MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, FEBRUARY 12, 1998 (8)
INTERNATIONAL
Companies
TransGlobe Energy Corp. (TGL/TSE - TGL.S/ASE - TGLEF/NASDAQ) announced that it has signed a farm out agreement with a large U.S. independent exploration and production company to finance TransGlobe's exploration commitments on the S-1 Damis Block in the Republic of Yemen. The agreement will allow the farminee to earn a 75 percent working interest in the S-1 Block by funding all of the initial work commitments under the Production Sharing Agreement consisting of 150 square kilometers of 3-D seismic and the drilling of three exploration wells over the 2.5 year First Exploration Period. TransGlobe will pay 25 percent of the signature bonus, agents fees and finders fees required to be paid and the farminee will pay 75 percent. The identity of the farminee will be released after disclosure to the Ministry of Oil and Mineral Resources ("MOMR") of the Republic of Yemen.
TransGlobe has forwarded a US$2.0 million letter of credit to the Yemen MOMR as the signature bonus under the PSA. The letter of credit will be drawn down by MOMR upon ratification of the PSA by the Yemen Parliament. The PSA has been forwarded to the Yemen Parliament for ratification which is expected to take ninety days.
TransGlobe completed two private placements to arms length investors yesterday to fund a portion of the letter of credit. One is a private placement of 92,819 units at CDN$1.45 per unit (each unit consists of one common share and a warrant to purchase three-quarters of an additional share for CDN$1.70 expiring in two years), the other is a private placement of a CDN$700,000 debenture, due September 1, 1998 at Canadian prime rate plus 1 percent (presently 7.5 percent) and warrants to purchase 257,350 additional shares for CDN$1.70 expiring in two years. The remainder of the letter of credit was funded from working capital.
Epic Energy Inc. (EPI/ASE) announced that drilling has been completed on its commitment well at the Preozornoye Field. Casing has been set and it is expected that the well should be perforated and tested before the end of February. Epic conducts exploration, drilling and production under licenses and agreements covering most of the Crimean Peninsula of Ukraine, an area of 7 million acres.
Cubacan Exploration Inc. (CCX/ASE), reported the drilling of its first exploration well known as Farola North #1 has commenced. The well is located onshore Block 17 in the Republic of Cuba and is approximately 10 km. from the town of Puerto Padre in the Province of Las Tunas.
Farola North #1 is an exploration well being drilled in Block 17 to test two target reservoirs. The primary target is Cretaceous carbonates within an extensional wrench anticline. These carbonates are anticipated to be either folded platform carbonates, with both primary and secondary porosity, or a paleo reef build-up with mouldic and fracture porosity (as identified from local outcrop samples obtained and analyzed by independent consultants). The secondary target reservoir is the erosional, reworked, detrital volcano-clastic sediments within the Cretaceous.
The location has been selected on the crest of the wrench anticline away from the bounding faults that define the limit of the structure. Numerous oil seeps located near the drilling location are likely the result of leaking of subsurface hydrocarbon accumulations up along the bounding faults to the surface. It is anticipated that the drilling of the well to the target depth of 2000 metres will take 30 to 45 days.
Cubacan has a 100 percent interest in each of Blocks 16 and 17 located in the Republic of Cuba which originally contained 6,900 km2 of exploration lands, and, through its investments in MacDonald Oil Exploration Ltd. (MACO/CDN), has an interest in an additional 9,900 km2 of exploration lands located in Block 22. Farola North #1 is the first of a number of prospects and leads identified by Cubacan following an extensive seismic program completed in 1997 which the Company plans to develop.
Itercap Resource Management Corp. (IRC/VSE) reported that gross production from the East Shabwa Development Block in Yemen, for the month of January was approximately 524,000 barrels of oil. Production commenced in December and has increased to nearly 20,000 barrels of oil per day from six wells.
Intercap through its 41.25% shareholding in COMECO Petroleum, Inc. owns an indirect 11.78% interest in East Shabwa. Upon obtaining funding, Intercap intends to acquire an additional 8.75% interest in COMECO for U.S. $4.4 million increasing its indirect interest in East Shabwa to 14.28% The other majority shareholder is COMECO, SOCO International plc. is also acquiring an additional 8.75% interest such that both Intercap and SOCO will hold a 50% interest in COMECO. The acquisition of the additional interest by Intercap is subject to funding and regulatory approval.
Jim D. Ford, Intercap's Chairman and President said "Based on better than anticipated production performance and the existence of numerous high quality exploration opportunities on the 948 square kilometer (1.9 million acre) East Shabwa Block, we believe increasing our interest is very attractive."
"1998 plans at East Shabwa include two development wells which are underway and upon completion should result in an increase in production before mid-year. In addition, a 178 kilometer seismic program is planned for this year and geological and engineering studies will continue on the three existing fields for the refinement of phase II of the development plan," stated Ford.
The other interest owners in the East Shabwa Development Area are Total Yemen, the operator, with 28.57%, Unical Yemen Limited with 28.57% and Kuwait Foreign Petroleum Exploration Co. with 14.29%.
GHP Exploration Corporation (GHPX.U/CDN) announced that completion operations are underway on its West Delta 78 #1 well (News-August 11, 1997). GRP has a 10% working interest (7.87% net revenue interest) in the well, which was drilled to a true vertical depth of 16,925 feet and encountered multiple potential pay sands.
The design of the production facilities is dependent on the results of upcoming production testing. The actual results will be made available when testing is completed, however, based on the evaluation of wireline logs, rates on the order of 15 million cubic feet of gas per day and 1,000 barrels of condensate per day are a reasonable estimate for expected performance.
The Company also announced that production casing has been successfully run to total depth in its Sud Nefta NF-1 well in Tunisia as part of ongoing completion operations. Additionally, GHP has been notified that a drilling rig is currently being moved in on its South Fort Stockton prospect in West Texas and should spud by the end of February.
GHP engages in the exploration for and development and production of crude oil and natural gas in the United States and Internationally with operations and interests in acreage in the Gulf of Mexico, West Texas, Egypt and Tunisia. The Company currently has 17.7 million common shares outstanding.
SERVICE SECTOR
Despite high utilization rates for rigs in Western Canada, the international market is where it's increasingly at for domestic rig manufacturers.
Companies such as Dreco Energy Services Ltd (DEY/TSE)., Precision Drilling Corporation (PD/TSE) and Tesco Corporation (TEO/TSE) have been going flat out designing and manufacturing for export markets while domestic demand cools off in the wake of lower world oil prices.
Tesco's Bob Tessari said his company is moving away from what he calls "1950s-style" mechanical rigs and concentrating almost exclusively on developing technologically innovative, computer-driven models, which are in high demand abroad.
In the wake of lower commodity prices he is predicting lower utilization rates in Canada, which is in turn will mean less pressure on rig manufacturers and drilling companies to supply units.
"We see a pretty good market, almost all of it international," Tessari said. "The Canadian market has almost dried up."
Glenn Dagenais, Ensign Resource Services Group Inc.'s (ESI/TSE) chief financial officer, agreed. Ensign drilled almost 20% of all wells drilled in Canada last year.
"There's not much new equipment going to be built this year. What new equipment there is will be highly specialized and backed up with a firm longterm contract by an operator," he said.
As far as utilization rates go, Dagenais predicts usage will remain strong through the first quarter. After that, he's holding his breath.
Utilization was up 14% in 1997 over 1996, with 84% of Canada's 503 rigs out drilling in the field. Ensign's 102 rigs drilled 3,037 wells in Alberta, Saskatchewan, Manitoba and British Columbia, a 21% increase over 2,398 wells drilled in 1996.
"We're taking a wait-and-see attitude until breakup. After that, a lot depends on our customers and what they do with their budgets," Dagenais said.
Dale Tremblay, chief financial officer for Precision Drilling, said his company won't be building any new rigs for the Canadian market this year and will instead concentrate on filling contracts for overseas operators.
Tesco's Tessari said a hot seller for his company is its portable rigs, which disassemble to fit into shipping containers for transport abroad.
Tesco completed its first integrated underbalanced drilling system in early December and has orders for three more. Tesco rigs feature magnetic top drives, hydraulic drives and fully programmable computer electronics.
Like Tesco, Dreco's North Sea rig is typical of the kind of rigs being built in Canada. The rigs are progressively becoming more hi-tech and sophisticated, incorporating a wide variety of equipment with increasingly specialized capability.
Dreco is in the process of putting the finishing touches on a platform rig which will be used in the North Sea. The $30-million derrick is being specially designed with weight considerations and portability in mind.
According to project manager Taso Palidis, versatility is the key word in design and manufacturing considerations. At a total weight of 400 tonnes, the Dreco rig is a featherweight in terms of North Sea rigs.
"The North Sea demands light, mobile, automated rigs. Weight was critical. Special consideration was given to the layout...it has to be assembled by existing cranes that only handle 20 ton weights," said Palidis. "It's an interesting project."
The new rig will be owned by Phillips Petroleum Company and operated by one of its Norwegian affiliates. It was designed to be utilized on nearly a dozen different older drilling platforms with varying construction specs.
Whereas conventional rigs require eight to 10 people to operate, this Dreco rig only needs two. This is the fourth rig Dreco has designed for Phillips for use in the North Sea, Palidis said. The company is also working on projects to build and design three rigs for use in Alaska. Although he agreed export markets will take centre stage for drilling activities in 1998, Precision's Tremblay questioned predictions utilization rates will fall dramatically for Western Canada in 1998.
"We haven't seen any indication of a slow-down," he said. "We've never been busier. In fact, we're actually behind. And unless they've decided not to fill those pipes -- which I don't think is the case -- I don't see much of a change," he said.
Airgen Corporation (AIR.A/ASE) is pleased to announce that it has entered into an Option Agreement to purchase Geo-Ray Oilfield Inspections Ltd. The option agreement allows Airgen to acquire, on or before March 21, 1998, all of the shares of Geo-Ray. The purchase price of $4,000,000 plus adjustments, will be made up of cash in the amount of $2,000,000 and Airgen Class A common shares valued at $2,000,000 at a deemed price determined on the basis of the lower of (i) the average trading price of the Class A common shares on the ten days trading immediately prior to the closing of the transactions and (ii) $0.85. Airgen plans to complete the acquisition of Geo-Ray, subject to due diligence and obtaining regulatory and other approvals, through debt and equity financing to be obtained on or before March 21, 1998. This transaction, scheduled to close at the same time as he recently announced acquisition of Commercial Sandblasting and Painting Ltd., completes Airgen's current expansion in the area of asset integrity services. The method for determining the deemed share price for the issuance of Class A common shares with respect to the acquisition of Commercial will be on the same basis as for Geo-Ray.
Geo-Ray Oilfield Inspections Ltd. is a major provider of tubular inspection and repair services for both production tubing and drillpipe. Geo-Ray's central inspection facility is located in Red Deer, Alberta with a satellite operation in Nisku, Alberta. Geo-Ray provides a comprehensive range of tubular inspection, repair, storage and inventory management services for both petroleum production companies and drilling contractors. In addition to the plant facilities, Geo-Ray operates a fleet of mobile tubular inspection units and drillpipe straightening units for wellsite or off-site service. The acquisition of Geo-Ray extends Airgen's offering in the area of asset integrity services, which currently includes pipeline testing and protective coatings.
Airgen is a diversified oil and gas service company that provides the oil and gas industry with (1) underbalanced drilling services, (2) heavy oil thermal recovery services, and (3) asset integrity services.
Airgen's goal is to become a leading provider of oilfield services by acquiring and developing successful private oilfield service companies, and investing in certain in certain promising technologies.
Calgary-based Dynafrac Well Services Inc. announced it had successfully completed its first fracture stimulation treatment. The frac job was performed in central Alberta last week for BelAir Energy Corporation, also of Calgary.
Brent Bullen, President of Dynafrac said "The gelled hydrocarbon frac, using Dynafrac's state-of-the-art equipment, was successful both from operational and well production standpoints. We are very pleased with how our new personnel and equipment performed the job."
"The frac job was also a first for us," said Vic Luhowy, President of BelAir Energy, "and the initial swabbing results indicate that the treatment will result in increased production from our well."
Dynafrac Well Services Inc. is a newly-formed energy services company with its head office in Calgary and field station in Red Deer, Alberta. Services provided by the company are primarily associated with high pressur treatments on oil and gas wells to increase their productivity. These treatments include fracturing, acidizing, chemical squeezes, nitrogen and coil tubing, using proprietary blends of chemicals and large, mobile high pressure pumping equipment.
BelAir Energy Corporation is based in Calgary and is involved in the exploration and exploitation of petroleum reserves in Western Canada. BelAir is listed on The Alberta Stock Exchange and trades under
the symbol "BGY".
The future of embattled Dominion Bridge Corp. was again in doubt late yesterday.
Both Dominion and Houston-based American Eco Corp. had promised statements on the outcome of the U.S. construction group's bid worth US$93 million for all Dominion's shares, which expired at 5 p.m. local time.
The American Eco bid had been recommended by Dominion's board and its U.S. financial advisers.
But Olivier DesprŠs, Dominion's vice-president and legal counsel, said last night although American Eco had come up with an initial US $5-million cash injection, "it could not meet certain other conditions."
He would not disclose what they were.
He said the American Eco bid "cannot go forward as it stands ... we agreed to keep other bidders waiting at the door for a week and now we'll consider alternatives."
No comment was immediately available from American Eco president Michael McGinnis in Houston nor from vice-chairman John Pennie in Toronto.
But a spokesman for Roxco Ltd., another U.S. construction company, said in Jackson, Miss., its earlier bid for Dominion "could be revived."
|
