MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING MONDAY, FEBRUARY 9, 1998 (5)
Bonavista Petroleum Ltd. (BNP/TSE) announced that it has entered into a purchase and sale agreement with an intermediate oil and gas company to acquire natural gas assets located in Bonavista's Dixonville core area in northwest Alberta. These natural gas assets are currently producing 3 million cubic feet per day with associated proven and probable reserves of 10 billion cubic feet. Included in this transaction is an extensive undeveloped land position of 50,140 net acres with an average working interest of 85 percent, which will increase Bonavista's total undeveloped land portfolio to 114,960 net acres. This transaction is effective January 1, 1998 and is expected to close on February 25, 1998. The company did not disclose how they would support the acquisition.
OTHER COMPANIES IN THE NEWS
Circle Energy Inc. (CEN/ASE) announced today that it has increased its working interest from 37 1/2 percent to 41 1/2 percent in its Brazeau River Shunda well. Completion and testing are on schedule to commence next week. Circle has booked a rig to drill a Nisku test well at Brazeau River after spring break-up and are on rig standby at Morinville, Alberta.
Due to their current financial situation San Marino Minerals Inc. will not be participating in the drilling program in New Mexico. Harvard Petroleum Corporation, a well established oil and gas company based in Roswell, New Mexico has purchased a 20 percent interest in the Aylsham and Bounty Projects. Harvard Petroleum is also Circle's partner in the Ranger Lake, New Mexico project. 3D seismic for Ranger Lake will commence in April. Given the high gas netbacks in New Mexico and our confidence in Harvard Petroleum we will continue to aggressively pursue U.S. prospects.
Circle has closed its Public Offering announced in the December 10, 1997 press release. Under the Public Offering Circle raised $1,138,500 (1,897,500 shares). The Flow Through component of the offering raised $826,800 of the total. Circle Energy Inc. is a petroleum and natural gas exploration company that holds oil and gas leases in the Brazeau, Morinville and Waskatenau areas of Central Alberta and in Guadalupe, Lea and Quay Counties in New Mexico, USA.
Sharon Energy Ltd. (SHY/VSE) announced that it has entered into an agreement with Clive Stockdale whereby the Company has obtained the right to acquire up to a 10% working interest in the South Lakeside prospect in Cameron Parish, Louisiana, which interest is the subject of an option that has been granted to Stockdale by Orbit Oil & Gas Inc. (''the Option''). The Option allows Stockdale to earn a 10% working interest in the South Lakeside prospect in Cameron Parish, Louisiana, by payment of US$585,000 which represents the actual leasehold costs and estimated drilling and completion costs for a 10% working interest. Upon receipt of the working interest to be acquired by exercising the Option, Stockdale has agreed to assign the working interest earned to Sharon Resources, Inc., the wholly-owned U.S. subsidiary of Sharon. The Option, as well as the contemplated assignment of the option interest, is subject to certain third party consents. The Option, as well as the right granted to Sharon pursuant to the Agreement, is also subject to the approval of the Vancouver Stock Exchange. The Agreement is conditional on closing of the Cdn$700,000 private placement announced on January 6, 1998, on or before March 3, 1998. Proceeds of the private placement will be used to fund a portion of the US$585,000 option price. Sharon will attempt to arrange additional financing for the balance of the option exercise price. Pursuant to the Agreement, the Company may also permit a third party to acquire 3% of the 10% working interest, whereupon the Company's interest will be reduced accordingly.
The key well in the South Lakeside prospect, the CMS-NOMECO Miami No. 1 well, was drilled in 1997 to test Oligocene Miogypsinoide sandstone pay at an approximate depth of 17,500 feet. Drilling results included a strong gas kick at the expected pay interval, however the expected payzone was not intersected by the wellbore and the well was plugged and abandoned. Subsequent evaluation of the wellbore position on 2-D and 3-D seismic reveals that the wellbore missed the target identified on the seismic. A re-entry will involve kicking out from the base of 9 5/8'' casing set to 14,000 feet and directionally drilling to an expected total depth of approximately 18,000 feet. Projected costs to Sharon's 10% interest through completion on the well are US$585,000. Other fields in the vicinity of the South Lakeside prospect have had cumulative production of 60 to 655 billion cubic feet of gas with associated condensate from the Miogypsinoide pay zones.
Sharon has previously announced a private placement financing on January 6, 1998, which is being effected by Canaccord Capital Corporation, as agent. Sharon and Canaccord have agreed to amend the terms of the private placement, whereby up to 3,500,000 Units will be issued at a price of Cdn$0.20 per Unit. Each Unit will consist of one common share in the capital of Sharon and one common share purchase warrant. Two common share purchase warrants will entitle the holder thereof to acquire one common share in the capital of Sharon at a price of Cdn$0.25 per share for a period of six months. In accordance with Blanket Order #97/12 of the British Columbia Securities Commission (the ''Commission''), Sharon will be filing an initial Annual Information Form with the Commission, whereupon the twelve-month hold period applicable to the securities will be reduced to four months. Accordingly, Sharon will not be proceeding with the prospectus filing contemplated in the January 6, 1998 news release.
Tappit Resources Ltd. (TPT/ASE) reported that its recent well to test the Red River Formation near Kisbey, in southeast Saskatchewan, resulted in a dry hole and the well is being abandoned. Tappit also announced that it has a working interest in two deep wells currently being drilled on its recently acquired acreage in southeast Saskatchewan (see news release 192.139.81.46 ).
INTERNATIONAL
Companies
Pendaries Petroleum Ltd. (PDQ/TSE) today announced the results of the CFD 1-1-1 well located on the 04/36 block in the Bohai Bay of the People's Republic of China. The well reached a target depth of approximately 13,960 feet and has been deemed not commercially viable. Although there were good hydrocarbon shows in an upper level over a 500 foot interval, further analysis indicated that this interval has permeability too low to permit commercial production. No significant shows of hydrocarbons were detected while drilling the buried-hill section.
"We are in the early exploration stage of a large inventory of over two dozen high-quality prospects, and we remain confident of the commercial viability of our long term corporate strategy," said Robert E. Rigney, Chairman and CEO of Pendaries. "To this end, during 1997, our proved reserves increased from 1.85 million barrels to 4.4 million barrels as a result of three successful delineation wells drilled on the CFD 2-1 prospect. In addition, we are currently involved in the process of evaluating a "fast track" production plan for the CFD 2-1 discovery area and are optimistic that our expectations will be met."
The 1998 drilling program for Pendaries includes exploration wellson three high potential prospects in Bohai Bay coupled with the drilling of the first exploration well on Block 27/11 in the SouthChina Sea. In addition to these exploration wells, Pendaries will complete 3D seismic interpretation on the CFD 2-1 prospect to aid in the development of the fast-track production plan now being studied. Also, the program calls for the evaluation by seismic and drilling of the CFD 11-1 prospect on Block 04/36 which recorded more than 200 feet of oil pay in the HZ-1 well drilled by the Chinese in 1973.
Pendaries has a 10 percent working interest in CFD 1-1-1, along with partners Kerr-McGee China Petroleum Ltd., a wholly owned subsidiary of Kerr-McGee Corp. (45 percent), and Murphy Pacific Rim Ltd. (45 percent). Block 04/36 is one of four blocks in Bohai Bay in which Pendaries has an interest.
Cachet Communications Inc. (ASE - CCE) announced that it has entered into an interim agreement to acquire all of the issued and outstanding shares of Neuquina Resources Ltd. ("Neuquina") in exchange for 6,000,000 common shares of Cachet. Neuquina is a private Calgary based international oil and gas company operating in Argentina through its subsidiary, Arcan Energy S.A. ("Arcan"). Arcan has acquired a 50 percent working interest in the 54 square kilometers Medianera Concession in the Province of Rio Negro, Argentina. Arcan is required to spend U.S. $3.6 million towards initial field development, operating and administrative costs by June 20, 1999 failing which Arcan may elect to pay to the vendor the residual unexpended amount or reduce its working interest pro rata in accordance with Arcan's actual expenditures. Arcan is the operator of the Medianera Concession and oilfield which has produced over 14 million barrels of oil to date. Neuquina, through Arcan, will apply its international expertise and its knowledge of Canadian oilfield technology to exploit the proven and potential reserves of the Medianera Concession and oilfield. An independent engineering report completed in June, 1996 identified 8.5 million barrels of proven reserves to the zones from which the majority of oil production has come in the past.
Cachet has also agreed to loan U.S.$250,000 to Neuquina on a secured basis, upon satisfaction of certain conditions. Closing of the transaction is subject to completion of due diligence by the parties and the entering into of a definitive agreement between Cachet and the shareholders of Neuquina, all of which are expected to be completed by February 17, 1998.
Cityview Energy Corp. provided an update on activity in Block GSEC 74 in the Phillipines. MMC Exploration & Production (Philippines) Pte Ltd has been advised by Arco Philippines Inc that they expect to spud Well No. Hippo-1 in Block GSEC 74 in the Southern Sulu Sea between February 11 and 13 1998. The seismic amplitude anomalies ("bright spots") to be tested by the well lie at depths respectively of approximately 3,200 feet (975 metres), 5,300 feet (1,615 metres) and 9,000 feet (2,743) metres) : it is anticipated that these targets will be reached approximately in 15, 25 and 45 days respectively. MMC Exploration & Production (Philippines) Pte Ltd holds a net 12.5% interest in Block GSEC 74. MMC Exploration & Production (Philippines) Pte Ltd is owned 51% MMC Exploration and Production BV and 49% CityView Energy Corporation Limited's wholly owned subsidiary Western Resources N.L.
Ram Petroleums Ltd. reported their well AIRU-1 has reached total depth of 6193'. It is the first exploratory well drilled by Ram on its 130,000 hectare (321,000 acre), Rio Putumayo Association Contract block in southern Columbia, where it holds 100% of the working interest. Live oil was indicated by significantly increased background gas, natural fluorescence and strong fast streaming to blooming cut of samples within a gross interval of 105'. Mud logging and sampling was done by Geoservices Limited. A Schlumberger logging unit is on its way to the location and logging should take place tomorrow.
Ram has used its own drilling rig, formerly Parker Drilling Rig No.154, to drill the well. After log interpretation, Ram plans to run and cement 7'' casing on Thursday and start production testing on Saturday.
Petrolex Energy Corp throws in the towel on Columbian operations. Adair International Oil and Gas Inc said Monday it agreed to acquire Colombian interests from Petrolex for undisclosed terms.
Adair said the assets to be acquired include a 15 percent carried interest in the Maracas Association Contract, a 223,482 acre tract where one well has been drilled that open flow tested 36 million cubic feet per day of natural gas.
The Maracas well has been described as one of the major discoveries in Colombia with estimated reserves being 50 to 300 billion cubic feet for the field, Adair said, noting about $4.5 million is being spent this year for additional drilling and exploration.
It said a 70 percent workinginterest in the Los Toches Association Contract covering 125,250 acres is also included. It is estimated the structures within Los Toches contains 59.5 million barrels of recoverable oil or gas equivalent.
About $500,000 is being spent to complete and test a the Santi 1 well there. Adair noted.
Countries
Columbia & South America
Security Concerns Counterbalance Opportunity In South America
As readers of Kerm's column, you have seen numerous comments regarding oil and gas activities in Columbia. Time and time again, I have posted articles of what's happening in Columbia. The bottom line objective was to make investors aware of what they were getting themselves into when investing into Canadian operations there. Someone else has finally picked up on the same subject.
South America presents many opportunities for the Canadian oil patch, but it poses an abundance of security risks as well, a seminar in Calgary was told last Thursday.
It is important for companies to consider the benefits, potential risks and the bottom line before sending employees into potentially dangerous situations, which can cost time, money and lives, speakers from Procon Protection Concepts, the Bison Security Group and NOVA Corporation said at the seminar hosted by the Canadian Council for the Americas.
In Colombia alone there were 1,822 kidnappings in 1997, up from 1,424 in 1996, according to Rod Cansdale of Procon. The average ransom demanded was $20 million (U.S.) and the average ransom paid was $1.4 million. The Occidental Petroleum Company pipeline in Colombia has been bombed 450 times since 1986, he added.
"It's not just the oil sector that's at risk," Cansdale said. "Industry as a whole is what's being targeted."
Petrolex Energy Corporation experienced two separate abductions in 30 days after operating in Colombia without incident for nine years, said Keith Fellowes, president and chief executive officer of the Vancouver based company. Two remaining employees, who were abducted from the Rubiales oil field on July 30, were safely returned on Jan. 31.
"Basically, about a dozen guys with big guns walked into our compound and rounded everybody up. They asked who was in charge and told our senior field engineer they wanted to chat. At the end of the day, that chat took six months," the Petrolex CEO recalled.
Fellowes said Petrolex built schools, bridges and other amenities for locals in the area and "naively" assumed it wouldn't become a target for guerrillas.
Paying ransom money is technically illegal in Colombia and he refused to disclose what, if any, concessions were granted the kidnappers to secure the release of Petrolex's employees other than to say the company "talked long and hard."
As a result of the kidnappings, the company's operations have been suspended for six months pending a review of security at operations sites, Fellowes said.
Part of what's fuelling these types of incidents are the opportunities for Canadian companies in Third World countries like Colombia, some of which are detailed in a recently released Canadian Energy Research Institute study.
Companies are increasingly looking to South America because the potential rewards far outweigh the risks.
Opportunities in the Southern Cone region of South America were examined by CERI using several scenarios for gas and pipeline development in Argentina, Bolivia, Brazil, Chile, Paraguay, Peru and Uruguay.
One conclusion of the study is that any new pipelines would be filled to capacity under best or worst case scenarios based on both the availability of resources and the projected demand, said Dr. Judith Dworkin, CERI's managing director.
There are several issues which have to be considered when operating in South America, including regulatory climates, attitudes toward foreign investment and the relative political and economic stability of individual nations, she added.
Countries like Colombia are attractive places to do business because operating costs are lower and rewards are higher, said Petrolex's Fellowes. The Rubiales oil field has proven recoverable reserves of four billion bbls, he indicated.
"If Rubiales were in Texas, we'd all be disgustingly wealthy. But companies like ours wouldn't even be able to get a leg in if that were the case. In a country like Colombia, smaller companies like ourselves can afford to pick up acreage we wouldn't be able to afford in a place like Texas," Fellowes said.
Even if Petrolex were forced to spend $500,000 per month on security, the cost compared to annual cash flow of $150 million would still be "withinbudget," he said. "If we have to build a big fence with gun turrets on it, we'll do whatever is needed to increase security."
The first concern of NOVA is the well-being of its people, said John Travers, director of corporate security for the company. NOVA goes out of its way to make sure its employees are housed in safe neighbourhoods, its offices are secure and personnel are adequately briefed on any potential risks before they leave Canada, he said.
"It even hits me. Sometimes I say to myself: 'I really don't like this place.' When you send people into a bad situation like that, not only do they get scared personally, but productivity goes down and they start to dislike the surroundings and the locals. It's bad for business," Travers said.
GHP Exploration Corporation (CDN:GHPX.U) announced the signing of a Memorandum of Understanding with Alliance International Petroleum Inc. (''Alliance'') whereby GHP shall farm-in to Alliance's 100% owned Central Sinai Concession, Block G. Under the terms of the Memorandum of Understanding, which is subject to execution of a definitive agreement and the approval of the Company's Board of Directors, GHP will earn a 25% working interest in the Concession.
The Block G concession consists of 4.5 million acres on the Sinai Peninsula bordering the eastern bank of the Gulf of Suez for more thin 100 km. Of particular interest are the portions of Block G that lie along the coastal area within the highly productive Gulf of Suez basin. This area is proven productive in three fields discovered by Shell using gravity techniques between 1946 and 1948. These fields, although within the confines of Block G, are excluded and held by the Egyptian General Petroleum Company (EGPC). Cumulative production from these fields is in excess of 100 million barrels of oil from shallow Miocene and Eocene formations at depths ranging from 2,000 feet to 4,000 feet. Additional potential also occurs from Carboniferous and Cretaceous age reservoirs that are currently producing 40,000 and 125,000 barrels of oil per day approximately 4 kilometers and 8 kilometers offshore in the Gulf of Suez.
In 1998 the joint venture partners plan to acquire 3-D seismic data over previously identified prospects and reprocess 2-D seismic along with some gravity/ magnetics and aeromag survey analysis. The first exploratory well is planned to be drilled during the first quarter of 1999.
GHP engages in the exploration for and development and production of crude oil and natural gas in the United States and Internationally with operations and interests in acreage in the Gulf of Mexico, onshore Texas, Utah and in Tunisia. The Company currently has 17.7 million common shares outstanding.
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