MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, JANUARY 20, 1998 (7)
TELFORD RESOURCES (TLF) reports that it has concluded its first phase of due diligence on the various companies contained in its November 20, 1997 press release. This process included reviews of company assets and performance together with consultations with investment industry analysts. As a result of these investigations, Telford has decided to proceed on the acquisition of companies which are already operating and are synergetic. Telford will not be proceeding with "conceptual" or "startup" situations because they are not currently operating and would therefore be dilutive at the share issue price of $0.50 per share.
Therefore, Telford will not proceed at this time with the following companies that were included in the November 20, 1998 release: Oil Resources Ltd., Top Gun Wireline and Broden Trucking. Telford may review these opportunities at a later date on a cash basis, or at higher share issue prices.
Telford will proceed with the following acquisitions on the terms previously disclosed:
Dominion Rathole Drilling Ltd:
Providing rathole drilling services in NE British Columbia and Northern Alberta from an established base in Fort St. John, B.C. and now throughout Alberta from its new base at Sylvan Lake, Alberta.
Alta Flights (Charters) Inc:
Providing personal transportation services throughout Western Canada from established bases at the Edmonton and Calgary International Airports.
T.T.S. Industries (1993) Inc.:
Offering lease construction and cleanup, trucking, environmental services and recently, pipeline construction by virtue of its newly established pipeliningb division, all from its established base at Sylvan Lake, Alberta.
Weir Construction Ltd:
Offering lease construction, clean up and reclamation and related environmental services from an established based in Medicine Hat, Alberta.
Hat Bit Supply Ltd:
Supplying the drilling industry with new and reconditioned drilling bits and related supplies from established bases throughout Alberta and SE Saskatchewan.
Dy-Drill Inc:
Providing coring services throughout the Western Canada oilpatch and more recently, overseas by virtue of its newly formed international operations division which is currently operating in Kazakhstan.
3 Drilling Ltd:
An oversight in the November 20, 1998 press release resulted in the omission of the details of the acquisition of the shares of 3 Drilling:
The letter of intent with 3 Drilling contemplates the purchase by Telford of 100% of the outstanding shares of 3 Drilling for the sum of $900,000, payable by the issuance of cash and shares to the shareholders of 3 Drilling. Those shareholders may, at their option, elect to receive up to $500,000 in cash, with the balance to be paid by the issuance of common shares of Telford at a deemed price of $0.50 per share. For each common share received by the 3 Drilling shareholders, they will also receive one half share purchase warrant. One warrant will entitle those shareholders to purchase one additional common share of Telford at a price of $1.00 for a period of one (1) year from the date of closing.
3 Drilling operates five "specialty" drilling rigs, three of which are seismic/mining test hole rigs and two of which have been equipped for thedrilling and casing of surface holes prior to the moving on of conventional drilling equipment. The latter two rigs yield savings to oil and gas operators for several reasons, including the following:
1. the rigs are self-moving, and are operated by two man crews;
2. they provide the ability to run and cement surface pipe, resulting in the saving of "big rig" waiting on cement time;
3. their ability to "feel out" surface drilling problems can avoid substantial rig time expenses associated with typical surface hole problems, those being lost circulation, gravel and boulders, washouts, etc.
The market for providing surface hole drilling is in its infancy. Management feels that the opportunities for growth in this part of the industry will exist for quite some time to come.
Consolidation Strategy
The acquisition of these companies is the first step of Telford's consolidation strategy. At closing, expected to occur in April, 1998, Telford will have established operating bases in Ft. St. John B.C., Sylvan Lake and Medicine Hat. The Sylvan Lake and Ft. St. John bases will enable Telford to service foothills natural gas exploration together with Northern Alberta/B.C. natural gas and oil exploration which management feels will comprise a significant percentage of future exploration growth. This first step includes being able to offer each of the company's many services from each of its operating bases. Phase two of Telford's consolidation strategy will occur after closing, and involves acquiring similar/complimentary companies into each of these operating bases.
Conditions
Closing of these transactions remains subject to fulfilling the previously disclosed conditions, including The Alberta Stock Exchange approval, and includes that certain revisions to the purchase price(s) may be made after completion of due diligence reviews.
As previously disclosed, all of the principals of each of the companies described above will continue in their current capacities, and have consented to voluntary 3 year escrow of the common shares of Telford that they will receive.
INTERNATIONAL COMPANIES
SANDS PETROLEUM AB has, through its 95.5 percent owned subsidiary International Petroleum Corporation ("IPC"), been awarded three exploration blocks onshore Albania. The agreements were signed with the Albanian government in Tirana on Monday, January 19th.
Blocks 2, 3 and A were awarded to a consortium comprising IPC who have a 20 percent interest, Occidental International Exploration and Production Company ("Oxy") with 50 percent and Anschutz Albania ("Anschutz") with a 30 percent interest. Oxy will act as operator for the group.
The blocks are located within and on trend with the proven petroleum system in Albania where an estimated 1 billion barrels of recoverable reserves have been discovered. Most of the existing oilfields in Albania are located within the boundaries of Blocks 2 and 3. The current producing area of these fields have been excluded from the permits, however, rights to deeper exploration objectives below these fields are included. The primary exploration target will be sub-thrust fractured carbonate reservoirs similar to those recently discovered in the southern Appenines of Italy (including Monte Alpi field with an estimated 1 to 2 billion barrels of recoverable reserves). Several large leads have been identified on existing seismic and landsat images.
Work commitments in the primary 3 year exploration phase are 650 kilometers of 2D seismic and the drilling of two exploration wells. During 1998 an initial 150 km seismic program including the extensive testing of specialized acquisition and processing techniques will be undertaken to address the primary technical risk which is the seismic imaging of sub-thrust structural prospects. Acquisition of the remainder of the seismic program and commencement of the drilling program are planned for 1999.
COUNTRIES IN THE NEWS
IRAN
Iran will invite bids for 11 oil and gas projects in the Iranian calendar year from 21 March, Ali Hashemi, deputy minister for production affairs at Iran's petroleum ministry said in an interview with the OPEC news agency, OPECNA published on Tuesday.
Hashemi said in the interview, monitored in London, that most of these would involve onshore projects.
The offer appeared to be a repeat of Iran's move in 1995 to offer 11 oil and gas projects on a buy back basis. These were offered after it secured a ground breaking $600 million deal with French oil firm Total SA (NYSE:TOT - TOTF.PA) to develop the offshore Sirri A and E oil and gas fields.
Under the buyback scheme the foreign investor recoups his capital and returns by receiving some of the projects' output.
The Total deal went ahead despite U.S. threat to sanction foreign firms investing more than $20 million in Iran.
Iran has set aide $5.4 billion for oil, gas and petrochemical projects under a budget for the next Iranian year.
Iran is aiming to boost oil production from its aging on-shore fields, which account for most of its output, but which have suffered from a lack of hard currency investment.
A senior Iranian economist recently predicted the country would have to invest $90 billion over the next 10 years to stave off a decline in production.
Hashemi said in the interview that among the most important aims of his division were enhancing the country's oil and gas production capacity, and promoting cooperation with Caspian sea littoral states, to optimize production from fields that are jointly held.
Gas injection programmes to maintain production level at oilfields was a main priority, he said, adding that water was also being injected in many of the offshore reservoirs.
Some 3,000 million cu. ft of gas is being injected daily and this is forecast to reach about 6,000 cu. ft per day in the future.
Regarding the development of the South Pars field, which is connected to Qatar's North Dome field forming, the deputy minister said a joint technical committee had been set up and is expected to be actively involved in the implementation of the South pars project.
COLUMBIA
Last year's record number of rebel bomb attacks on Colombia's Cao Limn oil export pipeline cost partners in the field around six million barrels of lost crude production and the attacks have been increasing in number and ferocity in the past few weeks.
Already in 1998, the line has been dynamited five times by rebels, including two back-to-back attacks, causing ruptures on four occasions. The latest attack came on Saturday and severed the line, which was repaired and restarted pumping on Tuesday.
Though the operators usually manage to keep the bombings from disrupting the Cao Limn crude export schedule, the bombings have been hurting production efforts.
''In total, six million barrels was lost by the partners in the field as a result of the attacks on the pipeline,'' a spokesperson for the Colombian division of field operator Occidental Petroleum Corp (OXY - news) said on Tuesday. Output from the field averaged 160,600 barrel per day in 1997, against a target rate of 175,000 barrels per day.
The Cuban-inspired National Liberation Army (ELN), which specializes in attacks on Colombia's key oil infrastructure, blew up the pipeline 66 times in 1997, shutting in around 10 percent of potential crude output.
Around 60 percent of the attacks actually ruptured the 230,000 barrel per day capacity pipeline.
Colombian state oil company Ecopetrol has a 50 percent stake in the field, Anglo-Dutch giant Royal/Dutch Shell (RD.AS) (UK & Ireland: SHEL.L) has 25 percent, and Oxy Colombia holds the remainder, although Spanish oil company Repsol (REP.MC) holds an indirect stake through Oxy's Colombian unit.
On two occasions last year back-to-back blasts on the pipeline forced Occidental and pipeline operator Ecopetrol to declare force majeur on field production and on crude shipments from the export terminal at Coveas.
The Occidental spokesman said that juggling oil in storage capacity has prevented the need for force majeur.
''We try to have maximum empty storage capacity at the field, and Ecopetrol keeps oil in storage at the terminal,'' he said.
He said the possibility of expanding the field's 500,000 barrel storage capacity was currently under discussion.
''Technically we'll do everything possible to not have to shut in capacity,'' said the Oxy spokesman.
Ecopetrol's floating storage unit at Coveas has a capacity of two million barrels, while a 500,000 barrel buffer which the company had stockpiled in the Bahamas was sold off in late November.
Repairs to the pipeline, Colombia's second largest, were completed on Tuesday after an attack on Saturday which halted pumping and forced production to be cut back to 12,000 bpd.
In 1996, the ELN dynamited the pipeline 47 times. Before 1997, the previous record for bombings was in 1994 when the pipeline was bombed 62 times.
EGYPT
An updated Country Analysis Brief on Egypt is now available. To access this report, the World Wide Web address is: eia.doe.gov .
ENERGY TRUSTS
Shiningbank Energy Income Fund today announced five property acquisitions which have closed in the last month or are expected to close in the near future. The acquisitions consist of increased working interests in two previously owned properties together with interests in additional Alberta properties at Penhold, Strachan and Doe Creek. Shiningbank will operate 65 percent of these long life producing properties which are located in and adjacent to its core area of west-central Alberta. In addition, approximately 11,000 net acres of undeveloped land were acquired with these transactions.
The additional interests acquired total $12.6 million and have added 2.3 million barrels of oil equivalent established reserves (proven plus 50 percent probable). Approximately 85 percent of the reserves are natural gas. The acquisitions will add an estimated 475 barrels of oil equivalent per day to production in 1998, an increase of 14 percent over projected 1998 base production levels. The additional reserves replace more than 140 percent of anticipated 1998 production and are expected to increase 1998 net operating income by approximately $3.0 million.
PIPELINES
Canada's National Energy Board said on Tuesday it scheduled a public hearing in April on IPL Energy Inc's [Nasdaq:IPPIF - news] plans to expand its crude oil pipeline system to the U.S. Midwest from Canada.
IPL's Interprovincial Pipe Line Inc has applied to expand its system's export capacity by 160,000 barrels a day at a cost of C$640 million in the first phase of its ''Terrace Expansion Project.''
The proposed expansion, scheduled to be in service in Spetember 1999, includes 619 km of new pipe between Kerrobert, Saskatchewan and Gretna, Manitoba, 30 pumping units, 14 tie-in facilities and related equipment.
The hearing is scheduled for April 15 in Calgary.
MISC.
Anadime Corporation (TSE: AEM) today announced the opening of its Elk Point heavy oil waste processing and disposal facility, effective January 15, 1998.
The Elk Point plant enhances the Anadime plant network and provides heavy oil producers with a local choice for slop oil and produced sand processing and disposal. The two Anadime-MCS three phase slop oil centrifuges give the plant over 250 m3 per day of heavy slop oil processing capacity. The pilot 40 m3 per day sand wash system is presently being commissioned, and following market acceptance of clean produced sand for industrial uses, will be replaced with a larger commercial version later in the year.
''One of the major challenges facing heavy oil producers today is high operating costs associated with costly slop oil processing and sand disposal,'' said Owen Pinnell, CEO of Anadime Corporation. ''The Elk Point plant is now the lowest cost option for heavy slop oil processing, primarily because producers retain most of the reclaimed oil. We also intend to provide the lowest cost option for sand disposal, when the commercial version of our sand wash system becomes operational.''
The plant is now accepting heavy slop oil and sand for processing and disposal and should be at full operating capacity by early February. The Anadime-MCS three phase centrifuges clean heavy oil slop to pipeline specifications of 0.5% BSW. The Anadime sand wash system removes all hydrocarbons and chlorides, allowing the clean sand to be marketed for commercial applications or soil enhancement.
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