MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, FEBRUARY 18, 1998 (7)
INTERNATIONAL COMPANIES IN THE NEWS
Gulf Indonesia Resources Limited (GRL/NYSE) made significant strides and achievements throughout 1997. In short, a public offering of 28 per cent of the company in September, sizable exploration successes and the acquisition of Clyde Petroleum Plc's producing assets in Indonesia have expanded operations and realized value for the Company beyond what could have been envisioned a year ago. Gulf Indonesia's assets provide a tremendous base for future expansion, and the Company looks forward to extending its 36-year history in the area into the next millenium.
Operational highlights for 1997 include:
- Crude oil sales volumes increased 62 per cent to 22,500 barrels per day as a result of the Clyde assets acquisition.
- Proved crude oil and natural gas reserves increased 40 per cent to 168 million barrels of oil equivalent, primarily from Gulf discoveries, but also as a result of the acquisition. This equates to a production replacement rate of over 500 per cent for the year.
- The acquisition of Clyde Petroleum (Kakap) for $105 million added 22.6 million barrels of oil equivalent gross proved reserves and 8,700 barrels to daily production.
- In February, project financing was obtained from a consortium of lenders for the Corridor Block Gas Project. Gulf's share of the limited recourse loan totaled $270 million of which $150 million was drawn by year end, reflecting the significant progress made in construction of the field facilities.
- Drilling successes announced in the second quarter included delineation drilling on the Corridor Block resulting in confirmation of a large extension of the Sumpal structure; the first discovery well on the 100 per cent Gulf held Tungkal PSC, which showed both oil and natural gas; and an oil discovery made on the currently producing Kakap PSC.
- Two new natural gas discoveries were added to the 1996 Bungkal discovery on the South Jambi 'B' PSC adjacent to the Corridor Block, providing additional reserves with the potential to be developed as another Corridor-size project.
- The promising Halilintar well, spudded near year end, is the deepest well Gulf has ever drilled in Indonesia; results are expected early in the second quarter of 1998.
Gulf Indonesia's 1997 operating revenue was generated primarily from crude oil sales from production at the Kakap and Corridor Blocks. Net oil revenue of $117 million for the year was 54 per cent higher than in 1996, primarily due to production from the acquired Kakap PSC. This was offset slightly by a lower average oil price received of $19.12 versus $20.09 per barrel in 1996.
Cash generated from operations of $73.9 million increased approximately 74 per cent over 1996, due mostly to the impact of the Kakap acquisition. Earnings of $8.3 million were approximately $1 million lowe than in 1996, mainly due to the extensive drilling program and associated dry hole costs that offset the benefits from higher production.
Capital expenditures and exploration expenses of $268 million in 199 reflected a much higher level of investment activity compared to $52 million in 1996. Capital expenditures included construction and drilling costs associated with the Corridor Project of approximately $178 million; 89 per cent of the project facilities and 59 per cent of the drilling were completed by year end. Drilling activity also increased significantly, resulting in six discoveries during the year including Mengoepeh, Tetangga and Rayun. The exploration drilling success rate exceeded 50 per cent. Gulf Indonesia also announced a discovery at Bungin in January 1998.
In September, the Company completed a public offering of 28 per cent of its outstanding shares (the remainder of the shares are held by Gulf Canada Resources Limited). The Company actively trades on the New York Stock Exchange under the symbol GRL and is actively pursuing a listing on the Jakarta Stock Exchange. At the time of the initial public offering, the stock sold for $19.50 per share, creating a recognized value for the Company of $1.7 billion. From this transaction, the Company netted approximately $100 million (after inter-company repayments and a dividend to Gulf Canada) that can be applied to the 1998 capital budget.
For much greater detail and review of properties, along with tables of data, see Message 3470274
Primeline Energy (VSE/PEH) provided further details of the reserve estimates in its news release dated February 16, 1998.
The estimates in the release were based on the result of a post well evaluation which was conducted by Primeline's own technical team in conjunction with Quad Consulting Ltd., a United Kingdom-based resource consulting firm involved in oil and gas exploration and development worldwide.
Management's post well evaluation utilized the data collected during drilling and testing the Vicky-1 (LS36-1-1) well including electric log data, drill stem test data, analytical data of the samples collected from the well and geophysical data. The structural closure has been re-interpreted/re-mapped in detail incorporating the well results. The reserve estimates were calculated probabilistically in order to not overstate the situation but at the same time not overlook the potential. The discovery is the first in the area and is located 100 km from the coast of China, 140 km from Wenzhou, a major city in South East China, in Zhejiang Province. However, this is a ''frontier discovery'' so the hydrocarbons discovered cannot be assigned as either ''proved'' or ''probable'' as defined in Canada's National Policy Statement 2-B at this early stage.
The ''most likely recoverable reserve'' of 660 billion cubic feet (bcf) of gas quoted was calculated by Primeline according to normal industry practice from the reservoir which was clearly demonstrated by the well data of Vicky-1 (LS36-1-1). The final reserve calculation will, however, require future appraisal drilling before the overall development program can be established.
The ''potential recoverable resource of over 4 trillion cubic feet (tcf) of gas'' describes the potential resources in the identified adjacent prospects within a 20 km radius to the Vicky-1 discovery if these prospects are successfully drilled. These prospects have geological similarities to the Vicky-1 discovery as indicated by seismic mapping and inversion processing.
As previously announced, Primeline intends to supplement its initial evaluation with a 3D seismic survey this spring before commencing with the drilling of appraisal wells in the locations identified following processing of the 3D seismic data. Once the results are obtained from one or more appraisal wells, there will be sufficient data for Primeline to commission an independent reserve report in accordance with National Policy Statement 2-B.
Primeline owns a 75 percent interest in Block 32/32, a 6,000 square km (1.5 million acres) concession block in the East China Sea. Primeline is exclusively focused on oil and gas exploration and upstream business opportunities in China.
Ram Petroleums Ltd. RPL.A/TSE) announced that it has been informed by Schlumberger that the logistical problem with the logging unit has been resolved. The unit is scheduled to be on the AIRU-1 location on February 25, 1998. The AIRU-1 well is a 6,193' indicated oil discovery in the 130,000 hectare (321,000 acre) Rio Putumayo Association Contract in southern Colombia in which Ram has a 100% working interest.
In view of the delay resulting from this logistical problem and the resulting risk of collapse of shales in an uncased hole, Ram ran and cemented 7'' casing yesterday. Ram will be working closely with Schlumberger to optimize the information that will be obtained from cased hole logs.
Del Mar Energy Inc. (DEM/ASE) reported the successful completion of the side track of its Mora 3 Well in the 5,034 acre Mora Block located offshore on the East Coast of Trinidad. Del Mar owns an indirect partial interest in a company Mora Oil Ventures Ltd. (''Mora Oil'') a Trinidad company with an offshore oil and gas license in Trinidad called the Mora Block.
The Mora 3 Well penetrated 200 feet of oil pay in the C-35 sand. Production and reservoir testing will be implemented over the next week to establish a stabilized production rate. In the first 20 hours, the Mora 3 Well tested at 600 BOPD at 18/64'' choke and 380 BOPD at 16/64'' choke. For comparative purposes, the Galeota Ridge 4 discovery well in the C-35 sand tested at 605 BOPD at 20/64'' choke and 3,108 BOPD at 44/64'' choke. The Mora 3 Well is producing the C-35 sand for the first time.
Del Mar, through its ownership in Mora Oil, plans to undertake further development and exploration activities on the Mora block in 1998 to further increase production.
Del Mar is currently evaluating several other onshore and offshore oil and gas projects in Trinidad as part of its strategic alliance agreement with Dr. Krishna Persad and Mr. Darcy Carr, two well respected oil strategists based in Trinidad.
Kyrgoil Corporation (KGO/TSE) announced continued increases to volumes of refinery production for Kyrgyz Petroleum Company, the Corporation's joint venture in the Kyrgyz Republic.
From the Kyrgyz Republic, Mr. Roth indicated that in the fourth quarter of 1997 gross average daily refinery production increased to 3,127 barrels per day (bpd) from 2,542 bpd refined in the third quarter and 1,572 bpd refined in the first half of the year. These gross figures include the crude oil supplied to the refinery by Kyrgyzneftegaz, the Republic's national oil company. KPC earns 25% of the Kyrgyzneftegaz volumes refined as a processing fee.
Net to the KPC joint venture, fourth quarter refinery production increased to 2,470 bpd from the 1,433 bpd reported for the third quarter and the 660 bpd reported for the first half of 1997. All of the refined petroleum products produced have been sold in the domestic Kyrgyz market.
Kyrgoil also announced that Mr. Ray Cej will be resigning as Chairman of the Corporation effective February 28, 1998 to pursue another opportunity. The Corporation wishes to acknowledge the significant contribution that Mr. Cej has made to the Corporation and wishes him success in his new endeavors.
Kyrgoil's corporate focus continues to be on increasing refinery production volumes, increasing operating cash flow and completing the required technical work to develop the upstream assets prior to commencing a development drilling program in the exclusive licensed areas held by KPC.
Kyrgoil Corporation is a Canadian-based public company. Its operations in the Kyrgyz Republic are conducted through Kyrgyz Petroleum Company, an integrated oil company formed and owned equally by Kyrgoil and Kyrgyzneftegaz.
Kappa Energy Company Inc. (KAP/TSE) announces its decision to abandon the Al Hijera-2 exploratory well in Yemen. Interpretation of electric logs run in the well showed the target reservoir sandstones to be water bearing.
Kappa will continue its 1998 exploration program with the Nabors 217 drilling rig moving to Kappa's second exploratory location, South Ma'ber-1 which is located approximately 20 kilometers west of the Al Hijera location. The Company anticipates this well will spud in approximately 2 weeks.
Kappa plans to drill a total of six or seven wells during 1998. Drilling in Colombia is expected to commence late in the second quarter with a well in the Cucuana block in the Upper Magdalena Valley. The Colombian drilling program will continue throughout 1998.
Kappa Energy Company Inc. is a Calgary based international oil and gas company with current exploration operations in Colombia, Egypt and the Republic of Yemen.
Lateral Vector Resources Inc. (LVR/TSE) announced that its Shareholders have approved a resolution which provides the company's board of directors with the discretion to consolidate the shares of the corporation on the basis of one newly issued common share in exchange for ten common shares or such lesser number of common shares as the directors may approve. A total of 99% of all ballots cast at the special meeting voted in favour of the consolidation which now enables the Company to pursue a listing on a US stock exchange.
LVR believes a listing on a US exchange is desirable for the followin reasons:
1. Approximately 25% of LVR's outstanding share capital is held by US residents;
2. The Company believes there is the potential to expand the shareholder base in the U.S.; and
3. The company is already an SEC registrant and filer in the US.
The Shareholders approved a two-year time period, within which the Company can effect the consolidation. The exact timing of the consolidation and pursuit of a listing will be at the discretion of the board but will be scheduled to coincide with other corporate developments in order to maximize shareholder value. The directors of LVR may elect not to act on or carry out the consolidation withoutfurther approval of the shareholders at any time prior to effecting the consolidation. The details of the consolidation are subject to the approval of The Toronto Stock Exchange. The Company intends to maintain its listing on The Toronto Stock Exchange.
Lateral Vector Resources Inc. is a Canadian resource company with head office in Saskatchewan. The Corporation specializes in international oil projects.
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