Sherritt and Pebercan shares rise after news of Cuban oil find

TORONTO (CP) - Shares in Sherritt International Corp. and Pebercan Inc. surged to new highs Thursday after news of a joint oil discovery off the coast of Cuba.

First word of the find came from communist dictator Fidel Castro, who told Cuba's National Assembly in a closed session Friday that the newly discovered deposit - Cuba's first such find since 1999 - contains up to 100 million barrels. Castro said production off Santa Cruz del Norte, east of Havana, could begin in 2006.

Shares in Montreal-headquartered Pebercan (TSX:PBC), which has a 55 per cent working interest in the play and is the operator, jumped from Friday's level of $4.50 to close at $6.10 Wednesday, then hit $9.20 Thursday morning before closing at $7.50. The stock was worth barely $1.50 a year ago.

Sherritt (TSX:S), with a 45 per cent working interest, closed at $10.07, up from $9.51 Wednesday and $8.99 Friday, and from a 52-week low of $6.02.

Pebercan said the oilfield could measure as much as 20 square kilometres, and an initial analysis of oil from the Santa Cruz 100 well, flowing at 1,300 barrels per day, showed a higher grade of oil than at other Cuban fields.

The company added that "results of the ongoing supplemental analysis will be communicated during the course of January 2005," and two delineation wells will be drilled in the first half of the year.

Cuba currently produces 75,000 barrels a day, about half of what it consumes. Industry experts believe Cuban waters in the Gulf of Mexico could contain substantial deposits, although earlier exploration led to only modest discoveries.

You never can tell with the MSM, but Pebercan announced:

The company added that "results of the ongoing supplemental analysis will be communicated during the course of January 2005," and two delineation wells will be drilled in the first half of the year.

Pebercan has a vested interest in this, since they were wholly set up to do oil drilling in Cuba; their map of properties is:

But Sherritt is a bit more credible company, and here is their press release on the find (a bit more cautiously worded than Castro's):

Sherritt International confirms drilling success in Santa Cruz prospect, announces closing of offer to purchase senior unsecured notes

TORONTO, Dec 30, 2004 (Canada NewsWire via COMTEX) -- Sherritt International Corporation confirmed today that initial results of exploratory drilling in the Santa Cruz prospect in Block 7 off the northwest coast of Cuba are promising.
Sherritt holds a 45% working interest in Block 7, and contributed to the acquisition and analysis of seismic data near Santa Cruz del Norte in the western portion of the Block. Sherritt has supported Pebercan, the operator and holder of the remaining 55% working interest, in the exploratory well and appraisal operations, which initially demonstrated a 1,300 barrel per day flow of 18 degree API oil. Additional delineation of the reservoir and further appraisal wells are to be undertaken in 2005.
Sherritt International Corporation, with assets of $2.4 billion, is a diversified Canadian natural resource company that operates in Canada, Cuba and internationally. Sherritt is the largest foreign oil producer in Cuba and has developed extensive expertise in complex fold and thrust belt geology and directional drilling.
Sherritt also announced the expiry of its previously announced offer to purchase, in aggregate, up to $100,000,000 par value of its 9.875% senior unsecured notes due March 31, 2010 for $101 cash per $100 par value of principal amount of Notes. No Notes have been deposited for repurchase under the offer and no Notes will be taken up by Sherritt.
The Offer was made only by reason of a technical requirement in the Note Indenture governing the Notes, and the offer price of $101 per $100 principal amount of Notes was below market price for the Notes at the time the Offer was made.
Sherritt's 131 million common shares, $200 million of 6% convertible debentures and $300 million of 7% convertible debentures trade on the Toronto Stock Exchange under the symbols S, S.DB and S.DB.A respectively. Sherritt's $105 million of 9.875% senior unsecured debentures trade on the over-the-counter bond market.
This news release contains forward-looking statements. These forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and other factors that are more fully discussed in Sherritt's continuous disclosure documents such as our annual report, annual information form and management information circular. These risks, uncertainties and other factors could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements.
VIEW ADDITIONAL COMPANY-SPECIFIC INFORMATION: http://www.newswire.ca/en/releases/orgDisplay.cgi?okey=31865
For further information: please contact: Deanna L. Horton,
Vice-President, Investor Relations and Corporate Affairs, Sherritt
International Corporation, (416) 924-4551, www.sherritt.co

Interesting followup on Yahoo!, with a bit more about China's role:

Cuba moves to clamp down on hard currency control after oil find
Thu Dec 30, 2:46 PM ET
Business - AFP
HAVANA (AFP) - Cuba made a surprise move to tighten the government's grip on hard currency, on the heels of an oil find that breathes new life into President Fidel Castro (news - web sites)'s communist rule.
The Americas' only one-party communist government said in a statement that from January 1, all revenues from state-run businesses must be channeled though Cuba's central bank.
"Next year, there will be a considerable increase in financial in-flows from abroad," thanks to deals with China, Venezuela and an oil exploration and production deal with Canada's Sherritt, explained the note, signed by bank chief Francisco Soberon.
Castro, 78, announced on December 25 that oil reserves of at least 100 million barrels had been found off the north coast near Santa Cruz del Norte, east of Havana, which is to be developed by a Cuban state firm in cooperation with Sherritt.
Led by Castro since 1959, Cuba has been in dire economic straits since the collapse of the former Soviet bloc, which once provided subsidized food and fuel.
Havana has been unable to complete a Soviet-technology nuclear reactor that was planned for Juragua. Energy for years has been the Achilles heel of its economy.
And with its oil-burning plants, Cuba has had to rely on Venezuelan imports, while its own crude -- which is high in sulfur -- has required costly cleaning to be used.
Venezuela, Latin America's only OPEC (news - web sites) member, delivers 53,000 barrels of crude a day to Cuba.
Now, the new find -- Cuba's first since 1999, and cleaner than other homegrown crude, according to Castro -- catapults Havana toward energy self-sufficiency.
Cuba's future capital movements "must be tightly controlled to ensure their optimum use," Soberon's note stressed.
The shift would make the central bank the only Cuban institution authorized to move hard currency; state businesses would have to seek special authorization to do so.
In November, Castro took the US dollar out of circulation in Cuba, more than a decade after having made it co-legal tender.
Cubans, having no alternative, exchanged their greenbacks for "convertible pesos" usable only on the island. The government invented the currency -- which Cubans call "chavitos" or "Monopoly (board game) money" -- to make up for the short supply of dollars.
When he met Chinese President Hu Jintao in November, Castro threw the spotlight on precisely how differently his government has adjusted to the post-Soviet era: He told his key communist ally that Cuba would pursue social goals its own way -- that is, he has no plan to embrace international capitalism as China has.
Earlier, Castro spent a staggering almost 10 hours on television in four broadcasts trying to explain power shortages that led to the dismissal of Basic Industries Minister Carlos Portal.

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