MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, MARCH 31, 1998 (3)
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Hibernia Oil Output Pinched Till June-July
NEW ORLEANS, March 31 - Production at the recently-launched Hibernia oil field off the East Coast of Canada will remain below capacity through June or July until injector wells now being drilled are completed, according to Murphy Oil Corp's (MUR) top executive.
''We're drilling injector wells,'' said Claiborne Deming, president and chief executive officer of Arkansas-based Murphy.
Previously, officials at Hibernia had said the pressure problems were not likely to extend beyond May.
Production at the field now totals 15,000 barrels per day (bpd) following two output cuts. Production had reached 60,000 bpd late last year shortly after the field became active and just before operations to bolster reservoir pressure were kicked off.
Water injected via the injector wells will help build up enough pressure to reestablish higher output levels.
Hibernia consortium president Harvey Smith said the timing for production to climb back up to previous levels had not changed from previous expectations.
Output from the field was projected to remain at 15,000-20,000 barrels a day until an injector well was brought into operation in May. Production would then climb to 50,000-60,000 barrels a day by the end of June, Smith said in a telephone interview from St. John's, Newfoundland.
''The water injector should come on line sometime in May. And that's just however fast we can get it completed,'' Smith said.
''So, then it will take however long it takes for the reservoir to respond and we're thinking that's going to be fairly quick.''
A fourth production well has been drilled and the consortium expects that to begin producing within the next two weeks, he said.
Murphy has a 6.5 percent stake in the Hibernia project, but among the larger stakeholders are Petro-Canada (PCA.TO) with 20 percent, Mobil (MOB) at 33.125 percent and Chevron with 26.875 percent
Others include the government of Canada with 8.5 percent and Norway's Norsk Hydro A/S (NHY.OL) (NHY), which holds a 5 percent stake.
Canadian Hunter Exploration Spinoff Put On Hold
The Financial Post
Shareholders of Noranda Inc. will have to wait until August for the public spinoff of wholly owned subsidiary Canadian Hunter Exploration Ltd., a natural gas producer based in Calgary.
Canadian Hunter chairman Jim Gray said yesterday plans to list the company in June had proved to be too aggressive.
Under a reorganization announced by Noranda last November, its entire interest in Canadian Hunter will be distributed to shareholders through a dividend and, in the process, become a public company for the first time in 25 years.
The EdperBrascan group, which owns 40% of Noranda's shares, will become Canadian Hunter's largest shareholder.
Gray, a member of the EdperBrascan board, said the delay is partly due to issues out of its control. Sources say the company is waiting for a tax ruling.
A poor market for oil and gas stocks is not a concern, Gray said, because the company is going public through a dividend, not through an initial public offering.
Canadian Hunter is a mid-sized to large producer, focused on western Alberta and northeastern British Columbia. Daily production is 270 million cubic feet of natural gas and 10,000 barrels of oil and liquids.
The company recently rolled out plans to double its size in the next five years.
Canadian Hunter expects to finalize a prospectus in June or July. No value has yet been set for the company, Gray said.
Canadian Hunter's sister company, Norcen Energy Resources Ltd., was sold to Houston based Union Pacific Resources Group Inc. in January as part of the same strategy.
Westcoast Energy Sells Gas Subsidiary In Alberta
The Financial Post
Vancouver-based Westcoast Energy Inc. said yesterday it is leaving the natural gas distribution business in Alberta with the $61-million sale of its wholly owned subisidiary, Centra Gas Alberta Inc.
The buyer is privately held AltaGas Services Inc. of Calgary.
The sale is part of a strategy by Westcoast to focus on markets where it has a larger presence - Ontario, Manitoba and British Columbia, the company said.
Based in Leduc, Centra Gas owns and operates a natural gas distribution business with 53,000 residential, rural and small industrial customers in 90 communities in central Alberta. It also owns Bonnyville Gas Company Ltd., which distributes natural gas to the town of Bonnyville, Alta. The unit has 135 employees.
The company said AltaGas is likely to retain the management team and employees at Centra Gas.
Westcoast will use the proceeds to fund other programs requiring large spending, said chairman Michael Phelps.
They include building the Maritimes & Northeast Pipeline to transport natural gas from Sable Island, offshore Nova Scotia, to the U.S., and the proposed Alliance natural gas pipeline.
The sale, subject to the approval of the Alberta Energy & Utilities Board, is scheduled to close in June.
TransAlta Big Winner In Alberta Deregulation, Atco Complains
The Financial Post
TransAlta Corp.'s potential financial windfall under Alberta's electricity deregulation bill will throw competition into uncertainty, says rival power generator Atco Ltd.
TransAlta could benefit to the tune of $5.5 billion over the 20 years from 2020, giving it market share that will deter new competition and impact the share value of electrical generating companies, said spokesmen for Alberta Power Corp., an Atco subsidiary.
"It creates a big inequity in the market," said Craighton Twa, Atco's president and chief operating officer.
"It would put us at a disadvantage compared to TransAlta. But, it would put any competitor trying to come into Alberta at a great disadvantage."
Linda Thomas, spokeswoman for TransAlta, said Alberta Power's figures are "misleading and alarming."
"You can orchestrate assumptions to come out with any number," she said. "I don't want to get into a battle of numbers. We're talking about speculating on things 20 years into the future."
Atco chairman Ron Southern is leading a protest of municipalities and consumer groups to stall the deregulation bill, which will move to third reading in the next few weeks.
The bill deregulates the industry in stages, beginning in 2001.
Years of negotiation between the Alberta government and industry players broke down last month.
The remaining contentious issue is the date of 2020 set by Energy Minister Steve West to deregulate existing electrical generating plants.
Most of these are owned by Alberta Power, TransAlta and municipally owned Edmonton Power.
Atco claims TransAlta stands to gain the lion's share of an estimated $8.7 billion ratepayers could recoup if long term contracts with the plants are ended in 2020, rather than waiting another 20 years before the plants are fully retired.
Alberta Power estimates it would recoup $1.4 billion.
Under the new bill, the utility companies must repay Alberta residents their up-front investment in the capital intensive plants by delivering lower utility bills until the plants are deregulated and handed to the companies' shareholders.
Atco said by 2020, only 80% of the plants' value will have been returned to customers and the arbitrary date misses the most lucrative years of the plants' life, once all depreciation has been paid down.
But an Alberta-commissioned report by a U.S.-based consulting firm, London Economics, disagreed with Atco.
"We refer to the [$8 billion] as an unreal number. It's not a number that has substance," said Dave May, a spokesman for the Alberta Energy Department.
The deregulation date of 2020 for existing plants was a compromise for the utility companies, said May.
TransAlta stands to gain the most by the timing of the deregulation and that is already reflected in its share price, said one analyst who asked not to be identified.
TransAlta's plants are older than Alberta Power's, and Alberta Power will be fighting to recover some of its capital costs for years to come.
MARKET ACTIVITY
Shares in British Petroleum Co Plc and other leading European oil companies dropped on Tuesday, as crude prices sank on scepticism over an OPEC agreement to limit global oil production.
In London, British Petroleum lost 1.71 percent or 15p to close at 862 while Enterprise Oil Plc( UK & Ireland: ETP.L) fell 0.74 percent, Lasmo Plc (UK & Ireland: LSMR.L) dropped 1.6 percent and Shell Transport & Trading Co Plc (UK & Ireland: SHEL.L) -- whose broader-based operations make it less sensitive to oil prices -- shed 0.25 percent.
Dealers noted that the sector had enjoyed a good recovery over the last couple of weeks.
''I'm not surprised to see people taking profits today after the last few weeks,'' one London dealer said. ''People are disappointed, but if the oil price keeps falling then that will be enough to stop this agreement falling by the wayside.''
Further weakness in beleaguered oil prices came after the Organisation of Petroleum Exporting Countries approved a 1.245 million barrels per day contribution to a two percent cut in world output.
The agreement was the first in ten years to limit production among the organisation that pumps 40 percent of the world's output. The move was designed to tackle the persistent glut of oil which has depressed oil prices to nine year lows.
''A lot of traders were obviously expecting bigger cuts,'' said one London analyst at a U.S. investment bank. ''People are also sceptical about whether the agreement will be adhered to.''
Shares in French company Elf Acquitaine (ELFP.PA) were still supported by news of drilling blocks in the Gulf of Mexico but Total (TOTF.PA) fell 1.5 percent, hit by profit taking after last week's record high.
The drop in crude prices weighed less heavily on other oil stocks with broader operations and less exposure to price movements.
Shares in Belgium oil company Petrofina (PETBt.BR) recovered some of its losses after falling 1.25 percent.
Analysts said weakness in oil prices was likely to persist.
''The good news is that there is now an effective floor for the price, because when we hit the $13 a barrel level people started hurting,'' one said.
''But we still expect downside in the second quarter of the year. Stocks are still very high, even with these OPEC cuts, and it will take until the third quarter to improve.''
Meanwhile in Spain, Ibersecurities downgraded its recommendation for Repsol (REP.MC) to ''neutral'' from ''buy,'' expressing doubts over the deal. Repsol was trading down 0.4 percent.
Oil shares fail to join Dow rally after OPEC |
