MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING MONDAY DECEMBER 15, 1997 (3)
OIL & GAS
Futures barely moved Monday on the New York Mercantile Exchange, as a visit to Baghdad by Richard Butler, the United Nations' chief weapons inspector, produced little unexpected news.
January crude oil slipped 4 cents to $18.17 a barrel. January unleaded gasoline added 0.24 cent to 54.84 cents a gallon; January heating oil fell 0.31 cent to 51.51 cents a gallon.
NYMEX Hub natgas futures ended lower across the board Monday in a lackluster session, pressured all day by a soft physical market and forecasts this week for fairly mild weather, market sources said.
January slipped five cents to close at $2.307 per million British thermal units. February settled 4.6 cents lower at $2.273. Other months ended down by 0.3 to 3.4 cents.
"There's no (cold) weather. It still looks pretty bearish," said one East Coast trader, noting cash seemed out of balance and was likely to stay that way near term with mild weather and the typically-soft holiday demand period ahead.
Forecasts this week call for normal to above-normal temperatures across most of the nation. A cold front moving across the U.S. later this week is expected to push temperatures back to more seasonal levels by the weekend.
Technical support in January was still pegged at $2.25, which is the low for January this year, with more buying likely around $2.14 and then at $2.05. Resistance was still seen at last Thursday's high of $2.38, with further selling expected in the high-$2.50s and low-$2.60s and then at the $2.81 double top from early December.
In the cash Monday, Gulf Coast prices slipped about a nickel to the low-$2.20s. Midcon pipes were down more than five cents to about $2.10. Chicago city gate fell about a dime to the low-$2.20s, while New York was about 10 cents lower in the low-$2.70s.
The NYMEX Henry Hub 12-month strip fell 2.1 cents to $2.237. NYMEX said an estimated 28,054 Hub contracts traded, down slightly from Friday's revised tally of 28,726.
TOP 20 - SPEC 12 - SERV 7 COMPANIES IN THE NEWS
GULFSTREAM RESOURCES CANADA LTD (GUR/TSE) announced that it is paying a dividend on common shares following a regularly scheduled Board of Directors meeting last Friday. The Corporation has declared a dividend of $0.02 per common share, payable on December 31, 1997 to the shareholders of record at the close of business on December 19, 1997.
MASTER DOWNHOLE CANADA INC. (MDH.A/ASE) has been approved as a
supplier by the engineering department of a large foreign oil company. The Company will be negotiating the payment terms of an $ 8,000,000.00 contract in January 1998. It is expected that production on the contract will begin in late January 1998, with the majority of the contract delivered prior to the May
KERM'S WATCHLIST
PRECISON DRILLING released their six months report yesterday and reflected impressive growth. The combination of the various acquisitions in the Oilfield Services business have generated a dramatic impact upon the financial performance of Precision Drilling Corporation.
Six month revenue was $478,820 compared to $183,757 compared to the same period last year. second quarter revenue was $255,433 compared to $108,814 last year.
Fully diluted earnings per share for the six month period was $1.25 compared to $0.59 last year. Second quarter earnings amounted to $0.70 versus $0.34 last year.
Effective September 30, 1997, the Corporation split its common shares on a two for one basis and all per share amounts have been stated given effect to the split.
The Corporation remains optimistic on the long-term industry fundamentals including the need for heavy oil development for the future. No other comments were made in their press release.
SYMMETRY RESOURCES INC. announced the following management appointments: Mr. Paul Jackson, P.Geoph, Manager, Geophysics ; Mr. John M.A. van Schyndel - P.Eng., Manager, Production; Mr.Roman Pachovsky, P.Eng., Manager, Engineering; Ms. Audrey Abdallah, Manager, Accounting.
I view this as a very positive move by the company. Beefing up the staff to bring in-house capabilities to a higher level is a positive sign for the company's future growth. The company is establishing strengths to begin controlling their own destiny.
TORRINGTON RESOURCES LTD. (TRN/TSE) and Lodestar Energy Inc. (LEI.A/ASE) jointly announce that they have entered into an agreement whereby Torrington will acquire Lodestar pursuant to an amalgamation. Lodestar shareholders will receive $1.15 cash for each Lodestar Class A Share held and 0.4 of a Torrington common share for each Lodestar Class B Share held. Torrington shares will not be affected. Torrington shares will not be affected.
Lodestar and Torrington each have a 50 percent interest in a farmin from Talisman Energy Inc. on approximately 122,000 net acres in the Edson area of west central Alberta.
TRI LINK RESOURCES ( TLR) announced that it has terminated its previously announced plan to reorganize the company. Mr. Gary Burns, Tri Link's President and Chief Executive Officer, said, ''This decision is in the best interests of our shareholders and reflects several developments since we announced this initiative six weeks ago. The recent weakness of oil and gas prices, together with the general market uncertainties of the past month, made it impossible for us to generate what we believed to be appropriate value for the properties in question. In addition, we have made a number of significant new discoveries, or upgraded our expectations from previous discoveries, on a number of the properties we had intended to offer for sale. These assets command a significant premium and we were unwilling to trade that away.
''During the past six weeks the comapny has made a number of new discoveries at Hazelwood and other projects. The company has conducted large 3-D seismic programs at Hazelwood, Manitoba and Seal projects. tri Link has continued to grow production. The company has prepared exploration and development drilling programs for the coming year. Mr. Burns added, ''Our budget for the coming year is approximately $120 million, about two-thirds of which will be directed to our Hazelwood project and allocated between the Tilston pools and the deeper Red River play underlying Tri Link's land position. The balance of next year's budget will be directed towards our exploration and development activities in our Seal Gas project plus our Seal and Manitoba light gravity oil projects. Tri Link controls more than 700,000 acres of land in the provinces of Alberta, Manitoba and Saskatchewan. Its largest asset, the Hazelwood Project Area, is one of the largest contiguous land positions held by any energy company in southeast Saskatchewan.
FEATURE STORIES
Orbit Oil & Gas Appeals To Holders
As anticipated, takeover target Orbit Oil and Gas Ltd. has asked shareholders to reject a $97-million bid by rival Sunoma Energy Corp. and wait for a white knight with deeper pockets to ride into town. Orbit's board of directors asked shareholders yesterday to turn down Sunoma's $1.70 per share bid, claiming the evidence proves it's worth as much as $2.50 a share.
Kind of make's me wonder what management was doing for shareholders before Sunoma's offer. Since that time, shares in the company will have doubled if the company gets the $2.50 it is looking for. It simply looks to me that present people behind the company don't want to lose control of a good thing. On the surface, a white knight bid at $2.50/share sounds like a good amount of premium is built into the asking price. With current poor market conditions, I don't expect too many companies are running to the boardroom table.
Armed with an independent report showing its natural gas reserves have grown by 11% over last year and its oil reserves by 25%, firebrand president Bob Lamond said the report proves Sunoma's bid was drastically undervalued. The company didn't mention what impact the new findings had on a "net asset value."
The evaluation, conducted by Fekete and Associates, shows the company has proven and probable reserves of 122.8 billion cu. ft. of natural gas and 3.1 million barrels of oil and gas liquids.
Sunoma has asked for Orbit to waive a shareholders' rights plan giving it 60 days to consider its bid and search for another suitor. It has given shareholders a total of 41 days to consider the offer.
Industry Racks Up 508 Licences For Week
Licence totals for Dec. 8-12 were down slightly for the second week in a row, but the number of exploratory wells continued to climb.
Licences were issued for 508 wells including 13 new field wildcats, up one from the previous week. In the week of Dec. 1-5, some 529 well applications secured regulatory approval. Of last week's new field gambles, eight were found in Alberta, four in Saskatchewan and one in Manitoba.
Renaissance Energy Ltd. at 53 topped the list for most licences. Its tally included two new field wildcats, one each in Saskatchewan and Manitoba, and 12 new pool wildcats in Alberta.
In Manitoba, Renaissance planned to drill 613 metres into the Devonian zone with a new field wildcat at 7-23-16-29 W1M in the St. Lazare area. The Belly River zone was the target of its Saskatchewan exploratory play at 14-28-9-22-W3M. The Carnagh-area hole had a projected depth of 549 metres.
Wascana Energy Inc. received approval for 39 wells, including one new field and 18 new pool wildcats. Located at 5-28-8-32 W1M in the Mair South area of Saskatchewan, the new field prospect was set to terminate at 1 270 metres in the Duperow formation.
The lone licence issued to Calibre Energy Inc. was for a 2780-metre new field effort at 6-14-7-13 W2M in the Weyburn area of Saskatchewan. The play was scheduled to bottom in the Precambrian zone.
Also targeting Saskatchewan for rank drilling was Crestar Energy Inc. It picked 10-14-28-24 W3M in the Fairmont area for its exploratory test, planned to go down 952 metres and terminate in the Torquay zone.
Northwestern Alberta was pegged for several new field wildcat licences. Elk Point Resources Inc. received permission for a well at 6-34-81-9 W6M in the Mulligan area aimed for a 2 092-metre trek to terminate in the Debolt formation. Husky Oil Operations Ltd. projected the terminating zone as the Shunda formation for its 1 930-metre effort at 8-30-75-1 W6M, situated in the Smokey North region. Rigel Oil & Gas Ltd. listed the Muskeg zone as the end point for its 2 170-metre its play at 10-32-101-7 W6M at Mega.
Esker Resources Ltd. was another firm whose single licence for the week was an exploratory target. Its new field wildcat, located at 3-27-9-13 W4M in the Cherry area of southeastern Alberta, aimed at going 976 metres and finishing in the Mississippian zone.
Paragon Petroleum Corporation's 9-29-65-15 W5M new field wildcat at Meekwap in Alberta was listed with a depth of 1 655 metres to the Fernie zone. Petro-Canada's new field gamble with 10-9-58-11 W5M at Blueridge pegged the Banff zone as the goal for a 1890-metre effort.
Poco Petroleums Ltd. picked the Garrington East area of west-central Alberta as the site for an exploratory probe at 3-15-33-3 W5M. It was slated to terminate in the Rock Creek formation at a depth of 2 440 metres.
Pan East Petroleum Corp. had the deepest well of the week with its new field wildcat at 7-7-53-26 W5M. The hole, sited at Gregg Lake, carried a projected depth of 5 450 metres and listed the Cambrian zone as the terminating horizon
Oilpatch Slips On Way To Market
Tri Link Resources, Alberta Oil & Gas Cancel Sales As Stock Prices Drop
By Claudia Cattaneo - Calgary Bureau Chief The Financial Post
Blaming poor market conditions, Tri Link Resources Ltd. yesterday scrapped a major corporate reorganization that included the planned sale of assets valued at $500 million.
President Gary Burns said market conditions have deteriorated to the point it would have been impossible for the intermediate oil and gas producer to realize the value it had hoped for only six weeks ago.
"When your peer group's corporate values are going down, it makes the purchase seem more and more expensive all the time because of their value relative to yours," he said.
The company also made significant discoveries in the past few weeks, rendering the reorganization and planned asset sale less attractive, he said.
The Toronto Stock Exchange oil and gas index closed yesterday at 6465.20, off 119.62 points from Friday.
The market decline is expected to adversely affect many more industry participants - by making it more difficult to raise equity to fund growth, or by depressing share prices to levels where weaker companies become takeover targets.
Alberta Oil & Gas Petroleum Corp. also blamed poor market conditions for the cancellation of a $10-million to $15-million equity offering announced last month.
"The prospect of having a successful equity issue was remote, regardless of price," chief operating officer Brent Gough said yesterday. "And we didn't want to just give the shares away."
The junior oil company is looking at other financing options like flow-through shares, a private placement, or living within its cash flow.
"The industry, I believe, is into a down cycle this year," said Burns.
"It's [because] of the outlook for both oil and gas prices. The industry has been overheated too long. The cost side has been too high for too long and when you have got flat commodity prices, or dropping, investors move capital to other sectors."
Bob Hinckley, oil and gas analyst with Merrill Lynch in New York, said: "The pressures are coming mainly from the supply side, as always. We think oil prices are going to be lower, mainly because of oversupply."
Under the reorganization plan, Tri Link was to put up for sale most of its oil and gas assets, valued at $500 million to $600 million.
The company's large Hazelwood, Sask., project, representing about 80% of its production and reserve base, was to be rolled into a new entity to be sold to other exploration and production companies in Canada and the U.S.
The remaining assets were to be captured into a new exploration and production company, X-EN Resources Ltd., whose mandate was to concentrate on earlier-stage exploration and development of major properties in Alberta, Saskatchewan and Manitoba.
"Things started to change halfway through the process," Burns said. "The industry had expressed interest in looking, but we knew the middle ground was not going to be satisfactory. So, ultimately, we didn't let anyone in the data room.
"The most common comment was: 'It's too expensive.' "
A major reason the company decided to try to sell the Hazelwood project was because of the large amount of capital required to fully develop it.
The company now plans to take on some debt and move forward on all fronts, Burns said.
Tri Link has budgeted $120 million in capital expenditures for next year, the same as this year.
Its shares (TLR/TSE) closed down $1.75 yesterday at $22.25. Alberta Oil & Gas shares (AOC/ASE) closed up 10› at $1.
|
