MARKET ACTIVITY/ WEEKEND EDITION OF TRADING NOTES JULY 5 1998 (11)
IN THE NEWS THIS PAST WEEK
Editor's note - The following was news this past week as releassed by the subject companies. There may appear to be duplication when compared to TOP STORIES, which were articles published by the media.
Northstar Energy Agrees To Be Acquired By Devon Energy
Devon Energy Corp. (AMEX/DVN) said it agreed to acquire Canadian based
Northstar Energy Corp. for a total of about 15.4 million common share equivalents, subject to adjustment.
Under the agreement, Northstar shareholders would receive 0.227 of a DVN common equivalent share for each Northstar share held.
The common equivalent shares are expected to be fully tradeable on the Toronto Stock Exchange and will be exchangeable, at each shareholder's option, for DVN common.
The agreement provides Northstar shareholders with a ''downside collar'' that allows for upward adjustment in the exchange ratio to a maximum ratio of 0.235 exchangeable shares for each Northstar share under certain circumstances. Such adjustment would begin if the market value of a DVN common share underlying the exchangeable shares multiplied by 0.227 would yield a value of less than $11 (Can.). DVN said, assuming current US/Canadian dollar exchange rates, an adjustment of the 0.227 ratio would not begin unless the price of DVN common shares declines below $32.95 (U.S.) per share. The exchange ratio would increase pro rata to the maximum 0.235 of an exchangeable shares for each Northstar share if the DVN share price declines to $31.82 (U.S.). Thereafter, no adjustment would be made.
DVN said it also would assume existing Northstar debt of US$312 million and certain other obligations
DVN stated that the merger would create an evenly balanced oil and gas producer with 53% of its reserves in the U.S. and 47% in Canada, noting that there also would be balance between oil and gas reserves with the combined company having total reserves of approximately 1.2 trillion cubic feet of gas and 117 million barrels of oil.
Following the acquisition, DVN would have some 47.7 million common equivalent shares outstanding with approximately 36.8 million shares in the public float. The company also would have approximately $70 million (U.S.) in working capital, $312 (U.S.) in total debt and about $500 million (U.S.) in untapped financing capacity.
The merger is expected to be accounted for as a pooling of interests so Northstar's financial statements would be restated to conform to U.S. generally accepted accounting principles. Among other things, this would result in a reduction, effective Dec. 31, 1997, in the carrying value of Northstar's oil and gas properties. Following this adjustment, the combined company would expect a 1998 depletion rate for its Canadian oil and gas properties of approximately $2.50 (U.S.) to $2.75 (U.S.) per energy equivalent barrel. DVN noted that the merger would not impact the depletion rate for its historical U.S. oil and gas properties.
Completion of the transaction is subject to approval by the shareholders of both companies as well as certain regulatory and court approvals.
DVN and Northstar each provided the other substantive ''termination fees'' and certain other rights in the event the merger is not completed. Each also agreed not to solicit other proposals within the limits of fiduciary responsibility. The directors and affiliates of each company have indicated their intention to vote their shares in favor of the transaction.
Cabre Exploration and Naftex Energy Transaction Fails to Close
Cabre Exploration Ltd. (CBE/TSE) and Naftex Energy Corporation (NFTX/CDN) had proposed to combine their respective 50 percent interests in the West Esh El Mallaha concession of Egypt whereby Cabre would become a 50 percent shareholder of Naftex by June 30, 1998.
The parties have been unable to resolve certain issues and the transaction as proposed will not close. Alternatives to the proposal are being considered. The previously announced 2-D and 3-D seismic program is over one-half completed and a Sante Fe drilling rig has been contracted for a four-well drilling program expected to commence in July.
Carmanah Resources Camar-6 Well Placed On Production
Carmanah Resources Ltd. (CKM/TSE) announceD that the Camar-6 well in the 84 percent-owned and operated Camar Field in the Java Sea was placed onstream on June 29, 1998.
Well test data over the first six hours of production from only the LL-3 zone yielded an average measured flow rate of 1,200 BOPD with 1.5 MMcf/d of natural gas and no formation water. The well is continuing to clean up and stabilized flow rates will be established over the next several days. With Camar-6 onstream at the indicated rate, Camar production has more than doubled to 2,350 BOPD.
Carmanah also announceD that the MPA-1 development well, located one mile southwest of Camar-6, was spudded on June 26, 1998 and surface casing has been set at 833 feet subsurface. The well has a projected total measured depth of 6,105 feet (4,340 feet TVD) which should be reached in 30 days. As this well is being drilled from the monopod platform recently installed to bring Camar-6 onstream, MPA-1 can be completed and placed on production without delay.
Immediately following completion of the MPA-1 well, in early August the Pride Pennsylvania jackup rig will be moved to the Camar-8 location, located approximately one mile east of Camar-6.
Because of mechanical problems with a safety valve in the completion string, the CN-3 well drilled in May will now be placed on production in late July, awaiting the arrival of a service rig and downhole equipment to complete the remedial work.
Ultra Petroleum Mesa 15-8 Well Exceeds Expectations
Ultra Petroleum (UP/VSE) reported all plugs have been removed from the Mesa 15-8 well and the first seven stages (between 10,360 ft. and 12,832 ft.) that have been completed so far (out of a total of 10 planned stages) are flowing on a commingled basis into the pipeline. In a 24 hour flow test on a 9/64 inch choke, the well flowed 9.7 million cu. ft. of gas per day with an average flowing casing pressure of 1650 psi.
According to Company engineers, the well is responding to fracture stimulation in a similar fashion to Jonah Field wells.
After several more days of flow, a plug will be set above the completed zones and three more fracs will be performed on the remaining 355 net ft. of pay between 8,439 and 10,243 ft., after which the entire completed wellbore will be opened up to the sales line.
The Mesa 15-8 is located approximately 20 miles NNW of Jonah Field on the northern plunge of the Pinedale anticline. It is the first of 6 earning wells on the Mesa project, which encompasses approximately 20 sections. Ultra has 85% working interest and Western Gas Resources (NYSE: WGR) has 15% working interest in the earning wells until payout. After payout, Ultra will have working interests ranging between 53.125% and 63.75% in the project.
Canadian Conquest Exploration Closes Acquisition Of SE Saskatchewan Assets
Canadian Conquest Exploration (CCN/TSE) reported the company has closed the previously announced acquisition of a suite of assets in southwestern Saskatchewan. The assets acquired include a 42.50% working interest in the Instow South Upper Shaunavon Voluntary Unit and a 44.8% working interest in the East Beverly (Java) Cantuar Voluntary Unit, both of which are operated by Conquest. As a result of the acquisition, Conquest now has an 87.50% working interest in the Instow property and a 100% working interest in the Java property. As part of the acquisition, Conquest also acquired varying working interests in four other oil producing properties in Saskatchewan.
The transaction, which has an effective date of January 1, 1998, will result in the addition of approximately 320 barrels per day of medium gravity crude oil production and proven plus risked probable reserves of approximately one million barrels of oil to Conquest's reserve base at a cost to Conquest of $3,365,000 prior to adjustments.
Westfort Energy Evaluates Pelahatche Deep Unit 18-4 #1 Well
Westfort Energy Ltd. (WT/TSE) said that the Schlumberger log analysis and laboratory core results together evidence that 14 zones are probable oil productive and total over 100 feet of oil saturation in the Lower Cretaceous formations.
In addition, there was a total of over 50 feet of sands in the Cotton Valley and the Buckner/Haynesville formations that analyzed as probable gas productive.
Most of the same Lower Cretaceous zones have been found to be productive in Pelahatchie field in offset wells. A zone at 11,300 feet analyzed particularly good, with over 15 feet of net pay. This same zone has been a target recently in the field, having had initial potential of over 1000 barrels of oil per day in a well in the northern part of the field and actual production averaging 160 barrels per day flowing the first year. The Cotton Valley zones have never been tested in the field. The Bucker/Haynesville zone was drill stem tested at an estimated 1,000,000 cubic feet per day in an offset well 3000 feet away.
Westfort has successfully set 15,900 feet of 7'' casing, cemented same, changed out the drill string to 3-1 1/2'' and will recommence drilling of the Pelahatchie Deep Unit 18-4 No. 1 about mid day today. At total depth of 17,350 feet, the company will again run logs and take sidewall core samples to evaluate the Smackover and Norphlet zones which are expected to be encountered.
The Johnny Rhodes 7-6 well being drilled in the north part of the field has reached a depth of 9477 feet. The one PDC bit employed to drill from 1700 feet to the present depth is now being pulled from the well and is to be replaced with a rock bit for the drilling to total depth. It is estimated that the bit trip will take 8 or 9 hours and drilling will recommence late this evening.
Thunder Energy Inc. 2nd Quarter Drilling Program Successful
Thunder Energy Inc. (THY/TSE) reported results of its second quarter drilling program. During the quarter Thunder drilled a total of 16 wells (8 net) resulting in 12 gas wells (6 net), 3 oil wells (1.5 net) and 1 dry hole (0.5 net). Thunder estimates its share of incremental production will be 2.5 mmcf/d of natural gas and 250 bbls/d of crude oil.
The new wells were all drilled at Thunder's core property at Rosalind, Alberta. The program consisted of 11 wells targeting shallow gas in the Belly River, three horizontal infill wells in the Rosalind oil pool and two deeper tests of the Mannville section. All but one of the Belly River wells were successful.
Due to proximity to existing infrastructure Thunder expects to have the new wells on stream by the end of July bringing total production to 11.5 mmcf/d and 1,150 bbls/d. Thunder will commence its third quarter drilling program in August targeting gas at its operated property at Matziwin.
Tethys Announces Two Sucessful Light Oil Wells
Tethys Energy Inc. (TET/TSE) reported completion of two light oil wells currently producing 675 barrels of oil per day net to the Company.
The 12-32-76-22 W5M well is a light oil discovery in the Girouxville area of Northwestern Alberta. Tethys has a 50% working interest in the well that was drilled in June. The well is currently flowing clean oil at a restricted rate of 150 barrels per day with a tubing wellhead flowing pressure of 960 pounds per square inch.
The second well is a 100% working interest horizontal well that was drilled in the Griffin area of Southeast Saskatchewan. This well is currently producing 600 barrels per day of light oil.
Randell Pardy, President and Chief Executive Officer of Tethys stated: ''I am extremely pleased with this success. Tethys has found two new oil pools and has had 100% drilling success on the Girouxville exploration play. Tethys has interests in 24 sections of land surrounding these discoveries.''
Tethys is currently drilling a four well program in the Cynthia/Carrot Creek area of west-central Alberta that is targeting natural gas.
Progress Energy Ltd. Expands Whitecourt Area
Progress Energy Ltd. (PGX.A & PGX.B/ASE) said production rates have increased to 700 bbls/d of average 30 API gravity oil. Production in the first quarter averaged 395 bbls/d. Progress also announces a major expansion in their Whitecourt, Alberta core area. Recent success at land sales, farm-ins and an acquisition have increased land controlled in the Whitecourt area to 74 sections (47,360 acres). Progress has an average 90 percent working interest.
The acquisition property (subject to normal due diligence and closing requirements) currently produces 195 bbls/d of medium gravity oil and has two capped gas wells which tested at rates of 4 mmcfd each. Progress will operate the property with an 80 percent working interest. The effective date is June 1 and the 155 bbls/d net oil production from this acquisition was included in our 700 bbl/d total.
In the second quarter Progress drilled 7 wells (4 oil, 1 gas and 2 dry). The oil wells are being completed and the 100 percent interest gas well tested 1 mmcfd and will be on production by August. Progress plans on drilling 10 wells in the third quarter. Progress has $2 million in cash and no debt after deducting the cost for the above acquisition.
Anvil Resources Reports Test Results From Webb County Well
Further to the News Release of May 7, 1998 and June 8, 1998, Anvil Resources announced results from tests conducted on one of the several potentially productive Wilcox sands encountered in the drilling of Anvil's first well in Webb County, Texas.
The first sand tested is 30 feet thick, and was perforated over a 10 foot interval. The initial natural flow rate was 125 MCFD (125 thousand cubic feet per day) of gas. After the fracing program on this sand, the well flowed during the clean up of frac fluids over a three day period, at rates between 1000 MCFD (1 Million cubic feet per day) and 1400 MCFD (1.4 million cubic feet per day) of gas with associated light crude oil on a 16/64 inch choke.
The Company will continue the testing program over the next few weeks on this well on several of the other Wilcox sands with similar characteristics which it encountered in the drilling of this well. The Company anticipates that when these additional sands are perforated and fraced they will add to the productivity of the well.
The company said that due to the positive results obtained to date from this first well, a second well location has been permitted and Anvil (Alberta: ANV) has requested the operator to prepare an A.F.E. (authorization for expenditures) for the drilling of a second well.
GHP Exploration Announces Third Gulf of Mexico Discovery
GHP Exploration Corporation (GHPX.U/CDN) reported that the initial exploratory well on the West Delta block 61 prospect has reached total depth and seven inch production casing has been set. GHP has a 10% working interest in the discovery.
The well was directionally drilled to a total measured depth of 16,175 feet (13,440 feet true vertical depth) in the Miocene formation. Based on log and sidewall core evaluation, multiple potential pay zones totaling in excess of 300 net feet of pay (true vertical thickness) were encountered below 7,500 feet. The well is currently being prepared for testing to determine hydrocarbon type in the lower zones and to assist in the design of the production facilities. The need for one or more development wells will be assessed following the results of the well test. First production is expected in late 1998.
The Company also announced that the Winfield Ranch 17 #1-E well on its South Fort Stockton prospect in Pecos County, Texas, (News-February 23, 1998) is progressing on prognosis and is currently drilling at a depth of 19,500 feet. This well is planned for a total depth of 26,000 feet in the Ellenburger formation.
Ohio Resources Increases Production Quarter To Quarter
Ohio Resources Corporation (OHO/VSE) said the company increased gas production during the third quarter as a result of five (1.45 net) successful gas wells drilled during the past winter and spring drilling programs.
Four of these wells were tied in and commenced production during March and April and the fifth well commenced production in May. These wells were drilled at Midwinter (3) in northeastern B.C., Turin (1) and Westerose (1), Alberta.
The company exited the third quarter at 381 boe/d vs 259 boe/d at the end of the second quarter. Ohio Resources has plans to participate in the drilling of four new wells throughout the summer. Two of these wells and one additional rework of an existing well will begin at Turin, Alberta (Ohio 50 percent) in mid-summer. These locations were identified by a 14 square mile 3-D program shot last fall. Ohio expects to exit the year ending July 31, 1998 at record production levels.
Husky Oil Ltd. To Buy East Coast Properties From Talisman Energy & Gulf Canada Resources
Husky Oil Limited has reached agreement with Talisman Energy Inc. (TLM/TSE) and Gulf Canada Resources Limited (GOU/TSE) to purchase a number of properties off the East Coast of Canada including interests in White Rose, Terra Nova, North Ben Nevis, Nautilus and Mara. A total of 12 significant discovery areas in the Jeanne d'Arc Basin are included and approximately 22,000 net hectares (55,000 acres). Talisman will receive $50 million for its lands and Gulf $20.66 million.
''This opportunity is an excellent strategic fit for Husky,'' says John C. S. Lau, Chief Executive Officer of Husky Oil. ''It builds on our long-term commitment to the East Coast as a significant part of our core business.'' ''This is a win for all involved,'' said Talisman President and C.E.O. Jim Buckee. ''The sale will allow us to focus our investment in higher working interest core areas in Canada, the North Sea and Indonesia.''
Richard Auchinleck, President and C.E.O. of Gulf Canada, adds, ''While Gulf remains committed to Canada's East Coast, this sale is part of Gulf's planned divestitures of properties in which we hold small, non-operating interests. This will permit us to reinvest funds into the Saint-Pierre & Miquelon Southcoast block.''
Husky Oil Limited is a Canadian-based integrated oil and gas company headquartered in Calgary, Alberta. The Company's operations include the exploration for and development of crude oil and natural gas, as well as the production, purchase, transportation, upgrading, refining and marketing of crude oil, natural gas, natural gas liquids, sulphur and petroleum coke, and the marketing of refined petroleum products, including asphalt.
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