MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, APRIL 8, 1998 (4)
TOP STORIES, Con't
Ottawa's Share Of Hibernia Not For Sale Yet
St John's Evening Telegram
If Petro-Canada wants to buy the federal government's 8.5 per cent share in Hibernia, it is going to have to wait.
The sale of the Canada-Hibernia Holding Company is likely months or even years away, the vice-president of the Crown corporation said Tuesday.
"This is going to be a fairly lengthy process," Jan DeJong said in an interview. "We anticipate there will be an auction in due course. . It could very well be that we don't initiate the process for a year or two."
A day earlier, Petro-Canada's vice-president in charge of East Coast operations, Gary Bruce, was asked by reporters if his company was interested in the purchase.
Bruce, who was speaking at a Newfoundland Ocean Industries Association (NOIA) trade mission in Calgary, said he was interested in any opportunities to boost Petro-Canada's 20 per cent ownership in the Hibernia project.
Norsk Hydro has also indicated it may be interested in increasing its five per cent ownership of Hibernia.
The Hibernia Management Development Company, meanwhile, spudded its sixth well Monday: a 6,682-metre gas injector well that will allow the partners to begin pumping gas back into the reservoir - and using it as fuel to power the platform - rather than burning it off at the end of the flare boom.
A water injection well is now about 1,000 metres from its target and the fourth production well is about to go into operation.
Without injector wells, the platform is producing about 15,000 barrels a day, but production is expected to reach 100,000 barrels a day by the end of the year, Bruce said in Calgary.
And as the platform approaches its peak production of 135,000 barrels per day, the value of Canada Hibernia Holding Company's share will likely increase, DeJong said.
East Coast Potential Promoted At Trade Mission
The Hibernia and Terra Nova projects signal the beginning of a sustainable oil industry offshore Newfoundland and East Coast companies are ready and willing to tackle the challenge.
That has been the message delivered by a four-day trade mission in Calgary put together by the Newfoundland Ocean Industries Association, representing 395 companies that supply and service the East Coast offshore oil and gas industry. Sixty five members from 52 East Coast supply and service companies were represented in the mission, which wraps up today.
Beginning with Hibernia in 1997 and Terra Nova in 2000, Petro-Canada envisages new developments coming on stream every two to three years, Gary Bruce, vice-president, offshore development and operations, said in the key- note speech Monday.
Based on the estimated five billion bbls of oil expected to be recovered from the Jeanne d'Arc basin, one of six potentially productive areas, the Grand Banks could produce up to 500,000 bbls per day for the next 30 years, he said.
Petro-Canada is the operator of a strategic alliance for exploration, which also includes Chevron Canada Limited, Mobil Oil Canada, Husky Oil Ltd. and Norsk Hydro A/S.
With estimated recoverable reserves of 615 million bbls for Hibernia and 400 million bbls for Terra Nova, the two fields are the two largest ac- cumulations of conventional oil in Canada today, Bruce said.
Flow rates of 20,000 to 30,000 bbls per day for Hibernia and Terra Nova are expected, compared to an average of 50 bbls per day in Western Canada, said Bruce. Finding costs to date are approximately $1.25 per bbl --about one-half the cost in Western Canada.
Bruce said Petro-Canada, the operator and a 29% stakeholder in Terra Nova, believes the $4.5-billion project, with its floating production system, will be a model for future Grand Banks projects. Costs for transportation and transshipment will average about $3 per bbl (constant Canadian dollars) for both Hibernia and Terra Nova.
The Terra Nova facility will be designed with a capacity of 125,000 bbls of oil per day and average annual production is anticipated at 115,000 bbls a day from 2001 through 2006. Estimated field life is 14-17 years.
The Terra Nova owners (Petro-Canada, Mobil, Norsk Hydro, Murphy Oil Co. Ltd., Mosbacher Operating Ltd. and Chevron) will likely charter one tanker and have access to the two Hibernia tankers through a regional pooling ar- rangement. These shuttle tankers will take crude to the transshipment terminal at Whiffen Head, Newfoundland or directly to market.
"On Canada's East Coast we won a living from the sea for 500 years," Stephen Henley, NOIA president, told 180 persons attending a noon luncheon Monday sponsored by the association. "This contest has prepared us to pioneer and understand marine operations and the support of an ever-growing range of construction services," he said.
"These wars still present the challenges that we encourage: resourcefulness and dogged determination." The ocean technology these traits produce is "second to none," said Henley.
East Coast delegates in interviews said they were pleased with the response from Calgary companies and believe the trips are a worthwhile investment.
"Trade missions serve as a reminder to Calgary oil companies that we exist, when they're looking at their next projects," said Dan Herder, business development manager for Doris Development Canada Ltd. in St. John's and NOIA treasurer. "Sometimes they need a bit of a nudge," but that's understandable.
For Robert Crosbie, president of Crosbie, Salamis Limited, a fabricating company contracted to the Hibernia and Sable Island projects, the mission allowed it to talk to Calgary companies about future plans and potential interest in the East Coast.
"We want to build a strong industry both in the West and on the East Coast to benefit Canada as a whole," said Capt. Mark Turner, director of the Offshore Safety and Survival Centre at the School of Maritime Studies in St.John's. The centre trains about 5,000 people a year, including representatives those from companies working in the North Sea and Gulf of Mexico.
Alberta Energy Corp. Ekes Out Small Profit
The Financial Post
Market favorite Alberta Energy Co. barely eked out a profit in the first quarter, giving investors reason to worry about how much the oil and gas industry is hurting from low commodity prices.
But president and chief executive Gwyn Morgan told shareholders at the annual meeting yesterday the company is well positioned to "sail through" this year's low commodity prices and to capitalize on the emerging continental market for natural gas.
The Calgary-based producer, the first in the industry to post results for the period, said net income was $2.2 million (2› a share), lower than analysts' estimates of 8› and down from $41.9 million (38›) a year earlier.
Cash flow was $108.5 million (97›), down from $164.7 million ($1.48) last year.
Revenue, net of royalties, was $384.9 million, down from $420.9 million.
Results were pulled down by lower oil and gas prices and a scheduled maintenance shutdown at the Syncrude oilsands plant, of which AEC is the second largest partner.
It plans to spend half its $800 million capital budget for the year on natural gas related projects.
Plans call for gas sales to increase to 800 million cubic feet a day in 1999, from 700 million cubic feet a day this year.
The company plans to increase conventional oil production more slowly because of low oil prices, while heavy oil production has been put on hold until prices improve.
Alberta Energy Corp. Looks Ahead
Calgary Sun
Falling oil and gas prices had no negative effect whatsoever on the shares of Alberta Energy Company Ltd., president Gwyn Morgan and chairman David Mitchell told a buoyant annual shareholders meeting yesterday.
In a packed Calgary Convention Centre room, Morgan and Mitchell pointed out that in recent months AEC share prices have increased from about $30 to $35 a share.
Indeed, they said, AEC shares had gained approximately 28% in market value during the first quarter of this year, despite depressed oil prices and uncertain markets.
They put this down to the company's long history of stable growth and its long-term plans for expansion.
"We view 1998 as the year of opportunity to further build our assets, deliver even greater operating efficiencies, and be poised to capture the much stronger gas markets that 1999 promises," said Morgan.
He did admit, however, that financial results for the first quarter were negatively "impacted" by lower oil and gas prices and a routine Syncrude maintenance shutdown.
"Liquid prices for the first quarter, for instance, dropped 36 percent while gas prices were nine percent less than in the first quarter of 1997."
AEC plans to spend half its $800-million capital budget for the year on natural gas related projects.
Gas sales will increase to 800 million cubic feet a day in 1999, from 700 million cubic feet a day this year.
The company plans to increase conventional oil production more slowly because of low prices, while heavy oil production has been put on hold.
At a gala event at the Palliser Hotel, AEC officials announced they were donating a total of $100,000 to help Alberta communities host or bid on cultural and sporting events in municipalities where AEC is most prominent.
Canadian Occidental Petroleum Extends Exploration Activities In Yemen
Canadian Occidental Petroleum Ltd. said yesterday it is back in the high potential exploration game in eastern Yemen with the acquisition of interests near its massive Masila producing fields.
The Calgary-based senior oil and gas company, 30% owned by Occidental Petroleum Corp. of Los Angeles, said it has signed an agreement with Kerr-McGee Yemen Ltd. to acquire a 47.5% interest in Block 50 and a 43.75% interest in Block 51.
The two million acre Block 51 is located immediately adjacent to the western boundary of the CanadianOxy operated Masila Block where over 700 million barrels of reserves have been discovered. During 1998, CanadianOxy will participate in a 220 mile seismic program and drill two exploration wells on Block 51 to evaluate exploration prospects in the western Saar Basin with similar geology to the producing fields on the Masila Block.
Block 50 covers over eight million acres and is located northwest of the Masila Block in an underexplored area that may contain a northern extension of the oil-rich Saar basin discovered on the Masila Block. CanadianOxy will participate in a 470 mile seismic program on Block 50 during 1998 to identify prospective drilling locations.
"We are still exploring on the Masila block, but we found the big targets and we are looking for smaller targets," said CanOxy spokesman Kevin Finn.
The Masila Block's reserves and production are continuing to grow. In 1997, exploitation drilling and production performance added 91 million barrels of proved and probable reserves net to CanadianOxy's 52% interest while gross production increased seven per cent to almost 190,000 barrels per day. Current production is 200,000 barrels per day and CanadianOxy is aggressively expanding its Masila Block program to take advantage of the extensive infrastructure it has in place.
CanOxy's share of production from Masila, which it operates, is more than 100,000 barrels oil equivalent daily - accounting for 40% of its overall production of about 250,000 barrels of oil a day.
More than 700 million barrels of oil have been discovered in the fields.
The block's production of 200,000 b/d represents 20% of the country's gross domestic product.
Under the agreement, Kerr-McGee has an equal interest in the blocks, while the balance is held by the Yemen government.
"These two blocks put us back in the high-potential exploration business again."
This year, CanOxy plans to spend $11 million to drill two wells and conduct seismic tests in the new areas, whose geological profile is similar to Masila's.
Commenting on the acquisition, Victor Zaleschuk, President and CEO said, ''We have a long term commitment to Yemen which is a key part of our company. Our strategy is to capitalize on our knowledge of the Saar Basin and control of the extensive Masila infrastructure to create additional longer-term business opportunities in the country. With the acquisition of interests in Block 50 and 51 this strategy is being realized.'' |
