MARKET ACTIVITY/ WEEKEND EDITION OF TRADING NOTES JUNE 21, 1998 (9)
IN THE NEWS THIS PAST WEEK
Richland Petroleum Corporation announced the successful completion of several exploratory wells drilled in the first quarter of 1998, which will lead to increased production levels in the second half of 1998.
At Kingsford, Saskatchewan, an exploration well drilled into the Midale zone (W.Iproduction tested and is now on pump at rates exceeding 150 barrels of light oil per day. This is the third zone successfully completed in this property, which is producing in excess of 450 barrels per day net to Richland.
At Huntoon, Saskatchewan, the Red River well (W.I. 50 percent) placed on production immediately before break-up has now been acidized and is flowing in excess of 500 barrels per day of light oil.
At McLean Creek, in northwestern Alberta, a Granite Wash exploratory success (W.I. 50 percent BPO, 25 percent APO) has been completed and flowed at rates in excess of 500 barrels per day of 46 degree API light oil on test. Production facilities are being installed and preparations are being made to shoot a 3D seismic program. Current interpretations suggest three to four follow-up wells on this structure and the potential for two other structures on Richland 50 percent working interest lands.
At Bienfait, Saskatchewan, the first new horizontal well (W.I. 90 percent) was recently completed in the Midale zone and is currently being production tested.
Mr. Richard A. M. Todd, President and CEO commented ''These completions cap a very successful exploration program for Richland in the first half of 1998. With this new production on stream, we are confident of reaching our forecast average daily production of 4,200 barrels per day for 1997, which represents 20 percent growth over 1997. With several high impact exploration wells to be drilled in the second half, plus our development program from earlier exploration successes, our exit production volumes will reflect a return to exciting growth for Richland.''
Canadian 88 Energy Corp. of Calgary, Alberta, announced that it is commencing the drilling of the first well in a multi-well drilling program planned over the next six months in the Caroline/ Chedderville/ Willesden Green area of West Central Alberta, targetting deep natural gas accumulations in the Leduc formation.
Canadian 88 announced today that it is preparing to spud a new pool wildcat well at L.S.D. 7 of Sec. 15, Twp. 37, Rge. 5 W5M in the Willesden Green area of West Central Alberta. The new deep pool test will be drilled at a cost of approximately $2.5 million into the Leduc formation to a total depth of 3,400 meters (11,155 feet). The well which is being drilled 100 percent by Canadian 88in association with its Rocky Mountain Exploration (RMX) Fund is the first of a new multi-well drilling program planned for the area by Canadian 88 targeting reserve accumulations of 20 to 50 Bcf/well. Canadian 88 has significant holdings in the area and recently expanded its interests in the area by adding 27,200 net areas of high quality undeveloped lands alongside a strategic asset acquisition completed in the area for $45 million May 15, 1998. Significant drilling opportunities have been identified and Canadian 88 plans to drill six deep natural gas wells in the area during 1998. Canadian 88 Energy Corp., RMX and Western Geophysical Company recently completed the shooting of 110 square miles of high resolution 3-D seismic in the area. The L.S.D. 7 of Section 15 wildcat well is being drilled on parcel of land identified by the seismic program and successfully acquired by Canadian 88 at the April 15, 1998 Alberta Government Land Sale for a record price of $1.1 million for an average of $4,297 per hectare.
Canadian 88 has budgeted $175 million of capital spending in Western Canada during 1998 alongside its $150 million Rocky Mountain Exploration (RMX) Fund focusing on deep foothills natural gas exploration and development. Canadian 88 is the leading deep natural gas driller in the Alberta foothills and the Company also leads the industry in Canada in the application of high resolution 3-D seismic having shot over 1200 square miles of data in Western Canada with the Western Geophysical Company over the past 24 months.
Berkley Petroleum Corp. announced that it has entered into an agreement to acquire all of Westminster Resources Ltd.'s Southeast Saskatchewan and Puskwa Alberta assets in exchange for $7.0 million cash, 1.6 million special warrants of Berkley and assets in the Conroy Creek and Fireweed areas of Northeast British Columbia. The special warrants are exchangeable for one common share of Berkley at no additional cost. The transaction allows Berkley to significantly increase working interest in the entire deep S.E. Saskatchewan play where the company is focussing on light sweet oil in the Ordovician and Winnipeg Sand Formations.
On June 11, 1998, Berkley and Paramount Resources Ltd. closed the acquisition of the Shell Canada Limited gas assets in the Bovie-Arrowhead-Maxhamish areas of the Northwest Territories and Northeast British Columbia in an all cash deal. The two acquisitions significantly increase the company's natural gas and light oil reserves and include considerable further reserve and production upside. Total land involved in the two deals is interests in approximately 498,000 acres. The transactions are part of the company's plan to consolidate and increase working interests in specific deep gas properties in Alberta, Northeast British Columbia and the Northwest Territories as well as the Southeast Saskatchewan light oil complex.
Derrick Energy has commenced a 26 well development program in the Verger area where the company operates with an average 80 percent working interest. The majority of the new wells will be multi-zone shallow gas completions expected to come on stream late in the third quarter of this year. In conjunction with the shallow gas project, Derrick will be drilling two deeper wells targeting the gas-rich Mannville formation in the area this summer.
Willow Creek Exploration Ltd. announced that the Johnny Rhodes 7-6 well in the Pelahatchie Field, Rankin County, Mississippi has been spudded today, and conductor pipe is being set. The main drilling rig, Nabors #981, is moving on location and drilling is anticipated to start Wednesday, June 17, to a total depth of 11,500 feet. Target zones are in the Lower Cretaceous, producing in offset adjoining locations, where initial rates in excess of 200 barrels of oil per day have been encountered. Drilling time is expected to be approximately 21 days. Willow Creek has a 25% working interest in the well.
First Star Energy Ltd. and Dalton Resources Ltd. advised that the Strachan 3-22-8-39W5M well commenced completion and testing procedures on June 1, 1998. Mechanical problems have been encountered, extending the program. The tests are continuing and will not be completed for some time. It is important to note that the well is under tight hole status and participants are not at liberty to disclose pertinent data on the well. First Star advises that there is no other news to announce at this time.
Diaz Resources Ltd. reported that drilling operations have begun on the No. 1 Miami Corporation well in section 22, T13S-R5W, Cameron Parish, Louisiana, on its South Lakeside prospect. The South Lakeside prospect is an exploratory natural gas and condensate drilling project with a primary objective of the Miogypsonoide (MioGyp) gas charged sands at an approximate depth of 17,350 feet. Diaz will be carried through the cost of the re-entry and completion of the well and will have a 5.75 percent working interest thereafter in the 2,313 acre prospect.
The South Lakeside prospect involves re-entering the No. 1 Miami well drilled by CMS-Nomeco to a depth of 17,490 feet in 1997. The original objective of the well was a large reserve target in the MioGyp sands based upon 2D seismic and a down-dip well drilled by Arco 2.4 miles to the west in section 30, T13S-R5W, which had several hundred feet of MioGyp sands with gas shows. The No. 1 Miami well encountered strong gas shows at the MioGyp target depth and is interpreted to have drilling into the up-dip edge of the reservoir. Operations commenced on June 10th to re-enter the well and to drill a side track out from existing casing at 13,450 feet to intersect the MioGyp reservoir target at a structurally down-dip position to the west of the original wellbore. Drilling operations reported presently to be at a depth of 7,000 feet. The operation is expected to take 40-60 days.
Range Petroleum Corporation announced that it has commenced shooting the first of several 3-D seismic surveys planned for Lambton County, southwestern Ontario. This is a new focus area for the Company, offering a broad range of economic opportunities. The primary targets in this part of the Michigan Basin are Silurian pinnacle reefs, which form prolific oil and gas reservoirs. Range believes the application of modern 3-D seismic will significantly impact the exploration success in this Basin.
The Company entered into this play through an arrangement with Hadley Resources Limited whose principle, Cy Hadley, has extensive experience throughout southwestern Ontario and northern Michigan. Hadley's geological knowledge of the Michigan Basin has provided Range with the direction needed to identify a number of oil and gas opportunities that will be evaluated by the 3-D seismic programs now being conducted.
Range has successfully acquired exploration and gas storage rights on over 40,000 acres of land through its freehold leasing program. Subject to the success of its 3-D seismic program, the Company expects to undertake a multi-well drilling program that could commence as early as August 1998. Range holds 100 per cent interest in this project.
Westfort Energy Ltd. released the following progress reports on its ongoing drilling operations. The location for the Johnny Rhodes 7-6 well has been prepared and the spud rig is spudding in and setting conductor pipe this morning. Nabor Drilling Co. Rig 981 is moving to the location today. With an anticipated 2 days rig up time, drilling operations are expected to commence Wednesday, June 17th to a total depth of 11,500. Targets are those zones in the Lower Cretaceous formations that have produced or are still producing in offset adjoining locations. Drilling time is expected to take 20 days or less. The company intends to employ the same type drilling bits and downhole motors that have decreased drilling time in the deep 17,350 foot Norphlet well that is now being drilled in the same field.
The Pelahatchie Deep Unit 18-4 No.1 well is drilling ahead at the depth of 14,800 feet. The company has decided to set the intermediate casing string at approximately 15,900 feet after drilling through the Buckner zone, a gas zone which was tested at over 1,000,000 cubic feet of gas per day in an offset well approximately 2,000 feet away. Before setting the 7'' casing string, the company will run a full suite of Schlumberger Electrical and Gamma Ray logs to fully evaluate the 24 different mud logs shows encountered thus far and also take side wall core samples for lab analysis. Approximately 4 - 5 days will be needed to log and change out the 4 1/2'' drill pipe presently being used to 3 1/2'' for the final part of the hole. Utilizing the latest technology in drilling bit design, together with a down hole motor to speed the rate of penetration, the company anticipates reaching total depth around July 4th, 1998 having spent 50 days drilling. This compares to 180 go days by Shell Oil used in 1967 and a best case prognosis by drilling experts of 76 days.
TriGas Exploration reported that it recently completed drilling and completion operations on 3 horizontal gas wells at Lone Pine, Alberta. Flaring restrictions limited production testing to a combined rate of 17 mmcf per day. The wells are expected to commence production in July, 1998 at a combined rate of at least 17 mmcf per day. TriGas owns a 50% interest in each well and is the operator of the Lone Pine property. The company plans to commence a multi-well drilling program in August, 1998 to further develop its Lone Pine and Irricana gas properties.
Petromin Resources Ltd. announced results from production testing to date of the first horizontal well at its Chamberlain (27 degrees API) Basal Quartz oil pool near Edmonton, Alberta. The well was placed on production June 7, 1998 with average production to date of 315 barrels of oil per day with a 5% water cut. The current production rate is 375 barrels of oil per day with a 5% water cut. The well's horizontal section encountered in excess of 250 meters of excellent reservoir quality in the lower Mannville oil bearing sands of the Chamberlain oil pool. Development of the project has been accelerated, and Petromin expects to drill an additional three (3) horizontal wells and install battery facilities in the third quarter of 1998. Petromin has a 12.5% working interest in this project.
Cirque Energy announced that the Turin Battery in Southern Alberta will become operational on June 19, 1998. Cirque will bring 10 wells into the facility, 7 of which have been shut-in for the past four months. Oil solution gas and two gas wells are expected to produce at rates of 450 bopd and 3 mmcfd gross (370 boepd net). Cirque as operator has 50% working interest. A total of 8 wells of 50 possible undrilled 3-D identified locations are scheduled to be drilled in 1998. Cirque's 3-D coverage exceeds 23 square miles.
In the Medicine Hat Area of Southern Alberta, Cirque acquired 100% interest in a two parcel (1,280 net acres) of land. A geologically and geophysically defined gas prospect has been farmed out and a well will be drilled at no cost to Cirque in July 1998.
Cirque's production will increase to 900 boepd with the start up of the Turin Battery and is expected to reach 2,000 boepd by December 31, 1998.
Exeter Oil & Gas Limited announced that it has now successfully completed the fourth well in the company's earlier announced 1998 six well drilling program. The well Exeter et al Clive 9-23-40-24W4M was drilled to a total depth of 6014 feet and completed as a Nisku oil well. On initial testing the well flowed at a sustained rate of 146 barrels of crude oil and 915 thousand cubic feet of natural gas per day. During the next month the well will be tied into processing and sales facilities in the nearby area.
Of the four wells drilled to date under the program two have been completed as oil wells, one has been cased as a potential gas well and one was drilled and abandoned. The company also advises that it has spud the fifth well in the program, Exeter et al Gunn 12-18-55-3W5M. The well is expected to reach its total depth of 4510 feet within the next week.
Poco Petroleums Ltd. and Canrise Resources Ltd. jointly announced that Poco has agreed to make an offer to acquire all of the issued and outstanding shares of Canrise. The offer will provide that Canrise shareholders will receive 0.3845 of a Poco common share for each Canrise common share tendered. Based on the closing price on June 15, 1998 of $13.80 per Poco share, the offer equates to $5.31 per Canrise share. Based on the last ten days weighted average trading price of $14.40 per Poco share, the equivalent acquisition price equates to $5.54 per Canrise share. The Canrise closing price on June 15, 1998 was $4.65 per share. If all Canrise common shares are tendered, the value of the offer, including the assumption of $38 million of debt, will be approximately $134.6 million based on the closing price of Poco shares on June 15, 1998.
The offer has the unanimous support of the Board of Directors of Canrise. FirstEnergy Capital Corp. provided to Canrise exclusive financial advice and has indicated it will provide an opinion to the Board of Directors of Canrise that the offer is fair from a financial point of view to the shareholders of Canrise. The offer is subject to all necessary regulatory approvals and to customary conditions, including that a minimum of 66 2/3 per cent of the outstanding Canrise common shares, calculated on a fully diluted basis, be tendered.
Poco has entered into an agreement with Canrise pursuant to which, among other things, the Board of Directors of Canrise have agreed not to solicit competing bids and to recommend acceptance of the offer to holders of Canrise shares. If a subsequent third party offer is madeto acquire 20 per cent or more of the outstanding Canrise shares and Poco does not acquire at least 66 2/3per cent of the Canrise shares, Poco will receive a fee from Canrise of $3.5 million.
Canrise's current production capability is 4,200 barrels of oil equivalent per day. Proven and probable reserves consist of 5.2 million barrels of crude oil and natural gas liquids and 117 billion cubic feet of natural gas. Canrise also has 121,000 net acres of undeveloped land and seismic which has an aggregate value of $20 million.
Poco's exploration program is focused on its Western Region in west-central Alberta. The Canrise assets are a natural extension of this program. Poco was attracted to Canrise principally because of the quality of its asset base that is highly concentrated within Poco's western Alberta core areas of operation. The Canrise transaction is consistent with Poco's business plan which continues to focus on the exploration, development and acquisition of natural gas assets in the deeper, more prolific portion of the western Canadian sedimentary basin. The offer will allow Canrise shareholders an opportunity to participate in the future growth potential of Poco shares.
Wolverine Energy Corp. reported the following update to ongoing activities.
Wolverine Energy is currently looking to establish a joint venture to expedite the delineation drilling on the West Ghost River project including the initiation of exploration activities on the South Ghost River prospect. The Company will remain a significant partner in the area and views this move as a very positive step in accelerating the Ghost River development.
The previously announced private placement has been postponed.
Wolverine Energy's current production capability is approximately 1050 BOEPD however the Company has 150 BOEPD shut-in due to a water disposal pump failure. While the extremely low oil prices have eroded cash flow, the Company will not be shutting in production as netbacks are still yielding profitable returns.
The Company is also continuing to evaluate and develop its drilling programs for the Badger, Halkirk and Alliance areas for later this summer. Wolverine Energy continues to optimize current operations to increase netbacks.
Invader Exploration announced that the Company has established a new major focus area in south eastern Texas. The area offers excellent opportunities to acquire multi-zone, natural gas prospects and is an area that has high demand for gas and strong prices. The Company has agreed to participate for a 10 percent working interest in a high potential reef prospect whose unrisked reserve potential is estimated to range from 1 to 3 trillion cubic feet. Lands on the prospect are currently being acquired.
The Company has also agreed to participate for a 6.25 percent working interest in a joint venture land acquisition program in the south eastern Texas prospect area. The joint venture will pursue the acquisition of other reef prospects that have been identified as well as a number of shallow zone gas plays. The Company has the option to increase its interest in any prospect through a negotiated farm in as to an additional 6.25 percent
Drilling on the South Texas prospect lands is expected to begin in late 1998. Natural gas exploration within the south eastern United States is Invader's primary focus. Invader's initial exploration area is the Arkoma Basin within Oklahoma and Arkansas where the Company owns a 25 percent working interest in approximately 68,000 gross acres of prospect specific lands. The Company expects to participate in the drilling of 6 to 12 exploration wells in the Arkoma Basin during the balance of 1998.
Devlan Exploration updateed its current activities. During the first quarter, the Company completed the 14,000' Highland Ranch evaluation well in Wyoming and acquired an additional 3,119 net undeveloped acres adjacent to its Pinetree prospect, which targets the Frontier at 12,500'. This brings the Company's total acreage in the Powder River Basin to 12,054 (11,814 net) acres.
Effective April 01, 1998, a Keho property acquisition will accentuate Devlan's core area. This producing property consists of 10,490 acres (7,300 acres undeveloped) and generates 850 MCFD. Fifteen kilometers of seismic defines two gas prospects within the contiguous acreage. Funds for the venture were made available through an increase in the Company's line of credit. The new production has been contracted at $2.23/GJ and is expected to lift Devlan's revenue, which is predominately natural gas by 39%.
Going forward, Devlan will remain focused on developing its Canadian land base, which is predominately gas prone and will utilize the Company's existing gas facilities. A multi-well development program is expected to commence in the Third Quarter.
Seismic and further development in Wyoming is expected to resume again in the Fall, pending future oil prices. Production from the evaluation well 44-18 did not commence until late March.
Oilexco Incorporated has commenced reentry operations at Cameron Parish, Louisiana. It is estimated that targeted depth for this operation will be attained in 45 to 60 days. Completion operations on the Company's second well in Monroe, Alabama should be completed within the next ten days. Test results will be announced in due course.
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