MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, FEBRUARY 18, 1998 (6)
KERMS WATCHLIST OF COMPANIES IN THE NEWS, con't
Canrise Resources Ltd. (CRE/TSE) announced its unaudited financial and operating results for the fourth quarter and 1997 fiscal year. Total revenue amounted to $8,012,000 compared to $3,930,000 in 1996. Cash flow was $4,592,000 ($0.27/share) versus $2,228,000 ($0.18/share) last year. Production averaged 3,501boe/d compared to 1754 boe/d in 1996.
For full detailed report with table data, see Message 3466374
Summit Resources Limited (SUI/TSE) reported their 1997 financial and operating results. Activity levels in the Western Canadian Sedimentary Basin were at an all time high in 1997, resulting in the drilling of 16,500 wells. Shortages in equipment, trained field personnel and professional staff resulted in delays and escalated costs impacting performance throughout the sector. The industry's heightened interest in heavy oil projects resulted in the heavy oil differential widening significantly, impacting netbacks for heavy oil producers. Summit's blend of higher quality crude oil, with an average API exceeding 35 degrees, mitigated this alarming,but not surprising, spread in the differential.
During 1997 Summit participated directly in 77 wells and farmed-out 7 wells to industry partners. Twenty-three per cent of Summit's participation wells were exploratory where the Company posted a 50 per cent success rate, and the remaining 77 per cent were development where the Company achieved an 81 per cent successrate. This drilling activity resulted in 42 oil wells (17.5 net) and 19 gas wells (13.9 net), with an average well depth of 1,700 meters.
Summit's 1997 BOE production increased to 12,362 BOE's per day which was within 3 per cent of budgeted production volumes forecast at the beginning of 1997. Oil and liquids production increased from 5,707 BOE's per day in 1996 to 6,145 BOE's per day in 1997, while natural gas production increased to 62.2 MMcf/d from 60.1 MMcf/d the previous year. Summit's 1997 average natural gas price of $2.06 per Mcf (1996 - $1.70 per Mcf) continues to rank in the top quartile for the industry. Summit's blend of natural gas contracts and higher than average BTU content contributed to Summit's premium pricing for its natural gas production. While natural gas prices firmed in 1997, crude oil prices declined by 6 per cent, with WTI prices averaging US$20.61 in 1997 compared to US$22.00 in 1996. As a result, Summit's 1997 realized crude oil price averaged $23.89 per barrel compared with 1996 realized prices of $25.49 per barrel.
During 1997 Summit expanded its production base in core areas through a combination of successful property acquisitions, asset rationalizations and an active drilling program which resulted in total expenditures of $88 million. Seventy-two per cent of the $65 million invested in oil and gas exploration and development activities was allocated to Canadian operations, with the remaining 28 per cent invested to expand Summit's light oil exploration and development activities in the U.S. portion of the Williston Basin.
Strategic property acquisitions completed in 1997 totaled $75 million and included an expansion of the Company's oil production base through the acquisition of producing assets in the Williston Basin and in Rabbit Hills, Montana, while an acquisition at Fox Creek, Alberta offset a portion of the Company's natural gas and liquids divestitures. As part of Summit's rationalization program in 1997, dispositions of non-core assets totaling $51 million were concluded, including dispositions at Sturgeon Lake, Dunvegan, Manir, Pine Creek and Hays in Alberta, and Viewfield and Cantal in Saskatchewan.
Summit's year-end 1997 long-term debt totaled $125 million, including $17.6 million incurred by the Company to finance its investment in Fort Chicago Energy Partners L.P. which is the largest owner of interest in the Alliance Pipeline projects. Excluding the debt associated with this investment, Summit's 1997 debt to cash flow ratio equates to 2.1:1.
Increased production levels in 1997 resulted in petroleum and natural gas revenues increasing to $101 million, an 11 per cent increase from the $91 million posted in 1996. Cash flow for the year increased to $51 million ($1.51 per share) compared to $50 million ($1.46 per share) in 1996. 1997 cash flow was impacted by higher operating costs due to increased production volumes from Summit's U.S. production which were converted to Canadian dollars, excess natural gas transportation commitments which have since been mitigated, and generally higher operating costs throughout the industry. Cash flow in the fourth quarter of 1997 totaled $13.8 million ($0.41/share) based on average oil and liquids production of 6,365 barrels per day ($22.65/bbl) and average natural gas production of 67.7 MMcf/d ($2.14/Mcf).
Under Generally Accepted Accounting Principles (GAAP) the Company is required to evaluate the carrying value of its assets in each country against the future cash flows its proven reserves will generate at constant prices over their economic life. In performing the "ceiling test" the Company has the option to either use average commodity prices for the year or prices in effect at the end of the year. In Canada future net revenues are considerably higher than the carrying costs of the reserves. Using average oil prices for 1997 (US$20.61 WTI) Summit's proven reserves in the United States satisfies the ceiling test requirements under GAAP. However, using year-end constant prices of US$17.68, a ceiling test deficiency resulted for the Company's U.S. cost centre. In light of the soft crude oil prices that currently exist and the expectation that soft prices are likely to continue in 1998 due to the decreased demand in south-east Asia and OPEC's decision to increase production output, the Company has elected to use the more conservative year-end oil price in its ceiling test calculation. This calculation, together with the Company's decision to write-off certain land and seismic costs on U.S. properties evaluated by the Company, results in Summit recording a net loss of $31 million in 1997, which includes a $34.5 million write-down on the Company's U.S. cost centre.
Summit's drilling and acquisition programs during the year added proven reserves of 11.7 million BOE's and 14.5 million BOE's of proven and probable reserves. Given the favourable market conditions during 1997, Summit disposed of some of its non-strategic properties, thereby reducing proven reserves by 5 million BOE's (6.6 million BOE's proven plus probable) while netting the Company proceeds in excess of $10.00 per BOE on a proven basis. Reserve revisions to prior years evaluations accounted for a reduction of 0.6 million proven BOE's and 2.3 million proven plus probable BOE's. The Company's total crude oil and liquids reserves increased to 20.1 million barrels, including 14.6 million barrels proven, while natural gas reserves totaled 185 Bcf, including 147.4 Bcf proven. The Company's U.S. reserves increased by over 300 per cent to 8.4 million BOE's, including 6.3 million barrels of proven reserves.
Summit has established a $40 million capital program for exploration and development activities in 1998, including drilling, facilities, land and geophysics. Sixty-eight per cent of this total has been allocated to the drilling of 70 wells, including 23 exploration projects and 47 development wells. Fifty-seven per cent of the Company's drilling and facilities capital has been allocated to natural gas and the remainder to crude oil. Forty wells are planned in Canada to expand the Company's natural gas and light oil production base, and 30 wells are planned in the U.S., mostly located in the Williston Basin, to expand the Company's crude oil production base.
1998 production volumes are projected to increase 13 per cent to 14,000 BOE's per day, comprising 6,700 barrels of oil and liquids per day and 73 MMcf/d of natural gas. Using budget parameters of US$18.50 per barrel for oil and $1.75 per MMcf/d (plus $0.15 per Mcf for settlement of an outstanding gas contract), Summit anticipates cash flow for 1998 of $48 million or $1.45 per share.
OTHER COMPANIES IN THE NEWS
Saxon Petroleum Inc. (SXN/TSE) reported net income for year ended December 31, 1997 of $61,542 ($0.00 per share) compared to $358,993 ($0.00 per share) for the year ended December 31, 1996. Cash flow for this same period was $9,276,105 or $0.06 per fully diluted share versus $6,360,280 or $0.05 per fully diluted share in the 1996. The results for 1997 include a charge of $1.0 million for costs associated with the share evaluation and enhancement process. If these costs are excluded, the net income would be $0.6 million ($0.00 per share) and cash flow would be $10.3 million ($0.07 per share).
Production volumes in 1997 averaged 2,868 barrels of oil equivalent per day (BOE/D) for a 53 percent increase over the corresponding period in 1996. Exit rates for production in December 1997 were 3,220 BOE/D compared to 2,440 BOE/D in December 1996. In addition to increased production, Saxon improved its netbacks to $12.84 per BOE in 1997 versus $11.76 per BOE in 1996.
Saxon continued the development of its Bigoray operations and devoted the majority of its capital expenditures of $49.9 million to this field. Saxon is currently expanding its waterflood to remove production restrictions from certain wells in Bigoray. Expenditures were also made in Kaybob South, increasing natural gas production for that area. In addition, further Kaybob South gas will be tied-in in early 1998 after the completion of a pipeline extension by the partner in the area.
The Board of Directors is continuing to review several alternatives with respect to the share value enhancement program which was announced in August 1997. Included in this evaluation is the scope of the 1998 capital expenditure program and in this regard an announcement will be forthcoming in the near future.
For full report with table data, see Message 3464954
Backer Petroleum Corp. (BCM/TSE) reported that three wells completed in 1996 and 1997 at its Darwin, Alberta, property commenced production on February 13, 1998, at a rate of 8.0 MMCF per day of raw gas.
Backer's 30% share of the natural gas production is 2.4 MMCF per day.
Construction of the natural gas processing facility has just been completed on the gas property located 60 miles north of Peace River, Alberta. The plant will handle 10 MMCF per day.
Backer's 1997 year end sales volume of 600 barrels of oil equivalent ("BOE") per day will increase to over 800 BOE per day, and Backer's net cash flow will increase by over $60,000 per month, based on recent oil and gas prices.
Four additional wells in which Backer holds a 30% Working Interest are in progress in the Darwin Area. These include one well drilled and completed as a potential gas well which will be production tested during the next three weeks and which earned three sections of land; one well which has had casing set with completion work underway which earned an additional three sections of land; one water disposal well to handle water recovered from the natural gas processing plant, and one location anticipated to spud within the next two weeks. Depending upon results, the new gas wells may also be tied in for production before spring break-up.
With the completion of the earning phase of the multi-well program initiated in 1996, Backer owns an 18% to 50% Working Interest in 32 sections, over 20,000 gross acres of land, in the Darwin Area. Drilling can only be conducted during the winter freeze-up season in this area. Consequently, an additional three or four wells to further develop the Darwin property will be drilled in the 1998-99 winter drilling season, and should provide additional natural gas throughput within the 10 MMCF per day capacity of the processing facility already in place.
HEGCO Canada, Inc. (HEG/ASE) reported an update on progress within the Company's Oklahoma operations. As indicated in a previous release, a general status report on Oklahoma is as follows:
1) The Nemaha No. 1 - Has been flow tested from the lower Arbuckle zone at a daily rate of 139 BO plus approximately 110,000 cubic feet of gas per day. The well will be hooked up, and all surface equipment installed, within the next two days. Management has encountered substantial pay zones above the productive Arbuckle interval, and as a result, is now considering twinning the well for two prolific sections of Wilcox.
2) The Guame No. 2-98 - Company will begin flow testing from the lower Arbuckle zone this week. As with the Nemaha No. 1, the well will be hooked up, and all surface equipment installed, within the next two to three days. Management has encountered substantial pay zones above the productive Arbuckle interval, and as a result, is now considering twinning the well for two prolific sections of Wilcox.
The Alberta No. 3 has been drilled and is awaiting completion. Testing will begin after completion operations are done on the Guame No. 2-98 well. During drilling, several good oil shows were observed over several known pay intervals.
Drilling is underway on the Meier No. 2 well, located in the NE Garber Field. The Company expects to be at total depth within 20 days. This well is being drilled to develop infield gas pay. The exploratory objectives will include drilling deeper than the pay objective to test and evaluate the deeper Arbuckle and Wilcox series.
HEGCO Canada, Inc., is an oil and gas production, servicing and drilling company with operations in Oklahoma and Arkansas.
Burner Exploration Ltd. (BXP/ASE) reports that it has participated for 25 % in the successful horizontal sidetrack of a liquids rich gas well in the Hamburg area of northwest Alberta. The well is tied-in and currently onstream. The Company has also participated for 25 % in the 8-19-64-3W6 well drilled in the Lator area of west central Alberta which has been cased awaiting further production testing. This well is the first well in a three well program that will earn the Company an interest in 62 sections of land in the Lator area.
With the addition of the Hamburg well, Burner's net production is currently 6.7 mmcf/d of gas and 150 bbls/d of oil and liquids.
Storm Energy Inc. reported record results for the year ended December 31, 1997. Revenue was $13,791,968 compared to $2,656,570 of a year ago. Cash flow was $7,054,046 (fd-$0.122/share) compared to $1,348,081 (fd-$0.047/share) last year. Production averaged 1527 boe/d versus 378 boe/d in 1996. The company exited the year with a production rate of 2350 boe/d.
For more information and table data, see Message 3466134
Calvalley Petroleum Inc. (CVI.A/MSE) today announced its participation as a fifty percent (50%) working interest partner in a drilling and seismic joint venture arrangement in the Battle Creek area of S.W. Saskatchewan. This contiguous block of 16 sections (10,240 acres) of petroleum and natural gas rights is located 30 miles S.E. of the city of Medicine Hat, is accessible on a year round basis, and is in close proximity to pipelines and facilities.
Calvalley, as the designated managing-operator intends that the initial exploration well will be drilled within the next 30-45 days to a depth of approximately 1300 meters, where it is anticipated that significant natural gas reserves will be encountered in the Second White Specks Formation (850m) and oil production from the Shaunavon Zone (1300m).
Calvalley Petroleum Inc. is a Calgary-based oil and gas exploration and development Company whose shares are traded on the Montreal Exchange.
BelAir Energy Corporation (BGY/ASE) announced today that the Company has closed the purchase of various working interests in producing oil and gas properties and undeveloped lands for $625,000.
The acquisition adds 47 boepd of production to BelAir's current production of 400 boepd and adds 600 MMcf of proven producing natural gas reserves and 46 Mbbl of proven producing oil and NGL reserves to BelAir's reserve base.
The acquired producing properties in Fenn West, Viking Kinsella and Wainwright complement BelAir's existing production in central Alberta and expands the Company's production base into east central Alberta.
According to President Vic Luhowy, ''This acquisition completes the first phase of our strategy to build a solid base of long life producing reserves and cash flow. This base is the foundation of BelAir's future growth. The next phase will be to build on the Company's undeveloped land base and to make strategic acquisitions with development potential.''
Midas Resources Ltd. (MDS/TSE) reported its sixth successful Hackett gas well in the Gadsby area. Midas has a 43.75 percent working interest in the well, which flowed 4.6 million cubic feet per day on drill stem test. The flow rate from the Hackett sandstone indicates the well has an absolute open flow potential of 40 million cubic feet. Midas plans to have the well on stream by the beginning of April at a rate of 4 million cubic feet per day, since the well is located within one half mile of Midas' existing gas gathering system. The gas is being marketed to Pan-Alberta Gas.
Midas has varying working interests in 13 Hackett sand gas wells in the Gadsby, Hackett and Fenn-Big Valley areas and interests in 26,500 gross (9,000 net) acres. The majority of Midas' 1998 capital budget will be spent in this focus area.
Best Pacific Resources Ltd. (BPG/ASE) reported 1997 year-end proven plus half probable reserves of 7,017 thousand barrels of oil equivalent (mboe). Best Pacific added to its reserve base in 1997 with commendable finding and development costs of $4.97 per boe based on the addition of 3,114 mboe of proven plus half probable reserves over the year. Proven reserve additions accounted for 2,654 mboe of this increase, bringing total proven reserves at December 31, 1997 to 5,692 mboe.
To date in 1998, Best Pacific has participated in two new gas wells in Alberta and two dual leg horizontal oil wells in southeast Saskatchewan, with one similar horizontal well to immediately follow. In addition a gas well in the Farrell Lake area has been put on production at a net rate of 22 boepd. Best Pacific has also completed a recently drilled oil well at its Michel property and is currently evaluating this new pool discovery. The Company's total current production is approximately 2,100 boepd.
Thus far in 1998, the Company has entered into 8 separate agreements primarily consolidating interests in its core areas and disposing of non-core assets.
Best Pacific Resources Ltd. is also pleased to announce the recent appointment of Mr. Vincent Cheung, M.Eng., P.Eng., as Vice President of Production. Mr. Cheung has 22 years of experience in reservoir engineering and production and asset management in Western Canada and abroad, and is a valuable addition to the Company's management team.
A complete summary of 1997 year-end reserves with table data is at
Message 3464620
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