MARKET ACTIVITY / TRADING NOTES FOR DAY ENDING WED., MAY 13 1998 (3)
TOP STORIES
Nova Scotia's Sable Spinoff
Oil Consortium's Latest Commitment A Shot In The Arm For Energy Sector
The Financial Post
Nova Scotia's infant energy industry took several steps forward yesterday with the announcement that a group of oil companies has agreed to work together on the Scotian Shelf and on picking a site to process gas liquids from the $3-billion Sable Island offshore project.
Mobil Oil Canada Properties, Shell Canada Ltd. and Imperial Oil Ltd. have formed a consortium to work on an exploratory program in the relatively shallow waters off Nova Scotia.
Mobil and Shell each have a 40% interest, and Imperial holds the remaining 20%.
The firms will co-operate in an area surrounding Sable Offshore Energy Inc.'s development, about 180 kilometres offshore.
Production from six fields near Sable Island is expected to start in late 1999 at 500 million cubic feet a day.
The pipeline for the gas, being built by a consortium that includes Westcoast Energy Inc. and SOE Inc., will be able to move more than 900 million cf/d.
Making use of the infrastructure being developed for Sable was a key driver of the agreement announced yesterday, said Ken Miller, vice-president of Eastern Canada for Mobil.
"It's another step in our broad strategy to develop the gas reserves of the Scotian Shelf."
All three companies have stakes in Sable and the deal grew out of working on that project.
Earlier this month, the three won an exploration licence for about 24,000 hectares in the area by promising to spend $9.5 million on exploration.
A joint technical team will be set up to manage the exploration program.
A $15-million, three-dimensional seismic survey will take place this summer.
Miller said two drilling rigs are working at Sable, and slots are available for exploration and appraisal drilling in late 1999.
Sable contains 3.5 trillion cubic feet of gas and 100 million barrels of gas liquids.
The Geological Survey of Canada estimates the entire Scotian Shelf has potential reserves of 18 trillion cubic feet.
News of the consortium's formation was welcomed by Jim Dickey, chief executive officer of the Canada-Nova Scotia Offshore Petroleum Board.
The nearly $93-million committed to work at the May land sale shows how the budding East Coast energy industry is progressing, he said.
"We expect to see continued interest in other areas of the offshore and we expect to see some activity that will result" from the growing interest.
The board, which must approve Scotian Shelf activity, will hand out the next round of exploration licences in December.
The group behind Sable, which also includes Nova Scotia Resources (Ventures) Ltd. and Mosbacher Operating Ltd., has picked a Cape Breton site for a gas fractionation plant as well as storage and loading facilities.
The price tag of the development is $50 million.
SOE Inc. has agreed to a long-term lease for a 36-hectare portion of Statia Terminals Canada, Inc.'s property at Point Tupper, N.S.
Statia will provide 500,000 barrels of dedicated tanks and access to dock facilities.
The fractionation plant will produce an average of 20,000 b/d of gas liquids, including propane, butane and light oil.
Feedstock will come via a pipeline from a gas processing plant at Goldboro, N.S.
Besides Sable and the region covered by the latest agreement, Mobil, Shell and Imperial have another exploration licence on the Scotia Shelf.
They won it in 1995 after agreeing to spend $86 million on the block.
Mobil and Shell each control 45.5%. Imperial holds 9%.
The concession includes the Adamant prospect, near the Thebaud field, which is part of the Sable project.
Exploratory drilling is being considered for late 1999 or 2000.
Chevron Triples Hebron Well Estimate
The Evening Telegram
The Hebron-Ben Nevis oilfields are expected to rival Terra Nova in size, with reserve projections now at 600 million barrels from 195 million 17 years ago, The Evening Telegram has learned.
Chevron Canada Resources spokesman Charlie Stewart confirmed Monday the fields have the potential to yield 600 million barrels of oil, three times more than 1981 projections.
The Terra Nova development is expected to yield between 400 million and 500 million barrels while Hibernia is estimated between 750 million and one billion barrels of oil.
Stewart said from his Calgary office that the Hebron-Ben Nevis consortium - which consists of Chevron, Petro-Canada, Mobil and Norsk Hydro Oil and Gas - is awaiting the outcome of delineation drilling this summer to confirm its projections.
"The early indications are that the 195 million barrels could be far greater than what they expected 20 years ago," Mines and Energy Minister Chuck Furey said Monday.
"But there's a lot of work that's still required out there."
Furey said only further drilling in the area will provide a more accurate reading of the "secrets held in this basin."
But, he said, the province is looking forward to the exciting prospect. "It's one prospect we have big hopes for," he said.
The Hebron-Ben Nevis fields are located 350 kilometres offshore, just 30 km southeast of the Hibernia field.
The consortium will begin drilling in the area in July. Over that 45-day period, the consortium is expected to drill down about 2,200 metres. The consortium will then move to another location in the same quadrant and drill even deeper to see if its forecasts are accurate.
Industry sources say the drilling will confirm what the consortium already knows - that the field will rival Terra Nova.
"I don't know who your sources are but I can tell you that the prospects are positive, it has a very bright future and that the numbers that were earlier tabled back in 1981 will grow," Furey said.
The actual size, however, cannot be predicted with certainty until further drilling occurs, he said.
The delineation wells will be drilled by the rig Glomar Grand Banks, operated by Glomar International (Canada) Drilling Co., a subsidiary of Global Marine Inc. of Houston, Tex.
The Glomar Grand Banks, originally known as the Vinlander, is expected to drill a number of wells over the life of the one-year contract.
The consortium drilled three wells 17 years ago in 94 metres of water on the Hebron-Ben Nevis field. Calculations at the time placed reserves at 195 million barrels of oil.
In terms of oil-producing wells in Newfoundland's offshore, Terra Nova is expected to come on stream in 2002, followed by White Rose and the Hebron-Ben Nevis field. Hibernia has been producing oil since late last year.
"The larger the field, the greater the opportunities," Furey said.
Hard-Hit Numac Energy To Sell Non-Core Assets
The Financial Post
Oil-oriented Numac Energy Inc. expects to post a $12-million loss in 1998 and hopes to raise $50 million to $70 million later this year by selling non-core assets, its chairman and chief executive, Stewart McGregor, told shareholders yesterday.
He said the company, which derives 60% of its production from oil, is taking a beating because of slumping prices. Numac has shut in more than 2,600 barrels a day of heavy oil until crude prices improve and has delayed two heavy oil projects in Saskatchewan and deferred expansion of one in Manatokan, Alta.
The company plans to hold capital spending near cash flow, expected to hit $90 million this year. But it is willing to look at acquisitions in core areas. "We will not shoot ourselves in the foot by being penny wise and pound foolish," McGregor said.
Disposition proceeds will be used to pay down debt, which was $278 million at the end of the first quarter. For the quarter ended March 31, Numac had a loss of $3.4 million on revenue of $56.8 million.
After the meeting, McGregor said the assets to be put on the block are mostly low priority or non-operated oil and gas properties.
Numac also plans to hire a new president and CEO in the next three months. McGregor said the ideal candidate will have a strong exploration and production background.
Canadian Natural Resources Hunts Bargains
The Financial Post
With a war chest of up to $300 million for acquisitions, Canadian Natural Resources Ltd. chairman Allan Markin is one of the few oilpatch executives hoping oil prices stay weak for a little while longer.
With low crude values causing bankers to become more nervous about lending money to energy firms, cash constrained producers may sell jewels to survive, he told reporters yesterday after the annual meeting in Calgary.
About 60% of his firm's production comes from oil, so gas properties are high on Markin's shopping list.
"I just think there are going to be some opportunities coming up in the next two or three months like we've never seen," he said.
If the right opportunity arises, the company, which has long-term debt of $1.32 billion, is willing to make another large deal similar to 1996's $670-million takeover of Sceptre Resources Ltd.
The firm plans to spend $700 million this year, compared with $1.11 billion in 1997. It will also drill 510 wells, down from 711.
Heavy oil properties in eastern Alberta and western Saskatchewan are taking the biggest hit from reduced activity. Canadian Natural will sink only nine wells in the region, down from original 1998 forecasts of 300 to 400.
Average oil and gas liquids output for this year is estimated at 85,000 to 95,000 barrels a day and gas flows are put at between 690 million cubic feet and 720 million cubic feet a day. Cash flow is forecast to vary from $495 million ($4.98 a share) to $520 million ($5.24).
The company has shut in 8,000 b/d of heavy oil. Markin said the wells will be put back onstream if oil prices recover to US$16 or US$17 a barrel. Benchmark crude marker West Texas intermediate closed yesterday at US$14.95 in New York.
IN THE NEWS
Pan East Petroleum Corp. (PEC/TSE) commenced production from the 11-19-64-1W6M well on April 30th. The well produces from the Wabamum Formation at a raw gas rate of 8 MMcf/d (7.1 percent acid gas) and 400 Bbls/d of condensate and natural gas liquids at a flowing well head pressure of 1,800 psi. Production is tied into the Simonette gas pipeline and is processed at the Kaybob South No.3 (K-3) gas plant, in both of which Pan East has direct ownership. Pan East owns a 90 percent working interest in the well, and sales gas and associated products net to Pan East's interest, expressed in gas equivalence, is 9.9 MMcfe/d.
The Company also plans to commence completion operations within the next 30 days on the Pan East et al Karr 13-25-64-2W6 well that is located approximately two miles from the 11-19 gas well. The 13-25 well was drilled to a total depth of 4,056 meters (13,304 feet) earlier in 1998. Pan East is the operator and owns a 66 percent interest before pay out and a 40 percent interest after pay out in the well and 12,160 acres of surrounding lands.
At Nordegg, Pan East has reached total depth of 1,610 meters (5,280 feet) in the Pan East et al Nordegg 12-9-41-17W5M well. Production casing has been run and the well will be tested within the next three weeks. Pan East is the operator and owns a 66.67 percent interest.
The Company is pleased to announce that recent production additions from the Midwinter, Karr and Sunchild areas bring the Company's current production to 40 MMcfe/d. Pan East's President and C.E.O., Richard A. Walls, stated, ''I am proud of my operational staff for meeting all of our production targets despite difficult weather conditions and numerous logistical considerations''.
Husky Oil, operator of the Whiterose oil field on the Grand Banks, has initiated an internal study to investigate the feasibility of a multi-pool development strategy for other Grand Bank fields that contain approximately 50 to 100 million barrels of recoverable crude oil, says Premier Brian Tobin.
In a presentation at the Offshore Technology Conference in Houston, Texas, earlier this week, Tobin said, "This study will investigate the best development strategy for fields of this size either as concurrent or consecutive production scenarios." |
