MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING THURS., APRIL 30, 1998 (4)
INTERNATIONAL
Countries
Yugoslavia Crude Imports Slump, Oil Products Jump
BELGRADE, April 30 - Yugoslav crude oil imports fell sharply in the first quarter of the year forcing increased refined product purchases, a senior official at state oil company Naftna Industrija Srbije said on Thursday.
''NIS has neither dinars nor hard currency. That is why crude imports fell 61.2 percent below the 720,750 tonnes planned for the first three months,'' said the NIS official, who asked not to be named.
Imports for the quarter, handled in a barter deal by Chinese state oil firm Sinochem, were limited to 280,000 tonnes, he said.
'I can promise regular fuel supply for May and beginning of June, but I cannot say what will happen afterwards,'' the official said.
Imports of petroleum products ran at 353,000 tonnes in the first quarter, twice as much as planned. Last year they stood at 50,000 tonnes over the same period.
Some 400,000 tonnes of crude was refined by third parties during the period at the Belgrade and Novi Sad refineries and then purchased for the domestic market.
Domestic refined product output other than third party production fell about 40 percent below planned levels because of the shortage of crude.
Yugoslavia had planned to import 2.3 milion tonnes of crude this year and 570,000 tonnes of products.
Yugoslavia, comprising Serbia and Montenegro, produces about one million tonnes of crude at home, insufficient to meet its growing demand for petroleum products estimated to rise by 8.0 percent this year to 4.4 million tonnes.
Crude imports were fully liberalised in 1996, immediately after lifting of the 42-month trade embargo. Imports of refined products were kept under state control to protect two local refineries now operating at less than half of their annual 7.0 million tonnes capacity.
In 1996, the Chinese state oil company Sinochem and the Serbian oil company NIS clinched a long-term barter deal for crude and products deliveries.
Financial details of the deal have never been disclosed. Yugoslavia pays for half the crude with with goods.
The deal helped the cash-starved state secure enough quantities of fuel to help revive the country's moribund industries.
NIS praised the deal because it provided regular fuel supplies and allowed delayed payments. ''It was a kind of credit and we still owe them for their deliveries,'' the NIS source said.
''The deal also promoted and raised demand for some of our goods on the Chinese market. But unfortunately our industries do not have sufficient quantities of goods competitive enough in price and quality to meet crude counter-deliveries.''
Domestic first quarter crude output was 229,500 tonnes, two percent less than planned.
Iran's Energy Lustre Is Blunting US Threats
MOSCOW, April 30 A growing number of international oil and gas companies are prepared to defy U.S. threats of sanctions and look for major investment opportunities in the untapped energy wealth lying onshore and offshore Iran.
Russia's Gazprom, the world's largest natural gas company accounting for a quarter of global supply, said it would continue to expand its operations in Iran, joining a chorus of oil and gas majors taking on Washington.
"We are working on the South Pars project (in Iran) with the French and Malaysians ," Rem Vyakhirev, head of Gazprom, told Reuters in an interview late on Wednesday.
"We will take part in tenders on (South Pars) four and five, and will fight for them."
Gazprom is one of three foreign companies participating in the multi-billion dollar development of Iran's South Pars offshore gas project. The other two are France's Total SA and Malaysia's Petronas.
The project is being carried out in phases, to which Vyakhirev was referring. The cost of each stage of the huge development is estimated by analysts at around $1 billion.
"It is interesting that Gazprom is also interested in the following phases of South Pars," said Manouchehr Takin, an Iranian oil and gas specialist at the Centre for Global Energy Studies in London. "It's very good news."
Gazprom joins Total and Petronas in throwing down the gauntlet to Washington. All three companies have the vocal backing of their governments, which are against the U.S. trying to impose its rules on other countries.
The United States passed the Iran-Libya sanctions act in 1996, allowing for penalties to be imposed on foreign firms investing more than $20 million a year in the oil and gas sectors of Libya or Iran.
The State Department is reviewing whether the South Pars deal violates U.S. law, and there is speculation that a decision will be taken possibly as early as next month.
A U.S. move to sanction companies could trigger a major trade row, with the European Union saying last week that it would immediately start a World Trade Organisation case against the United States were Total to be punished.
Takin said the fact that no penalties had been imposed so far suggested the Clinton administration was less comfortable with the idea than senators like Alfonse D'Amato, one of the main supporters of sanctions.
Vyakhirev, with typical bravado, thanked D'Amato for giving Gazprom a good reason for pulling out of a $750 million loan guarantee programme with the U.S. Export-Import Bank last year.
"Those measures which Mr. D'Amato intends to undertake are no more than a mosquito bite to us," he said. "Today I can even say 'thank you' to D'Amato as he saved us the trouble of turning down the Eximbank loan."
Iran has the world's second largest natural gas reserves after Russia, and unofficial estimates peg its recoverable crude oil reserves at between 80 and 100 billion barrels.
Afraid of losing out in the early oil and gas rush, more companies are eyeing projects there, including Italy's ENI, France's Elf Aquitaine and Anglo-Dutch oil and gas major Royal Dutch/Shell.
At the same time some U.S. majors, mostly privately, have bitterly attacked Washington's stance which they say is denying them a major new business frontier and giving the edge to European competitors.
Iran is also being tipped as a major energy transportation route, linking fields in the resource rich Caspian Sea to markets in Turkey and Europe.
The United States, aware of new pipeline proposals, has pushed for subsea routes connecting the east of the sea to the west, thereby bypassing Russia to the north and Iran to the south.
An important catalyst for increased interest by Western companies in Tehran is an apparent change of attitude by the Iranian government to foreign investment.
Analysts said that as early as 10 years ago the Iranian leadership realised it would need to court foreign companies if it wanted to benefit from its energy base.
"The main thing is not really reserves," Takin said. "It is how to develop and bring on stream proven reserves, and that requires major expenditure and modern technology. Iran realised this long ago."
A senior official at the National Iranian Oil Company (NIOC) said last month that Iran was throwing open its doors to foreign investment in key oil and gas fields, referring to over 100 prospects across the country that were "wide open".
PIPELINES
Novagas Canada Ltd. (NCL) announced today it will immediately mobilize construction crews to begin work on a $97-million West Stoddart natural gas processing project northwest of Fort St. John, British Columbia. This announcement follows the award of a Project Certificate from the B.C. government granting approval for the project to proceed.
''This approval has come within the time frame we'd planned for,'' said Randy Findlay, President, Novagas Canada Ltd. ''The West Stoddart project is one of the key components of NCL's overall gas and liquids gathering and processing strategy. NCL is on target to deliver its services and value-added benefits to producers.''
The West Stoddart project includes: a 160-million-cubic-feet-per-day natural gas processing plant and gathering lines; a 69-kilometre, 16-inch natural gas pipeline; and a parallel 6-inch natural gas liquids pipeline. Construction is scheduled to be completed by late summer 1998.
The West Stoddart facility is being developed primarily as a gas conservation plant to process raw sour gas associated with oil production from the Stoddart and Buick Creek fields. The plant will sweeten the gas recovered from oil production batteries operated by Canadian Natural Resources Limited and Remington Energy Ltd. The plant will also recover a portion of the hydrocarbon liquids in the gas stream.
Natural gas from the West Stoddart plant will then be transported by pipeline to the Younger natural gas processing plant at Taylor, B.C. NCL holds a 43.3 per cent interest in the soon-to-be-expanded Younger gas processing plant. The natural gas liquids will be further transported to NCL's liquids fractionation facility at Redwater-Fort Saskatchewan, near Edmonton, Alberta. The Redwater-Fort Saskatchewan facility, the capacity of which is 65,000 barrels of natural gas liquids per day, is targeted to be on-stream in the fall of 1998.
''This project enhances the economics of Remington's and CNRL's operations and contributes to NCL's large-scale integrated liquids project in B.C. and Alberta,'' said Findlay. ''The project is of strategic importance to the oil and gas sector in northeast British Columbia and will likely lead to further significant investments in the area.''
Paul Baay, President of Remington said the West Stoddart project illustrates the benefits of industry and government working together. ''The B.C. government appears committed to improving and streamlining the process. No doubt this will contribute to the overall competitiveness of the West Stoddart region and the oil and gas industry of British Columbia as a whole.''
CNRL Chairman Allan Markin said: ''In today's market, West Stoddart is the type of project that provides overall value to our shareholders. The approval from the B.C. government is a clear signal of the government's interest in fostering growth and development in the oil and natural gas industry.''
Construction of the West Stoddart plant is expected to generate 5,400 person days of employment, with the workforce peaking at 120 people. Pipeline construction is expected to generate 9,000 person days of work, with the crew averaging about 100 people. On completion, the West Stoddart plant is expected to have a full-time staff of 11 plus eight equivalent contract service and maintenance positions. Annual contracted maintenance services are expected to generate about 10,000 person hours per year.
EARNINGS
Northstar Energy Corp / Top 20 Listed
Message 4277419
New Cache Petroleum
Message 4276416
Granger Energy Corp.
Message 4277658
Pioneer Natural Resources Co
Message 4277298
Enerflex Systems Ltd./ Serv 10 Listed
Message 4276336
Computalog Ltd. / Serv 10 Listed
Message 4276475
Pembina Pipeline Income Fund
Message 4276369
Westcoast Energy Inc.
Message 4277545
IPL Energy Inc.
Message 4277397
EXCHANGE INFORMATION
In the U.S., oil-drilling names were one of the few groups that failed to participate in what was a solid and broad-based advance. Smit International fell 1.88% or $1-1/8 to $58-3/4. The Philadelphia Oil Service Index (OSX) fell 1.06 to 116.84.
Basin Exploration (BSNX) shed 2 5/8 to 19 7/8 thanks to a downgrade from Jefferies to "underperform" from "hold."
The Toronto Stock Exchange Oil & Gas Composite Index gained 0.3% or 19.68 to 6552.02. Among sub-components, the Integrated Oil's gained 0.5% or 39.56 to 8474.29. The Oil & Gas Producers gained 0 .3% or 18.33 to 5845.18 and the Oil & Gas Services fell 0.3% or 7.98 to 3105.55. As been the recent trend, the
oil & gas sector underperformed compared to progrress of te TSE 300, wic gained 0.7% or 55.46 to 7664.99.
Amber Energy, Gulf Canada Resources, Pinnacle Resources, Petro-Canada and Suncor Energy were among the top 50 most active traded issues on the TSE.
Remington Energy gained $1.00 to $19.00.
Percentage gainers included Black Rock Ventures 15.0% to $1.15, TransGlobe Energy 12.7% to $1.15, Maxx Petroleum 11.4% to $1.85, Ram Petroleum 8.0% to $1.35, Big Bear Exploration 7.7% to $1.40, Post Energy 7.4% to $5.10, Southward Energy 6.9% to $1.39, Real Resources 6.5% to $1.32 and Compton Petroleum 6.1% to $1.75.
On the downside, Gulf Canada Resources fell $0.45 to $7.45, Bitec Petroleum $0.40 to $3.30 and Imperial Oil $0.40 to $78.90.
Percentage losers included International Rocester 13.1% to $1.52, Bitec Petroleum 10.8% to $3.30, Gulf Canada Resources 5.7% to $7.45, Triumph Energy 4.8% to $3.00 and OGY Petroleum 4.2% to $1.15.
There were no service issues listed among the top 50 most active on the TSE.
Veritas Energy gained $8.20 to $76.20.
Percentage gainers included Veritas Energy 12.1% to $76.20 and Alpine Oil 8.7% to $1.25.
On the downside, Precision Drilling fell $0.70 to $34.00 and Shaw Industries A $0.50 to $50.30.
Tetonka Drilling lost 9.5% to $1.90.
Over on the Alberta Stock Exchange, Green River Petroleum, Corridor Resources, AltaPacific Capital, Dalton Resources, Enterprise Development, Anvil Resources, Niko Resources, Wolverine Energy, ICE Drilling and HEGCO Canada were among the top 25 most active tradedissues.
Destiny Resource Services gained $0.25 to $3.35, HEGCO Canada $0.19 to $3.39, Big Bear Explo ration $0.14 to $1.40, Venator Petroleum $0.13 to $1.70, Newbridge Resources $0.11 to $0.31 and Kintail Energy $0.10 to $1.00.
On the downside, Northline Energy fell $0.15 to $1.35, Bolt Energy $0.10 to $0.50, Granger Energy B $0.10 to $0.40, Global Link Resources $0.10 to $0.95, Niko Resources $0.10 to $5.50, Underbalanced Drilling $0.10 to $2.50 and First Star Energy $0.09 to $0.87.
RESEARCH NOTES
Gordon Capital
Anderson Exploration
(AXL-T: $17.40) BUY
Gas Growth At Birley/Nig
Anderson had a successful winter gas drilling season in its gas levered northern areas.
Its most important success, however, has been in the Birley/Nig area of northeast B.C., located north of Fort St. John. Over the past two years, production from this area has grown from zero to 50 mmcf/d. A further two year drilling inventory remains available to Anderson.
Overall, Anderson has drilled 340 wells to date this fiscal year (Sept. 30th year-end), and is on track to drill its target of 570.
Despite the volatility in commodity prices this year, the company's capital expenditure budget remains unchanged at $505 million.
We are forecasting fully diluted CFPS of $2.45 in 1998 and $2.95 in 1999. Our 12-month stock price target remains unchanged at $21.00.
Edge Energy
(EDG-Y: $4.20) BUY
Acquires Otter Property From Ranger Oil
Edge has paid $5.6 million to acquire Ranger's oil property at Otter, in northcentral Alberta. This immediately adds 210 bbls/d of net production to Edge, and increases its existing interests in the area. The acquired property also offers further exploration potential. Edge will be drilling on these acquired properties this summer. The transaction will be debt financed, increasing the company's debt from $3 million to $8 million, or 1.0X this year's cash flow.
Our stock price target is $7.00.
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