MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, FEBRUARY 25, 1998 (4)
INTERNATIONAL
Companies
CityView Energy Corporation Limited announced that on 24 February 1998 the Minister of Mines and Energy and the President Director of Pertamina (Indonesia's state oil and gas Company) signed the Production Sharing JOB Contract granting Genindo Western Petroleum Pty Ltd the legal title to the Simenggaris Block North East Kalimantan.
Genindo Western Petroleum Pty Ltd is owned 85% CityView and 15% PT Genindo Citra Perkasa.
The Simenggaris Block comprises 2734 square kilometres in the prolific oil and gas Tarakan Basin region. The Block holds the potential for the discovery of multiple mid-size oil and gas fields.
Several gas markets have been identified for the Block with gas prices of approximately US$2.20 per MCF expected. These markets include a future fertilizer plant and also the methanol plant of Bunyu Island which is suffering from feedstock shortages.
The initial work program will concentrate on the Sesayap gas-condensate prospect which is a fault-closed 4000 acre structure located on the western side of the Block. ARCO drilled the Sesayap-A1 and A2 wells in the late 1970's at a time when gas was not profitable. The A1 well tested 25 MMCFGPD and 65 BOPD from highly porous upper Miocene sandstones: the A2 well was a successful sidetrack. The prospect has proven and probable reserves of 200 BCF with upside potential of 335 BCF.
Two 1500 metre wells will be drilled in 1998-99 to upgrade reserves to proven.
Odyssey Petroleum (OILYF/NASDAQ) announced that the Board of Directors of the Egyptian General Petroleum Corporation ("EGPC") has awarded concessions for three onshore exploration blocks to Odyssey and Merlon Petroleum Corporation ("Merlon"), each as to a 50 percent interest. The award is subject to final parliamentary ratification. The Company anticipates this process will be complete by the end of March(x).
The Siwa Block measures 19,140 km2 and is located in the Western Desert. The dominant structural style of the Western Desert comprises two systems: a deeper series of low- relief horst and graben belts, separated by major faults of significant throw, and broad Late Tertiary folds at shallower depths. The deeper parts of the basins are filled with relatively unexplored Paleozoic and Jurassic aged sediments. These sediments have been prospective in other basins throughout North Africa and parts of the Middle East. In the shallower section, the Cretaceous comes into play asstratigraphic traps, or as structural plays, when draped over the deep seated structures. A number of prospects and leads have been mapped at both levels. Odyssey and Merlon intend to evaluate existing data and to formulate an appropriate exploration program.
The El Mansoura Block measures 1,840 km2 and surrounds the East Delta Gas Field. Area reservoirs comprise Miocene aged sandstones of the Abu Madi formation. To date, most exploration on the blockhas focussed on gas and condensate in that horizon. However, recent studies show the greatest potential for finding oil may exist in the deeper Tineh, Qantara and Sidi Salim formations. Ten prospects and leads have been identified using the existing 3,100 km of seismic on the block. Odyssey and Merlon plan to acquire detailed seismic this year, followed by a well in the first half of 1999.
The Qantara Block measures 150 km2 and encompasses a well capable of production. The well was production tested in 1982, and flowed at 19.2 MMSCF/d gas and 2730 BCF/d condensate. Odyssey and Merlon plan to analyze these engineering results, map the existing and associated structures, acquire seismic as needed, and optimize the existing well as soon as possible. Qantara is 10 km from the Suez-Ismailiya-Port Said 16" gas pipeline.
Odyssey and Merlon are in the process of establishing a joint office in Egypt, and with Merlon acting as operator, they expect to begin operations by mid 1998.
The company also updated it's project in Southwestern Ukraine. To date the company has earned an undivided 55 percent working interest, and may earn up to an 80 percent working interest in the Belolessky Block, which consists of a 900 square kilometer license to explore, develop and produce hydrocarbons in Ukraine.
The Belolessky Block has a history of Soviet seismic and drilling activity dating back to the 1950's. As part of the exploration program Odessa is continually researching, gathering and reprocessing data from this activity. There have now been eight Devonian targets identified within the Block including the Sarata area. The Ukrainian State Geological Reserves Committee estimates that the Sarata area contains 167 million barrels of oil in place.
Of the 26 previously drilled Soviet wells 10 are located in the Sarata complex which refers to a series of structures that includes Rosov, East Sarata, and Yaroslav. In Addition an undrilled structure named Rybalske occurs to the north. One of these wells the ES1, is a suspended well that was leaking two different types of oil. Recently the company re-entered the ES1 well to determine the condition of the casing, drill out the cement plug above the Lower Carboniferous zone, install a well head and prepare the well for further testing. Re-entry has determined that the well may be suitable for a re-drill program.
Approximately 13,000 line - kilometers of 2D seismic data have been shot by the Soviets (figure 4), however only selective amounts of seismic data have been obtained by Odessa and up until recently most of this data is limited to the Sarata area. Data acquired in 1997 has been reprocessed by geophysical consultants from the University of Kiev retained to complete a 2.5D interpretive study. This study is extremely encouraging as it has provided a superior set of depth maps with an alternative interpretation of secondary structural elements.
Odessa is actively collecting and processing acquired data and concurrently building a dataset to present to select joint venture candidates. Additionally Odessa is putting together an acquisition team to review new projects.
Countries
Venezuela Courts Canadian Investors
An open invitation to invest in Venezuela was issued by the president of the country's Petroleum Chamber at a seminar in Calgary last week.
In a presentation to the Canadian Council for the Americas, Marcelo Laprea Bigott said Venezuela is determined to make the oil and gas sector the centrepiece of its economy.
From humble beginnings of exporting coffee and cocoa back in the 1900s, the South American nation with 80 years of oil and gas history, has now set its sights on doubling current production volumes within the next 10 years.
"Basically the idea and the challenge is to multiply by two our production today and that needs capital investment, time and technology," Laprea said.
Venezuelan production presently stands at 3.2 million bbls a day, or about five per cent of the 64 million bbls a day world consumption rate. Petroleos De Venezuela, the national petroleum company, hopes to raise that output to six million bbls per day.
Although PDVSA buys or contracts 60% of its equipment and materials, as well as 90% of its services locally, Laprea insisted there is plenty of room for international investors.
He explained that even though national capabilities for services like cartography, engineering and environmental fulfill 95% of industry's needs, increased activity is expected to render the domestic skill supply insufficient.
Laprea also cited opportunities in non-core sectors such as infrastructure services for water and electricity, distribution and transportation facilities from derivatives and hydrocarbons transformation as prime candidates for capital investment.
Also a professor at the Petroleum Engineering Department of Universidad de Oriente in Venezuela, he said the country has 64,800 million bbls of light, medium and condensate reserves, 270,000 million bbls of heavy oil reserves (eight to 14 API gravity), and 1.2 million bbls a day of refining capacity. With world demand growing at an estimated 1.2% each year, Laprea contends there is great potential for exploration.
In addition to housing the sixth largest reserves in the world, Venezuela also offers competitive advantages in production capacity, trained professionals, labour costs, technological development, geographical location and political stability, he said.
However, many benefits are counterbalanced by disadvantages that could easily hamstring an ill-planned operation. Laprea noted that while there is an increasing contingent of technological professionals in Venezuela, supply is still short of demand. Though labour costs are low, companies need to be aware of strict employee laws. The local infrastructure is also in need of updating, Laprea said.
Income taxes could also adversely affect investors, Laprea cautioned. While the average production cost was $1.50 per bbl and a reasonable market prices lies between $12 to $17 per bbl, taxes can be as high as 67.7% and royalties are around 16.7%, he said.
Chris Larocque, an economist with the Export Development Corporation, a crown entity which helps Canadian exporters compete in international markets, noted the Venezuela government has a history of being involved where it shouldn't be. This year, with an election impending, the future of the country is heavily dependent on commitment to reform, he added.
While Venezuela has strong currency reserves, privatization should proceed slowly and cautiously, Larocque warned, noting wage and inflationary pressures could be a factor after the election.
To offset some of the risks of investing in the resource-rich, oil driven economy, EDC offers both financing and insurance services.
SERVICE SECTOR
A boom in service work for pipelines and refineries has doubled the size of Canadian Fracmaster Ltd.'s Edmonton office to 18 sales and engineering staff.
As a result, the company will be moving to larger quarters as of April 1, said Andre Cooman, assistant manager. "It's about four times the space we're in," he said. Most of the growth has been in the Calgary-based company's pipeline isolation department, which specializes in inspecting, removing and replacing worn sections of pipe.
PIPELINES
A proposed merger between Canadian gas firms NOVA Corp and TransCanada Pipelines Ltd would link complementary pipeline operations, Canadian Natural Resources Minister Ralph Goodale said on Wednesday.
"In a sense they are complementary enterprises and not overlapping, the one within Alberta would feed into the other nationally or internationally," Goodale told reporters in London where he briefed analysts on Canada's 1998 budget.
NOVA runs Alberta's huge pipeline network while TransCanada takes most of that gas and moves it on its pipelines in eastern Canadian and U.S. markets.
But Goodale said the deal would have to be scrutinised by regulators including the Competition Bureau and the National Energy Board before it could go ahead.
"Gas producers would obviously want confidence that this new larger entity would continue to provide services on a cost effective basis," he said.
He said the companies involved could argue that the deal would create economies of scale, allowing them to compete more easily in world energy markets, especially in the United States.
Gas producers have said they would only support the deal if the two companies drop their opposition to the Canada-Chicago Alliance pipeline scheme which would pump natural gas to Chicago from northeastern British Colombia.
The $9.7 billion merger was announced last month and could rank as the biggest ever involving two Canadian companies.
EARNINGS REPORTS
Place Resources (PLG/TSE) reports 1997 Results
Year ended December 31, 1997
Record cash flow of $5.2 million ($0.42 per share) was posted for 1997, essentially unchanged from the $5.2 million ($0.41 per share) reported in th prior year. Revenue was $11.8 million in 1997, while net income of $1.2 million ($0.10 per share) was up 61 percent compared to the $.7 million ($0.06 per share) reported a year earlier. Increased net income was the result of reduced non-cash expenses relating to the low cost base of the Company's reserves.
Oil and liquids production of 1,014 barrels per day grew by 10 percent over the prior year, while natural gas production declined to 4.2 million cubic feet per day (mmcf). During 1997, Place received an average price of $23.06 per barrel of oil and liquids and $1.89 per mcf of natural gas which compares to $22.63 and $1.48 in the prior year.
Fourth Quarter - 1997
Fourth quarter cash flow was $1.4 million ($0.11 per share) down slightly from $1.6 million ($0.13 per share) in the previous year. Revenue for the quarter was $3.0 million compared to $3.5 million in 1996. Net earnings for the quarter were up by 114% to $0.5 million ($0.04 per share) from ($0.02 per share) in the prior year.
Oil and liquids production of 1,029 barrels per day at an average price of $22.04 per barrel, when compared to 1,028 barrels per day in 1996 at $25.30 per barrel, resulted in lower oil and gas revenues for the quarter. Natura gas production declined to 4.7 mmcf per day, resulting in lower gas revenues, but were partially offset by higher gas prices of $1.93 per mcf, up from $1.75 per mcf received a year earlier.
Outlook
1997 was a year of reserve growth and restructuring, as Place sold mature non-operated gas properties and invested the proceeds in Place operated, light oil properties and facilities and two gas wells. In the fourth quarter, Place added gas production from two Kiskatinaw gas wells at Mulligan, Alberta, and completed installation of the Charlie Lake waterflood, also at Mulligan. Place operates the Mulligan field, with an 80% working interest in the gas wells and 89% in the waterflood.
1998 is already off to a good start. In the first quarter, Place has completed unitization and commenced water injection in the Charlie Lake waterflood at Elmworth, Alberta. Place operates and owns 59% of the waterflood. From both the Mulligan and Elmworth waterfloods, the production rates are anticipated to increase for two to three years to peak production rates. This, combined with Place operating more of its production, and hedging 50% of its 1998 oil and gas production at average oil and gas prices of $27.03 per barrel (WTI at Edmonton) and $1.82 per mcf (Alberta NIT) respectively, bodes well for 1998 cash flow and earnings.
For further detail and table data, see Message 3534932
Geophysical MicroComputer Applications International Ltd. (GMA/TSE) reporteed 1st Qtr results. Revenues for the first three months are up 22% over the same period last year, reflecting significant market penetration and acceptance of GMA's enhanced products now available on Windows and UNIX operating systems. Overall, net earnings of $39 thousand are down $19 thousand as expenses increased 22% and income tax liability increased by $37 thousand. Increases in compensation are the result of some additional staffing and salary increases; product development costs have increased because GMA's new Windows and UNIX products have now been commercialized and as a result these product development costs are no longer capitalized ($60 thousand deferred in 1996) and G&A/other expenses have increased because of expanded office lease costs and general infrastructure costs consistent with GMA's sales growth, customer service and administration. Nevertheless, management is confident that earnings in 1998 will continue to grow as its multi-platform products gain more exposure and acceptance in North American and international markets.
Ron Newman, President and Chief Executive Officer stated " As GMA and our products become better know and accepted in international markets the opportunity for growth is very encouraging. Revenue from the US operations increased 55% over last year's figures and at the same time our European operations increased revenues by 78%. This considerable revenue growth from international markets positions GMA very well for continued global market expansion. "
GMA International is a developer and supplier of geological, geophysical and petrophysical computer-aided exploration (CAEX) software products. CAEX software allows geoscientists to interpret and synthetically model variou subsurface characteristics of the earth enabling exploration staff to reduce non-productive drilling and thereby reduce the overall risk and cost of hydrocarbon discovery and exploitation.
For greater detail with table data, see Message 3535337
Diaz Resources Ltd. (DAZ/VSE - DZRUF/OTC) announced that cash flow for the fourteen month period ended December 31, 1997, totalled $360,000, compared with $196,000 for 1996. Production revenues, which totalled $500,000 in 1997, were principally sourced from United States natural gas production.
The Company also reported that its new management team plans to edirect the Company's efforts, primarily towards oil and gas acquisitions, in Canada, due to the increasing availability of producing properties, at reasonable prices.
The Company also stated that it proposed to reorganize its capital structure at its Annual Meeting, to be held on April 14, 1998. This reorganization will result in a one for two consolidation of the common shares of the Company and will also entail the division, on a prorata basis for each shareholder, of the consolidated shares into two classes. Management of the Company is proposing the reorganization to permit further fund raising, required for its aggressive acquisition program, to be facilitatedfrom a smaller capital base.
For further info and table data, see Message 3535392
Prairie Pacific Energy Corp. (PRP/TSE) earned a net income of $448,012 (7 cents per common share) in the fiscal year ended September 30, 1997, compared to $352,792 (6 cents per common share) for 1996, the Company announced today. The gain was 27 per cent expressed in dolla terms and 16.6 per cent in earnings per share; the difference was due to the issuance of 1.03 million common shares during the reporting period. The results reflected a one-time gain on the sale of shares in Inspan Investments Limited of $394,865 (5.9 cents per share), compared to a similar one-time gain on the sale of securities of $797,605 (14.1 cents per share) in fiscal 1996.
This is the second consecutive year of profits and the third year of improved financial results, Prairie Pacific Energy's president Malcolm Todd said. Cash flow in 1997 was $592,516 (8.8 cents per share); an increase of $107,608 or 21 per cent compared to $484,908 (8.5 cents per share) for the previous year. Oil and gas revenues net of royalty were up 34.5 per cent to $1.1 million in 1997, compared to $819,865 in 1996. Processing income declined modestly by $37,244, from $273,104 to $235,860. Expenses decreased by 23.4 per cent from $1.2 million to $964,542.
At the Annual General and Special Meeting of Shareholders on April 3, 1998 in Vancouver, British Columbia, Prairie Pacific Energy will ask shareholders to approve the elimination of the Company's accumulated deficit effective September 30, 1997 through a non-cash accounting transaction. If approved, this will be accomplished by reducing the stated capital of the Company from $9.99 million to $2.13 million, crediting the reduction of $7.86 million to the deficit. The shareholders also will be asked to approve the issuance by private placement of up to 100 per cent of the Company's issued and outstanding stock, subject to Alberta Stock Exchange restrictions. Management contemplates raising equity capital in fiscal 1998 on terms favourable to the shareholders.
The improved 1997 results reflect a successful drilling program. Prairie Pacific initiated production of high quality oil, natural gas and gas liquids from the Nisku reef of the Brazeau, Alberta 12-29-48-12 W5M dual zone oil and gas discovery. The Company also commenced production in northeast British Columbia from the Flatrock 16-18-84-16 W6M Cadomin gas discovery and tied it into Company interest processing facilities.
In fiscal 1997, Prairie Pacific Energy purchased its proportional shar of a partner's interest, to increase its stake in the Cecil/West Eagle gas processing plant and oil battery from 25 per cent to 33.33 per cent. Subsequent to year-end, two additional Cadomin discoveries were drilled on the Flatrock lands. Prairie Pacific is evaluating the potential for a new Cadomin play on its acreage and considering the expansion and extension of its processing capacity.
''The Company has entered a period of sustained improvement in its results based on successful drilling, the expansion and extension of its processing facilities and a constant review of its assets and resources to take advantage of opportunities to purchase or sell assets.'' Mr. Todd said.
''In the present aggressive business climate for independent Canadian oil and gas producers, virtually all of Prairie Pacific Energy's properties were the subject of discussions to drill, develop, expand, or dispose in 1997 and the first quarter of 1998. In addition we reviewed several opportunities presented by others or uncovered by our own due diligence. The Company will take advantage of chances to grow or to realize on its equity value from deals that can be transacted on terms favourable to its shareholders.
''First quarter results, which will be available shortly, will indicate the performance shareholders can expect in the current year,'' Mr. Todd said. ''Fiscal 1998 is more challenging because of weaker commodity prices, but the year has exceptional opportunities for debt-free companies with access to capital, strict fiscal and business discipline and tough rate-of-return guidelines for their investments.''
Genesis Exploration Ltd. (GEX/TSE) See Kerms Top 21 - Spec 15 - Serv 9 Companies In The News
Canadian Conquest Exploration Inc. (CCN/TSE) See Kerms Watchlist Of Companies In The News
INTERNAL AFFAIRS
NTI Resources Limited (NTI/ASE) announced that Messrs. James E. Allard and David E. Powell have decided to leave the Board of Directors' of the Company. The Company expresses gratitude for their valuable contributions and wishes them all the best for their future endeavors.
In order to meet with residence requirement and to streamline the board, Messrs. Chu-King Eng and Andreas Tjahjadi have also agreed to resign. However, Mr. Eng will remain as President of the Company. As a result of this reorganization, the Board now comprises of the following six directors, namely: Messrs. Edward S. Soeryadjaya as Chairman of the Board, Graham G. Baugh, TheodoreM. Hanlon, Tjoe-Pa Lim, Takala G.M. Hutasoit, and Kiem L. Thio.
NTI is currently in the process of raising funds to finance its 1998 capital commitments for its oil & gas properties in Mongolia and Nigeria. The Company has appointed Traction Capital, a Calgary - based merchant banker, as its advisor and agent.
BelAir Energy Corporation (BGY/ASE) announced that the Board of Directors has granted 370,000 stock options at an exercise price of $0.40 to officers and directors of the Company. The options were granted on February 12, 1998 and the closing price of BelAir common shares on February 11, 1998 was $0.35 per share. This grant of options is subject to regulatory approval.
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