MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING THURSDAY APRIL 23, 1998 (7)
EARNINGS
Oil Firms Post Lower Income, Cite Oil Prices
Major U.S. oil companies Thursday reported another batch of lower profits for the first quarter due to depressed oil and natural gas prices.
Texaco Inc. said its net income tumbled 90 percent to $259 million, or 46 cents per share, from year earlier earnings of $492 million, or 90 cents per share.
Revenues fell 48 percent to $8.14 billion from $12.02 billion.
"Production increases were on target toward achieving our planned double digit growth for the year. However, total earnings were significantly impacted by the drop in worldwide crude oil and natural gas prices," said Chief Executive Officer Peter Bijur.
The company said U.S. exploration and production earnings plunged to $107 million from $311 million a year earlier.
Average oil prices were $11.78 per barrel, or $7.84 below 1997's level due to rising oil inventories and slowing world demand. Its average natural gas prices were $2.14 per thousand cubic feet, or 52 cents below 1997 because mild weather cut consumption.
Falling energy prices also hit Texaco's international earnings, which dropped to $40 million from $156 million, the company said.
Texaco's stock was up 6 cents at $62.06 in composite midday New York Stock Exchange trading.
The drop in oil prices due to global overproduction has been a common thread through oil earnings in the first quarter.
Chevron Corp. said its earnings fell to $500 million, or 77 cents a share, from $831 million, or $1.27 per share, in last year's first quarter.
Revenues fell to $7.46 billion from $10.79 billion.
"Crude oil prices have remained 'soft' into the second quarter despite the agreement by oil-producing countries to cut production," said Chief Executive Ken Derr.
However, despite the price slide, Chevron said it would not make large cuts in capital spending this year.
Chevron, which is based in San Francisco, said its chemicals earnings were flat at $63 million while earnings from coal fell by $4.0 million to $11 million.
Chevron's stock was up 44 cents at $84.50 on the NYSE.
Phillips Petroleum Co. said its earnings fell to $171 million, or 65 cents a share, from $237 million, or 94 cents a share, last year.
The Bartlesville, Okla.-based company said its refining, marketing and transportation division's earnings rose to $29 million from $18 million and its chemicals unit earned $75 million, up from $63 million.
But the gains were offset by a 35 percent fall in oil prices and a 24 percent drop in natural gas prices, it said.
Phillips' stock was down 44 cents at $49.06 on the NYSE.
Meanwhile, oil refiner Sun Co. Inc. said its income almost tripled to $56 million, or 58 cents per share, from $18 million, or 10 cents per share, a year ago.
Sun's year-ago quarter included a $21 million after-tax charge. Excluding the charge, the company's operating income was $39 million, or 38 cents per share.
"Despite a substantial amount of refinery maintenance activity and significantly lower margins for retail gasoline and certain of our key petrochemical products, our operating earnings showed dramatic improvement versus the prior year quarter," said Chief Executive Robert Campbell.
Ashland Inc., the maker of Valvoline oil and a chemical producer, said strong gains in refining and marketing boosted quarterly income to $28 million, or 37 cents a share, from $7 million, or 3 cents a share.
Revenues fell to $1.8 billion from $3.3 billion.
Ashland said refining and marketing was the largest contributor to earnings, providing operating income of $41 million.
Operating income from Ashland Chemical was flat at $36 million.
Ashland's stock was off 81 cents at $54.375 on the NYSE.
EARNINGS REPORTS
Baytex Energy Ltd. / Watchlist
Message 4188383
Numac Energy Inc. / Watclist
Message 4187668
Backer Petroleum Corp.
Message 4186466
CE Franklin Ltd.
Message 4188032
Newalta Corp.
Message 4188433
Taylor Gas Liquids Fund
Message 4186506
Humboldt Capital Corporation
Message 4188255
MARKET ACTIVITY
In the U.S., Chevron (CHV) reported earnings of 77 cents per share, 9 cents better than analysts' expectations, but the oil giant rose just 3/16 to 84 1/4.
Halliburton (HAL) and Noble Drilling (NE) each fell fractionally reporting first-quarter profits up 42% and 95% from a year ago, respectively.
U.S. Weekly Reported Earnings Scorecard
Message 4189687
Oil was one of the better relative performers among major industry groups, although the Philadelphia Oil Service Index (OSX) fell 1.57 to 113.83 and the AMEX Oil Index (XOI) dipped just 0.31 to 490.
Reference bigcharts.com. & lonestar.texas.net .
Cliffs Drilling (CDG), due to report after the bell today, fell 2 5/8 to 49 1/8, while Smith International (SII) shed 1 7/16 to 57 1/2.
The Toronto Stock Exchange 300 Composite Index fell 0.1% or 5.85 to 7816.40.
In comparison, the oils did not fare well. The Toronto Oil & Gas Composite Index lost 0.4% or 28.40 to 6709.00. Among sub-components, the Integrated Oil's fell 0.1% or 6.16 to 8642.70. The Oil & Gas Producers fell 0.5% or 31.40 to 5968.30 and the Oil & Gas Services fell 0.7% or 22.84 to 3277.07.
References:
TSE 300.............. chart.canada-stockwatch.com
O&G Composite. chart.canada-stockwatch.com
Integrated Oil's.... chart.canada-stockwatch.com
O&G Producers.. chart.canada-stockwatch.com
O&G Services..... chart.canada-stockwatch.com
Petro-Canada, Renaissance Energy, Canadian Conquest Exploration, Rigel Energy, Newport Petroleum, Talisman Energy and Westfort Energy were among the top 50 most active traded issues on the TSE.
Imperial Oil gained $1.00 to $79.90, Rigel Energy $0.60 to $13.70 and Denbury Resources $0.50 to $24.95.
Percentage gainers included Westfort Energy 13.4% to $3.80, Eurogas Corp. 7.6% to $1.13, Abacan Resources 7.1% to $1.95, Pendaires Petroleum 6.7% to $8.00, Purcell Energy 5.9% to $1.07 and Crown Joule Exploration 5.6% to $1.50.
On the downside, Remington Energy fell $0.75 to $18.50, Hurricane Hydrocarbons $0.55 to $8.75 and Seven Seas Petroleum $.50 to $21.25.
Percentage losers included TUSK Energy 12.4% to $1.91, Spire Energy 10.5% to $1.70, Founders Energy 7.8% to $1.07, Jet Energy 6.4% to $2.20, Phoenix Canada Oil 6.3% to $1.50, Hurricane Hydrocarbons 5.9% to $8.75, International Rochester 5.7% to $1.50 and Rider Resources 5.1% to $3.70.
There were no service issues listed among ther top 50 most active traded issues on the TSE.
Tesco Corp. gained $1.00 to $25.20 and Enerflex Systems $0.75 to $43.75.
There were no listed service companies among percentage gainers.
On the downside, Canadian Fracmaster fell $1.15 to $21.85 and Precision Drilling $0.90 to $34.75.
Percentage losers included Kelman Technologies 7.8% to $1.75, McCoy Brothers 6.3% to $3.00 and Canadian Fracmaster 5.2% to $20.85.
Over on the Alberta Stock Exchange, First Star Energy, Anvil Resources, Cubacan Exploration, Dalton Resources, Goal Energy, HEGCO Canada, Scarlet Exploration, Raptor Capital, ICE Drilling, Red Sea Oil, Stellarton Energy, Green River Petroleum and Oilexco were among the top 25 most active traded issues.
Edge Energy gained $1.40 to $4.40, hyduke Capital Resources $0.45 to $2.95, Doreal Energy $0.15 to $1/37, Sunfirre Energy $0.15 to $0.85, Scarlet Exploration $0.13 to $1.13, Best Pacific Resources $0.10 to $1.00, Destiny Resource Services $0.10 to $3.45, Northline Energy $0.10 to $1.40, Stellarton Energy $0.10 to $4.10, Underbalanced Drilling $0.10 to $2.60, Energy North $0.09 to $0.50 and Redeco Energy $0.09 to $0.85.
On the downside, Red Sea Oil fell $0.25 to $1.45, HEGCO Canada $0.13 to $3.80, Mesquite Resources $0.10 to $0.15 and Solid Resources $0.10 to $6.70.
Most Active References
quote.yahoo.com
EXCHANGE DOING'S
Danoil Energy Ltd. (DAN.A/TSE) announced that effective April 24, 1998 its common shares commenced trading on the Toronto Stock Exchange under the symbol ''DAN.A''.
Danoil is a Calgary-based oil and gas company engaged in the exploration, development and acquisition of both oil and natural gas reserves in western Canada. In mid 1997, a strong technical and financial management team with a successful track record was installed. This team was largely responsible for the doubling of production from June to December 1997, exiting the year at over 10 million cubic feet per day and 3,000 barrels of oil per day.
An engineering report prepared by Sproule Associates Limited dated December 31, 1997, assigned total reserves of 10.3 million barrels of oil and natural gas liquids and 31 billion cubic feet of natural gas with a present worth of future net production of $70 million (discounted at 15 percent). Net asset value based on this report is $2.32 per share fully diluted. Included in these values are Danoil Energy Ltd.'s interest (89.6 percent) in Vintage Resource Corp., a company which was acquired by Danoil pursuant to an Offer to Purchase dated June 14, 1997.
Danoil Energy Ltd. is also listed on the Alberta Stock Exchange under the symbol DAN.A.
First Canadian Energy Ltd. announces today that its shares have been suspended from trading effective today because it did not complete a major transaction within the time required. First Canadian, nonetheless, is in active discussions with several candidates to complete a major transaction and will continue to seek out other such opportunities.
First Canadian's cash balance is $281,700 as of its most recent financial statement for the fiscal year ended December 31, 1997. This cash position represents over 90% of the net funds raised when it commenced operating as a junior capital pool company eighteen months ago.
RESEARCH NOTES
Gordon Capital
Edge Energy*
EDG/ASE: ($4.40) BUY
Trading Debut For Reorganized Company Edge Energy Inc. began trading yesterday on the Alberta Stock Exchange. The company will be listed for trading on the TSE in mid-1998.
Formerly known as Alberta Oil & Gas, this company had not traded since late 1997 as it had undergone extensive corporate restructuring. A new management team is now in place. Mr. Ken McNeil, formerly C.O.O. of Amber Energy, is the President & C.E.O., while other senior management includes Mr. Mark Behrman as the C.F.O. (a mechanical engineer who had worked for Computalog and more recently, RBC Dominion Securities), Mr. Brent Gough as the VP Engineering (formerly of Maxx Petroleum), and Mr. Al Williams as VP Exploration (20 years industry experience).
Management and directors own (excluding options) 27% of the 16 million shares outstanding. The company is currently producing 1,600 boe/d (60% gas, 40% oil), and is expected to exit 1998 at 2,600 boe/d.
We are forecasting CFPS of $0.50 this year, and have a preliminary forecast for 1999 of $1.00. The company has a very strong balance sheet, with debt of only $3 million (0.4X 1998 cash flow of $8 million), and an aggressive capital expenditure budget this year of $20 million. The Edge strategy will focus on acquisition/exploitation rather than on exploration. This is in keeping with the technical strength of the new management team.
We are recommending a BUY, with a stock price target of $7.00.
Natural Gas Alberta Spot Prices Falling
In conjunction with reduced spot prices for natural gas on the NYMEX during this week, Alberta spot prices have also been falling. Over the past week, the AECO spot price has fallen from over $2.30/gj to $2.03/gj yesterday (or from $2.46/mcf to $2.14/mcf).
Storage levels in North America are significantly higher than a year ago. In Canada, the last available data suggests that 163 bcf is in storage, vs. only 54 bcf a year ago. This represents 33% of Canada's capacity. In the U.S., storage stands at 1,135 bcf vs. 829 bcf a year ago, or at a current capacity of a whopping 36% as the industry heads into the summer doldrums. New storage data will be out later today.
To add to the bearish sentiment in Canada, all of the new natural gas capacity that was created during last winter's busy drilling season in northern Alberta and northeast B.C. will only become tied-in and "hit" the market over the next 3-5 weeks. Weaker spot prices are likely ahead.
Through all of the recent gas hype, we have not changed our natural gas price forecast. We are forecasting an average Canadian wellhead price of $1.80/mcf this year, and $2.00/mcf in 1999.
Schroder & Co
Analyst Michael Mayer has raised his 1998 earnings per share forecast for Chevron Corp (CHV) by $0.10 to $3.50 and his 1999 forecast by $0.05 to $4.15.
-- These estimates come after Chevron reported first quarter earnings in line with analyst expectations, excluding special items.
-- They are based on $16.00 spot West Texas Intermediate blend oil prices for 1998 and $2.20 per thousand cubic feet for natural gas, and $17.00 and $2.30 for 1999.
-- Mayer is maintaining his outperform rating and stock price target of $88.
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