MARKET ACTIVITY/ WEEKEND EDITION OF TRADING NOTES JUNE 28 1998 (10)
SELECTED NEWS THIS PAST WEEK
Maxx Petroleum's (MXP/TSE) production profile is currently 78% levered to oil. To counter this, the company is currently pursuing two natural gas exploration plays. First, at Cow Lake, in west central Alberta, a recent discovery well was put onstream at 10 mmcf/d and should be increased to 15 mmcf/d by early July. This complements an earlier well, which is currently producing 4 mmcf/d. Maxx is the operator of the Cow Lake play, with a 50% interest. The area could yield as much as 50 bcf in potential recoverable reserves. At
Willesden Green, also in west central Alberta, Maxx has a 100% interest in 4.5 sections of exploration lands. Offsetting these lands, Union Pacific Resources (formerly Norcen) have drilled six successful wells, and have licenced 14 more this winter. Maxx plans to drill its own first exploration well into this play in August. On the oil side,
Maxx has taken a 25% interest in eight sections of land, as well as another 25% interest in a 40 section farm-in at Simonette, in northwest Alberta. Maxx and its partners will be exploring for both Swan Hills and Leduc structures, with three potential such prospects already identified. The initial exploration well is scheduled for October. Each well will cost at least $2.5 million to drill.
AltaCanada Energy Corp., a junior capital pool corporation, announces the closing of an Initial Public Offering of 1,375,000 Common Shares at $0.20 per Common Share on May 5, 1998 to raise gross proceeds of $275,000. Yorkton Securities Inc. acted as agents for the offering. AltaCanada also announces its listing on The Alberta Stock Exchange on June 19, 1998. The Common Shares of AltaCanada will begin to trade under the stock symbol ''ANG'' on June 23, 1998.
AltaCanada reported the signing of a Purchase and Sale Agreement with Constellation Oil & Gas Ltd., a junior public company (ASE/CSK.A), and PacWest Resources Ltd., a private company, to acquire selected oil and natural gas properties (primarily natural gas) in the Viking-Kinsella, Rivercourse and Provost areas of East-Central Alberta for an aggregate price of $1,068,000. The purchase will be financed through the combination of bank debt and cash to be acquired through the acquisition of another private company. It is intended that the private company will complete a private placement which will provide the balance of the funds required to complete the Major Transaction.
The Viking-Kinsella area produces from 26 active Viking and Colony gas wells in which AltaCanada will have an average working interest of 30%. AltaCanada will also acquire a 43% interest in processing capacity of 11.5 MMCFD. The acquired areas include at least three active areas for further exploitation and exploration.
AltaCanada will seek to develop the interests it has acquired, will pursue other opportunities to acquire oil and gas properties in Western Canada, and will initiate its own exploration and development plans. Completion of the Major Transaction is subject to receipt of all necessary regulatory approvals, completion of satisfactory due diligence inquiries and minority shareholder approval.
In accordance with the requirements of The Alberta Stock Exchange, AltaCanada announces that at the time of closing of the Major Transaction, AltaCanada plans to issue an additional 19,625 stock options at $0.20 to one of its officers.
Dundee Petroleum Corp. (DPC/TSE) reported that it has closed the previously announced disposition of its minor working interest in a shallow gas property located in southwest Saskatchewan. Proceeds from the sale amounted to $525,000 cash, and will be used to reduce the Company's debt and fund future drilling operations.
Blue Range Resource Corporation (BBR.A/TSE) announced the sale of the gas marketing operations of its affiliate, Humble Petroleum Marketing Ltd. (''Humble'') to Enron Capital & Trade Resources Canada Corp. (''ECT Canada''), a subsidiary of Enron Corp. On June 16, 1998, ECT Canada entered into a long term Management Services Agreement with Blue Range and Humble to manage the gas marketing operations of Blue Range and Humble. Under the Management
Services Agreement, ECT Canada will continue to handle the operational aspects of the gas marketing business such as nominations and account balancing, allowing Blue Range to focus on more strategic elements.
''Our business relationship with Blue Range illustrates the customized partnering approach ECT Canada takes to meet the needs of our customers'', said John Lavorato, Managing Director of ECT Canada. ''By leveraging on ECT Canada's distinct marketing capabilities, Blue Range will be positioned to enhance the value of its natural gas portfolio.''
As a result of transactions associated with the sale to ECT Canada and the Management Services Agreement, Blue Range realized pre-tax gain in excess of $3 million.
Blue Range is a natural gas exploration, development, production, processing and marketing company based in Calgary, Alberta. Blue Range concentrates its activities on liquid-rich natural gas prospects in Central Alberta, Northwest Alberta and Northeast British Columbia. Blue Range common
Endless Energy Corp. (EEC/ASE) has accepted an offer from a third party to sell their Jenner Property located in southeastern Alberta fro $1,175,000.00 Canadian. The sale is subject to certain conditions including board approval of the purchaser and a satisfactory title and environmental review by the purchaser. The property represents 14.7% of the total reserves and 23.2% of total production of the Company. Proceeds from the sale will be used to eliminate the Company's debt. Endless Energy still retains 14 properties located in Alberta and British Columbia comprising more than 56,000 gross acres. Following the sale the Company will retain 96 BOES/day.
Lundin Oil AB (LOI/TSE), through its wholly-owned subsidiary, IPC Malaysia Ltd. reported that a Pre-Unitisation Agreement ("PUA") has been signed between Petroliam Nasional Berhad (PETRONAS) and PetroVietnam Oil and Gas Corporation (PV) covering the eastern flank of the Kekwa oil and gas accumulation on Block PM-3 CAA, the Commercial Arrangement Area between Malaysia and Vietnam and its extension into Vietnamese Block 46. The PUA will allow the relevant parties to work on the potential unitisation of the eastern flank of the Kekwa field.
Ian Lundin, President of Lundin Oil explained, "The Kekwa oil and gas extension into Vietnam will now be part of the overall development of the field."
Mr. Lundin further commented, "Block PM-3 has proven to be one of Lundin Oil's most exciting and rewarding projects. It is a large block, equivalent in area to 8 North Sea Blocks and, so far, 5 fields (Bunga Kekwa, Bunga Raya, Bunga Pakma, Bunga Seroja and Bunga Orkid) have been discovered, but the geology is complex and more than 100 separate reservoirs have been identified and featured in the development plan for PM-3. We are convinced that a lot more oil and gas has still to be discovered. Phase I of the Early Production System was completed in 1997 and current oil output is approximately 12,000 barrels of oil per day. The focus is now on Phase II of the development program and when onstream, initial production is expected to be at least 40,000 barrels of oil and condensate per day and 250 million standard cubic feet of gas per day."
Lundin Oil AB is the result of a recent merger between International Petroleum Corporation and Sands Petroleum AB. Block PM-3 is located offshore in the Commercial Arrangement Area between Malaysia and Vietnam. Lundin Oil AB has a 41.44 percent working interest (IPC Malaysia Ltd. 26.44 percent, Sands Malaysia AB 15 percent) and is the operator of Block PM-3 CAA. The remaining interest is held by PETRONAS Carigali Sdn Bhd with 46.06 percent and PetroVietnam Exploration and Production with 12.5 percent.
Austpro Energy Corporation (AUS/VSE) announced that Western & Pacific Pipelines Inc. ("W & P"), the Company's wholly owned pipeline consulting subsidiary, has filed applications with the Manitoba and Saskatchewan regulatory authorities for the construction of crude oil gathering systems in Southwestern Manitoba (in the vicinity of Kirkella, Manitoba) and in Southeastern Saskatchewan (in the vicinity of Wapella and Rocanville). In addition, W & P has advised that it anticipates filing an application with the National Energy Board early in July for the construction of a cross-provincial border pipeline linking these two systems.
The gathering system in Manitoba will be owned by Wapella Pipelines Manitoba Inc., the shares of which are beneficially owned by Tundra Oil and Gas Ltd.. The cross-provincial border link will be owned by Pipestone Pipelines Ltd., the shares of which are beneficially owned by 623712 Saskatchewan Ltd.. The gathering system in Saskatchewan will be owned by Wapella Pipelines Ltd., the shares of which are beneficially owned by Austpro. Collectively, the gathering systems and the cross-provincial border link will be known as the Wapella PipelineSystem (the "System"). The Company's wholly owned subsidiary, Wapella Pipelines Ltd., has been designated the operator of the System.
The total length of the System is approximately 124 kilometres ("km") (approximately 77 miles) and will consist of the following:
1) the gathering system in Saskatchewan will be comprised of approximately 33 km (21 miles) of 114.3 mm (4 inch) pipeline, 22 km (13 miles) of 168.3 mm (6 inch) pipeline, a truck unloading terminal, tankage and a pump station;
2) the cross-provincial border link will be comprised of approximately 33 km (20 miles) of219.1 mm (8 inch) pipeline; and 3) the gathering system in Manitoba will be comprised of 37 km (23 miles) of 219.1 millimetre ("mm") (8 inch) pipeline. The Manitoba end of the System will deliver to the Interprovincial Pipeline terminal at Cromer. The Saskatchewan end of the System will commence at Wapella. The cross border provincial link will connect to the gathering systems at Red Jacket, Saskatchewan and at Kirkella, Manitoba.
It is anticipated that the System will be constructed this fall and will commence operation later this year with estimated throughput of approximately 1,750 cubic metres of oil (or roughly 11,000 barrels) per day at tariffs that are considerably lower than present trucking rates. Total costs for the construction of the System are estimated at approximately $12,500,000 with each owner being responsible for their respective share of the costs.
This transaction should complete the reorganization of the Company commenced in 1996 and should result in the removal of the Company's inactive designation.
Denbury Resources (DNR/TSE) has reduced their capital program to US$60 million in response to low oil prices. This is the second reduction in the capital program so far this year from an initial level of US$95 million. At the Heidleberg field in Mississippi, which Denbury acquired late last year, production rates have been increased by 50%, however the economics of continuing the exploitation have deteriorated as the net field price for the field has slipped below US$8.00 per barrel.
Odyssey Petroleum announced that the Concession Agreements for Petroleum Exploration and Exploitation for the Qantara, El Mansoura and Siwa Concessions were signed Monday in Cairo. The signing ceremony was conducted between Odyssey, Merlon Petroleum Company ("Merlon"), the Egyptian General Petroleum Corporation and the Arab Republic of Egypt, and marks the final step in the approval process. The signing of the Concession Agreements now brings Laws 7, 8 and 17 of 1998 into effect, giving Odyssey and Merlon legal title to the concession properties. Odyssey and Merlon will continue their ongoing operations with the objective of bringing the Qantara Concession into production in 1999. Odyssey is also engaged in the production and distribution of ethanol in the western United States.
Plexus Energy Ltd. (ASE-PXU) and Peregrine Oil and Gas Ltd. (ASE-PGG) announced that it has entered into a letter of intent to participate for a 10 percent working interest in a high potential reef prospect in southeastern Texas that has natural gas reserve potential of one to three trillion cubic feet.
Lands are currently being acquired on the prospect and drilling is expected to commence late in 1998.
The letter of intent also includes the company's agreement to participate for a 6.25 percent working interest in a joint ventureland acquisition program with the option to negotiate, through farmin on a prospect by prospect basis, a further 6.25 percent in the same southeastern Texas prospect area. The joint venture will pursue the acquisition of other identified reef and shallow gas prospects.
The southeastern Texas project is considered to be complimentary to the Arkoma project of Oklahoma and Arkansas in assisting Plexus to achieve its objective of developing significant natural gas reserves.
Westminster Resources Ltd. (WML/TSE) and Berkley Petroleum Corp. (BKP/TSE) have closed their previously announced asset exchange. Berkley has acquired 100 percent of Westminster's interests in southeast Saskatchewan and Puskwa, and Westminster has received interests in 3 gas properties and facilities in the Conroy / Tommy Lakes, Hamburg and Fireweed areas of northern British Columbia.
Westminster also received $ 7 mm in cash and 1.6 mm special warrants of Berkley each of which are exchangeable for one common share of Berkley for no additional consideration.
Talisman Energy Inc. (TLM/TSE) that first production from the Ross oilfield has been rescheduled to January 1999. The development is 79% complete.
The contracted Floating Production Storage and Offloading vessel (FPSO) is being fitted out at Clydebank, Glasgow. Slower than expected progress in engineering, equipment deliveries and fabrication has resulted in rescheduling the sail away of the FPSO to December 1998, based on productivity achieved to date. This will result in first oil from Ross in January 1999.
The first three production wells have been completed and tested, with horizontal sections of up to 4,800 feet in length. The most recent well has just tested at an average rate of 10,200 bbls/d; this rate was constrained by test facilities and 15,000 bbls/d will be achievable under production conditions. In total, the first three production wells are expected to contribute 30,000 bbls/d of the planned initial production rate of 40,000 bbls/d. The fourth production well is drilling in the reservoir and a fifth production well and four water injectors remain to be drilled.
Fabrication and installation of the subsea equipment continues to progress. The Ross hot-tap tie-in to the Frigg UK gas pipeline was completed on behalf of the Ross coventurers in early June by Total Oil Marine p.l.c. This is the first subsea hot-tap in the UK sector of the North Sea. The 25 km long gas export pipeline from the Ross field to the Frigg tie-in has been laid and the remaining subsea equipment will be installed in the field in July and August of this year.
''We are confident that the new Ross schedule is robust. Talisman's production for 1998 is ahead of plan to date and we expect to reach our target of 240,000 boe/d for the year despite the delay of Ross first production. Ironically, the deferral of Ross may prove to add value based on the forward oil price curve,'' said Jim Buckee, President and Chief Executive Officer. ''This is the start of infrastructure in the area and Talisman is also studying the potential to tie-back other nearby discoveries to the Ross vessel.''
The coventure partners in the Ross field are Talisman Energy (UK) Limited (51.99%), Lasmo North Sea plc (16.33%), Kerr McGee Petroleum (U.K.) Limited (14.49%), Intrepid Energy North Sea Limited (13%) and Nippon Oil Exploration and Production (MF) Limited (4.19%).
Gulf Indonesia Resources Limited (NYSE)and Talisman Energy Inc, (TLM/TSE) announced a new natural gas discovery in the Corridor Production Sharing Contract (PSC) area located in South Sumatra, Indonesia. The Rebonjaro Dalam-1 exploration well tested four zones at depths between 1,801 and 2,124 metres (5,910 and 6,970 feet) and flowed at an initial rate of 6.2 million cubic feet of gas
per day through a 3/4 inch choke during an eight hour period. Thecomposition of the gas includes 26 per cent carbon dioxide. Gulf has initiated plans for additional wells on the structure to delineate the size of the field.
Rebonjaro Dalam-1 represents the eighth gas discovery made by the companies in the area since 1991. The proximity of the discovery to the Corridor Gas Project infrastructure will enable easy tie-in for future gas production from the area. The discovery lies 5 kilometres (3 miles) from the main gathering line that will transport gas to the processing plant. The first phase of the Corridor Gas Project is near completion and is expected to commence natural gas sales to Caltex's Duri steamflood project in central Sumatra within 90 days.
Gulf Indonesia Resources Limited maintains a 54 per cent interest in the Corridor Block PSC and acts as operator. Partners are Talisman (Corridor) Ltd. with 36 per cent and Pertamina of Indonesia with 10 per cent
Windsor Energy Corporation (WNS/TSE) announced that its new South Louisiana well, the Fleury #1, operated by KCS Resources, Inc., has been completed as a flowing gas well. Windsor Energy holds a 21.3 percent working interest in this well.
Thomas E. Hogan, President of Windsor Energy Corporation, said the well flowed 2.1 million cubic feet of natural gas per day and 70 barrels of oil through a 9/64-inch choke. The flowing tubing pressure was 4,260 PSIG from perforations at 13,027 to 13,043 feet with no water produced.
"Two other zones appeared productive by log analysis," Mr. Hogan added, "and the prospect is being evaluated for additional drilling."
CrownJoule Exploration (CJE/TSE) provided an operations report for their first quarter. During the first quarter of 1998, the company experienced its first full-capacity production quarter averaging over 12 Mmcfe/d from its recently expanded Doris gas processing facilities. Start-up for the new 18 Mmcf/d facility occurred during the fourth quarter of 1997 and was fully functional by the beginning of the first quarter of 1998 bringing total processing capacity to 36 Mmcf/d.
CrownJoule drilled four gross (1.67 net) wells in this short winter drilling quarter. Two exploration wells were drilled and abandoned. At Doris, a stepout well at the north end of the pool encountered four metres of gas pay, adding significant reserves and extending the pool further northward. This well is currently producing 1.8 Mmcfe/d into the Doris I plant. To the south, a second stepout well was drilled and abandoned after missing the play fairway on the updip edge. This does not rule out further potential to the south in the park as evidenced by two successful stepouts drilled further south late last year.
As exploration operator for the Doris area joint venture, CrownJoule shot and processed 150 kilometers of high resolution seismic data over the Doris West, Foley Lake, Sarah, Jane, Newton and Manola areas this past winter. This data has helped us better delineate drilling locations for the upcoming winter drilling season on these prospects.
At Foley Lake, CrownJoule entered into a seismic option arrangement with Pinnacle Resources, and has recently elected to drill a farmin well on this two section block this winter. Similarly, an additional four sections of land north of the Sarah area have been secured under a farmin drilling commitment with Richland Petroleums. Portions of the new proprietary seismic data were shot on the farm-in lands and have delineated drilling locations for the coming winter.
In addition to its farmin commitments, CrownJoule was successful in acquiring 34 percent of Texaco's interest in the Foley Lake Area. This acquisition included three shut-in gas wells, 32 kilometers of proprietary seismic data, as well as 52 sections of undeveloped land north along the Doris trend. This acquisition has added a further 5,685 net acres of undeveloped land as well as proven reserves in the area immediately north of the Doris I gas plant. This undeveloped land was acquired for $31.40/acre, while the proved reserves were valued at $0.54/Mcfe. With this Foley Lake acquisition completed, CrownJoule will tie-in the existing wells and drill three to four of the potential eight locations on this block this winter.
CrownJoule is well positioned, with a strong balance sheet and a focus on producing and exploring for natural gas and liquids, to take advantage of acquisition opportunities caused by reduced oil prices, lower cash flows and increased balance sheet leverage within industry. CrownJoule will also continue to initiate new exploration opportunities for growth to build shareholder value. These new opportunities are initiated by the creativity and imagination of quality people. In this light, CrownJoule is pleased to welcome Mr. Bill Goods to the team as Senior Geologist effective June 1, 1998.
Tappit Resources Ltd. (TPT/ASE) nnounced that an aggregate of 21,172,864 common shares of Goal Energy Inc. representing approximately 89.77 percent of the outstanding common shares of Goal have been validly deposited in accordance with the terms of Tappit's Offer dated May 29, 1998 to acquire all of the issued and outstanding common shares of Goal. All conditions to the Offer have been satisfied or waived by Tappit and Tappit has taken up and paid for all of the common shares of Goal that were validly tendered in accordance with the terms of the Offer by providing notice and the necessary consideration to Montreal Trust Company of Canada in accordance with the terms of the Offer and applicable securities laws. To facilitate the deposit of the remaining common shares of Goal under the Offer, Tappit has extended the Offer to expire at 5:30 p.m. (Calgary time) on Monday, July 6, 1998.
Draig Energy Ltd. (DRA/ASE) reported the results of a well that the company recently drilled in the Hanna area of Eastern Alberta. The company plans to place the well on production by June 26, 1998 at a rate of 4 million cubic feet per day. Draig has a 97.625 percent working interest in this well.
Saxon Petroleum Inc. (SXN/TSE) announced that it and its majority shareholder, Forest Oil Corporation (NYSE:FST), have entered into an agreement whereby Forest will acquire all of the shares of Saxon held by minority shareholders on the basis of one share of Forest common stock for every 47 shares of Saxon. The transaction, which reflects an improved exchange ratio over the terms announced on April 29, 1998, places a current value on Saxon shares of approximately $0.46 per share. The transaction is structured as a plan of arrangement and is subject to approval by minority shareholders of Saxon and the Court of Queen's Bench of Alberta. The annual and a special meeting of Saxon shareholders has been scheduled for August 7, 1998. The Board of Directors of Saxon, based on the recommendations of a special committee of independent directors and an independent valuation of Saxon, is recommending that minority shareholders approve the transaction. All directors and senior officers of Saxon who hold Saxon shares have executed lock-up agreements (subject to any superior alternative offer). Saxon and its financial advisor, Griffiths McBurney & Partners, with the support of Forest, is continuing to solicit superior alternative offers for the Company.
Magin Energy Inc. (TSE: MGY) mailed today to all registered shareholders of Torrington Resources Ltd. (TSE: TRN) a formal offer to purchase and takeover bid circular, pursuant to which Magin offers to purchase all of the common shares of Torrington on the basis that the Torrington shareholders will receive one common share and one-half warrant of Magin for every 2.25 shares of Torrington. The warrants will have an exercise price of $9.50 per share and will expire on September 1, 2000, subject to Magin's right to accelerate the expiry date in certain circumstances. The offer is open until 12:00 noon (Calgary time) on July 15, 1998 unless withdrawn or extended.
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