MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, MARCH 25, 1998 (3)
MARKET ACTIVITY
The Toronto Stock Exchange Composie 300 Index gained 0.4% or 27.99 to 7579.22.
In comparison, the Oil & Gas Composite Index gained 0.1% or 5.31 to 6630.23. The sub-components were mixed. The Integrated Oil's fell 0.5% or 44.93 to 8834.13. The Oil & Gas Producers gained 0.4% or 23.63 to 5897.89. The Oil & Gas Services fell 0.4% or 11.56 to 2941.33.
Gulf Canada Resources, Rigel Energy, Petro-Canada, Northstar Energy, Renaissance Energy, Baytex Energy, Alberta Energy, Pinnacle Resources, Tarragon Oil & Gas, Ranger Oil and Canadian Occidental Petroleum were among the top 50 most active traded issues on the TSE.
Imperial Oil gained $0.85 to $80.85 and Alberta Energy $0.80 to $36.20. Chieftain Int'l fell $1.40 to $33.50, Morrison Middlefield $1.00 to $9.00 and Cabre Exploration $0.75 to 15.25.
In the service sector, Shaw Industries B gained $2.70 to $49.20 and Shaw Industries A $1.00 to $48.00. Enertec Resource Services fell $0.95 to $7.75, Enssign Resource Services $0.85 to $29.30 and Dreco Energy Service Group $0.60 to $43.40.
Over on the Alberta Stock Exchange, Cubacan Exploration was down $0.12 to $0.45 on high volume of 707,300 shares and Burner Exploration fell $0.04 to $0.95 on 664,500 shares.
In the U.S., Chevron (CHV) was a drag in the blue-chip index, sliding 1 5/8 to 83 13/16 despite an uptick in crude prices. Oil drilling and services stocks responded positively to the commodity's move, sending the Philadelphia Oil Service Index (OSX) up 1.74 to 115.01.
Schlumberger (SLB) rose 1 1/8 to 78 1/2 after its CEO reported the company's alliance with AO Yuksi Oil Co., the largest Russian oil producer, will produce $200 million in revenue for Schlumberger in 1999.
Other big gainers in the sector included Smith International (SII) up 1 13/16 to 58 7/16 and Transocean Offshore (RIG), which closed up 2 1/16 to 53 15/16.
KERM'S LISTING UPDATES
Pan East Petroleum (PEC/TSE) reported 1997 operating and financial results. Gas, liquids and sulphur revenue totaled $15,282 versus $15,577 in 1996. Cash flow from operations was $6,540 ($0.14/share) in comparison to $9,901 (40.26) last year. Net earnings was ($3,594) versus $1,144 in 1996. Net earnings per share was ($0.08) compared to $0.03 in 1996.
Revenue from oil and gas operations was unchanged in 1997 from 1996. Cash flow from operations was lower in the same period. This was attributable primarily to hedging activities entered into in the fall of 1996. As a result of these hedging activities, Pan East received a natural gas price of $1.47 which was lower than the industry average for the same period. This was compounded by the higher royalty rate charged by the crown associated with industry average gas prices. In 1996, Pan East reported a one-time income transaction of $1.1 million. Finally, higher general and administrative expenses were realized as the company added to its technical staff in anticipation of the expanded capital budget in 1998. This lower level of cash flow and higher depletion and depreciation charges resulted in the company reporting a net loss in 1997
Average Daily Production amounted to 24.7 mmcf/d compared to 23.4 mmcf/d in 1996. Liquids totaled 186 bbl's/d versus 280 bbl's/d. Sulphur was at 153 lt/d versus 160 lt/d last year. Natural gas equivalent was 28.0 mmcf/d compared to 27.8 mmcf/d in 1996.
Pan East's current production is concentrated in the Kaybob/Edson and Strachan Deep Basin areas in northwest Alberta and Midwinter in northeast British Columbia. Pan East operates the majority of its production consisting entirely of natural gas, associated liquids and sulphur.
Pan East participated in the drilling of 14 (6.9 net) wells in 1997 resulting in 9 (4.1 net) gas wells and 5 (2.8 net) abandoned wells for a success rate of 64 percent. The wells averaged 3,000 meters (9,900 feet), with the deepest being 3,600 meters (11,900 feet) and Pan East operated 12 of these wells. Net capital expenditures in 1997 totaled $23.0 million of which 86 percent or $19.7 million was incurred for land acquisitions, seismic and drilling and completion costs with the remainder on production equipment. Proceeds from minor property dispositions were $2.0 million. Finding and on-stream costs based on the total capital program divided by the total reserves added, were $0.55 per McfE for established reserves (proven plus 50 percent probable) and $0.56 per McfE for proven reserves only. Reserve additions replaced 1997 production by 400 percent.
1998 Outlook
At December 31, 1997, Pan East had cash and working capital of $14.8 million. These funds combined with cash flow and available credit lines will finance a 1998 capital program budgeted at $50 million. Pan East anticipates drilling 30 to 35 wells in 1998 with an average working interest of 40 percent. To date in 1998, Pan East has participated in the drilling of 13 (5.1 net) wells resulting in 7 (2.6 net) gas wells, one (.6 net) oil well and 2 (0.7 net) dry holes for an 80 percent success rate to date with 3 (1.2 net) wells currently drilling. The Company anticipates production increases of 15 MmcfE per day during the second quarter bringing Pan East's daily production to approximately 40 MmcfE.
Pan East's Exploration Manager, Andrew Boland, commented "this years drilling inventory is our strongest yet. We will be drilling some exciting prospects with promising upside."
Enerchem International Inc., an oil and gas specialty chemical company and equipment rental company serving the oil and gas industry reported record revenues and net profits for the six months ended February 28, 1998.
Revenues were $8,808,164 versus $5,792,518 for the comparative period
representing a 52% increase. Earnings before tax were $2,291,915 compared to $1,129,757 for the same period last year, representing an increase of 103%. After tax earnings increased 115% to $1,295,615 from $602,757 reported in the comparative period. Earning per share for the comparative periods increased to $0.17 from $0.09.
Revenues for the quarter ended February 28, 1998 were $4,853,020 versus $3,047,555 for the corresponding period representing a 59% increase. Earnings before tax during the quarter increased from $633,239 to $1,252,369, an increase of 98%, and after tax earnings increased 121% to $715,669 compared to $324,239 for the quarter ended February 28, 1997. Earnings per share for the current quarter were $0.09 compared to $0.05 for the comparative quarter in 1997.
KERM'S COMPANY WATCHLIST NEWS
Canadian 88 Energy Corp. of Calgary, Alberta announced the spudding of three new pool wildcats wells in the Caroline, Ricinus and Wildcat Hills areas of West Central Alberta. The wells are being drilled as part of Canadian 88's expanded foothills natural gas drilling program targeting large foothills natural gas reserve accumulations.
Canadian 88's new Caroline well at L.S.D. 7 of Sec. 19 - Twp. 33 - Rge. 5 - W5M is being drilled to a total depth of 4,000 meters to evaluate all formations down to the Cambrian. The well being drilled is immediately offsetting a 3,200 acre drilling license in Twp. 33 - Rge. 5 - W5M which sold for a record bonus of $8.25 million at the March 5, 1998 Alberta Petroleum and Natural Gas Rights Sale.
In addition, Canadian 88 has spudded a new pool Wildcat well at L.S.D. 2 of Sec. 33 - Twp. 31 - Rge. 10 - W5M at Yara Creek on the Company's Wildcat Hills exploration play. The well is evaluating the first of three large foothills Mississipian thrust sheets the Company has identified in the area for drilling during 1998. Reserve potential of these thrust sheets range from 100 to 500 Bcf apiece. Canadian 88 paid $1.58 million in total bonuses for 8,320 acres in the Wildcat Hills area at the March 5, 1998 Alberta Government Land Sale with offsetting lands purchased by Petro-Canada and Shell Canada Limited totaling $1.26 million for 5,760 acres.
Furthermore in the Ricinus arc of West Central Alberta, Canadian 88 has spudded a deep test in L.S.D. 2 of Sec. 6 - Twp 34 - Rge. 8 - W5M to evaluate the Viking Formation northwest of the prolife Bearberry gas field where the Company has extensive exploration acreage. All three foothills wells will drill through break-up and they are expected to take from 60 to 90 days to drilling at a cost of approximately $3 million apiece.
In other developments, the Company said that intermediate casing is currently being run on its L.S.D. 3 of Sec. 16 - Twp. - 37 - Rge. 7 W5M Cheddarville well being drilled into the Leduc formation at a total depth of 3,570 meters and two rigs are currently drilling on schedule without difficulty on the Company's large Waterton natural gas play. Canadian 88 has successfully drilled and completed 4 deep Mississipian wells at Waterton with wells #5 and #6 currently drilling ahead at 3,014 meters and 2,901 meters at L.S.D. 16 of Sec. 13. - Twp. 7 - Rge. 3 - W5M and L.S.D. 3 of Sec. 7 - Twp. 7 - Rge. 2 - W5M, respectively.
Canadian 88 has budgeted $130 million of capital spending in Western Canada during 1998 alongside its $150 million Rocky Mountain Exploration (RMX) Fund focusing on foothills natural gas exploration and development.
Highridge Exploration Ltd. (HRE/TSE) had record results for year ending 1997. The folowing are the highlights in comparison to 1996.
Total revenue was $12.3 million versus $7.8 million. Net earnings amounted to $2.2 million from $2.8 million. Net earnings from continuing operations (see below note) was $2.2 million vs $1.9 million. Cash flow $7.3 million compared to $3.4 million in 1996.
Earnings per share was $0.17 versus $0.25 but earnings per share from continuing operations was $0.17 versus $0.17. Cash flow per share amounted to $0.58 compared to $0.31 last year.
Daily natural gas production increased 50%, from 6.6 mmcf/d to 9.9 mmcf/d. Liquids (oil + crude) increased 67% to 833 bbl's/d from 499 bbl's in 1996. Total boe/d (barrel of equivilants) amounted to 1,823 compared to 1,159 in the previous year.
These results are affected by the disposition of the U.S. properties effective January 1, 1996 for $10.4 million which resulted in lower cash flow, cash taxes payable and increased earnings. The continuing operations does not include the effects of the disposition.
For table data, as well as isolated 4th quarter results, go to Message 3841781 .
ALL OTHER LATE BREAKING NEWS
Cubacan Exploration Inc. announced that the Farola North No.1 well located within onshore Block 17 has been logged and is in the process of being cased to a depth of 1600 meters.
Log interpretations from an independent engineering consultant indicate 4 significant hydrocarbon bearing zones. (Table of log results can be found at Message 3840490 )
Seismic evidence supports that the area of closure of Zone A is between 4 and 5 square kilometers.
These independent interpretations show sufficient levels of porosity and hydrocarbon saturation to support further testing and evaluation. The hydrocarbons, as demonstrated on the gas chromatograph, are thought to be medium to high density gas with condensates or light oil.
Cubacan has initiated preliminary discussions with Cuban government officials regarding the marketing of gas for electrical generation projects in the eastern region of Cuba. The national electrical grid as well as numerous factories and resorts are located within a 10 to 100 km radius of the
wellsite.
The Farola North No.1 well was drilled to a total depth of 2314 meters kb. An additional hydrocarbon show was encountered from 2100 to 2150 meters kb. Unfortunately, hole conditions forced the well to be plugged back to 2085 meters kb where logging commenced.
Testing of the well immediately following logging was not completed as a result of damage to the testing equipment. Cubacan is now currently in the process of obtaining a Canadian service rig or equivalent equipment in order to conduct a production test over the identified hydrocarbon bearing intervals. After evaluation of the upper zones, a decision will be made as to the location of our next well.
Cubacan has a 100% interest in the Farola North No.1 prospect. This is the first of a number of prospects to be drilled on Cubacan's 100% owned onshore Blocks 16 and 17, which cover over 6900 square kilometers or approximately 1.7 million acres. These prospects and leads have been identified through the processing and interpretation of over 800 km of 2-D seismic acquired by the Company over the past 2 years.
The presence of hydrocarbons within multiple target intervals in the first well drilled by Cubacan has significantly enhanced the potential of the remaining prospects and plays identified on Cubacan's two concessions. Cubacan, in its first play within this wildcat region of Cuba, has demonstrated prospective hydrocarbon accumulations exist.
Success in this region of Cuba would be significant for both Cubacan as well as the Republic of Cuba.
Buffalo Oil Company Limited has entered into a seismic option agreement with an industry partner covering 2,240 gross acres in the Heward/Froude area of S.E. Saskatchewan. Buffalo's working interests in the area range from 25 to 67%. To date six miles of 2D seismic has been acquired and a 3 1/2 square mile 3D program has been shot. To date the optionee has committed to one earning well at Heward which will retain the option on 1,600 gross acres.
At Glen Ewen Buffalo Oil has participated in a second horizontal well (5.22% W.I.) which was placed on production last week. Both wells drilled to date on this prospect are being tied into processing and disposal facilities. This tie in will reduce operating costs significantly and will allow for the conservation of associated gas. Production rates to date have been very encouraging and a third well is planned immediately after spring break-up.
Pyramid Energy (PYI/ASE) updated their drilling activity in Pakistan. The company announced that its Hamza X-1 has reached its total depth of 1,353 meters. The targeted zone which is the Main Sui Limestone was encountered at 1,180 meters, some 27 meters higher than prognosed. The well was cased in preparation for testing.
Pyramid's second exploration well, Daud X-1, is currently drilling at 3,109 meters towards its total depth of 3,175 meters. The targeted zone which is the Lower Guru A Sand was encountered at approximately 2,982 meters. The well is expected to be logged during the first week of April, 1998.
HEGCO Canada, Inc. (HEG/ASE) reported the Company has set pipe on the Meier No. 2 well, which is located in the northeast Garber field, in Oklahoma. The Meier No. 2 well was drilled to a total depth of 5,750 feet. A multiple of pay zones were encountered between 70 to 120 feet high to offset wells. This is a newly discovered separate structural trap.
The primary objective for the Meier No. 2 was encountered 94 feet high to down dip productive wells north, south and west of the location. Porosities average 31% over an 86-foot pay interval. The corresponding gas saturations, for this primary objective, were 70%. This well will be placed into production over the next 45 days.
Millennium Energy Inc. (MLN/ASE) has entered into a letter of intent with two limited partnerships to acquire a number of oil and gas properties in Alberta and Saskatchewan. The purchase price of $4.2 million will be satisfied by Millennium issuing 16.8 million common shares to the vendors at a price of $0.25 per share. The approval of The Alberta Stock Exchange is required for the completion of the transaction, which was negotiated at arm's length. Trading in the shares of Millennium will be halted pending the filing of the documents prescribed by The Alberta Stock Exchange.
The acquisition will add approximately 283 Boe/day of production, consisting of 225 Bbls of oil and natural gas liquids and 630 Mcf of gas. Cash flow from the properties has been estimated at $1 million for 1998. Reserves, on a proved + 1/2 probable basis, have been prepared for management of the vendor and audited by Sproule Associates Limited, independent engineers, at 732 Mboe.
INTERNATIONAL
Nigeria Says To Pay Promised Money To Oil Firms
Nigeria's oil minister Dan Etete said the military government would keep its promise to increase cash call contributions to multinationals operating oil production joint ventures.
''There is no going back. We are committed to the sector and we will maintain that position,'' Etete told reporters in Port Harcourt on Wednesday. ''The joint venture companies will receive their share of the increased budget.''
Multinationals have complained that although the budget for funding the joint ventures with Nigerian National Petroleum Corporation was increased to $2.5 billion in 1998 from $2.05 billion in 1997, payments are still taking place at the old rate.
The industry is also concerned that individual companies still do not know how much they are each going to get for exploration and production -- almost three months after the budget.
''There are certain details to be worked out between oil firms and NAPIMS (government oil industry monitoring agency). It is not that the money is not there,'' Etete said.
Funding uncertainties made life difficult for the joint ventures that produce most of Nigeria's more than two million barrels of crude per day through 1997.
Most companies were forced to cut back drilling and some said output had been affected.
The biggest of the joint ventures is with Royal Dutch/Shell (RD.AS) (UK & Ireland: SHEL.L). Others are with Mobil (MOB), Chevron (CHV), Elf-Aquitaine (ELFP.PA) (EFLP.PA), Agip (AGIS.CN) and Texaco (TX).
China's Energy Production Slows down in January
China's energy output amounted to 78.65 million of standard coal equivalent in January, down 12.3 percent from the same period in 1997, according to the latest statistics from the State Statistics Bureau.
Sources with the bureau said the Spring Festival, the beginning of a new year on the Chinese lunar calendar on Jan. 28, caused the decrease in both work time and output in the country's energy industry.
In January, China generated 72.49 million tons of coal, down 18 percent on an annual basis. The crude oil output rose by 0.5 percent, reaching 13.71 million tons.
Meanwhile, the output of natural gas was 1.91 billion cubic meters, up 1.6 percent.
The country generated 86.63 billion kilowatts/hour of electricity in January, down 2.1 percent.
The provinces of Shanxi, Shandong and Henan ranked as the three top coal producers in January, turning out 21.18 million tons, 6.67 million tons and 5.5 million tons of coal, respectively.
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