MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, APRIL 1, 1998 (3)
TOP STORIES, con't
Tunisia Grants Petro-Canada Seismic Option Permit
TUNIS, April 2 - Tunisia on Thursday granted Canadian oil firm Petro-Canada a seismic option permit in the North African country's southern zone, officials said.
The permit covers 7,192 square kilometres in the region of Tataouine.
Petro-Canada, which gets its first permit in Tunisia but operates in neighbouring Algeria, is expected to invest some $4 million in the permit, energy sources said.
The contract was signed on Thursday in Tunis by Petro-Canada Tunisia head Norman McIntyre, Tunisian Industry Minister Moncef Ben Abdallah and Tunisian state-oil company ETAP chairman Moncef Boussen.
Poco Petroleums Chief Executive Took Home $1.5M
The Financial Post
Stock options accounted for more than half the total 1997 compensation for Poco Petroleum Ltd.'s president and chief executive, the company said in its annual information circular.
Craig Stewart took home $1.5 million in salary, bonuses and stock options. His base pay rose 23% to $375,000 and his bonus climbed 80% to $225,000. He cleared $890,000 from exercising options on 100,000 shares, and was granted options for 87,000 shares.
Other executives who also got 23% salary increases were John Ferguson and Robert Weiss.
Ferguson, vice-president and chief financial officer, collected $1 million, with $685,000 coming from stock options. The vice-president of marketing, Weiss earned $576,000 in stock options out of total compensation of $921,000. The company's return for investors declined 2.7% last year, compared with the Toronto Stock Exchange's 300 composite index gain of 14.9%, and the oil and gas index's advance of 3.6%.
Canadian Occidental Petroleum Ex-President Got $1.4M Sendoff
The Financial Post
Canadian Occidental Petroleum Ltd. paid former president and chief executive David Hentschel $1.4 million when he retired last May.
The payout, part of an employment agreement, increased his total compensation for the year to $2.3 million, including a $600,000 bonus and $287,500 in salary.
He earned $975,000 in salary and bonus in 1996. Hentschel, who continues to serve as a director, was also awarded options to buy 100,000 shares at an exercise price of $23.80, increasing his shares under options to 170,000. None was exercised last year. CanOxy's current chief executive, Victor Zaleschuk, earned $641,250 last year, including a $220,000 bonus and a $421,250 salary.
He also received options for 60,000 shares, half of them exercisable at $23.80 a share and half at $28. Zaleschuk's total compensation was $401,500 a year earlier.
B.C. Backs Alliance Pipeline Project
Calgary Herald
The B.C. government has jumped on the Alliance bandwagon.
"I'm publicly delighted to support the Alliance project," Premier Glen Clark told the Herald on Wednesday. "It has spectacular implications for B.C. I want to see it go ahead."
With Alberta on board, there are two provincial powerhouses behind the controversial natural gas pipeline project. Industry sources say it virtually assures the project's go-ahead.
Alliance is a $3.7-billion high-speed pipeline project designed to carry gas and chemical-rich liquids from northeast B.C. through Alberta to Chicago.
Alberta Premier Ralph Klein has said he would like to see Alliance proceed as quickly as possible.
Rivals TransCanada PipeLines Ltd., Nova Corp. and Foothills Pipe Lines Ltd., have intervened in Alliance's hearing before the National Energy Board. Their objections have put Alliance at least six months behind its target in-service date of fall 1999.
Clark's added support for Alliance is great for gas producers in British Columbia, said the Canadian Association of Petroleum Producers.
"We haven't witnessed this kind of co-operation out of B.C. previously," said CAPP president David Manning.
Clark is excited about the economic implications of Alliance.
"It requires a significant increase in natural gas production to fill the pipeline," he said.
Clark also hopes to entice greater oil and gas investment through lowering taxes and royalties.
"We're working to make our regimes competitive," Clark said.
The oilpatch was delighted with the prospect of a regime similar to Alberta's.
"They're looking for a more competitive fiscal regime and they're looking over the mountains to be sure the costs are as competitive as anywhere in the country," said Manning. "He's clearly embracing competitive access to markets and understands that."
Clark also wants to tighten the province's regulatory belt.
"He's looked at the regulatory maze in B.C. and recognizes it's a real impediment to getting work done," said Manning.
Clark explained that applications must go through a myriad of ministries which can delay approval times in a province where the building season is short.
"We take far too long in processing applications," Clark said.
But not as long as the National Energy Board hearing for Alliance where opponents are stalling its approval.
On Tuesday, the hearing set a record. It is now the longest hearing ever, and it could run into June. The NEB hearing into the Sable Island project off the coast of Nova Scotia held the previous record of 56 days.
New Pipelines Hold Promise, Risk
Canadian natural gas producers' long-sought access to Chicago markets will offer lots of opportunities but not without some costs, a gas conference in Calgary heard Monday.
"Now you're tied to the grid, you need to worry about what's happening in the Gulf of Mexico," Gordon Hart, manager, natural gas marketing for Shell Canada Limited told delegates attending the new gas pipelines and markets con- ference sponsored by The Canadian Institute.
Marketers and consumers also need to focus on the customer, said Hart. "Everyone is so anxious to leave the Western Canada Sedimentary Basin they forget about who will be buying at the other end," he said.
Customers, Hart noted, are demanding "door to door" delivery of gas. However, when the additional pipeline capacity comes on stream, Canadian ship- pers in the short term (1999-2004) might not be able to recover all their transportation charges, Hart suggested. Sable Island production would be the exception because there will be more new markets than gas supply, he predicted.
The WCSB, said Hart, may not be the cheapest basin in the future as it is costing more to find and produce gas. "We are running harder and harder with less results."
While there's still a lot of gas, it's in smaller pools and reserves are declining at an increasing rate, he noted.
In United States markets such as Maine and New Hampshire, No. 2 oil will be the major competitor to gas, selling for $3.15-$3.30 a gigajoule com- pared to $3.50 for gas, said Hart.
Liquid natural gas, while currently a small component now, could be another competitor in the northeastern U.S. market if the Asian flu persists, he said. A number of Asian petrochemical plants have been proposed and if they don't proceed, surplus LNG could put a cap on the winter peaking price, said Hart. "You're not going to see $5 (a gigajoule) gas in Boston."
In the meantime, the Northern Border Pipeline Company is "on schedule and on budget" for its extension to Chicago, which will carry an additional 700 mmcf of gas per day from Foothills Pipelines Ltd., said Bill Fonda, North- ern Border account executive. Construction should begin April 1 for a Nov. 1 in-service target, he said. Work on the 650-kilometre line will be done simul- taneously on five different contracts.
In extending the line, Fonda said, the company listened to its customers, who said they wanted direct access to the Chicago market.
Northern Border is now looking beyond Chicago with a new proposal, Project 2000, for a line to North Hayden, Indiana from Chicago. That area of- fers industrial customers and local distribution companies, said Fonda.
Northern Border is targeting an in-service date of Nov. 1, 2000 for this extension of what he described as a "fairly modest" system-wide expan- sion. Companies have until April 30 to indicate their interest in signing on and after that date Northern Border will have a better sense of how to pro- ceed, said Fonda.
"We want to ensure we will continue to be the low-cost transporter of choice," he said.
In the U.S., demand for gas will continue to grow with the largest in- crease in the electrical power generation area, said Chris McGill, director, gas supply and statistics, for the American Gas Association. Forecasts call for 3.7 tcf of imported gas from Canada in 2005. There are no concerns about potential U.S. gas supply, currently 65 years at current production rates, he said. The issue is "how much production at what cost."
McGill said he believes there will be increased production from the deepwater Gulf of Mexico, but first the infrastructure has to grow. And there are environmental issues that must be resolved if that gas is to get to market.
Coalbed methane, mainly in the Rockies such as Green River and Wind River in Wyoming, account for six to seven per cent of total U.S. gas produc- tion, said McGill. However, "the jury's still out" on whether those areas will be as prolific as the San Juan basin.
McGill also predicted technology will play an increasingly important role in boosting gas production, primarily from existing wells rather than through massive increases in the wells drilled, to meet current demand.
MARKET ACTIVITY
In New York, Chevron (CHV) was a bright spot, rebounding from Tuesday's loss to rise 2 3/16 to 82 1/2. Chevron led a surge in oil and related names, which led the AMEX Oil Index (XOI) up 4.87 to 482.25, while the Philadelphia Oil Service Index (OSX) climbed 4.98 to 114.74.
Among individual names in the oil patch, Mobil (MOB) rose 1 13/16 to 78 7/16 and Royal Dutch Shell (RD) gained 1 13/16 to 58 5/8. Oil drilling and services stocks were uniformly higher, led by Cooper Cameron (RON), which climbed 3 3/8 to 63 3/4, and Smith International (SII), up 3 15/16 to 59.
The Toronto Stock Exchange 300 Composite Index fell 0.4% to 7527.86.
In comparison, the TSE Oil & Gas Composite Index edged upward 0.1% or 4.74 to 6577.88. The sub-components were mixed. The Integrated Oil's gained 0.1% or 4.55 to 8798.72. The Oil & Gas Producers fell 0.2% or 8.71 to 5797.2. The Oil & Gas Services climbed 1.7% or 50.00 to 3076.20.
Jet Energy, Pinnacle Resources, Paramount Resources, Archer Resources and Gulf Canada Resources were among the top 50 most active issues on the TSE.
Paramount Resources gained $1.20 to $14.50, Carmanah Resources $0.65 to $8.0 and PanCanadian Petroleum $0.50 to $23.00.
Percentage gainers included k2 Energy 20.5% to $2.53, Paramount Resources 9.0% to $14.50, Carmanah Resources 8.8% to $8.00, Merit Energy 7.5% to $5.70, Westfort Energy 7.0% to $1.84, Crown Joule Exploration 5.6% to $1.50 and Genesis Exploration 5.6% to $7.50.
On the downside, Talisman Energy fell $1.1 to $41.65 and seven Seas Petroleum $0.60 to $25.20.
Percentage losers included Eurogas Corp 9.7% to $1.30, Canadian Conquest Exploration 8.7% to $1.05, Benson Petroleum 5.2% to $1.45 and Cavell Energy 5.0% to $0.95.
In review of the service sector, Artisan Corp was among the top 50 most actives on the TSE.
Precision Drilling gained $0.95 to $30.90, Tesco $0.75 to $23.75 and Ensign Resource Service Group $0.70 to $33.45.
Inter-Tech Drilling gained 9.1% to $1.20 and Ryan Energy Tech 5.5% to $9.60.
There weren't any service companies listed among the top net losers.
Geophysical Micro fell 14.6% to $1.11.
Over on the Alberta Stock Exchange, Justinian Exploration, Alta Pacific Capital, DeTECH, Oxbow Exploration, Hydduke Capital, Bearcat Exploration, Dalton Resources, HEGCO Canada and Raptor Capital were among the top 25 most active traded issues.
AltaQuest Energy gained $0.25 to $2.80, Red Sea Oil $0.15 to $3.5, Venator Petroleum $0.15 to $1.75, Big Bear Exploration $0.10 to $1.25, Hyduke Capital $0.10 to $2.05, Invader Exploration $0.10 to $0.80 and Parkcrest Exploration $0.10 to $1.05.
On the downside, Mera Petroleum fell $0.15 to $.40, Jett Investment $0.14 to $0.65, Desmarais Energy $0.12 to $0.23, Blue Power Energy $0.10 to $0.30, Canop Worldwide $0.10 to $0.50, Pacific Ranger Petroleum $0.10 to $0.50, Stellarton Energy $0.10 to $4.00 and Syner-Seis Tech $0.10 to $0.95.
RESEARCH NOTES
RBC - Financial Group
Crude Oil Commentary:
Our view was that the market had over reacted to the OPEC announcement last week and that we would pull back somewhat - and that we did. As the OPEC meeting got underway, prices began to slide as the market sensed that a 1.5 - 2.0 MM Bopd cut would not be sufficient to tighten the excess supply. Furthermore, market participants (and that includes us) are a little unsure as to whether OPEC members will actually comply with the proposed cuts. This implies a "wait-and-see" stance of about 3-6 months. In the meantime we can expect prices to partially fill in the gap that was left last week and soften to $15.50 which is the fist major level of support. The medium term technical picture remains neutral. Look for prices to trade between $15.50-16.50 this week.
Natural Gas Commentary:
Natural gas prices have been in a strong holding pattern, trying to break out to the upside of their recent range. As we eluded to in earlier publications, prices could stage a nice rally toward the $3.00 level before summer is upon us. The market remains moderately bullish at this point and we continue to suggest that producers gradually start stepping in to summer and winter hedge positions. Consumers, who have done no or little hedging for the upcoming gas year, we would suggest using option related products at this point or simply remaining on the sideline for now.
Alberta gas prices have been resilient. Fear of insufficient storage and the continued concern over low field receipts onto the Nova system have kept prices very (it's not often I use an adjective) strong. The view is that prices will remain strong and perhaps even strengthen further as we move into summer and next winter. Our recommendation for producers would be to begin averaging in to your hedge positions (especially for the summer). For consumers, hang tough for now.
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