MARKET ACTIVITY/ WEEKEND EDITION OF TRADING NOTES JULY 5 1998 (12)
IN THE NEWS THIS PAST WEEK, Con't
BriAlto Energy Corporation purchased a 20% working interest in 195 bopd, two capped gas wells which tested 4 mmcf/d each and 8,640 gross acres of land in Virginia Hills, Alberta, from a major energy company for $600,000 ($2.69/boe proved). The effective date of the acquisition is June 1, 1998 and closing is in mid July.
The properties have proved reserves, net to BriAlto, of 138.9 mstb oil and 840 mmcf gas. BriAlto, together with Progress Energy Ltd., its 80% partner, plan to drill at least two development oil wells on these lands in 1998.
In addition to the acquisition, BriAlto together with Progress farmed in on 13,760 gross acres of exploration lands in Virginia Hills from the same company. BriAlto has committed to participate for a 20% interest in two wells to be drilled on these lands prior to April 1999.
BriAlto is currently producing 250 bopd. The Company has $1.5 million in cash with no debt and has allocated $3.25 million for investment in 1998.
Berkley Petroleum (BKP/TSE) updated recent activities at Carstairs, southeast Saskatchewan and in northeast British Columbia.
At Carstairs, Alberta, the company has received permission from the EUB, effective July 1, 1998, to increase production from the Carstairs Elkton G pool under terms of a revised good production practice application (GPP). The company is anticipating net production of approximately 6500 Boepd during the second half of the year from the G pool.
In southeast Saskatchewan, net production has been increased to approximately 5325 boepd. This has been achieved through Ordovician waterflood optimization and production enhancements at Midale, initial Midale Winnipeg Sand production, and start-ups at Talmage and Harthaven. Significant further production additions are anticipated in the second half of the year from the Winnipeg Sand at Midale, the Midale C pool waterflood and further development of regional Ordovician Red River discoveries.
At Adsett, in northeast British Columbia, the company has completed the acquisition of producing, non-producing and exploration lands from Gulf Canada Resources Limited for a cash consideration of 14.3 million dollars. Current production for the property is 8.25 MMCFPD. The acquisition of these gas assets, which complement Berkley's existing production and facilities at Adsett, will allow the company to proceed with a major gas development in the area during the next 12 months.
During June, the company has cased new pool discoveries at Blueberry West and Wilder in northeast British Columbia and Wild River in Alberta.
Danoil Energy Corp. (DAN.A:TSE/ASE), effective June 30, 1998, acquired all of the issued and outstanding Coachlight Resources Ltd. (COO:ASE) common shares on the basis of $0.15 in cash and 0.375 of a Danoil common share for each Coachlight Common Share. In connection with the transaction, Coachlight has become a wholly-owned subsidiary of Danoil.
In reporting on recent activity, Danoil has drilled and cased two wells (60 percent and 35 percent interests) in its core area at Judy/Carson Creek. To date only one well has been completed, with gas flowing at rates exceeding 1.5 million cubic feet per day. The second well will be completed in July. As well, Danoil acquired varying interests (18-20 percent working interest) in six wells and increased its working interest in the Carson Creek gas plant. At Chigwell, the Company has drilled and cased one well (70 percent interest) and at west Drumheller, a recent recompletion (50 percent interest) is flowing 140 barrels of oil per day and 500 mcf/d of natural gas.
Summit Resources Limited (SUI/TSE) updated in its petroleum and natural gas reserves as a result of a successful first quarter drilling program. Independent engineering evaluations, effective April 1, 1998, place the Company's proved plus probable reserves at 215 Bcf of natural gas and 20.6 MMbbls of liquids. Reserve additions of 1.0 MMbbls and 36 Bcf reflect the results of Summit's increased natural gas focus and extends the Company's BOE reserve life index to 9.7 years. First quarter activities replaced 424 per cent of production at a finding and development cost of $5.28 per BOE ($7.14 proven plus half probable).
Continuing low oil prices have resulted in adjustments to Summit's1998 capital budget and drilling mix. Twenty-five (gross) wells planned for development of crude oil reserves at Mirage, Rabbit Hills, Knutson, Hayter and Kakwa have been deferred due to soft oil prices. In addition, exploration drilling on new light oil prospects at Vaux, McGregor, Pershing and Tyler have been postponed until next year. As a result, 1998 average liquid production is now forecast to average 6,250 barrels per day.
Natural gas drilling will increase with wells added at Alder, Chain, Gage and Mirage. Minor adjustments in natural gas volumes were made to account for delays in start-up of a non-operated gas plant at Mirage, Alberta and curtailments in production from Clarke Lake, British Columbia due to plant modifications and Two Creek, Alberta due to forest fires in May. Natural gas production for 1998 is now forecast to average 65.5 MMcf/d with exit rates of 73 MMcf/d.
The net effect of the above changes in Summit's drilling mix is a 5 per cent reduction in forecast production volumes to 12,800 BOE/d (10:1).
The Company has adjusted its capital budget to reflect the reduced oil drilling program with the 1998 capital budget lowered to $34 million. Forecasted cash flow for 1998 has also been adjusted to reflect the lower production volumes and changes in commodity prices. Cash flow is now estimated at $48 million for 1998, equating to $1.44 per share ($1.36 per share fully diluted). Year-end 1998 long-term debt is projected to drop by $30 million to $100 million as a result of the Company's reduced capital expenditure program and the sale of its interest in the Fort Chicago Energy Partnership (Alliance Pipeline).
Blue Range Resource Corporation (BBR.A/TSE) reached an agreement with ANG Gathering & Processing Ltd. (''AG&P'') to sell a 52% working interest in the Clear Hills Gas Plant and Gas Gathering System (the ''Facilities'') located in Northwest Alberta to AG&P. The purchase and sale of the Facilities will be effective April 1, 1998, with closing anticipated on or before July 31, 1998 (the ''Closing Date''). Total consideration for the sale, before adjustments, is $21 million cash. AG&P will assume operatorship of the Facilities on the Closing Date, including ongoing business development. As part of its management function, AG&P will seek new business opportunities for the Facilities, which may necessitate additional capital investment. Blue Range will continue to maintain a significant working interest in the Facilities and may elect to participate in such capital investments. Blue Range will dedicate its entire interest in the natural gas reserves and production in the vicinity of the Facilities for the life of the reserves.
Bison Resources Ltd. (ASE: BIS.A) reported the successful completion of an oilwell in the Innes area of Southeast Saskatchewan. The well was operated by a third party and initial indications are that it will produce at its maximum allowable of 200 barrels of oil per day. Bison retains a 45% working interest in the production. In addition, drilling operations on a 100% working interest multi-lateral horizontal well in the Huntoon area of Southeast Saskatchewan have been completed and Bison is commencing production testing on this well. Bison also announced that the company has completed a private placement of 2,000,000 flow-through shares at $0.50 per share ($1,000,000).
Enron Gas & Oil Trinidad has advised Mantaur Petroleum Corp.'s (MTUR/CDN) Eastern Petroleum subsidiary that Enron will not honour the terms of its Farm In Agreement for the East Brighton offshore project in Trinidad. On October10, 1997, Enron undertook, subject only to Trinidad government approvals, to reimburse seismic costs of US$1.2 million and pay 100% of the costs of an exploratory well on the East Brighton offshore Block and thereby earn a 50% interest in the 82 km(2) property.
Eastern acquired a 70% interest in the property from Premier Oil B.V. under an agreement which terminated June 30, 1998. An appropriate extension is now being discussed. The purchase from Premier provided for the same cash and drilling obligations of Eastern as were negotiated in the Eastern/Enron agreement.
Premier is supportive of Eastern/Mantaur's continuing effort to replace Enron with a suitable partner to fund the project and discussions are currently being held with several interested oil companies.
In the period October 10, 1997 to June 23, 1998 Enron continued to express its intent to proceed under the Agreement. The Trinidad government approvals for the transaction with Enron and Eastern were led by Enron but were delayed for six months because of a disagreement between Enron and the Trinidad state oil company (''Petrotrin'') on matters completely unrelated to East Brighton. The dispute was resolved in May and the Petrotrin approval received on May 7, 1998, naming Enron as operator of the Petrotrin/Eastern/Enron joint venture for the East Brighton property. In the period May 7 to June 23rd, Enron actively worked with Eastern, Petrotrin and Premier to conclude agreements, obtain a six month extension to the drilling date and secure a rig. This joint work was essentially completed when Enron Trinidad advised of a corporate decision to withdraw.
In light of the foregoing, Mantaur is considering its options including legal action if necessary.
Foothills Oil & Gas Ltd. (FH/ASE) reported it has acquired producing properties in the Chigwell area of Central Alberta at a cost of $1.47 million. The acquisition, which is effective January 1, 1998, is expected to add approximately 800 thousand cubic feet per day of natural gas and 30 barrels of oil and liquids to the Company's current production base of 50 barrels of oil equivalent per day.
Vision 2000 Exploration Ltd. (VNN.A/ASE) reports that two wells have recently been completed in the Pine Creek field in northwest Alberta both targeting natural gas in which the Company holds a 7.5% gross overriding royalty and a 3.75% gross overriding royalty respectively. Both wells are currently standing cased and are on tight hole status. Vision 2000, along with its partners, is pursuing possible follow-up locations to be drilled on the Pine Creek acreage.
At Niton, in northwest Alberta, in which Vision 2000 holds interests in 4,160 gross acres and 1,007 net acres, a Cardium well in which the Company holds a 8.44% working interest is scheduled to commence drilling by July 31, 1998.
At Knappen, in southern Alberta, Vision 2000 recently acquired all of Gulf Canada's interests in 3,840 gross acres and 2,053 net acres. The acquisition closed May 11, 1998. Vision 2000, with this acquisition, now operates 5 sections of land including a suspended Sawtooth gas well which was producing at 650 Mcf/d when it was shut-in in 1996. The Company's first exploratory well subsequent to the Gulf acquisition encountered a wet sand section and was abandoned. The Company has plans for other drilling locations on its Knappen acreage.
ENERGY TRUSTS
PrimeWest Energy Trust (PWI.UN/TSE) announced two property transactions, the net proceeds from which will initially be used to reduce debt by $6.2 million. These transactions will have no material impact on anticipated 1998 distributions.
Lone Pine Creek Acquisition
In the Lone Pine Creek area, PrimeWest has entered into agreements to purchase 401,700 established (proven plus one-half probable) barrels of oil equivalent (BOE) of natural gas reserves in the Lone Pine Creek area of Alberta for $2.1 million or $5.30 per BOE effective April 1, 1998. Production from these natural gas properties average 130 BOE per day.
"Lone Pine Creek is an area that we have been building our focus. We have operated our production here for the past 18 months and during the first quarter of 1998, PrimeWest took over operatorship of the gas gathering system. The purchase of these assets increases our concentration in the Lone Pine Creek area, a core operating area for PrimeWest. This area is proving to be prospective for property enhancement opportunities. A number of companies have been successful in dramatically increasing natural gas production from existing wells through the application of horizontal re-entry drilling," said Kent MacIntyre.
Non-Core Property Disposition
PrimeWest is financing the Lone Pine Creek purchase with the proceeds from the sale of a non-core natural gas property effective June 30, 1998 for $8.3 million. This natural gas property disposition was sold at a premium reserve value of $8.10 per established BOE. In this transaction, PrimeWest is divesting an asset that accounts for 230 BOE of production per day.
Impact on Distributions
The combined effect of these transactions will have no material effect on anticipated 1998 distributions for PrimeWest unitholders, while at the same time reducing total bank debt obligations.
"The benefits of these transactions far outweigh the costs," said Kent MacIntyre. "PrimeWest is in the business of providing strong, reliable unitholder distributions by maximizing property values. Normally, we optimize value through enhancement activities, but occasionally we recognize that, in some cases, the sale of a property is the optimum means of extracting value for our unitholders. By applying the net proceeds to our debt balances, we further improve PrimeWest's financial flexibility, without materially impacting unitholder distributions."
By improving its financial flexibility, PrimeWest is better positioned to pursue strategic acquisitions, such as the Lone Pine Creek purchase, and property enhancements on its properties, such as horizontal re-entry drilling at Lone Pine Creek. These strategies are oriented towards providing PrimeWest's unitholders with a reliable stream of cash distributions for the long term.
SERVICE SECTOR
Badger Daylighting Reports Second Quarter Success
Badger Daylighting Inc. (BAD/TSE) reported net income for the six month period year ended May 31, 1998 was $ 6.2 million as compared to $0.9 million in the same period of 1997, an increase of 589%. Revenues for the six months of 1998 were $ 49.7 million, an increase of more than 412% over 1997. Basic Earnings per share for the six months ended May 31, 1998 were $0.40, an increase of 400% compared to $0.08 in the first six months of 1997.
Ken Rose, President and CEO of Badger, commented, ''We continue to be extremely pleased with the performance of our operating divisions, despite the traditional industry slowdown experienced as a result of spring break-up.
During the second quarter, our Delta operating division continued it's high activity levels and our Bomega division fabricated 4 new hydrovac units, bringing Badger's total number of operating units to 56. We also completed the acquisition of a controlling equity interest in Baseline Technologies Inc., which provides Badger with access to technologies that will expand our pipeline integrity services and provide an additional high margin revenue stream to the Corporation. During the coming months, Badger will continue to seek out additional acquisitions of complimentary companies and technologies to augment our internal growth and expect these activities to accelerate the consolidation of hydrovacing services in Canada as we expand internationally.''
Badger Daylighting Inc., is a Red Deer, Alberta - based vertically integrated industrial technology company providing various services and equipment to the oil and gas, pipeline and utilities industries. The Corporation specializes in ''daylighting'' underground structures and trenching using a patented hydrovacing process that is safer than conventional mechanical excavation systems. ''Daylighting'' is a term used in the industry to describe the removal of the soil cover to allow visual observation of an underground structure. A hydrovac excavating system is one which simultaneously uses water under high pressure to remove soil cover and a vacuum system to suck up the debris. In addition to hydrovac services, Badger provides a complimentary suite of products and services to it's customers including small inch pipeline facilities and construction, pipeline anomaly locating, line locating, shoring and designing and manufacturing industrial equipment.
Precision Drilling Corp. Acquires Rigs From Brockham Oilwell Servicing Inc.
Precision Drilling Corporation (PD/TSE) said Drive Well Servicing has acquired 16 service rigs from Brockham Oilwell Servicing (1986) Ltd. and B.O.S. Well Servicing Inc., who carried on business under the trade names Widney Well Servicing and Brockham Oilwell Servicing. The acquisition was completed on June 25, 1998.
Drive Well Servicing is a well servicing business carried on by EnServ Well Services Limited Partnership which is wholly owned, directly and indirectly, by Precision Drilling Corporation. The acquisition of these service rigs results in Drive Well Servicing operating a total of 76 service rigs and 21 snubbing units.
Bowridge Resource Group Achieves Record Year
Bowridge Resource Group Inc. grew significantly and achieved its best-ever results for the year ended April 30, 1998. Revenues were up 85 percent over the prior year to $18,246,487.
Earnings before interest, taxes, depreciation and amortization were up 44 percent to $2,921,056 or 15 cents per share. Cash flow was up 33 percent to $1,690,859 or 9 cents per share. Net earnings after tax from continuing operations were up 35 percent to $907,876 or 5 cents per share. Per share numbers reflect the addition of 7.3 million shares to finance the acquisition of Delta-X in February, 1997.
Bowridge expects to see continued growth in its operating results in its current year because its operating divisions are niche businesses strategically positioned on the production side of the natural gas and oil service sectors.
The company's CPT division is Canada's leading provider of specialized gas production testing services in the foothills region of Alberta, Northeastern British Columbia, Northwest Territories and the Yukon. The Delta-X division is a worldwide supplier of high-tech oilfield automation equipment that will reduce operating costs for the producer and optimize production.
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