MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, FEBRUARY 3, 1998 (3)
MARKET ACTIVITY
INDEXES
The Toronto Stock Exchange 300 Composite Index gained 0.0% or 2.07 to 6773.45. In comparison, the Oil & Gas Composite Index managed to gain 0.1% or 4.97 to 6338.21. The sub-components were mixed. The Integrated Oil's fell 0.1% or 12.63 to 8724.59 and the Oil & Gas Servcices fell 0.8% or 22.42 to 2642.31. The Oil & Gas Producers gained 0.3% or 15.49 to 5603.57.
INDEX CHARTS
TSE 300.......... canoe.quote.com
O&G Composite. chart.canada-stockwatch.com
Integrated Oil's.... chart.canada-stockwatch.com
O&G Producers.. chart.canada-stockwatch.com
O&G Services..... chart.canada-stockwatch.com
NEW PHLX OIL SERVICE SECTOR
bigcharts.com.
lonestar.texas.net
MOST ACTIVES
Norcen Energy Resources, Ranger Oil, Tarragon Oil & Gas, Berkley Petroleum, Rio Alto Exploration, Canadian Natural Ressources, Petro-Canada, Tri Link Resources and Renaissance Energy were among the top 50 most active traded issues on the TSE.
No net gainers among producers in the top 50 on the TSE.
Percentage gainers included K2 Energy 12.5% to $2.25, Beau Canada Exploration 10.0% to $2.75, Triumph Energy 10.0% to $2.75, Abacan Rersources 9.5% to $2.65, Newquest Energy 6.1% to $6.10, Probe Exploration 5.5% to $4.43 and Canrise Resources 5.2% to $6.10.
On the downside, Hurricane Hydrocarbons fell $1.05 to $9.95, Pioneer Natural Resources $0.80 to $31.40 and Pendaires Petroleum $0.75 to $9.25.
Percentage losers included Profco Resources 11.7% to $1.06, Canadex Resources 10.7% to $1.25, First Calgary Petroleums 9.6% to $1.03, Hurricane Hydrocarbons 9.5% to $9.95, Black Sea Energy 8.5% to $1.50, Eurogas Corp. 8.3% to $2.20, Purcell Energy 7.6% to $1.10 and Gentry Resources 6.9% to $1.08.
K2 Energy reached a new 52-week high while Interaction Resources reached a new 52-week low.
Service companies were absent among the top 50 most active traded issues on the TSE.
Dreco Energy Services gained $1.20 to $40.35 and Enerflex Systems $0.75 to $34.50.
Percentage losers included Kelman Technologies 11.4% to $1.95.
On the downside, Canadian Fracmaster fell $1.00 to $18.50 and Ensign Resource Services $0.80 to $28.20.
No percentage losers.
There were no new 52-week highs or lows.
Over on the Alberta Stock Exchange, HEGCO Canada, ICE Drilling, Bearcat Explorations, Stampede Oils, Alta Pacific Capital, Storm Energy, Colt Energy, Green River Petroleum, Dakota Resources, Tappit Resources, Cubacan Exploration, First Star Energy and Scarlet Exploration were among the top 30 most active traded issues.
HEGCO Canada gained $0.74 to $2.24, Bearcat Explorations $0.12 to $0.62, AltaQuest Energy $0.10 to $2.35, Meota Resources $0.10 to $1.10, Parkcrest Exploration $0.10 to $1.45 and Ironwood Petroleum $0.08 to $0.40.
Percentage gainers included HEGCO Canada 49.3% to $2.24, Ironwood Petroleum 25.0% to $0.40, Bearcat Explorations 24.0% to $0.62, Rockport Energy 13.6% to $0.25, Stampede Oils 13.0% to $0.26 and Mart Resources 12.5% to $0.45.
On the downside, Petro-Reef Resources fell $0.22 to $0.68, High Point Energy $0.15 to $0.25, Tappit Resources $0.15 to $0.25, Barra Resources $0.14 to $0.35, Derrick Energy $0.10 to $1.20, Global Link International $0.10 to $1.20, Proprietary Energy $0.10 to $2.20, Request Seismic $0.10 to $1.20 and Green River Petroleum $0.08 to $1.12.
Percentage losers included High Point Energy 37.5% to $0.25, Barra Resources 28.6% to $0.35, Tappit Resources 27.3% to $0.40, Petro-Reef Resources 24.4% to $0.68, New Energy West 20.0% to $0.20, Pheasantback 15.0% to $0.26, PanOil Resources 15.0% to $0.34 and Dundee Petroleum 14.3% to $0.30.
First Star Energy, HEGCO Canada and Moxie Petroleum reached new 52-week highs.
Barra Resources and Best Pacific Resources reached new 52-week lows.
An excellent summary of most actives covering all four of the Canadian Stock Exchanges can be found at quote.yahoo.com
EXCHANGE INFORMATION
New listings on the TSE in the month of January included
Bromley Marr Ecos Inc. J (BME) waste management services / Shares = 31,338,237
Calahoo Petroleum Ltd. (CLX) oil/gas exploration & development / Shares = 65,162,759
Fort Chicago Energy Partners L.P. Cl A Units (FCE.UN) investment management / Shares = 65,991,375
International Rochester Energy Corp. J (ROH) oil/gas exploration & development / Shares = 8,865,290
NCE Energy Trust Units (NCA.UN) oil/gas exploration & development / Shares = 3,305,481
Sands Petroleum AB GDS (SPB) oil/gas exploration & development / Shares = 15,339,173
INSIDER TRADING
A select list of insider transactions which appeared in this mornings Financial Post included;
Baytex Energy Ltd. - Edward Molnar, director, sold 294,000 shares for $19 or $21 each to hold almost 360,000 directlyand indirectly.
Beau Canada Exploration Ltd. - Thomas Bugg, chairman, exercised one million options for $1.68 or $2 each and sold one million shares for $2.95 each to hold about 3.7 million shares directly and indirectly.
Chauvco Resources Ltd. - Guy Turcotte, officer, exercised 250,000 options for $9.25 or $16.25 each and sold 250,000 shares privately for $30 each to hold 1.2 million indirectly.
Renaissance Energy Ltd. - Sheldon Steeves, officer and director, exercised 65,000 options for $13.86 each and sold 65,000 shares for $30.07 each to hold about 89,000 directly and indirectly.
ANALYST - RESEARCH - FUND MANAGERS - MISC.
BUY - HOLD - SELL
Mid-cap specialist Jim Goar, vice-president of investments at O'Donnell Management Investment Corp., is finding good opportunities in his principal areas of interest - industrial companies, oil and gas producers and non-bank financials. Toronto-based Goar, who manages the O'Donnell Group Fund, noted that his universe - small and mid caps - has come under some selling pressure of late. "When the market comes under pressure, this segment tends to suffer more. Conversely, when the market does very well, these stocks can do better." In stock selection, Goar emphasizes companies with sustainable earnings growth that trade at earnings multiples below their prospective growth rates. His style is to buy and hold.
Stocks he is picking include;
Canadian 88 Energy Inc. (EEE/TSE) $5.30 ($7.05-$3.95). The Calgary based company "is very good at oil and gas exploration," said Goar. The company has two fields in Western Canada which it is seeking to bring on stream. Once they start operating, they will double Canadian 88 Energy's total production, "which is a major leap in production." The company is awaiting regulatory approval to go ahead with the wells, he said, and he is "fairly certain that this will be forthcoming."
Another energy producer that Goar favors because of its "excellent exploration track record" is Berkley Petroleum Corp. (BKP/TSE) $14.50 ($18.35-$10.33), which is engaged in oil and gas production in Alberta, British Columbia, Saskatchewan and the Northwest Territories.
Gordon Capital Morning Notes
Probe Exploration
(PRX-T: $4.20) BUY
Production Increases On Target
Probe is currently producing 8,700 boe/d, mostly from its Leduc area, acquired last year from Imperial Oil. With 3,500 boe/d of shut-in capacity coming onstream this month, Probe will be producing 11,000 boe/d by March 1st. Operating costs are running below $4.00/boe, and the corporate netback is $12.00 boe, despite currently weak oil prices. We believe that the company will exit 1998 at over 15,000 boe/d. Probe will drill at least 12 new wells into the D3 (with more planned after a 3D seismic program is shot), nine horizontal wells into the D2, horizontal wells into a potential oil leg in the D1, and nine more wells into the Ellerslie formation. The company has also discovered a new Sparky oil field. We forecast CFPS of $0.30 for 1997 and $0.80 for 1998. Our 12-month stock price target is $8.00.
IPO IN U.S. REFLECTS MARKET SENTIMENT
Energy IPO Rolls Into a Bearish Oil Patch Market
A 2-point drop in asking price is certainly an inauspicious way to head into an IPO. But that is exactly what Miller Exploration Company is grappling with as it prepares to roll out 5.9 million common shares in 1998's first energy-related IPO. The issue is expected to be priced Tuesday evening at between $8 and $9, down from the $10 to $12 listed in its initial prospectus.
"In this market, that is something of a death watch," says David Menlow, president of IPO Financial in Springfield, N.J. "If Miller is going to have a 2-point price drop, that is done because investors don't want to pay those prices."
No one's blaming Miller. The market's been bearish toward oil stocks due to price drops in crude, and new energy offerings in the first half of 1998 should be no exception.
Energy IPOs in 1998 aren't likely to repeat 1997's chart-topping performance. Twenty-five energy companies came public last year, and the average return from their IPO prices as of mid-December topped gains made by the telecommunications, transportation, and financial services sectors, according to CommScan, a New York-based data research firm. Exploration and production companies like Miller, however, fared far worse than their oil service and equipment brethren. E&P companies that went public in 1997 gained an average of 7% over their offer price while the sexier issues, the rig equipment and fabrication companies, gained an average of 66%. This year, the E&P sector as a whole is down about 4%, according to Baseline.
One can only imagine what the road show must have been like for Miller, which will trade on the Nasdaq under the symbol MEXP, as the price of crude in January dipped first to a two-year low, then a four-year low. Nevertheless, the company has laid out a strategy that will increase its reserves, the main asset on which an E&P company is valued. The original offering was for 6.1 million shares, 600,000 from shareholders. The 600,000 was cut to 450,000 Tuesday morning, according the equity syndicate desk at Bear Sterns, the lead underwriter. That brings the total shares offered down to 5.95 million. At $8 to $9 per share, Miller can expect to garner between $42 and $53 million, significantly less than the $66 million for which it originally planned.
But the lower prices may be what's needed to attract investors. Dan Rice, manager of the State Street Research Global Natural Resources fund, likes the company's prospects and relatively low cash flow multiple.
"If it is priced correctly the stock should do okay," he says. In general the buyers will be longer-term players, he added, as the momentum players who pushed up IPO prices in this sector are gone. "At $8 to $9 I will be participating. At that range I am interested; at $10 to $12 I am not."
Over the past four years, Miller, a family-owned business and the successor to an E&P company founded in 1925, has explored more extensively in the natural gas arena. Revenues from natural gas increased to 83% in 1997 from 74% in 1994. The small-cap company plans to focus its exploration efforts mostly in the Mississippi Salt Basin, an area with geologic formations indicating the presence of hydrocarbons. This area provided Miller with the bulk of its reserve increases in 1994 and 1995, and the company wants to get back in there to do some exploratory drilling.
Additional strategies for the Traverse City, Michigan-based company includes the extensive use of 3-D seismic data, an advanced technology that has greatly increased chances of drilling success. |
