MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, JANUARY 20, 1998 (3)
FEATURE STORY
Extending the Downward-Trend
Jan 20, 1998 -- Article provided courtesy of T-Chek Systems LLC
Diesel fuel prices continue to show unseasonably bearish trends off of low cost crude oil, ample product supply and warmer-than-normal weather trends. According to the Department of Energy, distillate supply is more than 16 mmb greater than this time last year; adding to healthy inventories are U.S. refineries operating at more than 97 percent of capacity. With stock levels as high as they are, prices can with stand increases in consumer demand without escalating greatly themselves. Stock builds throughout the Northeast and Midwest are a result of warmer weather and lulls in heating oil demand.
Market fundamentals continue to exhibit bearish sentiment, with no fresh news affecting price direction. Analysts speculate recent tension between Iraq and the United Nations had little to no effect on market prices. NYMEX crude oil persists on trading in the $16.50 bbl range, with considerable support from international markets; near month Brent crude is trading in the $15.50 bbl range. Traders remark bearish fundamentals remain the driving force keeping commodity values down.
NYMEX heating oil contract is supporting a 46.25 cents per gallon bottom and resisting a 46.85 cents per gallon top. An abundance of supply and lack of demand is depressing HEAT values, but traders remain confident contract prices are hard pressed to move any lower. If the market has reached it's bottom, support will dissipate and contract gains could be in sight. Analysts suggest price direction is dependent on cold weather moving into the Northeast. A cold snap would increase demand, put additional pressure on lowly prices and lend relief to wholesalers throughout the world's largest region of heating oil consumers.
The national wholesale average is 49.73 cents per gallon (Source: AXXIS Petroleum, Inc.), down 109 points on the week. Rack prices are surrendering to downward pressure from regional spot markets. The national retail average is down at $1.0931 per gallon, falling an additional 195 points on the week. Truck stop margins are radically low for this time of the year and cannot hold these tight levels very much longer. By default, market conditions and economics will force prices off the floor and release the margin gap between product cost and retail price.
What's the bottom line? Diesel is cheap -- Get it while you can. Prices are likely to ride low on lofty supply levels and extremely mild weather for the near term, but don't wait for prices to go any lower, many think a market correction is on its way. Watch fundamentals (news) and weather trends for diesel price direction in future weeks.
FEATURE STORY
Gounds For Optimism
CenAlta Well Services Inc. Building Rigs At Frenzied Pace
Calgary Sun
Rance Fisher, president and founder of CenAlta Well Services Inc., has repeatedly proven well servicing success is based on risk and innovation.
CenAlta, which is based in Calgary but has the bulk of its operations in Red Deer, is one of the largest service rig operators in North America.
The company has come a long way since Fisher launched the company in 1966, after getting his start in the industry in the 1950s.
Fisher has earned a reputation as an industry supporter through numerous education efforts and philanthropy.
It was Fisher and CenAlta that donated a rig to the Southern Alberta Institute of Technology, which uses it in industry training programs at the school.
But while supporting the industry through a variety efforts, Fisher has guided CenAlta with a wily awareness of trends and a dedication to advancing the art.
Like many operators in the service rig industry, CenAlta has been busy the past few years as drilling levels hit successive annual records.
"We got caught up in the whole frantic situation, (although) I think we're going to see some of that subside," says Fisher. "You can see it reflected in the stock market."
The frenzied pace has demanded expansion and CenAlta is in the midst of constructing 30 new rigs in a program launched early in 1997.
About 15 new rigs have been constructed, pushing CenAlta's fleet to more than 120, which keep the company's 1,100 employees busy.
Part of the construction program includes the installation of new diesel motors, which are both more efficient and less polluting.
The latter consideration is of growing importance to the oil and gas industry, Fisher says.
"I think we have to do that. We have to look out for emission control, and as well, I think it's going to get harder and harder as time goes on to buy parts for the older motors."
CenAlta, which owns a number of affiliates, including Crown Caisson and Toran Power & Equipment, is also in the midst of several construction projects -- two quite significant.
"We've been busting at the seams, so we're building a new shop," Fisher says of the $9 million, 100,000 sq.-ft. facility being built on Sheppard Rd. S.E.
CenAlta is also building a housing facility in Carlyle, Sask., including a new shop, a dormitory, houses and space for mobile homes, all for use by CenAlta employees.
The company has opened offices in Beijing and Houston and is considering one in the Middle East.
FEATURE STORY
Several Completion Records Set In 1997
Thirty per cent more wells than in 1996. A record for oil completions in Canada. Nearly 16,500 completions overall with only 17% reported as dry holes. The second best gas year in Canadian history although oil drilling was the focus. Record completion counts for both Alberta and Saskatchewan.
What a year 1997 was for the Canadian oilpatch!
A total of 16,484 wells were reported to the Daily Oil Bulletin with rig releases and final status for 1997. That compares to 12,689 in the previous record year of 1996 and represents a whopping 40% increase over the 1985 benchmark year when 11,720 wells were completed.
1997's drilling frenzy was dominated by oil exploitation, building on a trend which began in 1995. It brought an all time high for Canadian oil completions - 8,553 wells which is more than four times the number drilled in 1990 at the beginning of the decade. The other two big oil years of the last two decades were 1996 when 6,331 oil wells were drilled and 1985 when 6,901 oil holes drilled.
Although oil dominated, it was not a dominant year of searching for new oil reserves. Of the 8,553 oil wells drilled, 89% were development holes.
Industry's exploration efforts last year were devoted almost equally to oil and gas with 938 oil discoveries and 960 gas discoveries in the Western Canadian Sedimentary Basin.
The peak year for new oil discoveries remains 1985 when industry reported 1,251 new finds while the peak year for gas finds was 1994 when 1,688 discoveries were reported.
It is widely expected that 1998 will bring a renewed focus on natural gas to fill new pipeline expansions while current low levels of oil prices should bring cutbacks in oil-targetted drilling.
Nearly 73% (11,989 wells) of all well completions in Canada last year were drilled in Alberta. Saskatchewan was the next busiest province with 3,903 completions, followed by British Columbia with 467 wells, Manitoba with 107, northern Canada with 10 wells and eastern Canada with eight wells.
Gas Exports Worth $8.7 Billion For Contract Year
Gas exports grew three per cent for the contract year ended Oct. 31 and a jump in prices made the year highly successful for producers.
Revenues from gas exports to U.S. buyers soared 29% for the 12 month period ending in October while volumes climbed 2.9% to 82.1 billion cubic metres (about 2.89 tcf) from 79.82 billion cubic metres the previous year, according to National Energy Board statistics.
The average price for Canadian gas paid by U.S. buyers was $2.79 a gigajoule, up 25% from the previous year's average of $2.23.
As a result of the much higher prices and smaller volume gains, revenues from Canadian exports of gas climbed to $8.7 billion for the contract year from $6.77 billion a year earlier. For the same 12 month period ending in October 1995 revenues from gas exports were only $5.6 billion.
Volumes for the month of October were slightly lower at 6.81 billion cubic metres versus 6.87 billion in October 1996.
For the contract year, sales to California rose nearly 13% to 21.49 billion cubic metres while midwest U.S. sales were flat with the previous year. Sales to the U.S. northeast slumped 2.5% to 18.11 billion cubic metres. California's two main buyers stepped up their purchases with Pacific Interstate Transmission Company raising its take of Canadian gas by 35% to 3.35 billion cubic metres and Pacific Gas & Electric Company buying 6.39 billion cubic metres, up more than five per cent from a year earlier.
The trend is even more apparent on a calendar year basis (January through October 1997); sales to California are up 14% while exports to the U.S. midwest are down nearly two per cent and sales to the northeast are off one per cent.
Lower sales to the northeast may be due partly to an increase in LNG imports by the U.S. which rose by 134% over the first nine months of 1997 to 52.7 bcf and are expected to be at the highest level since 1993, according to the U.S. department of energy.
Moreover, in September Distrigas Corporation received its first shipment of LNG from Australia while in November Duke also received its first Australian LNG shipment at Lake Charles, Louisiana. Prices for LNG imports during the third quarter were between $2 and $2.38 (U.S.) per mmbtu.
Of the top 15 exporters for the year, the largest gains were made by Duke Energy Corporation (up 87% to 2.5 billion cubic metres), Norcen Energy Resources Limited (up 37% to 2.28 billion cubic metres) and IGI Resources (up 49% to 1.28 billion cubic metres).
The largest declines over the 12 month period were recorded by Canwest Gas Supply Inc., down 13% from the previous year, Shell Canada Limited, off 19.5% from a year earlier, and Renaissance Energy Ltd., down 12% from the previous contract year.
For the quarter ended Sept. 30, the U.S. Department of Energy's recently released statistics show gas imports from Canada of 692.6 bcf, down slightly from 694.8 bcf for the quarter ended June 30.
Through the first nine months of 1997 imports of Canadian gas by U.S. buyers rose slightly to 2.135 tcf from 2.133 tcf over the same nine months of 1996.
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