MARKET ACTIVITY/ WEEKEND EDITION OF TRADING NOTES JULY 12 1998 (14)
PAST WEEK'S NEWS HIGHLIGHTS, Con't
ENERGY TRUSTS
PrimeWest Energy (PWI.UN) has completed the production testing phase on two recently completed 100 per cent working interest horizontal re-entry wells drilled in the Lone Pine Creek area. The combined absolute open flow of the two wells is approximately 21.5 million cubic feet per day (MMCFD).
The first well is located at 11-14-030-29 W4M and has a horizontal section of approximately 740 meters in the Wabamum formation. The second well, also in the Wabamum formation, is located at 11-36-030-29 W4M and has a horizontal section of approximately 600 meters. The combined cost of horizontally drilling and completing the two wells was approximately $1.9 million.
Both wells have been placed on stream and are producing to the East Crossfield Plant where PrimeWest owns processing capacity. The combined initial sales capability for the two wells is approximately 11 MMCFD of natural gas and 180 barrels per day of natural gas liquids. This compares to the recent combined sales from these two wells of approximately 1.8 MMCFD of natural gas and 30 barrels per day of natural gas liquids, prior to the horizontal drilling enhancement program. In the near term, gathering system constraints will restrict sales from the two wells to approximately 50 per cent of their capability. PrimeWest is investigating alternatives to de-bottleneck the gathering system to permit unrestricted production later this year.
"This development will have a positive impact on unitholder distributions, reserves and net asset value," said Kent MacIntyre. "This new natural gasproduction has a very high netback or profit margin. First, because this natural gas is not dedicated to long term
natural gas sales contracts, we can take advantage of the higher prices we are currently seeing in the natural gas markets. Second, this production is eligible for Alberta Royalty Tax Credit, which significantly reduces the royalty burden. And finally, the marginal cost of the increased production is minimal because we can process this natural gas through spare capacity at the East Crossfield plant."
PrimeWest has a budget of $16 million for property enhancement projects in1998. As a result of low oil prices, PrimeWest has shifted its focus towards natural gas development activities for the remainder of the year to take advantage of strong natural gas markets. Natural gas production currently comprises approximately 45 per cent of PrimeWest's total production.
PrimeWest operates 78 gross (46.7 net) Wabamum natural gas wells and holds16,000 gross (10,200 net) acres of undeveloped land in the Lone Pine Creek and East Crossfield areas. PrimeWest believes there are additional natural gas production and reserve enhancement opportunities to be gained through horizontal drilling. Plans in this respect are supported by the recent acquisition in the Lone Pine Creek area, announced by PrimeWest on July 2,1998.
SERVICE SECTOR
Enerchem International Inc., (ECH/TSE - SPEC20) an oil and gas specialty chemical company and equipment rental company serving the oil and gas industry reported record revenues and net profits for the nine months ended May 31, 1998.
Revenues were $12,742,099 versus $8,935,842 for the comparative period representing a 43% increase. Earnings before tax were $2,806,120 compared to $1,597,932 for the same period last year, representing an increase of 76%. After tax earnings increased 87% to $1,594,120 from $851,608 reported in the comparative period. Earnings per share for the comparative periods increased to $0.21 from $0.12.
Revenues for the quarter ended May 31, 1998 were $3,933,935 versus $3,143,324 for the corresponding period representing a 25% increase. Earnings before tax during the quarter increased from $468,176 to $514,205 an increase of 10%, and after tax earnings increased 20% to $298,505 compared to $248,852 for the quarter ended May 31, 1997. Earnings per share for the current quarter were $0.04 compared to $0.03 for the comparative quarter in 1997.
Veritas DGC Inc. (VTS/TSE) (NYSE:VTS) today announced the successful deployment of a 12,000-meter streamer from its new flagship seismic acquisition vessel, the SRV Veritas Viking. This new industry towing record was set during the commencement of acquisition of their innovative long offset seismic program in the White Zone/Faroes area of the Atlantic Margin.
''This year's survey has been designed to record converted waves to image sediments below the high velocity basalts common in this area,'' says Elwyn Jones, vice president, business development of Veritas DGC Limited. ''Conventional long offset surveys have utilized the Wide Aperture Recording (WAR) technique which uses alternating sources and increasing separation between two vessels to build up the longer offset coverage required for converted wave imaging. However this technique has several technical limitations, as well as being commercially expensive. This survey is the first time a 12 kilometer streamer has been towed from a single vessel, and it is hoped that if successful will be a precursor to a long offset 3D in this area.''
''The Viking series of vessels have been designed to tow multiple arrays of ultra-long streamers'' says Dave Pratt, president of Veritas Geophysical Services. ''The success of this project demonstrates again the benefit of strategic alliances with our equipment vendors, in this case Syntron Inc. without whom this towing record would not have been possible. We will be using this ultra-long streamer capability on several of our current and future multi-client data library programs both in the Gulf of Mexico and West of Britain''.
Veritas has been the leading provider of high quality speculative 3D surveys in the White Zone/Faroes area over the past five years, and have again received strong industry support for this year's surveys. The long offset acquisition technique could have potential application in several other areas with similar high velocity layers, such as the carbonates present offshore in Western Australia or the salt intrusions in the Gulf of Mexico.
Veritas DGC Inc. is a leading provider of land, transition zone and marine-based seismic data acquisition, seismic data processing, and data library surveys to the petroleum industry in selected markets worldwide.
Plains Energy Services Ltd. (PLA/TSE) acquired all of the issued and outstanding shares of Lagore Bros. Drilling Services Ltd. This strategic acquisition provides Plains access to the directional drilling market through 100% Plains subsidiary, Fleet Coil Technologies Corp., both through utilization of conventional jointed drill pipe as well as through coiled tubing conveyed directional drilling. It is anticipated that the acquisition of Lagore Bros. Drilling Services Ltd. will be immediately accretive to Plains Energy Services Ltd. income. Plains Energy Services Ltd. is a fully integrated Canadian oil and gas service company carrying on operations in drilling, completions, production and abandonment activities through the western Canadian sedimentary basin, as well as in Texas and California.
PIPELINES
TransCanada PipeLines Limited, Enron Corp., and Tecnoconsult S.A., announced today that they have been awarded a contract by PDVSA, the state-owned oil company, to build, own and operate a natural gas liquids extraction facility in Venezuela.
The estimated capital cost of these facilities, referred to as Accro III & IV, is US$450 million. Construction is expected to begin early next year with operations underway in 2001.
This project is an integral part of Venezuela's natural gas liquids infrastructure expansion and will consist of a natural gas liquid (NGL) extraction facility in San Joaquin and Santa Barbara, as well as NGL fractionation, storage and refrigeration facilities in Jose, Venezuela. The project is estimated to allow the processing of 800 million cubic feet per day of natural gas and fractionation of 30 thousand barrels per day of extracted liquids allocated for exportation. Storage is expected to have the capability to contain 610 thousand barrels of extracted liquids.
''This contract is an important milestone for TransCanada,'' said George Watson, TransCanada president and chief executive officer. ''It will enable us to build on our North American activities in natural gas processing while positioning us for growth in Venezuela and the Americas.''
IPL Energy Inc. (IPL/TSE) and Detroit-based MCN Energy Group Inc., filed an application with the National Energy Board to construct and operate a 25 kilometre southern Ontario portion of the 551 kilometre Vector natural gas pipeline project.
Upon start-up in late 1999, Vector will provide a cheaper alternative transportation link for up to one billion cubic feet of natural gas per day from western Canada and the United States to growing markets in eastern Canada and the upper Midwest and northeastern United States. The Vector Pipeline Project will originate at points of interconnection with the terminus of the approved Northern Border Pipeline extension and the proposed Alliance Pipeline, near the rapidly expanding Chicago hub, to points in Michigan and on to the hub at Dawn, Ontario. Additional markets in eastern Canada and the United States will be accessed in the future through proposed and existing transmission systems.
In December 1997, Vector filed an application with the Federal Energy Regulatory Commission in Washington D.C. to construct, lease and operate the 526 kilometre U.S. portion of the proposed pipeline.
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