MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING MONDAY DECEMBER 22, 1997 (2)
OIL & GAS
Crude, heating oil and unleaded gasoline retreated on the New York Mercantile Exchange after Iraq signed off on an aid distribution plan, which could allow it to resume shipping oil within weeks.
January light sweet crude fell $0.22 to settle at $18.32.
The United Nations on Dec. 5 approved a new round that allows Iraq to ship $2.1 billion in oil every three months to buy food and medicine for its people. The humanitarian plan is an exception to an oil embargo imposed after Iraq's 1990 invasion of Kuwait.
But Iraq has refused to export oil under the program amid criticism that the distribution network took too long to approve contracts and ship food. That problem appeared to have been ironed out over the weekend, and it is expected to be presented soon to U.N. Security General Kofi Annan for approval. Iraq would export only about 1% of the oil shipped to Western markets, but other oil-producing nations are increasing their output after the first of the year, raising the possibility of ample new supplies flooding the market.
Also on the NYMEX, January natural gas fell $0.104 to settle at $2.367.
More On Crude
Expectations of fresh flows of Iraqi crude soon after the New Year and a wider transatlantic arbitrage cast a bearish shadow over the U.S. foreign crude market on Monday.
Traders said they expected Iraqi crude exports under the third term of the oil-for-food accord with the United Nations to resume in early January after Iraq said it had agreed an aid plan with the United Nations in Baghdad and was only waiting for a nod from U.N. Secretary General Kofi Annan.
Iraqi oil minister Amir Muhammad Rasheed said he expected oil exports to start on two weeks time.
Some oil traders had written off Iraqi exports at least until the end of January because of on-going wrangling between Iraq and the U.N.
"We're now expecting oil to flow in the first few days of January," said one regular lifter of Iraqi barrels under the first two terms of the oil-for-food deal.
U.S. lifters said they had not yet had any contact with Iraq's State Oil Marketing Organization (SOMO) about the details of sales contracts, and had not gone so far as to start chartering vessels to lift oil.
The news pressured regional benchmark February West Texas Intermediate at Cushing, which closed 22 cents down at $18.32 a barrel on NYMEX and differentials for rival foreign sours were expected to suffer.
Latin American sours such as Ecuadorean Oriente were thinly talked, but some traders saw prices weakening slightly.
"It appears to be relatively weak, there are still one or two prompt cargoes around," said one dealer.
He valued the Oriente market at a discount of more than $3.00 to WTI, although sellers said offers were still at WTI minus $2.85, closer to the last traded levels of around minus $2.90.
A Gulf coast refiner bringing a mid-January cargo of heavy Argentine Escalante to the Gulf pegged the market for that grade at $4.00 under WTI.
On the sweet side, a cargo of Colombia's Cao Limn was sold on Friday on a confidential basis, although the grade was valued at around WTI minus $2.00.
Traders said a recent spate of bomb attacks on the Cao export pipeline had not led to the cancellation of any cargoes, but they said some loadings may be "slightly delayed".
The January program for Colombia's Cusiana, the most active foreign sweet grade in the Gulf over the last month, was sold out after last week's Ecopetrol sell tender for three third decade cargoes.
"It's all sold up for January unless people are looking to resell any cargoes," a trader said, adding that the February loading schedule had not yet been released.
Despite soaring short-haul freight rates, January Cusiana prices held relatively firm, with the last three cargoes sold at a 55 to 59 cent discount to WTI, just five cents down on the early January loaders.
A lack of competition from other sweet grades from the North Sea and West Africa due to a narrow Brent/WTI spread has underpinned the market for Cusiana in recent weeks.
But on Monday the premium for WTI over Brent headed decisively over $1.00 a barrel and U.S. refiners were again eyeing the possibility of transatlantic trades.
Nigerian Qua Iboe for early February delivery was still heard shown around Dated Brent plus $1.75 to $1.80 on a delivered basis, but traders said the award on Friday of two VLCCs of Qua into India's February buy tender had taken the pressure off sellers.
"That's a lot of crude heading East which doesn't have to come this way," said one. A Zafiro from Equatorial Guinea loading January 20-21 was also on offer at March WTI minus 60 cents.
REFERENCES
Charts: oilworld.com
NYMEX Reference quotewatch.com
FEATURE STORY
Pipeline Group Jumps Gun, Awards Contracts
Claudia Cattaneo - Financial Post
Proponents of the Alliance natural gas pipeline have awarded $1.2 billion in construction contracts although the National Energy Board has yet to approve the project.
Three Canadian and seven U.S. firms have been hired to build 3,000 kilometres of large-diametre pipeline from Fort St. John, B.C., to Chicago.
The NEB hearings are to start Jan. 6. The board held pre-hearings on procedural issues in November, then decided to delay the start of the hearings, expected to take two months, so Alliance could provide more data.
The unexpected postponement will push back the start of construction by about two months to early next fall. Completion is still scheduled by the end of 1999.
Jack Crawford, Alliance's vice-president for government and regulatory affairs, said his group was presented with 800 information requests during the break by project opponents, in addition to the 2,400 presented before the pre-hearings.
Alliance believes they are part of a strategy by rival companies such as Nova Corp. and TransCanada PipeLines Ltd. to delay the project.
While concerned about pre-empting an NEB decision, the partnership decided to award the contracts before receiving regulatory approval to secure contractors and firm up construction costs,.
"There are a lot of pipeline proposals out there today, so we want to make sure we have access to the contractors," Crawford said.
The companies, picked after a lengthy bid process, are, for the most part, the low-cost bidders, he said.
The Canadian firms are Waschuk Pipe Line Construction Ltd. of Red Deer, Alta; O.J. Pipelines and Marine Pipeline Construction of Canada (1993), both of Nisku, Alta.
O.J. Pipelines is a subsidiary of Calgary-based Ocelot Energy Inc. The company said its $200 million contract involves building 563 km of line in Alberta and Saskatchewan.
Alliance is a consortium of producers, pipeline companies and marketers. They want to build the high-speed pipeline to help open new markets for Western Canadian natural gas.
INDEXES
The Toronto 300 Index benchmark gained 0.9% or 60.19 to 6595.53.
In comparison, the Oil & Gas Composite Index gained 0.6% or 41.57 to 6526.40. Of the sub-components, the Integrated Oils gained 1.6% or 146.10 to 9081.85. The Oil & Gas Producers gained 0.4% or 20.93 to 5705.15 and the Oil & Gas Services continued weak, falling 0.8% or 22.04 to 2881.37.
MARKET ACTIVITY
Compton Petroleum, Pan East Petroleum, Orbit Oil & Gas, Tarragon Oil & Gas, Anderson Exploration, Ranger Oil and Canadian Natural Reources were among the top 50 most active traded issues on the TSE.
Imperial Oil climbed $2.90 to $92.00, Petro-Canada $1.10 to $26.40, Remington Energy $1.05 to $23.00, Alberta Energy $27.75 and Canadian Occidental Petroleum $32.00.
Percentage gainers included Eurogas Corp. 23.3% to $1.85, Pan East Petroleum 10.8% to $1.44, Founders Energy 8.3% to $1.30, Renata Resources 8.3% to $1.30 and Hurricane Hydrocarbons 6.3% to $8.50.
On the downside, Suncor Energy fell $1.45 to $48.80, Pendaires Petroleum $1.30 to $10.70, PanCanadian Petroleum $0.85 to $21.25, Seven Seas Petroleum $0.70 to $17.30 and Paramount Resources $0.60 to $12.65.
Percentage losers included Post Energy 15.0% to $3.05, Pendaires Petroleum 10.8% to $10.70, Merit Energy 8.7% to $4.20, Tethys Energy 7.7% to $2.40, Spire Energy 6.3% to $1.50, Symmetry Resources 6.1% to $1.08 and Magin Energy 6.0% to $2.35.
Imperial Oil reached a new 52-week high.
Elk Point Resources, Mart Resources, Morrison Middlefield, PanCanadian Petroleum, Summit Resources and Tarragon Oil & Gas reached new 52-week lows.
In the service sector, as well as those companies with close ties to the industry, Tesco and Tetonka Drilling were among the top 50 most active issues on the TSE.
American Eco gained $0.55 to $13.95.
Alpine Oil and Enerchem International were among the percentage gainers.
On the downside, Enertec Ressource Services fell $1.35 to $11.40, Artisan Corp. $1.25 to $10.25, Precision Drilling $0.75 to $31.00 and Shaw Industries $0.70 to $44.25.
Percentage losers included Artisan Corp. 10.9% to $10.25, Enertec Resource Services 10.6% to $11.40, Pe Ben Oilfield 8.0% to $4.60, Computer Modeling 7.7% to $1.20 and Tetonka Drilling 6.7% to $2.10.
No new 52-week highs.
Computer Modeling and Geophysical Nicro reached new 52-week lows.
Oils and service sector companies on the Alberta Stock Exchange were again very active, both on the upside and downside. Ayrex Resources, Del Mar Energy, Jerez Energy, NTI Resources, Commonwealth Energy, Colt Energy, Bearcat Exploration, Tappit Resources, OTATCO, Mart Resources and Calahoo Petroleum were among the top 30 most active traded issues.
Canadian Crude Separators gained $0.25 to $5.50, Jett Investment $0.25 to $1.00, Jerez Energy $0.18 to $0.60, Deena Energy $0.17 to $1.35, Golden Trend Petroleum $0.15 to $1.00, Petro-Reef Resources $0.15 to $0.55, Alma Oil & Gas $0.10 to $0.70, Belfast Petroleum $0.10 to $2.90, Peregrine Oil & Gas $0.10 to $1.20 and Sunburst Oil & Gas $0.10 to $1.50.
Percentage gainers included Jerez Energy 42.9% to $0/60, Petro-Reef Resources 37.5% to $0.55, Jett Investment 33.3% to $1.00, Golden Trend Petroleum 17.6% to $1.00, Alma Oil & Gas 16.7% to $0.70, Deena Energy 14.4% to $1.35, Cascade Oil & Gas 14.3% to $0.40, Scimitar Hydrocarbons 13.3% to $0.68, Tessex Energy 12.5% to $0.45 and Del Mar Energy 10.0% to $0.55.
On the downside, Solid Resources slipped $0.90 to $7.60, Kappa Energy $0.20 to $2.50, Niko Resources $0.20 to $4.25, Cypress Energy $0.15 to $5.10, Danoil Energy $0.12 to $1.50, Cherryhill Resources $0.10 to $0.30, Granger Energy $0.10 to $1.50, Petro-Field Industries $0.10 to $0.20, Pan Oil Resources $0.10 to $0.30 and Pason Systems $0.10 to $6.30.
Percentage losers included Petro-Field Industries 33.3% to $0.20, Cherryhill Resources 25.0% to $0.30 and Pan Oil Resources 25.0% to $0.30.
No new 52-week highs.
Ayrex Resources, Cherryhill Resources, Constellation Oil & Gas, Epic Energy and Jett Investment reached new 52-week lows.
KERM'S TOP 20 - SPEC 12 - SERV 7 COMPANIES IN THE NEWS
TALISMAN ENERGY INC. announced that a Production Sharing Contract (''PSC'') covering the Madura Offshore Block in Indonesia was signed on December 4, 1997. ''We are very pleased to be awarded this new, very prospective exploration acreage. The PSC is on trend with a number of significant oil and gas discoveries and we are very excited about the potential,'' said Dr. Jim Buckee, President and Chief Executive Officer.
The Madura Offshore Block PSC comprises 4,246 square kilometers of high potential exploration acreage and is located southeast of Madura Island in the East Java Sea in a proven hydrocarbon basin. Water depths in the region are 70 to 130 meters. Talisman holds a 100% working interest in the Block.
Talisman's preliminary evaluation has identified Oligo-Miocene reefal anomalies as well as other prospects and leads in the Pliocene and Eocene limestones. The Company has an extensive seismic data base on the Block and anticipates that reprocessing and reinterpretation of the data will identify additional exploration potential. Talisman plans to drill its first well on the acreage in 1999, focusing on the largest of the Miocene reefs.
Talisman currently produces approximately 225,000 boe/d, of which 30,000 bbls/d are from Indonesia. Talisman (Corridor) Inc., a wholly owned subsidiary of Talisman Energy Inc., is a 36% participant in the Corridor Gas Project in Indonesia.
KERM'S WATCHLIST OPF COMPANIES IN THE NEWS
WESTMINSTER RESOURCES LTD. (50 percent) and BERKLEY PETROLEUM CORP. (50 percent) have entered into an agreement to acquire interests in the July Lake area of Northeastern British Columbia. The gross purchase price of $30.771 million will be shared equally by Westminster and Berkley. Closing is expected by mid January, 1998. The July Lake Property is located in Block L/94-P-09, Blocks G, I and J/94-P-10, Blocks A, B, and H/94-P-15 and Blocks D, E, F, G and K/94-P-16 approximately 85 miles northeast of Fort Nelson B.C.
The companies will acquire working interests ranging from 37.075 percent to 82.35 percent in 73,000 gross acres of land (average working interest 44 percent, 22 percent net to Westminster). Current production is approximately 16 mmcf/d of net sales gas from 15 wells producing from the Jean-Marie formation. An additional 4 wells are currently shut-in and are scheduled to be tied-in and on production early in 1998.
Westminster and Berkley expect net sales gas production of approximately 20 mmcf/d once the tie-ins are complete. The July Lake acquisition complements Westminster and Berkley's land and production holdings in the Helmut / Peggo areas 10 miles to the south. In northeast British Columbia, the companies now own interests in 305 sections of land (154 net) and have begun a 14 well drilling program for Jean-Marie and Slave Point gas. Westminster, as operator, plans to drill and tie-in 6-8 of the locations this winter. It is expected that the wells drilled this winter will be tied-in and producing late in the first quarter of 1998.
CYPRESS ENERGY INC. announced that it has completed the acquisition of assets located in the Thorsby area of central Alberta. Cypress purchased a subsidiary of Jordan Petroleum Limited which owned these assets for $73.9 million. The acquisition occurred following ReserveRoyalty Corporation's recent purchase of all of the shares of Jordan Petroleum Limited.
The Thorsby purchase enhances Cypress' presence in the area as theassets overlap Cypress' existing Thorsby property. Cypress has acquired over 3,000 BOE of production, 70 percent of which is natural gas, at a working interest of 95 percent. The purchase includes all related infrastructure and processing facilities, over 60,000 net acres of contiguous undeveloped land, and a substantial 3D and 2D seismic base. An aggressive capital expenditure program is planned for 1998 including recompletions and workovers of existing wells in addition to exploiting the drilling potential on this multi-zone property.
BITS & PIECES
INTERACTION RESOURCES has halted completion operations of the previously cased potential Wabamun gas well located at 1-36-81-15W6M. Operations have been halted at the current stage because subsequent activity would result in ongoing work through the holiday season. Completion and testing operations are set to resume after the holidays.
At Workman, Saskatchewan the 3-27-1-32W1M Precambrian exploration well that was cased on November 12, has been completed and tested in multiple zones, none of which are deemed to be currently economic. One of the zones has provided sufficient new information to warrant further investigation.
TRANSGLOBE ENERGY CORPORATION (TGL/TSE) announced the signing of a Production Sharing Agreement for the Damis S1 Block in Yeman. TransGlobe must pay a "signature bonus" of US$2.0 million to MOMR,and following ratification, the PSA becomes effective. The PSA requires that in the first exploration phase of 2 1/2 years, TransGlobe will conduct 150 sq. km. of 3D seismic data acquisition and drill 3 wells at an approximate total cost of US$11.0 million. Coincident with this announcement, TransGlobe is negotiating with several international oil companies as potential joint venture partners in the S1 Block and expects to finalize a farm-out agreement(s) early in 1998.
In other news, the Company advises that the operator, Clyde Expro plc, is still drilling the Tasour well in Block 32 in Yemen towards total depth, at which time testing of the well will take place. TransGlobe expects the drilling and testing to be completed in the near future and will announce results at that time. The well is located in the southern portion of Block 32, adjacent to Canadian Occidental's producing Sunah field. TransGlobe has an 8 percent working interest in Block 32, Yemen.
In Montana USA, the Brog 13-19 Red River C horizontal test well was spudded on Saturday December 13. It is expected to take approximately 45 days to drill and complete. The Company owns a 25 percent working interest (20 percent net revenue interest) in the East Meridian Project.
NAFTEX ENERGY CORPORATION commenced production on December 18, 1997 from the Kharir Field on the East Shabwa Contract Area (''ESCA'') in Yemen's Hadramaout region. The ESCA is located approximately 500 kilometres east of Sanaa and 140 kilometres north of the export terminal at Ash Shihr near Mukalla on the Gulf of Aden. Gross production from four wells on the Kharir field is currently averaging about 17,000 barrels of oil per day (bopd). This is expected to increase to 20,000 bopd in early January when additional wells are slated to come on production.
A second phase of development on the permit will be decided in late 1998, depending on the first year production history and on additional data obtained on the reservoirs. Naftex holds an effective 5% interest in the ESCA through its 17.5% shareholding in Comeco Petroleum Inc., which holds a 28.57% interest in the permit.
An Edmonton-based engineering firm, PAC-PARE CORP. (private company) says it is close to finalizing a US$75-million deal to purchase the bankrupt Gdansk shipyard from the Polish government. PAC-Pare said it would spend US$3 billion to modernize the rundown facility to manufacture custom made oilfield equipment and drilling rigs. The shipyard, famous as the birthplace of Poland's Solidarity movement and the scene of much labor unrest in the 1980s, would also continue to manufacture and repair ships and pressure vessels.
PAC-Pare said there's a hungry market for oilfield services equipment around the world, including Canada, where oil and gas industry growth was held back this year by a severe equipment shortage. Funding would be provided by a European consortium in partnership with the Canadian company, which would set up European headquarters in Warsaw. It also said it would increase the shipyard's workforce to 12,000 from the current 1,500.
His company's bid will almost certainly be successful because of its superior plans, PAC-Pare president Peter Cave said. An announcement is expected within 25 to 30 days. Five other groups - two local and two international - also presented bids. Privately owned PAC-Pare employs 200 people worldwide. It specializes in industrial and environmental engineering, and project management.
KINTAIL ENERGY INC., announced that it has received shareholder approval and has subsequently closed both it's Major Transaction and a flow through share issue for drilling. The Major Transaction consisted of the acquisition of oil and gas properties producing approximately 35 BOE/D and 6,349 net undeveloped acres of land for total cash consideration of $570,000. The properties are mainly in the South Pembina, Bashaw, and Gilby areas of Central Alberta.
OTHER NEWS
Rebel Attack Shuts Down Colombia Pipeline
BOGOTA, Dec 22 (Reuters) - Leftist rebels attacked Colombia's Cano Limon crude oil pipeline Monday, shutting it down for the 64th time this year, the state oil company Ecopetrol said.
A company spokesman said the latest dynamite attack made 1997 the worst year for the pipeline since 1992, when it was blown up 62 times by suspected National Liberation Army (ELN) rebels.
''It's a record,'' said the spokesman, adding that the run-up to the Christmas and New Year holidays could be full of ''fireworks.''
Ecopetrol operates the Cano Limon oil field in northeastern Arauca province in partnership with Occidental Petroleum Corp (NYSE:OXY - news). It was not immediately clear how output from the field would be affected.
The attack, late on Monday, followed an ELN bomb attack Sunday that failed to rupture the pipeline -- which carries Cano Limon crude to the Caribbean lifting terminal of Covenas. There were also two other rebel attacks last week.
Occidental spokesmen could not be reached for immediate comment on the rebel attack or how it might affect export schedules from the Cano Limon field.
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