MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, FEBRUARY 24, 1998 (4)
MARKET ACTIVITY
In the U.S., the Dow index was burdened by its oil components with Exxon Corp. off 1-13/16 to 62-1/2 and Chevron Corp. shed 2-3/16 to 77. Oil driller shares also sank with Schlumberger Ltd. dropping 2-7/16 to 72-1/16 and Diamond Offshore Drilling Inc. falling 2-3/4 to 42-3/4.
In Canada, the oils held up as a group after shares in many companies were slashed Monday. Companies with higher leverage to natural gas appeared to fare better. As example, Rio Alto Exploration was the most active oil and the company is a 90%+ gas producer.
Analysts said the easing of Middle East tensions and the Security Council's approval last week of a more than doubling in the U.N.'s humanitarian "oil-for-food" deal with Iraq, puts the onus back on Saudi Arabia to support world oil prices.
MAJOR INDEXES
The Toronto Stock Exchange 300 Composite Index edged up 0.1% or 6.06 to 6948.25.
In comparison, the Oil & Gas Composite Index gained 0.2% or 12.78 to 6218.11. Sub-components were mixed. The Integrated Oil's fell 0.3% or 29.69 to 8770.23. The Oil & Gas Producers gained 0.6% or 33.45 to 5452.33. The Oil & Gas Services fell 1.1% or 28.68 to 2545.95.
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
Merit Energy Ltd. (MEL/TSE) closed yesterday at $5.50, up 25›. The 52-week high is $7.35; the low is $3.60. The company said yesterday revenue and earnings jumped dramatically last year (see Earnings) and forecast another good year in 1998 as it teams up with giant Gulf Canada Resources Ltd. to tap oil and natural gas reserves in eastern Alberta.
MOST ACTIVES
Kerms Top 21 - Spec 15 and Serv 9 listed companies appear in bold print.
Rio Alto Exploration, Compton Petroleum, Berkley Petroleum, Norcen Energy Resources, Anderson Exploration and Probe Exploration were among the top 50 most active traded issues on the TSE.
Poco Petroleums gained $0.75 to $14.15, Anderson Exploration $0.70 to $15.75, Imperial Oil $0.60 to $83.10, Alberta Energy $0.55 to $32.85 and Hurricane Hydrocarbons $0.55 to $10.00.
Percentage gainers included Probe Exploration 9.4% to $5.25, Compton Petroleum 8.0% to $1.35, Purcell Energy 7.1% to $1.05, Merit Energy 6.8% to $5.50, New Cache Petroleum 6.7% to $6.40, Encal Energy 6.0% to $5.30, Hurricane Hydrocarbons 5.8% to $10.00, TransGlobe Energy 5.8% to $2.00, Poco Petroleums 5.6% to $14.15 and TriGas Exploration 5.0% to $1.25.
On the downside, Gulfstream Resources fell $0.55 to $6.15, Morrison Middlefield $0.50 to $8.50 and Talisman Energy $0.50 to $39.30.
Percentage losers included Eurogas Corp. 8.9% to $1.73, Gulfstream Resources 8.2% to $6.15, Triumph Energy 7.4% to $2.50, Bitech Petroleum 7.2% to $3.20, Abacan Resources 6.0% to $2.65, Richland Petroleum 5.9% to $3.20, Post Energy 5.8% to $3.25, Morrison Middlefield 5.6% to $8.50 and Pan East Petroleum 5.6% to $1.70.
No new 52-week highs.
Calahoo Petroleum, Founders Energy, Kappa Energy, Pinnacle Resources and Remington Energy reached new 52-week lows.
There weere no service companies listed among the top 50 most active on the TSE.
Shaw Industries A gained $0.80 to $45.65.
Plains Energy Service fell 5.3% to $9.00.
On the downside, Computalog fell $1.75 to $19.50, Ensign Resource Services $1.20 to $26.30 and Artisan Corp. $0.40 to $8.85.
Percentage losers included Computalog 8.2% to $19.50 and Inteer-Tech Drilling 7.1% to $1.30.
There were no new 52-week highs or lows.
AltaPacific Capital, Bearcat Exploration, HEGCO Canada, Stampede Oils, Green River Petroleum, Cirque Energy, Hampton Court, Raptor Capital, Doreal Energy, Jerez Energy, ICE Drilling and Airgen A were among the top 30 most active traded issues on the Alberta Stock Exchange.
Niko Resources gained $0.30 to $5.30, Palmetto Resources $0.10 to $0.90, Total Energy Services $0.10 to $2.45 and Green River Petroleum $0.08 to $1.42.
Percentage gainers included Orion Resources 14.3% to $0.40, Tappit Resources 13.3% to $0.34 and Palmetto Resources 12.5% to $0.90.
On the downside, Avid O & G fell $0.20 to $0.90, Doreal Energy $0.20 to $2.60, Hampton Court $0.20 to $2.60, Progress Energy A $0.20 to $2.35, Canop Worldwide $0.15 to $0.50, Scarlet Exploration $0.14 to $1.06, AltaQuest Energy $0.10 to $2.25, CanBaikal Resources $0.10 to $1.60, Colt Energy $0.10 to $1.17, HEGCO Canada $0.10 to $2.80, Master Downhole $0.10 to $1.25 and Colony Energy $0.09 to $1.36.
Percentage losers included Rapidfire Resources 34.0% to $0.17, Canop Worldwide 23.1% to $0.50, Wild Horse Resources 21.2% to $0.26, Green Maple Energy 20.0% to $0.20, Avid O & G 18.2% to $0.90, Quest Energy 16.7% to $0.25, Dalton Resources 15.8% to $0.32, Oilexco 15.0% to $0.34, Esker Resources 13.3% to $0.52, Cubacan Exploration 13.0% to $0.40 and Scarlet Exploration 11.7% to $1.06.
No new 52-week highs.
Canop Worldwide and NTI Resources reached new 52-week lows.
An excellent summary of most actives covering all four of the Canadian Stock Exchanges can be found at quote.yahoo.com
EXCHANGE INFO
ANALYSIS - FUND MGR.'S - B/H/S - MISC.
Gordan Capital
Berkley Petroleum (BKP-T: $13.05) BUY
Four Foothills Wells Testing
Berkley is involved in four deep exploratory wells in the southern Alberta foothills. All four of these wells have been drilled and cased and are in various stages of testing. Three wells are joint ventured with Imperial Oil (two at 35% and one at 50% working interests), and one is a farm-in on Stampeder Oils/Bearcat Explorations. Full disclosure of these tests will be known over the next two months. In southeast Saskatchewan, Berkley has a new Red River (Ordivician) discovery at Talmage, where it has a 50% interest in two cased wells which are currently being production tested. In the North West Territories, The Bovie C-76 well has encountered natural gas and is now being completed horizontally. The Arrowhead N-65 well has been cased as a commercial gas well, and is now being completed. At Maxhamish, an exploratory test has been cased as a new gas well, but is only thought to be of mediocre productive potential. Our forecasts remain unchanged, with CFPS expected to increase from $0.70 in 1997 to $1.55 in 1998. We are forecasting liquids production of 10,000 bbls/d this year (up 186%), and natural gas output of 175 mmcf/d (an increase of 157%). Berkley has a very strong balance sheet, with a 1998 year-end projected debt/cash flow ratio of 0.7X. This is compared to an average of 1.9X for the intermediate producers that we follow. Our 12-month stock price target is $16.00.
SG Securities Slash Oil Price Outlook To $15/bbl
In London, SG Securities' analysts said on Tuesday they had cut their 1998 forecast for dated Brent Blend crude oil by $2.00 a barrel to $15.00 because of a growing crude oversupply.
SG Securities' analysts John Toalster said there was a ''very weak prospect for oil prices over the next couple of years.''
He said the current oversupply, which he estimated at 1.25 million barrels per day, could rise to 2.7 million bpd by the year's end.
''The weak price outlook is undermining confidence in the (oil share) sector,'' he said.
On Monday, Brent crude fell below $14 for the first time since April 1994 on news that the United States had given cautious backing to a deal reached between the United Nations and Iraq to end a dispute over UN Weapons inspectors.
On Tuesday, shares in oil giant Shell Transport and Trading Co Plc (UK & Ireland: SHEL.L) dropped 0.5 percent in heavy trade on Tuesday after SG Securities cut the stock to ''hold'' from ''outperform.''
Shell was down 1-1/42 pence to 406-3/4 p by 1125 GMT, on volume of 14 million, making it the third most heavily traded stock in London.
SG also repeated a ''sell'' rating on British Petroleum Co Plc(quote from Yahoo! UK & Ireland: BP.L). BP shares were down two pence at 803p.
KERMS TOP 21 - SPEC 15 - SERV 9 LISTED COPMPANIES IN THE NEWS
Crestar Energy Inc. (CRS/TSE) announced their 4th quarter and 1997 results. They focused attention on the fact that they met their year end exit production target.
Crestar met its 1997 exit target rate of 97,000 boe/d, while producing an average of 91,100 boe/d in the fourth quarter of 1997. The production increases led to record levels of revenue and cash flow for both the fourth quarter and full year 1997.
Revenues for fiscal 1997 increased 13% to $575.9 million, resulting in cash flow of $291.3 million ($5.76 per share), 11% higher than a year ago.
Net income for the year was $32.1 million ($0.64 per share) compared with $51.6 million ($1.07 per share) in 1996, primarily due to higher royalties, operating costs, income taxes and depletion and depreciation charges.
Crude oil and natural gas liquids sales for 1997 averaged 43,700 bbls/d, 17% higher than in 1996. Overall, liquids realizations fell 10% to $20.07 per barrel for the year. Natural gas sales in 1997 increased 12% to average 358 mmcf/d. Crestar's average natural gas realizations rose 11% in 1997, to $1.96 per mcf.
Fourth Quarter Results
Volatile commodity prices in the fourth quarter resulted in a 21% decline in average liquids prices, partially offset by a 19% improvement in natural gas realizations. Despite this low price environment, higher production volumes in the fourth quarter of 1997 resulted in a 19% increase in revenues and cash flow. Fourth quarter liquids volumes of 49,700 bbls/d were up 10% compared with the third quarter and 25% higher than the fourth quarter last year. Average natural gas sales of 414 mmcf/d were 13% higher than the third quarter and 27% higher than the fourth quarter of 1996. Net income declined to $4.0 million ($0.08 per share) from $14.8 million ($0.30 per share) in the fourth quarter of 1996.
Exploration & Developement Activity
Crestar drilled a record 493 net wells in 1997, more than double the number drilled last year. This increase reflects our growing inventory of prospects. In the fourth quarter, Crestar drilled 58 net development wells and 47 net exploratory wells. While much of this activity was centered around our Southern and West of Five core regions, we also expanded our new venture exploration.
In the Jenner area, Crestar drilled 26 horizontal wells (including a milestone 100th horizontal well in the area) leading to a production increase of 4,300 bbls/d by year-end. At Little Bow, production climbed 2,300 bbls/d with the drilling of four horizontal infill wells and the tie in of 17 wells to new battery facilities. Completion of facilities at Czar and Hayter added 900 bbls/d. In the fourth quarter Crestar tied in new production from the Turner Valley pool at Dalemead, adding 12 mmcf/d of natural gas. Horizontal drilling and added compression at Three Hills Creek boosted natural gas sales in that area by 8 mmcf/d.
On December 1, 1997, we announced new pool discoveries at Hamburg, Claresholm and Jenner, and the commencement of our 1998 winter drilling program, the most active in our history. At Hamburg, in northern Alberta, we completed our discovery well at 15-21-96-10 W6M, which tested at a rate of 20 mmcf/d of natural gas and 1,500 bbls/d of condensate. Two follow-up wells were drilled in the fourth quarter, with indicated hydrocarbon pay. The wells will be tied in during the first quarter of 1998. Exploration is continuing in the first quarter at Hamburg, Lapp, Clarke/Klua and Peggo/Pesh. Development programs are underway at Vulcan and Niton.
Reserve Additions
Crestar's 1997 reserve additions are a testament to the growing momentum of our full cycle exploration and development program. We recorded significant reserve additions at Jenner, Little Bow, Hamburg and Mantario. Exploration and development activities added established reserves of 56.8 mmBOE, the largest increase in the history of the Company. This represents 196% of Crestar's annual production, up from 132% in 1996. Despite higher industry-wide costs for services in 1997, finding costs for established reserves from internally generated activity averaged $6.30 per BOE, $0.06 per BOE lower than last year. On a proven only basis, Crestar's exploration and development program added reserves of 45.0 mmBOE, at a cost of $7.95 per BOE.
Including net acquisitions, established reserves additions of 96.6 million BOE replaced 333% of production at a cost of $7.69 per BOE. Overall, our capital program added proven reserves of 77.3 mmBOE, replacing 266% of production at a cost of $9.60 per BOE. Crestar's overall finding and development cost includes the cost of the Grad & Walker acquisition. We expect that this acquisition will lead to the addition of further reserves in the future at lower costs as we drill out the targets we have identified on Grad & Walker lands.
Asset Management
Crestar maintains an ongoing program of asset management to increase its interests in core areas and dispose of non core properties. In the fourth quarter, net proceeds of dispositions totaled $25.7 million. Further dispositions in the range of $10 to $15 million will be completed in the first quarter of 1998. In addition, we have offered a number of minor properties and our producing interests in southeastern Saskatchewan for sale. These sales are expected to close in the second and third quarter of 1998.
Outlook
Since its inception in 1992, Crestar has delivered a solid record of growth through a blend of exploration, development and acquisition activity. In the past five years, annual cash flow has climbed to $291 from $91 million. Established reserves have grown an average of 16% per year, outpacing annual production increases of 14%.
Over the last few months, prices of both crude oil and natural gas have declined substantially. If sustained, these declines will lead to a marked reduction in cash flow, despite our significant production increases. Our exploration and development program has strong positive momentum which will lead to continuing production increases. To maintain this momentum in the face of lower commodity prices, on February 18, 1998, Crestar issued 5.25 million common shares to a syndicate of Canadian underwriters for net proceeds of $111.9 million.
For further detail and table data, see newswire.ca
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