MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, FEBRUARY 25, 1998 (3)
KERMS TOP 21 - SPEC 15 - SERV 9 LISTED COMPANIES IN THE NEWS
Northrock Resources (NRK/TSE) announced 1998 plans and office appointments. Building on the recently announced Strategic Alliance with Gulf Canada Resources Limited and the acquisition of Paragon Petroleum Corporation, Northrock Resources Ltd. announced that it has formulated its aggressive growth plans for 1998.
On February 19, 1998, the Board of Directors of Northrock approved a $207 million capital budget that has an emphasis towards natural gas exploration and development and includes the drilling of more than 300 wells in 1998, compared to 147 wells drilled in 1997. The significantly expanded exploration and development program includes $150 million for drilling expenditures emphasizing reserve and production growth. Building on the opportunity base established with the Strategic Alliance and the Paragon acquisition, 70 percent of Northrock's program is concentrated in the West Central Alberta focus area. Over 200 wells are targeted to be drilled in the area. Northrock currently has 22 drilling rigs active, including 16 rigs in West Central Alberta, and expects up to 35 rigs will be active after breakup this year.
With a significantly expanded exploration and development program for 1998, Northrock is also pleased to announce the appointments of Mr. Grant B. Fagerheim as Chief Operating Officer and Mr. John H. Van de Pol as Chief Financial Officer of Northrock. In addition, Mr. Andy J. Mah has been promoted to Vice President Production effective February 19, 1998.
Genesis Exploration Ltd. (GEX/TSE) tripled its proven reserves in 1997 to 140 Bcf (1996 - 45 Bcf) of gas and 6.6 million bbls. (1996 - 2.1 million bbls.) of liquids. Probable reserves have increased to 58.3 Bcf of gas (1996 - 5.7) and 2.4 million bbls. of liquids (1996 - 0.4). Finding and on stream costs per proven BOE were $5.96 and per proven plus probable BOE were $4.06. The Company also increased its undeveloped land position to 139,400 net acres (1996 - 42,800).
Genesis achieved cash flow of $15,705,000 ($0.66/share) and net income of $4,876,000 ($0.20/share) in 1997. This compares to 1996 cash flow of $5,365,000 ($0.35/share) and net income of $1,553,000($0.10/share). Gross revenue increased to $30.1 million in 1997 from $11.4 million in 1996 on a production increase to 4,246 BOE/d from 1,550 BOE/d in 1996. Operating costs in 1997 were $7,754,000 ($5.00/BOE/d) compared to $3,205,000 ($5.65/BOE) in 1996. General and administrative expenses, net of recoveries were $1,649,000 ($1.06/BOE) in 1997 versus $786,000 ($1.39/BOE) in 1996.
Capital expenditures in 1997 were $98.9 million including $46.2 million on acquisitions. The balance of $52.7 million of the Company's capital program was spent for the Company's ongoing exploration and development program with $32.7 million on drilling, $8.7 million on land, $3.5 million on seismic and $7.8 million on tangible equipment and gathering systems. During the year, the Company increased its net asset value per weighted average share outstanding to $5.24 from $4.01 in 1996.
KERMS WATCHLIST OF COMPANIES IN THE NEWS
Canadian Conquest Exploration Inc. (CCN/TSE) reported financial and operating results for 1997. Oil & gas revenue was $21.0 million vs $23.2 million in 1996. Net earnings were down 27% or $4.64 million (fd-$0.08/share) compared to $6.35 million (fd-$0.11/share) last year. Cash flow was $11.26 million in 1997 (fd-$0.18/share) compared to $14.14 million (fd-$0.24/share) in 1996. Conquest averaged 2,894 boe/d in 1997 compared to 3,375 boe/d in 1996.
The principal factor which impacted Conquest's financial performance during 1997 was a reduction in its production volumes. Conquest's daily production volumes were 14 percent lower last year than in 1996 due to the sale in February 1997 of its shallow gas producing properties in northeast Alberta. The daily production volumes from these sold properties amounted to 134 BOE during 1997 compared to 996 BOE in 1996.
Conquest's daily production volumes exceeded 3,900 BOE in January 1998, and are currently 4,200 BOE, setting the stage for substantial growth in cash flow and net earnings in 1998.
In 1997, the Company's gross capital expenditures amounted to $27,669,000, allocated as follows:
* $3,635,000 for the purchase of undeveloped land and seismic data;
* $7,732,000 for drilling and completion costs;
* $6,190,000 for the construction of gas processing and other production facilities.
* $8,772,000 for property acquisitions; and
* $1,340,000 of miscellaneous expenditures and capitalized administrative expenses.
During 1997, Conquest drilled 39 gross (25.9 net) wells, resulting in 19 gross (11.5 net) gas wells, nine gross (7.4 net) oil wells and 11 (7.0 net) dry holes, achieving a success rate of 72 percent. Through these drilling activities, the Company added 4,116,000 BOE of proven and probable reserves. In addition, Conquest acquired 1,366,000 BOE of proven and probable reserves through several property acquisitions. The Company's total reserve additions in 1997 were 5,482,000 BOE at a cost of $6.45 per BOE (proven and half probable) or $8.91 per BOE (proven only).
Conquest's reserve additions in 1997 (net of the northeast Alberta gas reserves sold in February 1997) replaced its production volumes for the year by 2.44 times, ensuring growth in the Company's reserve base and future cash flows.
Conquest's capital expenditure budget for 1998 is $30,000,000 and includes the drilling of at least 40 wells, most of which the Company will operate with an average 70 percent working interest. Most of these wells will be drilled in Conquest's northwest and central Alberta core areas where the Company owns, or controls under farmin arrangements, more than 142,000 net acres of undeveloped land. Conquest's 1998 drilling program is expected to yield substantial growth in reserves, production, cash flow and shareholder value. Conquest has two drilling rigs under full-time contract until April 1999 to accommodate its drilling schedule over the next 13 months.
Conquest's balance sheet remains strong, with total debt (including working capital deficit) amounting to $16,056,000 as of December 31, 1997. This debt level equates to about 62 percent of Conquest's $26,000,000 line of credit with the CIBC, providing the Company with sufficient financial flexibility to undertake an increased exploration and development program in 1998 while continuing to pursue strategic acquisitions.
For further detail and table data, see Message 3534767
Archer Resources Ltd. (ARC/TSE) has received proposals from certain parties interested in pursuing a transaction with Archer. The Board of Directors of Archer has only received a preliminary assessment of such proposals from management and its financial advisors and has instructed management and its advisors to consider and assess the most viable proposals in greater detail.
Archer's common shares trade through the facilities of The Toronto Stock Exchange under the symbol "ARC". The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.
Prudential Steel Ltd. (PTS/TSE) announced record-setting financial performance, for the year ended December 31, 1997. Net income for 1997 reached $42.8 million or $1.42 per share ($1.39 fully diluted), a 97 percent increase over 1996 net income. For the fourth quarter of 1997, net income reached $13.0 million or $0.43 per share. These highest-ever earnings are the direct result of record demand for energy related tubular products.
Sales for 1997 were $352 million, representing an increase of nearly 45 per cent over 1996 sales of $242.9 million. Sales of energy related products were driven by the record 18.2 million metres drilled in western Canada during 1997, a 30 per cent increase over 1996. For the fourth quarter, sales were $99.7 million, compared to $81.8 million in the same period of 1996.
Product shipments for the year totalled 369,010 tonnes, 44 per cent more than in 1996. Shipments in the fourth quarter increased21.7 per cent over 1996 to 104,670 tonnes. Energy-related products continue to be the largest component of Prudential's sales, representing 74 per cent of total shipments in 1997. Shipments of Oil Country Tubular Goods increased 31 per cent while line pipe shipments increased 65 per cent over 1996. Industrial product shipments in 1997 were down nearly two per cent due to Prudential's focus on energy products.
The average selling price per tonne increased by one per cent in 1997. Total cost of sales was up approximately 38 per cent over 1996. On a per tonne basis, the average cost of sales declined 3.6 per cent from the 1996 average.
Gross margins for the year averaged $213 per tonne, up 20 per cent over the 1996 gross margins of $177 per tonne. Gross margins in the fourth quarter were $222 per tonne, up eight per cent from the third quarter.
Outlook
Prudential Steel remains optimistic about the long-term future of the business even though some uncertainty exists in energy industry predictions for 1998 when compared to the record-breaking activity of 1997. Current energy industry forecasts predict that overall activity may decrease 14 per cent from 1997. However, the predicted level of activity is still 60 per cent higher than the 10-year average of 10 million metres per year. In 1997, the Canadian energy industry turned to imports to supply an estimated 20 to 25 per cent of energy-related tubulars since Canadian tubular producers could not meet the total demand. It is anticipated that the weakened Canadian dollar and lower drilling activity will substantially decrease the level of imports in 1998. Decreased heavy oil activity is not anticipated to be a large factor for Prudential Steel, as our overall customer base is widely engaged in exploration and production across western Canada.
The market for Hollow Structural Sections is anticipated to grow in North America, with imports into Canada remaining low. Prudential Steel anticipates stable demand for these products.
On the cost side, we expect a marginal increase in steel pricing during the first half of 1998. For the latter half of the year, factors indicate that steel prices will remain steady or decline.
Capital Program Update
In November 1997, the company announced its $23.3 million expenditure for the construction a new tubular manufacturing and distribution facility in Longview, Washington. This facility will have an annual production capacity of 125,000 tonnes. Start-up is expected late in the fourth quarter of 1998.
The $7.3 million capital expenditure announced in March 1997 to upgrade Mill #2 in Calgary, will be completed in July 1998 and will provide an additional 20,000 tonnes of annual capacity.
The recommissioning of Mill #1 in Calgary, announced in July 1997,was completed ahead of schedule in December 1997 and will provide an additional 60,000 tonnes of annual capacity.
Dividend
At the February 25, 1998 Board Meeting, the Board declared a dividend of $0.05 per share for the shareholders of record at the close of business on March 16, 1998, to be paid on or about March 31, 1998.
For further info and table data, see Message 3535387
OTHER COMPANIES IN THE NEWS
Willow Creek Exploration Ltd. (WCEASE) announces that after some start-up delays, both equipment and weather related, the operator of its six joint interest wells in Pelahatchie (25% working interest), and Gillsburg (50% working interest) has reported that the wells are currently producing at a combined rate of 130 BOPD (48 BOPD net to Willow Creek). For initial testing purposes, two of the wells in the Gillsburg area are currently producing only from the Lower Tuscaloosa zone. The company plans to dually complete these wells, adding the Upper Tuscaloosa zone in each well. This work will be carried out on one well in the next two weeks with the second to follow after further testing. It is anticipated that this will add significantly to daily production.
Management also announces that Willow Creek was granted approval for inclusion in Standard & Poor's Corporation and Records Services effective February 6, 1998. The initial description appeared in the "Daily News Section" on February 20, 1998.
Willow Creek was listed on the ASE on November 14, 1997 and is carrying out a program of re-entry and re-completion of existing wells, and has plans for new drilling on its established properties over the next few months. Willow Creek is also evaluating further potential low risk land and production opportunities of a similar nature in Mississippi and elsewhere.
Pointer Exploration Corp. became a wholly owned subsidiary of PanAtlas Energy Inc. (PA?TSE) on November 26, 1997. PanAtlas advises the amalgamation of the two companies was completed on January 1, 1998. The amalgamated company will carry on business as PanAtlas Energy Inc.
Paddock Lindstrom and Associates Ltd. have completed an updated engineering report on the amalgamated company effective December 31, 1997. In their opinion PanAtlas has total proven and probable reserves of 7.2 million barrels of oil equivalent valued at $51.9 million using a 10 percent discount factor. Sixty-nine percent of the reserves were classified as proven and 28 percent were natural gas.
Combined production in December 1997 for PanAtlas and Pointer was approximately 2,150 Boepd, consisting of 1,272 Bopd and 8.78 MMcf/d of natural gas. In addition to the overall production increases provided by consolidating operations, additional natural gas production was added at Craigmyle and Byemoor.
An active development program since September 30, 1997 has resulted in the drilling of 6 (2.17 net) natural gas wells and 6 (2.72 net) oil wells and no abandonments. Five (1.45 net) exploratory wells will be drilled in the first quarter of 1998. Included are two new pool exploratory tests in Saskatchewan with one testing a Red River Formation 3D seismic anomaly and the other evaluating a Mississippian 3D seismic prospect. The remaining three wells are located in Alberta at Byemoor, Cygnet and Pine Creek. Drilling rigs have been secured for all five projects with three operated by PanAtlas and two by partners. One exploratory well has been drilled and cased at Byemoor as a potential gas well following a 2 MMcf/d drillstem test. The Saskatchewan Mississippian prospect has been drilled and cased as a potential new pool Mississippian discovery. The Red River test, Founders PanAtlas Minard 14-6-6-6 W2M, is drilling.
A directional well is currently being drilled under farmout into Exploration Licence EL 1008 in West Newfoundland. PanAtlas is a principal shareholder (approximately 15.7 percent) in Vinland Resources Inc. a private company which will have a 55 percent interest in the project following completion of $1.0 million in earning obligations by the farmee. Other exploration commitments on 100 percent Vinland permits in the Deer Lake Basin are in progress. The farmee will earn a 25 percent working interest following completion of new seismic and the drilling of two exploratory wells.
The strategic business initiatives implemented in 1997 have positioned PanAtlas for continued growth in production and cash flow in 1998. Our 1998 base capital budget of $13 million will result in the drilling of up to 40 (16 net) wells on an expanded inventory of exploration and development projects.
Texalta Petroleum Ltd. (TEX.A/ASE) would like to advise shareholders that the company has licensed a horizontal well in the West Queensdale area Saskatchewan. The company has a 43.8 percent working interest in the project.
The well is expected to have a T.D. of about 2100m and at its furthest extremity will pass near an abandoned test well that had an IP of over 100 BOPD in 1957. The old well had a 32 foot (9.75m) oil column according to cores and logs.
The company's proprietary seismic data indicates porous Mississippian reservoir over about a 620 meter interval in the planned well.
Drilling operations at this well will start after break up expected at the end of April or early May.
Texalta will join Upton Resources and others in drilling a stepout well in the Wildwood area of SE Saskatchewan. This joint well is also expected to start in the late April early May.
In addition the company is in the process of arranging a group to drill a deep well on the company's West Queensdale property on a farmout basis. These efforts are incomplete at this time but Texalta is hopeful of success in the near future because of recent industry successes in the region and corresponding interest in deep drilling projects.
Devlan Exploration Company Ltd. (DVX/ASE) has perforated and tested three of four zones that encountered hydrocarbons in their first appraisal well, Devlan 44-18 of the Highland Ranch play located in Wyoming, USA. After establishing the presence of oil in all three zones, stimulation costs dictated a decision to complete the Frontier zone first. A frac procedure was completed and the isolated zone is currently being flow tested. It is too early to establish a stabilized production rate.
Reserves have been estimated at 200,000 STB ($1,812,000 at 12% NPV ($U.S.)) for this location. The significant potential of Highland's total acreage (7,855 acres) and the remaining fourth zone, the Sussex, will be addressed in an independent engineering evaluation that will be completed subsequent to the Frontier being put on continuous production. U.S. regulations require that a battery installation be completed before this can be achieved and construction is already underway,
This evaluation combined with the current 20.5 km seismic program will determine the future development plans for the Highland Ranch area. The original prospect focused primarily on the Dakota Sand. From the appraisal results, the Company is confident that there are three additional zones that must also be considered prospective in the future.
In addition to the aforementioned property, Devlan has been diligently working on a second prospect, known as the Pinetree play located in the same area. Due to competitive reasons, the Company has not previously released any information with regards to this series of land acquisitions. As of February 23rd, an additional 1,160 acres (net 920 acres) was secured, bringing the total Pinetree acreage to 4,199 (net 3,959). This prospect primarily targets the Frontier zone combined with several prospective upper zones.
As an update to the Canadian side of Devlan's ongoing operations an acquisition of a 2,080 acres prospect that identifies a Sawtooth opportunity from seismic data is the first of several initiatives the Company expects to bring to fruition. Farmout negotiations are underway with an industry partner whereby Devlan would remain operator of the project. A spud date for the first well is expected to be after breakup.
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