid income base. AEC's current stock market value exceeds C$ 3.4 billion. Common Shares trade on the Toronto and Montreal Stock Exchanges (AEC) and the New York Stock Exchange (AOG).
Thunder Energy Inc. (THY - TSE) announced 1997 year end reserves as determined by its independent engineering consultants, Sproule Associates Limited.
Total additions for the year were 2.4 million barrels of oil and ngl's and 29.6 BCF of gas. Seventy eight percent of 1997 additions were achieved with the drill bit with the balance coming from acquisitions. On a barrel of oil equivalent basis 1997 year end reserves have increased 449 percent over 1996 reserves.
During the year Thunder drilled a total of 36 wells (16 net) resulting in 21 gas wells (9.2 net), 11 oil wells (5.2 net), 1 service well (0.5 net) and 3 dry holes (1.1 net). Seventeen of these wells were drilled in the fourth quarter.
Total capital expenditures in 1997 are estimated at $19.3 million. For the year Thunder's finding and development costs were $4.69 per BOE on a proven basis and $3.63 on a proven plus probable basis. Thunder's three year average finding and development costs are $4.80 per BOE and $3.77 per BOE on a proven and proven plus probable basis respectively.
For complete information with table data, see Message 3465234
Badger Daylighting Inc., (BAD/TSE) reported its audited financial results for the year ended November 30, 1997. Net income for the year ended November 30, 1997 was $2.2 million as compared to $0.6 million in 1996, an increase of 267%. Revenues for 1997 were $26.1 million, an increase of more than 400% over 1996. 1997 earnings per share increased by 70% over 1996 to $0.17.
Commenting on the results, Ken Rose, President and CEO of Badger remarked, ''We are pleased to report, for the second consecutive year, record revenues and earnings for Badger. During 1997, the operations of the Bomega division were successfully integrated and the Corporation achieved several growth milestones, including the acquisition of Hewlett Shoring Systems, Ltd., the acquisition of Delta Oilfield Construction (''Delta'') and the licensing of Baseline Technologies, Inc.'s Pipeline Information Control System. Badger is now well positioned to provide a fully integrated service to the pipeline and utility sectors. We expect net income to increase substantially in 1998 as Delta operations are integrated and Badger expands into pipeline integrity and repair services utilizing Baseline's software system. The consolidation of Badger's operations into one facility late in 1997 will further improve profit margins in 1998 by increasing efficiency and reducing overhead costs.''
Mr. Rose further commented, ''During 1997 we added 21 hydrovac units and 1 environmental unit to the fleet, bringing the total number of operating units to 42 as at November 30, 1997. Utilization rates for our operating units exceeded 74% for the year. All divisions are currently operating at full capacity.
Badger Daylighting Inc. is a Red Deer, Alberta based vertically integrated industrial technology company providing various services and equipment to the oil and gas, pipeline and utilities industries. The Corporation specializes in ''daylighting'' underground structures and trenching using a patented hydrovacing process that is safer than typical excavation systems. ''Daylighting'' is a term used in the industry to describe the removal of the soil cover to allow for visual observation of an underground structure. A hydrovac excavating system is one which simultaneously uses water under high pressure to remove soil cover and a vacuum system to suck up the debris. In addition to hydrovac services, Badger provides a complementary suite of products and services to its customers including small inch pipeline facilities and construction, pipeline anomaly locating, line locating, shoring, environmental services and designing and, manufacturing industrial equipment.
For full report with table data, see Message 3462814
Crestar Energy Inc. (CRS/ TSE & ME) announced that it has completed the issue of 5.25 million common shares at $22.25 per share, for aggregate gross proceeds of $116.8 million, to a syndicate co-led by RBC Dominion Securities Inc. and Nesbitt Burns Inc.
The net proceeds from the offering of common shares will be used initially to reduce Crestar's bank indebtedness until required for the Company's exploration and development activities in 1998.
Crestar Energy is a senior Canadian producer of crude oil, natural gas and natural gas liquids.
KERMS WATCHLIST OF COMPANIES IN THE NEWS
Rigel Energy Corporation (RJL/TSE) reported results for the twelve months and quarter ended December 31, 1997. The Corporation recorded substantial gains of 43 percent in cash flow and 18 percent in production during the fourth quarter over the previous three-month period. The Corporation successfully replaced in excess of 250 percent of its 1997 production, adding 29.4 million barrels of oil equivalent on a proved plus half-probable basis. Cash flow for the twelve months ended December 31, 1997 decreased by one percent compared to the previous year, primarily as a result of lower production, which was affected by asset sales late in 1996 and higher operating costs. A net loss of $23.9 million was reported for the year, due to a loss provision associated with an asset sale that will be closed subsequent to the 1997 year-end.
Commenting on the results, Don West, President and CEO of Rigel said, ''the past year resulted in major changes in the direction of the Corporation. We successfully established a production base in the UK with the asset acquisition at MacCulloch and have drilled the first of at least two appraisal wells as a follow-up to the potentially significant discovery in the Moray Firth (Blake) area made earlier in 1997. We also consolidated our position in our core area, the Peace River Arch, with an acquisition of producing properties at Sinclair. The Moose Mountain project is moving forward with the granting of the approval to build a 25-kilometre pipeline that will allow for an extended production test to determine development plans for the area. However, operating activities and short-term production objectives have not met expectations, and as a result, an extensive reorganization of the exploration and development function into business units was undertaken late in 1997. We believe that these independent units can better respondto the challenges and opportunities facing our Corporation and industry.''
Financial Review
Revenue, net of royalties, for the twelve months ended December 31, 1997 increased to $215.3 million from $211.9 recorded in 1996. Increased revenue from natural gas prices more than offset lower oil and natural gas production. Funds generated from operations decreased marginally to $133.0 million, or $2.36 per share, from $134.7 million, or $2.40 per share, reported the previous year. Strong demand for industry services during 1997 contributed to an increase of $7.2 million in operating costs over the twelve-month period in 1996 and represented a significant portion of the decline in cash flow. In the UK, costs associated with leasing production facilities for the MacCulloch field will continue to be reflected in higher average operating costs during 1998, but will decline over the production life of the field. The effect of these costs on the netbacks for UK oil production is mitigated by the absence of royalties on new production. Primarily as a result of asset sales in southwest Saskatchewan to be completed subsequent to year-end 1997, the Corporation recorded a net loss of $23.9 million, or $0.43 per share, compared to net income of $2.4 million, or $0.04 per share in 1996. The sale resulted in a one time pre-tax write down of $37.8 million. Proceeds of approximately $35 million will be applied to debt reduction in 1998.
Revenue, net of royalties, in the fourth quarter increased by 38 percent compared to the third quarter as a result of both oil and natural gas production gains and higher natural gas prices. Cash flow rose to $40.1 million versus $28.1 million during the third quarter -- a 43 percent improvement.
Operations Review
Exploration and Development
Capital expenditures, including acquisitions net of dispositions, during 1997 totaled $309.2 million compared to $349.5 million in 1996 including the Inverness corporate acquisition of $256.9 million. Exploration in the UK and the MacCulloch acquisition resulted in expenditures of $151.7 million, or nearly half of total 1997 expenditures.
During the period, the Corporation participated in the drilling of 167 wells (excluding nine service wells and seven stratigraphic tests), resulting in 49 oil wells and 52 gas wells. This total for 1997 compares to 188 wells drilled in 1996, of which 55 were cased for oil production and 54 wells for natural gas. Drilling in the fourth quarter totaled 46, which resulted in the casing of 34 wells for production. Based on proved and half-probable reserves, additions (net of revisions and dispositions) totaled 29.4 million barrels of oil equivalent, or 252 percent of 1997 production, at a finding and on-stream cost of $10.48 per barrel of oil equivalent.
The winter program in northern Alberta is targeting natural gas from a number of potentially significant Slave Point prospects and is expected to add to production during the second quarter. At Burmis, located in the Alberta foothills, a well targeting high deliverability natural gas is expected to reach total depth in March. Additional drilling is under consideration pending results from the initial well.
Approval has been received to build a pipeline connecting Moose Mountain to Jumping Pound that will allow extended production testing of two oil wells beginning in September. Construction will begin on critical crossings prior to breakup with completion of the 25-kilometre line in the summer. Initial test rates are expected to be approximately 1,900 barrels of total liquids per day.
Operations in the Acme area of south central Alberta continue to expand with first quarter production expected to reach approximately 1,300 barrels per day following the completion of recently drilled wells. At least eight new prospects generated from newly completed three-dimensional seismic are proposed for 1998. Construction of a central oil battery with initial capacity of 1,600 barrels per day will be completed in June.
In the UK, evaluation of the first appraisal well offsetting the discovery well 13/24b drilled last year in the Moray Firth has been completed. Information regarding the well will not be released at this time due to competitive reasons. Further appraisal drilling is expected during the first half of 1998. Approximately 90 kilometres east, Rigel is also participating in an additional prospect located in block 21/6b that began drilling in mid-February. The Corporation will earn a 30 percent interest in the prospect, which is estimated to take approximately 35 days to drill and evaluate. Three additional prospects will be drilled through the remainder of the year.
Production and Pricing
Crude oil and condensate production during 1997 totaled 15,463 barrels per day compared to 16,352 barrels per day during the previous year. Approximately 1,100 barrels per day of this decline is attributable to sales completed late in 1996. Prices received for crude oil and condensate averaged $25.27 per barrel for the period compared to $26.07 per barrel recorded in 1996. Crude oil hedging contributed approximately $0.14 per barrel to the price received during the twelve-month period. Production for the fourth quarter averaged 18,479 barrels per day, with the addition of sales from MacCulloch, at a price of $24.81 per barrel.
Natural gas sales to December 31, 1997 averaged 148.0 million cubic feet per day compared to 156.2 million cubic feet per day recorded for 1996. Production was adversely affected by the sale of 12 million cubic feet per day late in 1996. As a result of a 25 percent improvement in average natural gas prices to $2.03 per thousand cubic feet from $1.62 per thousand cubic feet the previous year, revenue from natural gas sales increased by 19 percent. The addition of Sinclair production in November helped boost fourth quarter over third quarter production by approximately 10 percent to average 157.5 million cubic feet per day at a price of $2.18 per thousand cubic feet.
Natural gas liquids production declined to 1,635 barrels per day compared to 1,877 barrels per day recorded in 1996. The average price increased marginally to $16.33 per barrel from $16.10 per barrel received in the previous year.
Outlook
World events, including the recent financial upheaval in Asia, continue to impact commodity prices, which emphasizes the need to establish long-term objectives able to withstand the volatility of unpredictable revenues. Two years ago, Rigel began initiatives to reallocate corporate resources to manage the changes shaping our business. To this end, Rigel achieved significant progress over the past year in establishing an operating base in the UK. That effort will continue in 1998 with expectations of a drilling program consisting of six to eight wells.
However, the necessity of maintaining a strong Canadian based operation is paramount in our efforts towards international expansion. With this resolve, Rigel has reenergized its focus on the Western Canadian Basin, and with an aggressive program planned for 1998, expects to deliver significant growth in the coming year.
For full report with table data, see Message 3462567 |
