MARKET ACTIVITY / TRADING NOTES FOR DAY ENDING MONDAY, MAY 11 1998 (4)
IN THE NEWS
Energy North Inc., Electra Energy Corp. and Landhawk Petroleum Corp. announced that they have entered into a Letter of Intent defining the principal terms of a proposed merger among them. As a result of the amalgamation, the Amalgamated Corporation will have 10,000,000 Common shares issued and outstanding and purchase warrants to purchase anoter 2,618,691sares. The parties anticipate presenting the arrangement to their shareholders in mid-August.
Cephalon Resource Corporation (CHR/ASE) announced today that it has signed a letter of intent with Talisman Energy Inc. whereby Cephalon Resource Corporation will exchange certain of its oil and gas assets in the Pembina Area for all of Talisman's assets and interest in Fenn West.
Pan-Global Enterprises Inc. (PGE/VSE) announced that the drilling of a well at the Company's 12-6-18-22 W4M location, Long Coulee area of Southern Alberta, has been completed and the drill rig has been released. Production casing has been set to total depth. The well will be completed and production testing will be done shortly. This is the Company's third well in Alberta in addition to the drilling of the two previously announced gas wells in the Lomond and Long Coulee areas of Southern Alberta that resulted in a developmental well and a new pool discovery. The Company has also farmed in to additional interests in its third well location.
The Company has entered into a farm in agreement with Esker Resources Ltd., whereby the Company will earn a 35% interest in lands comprising 560 acres, on the Fenn Big Valley Leduc reef (''D-3'') in Central Alberta, by drilling a well, 6-14-37-20W4M, adjacent to the Leduc ''F'' pool which has produced 14.3 million barrels of oil from the D-3. Drilling on this, the Company's 4th well, commenced on May 8, 1998. There is also an additional potential zone of interest, known as the Nisku (''D-2''), in the area.
INTERNATIONAL
Companies
Carmanah Resources Ltd. CKM/TSE) announced that its wholly-owned subsidiary, GFB Resources (Natuna) Limited, the operator of the Northeast Natuna Production Sharing Contract ("Natuna PSC") offshore Indonesia, is proceeding to abandon the Durian Besar-1 exploratory well.
The well reached a total depth of 4,800 feet on May 10, 1998, with the top of the Terumbu Carbonate encountered at 4,362 feet. Electric logs indicate very good but water wet porosity averaging 30 percent with no indications of hydrocarbons. Sidewall core samples were collected and a check shot survey was completed.
The drilling results will be analyzed, evaluated and integrated into regional and detailed studies to further evaluate the hydrocarbon potential and future drilling locations in the contract area. Several reefal and structural prospects have been identified on the interpretation of 1996 and 1998 seismic programs totalling 2,300 kilometres. Geochemical and geophysical results obtained from the Durian Besar-1 well will be critical in highgrading these prospects.
Plans to drill a second well on the Natuna PSC are being developed.
Participants in the well included Carmanah/GFB, Esso Exploration and Production Durian Besar Ltd. ("Esso"), an affiliate of Exxon Corporation and P.T. Binatek Reka Natuna ("P.T. Binatek"), an Indonesian company. The well was drilled at no cost to Carmanah and P.T. Binatek pursuant to a Farmout Agreement with Esso.
Scimitar Hydrocarbons Corporation (SIY/ASE) announced that wholly-owned subsidiary Scimitar Production Egypt Ltd. has signed a Petroleum Service Agreement (''PSA'') with the Egyptian parastatal The General Petroleum Company (GPC), to proceed with the development of the large Issaran oil field. In order to facilitate early drilling, pre-drill operations, such as rig tenders, material procurements and environmental fieldwork studies have been commenced.
The Issaran field is located in Egypt onshore along the Gulf of Suez, approximately 200km southeast of Cairo. The field currently produces 850 barrels of oil per day (10.5 - 18 degrees API), mainly from 3 wells. Independent engineering studies have mapped the field to contain over 400 million barrels of oil in place in three very shallow zones less than 800 metres deep. Pursuant to the PSA, Scimitar has the rights to develop the field to increase production from this underexploited field. Scimitar will receive revenues based upon the incremental oil produced. Studies by independent Canadian heavy oil engineering experts have determined that Issaran could produce up to 20,000 barrels of oil per day using technologies developed in western Canada. Development of the field is expected to accelerate over the next several years, with application of enhanced oil recovery techniques beginning as soon as feasible.
Mr. Mark R. Smith, C.E.O. of Scimitar stated that ''the Issaran agreement is the first of its kind for the oil industry in Egypt and provides a ''win-win'' situation for both GPC and Scimitar. As well, the PSA is in line with broad economic reforms and oil industry modernizations being implemented in Egypt, and marks the cumulation of over one and one half years of technical studies and extensive negotiations''. Large-scale IMF backed economic reforms are currently being implemented in Egypt, which are designed to bring in foreign capital and expertise to Egypt.
The Issaran PSA exemplifies Scimitar's core corporate strategy of seeking out underdeveloped oil and gas opportunities internationally. Mr. Jeffrey K. Brookman, President and CFO commented that ''the finalization of the Issaran agreement provides Scimitar with a core asset for growth, however it is only the first of several discovered reserve opportunities that Scimitar has identified and is aggressively pursuing''.
Scimitar holds 100% of the project subject to an option held by Proprietary Energy Industries, Inc. (PPI/ASE) to farm-in on 10% of Scimitar's interest.
Vancouver based Indo-Pacific Energy Ltd. (Not to be confused with Indo Pacific Resources listed on the ase) reportd that the Kittiwake-1 well in its Timor Sea permit WA-199-P has reached a total depth of approximately 9,400 feet, and electric logging of the well has now been completed.
The Plover Sands, which were the main target of the well, were encountered at a depth near 8,800 feet, and were present down to the 9,400 foot level. Despite the presence of extensive and excellent quality reservoir sandstones in this interval, and some oil and gas shows, electric log evaluation indicates that there are no significant hydrocarbons in the reservoir. It is considered that any hydrocarbons escaped the Kittiwake structure via the fault on its south side. Accordingly, the decision has now been taken to plug and abandon the Kittiwake-1 well. The WA-199-P joint venture parties will meet in the near future to discuss further exploration plans in this large permit area, including considering the next prospect to drill in the coming year.
The Company also reports that the Tariki-2C well, in the onshore Taranaki Basin, New Zealand, to which it is making a fixed dollar contribution, has been terminated at a depth along hole of about 9,500 feet, to allow electric logging to be completed over the 1800 foot interval of horizontal hole drilled in the Tikorangi Formation limestones. Significant mud losses and gas peaks within this interval indicate the potential for producible, oil filled fractures within the Tikorangi limestones. Flow testing of the interval is planned following completion of logging.
Tariki-2C is located within permit PML 38148, in which the Company does not hold an interest; but tests a prospect which extends into the adjacent permit PPL 38706, in which the Company holds a 7.75% interest. In the event that Tariki-2C flows oil, it is likely that the discovery area would extend a considerable distance into permit PPL 38706, and that Indo-Pacific Energy and its joint venture partner, Fletcher Challenge Energy, would drill a well within PPL 38706 in the next few months, with the intention of establishing reserves and production within this license.
In the Ngatoro Oil Field (PMP 38148), also located in the onshore Taranaki Basin, in which the Company holds a 5% interest, a workover of the Ngatoro-2 oil producer has been suspended. The well is now being brought back into temporary production, with the intention of carrying out a complete rehabilitation of the well following completion of the Ngatoro-9 well, which will be drilled as a deviated well from the Ngatoro-2 well site early next month. Ngatoro-9 is planned as a new producer well within the Ngatoro-2 oil pool, which has exceeded production expectations, and may have considerably greater recoverable reserves than originally estimated. In the event of good success in Ngatoro-9, a further well into this pool is probable. In addition, an exploration well is planned for later in the year on a separate prospect defined by 3D seismic within the Ngatoro permit area.
Indo-Pacific Energy Ltd. (OTC BB:INDX), one of IREMCO group of companies, is an emerging, new frontier exploration company, holding interests in extensive oil and gas properties in the Asia Pacific region. The Company has a five percent interest in a producing permit and varying interests in 5,770,000 acres of exploration permits in New Zealand, making it the largest holder of onshore exploration acreage in New Zealand. The Company has a 50% interest in a 2,500,000 acre area in China and varying interests in 1,035,000 acres of offshore exploration permits in Australia. The Company also holds a 40% interest in a 1,200,000 acre exploration permit in Papua New Guinea.
Countries
Gulf Arabs Need $200 Bln to Boost Energy Sector
MANAMA, May 11 - Gulf Arab states will need to invest about $200 billion in their energy sectors over the next decade to meet an expected increase in demand for oil and other energy resources, according to a senior Kuwaiti official.
''It is estimated that about $200 billion would be required for the development and construction plans within the energy sector in the GCC states in the next ten years,'' the general manager of Kuwait Insurance Co (KWIS.KW), Ali Hamad al-Bahar, will say in a speech to be delivered later on Monday.
The Gulf Cooperation Council (GCC) is an economic and political alliance that groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
Bahar, who is to speak at a three-day marine and energy insurance seminar in Bahrain, forecast demand for oil from the Organisation of Petroleum Exporting Countries was likely to rise to 35 million barrels per day (bpd) by 2005 from 27 million bpd.
In the speech made availaible to reporters, Bahar pointed to Kuwait's target of raising oil production capacity to 3.5 million bpd by 2005 from around 2.4 million bpd now, as well as its plans to raise refining output.
''To do so would require Kuwait to inject billions of dollars in new construction, upgrading and expanding the existing facilities and its support infrastructure within the energy sector,'' he said.
Despite the decline in revenues due to falling oil prices, Kuwait would go ahead with most, if not all, planned projects, he said.
Bahar said several projects in Kuwait's energy and non-energy sectors were likely to be opened up to foreign and local private investors on a build-own-operate-transfer (BOOT) basis or build-operate-transfer (BOT) basis.
''Currently, there are several such projects in which the international investors through joint ventures would be invited to participate as partners. From this perspective...it gives us hope of increased insurance revenue,'' he said.
Bahar said Kuwait Oil Company, which oversees crude production, and refiner Kuwait National Petroleum Company had spent more than $5 billion to fight fires and repair facilities set ablaze or damaged during the seven-month Iraqi occupation in 1990-1991.
Bahar said the current deterioration in oil prices as temporary. ''We anticipate... that the trend (of lower oil prices) will be a temporary phase and that, eventually, the price of oil will go up.''
Funding Worries Again Haunt Nigerian Oil Industry
LAGOS, May 12 - A shortage of funds continues to dog Nigeria's oil industry and some multinationals have cut back drilling because the military government has not released promised money, industry officials said on Tuesday.
Expectations are sinking that 1998 will be a better year for the industry than last as monthly cash-call payments are still being paid at the 1997 level -- which assumes a budget of $2.05 billion instead of the $2.5 billion anticipated for 1998.
Nigeria's second biggest producer, Mobil Corp, last week said it had cut back one drilling rig because of the shortage of funds. Industry sources said Chevron Corp had also been forced to cut back drilling and release at least one rig.
Royal Dutch/Shell, operator of the biggest joint-venture with Nigerian National Petroleum Corporation (NNPC), said it had not yet been forced to cut back drilling or let go of rigs, but cautioned that development plans would not benefit if budget promises are not met.
"We're hopeful that since something was agreed then that is what we will get," a Shell official told Reuters in Lagos. "The hope is there and it is on that basis that plans have been made."
Multinationals last year complained that if funding was not increased in 1998 there would be a reduction in Nigeria's capacity to produce crude oil which accounts for more than 95 percent of export earnings.
But Nigerian officials, who in the past accused foreign companies of greed, say that since oil prices have stayed well below this year's budget predictions of $17 per barrel, now is not the best time to shop for government funds.
"When you remember that output has been cut by 125,000 bpd (barrels per day) in line with the OPEC cut, then it's clear that we are producing considerably below capacity in any case," said one finance ministry official in Abuja.
"Even so we will still try to meet the budget demand at some stage," he added.
Because of the specific agreement with the oil firms, it is only the government that suffers until te price drops below $12 per barrel if production is steady. If output goes down, whether or not prices rise, then the companies also lose.
Nigerian output averaged 2.15 million bpd in April. The government's target is to expand capacity to 2.5 million bpd by the year 2000 and to four million bpd by 2010 according to an economic masterplan released last year.
Industry officials say those targets will go by the board if the government does not pay more attention to its investment needs.
"I know they say we were crying wolf in the past when we warned that capacity could drop," said one senior industry executive. "What they have to realise is that capacity is definitely lower than it could have been by now if the investment had been made."
Long term hopes of higher output lie in deep waters far off the Nigerian coast, where production sharing contracts mean foreign companies are not reliant on government for funding.
But industry sources say development of new blocks is being held up by Nigerian government delays in working out fiscal terms for contracts to enable companies to try and start production in the much riskier and more expensive deep waters.
Political analysts say military ruler General Sani Abacha has more important concerns than the oil industry at a time when he is widely-expected to stand as the sole candidate for the presidency in August elections in the face of opposition protests and condemnation from Western countries.
SERVICE SECTOR
IPSCO to Install and Operate New Processing Facility in Houston Texas
IPSCO Inc.(IPS/TSE & IPS/NYSE) nnounced that one of its U.S. subsidiaries, Paper Cal Steel (Texas) Co., will install and operate a 300,000 ton per annum coil processing facility in Houston, Texas at an estimated cost of U.S. $23 million.
The new facility will include the first temper mill operating in Texas and will produce finished cut-to-length steel in widths up to 96 inches, thicknesses up to .750 inches, and lengths up to 60 feet in both regular carbon grade and high strength steel. David Sutherland, Vice President and General Manager, Raw Materials and Coil Processing, of IPSCO said that the installation was another step in the company's strategy to be a leader in providing wide, thick hot rolled material, and to ensure that there was adequate processing support for such products. He said that the investment was justified on the basis of purchasing steel for use in the operation but that IPSCO's output from its new Montpelier Steelworks would be available to the operation should economic or product specification requirements make this appropriate. The new operation is expected to be in production by the third quarter of 1999 and will employ approximately 30 persons.
EARNINGS
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