MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, JANUARY 21, 1998 (5)
Trading Strategies
Crude Oil Commentary
The crude oil market remains oversold and appears to be looking for support at current levels in the short term. Prices have made several attempts to move higher but have failed to break up above $17.00. So as we see it, near term support is at $16.25 and resistance is at $17.00 . And while we see a base building, the bearish uncertainty surrounding Asia and growing inventories (mild weather) may cause another push towards lower prices before the market can build a base strong enough to support a move to the upside.
The medium term technical picture remains bearish, with the MACD still pointing downwards (and below zero) and the stochastic indicator in oversold territory. As important, however, is that the charts indicate that good support exists around current price levels (with the next major level of support in the mid-$14s).
The low level of bullish fundamentals, the large number of short positions, combined with the spiralling price charts indicates that the market remains bearish - however, beware, if the shorts start covering their positions, the market will rally faster than we expect.
Natural Gas Commentary
There are still no fundamental reasons to justify much higher natural gas prices in the Gulf Coast region. Weather conditions, which remain key to near term price direction, have yet to provide any support. Last week, NYMEX gas made new lows touching $1.97/MMBtu, before rebounding by over $0.20 by the end of the week.
The medium term outlook also looks bearish. The market is oversold, but none of the indicators point to a major rebound in prices. The near term picture, is a little different - illustrating that natural gas prices could move higher, testing recent highs, before the downtrend continues.
The Alberta gas market has been relatively quiet lately, with prices having stabilized. With the warm weather forecasts, prices are more prone to move lower in the near term. Summer support at $1.35 and winter 1998/99 at $2.05..
KERM'S TOP 21 - SPEC 15 - SERV 9 COMPANIES IN THE NEWS
NORTHROCK RESOURCES continues to accumilate shares of paragon Petroleum in the open market. The company announced that it has purchased, through the facilities of The Toronto Stock Exchange, 96,100 common shares of Paragon Petroleum Corporation for an aggregate purchase price of $0.4 million. The highest price paid was $3.80 per Paragon common share.
The Paragon common shares purchased today, combined with purchases on January 19, 1998 and January 20, 1998 of 1,403,900 common shares, represent 4.8 percent of the outstanding number of Paragon shares. To date, the average price paid for purchases of Paragon common shares by Northrock was $3.79 per share.
KERM'S WATCHLIST OF COMPANIES IN THE NEWS
PETROBANK ENERGY AND RESOURCES LTD. announced that it has signed an agreement with PINNACLE RESOURCES LTD.(TOP-21) whereby Petrobank will fund 75 percent of an initial two well Wabamun exploration program to earn an incremental 25 percent working interest in 44,000 hectares of largely contiguous exploration acreage on its Blood Magrath property. The earning provisions of the agreement also call for Petrobank to fund 75 percent of 72 kilometers of new 2-D seismic which will be gathered over the next few weeks. Currently
Petrobank and Pinnacle share the acreage 25 percent and 75 percent, respectively and Pinnacle operates. Following the earning wells, the exploration rights will be owned on a 50/50 basis. Petrobank will also have the right to operate exploration and development prospects it brings forward.
NQL DRILLING TOOLS INC. reported First Quarter Results for the three months ended November 30, 1997
Gross Revenues grew by 53 percent to $15.8 from $10.3 million in the corresponding period the previous year. Similarly, Net Income improved by 158 percent to $3.4 million ($0.24 per share) from $1.3 million ($0.12 per share) and Cash Flow grew by 103 percent to $4.5 million ($0.32 per share) from $2.2 million ($0.20 per share).
The First Quarter results, reflecting continued growth, portray the activity level in the Oil & Gas Industry as well as continued demand for the Company's products. While the Company experienced growth in all of its markets, Canadian performance was particularly strong.
In the U.S., the Company has now secured premises for a full service facility in Lafayette, Louisiana with an expected operational start up in late February. Until then, the Lafayette office will continue to operate as a stocking and sales point. This will bring the number of U.S. full service facilities to six (6) and allow the Company to increase its market share in the United States.
The Company's management will continue to focus on the Downhole Tool Division and its core products as well as international expansion for the remainder of fiscal 1998. The new Nisku facilities will also enhance the Company's ability to complete Research & Development projects.
NQL Drilling Tools Inc. is an industry leader in providing downhole tools and technology used primarily in drilling applications in the oil and gas, environmental and utility industries on a worldwide basis.
OTHER COMPANIES IN THE NEWS
SEVENTH ENERGY LTD. announced the completion of a successful year end drilling program. During the last three months of 1997, Seventh drilled a total of thirteen wells resulting in nine oil wells, one gas well, one well cased for future water injection, and two wells dry and abandoned. All wells except two were operated by Seventh, and the Company's working interest averaged 74 percent.
The two outside operated wells were drilled at Gift Alberta in December and cased for oil. A third well finished drilling early in 1998 and was also cased for oil. Seventh now has an average 20 percent working interest in three Gilwood oil wells at Gift, one of which is producing and the other two completed and awaiting production equipment. Total net oil production from these three wells is expected to be 150 barrels of light, sweet oil per day. Two additional wells are scheduled to be drilled this winter at a similar working interest.
One well drilled in southwest Saskatchewan was cased as a potential new field gas discovery.
A dry hole was drilled at Provost Alberta and the remaining nine wells were drilled in southern Alberta. Two oil wells were drilled at Taber West and one oilwell was drilled at Turin. Two wells were drilled into the recently acquired Sawtooth oil pool at Hays, one of which will become an injector well. Two oil wells were drilled on previously owned company lands immediately offsetting the acquisition.
One dry hole and one oil well were drilled at Enchant.
Completion of the successful oil wells is proceeding during January 1998 and should increase daily oil production to 800 barrels of oil equivalent per day at sometime during the first quarter of 1998.
Plans for 1998 call for the drilling of five exploratory wells in the Provost area and six development wells. Eight of the wells will be operated. The average working interest will be 71 percent.
BXL Energy said that further to its announcement of November 19, 1997, the company has successfully drilled the second and third wells of its winter drilling program at Gift/Little Horse. The first well was put on stream in late November and is currently producing at approximately 350 (95 net) barrels of oil per day. The second well was drilled in December and put on stream in January at a rate of 300 (90 net) barrels per day. The third well was drilled in January and is expected to come on stream before month end at approximately 300 (70 net) barrels per day. For the balance of 1998, BXL estimates that these three wells will contribute 200 to 250 barrels of oil per day to its production base. Production from this area is light, sweet crude and once tied in to production facilities can be produced at low cost.
The balance of BXL's Gift/Little Horse winter drilling program includes at least three and up to five additional wells, at working interests ranging from 24 percent to 75 percent.
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