MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, FEBRUARY 19, 1998 (5)
MARKET ACTIVITY
INDEXES
The Toronto Stock Exchange 300 Composite Index fell 0.8% or 57.95 to 6886.26. The Oil & Gas Composite Index gained 0.3% or 16.48 to 6238.33. The sub-components were mixed. The Integrated Oils fell 0.1% or 8.81 to 8886.43. The Oil & Gas Producers gained 0.5% or 29.36 to 5422.31. The Oil & Gas Services fell 0.7% or 19.15 to 2642.11. Thus far this year, it is an unusual case when the Producers outperform the TSE 300 and their component mates. A rare occurrence indeed.
INDEX CHARTS
TSE 300.......... canoe.quote.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
NEW PHLX OIL SERVICE SECTOR
bigcharts.com.
lonestar.texas.net
HOT STOCKS
Amber Energy gained $2.65 to $16.95 on 100,355 shares. The company reported earnings yesterday. Trading in Pinnacle Resources has picked up again with 745,342 shares exchanging hands yesterday. Shares closed down $0.05 to $13.40
Shares of Colony Energy closed up $0.03 to $1.48. Trading in shares of the company was heavy, far over the daily average. Colony was the most active traded issue on the Alberta Stock Exchange.
MOST ACTIVES
Kerms Top 21, Spec 15, Serv9 Companies are identified in bold print
Ranger Oil, Gulf Canada Resources, Alberta Energy, Pinnacle Resources, Canadian Natural Resources, Berkley Petroleum, Talisman Energy and Rio Alto Exploration were among the top 50 most active traded issues on the TSE.
Net gainers included Amber Energy, up $2.65 to $16.95, Numac Energy $1.05 to $5.95, Alberta Energy $1.00 to $32.00, Pendaires Petroleum $1.00 to $9.75 and Remington Energy $0.80 to $16.15
Percentage gainers included Numac Energy 21.4% to $5.95, Amber Energy 18.5% to $16.95, Pendaires Petroleum 11.4% to $9.75, Southward Energy 10.5% to $1.05, Oiltec Resources 8.0% to $2.70, Spire Energy 6.1% to $1.75, Canadian Conquest Exploration 5.9% to $1.08 and Remington Energy 5.2% to $16.15.
On the downside, Pioneer Natural Canada fell $2.50 to $29.50, Pioneer Natural Resources $1.10 to $30.00 and Denbury Resources $1.00 to $24.25.
Percentage losers included First Calgary Petroleums 14.3% to $0.90, Ocelot Energy B $10.2% to $5.30, Pan East Petroleum 9.4% to $1.45, Black Rock Ventures 8.3% to $1.10, Black Sea Energy 8.0% to $1.15, Pioneer Natural Canada 7.8% to $29.50, Eurogas Corp. 6.8% to $1.91, Renata Resources 6.3% to $1.20, Richland Petroleum 5.9% to $3.20 and Beau Canada Exploration 5.7% to $2.31.
No new 52-week highs
Founders Energy, Kappa Energy, Ocelot Energy B, Pioneer Natural Resources, Pioneer Natural Canada and Sands Petroleum AB reached new 52-week lows.
There were no service and industry related companies found among the top 50 mst active traded issues on the TSE.
Net gainers included Enertec Resource Services $0.95 to $8.75.
Percentage gainers included Computer Modeling 14.3% to $1.20 and Enertec Resource Services 12.2% to $8.75.
On the downside, Shaw Industries A fell $0.75 to $44.00
Percentage losers included Petro Well Energy 12.9% to $1.01
No new 52-week highs or lows.
Over on the Alberta Stock Exchange, Colony Energy, Alta Pacific Capital, Scimitar Hydrocarbons, Ionic Energy, Green River Petroleum, Bearcat Exploration, HEGCO Canada, Stampede Oils, Hampton Court, Cubacan Exploration, Circle Energy, Tessex Energy, Parkcrest Exploration and Dalton Resources were among the top 30 most active traded issues.
Net gainers included Tier One Energy $0.25 to $2.25, Red Sea Oil $0.20 to $3.00, Scimitar Hydrocarbons $0.17 to $0.62, Circle Energy $0.11 to $0.60, HEGCO Canada $0.11 to $3.01, Gronartic Resources $0.10 to $0.65, Progress Energy $0.10 to $2.70 and Rapidfire Resources $0.09 to $0.25.
Percentage gainers included Rapidfire Resources 56.3% to $0.25, Scimitar Hydrocarbons 37.8% to $0.62, Circle Energy 22.4% to $0.60, Gold Star Energy 19.5% to $0.49, Gronartic Resources 18.2% to $0.65, Alta Pacific Capital 16.7% to $0.49, Mera Petroleum 13.3% to $0.68, Tier One Energy 12.5% to $2.25, Commonwealth Energy 11.7% to $0.67 and Esker Resources 11.3% to $0.59.
On the downside, Solid Resources fell $0.20 to $6.50, Crispin Energy $0.16 to $0.17, Belfast Petroleum $0.15 to $2.35, DeTECH $0.13 to $0.70, Syner-Seismic Tech $0.12 to $1.85 and Draig Energy $0.10 to $1.15.
Percentage losers included Crispin Energy 48.5% to $0.17, Q Energy 24.2% to $0.25, Moiibus Resources 17.8% to $0.37, DeTECH 15.7% to $0.70 and Carpatsky Petroleum 14.3% to $0.30.
Hampton Court, Lodestar Energy B and Moxie Petroleum were among 52-week highs
Roberts Bay Resources reached a new 52-week low.
An excellent summary of most actives covering all four of the Canadian Stock Exchanges can be found at quote.yahoo.com
ANALYSTS - FUND MGR.'S - BUY - HOLD - SELL - MISC.
Undisclosed
Alberta Energy (AEC, $31.00) Q4 Results Better Than Expected
Alberta Energy reported 1997 fully-diluted CFPS of $4.67 including $1.54 in Q4 compared to an estimate of $1.40-$1.45. The fourth quarter was better than expected because the Company realized a gas price of $2.35/mmcf and paid little Syncrude royalties due to weak oil prices (AEC pays virtually no Syncrude royalties when the oil price is <$18). The analyst has a positive outlook for AEC for the following reasons: AEC has a strong balance sheet with expected debt to cash flow of only 1.4x, the Company's G&A costs have been significantly reduced, finding costs are now under control and likely to improve, AEC is leveraged to gas (75% of added reserves in 1997 was natural gas) and the Company has a substantial land position to allow for long-term growth. 1998 estimate for fully-diluted and discretionary CFPS is $4.66 (vs. $4.55 in 1997) and this figure jumps to $5.65 in 1999. The analyst figures the NAV for AEC shares is $36 using $19 oil and $32 using $18 oil. A morning note has been written which outlines these points and confirms the Buy rating for AEC shares with a target price of $37.50.
Gordon Capital
IPSCO (IPS-T:$62.75) Long Term BUY Opinion Revised to Long Term BUY on Price Appreciation
IPSCO shares are fast approaching our $70 one-year target price. We continue to forecast EPS of $5.00 for 1998 and $6.25 for 1999. Our numbers are predicated on a 25% drop in drilling activity in 1998. Down hole pipe and gathering pipe account for about 1/3 of IPSCO's product mix. If this drop in drilling fails to materialize, our numbers would be conservative by an estimated $0.50 this year. We believe that ISPCO remains a great long term story with meaningful EPS upside to come from Montpelier ($2.50 in 1999), the Arkansas tubular mill and Toronto plate processing centre ($0.50+ combined) phasing in over the next 12 months. However, based on GCC's outlook for drilling activity and the run-up in the share price, we are revising our opinion from BUY to LONG TERM BUY.
Undisclosed
Gulf Oil Resources (GOU, $7.05) Scheduled to Report Friday; Financial Risk Remains
Gulf is expected to report Q4 CFPS in the low $0.50 range. The analyst believes an investment in Gulf carries inherent financial risk and he continues to recommend investors reduce their positions. With Gulf filing in the US, the Company faces stricter ceiling test standards which could result in regulated writedowns if the price of oil remains weak. Gulf's debt levels are high and if the Company falls out of favour with the banks or debt-rating services, it would be forced to sell some assets and/or experience higher debt costs.
Undisclosed
Chieftain International (CID, $31.00) Exploration Could Double Reserves
Following yesterday's comments, an analyst has written a morning note which highlights four of Chieftain's exploration plays in the Gulf of Mexico; South Marsh, Norphlet, Mississippi Canyon and Matagorda. Norphlet has the potential to double Chieftain's gas reserves, Mississippi Canyon has the potential to double the Company's oil reserves and South Marsh could be the largest discovery in the Gulf in 1998. A Hold for Chieftain shares is recommended, but he suggested that we follow CID and watch for upcoming results from these properties.
Gordon Capital
Pinnacle Resources* (PNN-T: $13.35) BUY New Saskatchewan Royalty System Beneficial
Last week, the Saskatchewan Government amended its royalty structure for crude oil production. Under the new regime, the first 12,500 bbls produced from a new well is charged a royalty of only 2.5% (vs. 4.0% previously). Once the 12,500 bbls have been produced, this is followed by a 15% royalty (vs. 24% before). With 67% of its oil production sourced from Saskatchewan, Pinnacle is the company that we cover that is the most levered to this benefit. The company's corporate average royalty rate on its oil production is estimated to fall from 22% to 19% this year and to 17% from 23% in 1999, as more new oil comes onstream. As a result, we are increasing our 1998 CFPS from $3.65 to $3.85, and our 1999 CFPS from $4.15 to $4.55. Pinnacle's 70% leverage to crude oil has hurt its stock price significantly in recent months. However, we continue to believe that it offers a high quality growth opportunity, particularly should global oil prices recover in the future.
*Gordon Capital Corporation has participated in an underwriting or acted as financial advisor for these issuers within the past 12 months.
Undisclosed
Summit Resources (SUI, $5.30) - Results in Line With Estimates
Summit reported basic CFPS of $1.51 in 1997, in line with the estimate. F&D costs were very high at $14.43 per BOE, however the Company made a number of acquisitions with reserves yet to be proven. An analyst reported the Company has had recent drilling success which should reduce F&D costs and he has written a morning note with a Buy recommendation and a target price for Summit shares of $6.10.
Gordon Capital
Amber Energy * (AMB-T:$14.30) BUY Winter Program At Pelican On Schedule
To date this winter, Amber has drilled 79 of its planned 100 horizontal wells at Pelican Lake. Only one more move of the rig fleet is required, before the last wells are drilled and pulled out. By next week, the company's infrastructure of gathering pipelines will be in the ground and covered. The company will not drill any further wells in this area until August/September. At Springburn, the company has been 100% successful on eight wells drilled, and has made five new light oil pool discoveries. Four of those wells are now on production at an aggregate gross production rate of 400 bbls/d. At Ekwan, in northwest Alberta, an early Spring break-up may reduce the number of exploratory wells drilled from six to four.
*Gordon Capital Corporation has participated in an underwriting or acted as financial advisor for these issuers within the past 12 months.
Undisclosed
Rigel Energy (RJL, $12.75) 1997 CFPS Higher Than Expected
Rigel reported 1997 basic CFPS of $2.36, slightly higher than expected. The analyst reported that he likes the Company's long-term growth potential in the North Sea and he believes Rigel shares will likely be trading in the high teens in a couple of years. A brief note on the Company will follow in time.
Gordon Capital
Rigel Energy Corporation (RJL-T:$12.75) HOLD 1997 Results Include High F&D Costs
Reported CFPS for the year ended December 31, 1997of $2.36 vs. $2.40 - slightly exceeding our 1997 forecast of $2.30. Total liquids production fell by 6% to 17,100 bbls/d, gas production fell 5% to 148 mmcf/d. Two of the factors behind these decline are: (i) roughly 1,100 bbls/d and 12 mmcf/d of production was sold in late 1996, and (ii), almost half of Rigel's net capital expenditures in 1997 were directed toward expansion efforts in the United Kingdom. These activities had only a minimal impact on 1997 volumes -with the full impact expected to be reflected in the 1998 and 1999 production volumes. Our oil and liquids forecast for Rigel of 25,500 bbls/d in 1998 and 26,500 in 1999 includes significant production increases coming from the U.K North Sea. We anticipate that in 1998, U.K. production will account for approximately 40% of Rigel's overall liquids volume. Our gas production forecast for Rigel is 170 mmcf/d in 1998 and 180mmcf/d in 1999. Rigel added 29 million boe of proven and half probable reserves -replacing production by 2.4X. However, finding and development costs in 1997 were high at $10.48/boe (proven plus half probable). In 1996 finding and development cost were $7.71. High finding and development costs have plagued this firm in the past. Our fully diluted CFPS forecast for is $2.10 in 1998 and $2.45 in 1999 based on a WTI forecast of US$18.50 in 1998 and US$19.00 in 1999. Each US$1.00 change in WTI impacts cash flow by approximately $0.20. Rigel offers unique upside in its Busby (or Moray Firth) prospect in the U.K. North Sea, and with its southern Alberta prospects, particularly at Burmis which is close to being drilled to its targeted depth. For this reason, we recommend that Rigel investors hold the stock until the results of these prospects are known.
Gordon Capital
Rio Alto Exploration (RAX-T:$12.90) BUY Winter Drilling Program On Track
Rio Alto is on schedule to drill 90 wells this winter in its northeast Alberta region, including seven horizontal wells. In the northwest area, Rio Alto is moving its rigs to its final winter drilling locations now. It plans to drill a total of 35 wells in this region this winter. Despite warm winter weather, the company expects to meet its targeted activity level, but with no time to spare. After Spring break-up, the company production is expected to reach 360 mmcfe/d, up over 60% from a year ago. The company's reserve life index now exceeds 10 years on proven reserves and 14 years on proven + probable. Its production is currently 85% levered to natural gas. We are forecasting CFPS of $1.95 for 1997, $2.10 in 1998, and $2.75 in 1999. We expect F & D costs for 1997 to be in the $6.00-7.00/boe range. Our stock price target is currently $16.50. We recommend a strong BUY of Rio Alto.
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