MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, FEBRUARY 3, 1998 (4)
KERM'S TOP 21 - SPEC 15 - SERV 9 COMPANIES IN THE NEWS
Bucking the industry trend, ALBERTA ENERGY CO. LTD. delivered better than expected operating results for 1997 by focusing on exploration and staying out of last year's expensive takeover frenzy.
While many oil and gas producers are expected to report disappointing earnings, the Calgary-based senior producer said it has added 1.1 trillion cubic feet equivalent of natural gas from successful exploration - 360% of its current conventional production of 318 bcfe and 28% of its entire conventional reserve base.
Finding and development costs, which for some producers will hit about $9 for a barrel of oil equivalent, were $5.80 a boe, down from $6.51 in 1996 and $6.64 in 1995.
"Everything we said we were going to do we have done, and we have done more than that," president and chief executive Gwyn Morgan said yesterday.
"The bottom line here is we think there is real justification for a re-evaluation of AEC, and there is no question we are significantly more valuable" than the current stock price. The shares (AEC/TSE) closed at $30.15 on Tuesday.
"Our 1997 additions alone equal the total reserves of many intermediate oil and gas companies," he said. AEC's financial results, scheduled to be released next month, will be on target with analysts' expectations.
"We are pleasantly surprised at the reserve increases," said oil and gas analyst Scott Inglis, managing director of institutional research at First Energy Capital Corp. in Calgary. The firm has a $38 target for the stock in the next 12 months.
The company has accumulated one of the industry's largest land holdings - six million acres in Western Canada, where it has a dominant position in several core areas like the West Peace River Arch in northwest Alberta and Maxhamish in northeast British Columbia.
AEC is well positioned to take advantage of an expected rise in natural gas demand later this year because of the addition of pipeline capacity to the U.S., Morgan said. About 77% of the company's reserve additions last year were natural gas. "Almost 90% of our 1998 production will be natural gas and light liquids," he said.
The company plans to reduce capital spending this year by $100 million, to $800 million, by deferring some new heavy oil production.
Many industry producers are moving away from heavy oil because of low prices. About 10% of AEC's production is heavy oil.
CRESTAR ENERGY INC. entered into an agreement with a syndicate of underwriters led by RBC Dominion Securities Inc. and Nesbitt Burns Inc. under which they have agreed to purchase from treasury 5,250,000 Common Shares. The purchase shares will be re-offered to the public at a price of $22.25 per share pursuant to a prospectus to be filed in all provinces of Canada. In addition, Crestar has granted to the Underwriters an option to purchase up to an additional 750,000 shares for a 48 hour period. Closing is expected on or about February 18, 1998.
PETRO-CANADA. The Hebron appraisal well will be drilled on the Grand Banks of Newfoundland this summer for a consortium of oil companies including Mobil Oil Canada, Chevron Canada Resources, Petro-Canada and Norsk Hydro.
The consortium has awarded a drilling contract for Hebron D-94 and other possible wells, which will enable the companies to move forward with their plans to identify Grand Banks oil developments to follow Hibernia and Terra Nova. The consortium recently acquired an additional four exploration licences in the area.
The Hebron-Ben Nevis oil field, 350 kilometres offshore Newfoundland and 30 kilometres southeast of the currently producing Hibernia oil development, was discovered in 1981 by Mobil. Drilling Hebron D-94 in July will be the first step in appraising the commercial viability of Hebron-Ben Nevis.
The well, three kilometres northeast of the Hebron I-13 discovery well, will take about 45 days to drill and test at a depth of 2200 metres. The Hebron appraisal well was initially planned to be drilled in September 1997.
Interests in the well are: Mobil Oil Canada (36.84375%); Chevron Canada Resources (31.875%); Petro-Canada (21.89688%); and Norsk Hydro Oil and Gas (9.38437%).
The consortium has awarded a drilling contract to Glomar International (Canada) Drilling Company, a company owned by Global Marine Inc. of Houston, Texas, for the semi-submersible currently known as the Vinlander. Global Marine recently acquired the rig and plans to rename it. Global Marine Inc. plans to establish an operations office in St. John's.
The Global Marine Inc. contract is for one year beginning July 1998, and enables the consortium to drill a number of wells on the Grand Banks. Details of the drilling program have not yet been determined. There are options to renew the contract for a period up to a total of five years. Terms and value of the contract were not released.
KERM'S WATCHLIST OF COMPANIES IN THE NEWS
NORCEN ENERGY RESOURCES notches up record earnings. Higher production, stronger gas prices and an asset sale pushed Norcen Energy Resources Ltd. to record earnings last year.
Net income was $140 million (75› a share) on revenue of $1.22 billion, up from $92 million (53›) on revenue of $1.31 billion in 1996.
A net after-tax gain of $34 million was booked last year on an $84-million profit from selling a 40% stake in a propane marketing firm. It was offset by a $50-million income tax charge.
Cash flow climbed 19% in 1997 to $584 million ($3.12) from $489 million ($2.82) in 1996.
Results for the company, which is active in Canada, the U.S. and South America, were good, said John Tysall, an analyst with Standard & Poor's Inc. It did well holding down its finding costs, while boosting reserves substantially.
Norcen is being taken over in an all-cash offer of $19.80 a share by Fort Worth, Tex.-based Union Pacific Resources Group Inc. Norcen "epitomized what you can do if you concentrate on core operations," Tysall said.
Fourth-quarter earnings of $36 million (19›) came on revenue of $263 million, compared with $35 million (19›) on revenue of $378 million in the same period of 1996.
Shares of Norcen (NCN/TSE) closed unchanged yesterday at $19.60.
TRI LINK RESOURCES announced a new pool discovery on the first test of a multi-well Deep Drilling Program in Southeast Saskatchewan. The well, drilled within the 100 percent owned Hazelwood Project, reached total depth of 2,400 metres and is production testing light gravity crude at economic rates from a zone approximately 1,000 metres below the currently producing operations. The well will undergo extended production testing over the next few weeks.
Three more Deep tests are scheduled to be drilled by the end of March - the second Deep well is now drilling on a separate structure 50 miles away from the announced discovery but still within the Hazelwood Project. In addition to continued active development and exploration on the shallower Hazelwood Mississippian age pools, Tri Link plans to drill a number of Deep Basement tests across the land base in the new fiscal year commencing April 1, 1998.
Tri Link currently produces about 11,000 barrels per day of 100 percent owned light and medium gravity oil from the shallower Mississippian age reservoir at Hazelwood. Tri Link's Hazelwood Project is composed of 300,000 contiguous acres extending over approximately a 75 mile length. In addition to the extensive land position, Tri Link's Hazelwood Project contains a very large infrastructure of production facilities and pipelines to handle the oil production from the Mississippian level of 1,200 metres.
RENAISSANCE ENERGY LTD. has been testing the waters to see if acquiring another oil and gas company would make sense for the Calgary-based producer, but no deals are currently in the works, Renaissance Chief Executive Clayton Woitas said on Thursday.
Renaissance, which was plagued by failure in 1997 to meet production forecasts, has recently been touted as a suitor for various energy firms, despite its never having made a corporate acquisition.
''We are increasing our knowledge on companies that are out there -- it's better to say no from knowledge than no from ignorance,'' Woitas told Reuters. ''Are we necessarily looking for one? No.''
Renaissance, perennially the Canadian energy industry's busiest driller, had its stock price almost halved over the past year when operational difficulties forced it to claw back its oil and gas output outlook.
The stock drooped from 49.75 in mid-January 1997 to a low of 25.15 on January 9 of this year. It closed on Thursday at 29.35, up 0.50.
Renaissance took its first hit in early July when it said poor weather, maintenance at its Alberta and Saskatchewan oil facilities and delayed drilling in the second quarter of 1997 would see the year's average oil output estimates cut to 85,000 barrels a day from the previously projected 92,500.
In early November, it reduced its forecast for 1997 again to 82,500 barrels a day in early November.
Production targets would be less aggressive this year, Woitas said.
''We did show pretty reasonable growth in 1997 over 1996, and all through internal growth. In 1997, we just set our expectations too high and we would counter that in 1998 by managing expectations.''
He said that would be made easier by the current uncertainty in oil and gas prices, which has affected all Canadian energy firms.
''Oil prices today for ourselves and for the industry, if you are producing a medium or heavy (gravity) barrel, are half of what they were 12 months ago and gas prices are lower,'' he said. ''It's a time to be cautious -- you really want your dollars now.''
Some analysts have said an acquisition to beef up production and cash flow would make sense for Renaissance now that oil stock prices were low.
Oil and investment industry speculation has pegged Renaissance as bidding for, or merging with, such companies as Archer Resources Ltd (ARC.TO - news), Pinnacle Resources Ltd (PNN.TO - news) and Crestar Energy Inc (CRS.TO - news), all of which have been deemed as having complementary operations.
But Woitas said a merger deal was not currently in the works.
Renaissance has yet to release its 1997 average production figures or give its estimates of how much oil and gas it expects to produce in 1998.
Production for the first nine months of 1997 averaged 81,151 barrels of oil and 421 million cubic feet of gas a day.
NORCEN ENERGY RESOURCES notches up record earnings. Higher production, stronger gas prices and an asset sale pushed Norcen Energy Resources Ltd. to record earnings last year.
Net income was $140 million (75› a share) on revenue of $1.22 billion, up from $92 million (53›) on revenue of $1.31 billion in 1996.
A net after-tax gain of $34 million was booked last year on an $84-million profit from selling a 40% stake in a propane marketing firm. It was offset by a $50-million income tax charge.
Cash flow climbed 19% in 1997 to $584 million ($3.12) from $489 million ($2.82) in 1996.
Results for the company, which is active in Canada, the U.S. and South America, were good, said John Tysall, an analyst with Standard & Poor's Inc. It did well holding down its finding costs, while boosting reserves substantially.
Norcen is being taken over in an all-cash offer of $19.80 a share by Fort Worth, Tex.-based Union Pacific Resources Group Inc. Norcen "epitomized what you can do if you concentrate on core operations," Tysall said.
Fourth-quarter earnings of $36 million (19›) came on revenue of $263 million, compared with $35 million (19›) on revenue of $378 million in the same period of 1996. Shares of Norcen (NCN/TSE) closed unchanged yesterday at $19.60.
WINSOR ENERGY [AMEX:WNS] Corporation (TSE:WNS) announced that it has signed an agreement with Stanton Capital Corporation relating to the sale of its 90 percent owned joint venture, Windsor Corporation S.A., through a leveraged recapitalization.
The acquiring company will be named ''Winfield Energy Corporation'' and the properties to be included in the transaction consist of Rincon, Hermosa Beach, SMK and certain others. If, through the purchase of all the shares of Windsor Corporation S.A., Winfield Energy Corporation acquires all of the assets from the joint venture as contemplated by the agreement, the purchase price would be U.S. $170 million (or approximately Can. $248 million) (less indebtedness and other liabilities assumed). The acquisition is expected to be financed with a combination of debt, U.S. $15 million (or approximately Can. $22 million) of preferred equity invested by Windsor Energy Corporation, and an expected equity investment by each of Windsor Energy Corp. and Stanton Capital Corporation of up to U.S. $17.5 million (or approximately Can. $25.5 million).
Upon completion of the acquisition, in addition to the preferred equity, Windsor Energy Corp. will own an approximate 50 percent common equity interest in Winfield Energy Corporation, leaving Windsor Energy Corp. with cash from the transaction of approximately U.S. $137.5 million (or approximately Can. $200 million) less net debt of approximately U.S. $18 million (or approximately Can. $26 million) repaid or transferred to Winfield Energy Corporation (leaving Windsor Energy Corp. debt free). Also, Windsor Energy Corp. will retain all of its interests in businesses and properties located in Canada and its principal exploration assets located in the United States. Further, Winfield Energy Corporation will provide administrative management services for the U.S. assets retained by Windsor Energy Corp.
A primary objective of Winfield Energy Corporation is to access increased capital resources, enabling it to accelerate the development of its oil and gas exploration and production assets.
The agreement is subject to, among other things, approval of the Board of Directors of Windsor Energy Corp. of the final terms of the transaction, regulatory approval, and the successful completion of the acquisition financing.
Stanton Capital Corporation is a private equity investment firm based in New York, New York, and has completed several investments with an aggregate transaction value exceeding U.S. $500 million over the past two years. The financial resources of Stanton Capital Corporation are provided by several major investment groups based in the U.S. and Canada, which groups have total assets exceeding U.S. $10 billion. Principals of Stanton Capital Corporation have many years of experience in transactions involving oil and gas exploration and production companies.
Windsor is a Calgary-, Alberta- and Dallas, Texas-based international exploration and production company traded on the Toronto Stock Exchange (TSE: WNS) and the American Stock Exchange (AMEX: WNS).
ESKER RESOURCES LTD. first operated well of 1998; on our Cherry prospect has been drilled and completed as an oil discovery, Esker has a 50% working interest in this well. The Glauconite sand has been completed and is expected to go on production in early February at 200 bopd. A 3D seismic program will be conducted in the near future to help with development of this new pool.
Esker also wishes to update shareholders and investors, of the previously announced Petromet et al WildR 2-2-57-24 W5 deep Devonian well in which Esker is earning a 10% working interest (see Petromet Resources Limited news release January 12, 1998). The well is cased for Leduc sweet gas production at a total depth of 4265 meters. The well will be completed in early February and tied in to the gathering system in the near future. A follow up well at 12-11-57-24 W5 has been licensed and is expected to be drilled in 1998.
Further, at Wainwright, the previously announced well at 5-10-45-5 W4 in which Esker has a 25% working interest has be drilled, completed and tied in for Colony gas production. The well, which went on in December '97, will be restricted to 500 mcf/d initially, until a production profile can be established. Also at Wainwright, two new drilling locations have been approved, the first of which will spud in early February 1998. Esker will have 33.33% working interest in each well. Also, plans have been discussed to recomplete several wells on this property to maximize production from this area over the next six months.
The latest three well development program at Manyberries has been completed, with two of the three wells being eased for oil production. These new oil wells have been completed and went on production during January 1998.
These successful drilling results should put Esker's production rate over the 300 BOE per day mark by summerand ultimately move towards a target exit rate for 1998 of over 500 BOE per day.
MERIDIAN ENERGY CORP.and Esker Resources Ltd., as operator, have successfully completed the first well in a new pool oil discovery drilled in early January, 1998 in Southern Alberta. Meridian has a 25 percent working interest in the first well before payout, reverting to a 15 percent working interest in the balance of the section the well was drilled upon. Meridian anticipates that the well will be placed on continuous production in early February at rates in the order of 200 barrels per day. Net production to Meridian from this well alone is expected to almost double current average production rates. Further development drilling on this property will be deferred until the completion of a 3-D seismic survey, to be shot this winter, to delineate the extent of the reservoir and to identify further drilling locations on the lands.
At Paddle River in Central Alberta, the Company has completed the 15-32-55-7 W5M well as a flowing oilwell in November of 1997. The well was placed on continuous production in December and flowed at an average rate of 133 barrels of oil per day during the month. The well is expected to produce at a stable rate of approximately 100 barrels of oil per day.
To date Meridian and partners have acquired a total of six contiguous sections of land directly offsetting the Paddle River oilwell and negotiations are well underway to add two additional half sections to the land porfolio. Three new well locations havebeen surveyed and the Company expects drilling of the first well will commence in February with the balance of the wells to be drilled prior to spring breakup. Meridian has a 25 percent working interest in the 15-32 well before payout, reverting to 20 percent after payout. The Company will have an average 35 percentworking interest in all further development wells on the lands acquired to date.
|
