MARKET ACTIVITY/ WEEKEND EDITION OF TRADING NOTES JULY 12 1998 (13)
PAST WEEK'S NEWS HIGHLIGHTS, Con't
Brigdon Resources Inc. (BRG.A/TSE) reported the recent completion of two Basal Quartz zone gas discoveries at Buffalo Lake, in central Alberta.
The first well (70% working interest) tested at initial flow rates of between 6 million and 12 million cubic feet of gas per day. Pipeline construction was completed last week and the well is on stream, producing 3.25 million cubic feet of gas (2.25 million net) per day.
The second well (38.75% working interest) tested at initial flow rates greater than 1.5 million cubic feet of gas per day, but showed declining flow pressures. This well is on an extended testing program.
Brigdon's Red Willow plant (100% working interest) is now processing about 7.8 million cubic feet of gas per day. Over the next three weeks the company expects to increase Red Willow throughput to about 8.5 million cubic feet per day, including 1.25 million cubic feet of gas per day processed for non-operators.
Brigdon's sales from Red Willow and other facilities will total approximately 7.7 million cubic feet of gas equivalent per day; an increase of 40% over recent production levels.
Brigdon has proposed to its joint venture partners a four to six well summer drilling program of Basal Quartz and Glauconite gas targets and expects to begin drilling later in July.
Marchwell Capital Corp. (MHW/ASE) announced that it has concluded the acquisition of certain oil and gas interests in the areas of Open Creek, Alberta and Nevis, Alberta. pursuant to a Purchase and Sale Agreement made as of April 14, 1998 with Bonanza Energy Ltd. The consideration paid for the Alberta Assets consisted of approximately $147,514 cash and the issuance of a unsecured subordinated convertible debenture in the principal amount of $500,000 bearing interest at a rate of 6 percent per annum. The terms of the conversion are one Common Share of the Corporation for each $0.62 of principal amount of the Convertible Debenture. The consideration is supported by two independent oil and gas reports prepared by Sproule Associates Limited and O'Neill Petroleum Exploitation Consultants Ltd.
The Acquisition is non-arm's length as Mr. John Fleming, Presidentof Bonanza Energy Ltd., is also a shareholder and director of 721073 Alberta Ltd., a company which holds 1,000,000 escrowed shares of the Corporation. The Corporation is a junior capital pool company and the Acquisition of the oil and gas interests in Open Creek, Alberta and Nevis Alberta, will constitute the Corporation's Major Transaction.
Exeter Oil & Gas Limited (EOL/VSE) has now successfully completed the fifth well in the company's earlier announced 1998 six well drilling program.
The well, Exeter et al Gunn 12-18-55-3W5M was drilled to a total depth of 4510 feet and cased as a potential Banff gas well.
Of the five wells drilled to date under the program, two have been completed as oil wells, two have been cased as potential gas wells and one was drilled and abandoned. Wet weather conditions throughout the Province of Alberta have hampered the company's efforts to complete and tie-in the four successful wells. The company now intends to proceed with this work as quickly as possible during July and August.
INTERNATIONAL
Pacalta Resources Ltd.'s (PAZ/TSE) 100% owned Ecuadorian subsidiary, City Investing Company Limited has received notice from the Ecuadorian National Hydrocarbons Directorate that all allowables into the SOTE/OTA export pipeline system have been re-apportioned. Effective July 7,1998, the Company's allowable has been increased to 24,189 BOPD. While the Company's production is still restricted, this increase reflects the inclusion of the Dorine field in the national production base.
However, this increase does not include allowables for the two new pool discoveries announced in June of this year, or the new Dorine 8 development well. In addition, the Company is awaiting allowables for four new wells drilled on the Fanny 20 pad. As allowables are set for these additional wells, the Company anticipates further increases in SOTE/OTA pipeline allocation. The ultimate production from all the Company's wells in Ecuador will be prorated to reflect the restricted export capacity available on the SOTE/OTA pipeline system.
The total transportation capacity available in Ecuador has increased by 10,000 BOPD to 395,000 BOPD, which reflects additional capacity available from the recent minor expansion of the SOTE pipeline. Based on the original design parameters of this minor expansion, there may be potential to increase the throughput by an additional 10,000 to 15,000 BOPD.
The company also provided an exploration update. On City Block, testing operations have concluded at the Mariann 4A discovery well. In addition to the two ''T'' sandstone zones, which tested at a cumulative rate in excess of 3,600 BOPD of 31 degree API oil, the well has been evaluated over three other productive intervals. The first of these intervals, the Lower ''U'' sandstone, tested at a final rate of 272 BOPD of 19 degree API oil from a 5 foot perforated interval. The next zone, the Middle ''U'' sandstone, tested at a final rate of 1,434 BOPD of 26 degree API oil from a 12 foot perforated interval. The last zone evaluated in the well, the ''M-1'' sandstone, tested at a final rate of 360 BOPD of 12 degree API oil from a 12 foot perforated interval. The Company is currently evaluating accelerated production plans for the light oil discovery.
On Block 27, testing operations have been temporarily suspended at the Tipishca 1 discovery well while the second exploratory well on the Block, Patricia 1, is drilled from the same surface location. The Patricia 1 well is expected to reach total depth within the next two weeks.
Seven Seas Petroleum Inc. (SEV/AMEX) (SVS.U/TSE) successfully completed drilling operations on the Tres Pasos No. 4-E well, the ninth well drilled on the Emerald Mountain project in Colombia, South America. The Tres Pasos No. 4-E well is located on the Rio Seco Association Contract area, approximately 5 kilometers northwest from the surface location of the previously announced El Segundo No. 1 discovery well. The well reached a total depth from the surface of approximately 6,300 feet. Analyses while drilling, including the examination of highly fractured core samples, log interpretations and significant shows of oil and gas, indicate the well should be quite productive. Approximately 292 feet of the Upper Cretaceous Cimarrona formation was encountered. There was no apparent oil-water contact in the well.
The Company expects to initiate drilling operations on the Tres Pasos No. 3-E well within the next two weeks. The Tres Pasos No. 3-E well is located approximately 4 kilometers south of the Tres Pasos No. 1-E well and will be the most southern well to be drilled to date on the Rio Seco Association Contract area.
Seven Seas also stated that it plans to begin production testing the Tres Pasos No. 4-E well within two to three weeks. Once initiated, production testing of this well is expected to last approximately two weeks. After testing the Tres Pasos No. 4-E, the Company will then initiate an extensive production testing program on the recently completed El Segundo No. 6-E well. The production testing program for the El Segundo No. 6-E is anticipated to last for a period of at least 12 weeks. This relatively long testing program is designed to provide uninterrupted production at a constant daily rate to establish extensive additional reservoir information over a comparatively large area of investigation. Because of very limited on-site storage and transport capacity the daily production will, of necessity, be at a comparatively modest daily rate. Due to this long expected test period, Seven Seas anticipates the issuance of an interim progress statement.
GHK Company Colombia, a wholly owned subsidiary of Seven Seas, is the operator of the Emerald Mountain project. Seven Seas holds a 57.7% interest in the Emerald Mountain project which encompasses the Dindal and Rio Seco Blocks.
Hurricane Hydrocarbons Ltd. (HHL.A) has successfully spudded two wells in the company's 518,400 acre exploration license area.Plans are in place to drill an additional three wells in this license area in1998.
Hurricane has drilled seven wells in the Kumkol South field and three, in the South Kumkol field during the past three months. Of these wells, five are at the edge of the license borders and, based on the log data, extends the limits of the pools. This will increase the proven developed producing reserves in these pools. The wells have been cased and are awaiting perforation and testing.
The South Kumkol wells SK No.5 and SK No.7, which finished drilling in the last quarter of 1997, were completed and production tested during the first quarter of 1998. During a 48 hour flow test, these two wells flowed light, clean oil from the Jurassic II formation and stabilized at a rate of 2430 barrels per day on a 10 mm choke and 1715 barrels per day on a 12 mm choke with a sandface pressure drawdown of 3.4 and 9.8 per cent respectively.
Oil production for May was 57,467 barrels per day and 58,143 barrels per day for June. Hurricane continues with several planned initiatives to enhance production throughout 1998. These initiatives include modifications to our reservoir pressure maintenance and water injection facilities and a concentrated focus on workovers and pump optimizations. Hurricane is working to expedite, the approval for the South Kumkol commercial project, to finalize the gas utilization feasibility study and the development strategy for getting the Qyzylkiya field on production.
The company expects the greatest increase in production to occur when the joint venture agreement with LUKoil is finalized. Hurricane has reached an understanding with LUKoil and is awaiting final approval to begin the drilling program planned for the Kumkol North field.
As a result of continuing low world oil prices, crude prices in Kazakhstan are currently in the range of US$70 per tonne, or US$7.85 (net of value added tax).
In early June Hurricane sponsored an international investment summit held in Almaty, Kazakhstan. The summit attracted nearly 500 delegates from more than 20 countries. The President of Kazakhstan, Nursultan Nazarbayev, addressed the audience and stressed the country's commitment to economic development and support for foreign investment. Economic reforms to date have been praised by the International Monetary Fund in a statement released June 4, 1998.
Bitech Petroleum Corp. (TSE: ''BPU'') has consolidated its position in the Komi Republic of the Russian Federation.
The acquisition of the remaining 5% interest in its Russian subsidiary, Bitech-Silur JSC, has now been completed. The consideration paid for the acquisition was the issue of 2,190,116 Bitech Petroleum Corporation shares. Based on the latest audited reserve report, this acquisition added approximately 7.4 million barrels to the Company's 1st January 1998 reserve estimates.
Following its recent successful tendering for the West Kyrtayel license, Bitech has been offered an additional license, referred to as the Denissov Depression. This license lies to the north of Pechora, the centre of the Company's operations. The work programme is currently under negotiation with the Government but is expected to comprise a five and half year period, including a mix of reprocessing of existing seismic and the acquisition of new seismic leading to the possible drilling of two wells. The area covered by the Denissov Depression is 4,393 km(2).
Commercial production commenced at Lekker on 11th June from well L-11. Well L-1 is expected to be in production shortly.
Bitech also recently released its first quarter's results. These reported net income for the quarter of US $899,546, based on oil revenues of US $8,033,630.
This represented cash flow from operations before changes in non-cash working capital of US $2,488,751 or 5.4 cents per share.
In the text of the Quarterly Report, reference was made to the decline in the price of crude oil and the effects this has had on the Company's cash flow and operations. The oil price situation has declined even further in the last few weeks. The price of Brent is now at its lowest point for a number of years and the domestic price in Russia has weakened. The latter point appears to have been caused by a Government decree seeking to control export sales of those companies who have taxation arrears. Bitech is not affected by the decree directly as its tax payments are up to date.
In view of the deteriorating price position, Bitech has taken stringent but controlled cost cutting measures to preserve cash. These have included the decision to curtail its current development programme at its Lekker and South Kyrtayel fields and defer the drilling of new wells at Lekker. All necessary infra-structure, for full production at Lekker, is in place, including the drilling rig and Transneft pipeline tie in. The first Lekker well will be spudded and other capital programmes resumed, when Management believes the oil price has returned to sustainable levels.
Two wells have been drilled recently at South Kyrtayel. Well SK-102, drilled from the south pad, was a step-out well aimed at appraising the eastern flank of the reservoir. The well demonstrated that the main oil-bearing sand has been eroded in this area. The well is currently suspended and will be side-tracked when the oil price improves.
SK-204, drilled from the north pad, encountered a separate fault block with reservoir pressure higher than that originally experienced in the main field. The well is currently being tested to provide an initial indication of the reserves contained in the separate fault block. Following this, it is expected that the well will be deepened to determine the oil water contact and further assess the size of this new accumulation. Again, the timing of this extension is dependent on the oil price.
To increase production in the short term, the Company is carrying out two work-overs at South Kyrtayel and the selective acidization of wells L-1 and L-11, at Lekker.
The effect of the drilling results and the deferral of the new drilling at Lekker means that the 1998 production targets will not be met. The impact of this is partly mitigated by the anticipated increase in production from the work-overs and selective acidization discussed above. On the assumption that one new well is drilled at Lekker it is now anticipated that year-end production will be approx. 12,000 barrels of oil a day.
Cirque Energy reported the directionally drilled Fiskerton FA2 is currently being cased to 1685 meters as a potential oil well. The well encountered Basal Sandstone units totalling 38 feet of oil stained porous reservoir rock. No drillstem tests were run. The FA2 well was drilled into a separate fault block on the Fiskerton structure, expanding the reserve base to the west.
The rig will be moved 10 meters to the FA3 surface location and a target zone will be directionally drilled to test the north east boundary of the original Fiskerton discovery. The FA3 well is expected to reach its target depth by July 31, 1998. The discovery FA1 well continues to produce at a restricted flow rate of 300 barrels of oil per day. The new wells, FA2 and FA3, will be completed after the drilling rig moves off the Fiskerton pad allowing access for a service rig.
GHP Exploration Corporation (CDN/GHPX.U) reported that its wholly owned subsidiary, GHP Exploration (Egypt) Ltd., has commenced a seismic acquisition program in the West Gharib Concession, onshore Gulf of Suez, Egypt. The Company has a 30% interest in the concession. The survey, consisting of 240 kilometers of two-dimensional and 35 square kilometers of three-dimensional seismic, is designed to further delineate nine prospects and leads identified from existing data and to evaluate other unexplored lands in the concession. It is anticipated that up to two exploratory wells will be drilled on the concession during the fourth quarter of 1998.
Also in Egypt, the Company is pleased to announce that it has commenced the acquisition of a 70 square kilometer high resolution gravity and magnetics survey in its Central Sinai Concession, onshore Gulf of Suez. The Company has a 25% working interest in this concession. This survey is designed to further delineate several prospects and leads in the area and is expected to take up to two months to complete. The Company expects to drill the first well in this concession during the first quarter of 1999.
GHP currently has interests in approximately 5.1 million acres in Egypt (1.3 million net acres). Approximately 1.25 million acres (330,000 net acres) of which is located within the prolific Gulf of Suez basin. The Company has committed to drill a minimum of seven exploratory wells during the next three years on these concessions.
Ridel Resources Ltd. (RDL/ASE) announced it has acquired Asia Pacific Energy Co. Ltd. (APEC) of Hong Kong, which holds contracts that allow the company to earn a share of profits from incremental production and exploration and development in three oil and gas fields in Myanmer (formerly Burma). The acquisition was completed for consideration of 15 million Ridel shares, at a deemed price of C$1 per share, to APEC shareholders.
"The APEC acquisition places Ridel in a position to become a mid-sized oil producer within the next three years," said the company's President and Chief Executive Andrew Chinnick. "The fields have substantial proven oil reserves and tremendous potential for possible recoverable oil. The fields currently generate nearly one-third of Myanmar's oil production."
"During the next six months, we will be rehabilitating hundreds of wells that have been under developed or abandoned due to shortage of equipment and capital. We anticipate that Ridel will realize cash flow from production activities beginning in the first quarter of 1999."
The acquisition followed the completion of an independent study by consulting firm Sproule International Limited of Calgary, whose report on two of the fields - Htaukshabin and Kanni - indicated proven and probable reserves of 14 million barrels of oil, with significant potential for additional barrels of recoverable oil. Ridel's own studies have indicated up to 110 million barrels of recoverable oil reserves at depths less than 6,000 feet, plus additional reserves deeper, and in the southern portion of the contract area.
Sproule has assessed the contracts' total net present value - based on proven and probable reserves at US $21.7 million, and resource potential at US $ 20.7 million - on a fully risked basis, (at 10% discount rate and after tax).
Profco Resources Ltd. ('PSO/TSE) announced that construction of the production facilities platform for the main Ejulebe field offshore Nigeria has been completed. The platform is on a barge and is presently in tow out of the Gulf of Mexico. The platform is expected to arrive in Nigeria in approximately five weeks at which time it will be located at the Ejulebe No. 1 well location 12 kilometers offshore.
Upon completion of pipeline construction, the platform will be tied into the four oil wells and one pressure maintenance well with production expected to commence at the end of September, 1998, at approximately 13,000 barrels of oil per day. Profco's share of this production is 60% before recovery of all its costs and 22.5% thereafter. The balance of the production is owned by Profco's Nigerian partner, Atlas Petroleum International Ltd. The four oil wells were cumulatively production tested at 21,000 barrels of oil per day.
The Company also reported it is continuing discussions with its Nigerian partner as to the drilling of additional development prospects surrounding the main Ejulebe pool and the continued exploration of the balance of the 215,000 acre concession known as OML 109.
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