Kerms Korner / Tier II Portfolio Material Changes
TIER II Additions 021703 (Part III)
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Beginning Cash Position $52,039.34
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Enterra Energy Corp
ENT – 300 Shares @ $11.00
Total Invested $3,300.00
In the first nine months of 2002, Enterra drilled eight wells, resulting in four oil wells and four gas wells for a 100% success rate. Enterra exited the third quarter with a production rate of 2,456 boe/d, a 24% increase over our second quarter exit rate of 1,981 boe/d. The company reported producing at a rate of approximately 3,000 boe/day and should of exited the month of November at about 3,500 boe/day.
In the first nine months of 2002, Enterra concentrated its efforts on reducing operating costs (which are currently almost 40% lower than they were one year ago on a per boe basis) while setting up its development and exploitation programs in its core areas of Sounding Lake, Clair and Bindloss.
In early January, Enterra announced that it had exceeded its year-end exit production goal of 5,000 boe/d. The company was completely focused on this target, especially during the last two months of the year when most of the drilling activity took place..
The company's actual exit rate on December 31, 2002 was 5,335 boe/day. The increase in daily production rate is largely attributed to Enterra's drilling program in the Clair area and to overall operating efficiencies. To date the company has drilled 23 wells at Clair and it intends to continue its accelerated pace in the first quarter of 2003 with plans to drill approximately 20 additional wells at Clair.
Enterra’s new goal is to exit the first quarter at 7,000 boe/d. "The company recently finalized its budget for 2003 and, based on the information available to us at this time, we feel that a target of 7,000 boe/day as an exit rate at the end of Q1, 2003 is achievable," said Reg Greenslade, President and CEO of Enterra. "This target may be reduced by some production loss due to asset rationalization, if certain properties are sold in the first quarter."
Enterra appears to be an undervalued situation, with rising cash flow to apply to an excellent inventory of drilling properties
SEDAR sedar.com
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Cequel Energy Inc.
CQL – 400 Shares @ $5.65
Total Invested $2,260.00
On January 24, 2002, the Company completed an $8,000,000 private placement of common shares and warrants and certain reorganization transactions which included the resignation of all the then current directors and officers of the Company and the appointment of new officers and a new board of directors.
Donald F. Archibald has been the President and Chief Executive Officer of Cequel since January 24, 2002; prior thereto Mr. Archibald was the President and Chief Executive Officer of Cypress Energy Inc., a public oil and gas company, from 1995 to March 2001. The rest of the management team is also from Cypress Energy.
In February, a $17 million equity issue was put together – shares being offered at $2.20/share.
Argonauts proceeded to acquire Chain Energy Corp. under the Business Corporations Act of the Province of Alberta to form Argonauts Group Ltd. The Shareholders of Argonauts passed a special resolution approving the change of name of Argonauts Group Ltd. to Cequel Energy Inc. In May, a second equity issue occurred, priced at $3.75 per share - amounting to $65 million. In early June, the company was listed on the Toronto Stock Exchange. Late June, the company acquired property from EnCana Corp. for $76 million. Following the acquisition, a $15mm equity issue priced at $3.75 per share occurred. In late August, the company acquired further acreage from Devon in the Gold Creek area of Northwest Alberta for $32.5 million. Subsequent to closing the $32.5 million acquisition the company also sold three minor properties for proceeds of almost $3.0 million. These minor properties were producing approximately 150 boe per day at the time of the sale and the disposition proceeds were used to reduce debt.
In November, cash flow per fully diluted share increased over 900% and production increased by over 500% as compared to the month of February when management took over the company. Production per fully diluted share also increased over 240% in this period. Oil and gas production was over 7,000 boe/d compared to approximately 1,292 boe/d in February. The company expects to exit 2002 with production volumes of approximately 8,600 boe/d.
Management believed the company would be more successful if it quickly and aggressively grew the asset base in its early stages. During the spring of 2002 they felt that the company could do a better deal if it was a larger deal. Management beieved a larger deal would enable the company to buy a better quality and more geographically concentrated property. The purchase of $108.5 million of assets in the Gold Creek/Karr area of Northwest Alberta enabled us to accumulate the specific type of assets management had targeted. These assets were medium depth, multi-zone, gas prone properties with good processing infrastructure that came with a large amount of undeveloped land located in a desirable part of the Western Sedimentary Basin.
The focus of company activity during the first three quarters was concentrated on acquisitions and establishing the core asset base of the company. Over the coming months the focus of activity will evolve as the company begins to aggressively exploit and explore on their core properties. Over 90% of production is from the three core areas of Central Alberta, Northwest Alberta and the Peace River Arch area of Alberta. These three areas account for 20%, 60% and 10% respectively of our production.
Cequel is engaged in a three part program of exploitation and exploration in the Gold Creek, Karr and Economy Creek areas of Northwest Alberta. The program consists of workovers and recompletions, drilling of new wells and the tie-in of existing wells. This program may involve work on up to 40 wells prior to year end 2002.
There are currently have two drilling rigs active and they are expected to keep active throughout the winter drilling season, primarily in the Gold Creek area. As well, Cequel has two service rigs active and a number of crews bringing wells on production.
The company expects this level of activity to continue throughout the fall and winter of 2002/03 which will provide for continued growth of Cequel.
SEDAR
sedar.com
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Impact Energy Inc.
IEY – 1400 Shares @ $1.48
Total Investment $2,072.00
Impact Energy Inc. is a junior oil and gas company engaged in the exploration for, and development and production of, natural gas and light oil reserves primarily in the provinces of Alberta, British Columbia, and the State of Montana. (approximately 130,000 net acres of undeveloped land focused in the gas prone)
In the third quarter, the company initiated its second major phase of drilling and exploration activity since its inception in early 2001 as a high impact, full cycle natural gas exploration company. Operational results in the quarter were affected by the shut-in of production at Whiskey Creek due to a pipeline break, and a gas plant maintenance turnaround in N.E. British Columbia. The company continued to move forward on its drilling and infrastructure activities in these areas such that Impact currently has approximately 1,600 Boed (8.0 MMcf/d of natural gas plus 275 Bbls/d of NGLs) of production awaiting tie-in inclusive of the reactivation of the Whiskey Creek discovery well. Current production is approximately 1,000 Boed (4.5 MMcf/d of natural gas and 250 Bbls/d of oil and NGLs).
On Feb. 5 2003, Impact announced that the pipeline that delivers natural gas from its Whiskey Creek 7-5-22-3W5 well had been brought back into service after receiving approval from the Alberta Energy Utilities Board ("AEUB"). The 7-5 discovery well, which represents approximately 500 Boe/d (6:1) of production net to Impact, has been shut-in since May 11, 2002 due to a pipeline break on the transmission line delivering gas to the Quirk Creek plant.
The company's activities through the first quarter of 2003 will be focused on bringing these successful natural gas wells into production as well as continuing to drill the company's exciting high impact natural gas prospect inventory.
During the third quarter 2002, Impact was successful in acquiring controlling interest in Encounter Energy Inc., which, subsequent to the end of the third quarter became a wholly owned subsidiary of Impact. In addition to the excellent property fit in one of the company's core growth areas, the combination brings a complementary natural gas prospect inventory - some of which will be drilled in the 2002/03 winter.
SEDAR sedar.com
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Current Cash Position $44,407.34 After Purchases
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