MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING MONDAY, NOVEMBER 24, 1997 (6)
MISC.
Newport Petroleum (TOP 20 Listed)
The company intends, subject to obtaining required regulatory approval, to make a normal course issuer bid to be conducted through the facilities of The Toronto Stock Exchange. The company intends to purchase up to 7,274,467 of its common shares, being approximately 10 percent of its 72,744,669 outstanding common shares comprising its public float, provided that no more than 2 percent may be purchased in any given thirty day period. Newport's Board of Directors believes that the underlying value of Newport Petroleum Corporation's common shares is not reflected in the current market prices. All shares purchased under the issuer bid will be cancelled, thereby increasing the respective proportionate share interests of all remaining shareholders.
Compton Petroleum Corp. (SPEC 12 Listed)
Phase One of its $6.2 million Mazeppa Sour Gas Plant expansion project is complete. The Phase One expansion increased the gas inlet capacity of the plant from 42 to 60 mmcf/d. The plant is currently producing at capacity and awaits completion of the Phase Two expansion expected by the end of 1997. The Phase Two expansion will increase plant inlet capacity to 80 mmcf/d and is expected to be completed on schedule and on budget. Compton has also commenced an engineering study to evaluate increasing the Mazeppa gas plant throughput capacity to 110 mmcf/d by the middle of 1998. Compton currently has a 93.6% working interest in the Mazeppa gas plant which it has operated since September 30, 1997. The plant is located approximately 70 kilometres south of Calgary.
HOT STOCKS
Seven Seas Petroleum Inc. (SVS/TSE), up US75› to US$18.90, on volume of 208,429 shares. The company has completed drilling on the El Segundo No.2-E well at the Emerald Mountain project in Colombia. "Preliminary analysis, including oil shows while drilling, indicate the well should be productive," it said. Seven Seas holds 57.7% of the project. Its stock hit a 52-week low of US$8.25 on April 17.
Abacan Resource Corp. (ABC/TSE), down 44› to $2.90, on volume of 454,320 shares. Yesterday was the fifth successive price drop for the petroleum producer, which closed at $4.15 a week ago. Last Wednesday it reported production from the Ima field, offshore in the Niger River delta, fell in the third quarter from the second quarter.
Midland Walwyn Capital Inc. analyst Mark Christensen downgraded the company last week, said Jim Harvie, Abacan's chief operating officer. Midland Walwyn has been the biggest net seller of Abacan stock over the past six trading sessions. Yesterday's price fall may have been related to Abacan's arrangements for an interim financing while it looks for a strategic partner. "There was a rumor ... it had fallen through, which was not true," Harvie said.
Newport Petroleum Corp. (NPP/TSE), up 15› to $4.90, on volume of 630,125 shares. Newport said it will repurchase up to 7.3 million of its shares because the board believes the market is undervaluing the company. The 7.3 million shares represent 10% of its float. The stock fell $1.50 to $4.60 last Wednesday after it cut its production forecast to 18,800 barrels of oil equivalent by the end of the year, from 26,600 predicted two months ago. It traded as high as $7.90 in mid-September.
FEATURE STORIES
$3 Billion Boost For Oilsands
Syncrude's plan to expand oilsands extraction is only the latest in the $18 billion of investment announced recently for Alberta's hottest energy sector.
Syncrude Canada Ltd. announced yesterday a $3-billion expansion of its oilsands plant near Fort McMurray, Alta. The plan by the oil companies' consortium doubles to $6 billion the value of expansion under way at the massive project, Canada's largest single source of crude oil. Overall, developments worth more than $18 billion have been announced recently to unlock Alberta's oilsands.
Martin Molyneaux, managing director of institutional research at First Energy Capital Corp. in Calgary, said oil producers' massive oilsands commitments show they're optimistic oil prices will stay in the US$20 range for the long term. "They also see how profitable they [the oilsands] are. Both Syncrude's and Suncor's facilities have rates of
return of 17%, 18%, on invested capital, and returns at the margin are even higher than that," he said.
Syncrude's newest plan means boosting the capacity of its upgrader to increase synthetic crude production to 175 million barrels a year from 110 million barrels.
The upgrade follows previously announced plans for two new bitumen mines, North and Aurora.
The project is scheduled to be designed and built over the next 10 years, creating 74,000 person years of direct and indirect employment across Canada. It will use bitumen feedstock from oilsands leases already owned by Syncrude. The upgrader will produce an even better quality, low-sulphur crude, said Syncrude chairman Eric Newell. "With this new upgrader, we mark the beginning of a new value-added process. Our Syncrude sweet blend product will feature environmental attributes that are among the highest in the industry and fully in step with society's expectations for cleaner burning fuels," he said.
Syncrude is a joint venture of AEC Oil Sands LP, Athabasca Oil Sands Investments Inc., Canadian Occidental Petroleum Ltd., Canadian Oil Sands Investments Inc., Gulf Canada Resources Ltd., Imperial Oil Resources, Mocal Energy Ltd., Murphy Oil Co. Ltd. and Petro-Canada.
The consortium estimates Syncrude's operating costs will decline to $11 to $12 a barrel by 2000 to 2002, and to $9 to $10 in 2005 to 2007. Last year's cost was $13.70. "Syncrude is one of the most profitable oil and gas operations in Canada," said Gwyn Morgan, Alberta Energy Co. Ltd.'s president. "Due to the vast resource supporting the plant, there is no exploration cost associated with new development." The expansion means a one-third increase in AEC's proven light oil reserves, to 425 million barrels, Morgan said.
In a related development, AEC Pipelines LP, 70% owned by AEC, said it plans a $220-million pipeline expansion of its Alberta Oil Sands Pipeline to accommodate Syncrude's additional output. This triples the pipeline's rate base.
Recently announced megaprojects at various stages of planning to develop Alberta's oilsands between 1997 and 2006 include:
* A $2.2-billion expansion of Suncor Energy Inc.'s integrated operation at Fort McMurray. When completed in 2002, oilsands production will increase to 210,000 barrels of oil daily from 78,000 b/d this year.
* A $1.8-billion bitumen upgrader by Shell Canada Ltd. at its Scotford refinery near Edmonton. This would process thick tar from Shell's Lease 13 site in the Athabasca oilsands area, to be developed for $1 billion.
* $1 billion by Imperial Oil Ltd. to expand heavy oil production at Cold Lake.
* $1 billion by Mobil Oil Canada Ltd. to extract bitumen from Lease 36.
Syncrude's announcement marks the beginning of the project's regulatory approval process before the province's energy and environmental review boards.
The Canadian Association of Petroleum Producers estimates there are 300 billion barrels of recoverable oil in Alberta's oilsands -- based on current technology -- out of total reserves of 2.5 trillion. That's 125 times more than remaining recoverable oil from Alberta's conventional sources, which are estimated at 2.4 billion.
Current production from the oil sands is 316,000 b/d of synthetic crude from the Suncor and Syncrude facilities, and 165,000 b/d of bitumen.
Synthetic crude production from the oilsands meets 15% of Canada's daily oil needs, estimated at 1.5 million b/d.
American Eco Guarded Over Dominion Bridge
Acquisition-minded American Eco Corp. was cagey yesterday about its interest in buying some of the assets of troubled engineering construction firm Dominion Bridge Corp. But chief financial officer David Norris confirmed the industrial services firm has had dealings with Deere Park Equities LLC, an Illinois investment firm that holds 20.9% of Dominion Bridge with the Montreal-based firm's senior managers.
Some analysts suggest American Eco might have its eye on Dominion Bridge subsidiaries Steen Contractors Ltd. of Toronto, and Davie Industries Inc., which holds the Quebec City Davie shipyard that is awaiting confirmation of financing for several large oil rig projects. American Eco provides services such as construction and environmental cleanup for the oil and gas industry, as well as other industries.
Norris declined to comment on whether American Eco will try to acquire Dominion Bridge assets.
A deal with dissident shareholders and Deere president Doug Gerrard stipulates a consent solicitation campaign to oust Dominion Bridge management will be halted until Dec. 1 or "the presentation of a written proposal to the board regarding a change of control," whichever is earlier. The deal worked out in return for a cash payment by Deere to rebel shareholder group, the Committee to Revitalize Dominion Bridge, was filed before the U.S. Securities & Exchange Commission on Friday.
American Eco is mainly run out of Houston, although it has offices and operations in Canada. It trades primarily on the Toronto Stock Exchange, following a reverse takeover of Eco Corp. in 1992. Last year, it also acquired publicly traded Vancouver company Industra Service Corp. Its revenue increased from US$7 million in 1993 to US$120 million in 1996 (and US$101 million for the first two quarters of fiscal 1997) through an aggressive acquisition program. Profit grew from US$300,000 (US7› a share) to US$8.8 million (US81›).
Dominion Bridge, which has had operating cash problems, hired a New York investment firm this year to seek potential investors or buyers. Vice-president Olivier Despr‚s said last week at least one serious candidate had emerged, but others have looked at the company too.
Dominion Bridge (DBCO/Nasdaq) closed unchanged yesterday at US$1 7/8. American Eco (ECX/TSE) closed down 5› at $15.50.
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