MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, APRIL 16, 1998 (4)
TOP STORIES Con't
PanCanadian Petroleum Lost Focus
Canadian Press
Making changes at PanCanadian Petroleum caused the company to lose focus, momentum and millions of dollars in profits, shareholders discovered at their annual meeting Thursday
Making changes at PanCanadian Petroleum caused the company to lose focus, momentum and millions of dollars in profits, shareholders discovered at their annual meeting Thursday. Despite a $450-million jump in 1997 revenues, PanCanadian's profits fell by $16 million.
Restructuring of the company's heavy oil and gas operations was the culprit for the dip, said PanCanadian president David Tuer.
"Fundamental change has proven to be neither easy nor swift," Tuer said in the company's annual report.
"This task of organizing proved to be more far-reaching and time consuming than I had anticipated."
In June last year, PanCanadian made its largest-ever corporate acquistion when it purchased heavy oil specialist CS Resources Ltd. and folded its heavy oil assets into one business.
Also that month, the company launched its largest capital project with the announcement of the $1.1-billion Weyburn oilfield project in southeast Saskatchewan, which will add production of 120 million barrels over the next 25 years.
PanCanadian also took a beating because its 1997 operating cost per barrel in heavy oil was an "unimpressive" $10.02 per barrel, Tuer said, adding those operating costs have already decreased by 30 per cent this year.
"I think it was a very challenging year for PanCanadian," said energy analyst Craig Langpap of FirstEnergy Capital Corp."And 1998, in the oil-price environment we're in, it's not going to make it any easier."
PanCanadian, a branch of resources and transportation giant Canadian Pacific Ltd., is Canada's second biggest energy producer and a major supplier of conventional and heavy oil, natural gasand liquids.
Daily production of crude oil was also down in 1997, to 140,000 barrels from 146,000 barrels. The company said the decline was due to slumping oil prices, which started out last year at $26.62 US per barrel and plummeted to $17.60 by December.
PanCanadian was the first major energy company in Canada to respond to low oil prices, cutting 200 jobs and easing production of heavy oil last February.
Although the oil and gas powerhouse was busy making changes to accommodate growth, it still made a $330-million profit.
With natural gas prices hitting record highs, the company plans to pump out more gas this year - from 800 million cubic feet a day to 880 million cubic feet a day by the year's end
"They're going to be concentrating on their gas projects and it's not easy to switch from one focus to another," Langpap noted.
Asked about how the company is faring in its efforts to reduce greenhouse gas, Tuer said Canada's reduction target will cost all Canadians. To put it in perspective, Tuer said if all oil and gas wells in the country were shut down today, only half of Canada's targeted reductions would be achieved.
"I think that all Canadians would be feeling some real pain and the oil industry would be sharing it," he said. Canada's goal is to curtail the country's fossil fuel emissions by 25 per cent from current levels by 2010, with further reductions in the decades after that. PanCanadian will release 1998 first quarter results early next week.
PanCanadian Petroleum Expects To Post Small Quarterly Profit
The Finance Post
PanCanadian Petroleum Ltd. will post a small profit when it releases first quarter results next week, the Calgary-based company said yesterday.
Weak oil prices are forcing it to alter plans almost daily to ensure cash flow funds most of the "tenuous" 1998 capital budget of $960 million, president and chief executive David Tuer said after the company's annual meeting.
He declined to be specific about earnings, saying the figure will be at least eight digits. In the first quarter last year, PanCanadian had a profit of $135 million.
The company intends to drill 1,250 wells this year, most of them in Western Canada.
It will start a $15-million well, called Grande Pre, off the coast of Nova Scotia in the next few days. Three wells in the Gulf of Mexico, with depths ranging from 22,000 to 28,000 feet, will each rack up drilling costs of US$25 million to US$40 million.
Tuer told shareholders there is little the company can do about commodity price fluctuations.
"We are price takers in the world market. We will, however, continue to manage our costs and our spending."
A 10% staff reduction in February helped reduce first-quarter heavy oil operating costs by more than 30% from the $10.02 a barrel averaged in 1997, he said.
Heavy oil makes up most of the 6,000-barrels-a-day cut from production levels the company had forecast before oil prices started to slide.
Tuer said PanCanadian is aware of discussions about building another upgrader, which would refine heavy oil and increase its value, but the firm isn't leading the charge.
"I don't think that we're necessarily, or should be seen as, the leaders" of the producer-driven effort, he said.
For 1988, PanCanadian expects oil and gas liquids production to average 148,000 b/d and natural gas to come in at 800 million cubic feet a day. Volumes in 1997 averaged 140,000 b/d of oil and 744 million cubic feet a day of gas.
Numac Energy Inc. Looks For New Guidance At The Top
The Financial Post
Numac Energy Inc. is restructuring its executive suite and, with the departure of a senior vice-president, is looking for a president and chief executive.
Rich Couillard has resigned as senior vice-president of exploration and production, a post from which he directed Numac's increased activity in heavy oil, a sector hit by low oil prices over the past six months.
Stewart McGregor, chairman and chief executive, said the Calgary-based company went through an intensive review to assess strategies in light of changing prices for oil and gas.
"We think it was time for a change - new blood, new ideas - for our exploration program," he said.
Numac hasn't had a president since Irv Koop left about three years a go. To fill the position now, McGregor has indicated he is willing to relinquish his CEO role to help attract a strong candidate.
Numac's desire to recruit a new president should alleviate concerns that four Hong Kong based investors, who own more than 50% of the stock, are not committed to its success, McGregor said.
"I think the fact we're making these management changes suggests the Hong Kong investors do take a long-term view."
An upbeat Couillard, reached at his Calgary home, said he enjoyed his time at Numac. He said there were philosophical, operational and management differences, as there are at all companies, but there was not a single issue that caused his departure. "It's been positive. There's nothing nefarious here."
A 25-year veteran of the oilpatch, Couillard was recruited in 1994 from Chevron Canada Resources Ltd. He intends to take a breather before re-entering the business.
Some analysts said yesterday a revolving door at the top won't help Numac's battered stock.
"I don't see it going a lot lower, as it's already trading pretty cheaply," said Gord Currie, a Calgary based analyst with Canaccord Capital Corp. He doesn't think the stock will move much until the new executive begins to deliver on a new strategy.
A chance to turn around a company that's struggled to bring down its finding and development costs could be attractive to some candidates, he said.
Numac's strong asset base and technically proficient staff are positives, said Peter Linder of CIBC Wood Gundy Securities Inc. in Calgary. "Under the right captain, there is considerable upside on the stock."
He said Numac's intention to hire a top executive should take the firm off the list of rumored acquisitions.
Real Resources Inc. (RER/TSE) has entered into an agreement to acquire all of the shares of a private company which has interests varying between 50 to 100% on 20 sections of undeveloped land in the Burmis area located in southwest Alberta.
The lands are in an area of active industry drilling, targeting natural gas prospects in the Mississippian zone.
Lowell Jackson, President & C.E.O. of Real Resources Inc. said ''the acquisition adheres to our strategy of focusing the majority of our exploration thrust on longer life natural gas reserves''.
Total consideration for the acquisition is 1,100,000 common shares of Real.
Ridgeway Petroleum Corp. announced today the results of an economic analysis contained in an ongoing field development plan, a portion of which has been previously released. This analysis indicates that the first production phase of its ''Arizona-New Mexico CO(2)/Helium Project'' has a pre-tax net present value discounted at 10% of US$409.9 million over its 40 year life.
This estimate represents the results of seven sensitivities prepared by the consultants to determine the optimal production formula to maximize the rate of return for this phase. Other parameters in the estimate are summarized below:
Rate of production:
500 million cubic feet per day for 35 years and five additional years at an average of 386 million cubic feet per day.
Total gas produced:
7 trillion cubic feet (''TCF'') or approximately 51% of the estimated 13.86 TCF of gas in place in the East Field. The West Field is estimated to contain 7.51 TCF of gas in place.
Number of wells:
203 in the first three years; 1,195 over the 40 year period.
Capital cost:
To reach 500 million cubic feet per day within three years, US$159,600,000 which includes plant and compression facilities.
Gas price:
Confidential for competitive reasons but within current negotiation range.
Payout: Pre-tax 3.6 years
Rate of return: Pre-tax 50%
Net present value discounted at 10%: Pre-tax US$409,900,000.
The success of planned horizontal drilling could have a significant impact on the Project as a result of increased productivity.
This sensitivity is only one of a number of options the Company is considering as it continues to explore strategic alternatives to enhance shareholder value.
Ridgeway Petroleum Corp., which has been exploring for oil and gas in North America since 1980, is on course, management believes, to potentially become one of North America's largest producers of carbon dioxide and helium.
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