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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Lucretius who wrote (13002)	2/26/1998 8:51:00 PM
From: debra vogt	Respond to of 95453

Know you're interested in natural gas, FWIW: Canadian junior oil firms push natgas exposure February 26, 1998 01:59 PM By Jeffrey Jones NEW YORK, Feb 26 (Reuters) - Small Canadian oil companies, battered along with the rest of the industry by the decline in crude oil prices, had an overriding message for investors on Wednesday -- forget oil. Think natural gas instead. Several junior oil companies pitching investors at FirstEnergy Capital Corp's FE annual East Coast Canadian Energy conference went to great lengths to explain how their emphasis on drilling and production had swung to gas amid growing bullishness over prices projected by the end of 1998. It was a stark contrast to presentations of the past two years that highlighted oil, and especially Canadian heavy oil, as the target of choice. That ended when prices for heavy crude slumped amid ballooning production and limited capacity in key markets to refine the tar-like substance. Echoing recent predictions from a number of forecasters, executives with companies such as Barrington Petroleum Ltd CA:BPL , Beau Canada Exploration Ltd CA:BAU , Merit Energy Ltd CA:MEL and hot stock Genesis Exploration Ltd CA:GEX said Canadian gas prices were expected to rise by November when about 1.1 billion cubic feet of new export pipeline capacity would drain off a long-standing surplus in Alberta. "The key to this is the pipeline expansions," said Barrington president Brian Gore, referring to the expansion and extension to Chicago of the Northern Border Pipeline and expansion of TransCanada PipeLines Ltd's CA:TRP TRP mainline. The new capacity could mean a reduction in the discount for Canadian gas compared to U.S. NYMEX gas to US35 cents per thousand cubic feet from the current US$1.35, he said. Barrington, which earlier emphasized oil production, plans to spend C$100 million in 1998, 75 percent of that on gas development in western and northwestern Alberta. The company forecast gas and gas liquids production of 156 million cubic feet a day in 1998 and 202 million cubic feet a day in 1999. Cash flow this year was projected at C$60 million or C$1 a share, about flat with 1997. Beau Canada, which expects about 1,500 barrels a day less oil output this year as a result of shut-in heavy crude, projected gas production of 100 million cubic feet a day in 1998, up from 71 million last year. Net capital expenditures were budgeted at C$75 million, about 70 percent of the total targeted to gas. Beau Chairman Tom Bugg said he did not expect Canadian gas prices fall like heavy oil in a surge of drilling. When Alberta is better hooked into the North American pipeline grid, Canadian producers would be able to reap rewards of higher demand in the U.S. as electrical utilities switch to gas from old nuclear and oil units, he said. In addition, Canadian producers could have difficulty filling this year's pipeline expansions -- and the expected 1.3 billion cubic feet a day Alliance Pipeline in 1999 -- while trying to arrest declines in current output, Bugg said. Although there were risks the Chicago price would fall with a flood of new Canadian as well as Gulf Coast production, the narrower price spread would still mean better returns for Canadian producers, he said. "We're betting the farm on that so I hope we're right." Genesis Chairman Donald Sabo said his firm did not set out to take advantage of this year's projected higher prices, but it so happened its main operating regions were rich with gas. The company has excited investors with deep prospects in west- central Alberta. Genesis expects to produce 7,350 barrels of oil equivalent in 1998, 70 percent of it gas. Cash flow per share was forecast at C$1.05 this year, up from C66 cents last year. Investors said the companies' gas pitch made sense in the current low-oil-price environment. "It's one of the safer plays," said New York-based investor Kenneth Moss. "There's capacity that's going to be underutilized instead of gas hitting that brick wall." ((Reuters New York Power Desk 212-859-1624)) REUTERS