MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, FEBRUARY 24, 1998 (6)
OTHER COMPANIES IN THE NEWS
Merit Energy Ltd. (MEL/TSE) updated their recent activity from the first of the year. Merit was successful in acquiring 2,000 barrels of oil equivalent per day and 275,000 net acres of land from Rigel Oil and Gas Ltd. The assets are located in Southwest Saskatchewan. An estimated 8.0 Mmcf per day of natural gas per day from the properties should come onstream in the second quarter of 1998.
Effective January 1, 1998, an alliance was formed with Gulf Canada Resources Ltd. which covers 420,000 acres in the Company's core East Central area of Alberta. As operator of the alliance, Merit will spend $20 million in net capital drilling 50 wells during 1998. The combination of Gulf's extensive seismic and land base and usage of Merit's processing facilities will allow the Company to maximize operating efficiencies in this key area.
Merit has drilled another 100% working interest discovery well in the Little Bow area of southern Alberta. Preliminary indications on this new pool discovery suggest the well will produce at rates of 4 Mmcf per day from the lower Mannville formation. Additional seismic data is being assembled to define offsets to this location. Merit has approximately 6,500 gross acres of undeveloped land in proximity to the discovery. Production tests are currently underway to prepare the well for tie-in.
In the Manitou area of western Saskatchewan, Merit has drilled a successful 100 percent step-out well in the McLaren formation. Tests indicate the new well will produce at 2 Mmcf per day. This well substantially increases Merit's gas reserves in the area. The Company plans additional drilling in the area on 18,000 net acres of offset lands.
Tessex Energy Inc. (TES.A/ASE) announced that it has entered into a Letter of Intent relative to a Plan of Arrangement with Encounter Energy Inc., a privately held oil and gas company. The new company will be positioned for rapid growth with over $7.0 Million working capital and a current annualized cashflow of approximately $2.5 Million. Current production is 625 BOED which is anticipated to increase to 800 BOED over the next several months. The new Company will operate under the name of Encounter Energy Inc. See Internal Affairs for further information.
Sharon Energy Ltd. (SHY/VSE) announced that the Henning #1-15 well was placed on production February 17, 1998. Production during the first week was stabilized at a restricted rate averaging 1,200 MCFD from one Cretaceous Forbes zone with perforations from 5565-68. The Henning #1-15 well is located in Section 15, T21N-R2W, Glenn County, California. The Henning well is the fourth well drilled in Sharon's Merlin 3-D Gas Project, and the second new pool discovery completed for production. Several additional zones remain to beperforated in the well once production testing has been completed on the initial zone. Equity Oil of Salt Lake City, Utah, is the operator of the Merlin Prospect in which Sharon has a 20% working interest.
Sharon further reports that it has received a proposal for a fifth well in the Merlin 3-D Gas Project from Equity. The Otto Loshe #1-22 will also target the Cretaceous Forbes and is scheduled for drilling later this spring in Section 22, T21N-R2W with a projected total depth of 5,665'.
T & H Resources Ltd. (THE/TSE) is pleased to announce that the Winfield Ranch 17 No. 1-E Well, located near South Fort Stockton, Pecos County, Texas commenced drilling over the weekend. BayTech, Inc. of Texas is operator of the project.
The primary drilling objective will be the Ellenburger Formation at 26,000 feet with the secondary objective being the Devonian Formation. The adjacent Gomez Field to the northwest has produced 4.7 trillion cubic feet (TCF) of gas of the 7 TCF of recoverable reserves while the adjacent McComb Field to the north has produced 50 billion cubic feet (BCF) of the 160 BCF of recoverable reserves and the Puckett Field 15 miles to the southeast has produced 3.8 TCF of the 5 TCF of recoverable reserves.
T&H has paid 20% of the turnkey cost of the drilling and completion of one well to earn a 20% interest in the initial well and a 15% interest in the contract lands. T&H's interest in the initial well is subject to BayTech's 25% back-in after payout. Following payout of the initial well, T&H will have a 15% working interest in all subsequent operations in the entire leasehold of 5,280 gross acres (3,920 net acres).
Pioneer Natural Resources, Inc. (PXD/TSE) announced today test results from the recently drilled Eugene Island Block 208 K-4 well.
The K-4 well is a dual completion which tested at a total rate of approximately 3,200 barrels of oil and 7 million cubic feet of natural gas per day from two intervals between 6,400 feet and 9,000 feet. The well was drilled on the flanks of a salt dome to test potential hydrocarbon accumulations defined by 3-D seismic data. A total of 90 feet of hydrocarbon pay was encountered. An additional interval in the well was completed as an alternate for future production. The well was drilled from existing facilities and began producing immediately.
Pioneer operates and owns 75 percent working interest in the K-4 well located 70 miles south of Morgan City, La. in 100 feet of water. This property was acquired via the acquisition of Greenhill Petroleum in April, 1997. Three additional wells are planned to test similar objectives from the adjacent "J" platform. Pioneer continues to evaluate higher impact exploration opportunities in the field area from deeper horizons.
INTERNATIONAL
Companies
Sands Petroleum AB ( SPB/TSE) is announced that the "Borgny Dolphin" semi-submersible drilling rig has been mobilized from the North Sea and is expected to arrive in the Falkland Islands in early May. Several large, well defined prospects exist on the Company's 6 blocks (Tranche F) offshore the Falkland Islands.
The drilling rig will be shared with 3 other licence holders in the area. Sands' first of two exploration wells is expected to be spudded in October, 1998. The other 3 licence holders will drill their first wells ahead of Sands starting with Amerada Hess as soon as the rig arrives.
Tranche F comprises an area of 1,600 square kilometres and is situated in the North Falkland Basin. Geologically, the North Falkland Basin is similar to the North Sea and is one of the few large sedimentary basins that has not yet been explored for oil.
To date, the Company has acquired 2,625 line kilometres of existing seismic data and 1,600 line kilometres of new seismic data. Several potential reservoir sequences have been identified and include syn- rift sandstones of mainly Jurassic and Lower Cretaceous age; post- rift sandstones and reefal carbonates of Valanginian to Albian age; and others. Various source rock intervals are thought to be present in the Jurassic-Cretaceous sequence and modeling has shown these intervals to be mature for oil and gas. Numerous structures are present in the area including fault-bounded three-way dip-closed structures at the Jurassic and Lower Cretaceous levels.
Sands holds a 100 percent interest in Tranche F.
AltaQuest Energy Corporation (AQF/TAE) announced that it has closed the previously announced acquisition of a natural gas property in the Sylvan Lake area of Alberta. The acquisition, effective December 1, 1997, has strategic value in AltaQuest's existing core area of Sylvan Lake. The upside potential of the property will be realized in 1998 with well recompletions, development drilling and plant optimization. AltaQuest plans to drill five wells in the area this year with netforecasted 1998 exit production from the property expected to be 750 barrels of oil equivalent per day (BOE/d).
AltaQuest plans to drill up to five wells (24.5 percent working interest), starting in June of this year, on its Fiskerton discovery in the United Kingdom. With these wells, and an anticipated pipeline tie-in in June of 1998, net production should average 165 barrels of oil per day in 1998 and exit the year at 630 barrels of oil per day. This production, along with our domestic forecasted production, nets the company an average 900 boe/d and exit 1998 at 1500 BOE/d.
As well, AltaQuest has secured a rig for its next exploration location at Newton-on-Trent (20 kilometres to the west of Fiskerton) and anticipates a spud date within the next two weeks. AltaQuest has a 50 percent APO working interest in Newton-on-Trent, which will test a similar geologic feature as its Fiskerton discovery.
AltaQuest has applied for 100,000 net additional acres surrounding our East Midlands acreage. It is anticipated that the successful bidders will be announced imminently by the Department of Trade and Industry in London.
TransGlobe Energy Corporation (TGL/TSE) announced that it has completed a farm out agreement for the S-1 Block in the Republic of Yemen with Vintage Petroleum International Inc.("Vintage"), a 100 percent subsidiary of Vintage Petroleum Inc., a large U.S. independent exploration and production company based in Tulsa, Oklahoma and listed on the New York Stock Exchange. The agreement will allow Vintage to earn a 75 percent working interest in the S-1 Block by funding 100 percent of TransGlobe's exploration commitments for the first exploration period of 2.5 years under the Production Sharing Agreement ("PSA"). TransGlobe will pay 25 percent of the signature bonus, agents fees and finders fees required to be paid and Vintage will pay 75 percent. The PSA has been forwarded to the Yemen Parliament for ratification which is expected to take ninety days. After ratification Vintage and TransGlobe will commence the first period exploration work commitments consisting of 150 square kilometers of 3-D seismic and the drilling of three exploratory wells.
PIPELINES
The National Energy Board has set down for public hearing an application by AEC Suffield Gas Pipeline Inc. (AEC Suffield) of Calgary to construct and operate a natural gas pipeline from southeastern Alberta to southwestern Saskatchewan. The hearing will commence on Monday, 25 May 1998 at a location to be announced at a later date. Interventions are due by Thursday, 19 March 1998.
The company is applying to construct approximately 114 kilometres (71 miles) of new pipeline and associated control facilities which will begin near the southwestern corner of the Suffield Military Block in Alberta, extend along the southern end of the military block and then northeast to join the TransCanada PipeLines Limited system near Burstall, Saskatchewan.
The AEC Suffield pipeline will have a design capacity of approximately 5.67 million cubic metres (200 million cubic feet) of natural gas per day. The estimated capital cost of the project is $26.2 million.
ENERGY TRUSTS
NCE Resources Group (NCD.UN) announced that NCE Diversified Income Trust has declared a cash distribution of three cents ($0.03) per unit. The distribution is payable on March 6, 1998 to holders of record on February 27, 1998.
EARNINGS REPORTS
Niko Resources Ltd. (ASE/NKO) announced its financial results for the three and nine months ended December 31, 1997.
During the three months ended December 31, 1997 operating revenue increased to $971,000 compared to $447,000 in 1996. Cash flow from operations rose to $510,000 or $0.025 per share compared to $292,000 or $ 0.015 per share in 1996. The Company earned $234,000 or $0.011 per share compared to $260,000 or $0.013 per share in 1996.
For the nine months ended December 31, 1997 revenue was $2,097,000 compared to $892,000 in 1996. Cash flow from operations was $1,106,000 or $0.054 per share compared to $353,000 or $ 0.022 per share in 1996. Net income was $497,000 or $0.024 per share compared to net income of $270,000 or $0.010 per share in 1996.
Merit Energy Ltd. (MEL/TSE) reported 1997 results. Revenue increased 446 percent to $18,893,424, compared to $4,240,782 in 1996, while funds from operations increased 585 percent to $11,358,248 ($0.52 per share) from $1,942,293 in 1996 ($0.17 per share).
Net earnings for the year ended December 31, 1997 were $4,426,587 ($0.20 per share) compared to $410,925 ($0.04 per share) in 1996.
Net capital expenditures amounted to $75,036,093 in 1997 compared to $19,448,710 in 1996. The capital program was financed by cash flow, bank debt and equity. At December 31, 1997 the Company's long term debt was $24.9 million compared to $5.5 million at December 31, 1996.
The Company achieved a 1997 exit production rate of 5,200 Boe per day, a 222 percent increase over the 1996 exit production rate of 1,614 Boe per day.
Fourth quarter 1997 oil and liquids production averaged 854 Bbls per day up 307 percent over the fourth quarter 1996 results of 210 Bbls per day. Fourth quarter 1997 natural gas production averaged 44.9 Mmcf per day up 441 percent over the fourth quarter 1996 results of 8.3 Mmcf per day.
1997 average natural gas production was 26.6 Mmcf per day up 269 percent from 7.2 Mmcf per day during 1996 and oil and liquids production was 678 Bbls per day up 434 percent from 127 Bbls per day in 1996.
Merit drilled 65.7 net (83 gross) wells resulting in 23.6 net oil wells, 30 net gas wells and 1.5 net service wells for an overall success rate of 84%.
1997 activity resulted in net proved and probable reserve additions of 4,069 Mbbls of oil and liquids and 96.8 Bcf of natural gas or 13.7 million barrels of oil equivalents representing replacement of 1997 production by 11.2 times.
Finding costs inclusive of all additions and revisions on a cumulative basis was $5.66 per Boe proven and $4.12 per Boe proven and probable at December 31, 1997. Continuing with the Company's commitment to capital infrastructure, Merit spent $7,095,733 on facilities in 1997 compared to $6,691,591 in 1996. This spending represents 9.5 percent of the capital expenditures for 1997 (34% in 1996).
Finding and development costs inclusive of all additions and revisions on a cumulative basis was $6.71 per Boe proven and $4.88 per Boe proven and probable at December 31, 1997.
Undeveloped land increased 136 percent during 1997 to 187,096 net acres from 79,272 acres in 1996.
For further info, with table data, see Message 3521837
Cotton Valley Resources Corporation (KTN/AMEX) announced financial results today for the six months ended December 31, 1997.
The condensed consolidated net income after tax was $54,403 on revenue of $1,157,985. This compares very favorably with a net loss of $602,116 on revenue of $41,365 for the comparable period in the previous fiscal year. The Company reported revenue of $532,784 and net loss of $78,919 for the second quarter.
"The slight drop in revenue and slight increases in general and administrative expenses from the first quarter to second quarter were due mainly to the concentration of efforts to bring additional equipment and facilities on-line at the Mustang Companies," stated Gene Soltero, CEO and chairman of Cotton Valley. "Of key importance to the Company's strategy, we completed the organization of our Mustang oilfield services operating subsidiaries including Mustang Oilfield Equipment Company, Mustang Horizontal Services, Inc. and, most recently, Mustang Well Servicing Company."
"As a result, our well workover program has begun and is progressing rapidly. Currently, we are now operating our own workover rigs in the Means (Queen) Unit purchased in the first quarter and the Sears Ranch property which we purchased during the second quarter. While it is premature to quantify, initial development is resulting in increased production, revenues and income from oil and gas."
"Finally," concluded Soltero, "we are quite pleased with the progress of our Mustang operating companies. In one quarter, these subsidiaries have put together technical personnel equipment and are really moving forward with our development programs. While that is our primary motivation, Cotton Valley isalso poised to benefit from increasing incremental revenue from third-partyequipment sales and oilfield servicing. For the Company as a whole, we expect our third quarter and fourth quarter of this fiscal year to show materially increasing gains over the results of the first half. The condensed consolidated statement of operations for the first half of FY 1998 and the condensed consolidated balance sheet for December 31, 1997, are attached."
Cotton Valley Resources Corporation concentrates on acquiring and improving Texas and Oklahoma oil and gas properties using new technologies and its own service companies. There are approximately 17 million common shares outstanding.
Granger Energy Corp. (GAS.A/ASE) See Kerms Top 21 - Spec 15 - Serv 9 Companies In The News
Gulfstream Resources Canada Limited (GUR/TSE) See Kerms Watchlist Of Companies In The News
New Cache Petroleum Ltd. (NWA/TSE) See Kerms Watchlist Of Companies In The News
Encal Energy Ltd. (ENL/TSE - ECA/NYSE) See Kerms Watchlist Of Companies In The News
Ranger Oil Limited (RGO/TSE) See Kerms Watchlist Of Companies In The News
Crestar Energy Inc.(CRS/TSE) See Kerms Top 21 - Spec 15 - Serv 9 Companies In The News
FINANCIAL
Berkley Petroleum Corp. (bkp/tse) announced that it has successfully closed its previously announced offering of 2,000,000 common shares issued on a "flow-through" basis at $17.00 per share pursuant to its final prospectus dated February 5, 1998. The offering was underwritten by a syndicate of Canadian investment dealers led by Nesbitt Burns Inc. and First Marathon Securities Limited, and including Bunting Warburg Inc., CIBC Wood Gundy Securities Inc., FirstEnergy Capital Corp., Peters & Co. Limited and TD Securities Inc. Gross proceeds were $34,000,000.
Proceeds from the issue will be used to fund Berkley's ongoing exploration activities.
INTERNAL AFFAIRS
Canadian 88 Energy Corp. (EEE/TSE) announced that it will be proceeding with a normal course issuer bid to purchase, through the facilities of the Toronto Stock Exchange, up to 8,000,000 of its Common Shares, representing approximately 10 percent of Canadian 88's public float of approximately 82,198,834 Common Shares. A maximum of 2 percent of the outstanding Common Shares may be purchased in any 30 day period. Common Shares purchased by Canadian 88 will be returned to treasury for cancellation. Purchases by Canadian 88 can commence on February 26, 1998 and will end no later than February 25, 1999.
Canadian 88 purchased 69,100 of its Common Shares between February 26, 1997 and February 25, 1998 at an average price of $4.47 per share
Tessex Energy Inc. (TES.A/ASE) announced that it has entered into a Letter of Intent relative to a Plan of Arrangement with Encounter Energy Inc., a privately held oil and gas company. The effective share ratio for the transaction will be 1.67 shares of Tessex for each Encounter share. Subsequent to a one for three share consolidation, the new Company will have 14,174,779 shares issued and outstanding and 18,705,720 shares on a fully diluted basis.
In connection with the combination, the current officers of Tessex will resign and be replaced with the current officers of Encounter: John H. Carruthers as Chairman and CEO, Paul L. Mitchell as President, C.A. (Butch) Bauer as V.P. Engineering and Donald C. Ross as V.P. Finance and Chief Financial Officer. All of these individuals have extensive oil and gas experience in both private and public companies. John Carruthers was the founder and president of Lorrac Energy Ltd. which was merged in 1996 to form Tethys Energy Inc. Paul Mitchell was a founder and V.P. Exploration of Amber Energy Inc. until his resignation in late 1996. Don Ross was a founder of Amber Energy Inc. and Intensity Resources Ltd. and has held a number of senior finance positions within the oil and gas industry. Butch Bauer was the founder and president of Maxon Energy Inc. which was sold in 1995 to Neutrino Resources Inc. The current president of Tessex, Mr. Bill Wilson, will retire. The new Company will operate under the name of Encounter Energy Inc.
The Board of Directors of Tessex (Encounter) will be reconstituted by the addition of three (3) new board members: John H. Carruthers, Paul L. Mitchell and William S. Maslechko. John A. Tessari and Robert J. Tessari will remain on the Board of Directors.
Enertec Resource Services (ERS/TSE) announced that it has received approval from the Toronto Stock Exchange to make a Normal Course Issuer Bid to purchase its common shares. Enertec has allocated an initial amount of up to $500,000 to acquire its common shares outstanding. The Company will consider the allocation of additional funds to this bid after assessing the success of purchases made in terms of the initial allocation. However, the Company's purchase of its common shares will not exceed 447,195 common shares, the maximum number permissible pursuant to the rules of The Toronto Stock Exchange governing normal course issuer bids. As of the date hereof, 7,290,182 common shares of Enertec are issued and outstanding. The public float consists of 4,471,949 common shares.
Plains Energy Services Ltd. (PLA/TSE) announces that it has filed with The Toronto Stock Exchange a notice of intention to make a normal course issuer bid to purchase up to a maximum of 1,000,000 Common Shares (5% of the outstanding Common Shares) over the next twelve months. Not more than 2% of the outstanding Common Shares will be purchased in any 30-day period. As of February 20, 1998 the Corporation had 20,994,855 Common Shares outstanding.
The Common Shares will be purchased on the open market by George Gosbee of Newcrest Capital Inc., the Corporation's broker, from time to time through the facilities of The Toronto Stock Exchange. Common Shares purchased will be paid for with cash available in the Corporation's working capital.
Crew Development (CRU/TSE&VSE) announced that Crew Holdings Ltd. proposes to sell up to 1,500,000 shares of Crew Development Corp., through the Vancouver and/or Toronto Stock Exchanges, commencing February 26, 1998.
If these shares are all sold, Crew Holdings Ltd. will continue to hold 3,000,000 shares of Crew Development Corp.
MISC.
The Financial Post listed the following inside transactions;
The Caisse bought 1.7 million shares of Paragon Petroleum Corp. for $3.60 each to hold almost 3.3 million shares. And it bought 110,000 units of North West Company Fund for $13.94 each to hold almost 1.6 million.
Beau Canada Explorations Ltd. - Thomas Bugg, officer, director and holder of more than 10%, exercised one million options for $1.68 or $2 each and sold a one million shares for $2.95 each to hold more than 4.7 million shares directly and indirectly.
International Petroleum Corp. - Ian Lundin, officer and director, exercised 1.5 million options for $4.50 each to hold more than 2.8 million shares. Adolf Lundin, officer and director, bought 150,000 shares in August for $5.85 each to hold more than 7.6 million shares directly and indirectly.
Penn West Petroleum Corp. - Murray Edwards, director and holder of more than 10%, sold 200,000 shares for $13.50 each to hold more than 3.8 million shares directly and indirectly.
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