MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, DECEMBER 9, 1997 (3)
OIL & GAS
Crude-oil and petroleum-product futures finished lower on the New York Mercantile Exchange, with no news to break January crude out of the narrow trading range it's been in since last Monday.
January light sweet crude oil finished down $0.17 to settle at $18.67.
News that Shell Nigeria was forced to close two of its flow stations on Nov. 25 was mildly supportive to crude. Around 80,000 barrels a day of oil have been affected, which to date adds up to a loss of around 1.1 million barrels of oil.
January natural gas closed up $0.104 to settle at $2.526.
US Foreign Crude - W Africa Grades Pressure Sweets
The imminent arrival of West African crudes to the U.S. Gulf looked set to pressure rival Colombian sweet grades on Tuesday, despite a persistently narrow Brent/WTI spread, traders said.
Nigerian Qua Iboe for January 1-5 and 10-15 arrival were on offer at Dated Brent plus $1.70, while Forcados was offered at Dated plus $1.90.
"This stuff is loaded on to VLCCs (Very Large Crude Carriers)...it has to come over. It will get sold eventually," said one trader for a Gulf Coast refinery.
The premium for WTI over Brent widened marginally on Tuesday to around 75 cents, still far below the spread typically required for the transatlantic arbitrage to work.
Traders said they expected differentials for the Nigerian grades to come off before any deals would be done. Dated Brent for mid-January delivery was also being shown at Feb WTI plus 20 cents but little interest was shown.
A Colombian Cusiana cargo loading January 6-10 was heard offered at February WTI minus 45 to 50 cents, the same level achieved in an Ecopetrol tender for another January cargo on Friday.
Some some traders expected the next traded level to be weaker.
"The freights are rebounding a bit, I think the market (for Cusiana) has to come off by about five to 10 cents ... There's no real reason to be bullish," said one player.
Pipeline exports of Colombia's Cao Limn crude had not resumed on Tuesday following a rebel bomb attack on the line on Monday, and production at the field was cut to 50,000 barrel per day (bpd) from normal levels of 175,000 to 180,000 bpd.
Repair work to the ruptured pipeline was expected to be completed by Wednesday morning, said a source at field operator Occidental Petroleum.
Elsewhere in Latin America, Argentine crudes were actively discussed. A tender for three January-loading cargoes of Medanito was awarded at February WTI minus $1.75. The cargoes are each for 380,000 barrel, with one loading in each decade of the month.
An Argentine Canadon Seco, loading around mid-January was on offer at WTI minus $2.50, traders said.
INDEXES
The Toronto Stock Exchange 300 Index fell 0.3% or 20.72 to 6766.99.
In comparison, the Oil & Composite Index fell 0.7% or 48.72 to 6887.12. The Integerated Oil's gave up some of Monday's large gain, falling 1.5% or 141.04 to 9072.63. The Oil & Gas Producers fell 0.1% or 6.43 to 6099.12. The Oil & Gas Services lost 2.6% or 90.10 to 3316.29.
MOST ACTIVE ISSUES
Poco Petroleums, Petro-Canada, Talisman Energy, Baytex Energy, Anderson Exploration, Northstar Energy, Norcen Energy Resources, Carmanah Resources, Gulf Canada Resources, Canadian Natural Resources, Richland Petroleum and Rio Alto Exploration were amonf the top 50 most active issues on the TSE.
Over on the ASE, Red Sea Oil, Wildhorse Resources, Fox Energy, Ascot Energy Resources, Stampede Oils and Oxbvow Exploration were among the top 30 most active issues.
HOT STOCKS
IPL Energy Inc. (IPL/TSE), up 20› to $62.50, on volume of 48,996 shares. International Pipeline, the main artery that carries Canadian crude to the U.S. Midwest, continues to operate at capacity.
IPSCO Inc. (IPS/TSE), up $3.50 to $60.50, on volume of 17,353 shares. The Regina-based company said Monday that it will split its shares on a three-for-two basis and that it will boost its dividend by 56%.
Genoil Inc. shares(GNOL/CDN) closed yesterday at $0.16, up $0.01. The shares traded at $3.90, a 52-week high, on Feb. 7. Lawyers for Genoil Inc., one of the companies directly affected by the financial crisis at St. GeneviŠve Resources Ltd., abruptly quit working for the company yesterday. The resignation was one sign among others that Genoil, after suffering an unauthorized withdrawal of US$5 million from its bank account by St. GeneviŠve, is leaning toward letting St. GeneviŠve decide how to set matters straight. Genoil now has the same lawyer who represents St. GeneviŠve and another affiliate which had money taken from it without its knowledge. Two of Genoil's four directors also walked away yesterday. Genoil's former lawyers, from the firm McCarthy T‚trault, disassociated themselves from the company yesterday morning during a meeting of its board. The oil and gas exploration firm is part of the St. GeneviŠve family of companies recently thrown into turmoil by a cash shortage. Genoil and two other affiliates - Emerging Africa Gold Inc. and Icelandic Gold Corp. - had money taken from their accounts without the knowledge or approval of their boards. St. GeneviŠve has filed for creditor protection and proposed a series of restructurings and asset sales. It has raised the possibility of selling its stake in Genoil or including the company in a merger of the group's different members. One of the remaining Genoil directors is Pierre Gauthier, the executive at the centre of the St. GeneviŠve group and its current woes. Gauthier is chairman of St. GeneviŠve and also sits on the board of each of the companies that suffered unapproved withdrawals. Richard Wilson, a lawyer in McCarthy T‚trault's Calgary office, would not discuss the law firm's specific reasons for quitting St. GeneviŠve. "We had a difference of opinion with the board," he said. Until yesterday, Wilson had been Genoil's spokesman and was at times sharply critical of St. GeneviŠve. The statement released by Genoil suggests the company may soon consider some form of after-the-fact endorsement of the withdrawal. Genoil will soon hold a special meeting of shareholders, who will be asked to consider a "ratification" of the unauthorized withdrawal, as well as the election of a new board of directors. St. GeneviŠve owns 35.6% of Genoil shares. In a release issued last Friday, the companies blamed a Russian gold development for the unauthorized
withdrawals. KWG was under pressure to have enough equipment on a mine site at the Ametistovoe gold deposit by Dec. 31, 1997, to mine 200,000 tonnes of ore a year. But it fell behind in the commitment and, with the price of gold plummeting during the late summer and fall, could not raise money from outside sources, it said. The money was borrowed in hopes the gold price would reverse its decline. As of Nov. 30, St. GeneviŠve owed $5.2 million to Genoil, $15.3 million to Emerging Africa and 4400,000 to Icelandic.
US NOTES
Oil-drilling and -services stocks suffered some retrenchment after Monday's big gains. Among the highlights: Smith International (SII) closed down 1 1/4 to 71; Schlumberger (SLB) fell 2 to 85 1/2; Noble Drilling (NE) lost 1 1/8 to 32 9/16; and Camco (CAM) closed down 2 1/2 to 63 3/4.
TOP 20 - SPEC 12 - SERV 7 NEWS
Petro-Canada Spending Third Of 1998 Budget In Western Canada
Petro-Canada's directors have approved a capital budget of $1.13 bil- lion for 1998, with one-third going to conventional exploration and development activities in Western Canada.
Of the $375 million to be invested in conventional oil and gas properties, about $125 million will be allocated to exploration and $250 million to development. Most of the money will go to growing the company's gas portfolio in Alberta and northeastern British Columbia at sites such as Tommy Lakes.
Petro-Canada expects to drill 300 wells in Western Canada in 1998.
Last December, the company set its 1997 capital budget at $950 mil- lion, although it boosted spending during the summer to $1.15 billion on the strength of first half gains
"For Western Canada, the (conventional oil and gas) figure we had boosted it to was a total of $380 million of which $125 million was for exploration," said spokesman John Skelton. "So it's virtually the same in terms of development."
In 1998, Petro-Canada will invest about $300 million in the continued development and exploration of assets offshore Newfoundland. The company will spend approximately $250 million on the development of the Hibernia and Terra Nova fields.
It will continue acquiring and processing seismic data and drilling on other Grand Banks fields. Capital investment for the Terra Nova development is conditional on final approval by regulatory authorities and sanction by project owners.
Nine wells will be drilled at Hibernia in 1998 and three-dimensional seismic willbe shot on both the Riverhead Block and the recently acquired oil and gas exploration parcels in the Jeanne d'Arc Basin.
Petro-Canada said its vision for the Grand Banks is to bring a major new oil field on-stream every two to three years.
The capital budget for the East Coast is less than last year's $335 million, Skelton stated.
"Hibernia expenditures were much higher in 1997 than they will be in 1998," he noted. An additional $100 million of capitalized lease obligations, related to a Hibernia tanker, was added to Petro-Canada's accounts in 1997.
"Keep in mind, Hibernia through much of 1997 was still in the develop- ment phase and so the capital expenditures were going for the finishing of the production platform and the capitalized lease for the tanker," Skelton explained. "For '98, the expenditures related to Hibernia are primarily drilling."
The company will also invest about $95 million in Syncrude Canada Ltd.
Around $280 million will be invested in the refining and marketing segments of the integrated firm -- primarily to enhance the efficiency and profitability of the company's three refineries and lubricants facility. Downstream expenditures will include $25 million to expand the cat cracker and boost production at the Montreal refinery.
The company will also invest $35 million in business systems and pro- cess improvements next year.
IN THE NEWS
Northern Exposure
Calgary Sun
A lot of things have changed in Canada's north in the last 25 years. Some important things haven't. Yesterday, Stephen Kakfwi, the Minister of Resources, Wild-life and Economic Development for the Northwest Territories was here in Calgary to promote oil and gas exploration in his jurisdiction.
Kakfwi was among the speakers at the Northwest Territories Petroleum Show at the Metropolitan Centre, part of a four day effort to promote oil and gas development and mining in the north.
"There's a lot of interest from industry and increasing awareness of the north again, something that we lost back in the '70s," said Kakfwi.
Twenty-five years ago, Kakfwi was among the north's Native leaders who were battlinggrandiose plans by two groups to build the Mackenzie Valley Pipeline.
One proposal, the Arctic Gas Pipeline, stretching 3,860 kms, would have been the world's largest construction project -- ever. The two groups included some well-known firms, including Exxon -- the parent of Imperial Oil Ltd. -- Gulf, Shell, TransCanada PipeLines, Nova Corp. and Westcoast Energy.
"In '74-'75-'76, I was one of the principal organizers fighting against the Mackenzie Valley Pipeline, and I was mostly interested in getting recognition of the rights of aboriginal people," Kakfwi recalled.
"Most of that has been achieved and resolved; clarified with the federal government," he noted.
But along with the recognition of aboriginal rights, the Mackenzie Pipeline debate also produced a moratorium on exploration permits from 1977 to 1994, so it may to some degree have been a hollow victory.
"We also have no capacity whatsoever to seize opportunities," Kakfwi said bluntly. That's one of the reasons Kakfwi and NWT deputy Premier Goo Arlooktoo are here -- to invite the oilpatchnorth once again.
"We're trying to be pro-active and let people know that we think it's a good time, it's becoming increasingly economical to get back into exploration and production."
Kakfwi notes that most northern Native land claims have been settled and that northern communities have developed the social and administrative infrastructure to deal with development.
But perhaps more importantly, the north desperately needs the jobs oil and gas and mining could provide.
"Economically, it was easy for us to oppose the pipeline, since most of our people were trappers and hunters and they had no need for government or industry at the time.
"Now, increasingly, more and more of our young people are looking for jobs, and are less and less able to rely on trapping."
There are a few companies involved in the NWT, including Imperial, Amoco Canada, Paramount Resources Ltd. and Canadian 88 Energy Corp., but there's room for lots more, he said.
Kakfwi argued toll changes to an Imperial pipeline between Norman Wells and Zama, expected to be announced soon, combined with excess capacity on that line may spur activity in the Sahtu area.
One thing that hasn't changed in the north is an intense dislike of Ottawa and a meddlesome federal bureaucracy.
"The federal government is still handling us like a colony. They handle all oil and gas, minerals, all environmental hearings, exploration and licensing," said Kakfwi, who conceded it's frustrating.
"It's our land, it's our resources and we're there."
Controversal Drilling A Go
Calgary Sun
A Calgary company said yesterday it intends to start a controversial plan to drill for oil under Wabamun Lake next month. Maxwell Oil and Gas Ltd. president Gordon Dolph said yesterday his company is to drill the well 350 metres from the south shoreline of the lake, 50 km west of Edmonton.
Maxwell is to drill 1.6 km down before turning horizontally under the lake, which is about 12 metres at its deepest. The plan was approved last month by the Alberta Energy and Utilities Board.
However, the company says there is no guarantee of striking oil.
"We're obviously pleased with the EUB's decision, as it permits Maxwell the opportunity to explore and exploit an interpreted oil accumulation underlying Wabamun Lake," said Eric Stein, vice-president of exploration for Maxwell.
He said the company only has data of the lake from a seismic line that was charged as a demonstration, and geological information from dry land surrounding the lake.
Dolph said the company expects production of about 200 barrels of oil per day from the field beneath the lake.
The well is to be situated near the summer villages of Seba Beach and Betula Beach.
The Lake Wabamun Enhancement and Protection Association, a group of residents, argued against the development during an EUB hearing but failed to sway the board.
"(We) wish to reassure residents that the company will, as always, be extremely diligent in meeting all regulatory requirements associated with the drilling," Stein added. |
