MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING MONDAY APRIL 27, 1998 (7)
EXCHANGE ACTIVITY
In the U.S., oil was the strongest of the major industry groups Monday, as the AMEX Oil Index (XOI) managed to suffer only a fractional decline. The Philadelphia Oil Service Index (OSX) did end lower, but only by 1.58 to 109.76.
Shares of international oil companies rose Monday while the wider market fell as investors switched into the energy sector, which has underperformed the wider market over the past 12 months.
''It is also important that the major oils have really beaten Street estimates. Although it was worse than last year, people buy stocks on what is going to happen, not what has happened,'' said Fadel Gheit, an oil analyst at Fahnestock & Co. in New York. The S&P Oil International Index (^SPOILI - news), which tracks the performance of major oil companies, rose 6.98 points, or 0.83 percent, to 843.57 by midday in New York.
In contrast, the Dow Jones Industrial Average was down 179 points at 8885 at midday Monday.
Exxon Corp. (XON) added 7/8 to 74-3/8, Mobil Corp. (MOB) rose 1-5/16 to 79-3/4, Texaco Inc. (TX) gained 1-1/8 to 62-5/8, Chevron Corp. (CHV) rose 14/16 to 83-5/16, and Amoco Corp. (AN) climbed 1 to 86-1/2.
The U.S. also is on the brink of the spring and summer driving season, which heats up with the Memorial Day holiday weekend in late May and boosts demand for gasoline.
''As long as the economy remains strong and there are some new oil production cuts, that is good for the sector,'' Gheit said.
Finally, analysts say that oil industry executives are looking with envy at the kind of multiples that banking stocks command after the recent merger frenzy in that sector.
Gheit believes that the oil industry is set for a phase of consolidation.
''It is pure speculation, (but) a lot of people believe we are entering a phase of consolidation. Small and large companies are looking for partners,'' said Gheit.
Analysts have cited British Petroleum Co. Plc (UK & Ireland: BP.L; BP) and Mobil Corp. as leading contenders to pair up after the success of their European downstream venture. But BP Chairman Peter Sutherland said last week the company had no intention of doing any mergers.
Bucking Monday's trend of gains, however, British Petroleum's ADR was down 15/16 to 89-13/16 at midday in trading Monday on the New York Stock Exchange.
The Toronto Stock Exchange Oil & Gas Composite Index fell 1.5% or 96.28 to 6529.46. Among sub-components, the Integrated Oil's fell 1.4% or 115.33 to 8407.96. The Oil & Gas Producers fell 1.2% or 71.06 to 5833.13 and the Oil & Gas Services lost 3.4% or 109.01 to 3103.69.
Compton Petroleum, Poco Petroleums, Westfort Energy, Newport Petroleum, Gulf Canada Resources, Tarragon Oil & Gas and Petro-Canada were among the top 50 most active traded on the TSE.
Paramount Resources gained $1.00 to $16.25, Morrison Middlefield $.40 to $9.80 and Startech Energy $0.25 to $6.00.
Percentage gainers included TUSK Energy 9.7% to $2.03, Tetys Energy 7.4% to $2.90, ML Cass Energy 7.1% to $1.05, Crown Joule Exploration 6.7% to $1.60, Paramount Resources 6.6% to $16.25, Courage Energy 6.0% to $2.65, Black Sea Energy 5.8% to $1.10, Canadian Conquest Exploration 4.3% to $1.20, Startech Energy 4.3% to $6.00, Morrison Middlefield 4.3% to $9.80, Calahoo Petroleum 3.8% to $1.10, Maxx Petroleum 3.0% to $1.70 and Richland Petroleum 3.0% to $3.40.
There were no oil producers among the top 50 net losers.
Percentage losers included Westfort Energy 16.3% to $2.97, Spire Energy 14.8% to $1.55 and Genesis Exploration 7.1% to $7.15.
There were no service companies listes among the top 50 most active traded issues on the TSE.
ATCO I gained $0.25 to $33.85 and Bonus Resource Services $0.20 to $5.20.
Percentage gainers included Bonus Resource Services 4.0% to $5.20 and Trican Well Service 2.6% to $5.90.
On the downside, Shaw Industries A fell $2.50 to $51.50 and Dreco Eneergy Services $2.00 to $53.00.
CE Franklin lost 11.4% to $9.30.
Over on the Alberta Stock Exchange, Dalton Resources, First Star Energy, Edge Energy, Anvil Resources, EGCO Canada, Cubacan Exploration, AltaPacific Capital and Green River Petroleum were among the top 25 most active traded issues.
Brigadier Energy gained $0.14 to $0.60, Wolverine Energy $0.09 to $1.09, Petro-Reef Resources $0.07 to $0.59, Best Pacific Resources $0.05 to $1.20 and Colt Energy $0.05 to $0.85.
On the downside, Hyduke Capital Resources fell $0.35 to $2.70, Niko Resources $0.25 to $5.60, Corlac Oilfield $0.15 to $0.60, Granger Energy A $0.15 to $0.75, Request Seismic $0.15 to $1.50 and Red Sea Oil $0.15 to $2.35.
JUNIOR CAPITAL POOL COMPANY MAJOR TRANSACTIONS
C.P.M. Technologies Inc., a junior capital pool company, announces that it has entered into a Letter of Intent executed April 24, 1998 to acquire certain producing oil and gas properties from a private Alberta based oil and gas company in consideration for $650,000 payable as to $200,000 by the issuance of 1,000,000 shares in the capital stock of C.P.M. and as to the balance by cash. The transaction is conditional upon the approval of the majority of the minority shareholders of the Corporation, the approval of the Alberta Stock Exchange and arranging satisfactory financing by the Corporation.
C.P.M. also announces in connection with this transaction the resignations of William R. McMahan, Preston Maddin and Bruce Kenway as directors of the Corporation and the appointment of R.G. (Jerry) Ball of Calgary, Alberta as the President and a Director of C.P.M. Mr. Ball is a geologist with 22 years experience in the oil and gas business in Alberta. The Board of Directors of C.P.M. will be comprised of Mr. Ball, Larry Parks and David Calnan.
The Corporation is a junior capital pool company and the acquisition of the properties by the Corporation is intended to constitute the Corporation's major transaction pursuant to Policy 4.11 of the Alberta Securities Commission and Circular No. 7 of the Alberta Stock Exchange. As such the transaction is subject to approval of the Alberta Stock Exchange and the Corporation's minority shareholders.
RESEARCH NOTES
Standard & Poor Rates Canadian Occidental Petroleum's Sr Notes 'BBB'
Standard & Poor's CreditWire 4/27/98 -- Standard & Poor's today assigned its triple-'B' rating to Canadian Occidental Petroleum Ltd (CXY/AMEX.& CXY/TSE) drawdown of US$200 million of senior unsecured notes due 2028 from its US$500 million shelf registration filed on Dec. 24, 1997.
In addition, Standard & Poor's affirmed the company's triple-'B' corporate credit and bank loan ratings. The outlook is stable.
The proceeds from the offering will be largely used to replace existing debt.
The rating reflects Canadian Occidental's growing production and reserve base, and the company's geographically diversified operations.
These factors are offset by a high debt burden.
Calgary, Alta. based Canadian Occidental produces approximately 186,000 barrels of liquids a day and 388 million cubic feet of gas per day from proved reserves of 664 million boes with an 80 to 20 liquids to gas mix. The company continues to benefit from its March 1997 acquisition of Saskatchewan-based Wascana Energy Inc. The acquisition has significantly increased production and reserves in western Canada, thereby reducing Canadian Occidental's dependence on crude production from Yemen. Production from Yemen now accounts for approximately 42% of total production versus 54% in 1996. In addition, the company should continue to benefit from more than 1,000 drill-ready prospects from its significantly larger land base in western Canada.
As a result of the acquisition, total debt has increased more than C$2.2 billion from C$572 million, despite asset disposals of over C$400 million in 1997. Total debt to capital has increased to about 63% from 33% at year-end 1996. Going forward, leverage is expected to remain high for the rating category, as free operating cash flow otherwise available for debt reduction will be used to fund capital expenditures. Canadian Occidental plans to spend about C$800 million annually in capital expenditures although a significant portion of the capital program for 1999-2000 is currently being allocated for unidentified opportunities. Earnings before interest, taxes, depreciation, and amortization interest coverage at about 8 times to 9 times is adequate for the rating.
Outlook: Stable - Canadian Occidental's debt leverage is not expected to increase beyond currently high levels. In addition, total debt is expected to be reduced through internally-generated cash flow starting in 1999. The company is expected to continue to replace reserves in Yemen by increasing production in western Canada, Standard & Poor's said.
Gordon Capital
Berkley Petroleum
(BKP-T: $13.75) BUY
Two Discovery Wells Reported
Berkley has participated in two recently announced discovery wells in Alberta.
At Turner Valley, in southern Alberta, the company has a 40% interest in a farm-in well on another company. The well has been successfully tested at 3 mmcf/d, and should be capable of producing 10 mmcf/d, once developed. Berkley is of the opinion that the discovery is at least 150 bcf of recoverable gas reserves. The discovery could potentially be much higher, however.
At Musreau in northwest Alberta, Berkley has a 12% interest in a deep gas discovery well recently announced by Chevron, who was the operator, that had been drilled a year ago. This well, drilled to a depth of over 4,600 meters, is capable of producing 40 mmcf/d. It has since been followed up by two other wells which remain tight. Our stock price target is $17.00. BUY.
Insider Trade
Jeffrey M. Waterous, Chairman of Mercantile International Petroleum Inc. announced the purchase of 1,659,000 common shares of Mercantile on The Toronto Stock Exchange. Together with his previous holdings of common shares, and assuming the exercise of his warrants and options, Mr. Waterous would hold 8,396,355 common shares (approximately 18.58%) of the then outstanding common shares of Mercantile, assuming no other options or warrants were exercised. Mr. Waterous now holds 5,717,785 shares of Mercantile which is 13.45% of the currently outstanding 42,521,442 shares of Mercantile.
MISC.
You are invited to attend a Media Briefing following the Annual General Meetings for Gulf Canada Resources Limited and Gulf Indonesia Resources Limited first quarter results. Mr. Dick Auchinleck, President and CEO, and other senior officers will be available for questions.
Gulf Indonesia Resources Limited:
Tuesday, April 28, 1998 at 12:00 pm MST
Gulf Canada Resources Limited:
Thursday, April 29, 1998 at 3:00 pm MST
Please plan on attending at Gulf Canada Square Conference Room No. 4
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