MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING MONDAY, NOVEMBER 24, 1997 (3)
EARNINGS , (con't)
S.R.I. Oil & Gas
Revenues for nine months were $1,462,828 vs $999,645 a year ago. Net earnings were 187,711 vs $90,356 and earnings per share were $0.05 vs $0.04 vs a year ago. Basic cash flow was $997,279 vs $615,356 and cash flow per share was $0.29 vs $0.25 a year ago. For the quarter, revenues were $405,703 vs $270,726 a year ago. Net earnings were $60,293 vs $32,883 and earnings per share was $0.02 vs $0.02 a year ago. Basic cash flow was $374,624 vs $130,017 and cash flow per share was $0.11 vs $0.06 a year ago. Basic shares issued and outstanding for both the nine months and three month period were 3,478,041 vs 2,475541 a year ago. The company did not provide production information.
Search Energy Corp.
The company released their nine month report results ended September 30, 1997. These results include the acquisition of Lionheart Energy Corp. which closed on May 2, 1997 financial results for the nine months ended September 30, 1997. Revenues were up significantly, totalling $7,812,000 in 1997 as compared to $1,666,000 in 1996. Cash flow from operations totalled $2,951,000 ($0.13 per share) as compared to $469,000 ($0.08 per share) reported in 1996. The Company had a net loss of $389,000 ($0.02 per share) while in 1996 it had net income of $1,000 (nil per share). Search produced a daily average of 907 Bbls and 3,343 Mcf for a total of 1,241 Boe in the 1997 nine-month period. Comparative daily average production for 1996 was 234 Bbls and 370 Mcf for a total of 271 Boe. Current production is 1,572 Boed.
Operationally the Company completed a two-legged horizontal well in the Gainsborough area, southwestern Manitoba, for 182 Bopd in which Search has a 32% working interest. A follow-up location is being evaluated. In the Wainwright area, Alberta, Search drilled a well to test the McLaren formation which has been cased as a potential oil well. Completion operations are underway. Several additional locations are being evaluated in the same area. In other news Search is pleased to announce that they have closed a transaction to sell their working interest in the Morningside and Chigwell gas plants for $4,370,000. As part of the transaction Search receives firm capacity to process its gas through the plants for a non-escalating process toll of $0.40 per Mcf. Proceeds from this sale will be applied against long term debt.
Oiltec Resources
Revenues for nine months were $8,128,116 vs $6,967,919 a year ago. Net earnings were $1,040,646 vs 1,544,566 and earnings per share $0.06 vs $0.13 a year ago. Cash flow was $3,725,628 vs $3,114,820 and cash flow per share was $0.22 vs $0.26 a year ago. Weighted average basic number of shares outstanding were 16,770,740 vs 12,202,562. Production was at 1,200 boe/d vs 1,063 boe/d a year ago. The company did not reflect three month statistics.
The company noted that previously reported weather and equipment related delays suffered through the first half of 1997, Oiltec's production and financial performance lags behind management's original forecast. During the four-month period of reduced field activity, Oiltec took the opportunity to enhance its inventory of exploration and development prospects for future exploitation. With rigs presently in good supply, the Company's drilling activity is at an all time high, including an accelerated for schedule for its high-profile Red River exploration.
Orbit Oil & Gas
Revenues for the nine months were $18,145,000 vs 16,304,000 a year ago. Net earnings were $1,805,000 vs $2,403,000 and earnings per share were $0.04 vs $0.06 a year ago. Cash flow was $10,229 vs $9,083 and cash flow per share was $0.24 vs $0.22 a year ago. Average shares outstanding were 42,945,000 vs 41,994,00 a year ago. Production for the nine month period averaged 4,111 boe/d vs 3,681 boe/d a year ago. The Company reported that average natural gas production reached 37 Mmcf/d in September, the highest in its history. The recent disposition of small working interest properties in south central Alberta, for $7.6 million, reduced the Company's bank debt to less than one year's cash flow. Orbit's strong financial position and rapidly increasing exploration effort, should combine during the next two quarters to yield steadily increasing production volumes.
Laurasia Resources Limited
The company reported nine month revenue of $8,685,907 compared to $6,389,842 a year ago. Net earnings were $975,763 vs $1,314,474 and earnings per share was $0.021 vs $0.028. Cash flow amounted to $4,280,404 vs $3,426,227 and cash flow per share was $0.092 vs $0.074.
In the first three quarters of 1997 the Company increased its daily
production rate from the 1,321 boe/d in 1996 to 1,622 boe/d. Fourth quarter production levels and natural gas prices have further improved with the Company producing 1,800 boe/d during the month of October 1997 coupled with natural gas pricing of $2.20/mcf. These prices are forecast to further increase in November and December. Laurasia completed its battery and treating facility at Retlaw in September and October and is now delivering clean oil at the pipeline terminal. 2D and 3D seismic programs have been and are being shot at Bantry, Beacon Hill, Browning and Retlaw. These programs will result in additional drilling at these locales. The Company anticipates a strong fourth quarter with increased production and increased revenues forecast and a successful outlook for 1998 is expected.
Magin Energy Inc.
Magin's cashflow for the first nine months of 1997 rose in excess of seven-fold over 1996 and reached $9.6 million. On a per share basis, cashflow increased to $0.27 for the first nine months of 1997 compared to $0.13 in 1996. Third quarter cashflow per share was $0.10 in 1997 compared to $0.05 in 1996. On a barrel of oil equivalent basis (boe), the Company's 1997 average production increased to 4,192 from 332 boes per day during the first nine months of 1996. As Magin acquired Discovery West effective May 1, 1997, the results only include the combined operations for five months. Production in the third quarter averaged 6,277 boes per day, which was five percent below budget. This variance was due to operational delays related to turnarounds at several facilities along with long lead times for the acquisition and rental of field equipment. In November, Magin announced the issue of up to $10.7 million of flow-through shares at an issue price of $3.50 per share. Closing is expected in early December. This issue will allow the Company to accelerate both its drilling and operational acquisition programs.
Petroleum and natural gas revenues have increased to $24.2 million in the first nine months of 1997 compared to $2.1 million during the corresponding 1996 period. This 1041% increase is due entirely to higher production volumes as the price received on a boe basis is 6% less than in 1996. Operating costs increased to $7.26 per boe in 1997
from $5.90 per boe in 1996. Operating costs for the fourth quarter of 1997 are currently expected to average $6.50 per boe which includes a charge of $0.60 per boe related to the sale of facilities in the third quarter. Operating costs on a per unit basis are expected to decrease in 1998 with increased production volumes. The Company showed a small loss of $103,159 for the third quarter. Earnings after tax for the first nine months of 1997 were $786,444. The Company currently has over $90 million in income tax pools.
Production is now averaging in excess of 7,000 boes per day. Year-end exit production of 8,000 boes per day remains fully achievable with scheduled daily production increases of 5 million cubic feet of gas at Gleichen, 300 barrels of oil at Eyehill, and 3 million cubic feet of gas at Windfall. The Spirit River prospect has been tested and could add an additional 2 million cubic feet of gas provided the pipeline tie-in can be completed by year-end. To the end of the second week of November, Magin has drilled 33 wells in the fourth quarter, of which 28 have been cased for production. Currently four wells are drilling with up to another 16 scheduled prior to year end. Upon meeting the year end production projection of 8,000 barrels of oil equivalent per day, and with the high level of drilling activity, it is anticipated 9,000 barrels of oil equivalent per day will be reached in the first quarter of 1998.
Western Star Exploration Ltd.
The company released its financial and operating results for the first quarter ending September 30, 1997. Western Star's net revenue was $997,000 compared to $799,000 the year prior. Net earnings was $90,000 vs $143,000 and earnings per share was $0.01 vs $0.02 last year. Cash flow amounted to $537,000 compared to $506,000 a year earlier. Capital expenditures for the quarter was $1,435,000 vs $3,870,000 of last year. Average production was 555 boe/d vs 549 boe/d of a year ago. During the first quarter the Company participated in the drilling of 3 (0.52 net) wells resulting in 2 (0.39 net) gas wells and 1 (0.13 net) oil well. Capital expenditures in the three months ended September 30, 1996 reflect the acquisition of 388623 Alberta Ltd. Western Star has expanded its role as operator on new projects during the quarter that ended September 30, 1997. At Rainbow the Company has designed an oil battery with construction to begin in the second quarter. The Company expects incremental gas production to come on stream over the next 6 months at Worsley, Hanna Garden and Thornbury. New sources of oil production will be obtained from Rainbow and Worsley which will enable the Company to reach all of its targets.
Del Roca Energy
Del Roca Energy Inc. (formerly Coulee Ridge Capital Corp.) started active operations this quarter, with the completion of its major transaction. The Corporation purchased all of the issued and outstanding shares of Del Roca Resources Ltd., a private oil and gas company with existing oil production and approximately $1 million of cash on September 25, 1997. Concurrently, the Corporation purchased the oil and gas assets of BowRio Investments Ltd. effective June 1, 1997 and raised over $500,000 in a private placement. The resulting Corporation, now known as Del Roca Energy Inc. and trading on the ASE under the symbol DER, has oil production of over 60 bbls per day and approximately $1.7 million in cash with which to finance further acquisitions and development of its oil and gas properties. The existing management team from Del Roca Resources Ltd. assumed management control of the new company and provides the guidance and
strategic direction for the Corporation. The major transaction occurred late in the quarter and therefore, the Consolidated Income Statement reflects only 6 days of revenue from the private company. The Consolidated Balance Sheet combines the two companies. As a result of the major transaction, the number of issued and outstanding shares as at September 30, 1997 was 23,639,919. A further 337,000 shares were issued after September 30 due to exercise of options and finalization of the private placement. Operations consist of;
Norbuck, Alberta ...Del Roca owns an average of 53 percent working interest in the Norbuck field in the Pembina area of Alberta. Current production is about 86 bbls/d, 48 bbls/d net to Del Roca.
Turin, Alberta... Del Roca owns a 20 percent interest in one section of land along with 2 producing vertical wells in the Turin area. Del Roca participated for its 20 percent interest in a horizontal well which was drilled during the quarter. A 3D seismic program is planned for later in the fall and could result in drilling furtherwells for Taber Sand or Livingstone potential, or both. Net production from the Turin area is currently about 19 bbls/d.
Management of Del Roca continues to evaluate both property and corporate acquisition candidates. Del Roca's focus is on properties near the existing core base where development upside can be specifically identified.
DRILLING ACTIVITY / UPDATES
Canadian 88 Energy (TOP 20 Listed)
As reported in the company's nine month report, the company commenced the shooting of its first high-resolution 3-D seismic program in West Central Alberta and initial interpretations should be available prior to year-end on100 square miles of new data.
In addition to the ramp-up of the seismic and drilling program, major production gains will occur over the next several months. At Chedderville, a multi-well drilling program is currently underway with three rigs operating. Approximately 10 mmcf per day of natural gas production is currently shut-in awaiting tie-in and from 10 to 20 mmcf per day of further production may be expected prior to year-end from the current drilling program which is targeting prolific Leduc reef accumulations of 20 to 50 bcf per well. Our 1-19-36-6 W5M well has just defined a new Leduc reef prospect with further locations pending and to the credit of our exploration team led by Mr. Cam Taylor, it is our fourth consecutive successful Leduc test in the area.
At Waterton, we are pleased to report that we have just completed the drilling and logging of our third consecutive successful deep Mississippian test at 4-19-7-2 W5M. The Waterton play discovered by Canadian 88 last year at 4-18-7-2 W5M has evolved to be one of the best deep gas foothills discoveries in Alberta during the last ten years and may contain up to 1 TCF of natural gas, approximately two-thirds of which should lie under Canadian 88 land should a well currently being drilled by a competitor north of our recent discovery prove productive. We are confident we have proved up from between 300 to 500 bcf under our 90 percent W.I. holdings and full field development should occur expeditiously in the new year with six wells onstream adding deliverability of upwards of 70 mmcf per day by the end of the second quarter of 1998. Two rigs are operating on the prospect including a well drilling at 12-32-6-2 W5M on our $3.25
million sale parcel which should reach total depth within the next 30 days. During the last two weeks our engineering group led by Mr. Robin Gill, who recently joined us from Amoco as Operations Manager, completed an Alberta Energy and Utilities Board regulatory hearing into our Waterton pipeline application and we are poised to immediately commence pipeline construction on this important project the instant regulatory approval is granted.
At Olds/Crossfield, one of the best deep gas development projects in Western Canada, we have approximately 20 mmcf per day of shut-in natural gas production awaiting expansion of our 100 percent-owned sour gas processing facility. 400 square miles of 3-D seismic data covering our 140 100 percent-owned Canadian 88 sections of land in this area has identified several years of quality drilling prospects not to mention the primary Wabamun target with reserves averaging 10 to 15 bcf per section. Three rigs remain active in the area and our gas plant expansion application has been set down for an Alberta Energy and Utilities Board hearing on January 13, 1998. Given the magnitude of our reserves in this area we have been cautious as to not proceed forward too hastily with custom processing options and risk long-term shareholder value.
In addition, in West Central Alberta, two 100 percent Willesden Green Ostracod gas tests at 10-26-26-8 W5M and 3-5-39-6 W5M have been completed and are currently being brought onstream. Both of these wells were drilled as part of a large multi-well drilling program currently underway in the area. At Little Bow in Southern Alberta, a follow-up well at 9-16-14-18 W4M is currently being tied-in and should be on production in December at 200 barrels per day of oil. The initial discovery well at 16-16-14-18 W4M is currently on production at 230 barrels per day of clean oil. Several follow-up locations will be drilled over the next few months.
With the above-mentioned and other exciting exploration and development projects at hand, the Management and Staff of Canadian 88 are committed to moving forward and growing the Company into a major oil and gas producer during the upcoming months and years to come. We have developed the "Canadian 88 Advantage" with growth through the drillbit. The Company has grown ten-fold over the past five years in terms of production, reserves, earnings, cashflow and most importantly, returns to shareholders. As the largest shareholder of the Company, Management is now focused on striving to double or triple value over the upcoming months. We have the high-quality assets to facilitate this growth and we look forward to the future.
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