Stampede year-end review
Stampede Oils Inc STF
Shares issued 54,089,750 Jul 2 close $0.10
Fri 2 Jul 99 Company Review
Mr. John McLeod reviews the company
The past year had been one of great expectations related to the company's
Turner Valley project. During the past year, the following information has
been treated by the farmor group (Stampede Oils Inc. et al) on a low
profile basis, as much as possible, with the hopes that in doing so,
approval for the drilling licence of the Stampede et al TV 11-15-21-3 W5M
offset location to the 2-21-21-3 Turner Valley gas discovery well might be
acquired without related delay complications. However, unfortunately, this
has not been the case.
After approximately four and a half months of attempting to address and
alleviate purported objections by an apparently well-orchestrated block of
area residents, Stampede, the operator for the farmor group for the Turner
Valley project, was finally in a position to submit to the Alberta Energy
and Utilities Board an application for the 11-15 drilling licence on Oct.
23, 1998. Subsequently, the EUB set a public hearing date of April 13,
1999, to process the application. At the request of one of the objectors,
the EUB deferred the hearing for the 11 well to June 1, 1999, approximately
11 months from the date when the related area resident information package
was distributed. The hearing date is now July 6, 1999.
The company therefore decided in early April, that as efforts to prevent
delays in obtaining the necessary drilling licence for the 11-15 offset
well to the Imperial discovery well unfortunately were not successful, and
as the related events are extremely unique, corporately, it was in the best
interests of all Stampede shareholders that they be made aware of certain
pertinent Turner Valley exploration/development facts.
Imperial Oil Resources (farmee/operator) farmed in to the company's
petroleum and natural gas lease block in December, 1996.
By early January, 1998, the drilling of the 2-21 well had missed Imperial's
intended primary Turner Valley overthrust gas target zone. Subsequently, on
Jan. 23, 1998, the underlying Regional Turner Valley formation anticlinal
structure was drilled into, which at this location has a 50-foot gas cap
overlying an indicated oil leg of approximately 50 feet.
Despite Imperial's insistence that the entire Turner Valley reservoir in
the 2-21 well is gas, it has been made aware that Stampede et al was, and
still is, determined to conduct an adequate test of the indicated oil zone.
To allow the gas cap to be produced independent of the indicated oil leg
could result in the loss of a potential three million barrels of
recoverable oil reserves per section, according to an in-house company
determination. Available data indicate that an oil well completed in the
Turner Valley Regional formation in this area may be capable of producing
anywhere from 1,000 to 2,000 barrels of oil per day.
A notice of default was serviced on Imperial in December, 1998. The
governing farm-out agreement provides that the farmee has 30 days from the
receipt of a notice of default by which to commence the remedying of such
defaults. To date the basic response by the farmee/operator has been one of
stonewalling and denial.
On April 9, 1999, documentation was delivered to the operator by which to
effect a transfer of operatorship of the 2-21 well to Stampede, the
operator of the farmor group companies, along with advisement that Imperial
has forfeited its right to earn an interest from the farmor group in the
2-21 well and spacing unit and in the balance of all related farm-out
lands. The farmee subsequently refuted this position. As of Jan. 12, 1999,
Stampede's interest in the 2-21 well and spacing unit is 18.585 per cent.
Stampede, and the rest of the farmor group, intend to pursue effecting the
change of operatorship diligently and with extreme vigour.
The company and its partners conducted two operations in the fall of last
year in the Turner Valley area, the deepening of the 7-25-20-3 W5M and the
final completion operation preparatory to having the 4-13-19-2 W5M well on
production. Gas production from the 4-13 well and the 11-12 offset well
will be transmitted by pipeline approximately 22 miles northeast or
preferably, 14 miles northwest to the nearest sour gas plant. The deepening
of the 7-25 well has demonstrated the possibility of major recoverable gas
reserves extending approximately 10 miles toward the Red Deer Lake area to
the north/northeast.
Statement of Loss
Year ended Jan. 31
1999 1998
Revenue
Oil and gas revenue,
net of royalties $ 4,864 $ 692
Interest
income 23,765 17,590
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28,629 18,282
Expenditures
Production costs 51,734 23,167
Audit and legal fees 13,950 12,051
General,
administrative
and operating costs 189,472 204,385
Interest charges 48,831 72,538
Listing, trustee and
agency fees 18,845 11,677
Amortization 244 366
Reduction in invest-
ment in a related
party 1,253,300 325,458
Writedown to
reflect impairment
of marketable
securities - 27,200
------- ------
1,576,376 676,842
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Loss $(1,547,747) $(658,560)
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Loss per share 3.5 cents 1.7 cents
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