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Gold/Mining/Energy : Canadian Oil & Gas Companies -- Ignore unavailable to you. Want to Upgrade?

To: Kerm Yerman who wrote (4114)	11/12/1997 5:48:00 PM
From: HAZ	Read Replies (2) \| Respond to of 24918

Kerm / Courage Energy (Hot off the press) I called the company yesterday to get an update. The first thing I noticed when I started to research this company was the fact that their Web site was out of date, with respect to financial reports (only 1996 & Q1-97). I couldn't find any financial reports on the news services except for 1996. This started me thinking that they didn't have a lot of good things to report and that they want to remain low key for some reason. The company had projected CFPS of 0.50 for 1997 on their website, but actual CFPS will come in around 0.30 in 1997, which is flat with 1996. Management is now forecasting 1998 CFPS will come in at 0.50. Therefore if we are to believe management, then cashflow/price ratio is 6.6 for 97 and 4 for 1998. The company's main problem has been its ability to get drilling and service rigs. They did not contract any for 1997 and basically subleased them from other companies when they become available in their drilling areas. Although Courage has not had a very active drilling program in comparison to other junior companies, their recent drilling successes have been significant and when all the production is on stream it will have a material effect on cashflow, earnings, NAV and consequently will lend credence to the 1998 CFPS forecasts. The company has purchased approximately 118 K shares at an average price of $ 1.80 for their Normal Course Issuer Bid out of an allowable 1.1 million. The company intends to buy more shares if they fall from the current 2.00 - 2.10 range and this will act as support for the stock. Also worthy of note is the fact the management owns approximately 25% of the shares. Here is a recap of recent drilling success ; 1) At Alhambra (Courage 50% working interest), the well flow tested from a Lower Mannville zone at a stabilized rate of 11.4 MMCFD, at 1950 psi tubing head pressure, with 70 bbls/MMCF of condensate and liquids. The well is expected to be on stream in August at a rate of approximately 5.0 MMCFD and 350 BBL/D of liquids. NOTE : This well has been producing since mid August at a higher rate of 6 MMCFD AND 350 BBL/D. 2 ) The Leduc Well (Courage 100% working interest) flow tested at a rate of 6.3 MMCFD at 990 psi tubing pressure from one of the pay zones in the well. A second pay zone in the well, which was drill stem tested upon penetration, tested at a stable rate of 4.25 MMCFD at 275 psi. Production and tie-in alternatives are currently being evaluated. NOTE : Courage is talking with Probe about processing the gas from one zone and with Esso about processing the gas from another zone. The Leduc area has primarily been an oil producing area and Probe has just recently discovered gas on their new lands. ** Bringing this production on stream is the biggest priority for the company right now. 3) The well at Medicine River (Courage 100% working interest) was completed and stimulated in a Lower Mannville interval which yielded oil. This interval will be production tested and evaluated prior to evaluating an up hole zone which drill stem tested gas. NOTE : I forgot to ask about this well. 4) UK property holds significant production potential. Courage was brought into this play by Altaquest and is their partner. They hold a 17.5% WI before payout & 10.5% after payout in the Fiskerton discovery. The production test will occur once they receive the approval but I expect it would occur before year-end. The Fiskerton prospect is approximately 1.5 miles south of the producing Welton field. The operator at Welton has recently developed a third producing horizon, the field is forecast to produce 4,400 BOPD in 1997 and contains approximately 20 million bbls recoverable oil. 5) In the remaining three licenses, EXL 141, PEDL 18, PEDL 17, Courage will shoot a 21 km seismic survey with the option to commit to drill an exploration test well within six months. Courage's interest would be 100% before payout and 50% after payout and would earn an interest in 96,152 (48,076 net) acres of undeveloped land. There are seven additional prospects identified on this block of land. Recent Update : In the United Kingdom, the 1997 seismic program has been shot and interpreted. A strong structural anomaly exists and a drilling location for the Block B lands (Courage 100% before payout/50% after payout) has been identified. Subject to rig availability and regulatory approval, Courage hopes to drill this location in the 4th quarter 1997. Offset oilfields all within 1 mile of the license area are Eakring at 6.5 million bbls, Egmanton at 5.1 million bbls and Bothamsall at 3.0 million bbls. Summary : 1997 has not been exceptionally good for Courage but as the year-end approaches their recent drilling successes in Canada and prospects in the UK may bode well for 1998. Management has also informed me that they will get their Web Site up-to-date and investigate why the Q1 & Q2 97 reports were not distributed. I will follow up with the financial numbers once I get these reports. IMO this one is worth some DD. Cheers & good investing