MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING FRIDAY, FEBRUARY 13, 1998 (4)
FEATURE STORY
Deal Solv-Ex Oilsands Woes
United Tri-Star Takes Over Burden
Jerry Ward - Edmonton Sun
Financially-troubled Solv-Ex Corp. of New Mexico has sold its remaining interest in oilsands lease in northern Alberta. But the controversial company continues to own mineral and metal rights on the Fort McMurray-area property.
"It eliminates Solv-Ex from the oil extraction project," said John Ogden, executive vice-president of United Tri-Star Resources, which bought the 12% interest Solv-Ex held.
"Solv-Ex will still be involved in the metals processing, but that's a separate issue."
Toronto-based UTS now holds a 22% interest on the property, with Calgary-based Koch Exploration Ltd. tentatively controlling 78% through a proposed $30-million deal that is still under negotiation.
Solv-Ex chairman John Rendall said yesterday from Albuquerque the deal with UTS is "what the doctor ordered. "We're coming out of this as strong as we ever hoped we could, without the liabilities to feed a $100-million plant," said Rendall, of the planned operation. "UTS has taken that burden off of our shoulders."
Solv-Ex is restructuring under the Canadian Companies Creditors Ar-rangement Act and under Chapter 11 of the Bankruptcy Code in the U. S.
It is expected to present its reorganization plan to the courts before Feb. 28. Rendall promised creditors "100 cents on the dollar." Dwight Jones, spokesman for the Fort McKay Metis Corp. -- which claims it is owed $1.52 million -- said Solv-Ex creditors are under "a gag order," then declined further comment.
Under the deal, Solv-Ex is to receive five million common shares of UTS and $4.4 million in cash, Ogden said. UTS will buy participation rights in the experimental metal extraction technologies and hydrocarbon extraction technologies developed by Solv-Ex. As well, UTS has agreed to give a warrant to Koch to acquire two million common shares of UTS at 65 cents each for allowing UTS to move ahead with the buyout of Solv-Ex.
The deal is subject to court approval. Ogden said "absolutely" the next step is to get the plant up and running, but referred questions about the operation to Koch.
"It's too soon to comment on that," said Koch spokesman Tammy Sauer, noting it's not yet known which technology the company will use to extract oil from the tar sands.
FEATURE STORY
Syncrude President Remains In Hospital
Irene Thomas - Fort McMurray Today
The president of Syncrude Canada remains in stable but critical condition in an Edmonton hospital. Last Sunday morning, Jim Carter was rushed via air ambulance to the provincial capital with an undisclosed illness.
"Jim suffered a tear in the esophagus tube which joins the stomach. That caused internal bleeding which required fairly extensive surgery," said Syncrude spokesperson Peter Marshall. The 50-year-old executive has been moved to a private ward from the intensive care unit. "The prognosis is good," said Marshall. "Jim needs lots of rest. They will be closely monitoring him for the next several of days."
Only immediate family members are allowed to visit Carter, Marshall said. Hospital staff have requested people don't send further flowers or items for Carter. The name of the hospital hasn't been made public for the privacy of Carter's family. "For those wishing to send wishes they can certainly contact myself or they can e-mail me at p.marshall@syncrude.com and I can forward them to his secretary," Marshall said.
Eric Newell, Syncrude's chairman and CEO, will assume Carter's responsibilities in the interim.
Carter was named Syncrude's president last September, assuming the post Newell held since August 1989. He was appointed as the oilsand giant's chief operating officer in 1994. Carter is married and has lived in Fort McMurray since 1979 when he began with the company as manager of overburden operations.
NYMEX
Crude Oil
Oil prices closed nervously higher Friday as many traders were unwilling to remain sellers heading into a three-day holiday weekend with a possibility of military action in the Middle East Gulf.
At the New York Mercantile Exchange, crude oil for March delivery closed 6 cents higher at $16.02 a barrel after dropping near four-year lows a day earlier.
Tracking crude oil, March heating oil settled 0.15 cent a gallon higher at 44.72 cents and March gasoline 0.08 cent a gallon higher at 49.56 cents.
The United States and Britain have threatened Iraq with air strikes unless it grants the United Nations unfettered access to suspected weapons sites in Iraq, a condition of the 1991 Gulf War cease-fire accords.
Iraq continues to balk at the demand even as the U.S. has built up its air and naval forces in the oil-rich Gulf region to their largest since the war ended.
"The possibility of a military strike is slight, but it exists," said Richard Redash, analyst with Prudential Securities in New York.
U.S. futures exchanges are closed on Monday for the U.S. Presidents Day holiday.
Many traders doubted a military strike would actually occur over the weekend since Russia, France and other key players are pressing for a diplomatic solution and the U.S. Congress has yet to pass a resolution supporting a military strike.
But U.S. President Bill Clinton said Friday that Russia's opposition to a military strike would not stop the United States.
"The market is just not that nervous about supply, even with the Iraqi situation," said Redash.
The global oil market is deemed in large oversupply due to a hefty 10 percent increase in OPEC's production ceiling last fall as well as weaker demand due to Asian economic turmoil and a mild winter in Europe and the United States.
Natural Gas
Natural gas futures ended lower Friday in a moderate session, hit by a late wave of technical selling and long liquidation after some early pre-holiday short covering stalled at resistance.
March skidded eight cents to close at $2.208 per million British thermal units after stalling midday at $2.32 resistance. April settled 8.4 cents lower at $2.247. Other months ended down by 3.7 to 7.3 cents.
"They couldn't hold the market up on technicals forever. The fundamentals are still bearish," said one East Coast trader, referring to extended forecasts for more mild weather.
NYMEX will be closed Monday for the U.S. Presidents Day holiday.
Most agreed unseasonably-mild weather coupled with a significant storage overhang continue to undermine sentiment.
Six- to ten day forecasts still call for mostly above normal U.S. temperatures though a brief, weekend cooldown was expected in the Northeast and Mid-Atlantic.
Chart traders pegged key resistance in March at Monday's $2.32-2.35 gap. Major selling should emerge at last week's prominent high of $2.435 and then in the $2.50 area.
After $2.20, key March support was still at $2.18, with $2.03 the next level.
In the cash Friday, Gulf Coast weekend quotes firmed a couple of cents to the high-teens. Midcon pipes were up a similar amount to the $2.10-2.15 area. Chicago city gate gas was two to three cents higher in the mid-$2.20s, while New York was flat to up slightly at about $2.40.
The NYMEX 12-month Henry Hub strip tumbled six cents to $2.38. NYMEX said an estimated 54,900 Hub contracts traded, down from Thursday from Wednesday's revised tally of 35,999.
CANADA SPOT GAS
Canadian spot natural gas prices carved out additional losses in Alberta on Friday as mild weather kept many buyers on the sidelines, market sources said.
Spot gas at the AECO storage hub in Alberta was quoted mostly at C$1.60-1.63 per gigajoule (GJ), down six cents from Thursday.
"A lot of people had to cover positions. They're probably dumping gas before the long weekend," one Calgary-based trader said, noting weather forecasts were calling for normal to above-normal temperatures in Calgary through next week.
Temperatures in southern Alberta were forecast to reach highs of four to seven degrees Celsius through Monday.
Storage withdrawals in the West remained fairly sparse, about 496 million cubic feet per day on Thursday, and some traders said they were anticipating some injections this weekend due to the mild weather.
Meanwhile, March AECO also retreated ahead of the weekend to about C$1.63-1.64, while summer business was reported done at C$1.62-1.64 per GJ.
In the export market, Sumas, Wash., prices remained fairly steady around US$1.20 per million British thermal units (mmBtu) in stagnant trade. Continuing to temper demand were above-normal temperatures in the U.S. Northwest, traders said.
Conversely in the East, Niagara export prices were quoted about four cents higher at US$2.40 per mmBtu in response to slightly firmer prices in the U.S.
U.S. SPOT GAS
U.S. spot natural gas prices were boosted a little higher Friday by a premature storage demand and firm support in the futures market ahead of a three-day weekend, industry sources said. Forecasts still call for above- to much-above-normal temperatures across the U.S. this week, a trend which is expected to continue into next week in the Northeast, upper Midwest and across the uppermost northern plains.
Swing gas at Henry Hub was quoted about three cents higher at $2.20-2.24 per mmBtu as buyers pumped gas into storage and purchased gas for the long holiday weekend. Spurring more storage demand, sources said, was a rally this week in summer electricity prices to about $50 per megawatt hour.
Meanwhile in western Texas, Permian prices tacked on about one cent to $2.02-2.06, while San Juan values were similarly firmer at $2.01-2.03.
In generation news, the 750 MW unit 5 at the Four Corners generating station in New Mexico, shut late Tuesday for repairs, was expected to restart early Monday. The 220 MW unit 3 at the Four Corners plant was expected to restart this weekend.
In the Midcontinent, prices rose an average of two cents to $2.10 - 2.15, with Chicago city-gate quoted mostly at $2.25-2.26.
In the East, New York city gate prices were talked mostly again in the high-$2.30s to about $2.40, while Appalachian prices on Columbia crept up to about $2.29-2.35.
OIL & GAS REFERENCES
Charts:
oilworld.com
oilworld.com
NYMEX Reference:
quotewatch.com
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