Report from Calgary Cdn N.W. betting oil will rise

Based on a belief that there will be a return to rising oil prices b y the end of this decade, Canada Northwest Energy is taking advantage of the present depressed state of the petroleum industry by obtaining interests in areas that require up to a 4-year lead time for project maturity. Such projects would be focussed on the development of large reserves of low-cost conventional oil and gas.

During the nine months ended June 30, the company showed increases of 47% in oil production and 118% in gas production from the equivalent period in the previous year. For this period, after-tax cash flow was up 7.75% to $54 million. Canada Northwest is represented by operations in Canada, the United States, Italy, Spain, Australia, China, Indonesia, Pakistan and the United Kingdom. Canada

During the last nine months in Canada, the company participated in the drilling of 181 wells in Alberta and Saskatchewan, with an over-all success ratio of 78%. Drilling, however, during the last three months was reduced to eight wells. Oil production totalled 1.77 million bbl, an increase of 69.7% over the past equivalent period, and gas production was up 95.3% to 3,189 million cu ft. Production totals in the near future are expected to level out as economic conditions preclude an aggressive maintenance and development program on existing producing properties. United States

Quadra Oil and Gas Inc. is the wholly-owned subsidiary of Canada Northwest in the U.S. This company participated in the drilling of 13 wells resulting in two oil wells, four gas wells and seven dry holes. Quadra has varying interests in approximately 95,500 net acres of undeveloped land in 13 states. Europe

Operations in Italy are conducted both onshore and offshore through another wholly-owned subsidiary, Canada Northwest (CNW) Italiana S.A. This company has a 20% interest in the Vega oil field offshore Sicily. Three wells were drilled from a floating rig during the reporting period. Two additional wells are planned to bring the total to 13 available for production. At that time a permanent production platform will be installed. Onshore, one of the two proposed wells was drilled on the Fiume Agri permit in southern Italy. Four separate test intervals produced an aggregate of six million cu ft of dry gas per day. The company is earning a 20% interest in the permit.

Oil production in Spain is from the Casablanca Field in the Gulf of Valencia and averaged 32,810 bbl per day during the past three months. Canada Northwest, through its Spanish subsidiary, has a 12.447% interest in this field. Recently the company acquired a 20% interest in two onshore permits in northern Spain, covering 120,981 acres.

The company’s Australian subsidiary, of which ownership is 71%, participated in no drilling during the period, but has interests in six onshore permits and one offshore permit totalling 1,279,704 acres. Far East

Canada Northwest recently signed a joint venture agreement with a Hong Kong company with the objective of obtaining oil and gas exploration contracts in certain producing basins of onshore China. Discussions and field reviews are ongoing.

The company has a 10% interest in the 1.9-million-acre Seram Island production-sharing contract in Indonesia. Seismic data now is being reprocessed and interpreted.

In Pakistan, a petroleum concession agreement has been signed between the government and a group of companies including Canada Northwest, which has a 47.5% interest in the permit and will act as operator. United Kingdom

The company holds a 56% equity interest in Marinex Petroleum plc which has a 14% interest in the Humbly Grove oil field in southern England. Two wells were drilled during the reporting period, bringing the total for the field to 14. Field production began in May at approximately 1,000 bbl oil per day. Rates in the order of 2,300 bopd are forecast for the field.

Despite a decrease in price for gas sold to $2.12 per thousand cu ft from the previous year rate of $2.55 per mcf, Grosmont Resources showed a 58% increase in cash flow from operations.

This was a result of more aggressive industrial gas marketing and the increased gas production capability at Legend, Alta., which stepped up production 66% over the previous year.

Grosmont’s net capital expenditures of $3.2 million went to drilling and production capability expansion. The company participated in a total of 61 wells with interests ranging from less than 1% to 50%. This resulted in 50 gas wells, three oil wells and seven dry holes for a success ratio of 88%. One well is drilling.

The majority of the expenditures were made in the Liege field where the company took an 8% interest in the drilling of 24 gas wells and participated in expanding the existing plant capacity to 40 mmcf from 25 mmcf.

In the coming fiscal year the company hopes to increase natural gas production in order to compensate for further anticipated price declines.

Field aspects of the Phase II program have been completed on the SNIP property in the Iskut River area of northern B.C. by Delaware Resources Corp. The program consisted of 1,135 ft of drilling in four holes and six new trenches. Analyses of core and trench samples have not as yet been reported, but mineralization was observed in all cases.

Phase III of the program is planned for immediate commencement and will involve additional drilling and trenching.

Giant Reef Petroleum participated in a total of 26 wells in western Canada last fiscal year, resulting in 20 oil wells and six dry holes for a 77% success rate. These operations were carried out on existing land holdings primarily in the Lochend and Ferguson Lake areas of Alberta and at Coleville, Sask.

Revenue and earnings for the fiscal year were down to $2.9 million and $900,000 from $3.1 million and $1.4 million respectively in the previous year. These results reflected the general decline in world oil prices.

Giant Reef expects to participate in 10 wells in the coming year. Efforts will be focussed in western Canada on low-risk prospects with immediate cash flow potential as well as commitment wells required to maintain the company’s acreage position.

Dawson Eldorado Mines has announced a 100-ton shipment of 250-oz-per-ton silver material to smelter from its Plata-Inca property in the Yukon. Mining of additional material has been suspended temporarily while exploration and development of new targets on the property is under way.

Crude oil production has increased 74% for Morgan Hydrocarbons Inc. during the first half of 1986, to 860 bbl per day from 495 in the same period in 1985. Further increases to the present put production at an average of more than 1,000 bopd.

In spite of this surge in output, revenues increased only 21% and net income was down 69% to $733,298 from $2.4 million for the first six months.

This was a result of higher operating costs and depletion charges associated with the increased production plus increased interest charges, as well as an average oil price decline to $16.38 a bbl during the first half of 1986 from $34.63 in 1985.

A dramatic increase in net earnings to $924,000 during the fiscal year ended March 31 from a loss of $4.5 million the previous year is reported by Nortek Energy Corp.

In addition to involvement in oil and gas exploration, Nortek operates as a diversified service company with particular expertise in the oil and gas industry.

More than 90% of its revenues were derived during the past year from its electrical division, which now is expanding internationally into Costa Rica and Argentina. The flare systems division has been awarded a contract in Egypt and is bidding on a project in Russia.

This aggressive, market-expansion program and a negotiated debt restructure agreement have allowed the company to experience its best year of operations since formation in 1974.

Revenue from oil and gas operations was down 2% from, the previousyear to just under $2 million. Due to the expiration of oil and gas revenue rights this year, a further decrease in cash flow is expected for 1987. This should be compensated to some extent by gas wells that are due to come on-stream next year.