MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING FRIDAY, DECEMBER 5, 1997 (5)
December 5, 1997
Remington Announces Cache Creek Gas Discovery
Remington Energy Ltd. says first test and drilling results from its Cache Creek property inBritish Columbia indicate it has hit a liquids-rich gas discovery in the Triassic Doig formation.
The initial horizontal outpost well, located on surface at 15-2-88-22 W6M and downhole at11-2-88-22 W6M, had a calculated wellhead flow of 22 mmcf per day with 40-50 bbls of associated condensate per mmcf. The well was drilled to 2 340 metres, the company said.
The test confirmed drilling results indicating a more homogeneous reservoir with better average porosity than was encountered at the adjacent West Stoddart property.
"We'll probably drill initially one well per section instead of four," said Paul Baay, presidentof Remington. "The wells are about a million-and-a- half (dollars) a piece so it saves $3-4 million."
The outpost well will come on production at around 1,000 bbls of oil equivalent per daybefore year end, the company said.
Baay said this liquids rich gas discovery will allow the company to fully utilize thecapacity at West Stoddart and shorten the development time for the Cache Creek fieldusing less capital. An additional six wells are scheduled for Phase I of the Cache Creek project.
ELSEWHERE
Red Sea Oil Corp. (RSO/ASE), up 61› to $2.71, on volume of 794,749 shares. On Wednesday, the company said it had encountered oil shows at the B1-NC177 well in the Sirte basin in Libya, driving the stock up $1.05. Thursday the market took back 30›. Red Sea Oil is the property operator, with a 60% interest. Sands Petroleum AB holds 40%.
RESEARCH - ANALYST COMMENTS
RESEARCH ALERT- Coho Energy Downgraded
Brean Murray said analyst Philip Putnam on Friday downgraded Coho Energy Inc (Nasdaq:COHO - Toronto:CEE.TO) to market performer from strong buy.
-- said the company's acquisition of Amoco Corp's (NYSE:AN - news) Oklahoma oil assets, announced Monday, ''will materially change the investment characteristics of Coho...''
-- said the ''increased financial and business risks associated with this leveraged acquisition cause us to withdraw our purchase recommendation.''
Gordon Market Opening Notes - December 5, 1997
Berkley Petroleum Corp. (BKP-T:$14.75) BUY (Changed from Hold)
The horizontal section of BKP's second well at Froude Saskatchewan (1B2-32-8 10W2) production tested 4,200 bbls/d of 42 deg. API oil with no water from the Ordovician Red River formation. Originally drilled vertically, this well had production tested at 1,85 bbls/d prior to being completed horizontally. This well will be produced at restricted rates of 2,600 to 3,000 bbls/d for the rest of the month, then production will be further restricted until the well is given GPP approval.
The first well at Froude now has GPP approval and is currently being produced at over 1,000 bbls/d. Both of these wells also showed commercial quantities of oil from the Frobisher and Winnipegosis formations.
A third well is currently drilling at Froude, and three more development wells are planned in the next three months. Berkley has a 50% working interest in these wells, Paramount and Westminister each have 25%. For now, we are maintaining our 1998 production forecast of 10,000 bbls/d of liquids and 175 mmcf/d of gas.
We are forecasting fd CFPS of $0.80 in 1997 and $2.10 in 1998. We are upgrading our recommendation from a Hold to a BUY. Our 12 month stock price target remains $18.00.
Gordon Market Opening Notes - December 4, 1997
Ulster Petroleum (ULP-T$12.75) BUY
Beau Canada Exploration (BAU-T:$3.05) BUY
Gold Creek Well At Targetted Depth
The prospective Wabumun discovery at Gold Creek has been drilled horizontally to its targetted depth. The horizontal section will be completed as an open hole. Due to an estimated H2S content of 9%, the well will not be production tested soon. In fact, it may be tied-in to a new pipeline as a production well in February 1998, without a production test at all. The well has encountered 115 metres of vertical gross pay zone with porosity of 7%. Ulster is the operator, with 50%, Beau has 30% and Petro-Canada owns the remaining 20%.
Canadian 88 Energy (EEE-T:$4.65) HOLD*
More Delays At Waterton
The AEUB has rejected Canadian 88's application to build a three mile pipeline into Shell's local Waterton gathering system. Canadian 88 will now make application to build a larger, 14 mile pipeline which will connect its Waterton discovery directly into Shell's Waterton gas plant. Assuming the larger pipeline is approved and that Canadian 88 will begin producing in September 1998, our 1998 gas production estimate is being reduced from 144 mmcf/d to 133 mmcf/d, and our 1998 CFPS being reduced from $0.78 to $0.72. Our 1997 CFPS estimate is $0.40.
Gordon Market Opening Notes - December 1, 1997
Probe Exploration Inc. (PRX-T:$4.65) Buy
Reported fd CFPS for the first nine months of $0.15 vs. $0.02. Probe has delivered outstanding production growth YTD. While production for the nine months averaged only 2,856 boe/d, production in Q3 was 4,422 boe/d and current production is in excess of 8,500 boe/d. This production is split approx. 65% oil and 35% gas. We are forecasting fd CFPS of between $0.25 and $0.30 in 1997 and $0.90 in 1998. We reiterate our BUY opinion and our 12 month stock price target of $10.00.
Blue Range Resource Corporation (BBR.A-T:$7.15) Hold
Reported CFPS of $0.50 vs. $0.60 the first six months. Gas production averaged 108 mmcf/d for the fist six months up 20% over last year. Liquids productionin the firt half was 3,491 bbls/d down 4% over last year. For the year ending March 31, 1998 we are forecasting gas production to average 120 mmcf/d and liquids production 3,200 bbl/s. Our fd CFPS forecast is $1.55. We maintain our HOLD recommendation on Blue Range. We are lowering our 12 month target price from $10.00 to $8.75.
* Gordon Capital has participated in an underwriting or acted as financial advisor for these issuers within the last 12 months.
Friday December 5, 11:59 am Eastern Time
CONTINUED TROUBLE IN COLUMBIA
Crude oil output at Colombia's Cano Limon oilfield was cut back to 100,000 barrels per day (bpd) on Friday from the normal production level of 175,000 to 180,000 bpd following a rebel attack on electricity pylons on Thursday, field operator Occidental Petroleum Corp (NYSE:OXY) said.
Output was initially cut to 140,000 bpd after leftist rebels blasted two pylons that supply power to the field.
Throughput in the export pipeline, operated by Colombian state oil company Ecopetrol, was also running at 100,000 bpd, the Occidental spokesman said.
''We've evacuated all field storage and we're producing the same as we're pumping,'' he said.
The field has its own power plant but draws extra electricity supply from the national grid.
The spokesman said repair teams were still assessing the damage to the two pylons, but he expected the field to be back to full production in two to three days.
He said the he did not expect the lifting schedule from the Ecopetrol-operted Caribbean export terminal at Covenas, to be affected by the cutback.
''They keep as much storage as possible there for this very reason,'' he said.
U.S. TRADING OBSERVATIONS
In addition to its technology, the Dow was led by Exxon (XON), up 1 11/16 to 64, and Chevron (CHV), which rose 1 5/8 to 79 1/4. Oil stocks were buoyed by a rise in crude prices, which climbed on news that Iraq will cease exporting to the Western market.
Oil drilling and services stocks continued to climb after some recent weakness.
Leading the way on Friday were the likes of Diamond Offshore (DO), up 2 1/4 to 52 15/16; Transocean Offshore (RIG), which jumped 3 to 51 1/16; Schlumberger (SLB) surged 3 1/8 to 86 1/4; Halliburton (HAL) rose 2 1/8 to 56 7/16; and Varco International (VRC) climbed 1 3/4 to 28.
Elsewhere in the group, Smith International (SII) gained 2 11/16 to 70 11/16, Nabors Industries (NBR) closed up 1 7/16 to 37 1/2, while Camco (CAM) rose 1 5/8 to 66 3/8 and Falcon Drilling (FLC) climbed 2 1/4 to 35 9/16. The Philadelphia Oil Service Index (OSX) rose 6.65 points to 124.74.
Basin Exploration (BSNX) climbed 2 to 19 1/4 thanks to an upgrade from Hainfen Imhoff to "buy" from "hold." While the performance of the oil group wasn't surprising, traders expressed amazement at the ability of financial stocks to improve despite the rise in interest rates.
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