MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, MARCH 26, 1998 (5)
MARKET ACTIVITY
The Toronto Stock Exchange 300 Composite Index fell 0.1% or 9.91 to 7569.31.
In comparison, the Oil & Gas Composite Index gained 0.4% or 27.06 to 6657.29. The Integrated Oil's were up 0.2% or 14.92 to 8849.05. The Oil & Gas Producers eeked out a gain of 2.30 to 5900.19. The Oil & Gas Service's climbed 3.8% or 111.31 to 3052.64.
Petro-Canada, Poco Petroleums, Ranger Oil, Beau Canada Exploration, Talisman Energy, Canadian Natural Resources, Amber Energy and Renaissance Energy were among the top 50 most active traded issues on the TSE.
Cabre Exploration gained $0.65 to $15.90. Imperial Oil fell $0.85 to $80.00, Alberta Energy $0.80 to $35.40 and Crestar Energy $0.55 to $20.20.
Service companies had a banner day. Dreco Energy gained $2.60 to $46.00, Enerflex Systems $1.50 to $40.50, Canadian Fracmaster $1.25 to $21.85, Tesco $1.00 to $24.50, Ensign Resource Services $0.95 to $30.25, NQL Drilling $0.90 to $12.00, Badger Daylighting $0.85 to $7.35 and Precision Drilling $0.70 to $30.45.
Over on the Alberta Stock Exchange, Colt Energy was the most active, closing up $0.08 to $0.98 on 1.4 million shares. Also among the most active were HEGCO Canada, up $0.30 to $2.35 and Cubacan Exploration, down $0.05 to $0.40.
In New York, oil stocks rallied after crude oil prices extended their recovery on the prospects that global oil producers would reduce the glut of supplies.
Dow components Chevron Corp. gained 7/16 to 84-5/16 and Exxon Corp. added 5/16 to 68-3/16. Texaco, Inc. rose 15/16 to 61. Sun. Co. rose 15/16 to 41 13/16. USX Marathon rose 1 1/16 to 38 1/16. Schlumberger rose to 78 7/16.
Philadelphia Oil Service Index (OSX) gained 1.58 to 116.59 and the AMEX Oil Index (XOI) rose 1.47 to 487.55. Individual standouts included Smith International (SII), up 2 1/8 to 60 9/16 and Cliffs Drilling (CDG), which gained 1 7/16 to 43 15/16. Tesco (TESOF) rose 1 /8 to 17 1/2 on excitement about new products that could significantly enhance the oil service firm's earnings.
Hondo Oil & Gas (HOG) fell 1 7/16 to 1 13/16 in a second day of selling after the company reported "disappointing" drilling results at an oil find. Mitcham Industries (MIND) fell 3 3/4 to 13 after warning that fourth quarter earnings will not meet expectations.
KERM'S LISTED COMPANIES IN THE NEWS
Penn West Petroleum Ltd. announced record results for the three months and year ended December 31, 1997. Gross revenues for the year ended December 31, 1997 increased by 25 percent to $217.6 million from $173.8 million for 1996. Cash flow increased by 36 percent to $122.9 million ($3.09 basic or $3.01 fully diluted per share) from $90.1 million ($2.51 basic or $2.43 fully diluted per share). Net income for 1997 increased by 56 percent to $37.2 million ($0.94 per share) from $23.8 million ($0.66 per share) for the same period in 1996.
Gross revenues for the three months ended December 31, 1997 increased by 16 percent to $61.1 million from $52.6 million for the same period in 1996. Cash flow for the fourth quarter increased by 23 percent to $36.7 million ($0.92 basic or $0.89 fully diluted per share) from $29.9 million ($0.79 basic or $0.77 fully diluted per share) for the fourth quarter of 1996. Net income increased by 4 percent to $10.7 million ($0.27 per share) for the fourth quarter of 1997 versus $10.3 million ($0.27 per share) for 1996.
The year 1997 represented another successful year of record growth for Penn West. Penn West met or exceeded its financial and operational targets of 1997 including production volumes, cash flow and net income. The Company now has a five year track record of continual, year-over-year growth in the crucial operating and financial benchmarks that indicate sustained creation of shareholder value.
The fourth quarter of 1997 saw Penn West post its highest quarterly cash flow with growth of 23 percent over the same periodin 1996. This increase resulted from a 30 percent growth in natural gas production, a 13 percent growth in oil and liquids production, and a 7 percent increase in natural gas prices that was offset by a 17 percent decrease in oil and liquids prices.
Penn West completed its capital program for 1997 with a favorable drilling success rate of over 85 percent. Penn West continued its record of successfully adding oil and natural gas reserves at low costs in 1997, with finding costs for the year of $5.93/boe on a proven plus probable basis.
During 1998, the Company anticipates that capital expenditures will total $185 million. Our capital program will include the drilling of approximately 210 wells (195 net) in a program that focuses on increasing natural gas production in our Northern and Central Core areas. This capital program is expected to result in average total daily production during 1998 of between 33,000 and 34,000 barrels of oil equivalent.
For table data, go here; Message 3853423
Vermilion Resources Ltd. (VRM/TSE) has closed its previously announced bought deal financing led by Griffiths McBurney & Partners and FirstEnergy Capital Corp. and included First Marathon Securities Limited and Nesbitt Burns Inc.
Pursuant to the financing, Vermilion issued 5,063,291 common shares at $7.90 per common share for gross proceeds of $40,000,000. Taking into account this financing, Vermilion will now have 47.7 million shares outstanding and no long-term debt.
Proceeds from the issue will be used to facilitate the expansion of Vermilion's ongoing exploration, development, and acquisition plans.
Vermilion is also pleased to announce that it has finalized a new $60 million credit facility with The Chase Manhattan Bank of Canada and Credit Lyonnais Canada and together with its equity financing puts Vermilion in a very strong financial position to take advantage of new business opportunities.
Vermilion Resources Ltd. is a publicly traded Canadian resource company with domestic and international operations and current market capitalization of $375 million. The company's primary objective is to maximize shareholder value by managing risk as it builds resource assets through the acquisition, exploitation and exploration of natural gas and crude oil.
Trican Well Service Ltd. (TCW/TSE), a well servicing company that provides stimulation, coil tubing, cementing, fracturing and related service to the oil and gas industry in western Canada announces that today it has closed the previously announced private placement offering of 2,000,000 Special Warrants at a price of $4.50 per Special Warrant. Each Special Warrant is exchangeable for one common share of Trican at no additional cost.
Goepel Shields & Partners Inc. and Peters & Co. Limited acted as underwriters in this offering.
The net proceeds of the offering will be used to fund capital expenditures relating to the expansion of the business of Trican.
WATCHLIST COMPANIES IN THE NEWS
Chieftain International, Inc. (CID/TSE CID/AMEX) has drilled a gas / condensate discovery well on East Cameron Block 34 in 30 feet of water, 10 miles offshore Louisiana. The well logged in excess of 100 net feet of reservoir gas sands in multiple zones below 10,350 feet. Future plans include completion of the well and installation of production facilities. Initial production is expected to begin prior to year-end 1998. Chieftain has a 40% working interest in the well and the block. The remaining 60% is held by Basin Exploration, Inc.
Elk Point Resources (ELK/TSE) doubles production and reserves in 1997 and reports success in the Powder River Basin of Wyoming.
Elk Point more than doubled its production and reserve base in l997 providing a solid foundation for continued aggressive exploration and development. The Company grew its average daily production by over 130 percent to 4,117 barrels of oil equivalent per day in 1997 from 1,784 barrels of oil equivalent per day during 1996. In the fourth
quarter of 1997, production averaged 5,192 barrels of oil equivalent per day, a 145 percent increase from 1996 fourth quarter production of 2,116 barrels of oil equivalent per day. The Company's total reserve base grew by over 150 percent to 23.5 million barrels of oil equivalent at the end of 1997 from 9.2 million barrels of oil equivalent at the end of 1996.
Gross oil and natural gas revenues doubled to $30.4 million in 1997 from $15.3 million in 1996. Cash flow grew by 78 percent to $16.0 million from $9.0 million in 1996.
The Company was also successful on its oil exploration initiative in the Powder River Basin of Wyoming, USA. The Company cased its first exploration well at Boley in December 1997 and followed up this success with the first development well in March 1998. The discovery well is producing approximately 120 barrels of oil per day (50 percent working interest) and the development well recently commenced production at 360 barrels of oil per day (41 percent working interest). The Company plans to drill a development well at Boley and an exploration test at Federal commencing next week.
Elk Point recorded a 78 percent increase in cash flow to $16.0 million ($0.91 per share) in 1997 from $9.0 million ($0.96 per share) in 1996. The increase was directly attributable to the significant growth in Elk Point's natural gas and crude oil production from its successful exploration, development and acquisition programs. Earnings were $1.4 million ($0.08 per share) in 1997 compared to 1996 earnings of $2.6 million ($0.27 per share). As expected, these earnings reflect a higher depletion rate in 1997 that stems from the purchase of considerable probable reserves in the Truax acquisition. The Company expects earnings to improve in the long term as the Truax properties are more fully developed and probable reserves are converted into proven reserves.
During 1997, Elk Point's natural gas production grew by over 230 percent averaging 24.6 million cubic feet per day compared to 7.4 million cubic feet per day in 1996. The Company averaged 32.2 million cubic feet per day during the fourth quarter of 1997, a growth of over 350 percent from 1996 fourth quarter production of 7.1 million cubic feet per day. The Company's production gains came from development projects at Saddle Hills, Pemburton Hill, Pembina and Thunder Lake as well as natural gas production from the Truax acquisition. At Pembina, the Company added 5.0 million cubic feet per day of gas production in mid November and placed an additional 2.0 million cubic feet per day of gas on stream subsequent to year-end.
Oil production averaged 1,654 barrels per day during 1997, a 58 percent increase over 1996 average production of 1,047 barrels per day. The Company averaged 1,971 barrels per day in the fourth quarter of 1997 as the Pembina project came on stream mid-November. This is a 40 percent increase over 1996 fourth quarter production of 1,404 barrels per day.
Elk Point drilled 100 gross (59.3 net) wells in 1997, more than double the 43 gross (28.9 net) wells drilled in 1996. The Company drilled 58 gross (32.0 net) development wells with an 83 percent (88 percent net) success rate. Elk Point drilled 42 gross (27.3 net) exploration wells with a 55 percent (46 percent net) success rate. The greater emphasis on exploration has led to several new pool discoveries that will provide a larger component of development drilling in the Company's program throughout 1998.
In total, Elk Point cased 48 gross (30.5 net) wells as oil wells and 22 gross (9.1 net) wells as gas wells, while 29 gross (18.7 net) wells were dry and abandoned and one gross (1.0 net) well was a service well for an overall success rate of 71 percent (69 percent net).
Elk Point replaced its production in 1997 by a factor of 10.5 times based on total reserves. Total proven and probable natural gas reserves were doubled to 118.2 billion cubic feet of gas at the end of 1997 from 56.3 billion cubic feet of gas at the end of 1996. Crude oil and natural gas liquid reserves increased by 226 percent to 11.6 million barrels of oil from 3.6 million barrels of oil at the end of 1996. On capital expenditures of $112.9 million in 1997, finding and development costs were $7.16 per barrel of oil equivalent of proven plus probable reserves and $8.69 per barrel of oil equivalent of proven plus half probable reserves ("established reserves"). Land and seismic expenditures were a significant component of capital expenditures and comprised $0.62 and $0.20, respectively, per barrel of oil equivalent of proven plus probable reserves and $0.75 and $0.24, respectively, per barrel of oil equivalent of established reserves. Development costs for facilities and equipping totalled $1.55 per barrel of oil equivalent of proven plus probable reserves and $1.87 per barrel of oil equivalent of established reserves. Finding costs net of land, seismic and facilities were $4.79 per barrel of oil equivalent of proven plus probable reserves and $5.83 per barrel of oil equivalent of established reserves.
Elk Point has boosted its current productive capability to over 7,000 barrels of oil equivalent per day of which 63 percent is natural gas. The Company is planning to drill 120 gross (60 net) wells this coming year with an increased focus on natural gas. A number of development projects which will lead to further production growth are underway at Pembina, Lobstick, Corbett Creek and Newton in west central Alberta and Elcott in southeastern Saskatchewan. While directing 65 percent of its drilling towards development, the Company plans to evaluate 43 exploration prospects in 1998. Exploration efforts will be directed mainly towards multi-zone natural gas in west central and northeastern Alberta, light oil in southeastern Saskatchewan and medium oil in the Powder River Basin, Wyoming. Elk Point will operate and participate with a 10 percent working interest in a high impact, deep exploration test at Lost Hills in the San Joaquin Basin in California targeting long life, light oil reserves.
For table data, go here: Message 3853479
ALL OTHER COMPANIES IN THE NEWS
Two new wells were placed on production this month, resulting in Scarlet Exploration Inc. (ASE/SCO) achieving its 1998 production target of 1,000 BOEPD net to the company, effectively doubling 1997 production. One well is located in the Zama/Sousa area of Alberta, the second in southeast Saskatchewan.
"This is a major milestone in Scarlet's growth," said Alan D. Jack, president and chief executive officer. "We're not only proud that we have broken the 1,000 barrel barrier, we've done it even more quickly than we anticipated."
Scarlet has completed all six wells in its 97/98 winter drilling program in the Rainbow Lake region. The company's fifth well is flowing at a restricted rate of 450 BOPD (42 percent net working interest). The sixth and final well will be placed on production in the immediate future.
In the Paddle River region, Scarlet recently completed two new wells on its previously announced 42 section farm-in. The first well, a gas well, flowed at 4.1 mmcf/day with 50 bbls/mmcf of liquids on perforation from the Mississippian interval. Reserves are also present in the overlying Jurassic intervals and will be evaluated at a later date. In the second well, Mississippian gas and oil pay was also encountered. A drill stem test in the overlying Jurassic recovered 1,300 m of clean oil. This well has been cased and is waiting on completion.
Scarlet expects to drill additional locations on this farm-in after breakup.
Earlier this month, in southeast Saskatchewan, Scarlet placed on production its first horizontal well in the Lampman area at 150 BOPD (gross).
Orion Resources purchased a 25% interest in the Star Project in Texas at a cost of $500,000.00 U.S. This property is a 10,000 (+-) acre project which has 12 cased wells three of which are currently on production at a combined rate of 600,000 cubic feet of gas per day. It is expected that the remaining nine wells can be brought back into production at rate of between 200,000 and 300,000 MCF per well per day. Within the next year it is expected to increase the revenue from the property from the current $20,000 - $25,000 U.S. per month to $150,000 to $60,000 per month of which 25% will be Orion's interest. The cost of the work overs of the existing wells will be $250,000.00 U.S. for Orion's interest.
The property will be operated by Orion's partner in the Texas Gulf Coast exploration plays Producers Energy of Houston (see press release January 28,
1998). As part of the production purchase which was closed on March 20, 1998 (effective date March 1, 1998) Orion and its partners have a one year option on 10,000 acres of optional land which have the potential for further development and exploration. There are five productive zones this area and when the original wells were drilled as a result of one of the zones being overpressured the productivity of the other zones were damaged by the high mud weight required to control the overpressured zone. This bypassed gas pay production could be enhanced with the use of horizontal drilling techniques which have not yet been used in this area.
This project should improve Orion's cash flow by the end of this year from the current $10,000.00 (Can) per month to in excess of $60,000.00 (Can) per month. This cash flow estimate does not include any amount for any exploration success on the Star property or on the Gulf Coast properties which could add significantly to the expected cash flow.
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