MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, MARCH 19, 1998 (4)
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UPDATES TO KERM'S T0P 21 - SPEC 15 - SERV 9 LISTED COMPANIES
Ulster Petroleums Achieves Record Results for 1997
"Ulster Petroleums (ULP/TSE) has reason to celebrate its 30th year as a public company" said Fred Woods, President of Ulster Petroleums Ltd. "And what better way to celebrate than with another record breaking year - Ulster's best ever!"
Net earnings increased by 111 percent to $9,300,000 or $0.22 per fully diluted common share for the fourth quarter of 1997.
Earnings for the year ended December 31, 1997, rose 93 percent to $17,991,000 or $0.49 per fully diluted common share.
Cash flows from operations of $29,438,000 or $0.68 per fully diluted common share for the final quarter of 1997 was 33 percent higher than the $22,159,000 achieved during the same period in 1996. For the full year of 1997, cash flow of $82,501,000 or $2.15 per fully diluted share was 37 percent higher than that attained in 1996. This increase is directly attributable to record production volumes, coupled with strong natural gas prices.
Natural gas production volumes rose by 18 percent to average 104.9 million cubic feet ("MMcf") per day during the fourth quarter. For 1997, natural gas production volumes reached an average of 96.6 MMcf per day, 31 percent higher than the 1996 annual level. Production growth came from new wells tied-in at Wapiti, Knopcik, Gold Creek and Montag.
Crude oil and NGL production volumes rose by 18 percent to average 11,200 barrels per day during the fourth quarter. Production volumes for the year ended December 31, 1997 jumped 27 percent to average 9,400 barrels per day compared to 7,400 barrels per day for 1996. This production growth came from new wells tied-in after the completion of the major plant expansion at Wimborne and drilling success at Wapiti and Gold Creek.
During 1997, Ulster added 23.0 million barrels of light gravity oil and liquids and 222.7 billion cubic feet ("Bcf") of natural gas to the Company's reserves. These additions represent 6.5 times production volumes for the year. Year end reserves totalled 52.2 million barrels of oil and liquids (39.5 million barrels proven) and 470.1 Bcf of natural gas (348.0 Bcf proven).
Ulster's annual report will be mailed to shareholders on April 2, 1998.
The Corporation's Annual Meeting will be held on Tuesday, May 5, 1998 in the Turner Valley Room at the Palliser Hotel at 9:00 a.m.
Thunder Energy Inc. Announces Exploration Joint Venture
Thunder Energy Inc. (THY/TSE) announced today it has entered into an exploration joint venture with an industry partner. Under the terms of the agreement a total of $5 million will be spent on land and seismic costs in 1998. The industry partner will pay 100 percent of the costs in 1998, Thunder will equalize into the joint venture in 1999. Future drilling costs, operating costs and revenues will be split 50-50 between the parties.
Thunder will use this joint venture to aggressively build its land and prospect inventory during the year. Expansion will occur at its three core properties as well as the development of new core areas. The deferral of land and seismic costs until 1999 allows Thunder to focus its 1998 capital budget on drilling activities.
1998's capital budget has been estimated at $12 million. Thunder expects to drill a total of 35 gross (18 net) wells during the year. Drilling targets will be primarily gas with emphasis at Rosalind and Matziwin where Thunder has excess capacity at its plants. Current production levels have reached 1,100 bbls/d and 9 mmcf/d on track for year end production rates of 1,300 bbls/d and 14 mmcf/d.
Tethys Energy Closes Financing
Tethys Energy Inc. (TET/TSE) has closed its previously announced private placement of 4,000,000 Special Warrants at $2.80 per Special Warrant, for gross proceeds of $11,200,000. Each Special Warrant will be exchangeable for one common share at no additional cost.
The Special Warrants were sold to investors pursuant to prospectus exemptions under applicable securities legislation through RBC Dominion Securities Inc., Peters & Co. Limited, Newcrest Capital Inc. and Griffiths McBurney & Partners.
Tethys intends to file a prospectus, in those jurisdictions where the Special Warrants have been sold, to allow the common shares, issued upon the exchange of the Special Warrants, to be freely tradable. The proceeds from the Special Warrants will be used to expand Tethys' 1998 capital budget from $12 million to $24 Million.
MARKET ACTIVITY
A rebound in energy prices boosted Canadian oil and gas stocks Thursday but it wasn't enough to lift the blue-chip Toronto Stock Exchange index out of its doldrums.
A gain of about $1.13 US in the price of West Texas Intermediate crude Wednesday helped boost the oil and gas sub-group of the TSE by almost a full per cent.
The Oil & Gas Composite Index gained 0.9% or 56.58 to 6271.55. Among the sub-components, the Integrated Oils gained 1.8% or 151.84 to 8562.55. The Oil & Gas Producers Index rose 0.7% or 354.92 to 5541.39 and the Oil & Gas Services Index lost a little ground, falling 0.1% or 2.11 to 2703.53.
Leading the gains were the integrated oil's. Suncor Energy Inc. was up $1.35 to $50.60, Shell Oil A up $1.00 to $24.40, <b.Petro-Canada up $0.30 to 24.65 and giant Imperial Oil gained 30 cents to close at $77.35.
Among producers; Talisman Energy rose $1.10 to $41.20, Canadian Natural Resources $1.05 to $27.1 and Canadian Occidental Petroleum $0.70 to $27.95. On the downside, Northstar Energy fell $0.35 to $8.90, Ranger Oil $0.35 to $8.30 and Startech Energy $0.25 to $6.00. All of these producers were among the most active traded issues on the TSE.
In the service sector, IPSCO gained $1.25 to $45.75, Dreco Energy $0.60 to $38.60 and Precision Drilling $0.60 to $27.10. On the downside, Enerflex Systems fell $1.50 to $37.50 and Shaw Industries A $1.00 to $45.00.
RESEARCH INFORMATION
Salomon Smith Cuts Driller/Svc EPS
NEW YORK, March 18 - Salomon Smith Barney has cut its 1998 earnings per share forecasts for oil drilling and service companies because of a sharp decline in oil prices, which may result in cuts in exploration and production spending.
-- Analyst Geoff Kieburtz said in a research report that Salomon's survey of 1998 capital spending plans projected 11 percent year on year growth. The projection was posited on a 1998 average oil price of $19.00 per barrel for the benchmark West Texas Intermediate blend, but the blend was trading at $13.76 per barrel on Wednesday.
-- ''Recent inputs from large oil companies indicates an increased likelihood of increased spending cuts,'' Kieburtz said.
-- He estimated that exploration and production spending growth for 1998 could slow to six to seven percent and that, as a result, earnings growth for drilling and service companies could fall to 22-24 percent from a previous expectation of 30 percent this year.
-- ''We believe that the stocks are attractively valued following our earnings reductions and we recommend purchasing shares on weakness,'' Kieburtz said.
1998 EPS Revisions
Baker Hughes(BHI) $2.10 to $2.00; BJ Services (BJS) $2.10 to $1.90; Camco Intl (CAM) $3.15 to $2.95; Cooper Cameron(RON) $3.55 to $3.40; Dresser $2.20 to $2.20; EVI Inc (EVI) $3.30 to $3.05; Halliburton (HAL) $2.40 to $2.30; Schlumberger (SLB) $3.35 to $3.20; Smith Intl (SII) $3.35 to $3.05 and Weatherford (WII) $2.60 to $2.40.
Gordon Capital
Canadian Natural Resources
(CNQ-T: $26.10) BUY
Pelican Lake Update
CNQ has drilled 43 wells to date this winter at Pelican Lake, with 32 now onstream and producing. With spring break-up approaching, and oil prices weak, CNQ has reduced the number of active rigs in the area from five to three. Lately, the company has experienced higher than expected gas content in some of its Pelican wells. As a result, the initial production rate expectations of 250 bbls/d per well have been reduced to 150 bbls/d. CNQ is now forecasting that once the pipelines are online June 1st, its Pelican Lake production will be in the 12,000 - 15,000 bbl/d range, rather than the previously expected 15,000 - 20,000 bbls/d range. However, we continue to forecast that the company will average oil production this year of 97,000 bbls/d, which had been at the bottom of CNQ's own forecasted range of 97,000 - 103,000 bbls/d. CNQ's natural gas production is currently ahead of expectations. The company experienced a drilling success rate of over 80% this winter in its gas operations, and is now producing 686 mmcf/d, higher than our forecasted average for this year of 680 mmcf/d. In particular, CNQ had a 52% interest in a new gas discovery at Murray River in northeast B.C. which test flowed at 30 mmcf/d. At Big Bend, in north central Alberta, the company has drilled 15 successful gas wells, with 4-5 wells adding an impressive 5 bcf in new reserves each. We are forecasting CFPS this year of $5.25. Our stock price target is $33.00.
Probe Exploration (PRX-T: $4.65) STRONG BUY
More Success At Leduc
Probe has drilled a very successful horizontal well into the Wabamun formation (D1) at Leduc, on its second attempt (the first well was unsuccessful). The well is capable of producing in the 400-500 boe/d range, vs. an expectation of 150 boe/d. To date, Probe has only drilled into one of the four identified Wabamun pools. A third horizontal well is currently drilling. In the Sparky oil discovery, also at Leduc, Probe has drilled eight of the ten wells planned before spring break-up. While information from the wells is being held "tight", management seems very encouraged. Probe will release its year-end 1997 reserve data early next week and its financial results in 2 - 3 weeks time. We recommend a STRONG BUY on Probe with a 12-month stock price target of $8.00.
INTERNATIONAL
Huge Gulf Of Mexico Oil Lease Bids To Be Scrutinized
United Press Int'l
NEW ORLEANS, March 19 - Bids have been opened for what's being called the third largest grossing federal oil lease sale for the central Gulf of Mexico.
Oil industry experts today began analyzing implications of this week's oil bid lease sale and federal officials are reviewing the high bids received.
The bids opened after crude oil prices, which are at a 10-year low, stopped their downward slide Tuesday after Venezuela proposed cutting oil production to raise prices.
In recent months, prices for crude have fallen from around $21 a barrel to $13.35 per barrel for West Texas intermediate crude, the U.S. benchmark.
Prices dipped to $12.90 this week for Louisiana sweet crude.
The sale brought bids of $810.4 million, down from the $824 million bid last year.
Even though the international oil glut drove prices lower, bidding on the Gulf tracts revealed no pessimism over the future of oil and gas prices.
Bob Stewart of the National Ocean Industries Assn. said, ''My judgment is that what oil companies are looking at, it's not oil prices today, but what they're likely to be five, seven, eight, 10 years from now when these resources are being produced.''
Conoco bid on the largest number of tracts, with bids on 122 lots. State Oil Exploration was the largest bidder on a single tract at $28 million.
Each tract represents about 5,000 acres of ocean floor.
Colombia Announces Big Changes To Oil Contracts
BOGOTA, March 19 - Colombian Mines and Energy Minister Orlando Cabrales on Thursday announced sweeping changes to oil contracts granted to private sector companies in a bid to ensure the country remained self-sufficient in hydrocarbons well into the next century.
The main beneficiaries of the changes are set to be those firms who hold so-called sliding scale contracts, including British Petroleum Co Plc (UK & Ireland: BP.L).
Under the terms of the new deal, those companies which have not yet fully explored blocks assigned to them under the sliding scale contract can hand back areas and automatically be reassigned 25 percent of that area under more lucrative R-factor contract terms.
The remaining 75 percent of the returned area will then be put up for public auction, Cabrales said at an evening press conference.
Until now, contracts have been awarded to private sector associates as a result of one-to-one negotiations with Ecopetrol. Cabrales said, however, that the first open auctions -- whereby companies offer a certain split of production for Ecopetrol -- would be held in June.
The plan was outlined last October as a way of stimulating exploration and production in hitherto unexplored or marginal areas.
Cabrales also announced that Ecopetrol had this week awarded four offshore blocks, which together cover the entire Atlantic coast out to a depth of 9,900 feet (3,000 m).
He declined to name the companies involved but Texaco (TX), Shell (RD.AS) (UK & Ireland: SHL.L) and Occidental Petroleum Corp (OXY) have been actively considering offshore opportunities.
The Mines and Energy Minister also used the press conference at the presidential palace in downtown Bogota to announce that Ecopetrol had granted BP commerciality on its Pauto field, part of the Piedemonte block, in eastern Colombia.
He said, however, that Ecopetrol had asked for additional details about BP's application for commerciality on the neighboring Florena field and said the request would be reconsidered ''within the next three months''.
BP has said it hopes to bring on stream Pauto and Florena, with estimated reserves of between 150 million and 600 million barrels of crude equivalent, by the year 2000.
The sweeping contract changes announced Thursday are largely due to the intense pressure exerted by BP, which has consistently complained that its contract terms for the remainder of the Piedemonte field are unprofitable.
In additional information, Cabrales said Ecopetrol posted 1997 net profits of 105 billion pesos, a 10 percent fall compared to 1996 before adjustment for inflation. The drop in profits once inflation was factored in was 34.4 percent, he said.
PIPELINES
New Team For Nova/TCPL
Both Companies Will Contribute An Even Number Of Executive Players
The Financial Post
Nova Corp. and TransCanada PipeLines Ltd. have announced the new executive team of their merged company although they are still months away from receiving regulatory and shareholder approval for the deal.
In a four-page memo distributed to employees yesterday, the Calgary-based pipeline giants said Bruce Simpson, senior vice president of Nova Corp. and president and chief operating officer of Nova Gas Transmission Ltd., will lead Nova/TCPL's gas transportation businesses as executive vice-president under George Watson, president and chief executive.
Two executives are leaving: Kent Jespersen, named chief executive of Nova's pipeline business in a reorganization before the merger was announced; and Bob Hodgins, senior vice-president and chief financial officer of TCPL.
The new executive team will be almost evenly split between TCPL and Nova executives.
However, one outsider, Val Mirosh, president of Alberta Natural Gas Co., will become senior vice-president, business development and corporate strategy.
The merged company, announced Jan. 26, will become the fourth-largest energy services company in North America with $21 billion in assets, $16 billion in revenue, 6,300 employees and 35,000 kilometres of pipe.
But the deal must first get the blessing of the federal Competition Bureau and the Alberta Energy & Utilities Board and approval from both sets of shareholders this spring.
Nova and TCPL have postponed their annual meetings until June to get over the regulatory hurdles and to present the deal to shareholders in time for a wrap-up by the end of the second quarter.
As soon as the merger is finalized, Nova's chemical division will be spun off into a public company, led by Jeff Lipton, president and CEO.
Dan Boivin will remain as senior vice-president of the chemicals company and president of the olefins and polyolefins business.
The new appointments won't be effective until the merger is approved, but an early announcement was necessary to have the companies ready to go, said Sheila O'Brien, Nova's senior vice-president of human resources and public affairs, who will move to the chemicals division in the same capacity.
"You can't wait until the 23rd hour when you're combining companies of this scale," she said.
"Between now and then, each one of us will be moving heaven and earth to make the merger happen."
Jespersen's departure came as a surprise to some analysts, while Simpson's appointment was both expected and applauded.
"He's clearly the key man to run and expand Nova," said one analyst.
Simpson has been a strong, vocal opponent of the rival $3.7-billion Alliance pipeline project, but that is expected to diminish, said the analyst, in order to gain support for the Nova/TCPL deal.
"I think everyone is pretty much expecting the Nova opposition to diminish to the extent that there can be some accommodations with Alliance," he added.
No Need For Special IPL Oil Capacity Plan In April
CALGARY, March 19 - IPL Energy Inc unit Interprovincial Pipe Line Inc said on Thursday that nominations for April capacity on its Canada - U.S. crude oil pipeline system were not high enough to trigger the Historical Average Procedure (HAP).
Under the temporary HAP system, approved two months ago by Canada's National Energy Board in a move aimed at combating chronic overnomination for space on IPL each month, shippers are restricted to moving crude volumes equal to historical levels if nominations exceed 115 percent of the capacity on any of the adjacent pipelines.
"Normal verification will take place," the company said on its shipper hotline.
For March, Line 2, which ships mostly light crudes to Superior, Wisconsin from Edmonton, Alberta, was apportioned at 16 percent above HAP volumes. Lines 3 and 13, which carry mostly heavy crudes to the U.S. Midwest, were apportioned at four percent over HAP volumes.
Apportionment is the amount of crude oil expected to flow on the pipelines subtracted from nominations by shippers.
IPL said it was asking its shippers to submit capacity verifications by 1600 MST (1800 EST/2300 GMT) on Friday and that it hoped to announce April apportionment numbers on Monday.
April was the last month for which the NEB approved the historical nomination process.
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