MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING THURS., JANUARY 8, 1998 (3)
INDEXES
The Toronto 300 Composite Index fell 1.5% or 99.94 to 6490.67
In comparason, the Oil & Gas Composite Index fell 1.6% or 98.45 to 5951.21. The sub components were mixed. The Integrated Oils again reflected the strength of the group, rising 0.9% or 71.62 to 8465.24.
Meanwhile, the Oil & Gas Producers continued strong downward movement, falling 2.4% or 128.03 to 5158.26. Even worse, the Oil & Gas Services fell 4.2% or 115,05 to 2594.82.
The Oil & Gas Producers Index has fallen 30.9% since last October. The Oil & Gas Services Index has fallen 40.4% in the same period. There is a striking difference between the two freefalls. The oil and gas producers are falling to new 52-week lows while the oil and gas service companies are still far from their 52-week lows. One has to wonder just how far this correctional move has to go. My opinion, not much further. However, one shouldn't expect a fast recovery when it does turn the corner.
INDEX CHARTS
TSE 300.......... canoe.quote.com
O&G Composite. chart.canada-stockwatch.com
Integrated Oil's.... chart.canada-stockwatch.com
O&G Producers.. chart.canada-stockwatch.com
O&G Services..... chart.canada-stockwatch.com
MARKET ACTIVITY
MOST ACTIVE ISSUES
Petro-Canada, Norcen Energy Resources, Canadian Natural Resources, Amber Energy, Eurogas Corp., Anderson Exploration, Gulf Canada Resources and First Calgary Petroleums were among the top 50 most active traded issues on the TSE.
Seven Seas was the number 1 net gainer, rising $2.05 to $17.80, Norcen Energy Resources $0.75 to $15.25, Shell Canada A $0.60 to $22.60, Petro-Canada $0.55 to $24.45 and Archer Resources $0.40 to $6.60.
Percentage gainers included Profco Resources 25.7% to $1.37, Seven Seas Petroleum 13.0% to $17.80, Eurogas Corp. 12.2% to $2.30, First Calgary Petroleums 11.7% to $1.15, Westfort Energy 10.7% to $1.14, Archer Resources 6.5% to $6.60, TransGlobe Energy 5.9% to $1.43, Vermilion Resources 5.3% to $7.00, Norcen Energy Resources 5.2% to $15.25, Canrise Resources 5.0% to $5.25 and Canadian 88 Energy 5.0% to $4.20.
On the downside, Northrock Resources fell $2.60 to $18.90, Tri Link Resources $2.15 to $15.75, Canadian Occidental Petroleum $1.55 to $27.25, Remington Energy $1.50 to $20.00, Chieftain International $1.45 to $27.90, Talisman Energy $1.15 to $37.65, Imperial Oil $1.00 to $86.40 and Renaissance Energy $1.00 to $25.50.
No new 52-week lows. Canadian Natural Resources, Gulf Canada Resources, Morrison Middlefield, Orion Energy, Probe Exploration, Ranger Oil and Tri Link Resources reached new 52-week lows.
In the oil and gas services group, as well as those companies with close ties to the industry, none made the list of most active traded issues on the TSE.
American ECO gained $0.50 to $16.00 and Badger Daylighting $0.40 to $5.50.
Percentage gainers were Badger Daylighting 7.8% to $5.50 and Inter-Tech Drilling 4.3% to $1.20.
On the downside, Dreco Energy Services fell $2.00 to $44.00, Precision Drilling $1.75 to $26.50, Computalog $1.70 to $19.80, Enerflex Systems $1.45 to $28.05 and Canadian Fracmaster $1.05 to $17.95.
Computalog was among the percentage losers, losing 7.9% to $19.80.
ATCO II reached a new 52-week high while Peak Energy fell to a new 52-week low.
Over on the Alberta Stock Exchange, NTI Resources, Bearcat Exploration, Palmetto Resources, Calahoo Petroleum, Enterprise developement, Commonwealth Energy, Esker Resources, Gold Star Energy and Cascade Oil & Gas were among the top 30 most active traded issues.
Capco Resources gained $0.95 to $3.00, Lodestar Energy $0.25 to $0.75, Stellarton Energy $0.20 to $4.50, Destiny Resource Services $0.19 to $3.00, AltaQuest Energy $0.18 to $2.45, Syner-Seis Tech $0.18 to $2.28, Extreme Energy $0.15 to $0.65, Best Pacific Resources $0.10 to $1.20 and Scimitar Hydrocarbons $0.08 to $0.78.
Percentage gainers included Capco Resources 46.3% to $3.00, Extreme Energy 20.0% to $0.65, Mesquete Resources 25.0% to $0.25, Nycan Petroleum 22.0% to $0.31,m Lodestar Energy 16.7% to $1.75 and Scimitar Hydrocarbons 11.4% to $0.78.
On the downside, Southesk Energy fell $0.40 to $3.75, Palmetto Resources $0.31 to $1.00, Niko Resources $0.30 to $4.00, Golden Trend Petroleum $0.15 to $0.80, Belfast Petroleum $0.14 to $2.61, Reeflex Petroleum $0.13 to $0.12, NTI Resources $0.12 to $0.28, Deena Energy $0.10 to $0.90, Firstland Energy $0.10 to $0.70 and Hyduke Capital Resources $0.10 to $2.50.
Percentage losers included Reeflex Petroleum 52.0% to $0.12, NTI Resources 28.8% to $0.28, Palmetto Resources 23.7% to $1.00, Newbridge Resources 20.0% to $4.00, Golden Trend Petroleum 15.8% to $0.80, Enterprise Developement 13.3% to $0.26 and Firstland Energy 12.5% to $0.70.
Extreme Energy reached a new 52-week high while Calahoo Petroleum and NTI Resources reached new 52-week lows.
EXCHANGE NOTES
The Board of Directors of Redeco Energy Inc. (formerly Peat Sorb Incorporated) (the "Corporation") are pleased to announce that all final documentation with respect to the re-listing of the Corporation's Common Shares on The Alberta Stock Exchange (the "Exchange") have been filed and that the Common Shares (RE) will commence trading on the Exchange on January 8, 1998.
RESEARCH/ANALYST COMMENTS
GOLDMAN, SACHS
Halliburton Pulled From List
Goldman, Sachs said on Thursday it pulled Halliburton Co (NYSE:HAL - news) from its U.S. priority list.
-- The shares remained on the Wall Street firm's U.S. recommended list.
GORDON CAPITAL MORNING NOTES
Northrock Resources (NRK - T: $21.50) HOLD
Bids To Acquire Paragon Petroleum
Northrock Resources has made a bid to acquire Paragon Resources, with an offer of cash and stock. The $134 million offer is friendly, and offers Paragon shareholders either $4.10 cash or 0.19 Northrock shares, with maximums of $67 million cash or 4.35 million Northrock shares. With assumed debt, the total cost of the take-over is $160 million. On a proven + half probable reserve basis, Northrock is estimating that it is paying in the range of $6.00 - 7.00/boe. Without year-end reserve data, we cannot verify this estimate. Strategically, the acquisition further builds upon Northrock's aggressive strategy to pursue liquids rich gas prospects in west central Alberta. The deal will provide Northrock with 1998 average production of 12,500 bbls/d of liquids and 165 mmcf/d of natural gas. We estimate this will result in CFPS of $3.65. We also estimate that the acquisition will increase Northrock's debt substantially, with an estimated year-end 1998 level of $344 million, or 3.4x estimated 1998 cash flow. While theacquisition will significantly aid Northrock in its west central Alberta strategy, it will also increase the company's debt leverage to the highest of its peer group. The stock price is currently trading at 5.9x 1998 CFPS, again well above its peer group. A good strategic deal, but a weak balance sheet. We continue to recommend a HOLD.
Northstar Energy Corporation (NEN-T:$8.55) BUY
Northstar has sold its 48% working interest in the Windsor co-gen facility for $72.5 million. Proceeds will be used to reduce debt which at Q3 stood at $460 million. We expect debt at the end of the year of 1998 to stand at $440 million, or 2.8x 1998 cash flow. We are currently forecasting fully diluted CFPS of $2.10 in 1997 and $2.25 in 1998. (1998 forecast is based on WTI of US$18.50).
KERM'S TOP 21 - SPEC15 - SERV 7 COMPANIES IN THE NEWS
POCO PETROLEUMS LTD. has increased its natural gas potential with a series of deals in northeast British Columbia, including one to buy all of Shell Canada Ltd.'s interests in the Monkman Pass region.
Including the Shell deal announced yesterday, Poco has invested $224 million in the area in the past 12 months, acquiring 1998 production of 100 million cubic feet per day of gas, 300 billion cubic feet of reserves, seismic data and 300,000 acres of undeveloped land.
Poco estimates its investments at Monkman have resulted in an average price of $4.47 per barrel of oil equivalent.
"It gives us the opportunity to materially grow our gas production in northeast British Columbia," president Craig Stewart said.
Capital spending this year of $30 million for the region, located near Fort St. John, includes drilling two wells, connecting another and shooting seismic data.
Shell conducted an auction for the properties last fall. Poco was not the winning bidder initially, but it succeeded when problems developed with other offers, Stewart said.
Poco will sell non-core assets worth $100 million by the end of the current quarter to pay for the Shell purchase, scheduled to close at month's end.
After the various transactions are concluded, Poco's daily production is expected to average 550 million cubic feet of gas and 43,000 barrels of oil and gas liquids this year. On a barrels of oil equivalent basis, it will be weighted 56% to gas this year.
Expansion of the northeast B.C. properties should position the company well should gas prices rebound later this year or in 1999, said Dave Stenason, an analyst at Gordon Capital Corp. in Montreal.
He said the Shell deal will have little impact this year. "I think you have to see it as building up a core area. It's a long-term purchase.
Stenason put a target price of $19 on Poco shares (POC/TSE) by November in a recent report.
The stock closed yesterday at $11.35, off 15›.
The company has estimated this year's earnings will amount to $55 million (43› per share), with cash flow of $390 million ($3.05) and capital spending of $425 million. The Shell transaction increased the capital budget by $25 million.
Poco Petroleums Ltd. held a briefing for analysts and media to discuss its recent expansion in the Monkman Pass area in northern British Columbia A taped rebroadcast of the call will be available to listeners for two business days beginning Thursday, January 8, 1998 at 11:00 a.m. MST, 1:00 p.m. EST. To listen to the rebroadcast, please call 1-800-558-5253 and provide the following reservation No.
3680697.
COLONY ENERGY announced that it has completed the previously announced sale on a private placement basis of 8,462,000 Special Warrants at a price of $2.10 per Special Warrant for gross proceeds of $17,770,200. Griffiths, McBurney & Partners led a syndicate of underwriters which included Newcrest Capital Inc., Peters & Co. Limited, Midland Walwyn Capital Inc. and Canaccord Capital Corporation. These Special Warrants are, subject to adjustment in certain circumstances, exchangeable without further payment for common shares of Colony on a one for one basis.
Colony also announced that on December 19, 1997 it completed its previously announced private placement sale of 2,000,000 flow-through shares at a price of $2.50 per share.
On the acquisition front, Colony announced the completion of various previously announced transactions which included the closing today of its purchase of assets in the Rainbow Lake area of Alberta from Pinnacle Resources Ltd. for an aggregate price of approximately $27 million, the closing on December 24, 1997 of the acquisition of all of the outstanding shares of a private corporation called Big Bear Energy Ltd. that resulted in a change of the management of Colony and the acquisition on December 24, 1997 pursuant to its take-over bid of approximately 94% of the issued and outstanding shares of Black Jack Energy Ltd., a junior capital pool company. The assets of each of Big Bear and Black Jack consisted primarily of cash.
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