MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING FRIDAY, FEBRUARY 20, 1998 (6)
KERMS TOP 21 - SPEC 15 - SERV 9 COMPANIES IN THE NEWS
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KERMS WATCHLIST OF COMPANIES IN THE NEWS
Gulf Canada Resources (GOU/TSE) reported its year-end results for 1997. Revenue surged to $1.68 billion, up from $909 million in 1996. Gulf reported a $204-million profit for 1997 (62› a share), up from $37 million (3›) in 1996, helped by the partial sale of its Indonesian subsidiary. Cash flow increased to $592 million, from $440 million a year earlier.
Gulf Canada Resources Limited became a true international, diversified oil and gas exploration and production company in 1997. The acquisitions of Clyde Petroleum plc and Stampeder Exploration Ltd. added to Gulf's already large and prospective position internationally and in Western Canada. These actions present the opportunity in 1998 and beyond for Gulf to utilize its exploration and technological expertise to maximize the value of its assets. In addition, Gulf Canada successfully took Gulf Indonesia Resources Limited public, retaining 72.4 per cent, and establishing a US$1.7 billion net value for these assets.
Success in 1997 was recognized not only through these transactions, but also through the drill bit with sizable discoveries in Indonesia plus success in new international areas including Australia, the Netherlands and Yemen.
Average production on a barrel of oil equivalent (boe) basis increased 37 per cent to 180,000 boe/d. This increase was achieved in combination with reduced operating and G&A costs that averaged $7.05 per boe for the year versus $7.44 in 1996. Gross proved reserves increased 46% per cent to 912 million barrels of oil equivalent (mmboe) from 624 mmboe. This also equates to a production replacement rate of over 450 per cent. Probable reserves more than doubled to 618 mmboe indicating a sizable base for future proved reserve additions. Financially, earnings grew to $0.62 per share from $0.03, largely as a result of the gain realized after the Gulf Indonesia public offering, and cash generated increased 14 per cent to $1.96 per share.
Gulf continued with its strong finding and development costs record with gross proved reserve averaging $6.56 per boe for the year and $5.28 per boe using a three year average. For Western Canada conventional, the averages are $5.54 per boe for 1997 and $5.97 per boe using a three-year average. The 1997 finding and development cost figure does not include discoveries recently announced in Australia, Indonesia and Yemen, which will be delineated in 1998.
During the year, Gulf invested $1.1 billion in exploration and development and completed $1.9 billion worth of acquisitions. Funding included $0.6 billion in cash generated from operations, $1.1 billion from asset sales and the Gulf Indonesia public offering, approximately $1.0 billion in equity issued and $0.5 billion in new debt net of repayments and cash.
The 1997 capital and exploration expenditure budget of $1.1 billion was significantly higher than $644 million in 1996. The capital program was applied to North America (53%) and Indonesia (32%), and the remainder to other international programs.
Highlights from Gulf's 1997 operations include:
Western Canada
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- Canadian conventional light oil and natural gas production averaged approximately 100,000 boe/d.
- Capital expenditures for the conventional light oil and natural gas operations of $450 million funded 588 wells and a significant investment in infrastructure and processing facilities in and around Gulf's west-central Alberta holdings. Gulf is positioning the region to take advantage of improved gas markets expected beginning in late 1998.
- Gulf formed several innovative joint ventures/alliances with aligned parties, bringing together prospective natural gas exploration properties, infrastructure and shared expertise to more quickly and economically explore large land positions. These alliances allow Gulf to accelerate the exploration and development of large areas.
- Divestitures totaled $451 million, of which $366 million is from the fourth quarter including the sale of the Zama Virgo properties, were completed and funds received were applied to reduce debt.
- Gulf Heavy Oil was established in October, and it is now being positioned for public offering later this year or in 1999. Timing of the offering will depend upon market conditions and the differential obtained for heavy oil, as well as technological results from the Surmont pilot thermal recovery project. Steam injection at the Surmont pilot project began in August and reservoir response has been encouraging to date. Results required to make a decision regardin commercial production potential are expected by yearend 1998. If successful, Gulf estimates ultimate recoverable reserves of more than two billion barrels.
- In November, the owners of Syncrude approved a plan to double the size of the Syncrude project in a four-stage expansion program to be completed in 2007. Gulf holds a 9.03 per cent interest in Syncrude and its shares of 1997 production averaged 18,600 b/d. Gulf also administers the Athabasca Oil Sands Trust that holds an 11.74 per cent interest in Syncrude.
Indonesia
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- Indonesia crude oil production averaged 22,500 b/d, up from 13,900 b/d in 1996, due to the acquisition of Clyde Petroleum plc's Kakap assets early in the year.
- Cash generation from Indonesia was $100 million for the year, or $0.26 per Gulf Canada share.
- An 80 per cent increase in exploration activity resulted in significant finds, including the Mengoepeh oil discovery and the Rayun and Bungin natural gas discoveries.
- The Corridor natural gas development project (54% WI) is on time and on budget, with start-up expected in fall 1998.
North Sea and Australia
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- Daily sales volumes averaged 18,500 barrels of oil and natural gas liquids and 62 million cubic feet natural gas in the North Sea. Development of the Ross field (14.5% WI) is underway.
- Australian production averaged 5,000 boe/d in 1997. Gulf announced the Tenacious wildcat discovery (25% WI) offshore in the Timor Sea. This discovery identifies a new reservoir which Gulf will be delineating in 1998. Development scenarios are currently being discussed.
''Gulf has undergone a terrific year of geographic diversification and expansion of operations with significant increases in cash flow and earnings per share'' says Richard (Dick) H. Auchinleck who was recently promoted to the position of President and Chief Executive Officer and appointed to Gulf's Board of Directors. ''Moving forward into 1998, Gulf is well positioned to maximize the value of its sizable and geographically diversified asset base Operating activity will focus on delivering value from our existing core assets. Corporate activity will concentrate on our debt repayment program announced today and achieving an investment grade credit rating from U.S. agencies.''
Gulf Canada Resources Limited (GOU/TSE) announced a significant debt reduction program, including the sale of North American and international producing and non-producing assets and the creation of an infrastructure trust in Western Canada, with target proceeds of approximately $850 million.
Gulf has hired RBC Dominion Securities Inc. to assist in the creation and marketing of an infrastructure trust to capture value by selling approximately 49 per cent of a portion of the Company's extensive network of gas transmission and processing facilities with one billion cubic feet of sour gas processing capacity in west-central Alberta, a highly prospective area for natural gas. Gulf has made a significant investment in these assets over the past three years to increase capacity to handle and process third-party gas volumes. The long-life infrastructure trust will monetize third party processing revenues. Gulf will continue to operate the facilities and maintain the flexibility to process its gas volumes in what the Company believes is becoming a very exciting gas market.
In addition, the company plans to sell its interest in the United Kingdom North Sea. Budgeted 1998 production from interests in four non-operated oil fields is approximately 19,000 barrels per day, less than nine per cent of GulfŠs total budgeted production. The company also has two projects currently under development, and onshore and offshore exploration licenses totaling 500,000 undeveloped acres. The Company's Netherlands North Sea assets will not be part of the divestiture package.
Gulf also plans to sell approximately $100 million of non-oil and gas assets including its Mount Klappan coal deposit, its large acreage position near Reno, Nevada, and approximately $50 million of non-producing Canadian assets.
Adds Gulf's President and CEO Dick Auchinleck, ''The program announced today will not distract us from our aggressive 1998 exploration and development program that calls for capital investment of nearly $1 billion in our core assets. The divestiture program allows us to focus on those core areas that can continue to generate significant growth rates for the company. We believe that Gulf is significantly undervalued in today's market. We plan to move quickly to capture unrealized value from our assets and reduce debt to approximately 2.5 times cash flow within the next 12 months. The benefits of having an investment grade balance sheet and the financial flexibility that will give us more than offset the modest impact this program will have on production volumes and cash generation.''
In another move today, the Board of Directors of Gulf adopted a Shareholders' Protection Rights Plan. The Plan will be presented to the shareholders for ratification at the Gulf Annual and Special Meeting on April 30, 1998.
See Feature Stories on Gulf Canada Resources. For further detail and tables, see Message 3489205
Symmetry Resources (SYO/TSE) updated their winter activity.
Dawson, Alberta
Development of Symmetry's principal property in north-central Alberta has progressed on three fronts: land acquisition, seismic acquisition, and successful drilling.
At the January 21 Alberta Crown sale, Symmetry, with its joint venture partner, acquired three sections of Slave Point rights offsetting existing acreage. Current company land holdings in the area for Slave Point rights offsetting existing acreage. Current company land holdings in the area for Slave Point rights total 5,760 gross and 3,520 net acres. Further agreement was reached to post several more parcels of land for a late spring Crown sale.
As a result of winter geophysical activity, seismic coverage now includes approximately nine square miles of 3D data complemented by 70 miles of conventional data. A larger 3D program of up to 14 square miles is currently planned for early summer over newly acquired lands and lands now posted by Symmetry.
A multi-well drilling program commenced in early December including three Symmetry-operated wells (two joint wells at 50% and one at 100%), and three 50% partner-operated wells. All six wells have been cased as Slave Point oil wells. Drilling statistics reflect the exceptional nature of this developing play with a 100% success rate for the first fourteen wells that Symmetry participated in. Four of the wells drilled this winter have been completed and are on production while the last two are waiting on completion. The company's 100% 4-36-79-16 W5 well is producing at a rate of 250 barrels of clean oil per day, while another Symmetry-drilled joint well is producing in excess of 500 BOPD. The other two joint wells have recently gone on-stream at stabilized rates in excess of 250 BOPD. Lease surveys are being acquire on three new locations with a fourth location already built and expected to spud soon. At least one of these locations will test a 100% Symmetry anomaly.
The expected cumulative effect of these new completions, the reinstatement of shut-in production due to over-production of allowables in 1997, and of new drilling between now and break-up is a first quarter company exit rate in excess of 2,300 BOE/D.
Elk Valley, British Columbia
Symmetry Resources Inc. successfully acquired more than 11,600 acres of mineral rights at a Crown sale in British Columbia in November, 1997. This large tract of contiguous acreage in the southeast foothills of B.C. was purchased for the purpose of evaluating a large reserve base of methane gas associated with several coal beds at depths of less than 2,300 feet. Gas content analyses of the coals in this valley indicate methane reserves in excess of 100 BCF with about half of this potentially recoverable. |
