MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, FEBRUARY 3, 1998 (6)
INTERNATIONAL
COMPANIES
GULF INDONESIA RESOURCES LTD. announced another natural gas discovery in the South Jambi 'B' Production Sharing Contract (PSC) Area, South Sumatra, Indonesia.
Testing is completed at the Bungin-1 exploration well, located in the southern part of the PSC. The well flowed at a combined rate of 34 million cubic feet per day from three perforated zones at 2,925 to 2,940, 2,555 to 2,576 and 2,181 to 2,188 metres. The lower two zones flowed gas that contains 53 per cent carbon dioxide, well within range for economic processing. The upper zone flowed gas containing only 18 per cent carbon dioxide. Two appraisal wells are planned for the second half of this year.
This discovery well is located approximately 14 kilometres (9 miles) west of the Rayun-1 natural gas discovery announced last month and 13 kilometres (8 miles) north of the Bungkal discovery announced in 1996. Bungin-1, combined with discoveries at Rayun and Bungkal, form a sizable core of natural gas resources for which several development scenarios are being considered. All development planning will focus on accessing regional gas transmission facilities, located less than 16 kilometres (10 miles) to the east.
The company also announced that testing is completed at the North Ringin-1 well on the South Jambi 'B' PSC, and it has been plugged and abandoned as a dry hole.
Gulf Indonesia Resources Limited is a 72 per cent subsidiary of Gulf Canada Resources Limited. Gulf Indonesia holds a 45 per cent interest in the South Jambi 'B' Block and is the operator. Partners are TOTAL of France with 30 per cent and Pertamina (Indonesian state oil Company) with 25 per cent.
NAFTEX ENERGY CORPORATION announced that it has entered into an Agreement to sell its interest in the East Shabwa Contract Area (''ESCA'') in the Yemen Arab Republic to Comeco Petroleum Inc.. The overall consideration to be paid by Comeco is US$9.21 million (approximately Cdn $13.30 million). Closing is due to take place on or before Friday, February 6, 1998.
The Company's interest in ESCA, equivalent to a 5% indirect interest, was held via non-voting shares in Comeco.
The Directors consider that, given the limited upside exploration potential remaining on the block and the indirect nature of the Company's interest, the funds generated from its sale can be more effectively applied to the Company's direct 50% working interest in the West Esh El Mallaha (''WEEM'') Concession in Egypt.
Commenting on the transaction from Houston, Texas, Ken Fellowes, Chairman of Naftex, said: ''The sale of the East Shabwa interest puts Naftex in a strong financial position to pursue an aggressive development and exploration program in its WEEM Concession in Egypt as soon as a rig can be secured.
- The initial Cdn$7.2 million raised by Naftex has been replaced and increased by Cdn $5.7 million.
- Production from WEEM is scheduled to start later this week, providing the Company with immediate cashflow.
- The ESCA interest served a very useful purpose in getting the Company listed with a modest proven reserve base. Its sale at this time will allow Naftex to further explore the remaining 85% of the WEEM Concession area which appears to contain all of the elements of a petroliferous basin and clearly a 50% direct interest in WEEM is preferable to a 5% indirect interest in ESCA.
- Now that the Joint Operating Company is formed, Naftex does not anticipate any further delays in proceeding with the aggressive exploration program announced almost six months ago.''
A total of 54,047,191 common shares of the Company is presently issued and outstanding.
MERCANTILE INTERNATIONAL PETROLEUM INC. announced that recent torrential rains in the Talara Basin and La Brea mountains of Peru are causing massive flooding in the area and production operations are now being severely hampered.
Mercantile announced that it has been able to maintain its gross production levels in Latin America at approximately 3,400 bbls/d despite the negative impact of the El Nino rains on Blocks III operations in Peru. Although a number of wells have been shut-in due to flooding, the majority of the wells continu producing through the expansive pipeline and gathering infrastructure that the company installed during start-up activities in 1996. Block III production has been reduced to approximately 1350 bbls/d compared to 1800 bbls/d prior to the impact of El Nino while overall in the company's net production is approximately 2,900 bbls/d.
Chief Executive Officer, J. Arthur Bray, noted it is important to recognize that, as a result of company initiatives taken to reduce operating costs through staff reductions and office closures, the company is able to maintain a break-even cash flow position covering all interest and G & A charges even in the current low oil price environment where WTI is approximately $16.50/bbl. The Company currently has cash in excess of $9.0 million and holds an inventory of approximately 850 wells over it's 170,000 acre properties in Peru, 300 of which are candidates for rehabilitation over the next three years. The company has been averaging better than 20 bbls/d from its rehabilitation work conducted in the last few months and expects to fund the majority of its workover program from internally generated cash flow from operations and partially from existing cash reserves. The company believes that results from future rehabilitation work will improve significantly with the integration of the recently interpreted 3-D seismic data with existing well and log data in the Puertochuelo, La Boca and La Brea fields.
The Company suspended all new drilling activity pending the outcome of the interpretation of the 3-D seismic data that focused on Zones A and C of Block III. That interpretation is now being completed and has delineated a significant number of un-drilled structures both within the existing boundaries of the producing fields and along lateral extensions of such fields. More important, however, is the identification of a large structural deposition that has the potential to more than double the size of the existing Puertochuelo field. Recently interpreted 2-D seismic on Zone B of Block III is showing a large number of potential structures and the Company has also obtained additional 3-D data on the western arm of Zone B that is currently being processed. In Zone A, the northernmost area of Block III, the 3-D has identified a large number of deeper horizons which have never been tested; as the existing fields were drilled in the early part of the century and only penetrated the shallow horizons above the 1500' level. The Company is in the process of re-targeting its drilling program with the added knowledge obtained by the 3-D interpretation, as well as redefining its rehabilitation prospects in the existing oil fields and correlating the newly acquired 3-D data with existing well log and geological mapping information. The Company anticipates an increase in production results from the rehabilitation wells and new drilling locations utilizing the new 3-D information.
The Company announced that its contracts with Peru Power Holdings (Cayman) Ltd. (PPH) to develop its gas reserves and purchase gas for a power development project are in default. PPH have missed a number of significant milestones in the contracts including failure to make take or pay payments to the Company. As a result, the Company has decided to pursue other opportunities for the development of its gas reserves leading to a power development project. Mercantile is seeking a strategic partner capable of developing its gas reserves while providing key technical expertise necessary to plan, construct, and operate a fully integrated power project. The Company is in the process of updating its gas reserves in Peru and, based on earlier studies, believes that its properties in the Talara basin could contain reserves of up to one tcf of gas. The majority of the reserves are presently in the probable and possible categories and the properties need further development to determine their ultimate ability to deliver these quantities of gas.
Mercantile is completing the initial joint study of the Myanaung field in Myanmar and hopes to successfully negotiate a 10 mile buffer zone around it existing license area. Early results from the study; including the interpretation of 2-D seismic never before processed, indicate the field could extend to the South and East in addition to a major sub-thrust horizon below the 5000' level. Preliminary estimates for reserves show the potential for either the extensions or the sub-thrust horizon to double the productive capability of the field that, to date, has produced approximately 24 million barrels of light, 49 degree API oil.
Mercantile, as an ''oil exploitation company'' with interests in Peru, Colombia and Myanmar, continues to look for international on-shore properties where the application of leading edge technologies will allow the company to recover more oil. Mercantile's common shares are listed on The Toronto Stock Exchange and trade in U.S. dollars under the symbol MPT.U while its debentures are listed on the Winnipeg Stock
Exchange.
PETROLEX ENERGY CORPORATION reported the safe return of its remaining two Colombian employees who were abducted on July 30, 1997 from the Rubiales Oilfield. The two men were released safe and well, and reunited with their families on Saturday January 31, 1998, six months from the date of their abduction. The Company has now secured the release of all personnel that were the subject of abduction in two separate incidents during the third quarter of 1997.
The Company's operations in Colombia remain suspended pending a review of the recommendations of the security assessment that has been recently received.
Since the December 18, 1997 news release the Company has advanced discussions to provide blend stock for its Rubiales crude, access through the major trans-Andean export pipeline and marketing of the resulting Rubiales blend through Covenas on the Caribbean coast. The Company will be participating in further discussions with the relevant parties during February 1998 with a view to advancing these issues.
PACALTA RESOURCES received an updated engineering report for its reserves in Ecuador, effective December 31, 1997. The Ryder Scott report indicates gross remaining proved reserves of 110.3 million barrels of oil (80.4 million barrels, net of royalty) and gross probable reserves of 9.2 million barrels of oil (6.9 million barrels, net of royalty). The discounted future net present value of the proved reserves is U.S.$487.6 million based on a 10 percent discount rate and constant commodity pricing.
This report reflects an increase of 65.9 million barrels of oil after production, or a 150% increase, in gross proved reserves and a 4.0 million barrel increase in gross probable reserves from the previous Ryder Scott report which was effective March 31, 1997.
On October 15, 1997, Pacalta sold its Canadian reserves and properties in their entirety. The gross proved reserves associated with this disposition totaled approximately 23.1 billion cubic feet of natural gas and 0.2 million barrels of oil and natural gas liquids.
KAPPA ENERGY COMPANY INC. announced the commencement of its 1998 exploratory drilling program with the spudding of the Al Hijera - 2 well in Yemen. The well, located 2.7 kilometres southeast of the by-passed discovery well Al Hijera - 1 in the Kappa operated Al Ma'ber Block 2, spudded just after midnight (Yemen time) on February 2. Anticipated TD of the well is approximately 1650 meters (5400 feet), which should take on the order of four weeks to complete prior to testing. It is planned to continue the program with a well on the South Ma'ber structure located 20 kilometres to the west.
Kappa plans to drill a total of six or seven wells during 1998. Drilling in Colombia is expected to commence late in the second quarter with a well on the Cucuana block in the Upper Magdalena Valley. The Colombian drilling program will continue throughout 1998.
The exploratory program on Kappa's newly acquired Northwest Gemsa Block ''E'' in Egypt has commenced with a test seismic reprocessing program. Drilling in Egypt will begin late in 1998 or early 1999. Kappa plans to aggressively pursue its exploration program in Egypt. To this end, Kappa is pleased to announce the appointment of Amr El-Homossany as General Manager of its branch office in Cairo. Mr.
El-Homossany was formerly employed by British Gas-EGPC joint venture companies and brings more than 25 years of experience in Egypt to Kappa.
EQUATORIAL ENERGY INC.uatorial Energy Inc. (formerly Australian Oilfields Pty. Ltd.) (VSE/OZ') announced receipt of the ''Declaration of Commerciality'' (''Commerciality'') from PERTAMINA, the Indonesian state owned oil and gas company and the Company's partner in a ''Technical Assistance Contract'' (''TAC'') to develop the Tanjung Lontar oilfield in South Sumatra.
Commerciality will allow the Company to sell oil produced from Tanjung Lontar for the remaining 18.5 years of the TAC. The 800 BOPD of 47 degree sweet light crude resulting from a recently completed 9-well workover program can now be delivered and sold on a daily basis. The Company expects daily production to increase to 1,000 BOPD by the end of March, 1998 and 3,500 BOPD by year-end.
The Company also announced it has spud the first deep well (4,500 ft. total depth) in a multi-well development program. These wells are targeting multiple pay zones that include proven horizons down to 2,500 ft. and additional probable horizons to 4,500 ft. Prior drilling did not penetrate depth below 2,500 ft.
A second drilling rig is operating in the southern portion of Tanjung Lontar. Two shallow wells (800 ft. total depth) have been drilled and completed for less than US$80,000 per well and both wells exhibit multiple pay zones. An extended production test in one zone in the initial well has averaged 220 BOPD with high fluid levels and flowing pressures. Production testing is currently ongoing in the second well with similar results. The Company has PERTAMINA approval to drill a minimum of 22 additional shallow wells.
Further, the Company has received Board approval to proceed with the purchase of First Dynasty Mines Ltd.'s 100% interest in Energy Process Services Ltd. (''EPS''). EPS owns 80% of Genindo EPS which operates the Sumbakung oilfield in East Kalimantan, Indonesia. Closing is expected to occur on or before May 15, 1998. The Sembakung oilfield is currently producing approximately 3,700 BOPD. The Company intends to expand production beyond 10,000 BOPD through a capital investment program that will commence in the 3rd quarter of 1998.
CITYVIEW ENERGY CORP. announced that Sangkimah Well No. SST-1 geologic target of the ''Q'' sands was successfully directionally drilled and logged to a total depth of 1550 metres depth. The directional result was 5.5 metres distance from bulls-eye and within the 25 metre target objective radius. Sandstone interest intervals were: (i) 1254 - 1264 metres : minor oil content, 28% porosity. (ii) 1277 - 1279 metres : minor oil content, 17% porosity. (iii) 1459 - 1472 metres : no hydrocarbon oil content, porosity 12%.
Geologic correlation to 3-D seismic and surrounding Sangkimah wells is in progress, with SST-1 being plugged and abandoned. Discussions with Pertamina for the proposed joint study\operations on the adjacent Sangatta oilfield (currently producing approximately 2,700 barrels of oil per day) have been set for early February 1998.
SEVEN SEAS PETROLEUM INC. even Seas Petroleum Inc. (Amex: SEV - news; Toronto: SVS.U) announced the completion and results of 33 days of production and reservoir testing of its El Segundo No. 2-E well located on the Dindal Association Contract (concession) of the Emerald Mountain project in Colombia, South America. A maximum actual production rate of 5,381 barrels of oil per day and 826 thousand cubic feet of gas per day were realized from a perforated production interval of 314 feet in the Upper Cretaceous Cimarrona formation encountered approximately 1168 feet low to the structural position of the discovery well, the El Segundo No. 1-E. This actual production rate was realized through the utilization of a downhole pump rated at a maximum production level of 5,200 barrels per day. Production testing confirmed that there was no evidence of any oil-water contact.
Of particular importance was the clear indication of interference or pressure communication between this well and the El Segundo Nos. 1-N and 1-S wells approximately 4.5 and 6.0 kilometers to the south, respectively. The El Segundo 2-E's actual production rate and the interference data confirm a significant extension of the reservoir to the north, with a consistently high degree of permeability and productivity.
Seven Seas also announced that the Tres Pasos No. 2-E well, which had been sidetracked at a depth of approximately 3,100 feet, was currently drilling ahead at approximately 4,900 feet. The Tres Pasos 2-E well is located approximately 9 kilometers north-northwest of the El Segundo No. 1 wells' surface location.
The Company further stated that completion work was continuing in an effort to overcome mechanical problems encountered earlier on the El Segundo No. 3-E well, located approximately 4.5 kilometers to the south of the El Segundo No. 1 wells' surface location.
BOW VALLEY ENERGY LTD. announces that Bow Valley and Bakrie Minarak Petroleum Ltd. have initiated discussions with respect to Bakrie's involvement in the Balal offshore development project in Iran. Pursuant to agreements entered into in 1997, Bow Valley is responsible for the operational aspects of the project and Bakrie is responsible for providing financing.
Bakrie has now indicated to Bow Valley that, in view of the curren economic and currency crisis in Indonesia, Bakrie is unable to fulfil its obligations to provide or arrange financing for the Balal project.
Bakrie has not complied with requests for funding with respect to past costs and current commitments. Bow Valley has incurred costs attributable to the project in the amount of approximately $1.1 million. Bow Valley is discussing arrangements with Bakrie regarding its obligations and is examining all options including seeking other partners for the Balal project.
Bow Valley has completed a preliminary geophysical and reservoir engineering review of the Balal field aud is proceeding with front end engineering and design of the offshore structures.
FIRST CALGARY PETROLEUMS LTD. ('FCP') released the following report on the status of the company's drilling program on the Sud Nefta exploration permit in Tunisia.
The well, Nefta 1, which was spudded on September 5, 1997, reached final total depth of 4,675 meters and preparations are underway to run a 7'' liner to total depth. Upon completion of the casing operations, testing through perforations will begin in order to evaluate several potential zones of interest. The first test of a multi-zone testing program will be run in the Cambrian and is expected to start by mid-February.
The Nefta 1 well was drilled to evaluate the Alpha prospect, a large paleo structure with over 43,000 acres of closure. The well confirmed the presence of the structure and found it to be some 340 meters higher than prognosis at the Cambrian level.
During the drilling and logging operations, several zones of interest with potential for commercial hydrocarbon reserves were identified in the Jurassic, Triassic / Ordovician and the Cambrian.
Participants in the Sud Nefta drilling program are: EUROGAS CORP. 57.02 percent (operator), FIRST CALGARY PETROLEUMS 10 percent, GHP EXPLORATION 8 percent, ADDA RESOURCES 6.66 percent, GLENEAGLES PETROLEUM 6.66 percent, SOGW TUNISIA 6.66 percent, LARGO PETROLEUM 3 percent and RIGO OILigo 2 percent. ETAP, the Tunisian state oil company, has the right to participate up to 50 percent in the development of any discovery on the permit.
FIRST CALGARY PETROLEUMS LTD also updated their activity in Texas. The Cabeza Creek well in Goliad County, Texas has been cased to a total depth of 13,000 feet. The Company has a 33.33% net working interest in the well which will be production tested within the next week.
MANTAUR PETROLEUM CORP. reported today that it has agreed to assign its working interests in East Meridian Blocks A & B in the Williston Basin, USA to Collins & Ware of Midland, TX for a consideration of C$2.7 million. Transactions involving the Company's Bainville property and its interests in North Dakota are in negotiation with other operators.
Mantaur Petroleum is a Canadian oil exploration company focussing on its projects in Trinidad and Mongolia. The presently issued share capital of Mantaur is 19,382,310 common shares (25 million shares fully diluted).
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