MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING FRIDAY APRIL 24, 1998 (6)
TOP STORIES, Con't
Mud Flies In Calgary Drilling Tool Suit
The Financial Post
Two oil and gas service firms are in a patent battle over drilling tools used in the oilpatch and by utilities.
Wenzel Downhole Tools Ltd. of Calgary is suing NQL Drilling Tools Inc. of Nisku, Alta., and its subsidiaries for patent infringement.
Filed with the Federal Court of Canada, the lawsuit asks for $25 million in damages and an injunction preventing NQL Drilling from future violations.
Chief executive officer Bill Wenzel said the case revolves around his patented bearing pack for "mud" motors - these are inserted in a horizontal or directional well to power the drill bit and driven by the drilling fluid, which is commonly called mud. The design is shorter, can take higher loads and reduces the number of bearings required, he said.
The company received patents for both Canada and the U.S. in the early 1990s.
NQL denies it infringed Wenzel's patents.
"All of our motors have their own patent. Every single motor that's in the field has patents that have been duly approved in the U.S. and Canada," said chairman Walter Stelmaschuk.
Warmer Winter Melts TCPL Earnings
The Financial Post
Lower energy prices and warm weather took a bite out of TransCanada PipeLine Ltd.'s first-quarter earnings.
TCPL reported net income of $103 million (46› a share) for the first quarter on revenue of $3.39 billion, down 2.4% from earnings of $105 million (48›) on revenue of $3.65 billion a year ago.
The latest profit was slightly below analysts expectations of 48› a share, according to a poll of 12 analysts by First Call Corp.
"I was a bit disappointed," said one analyst who recently downgraded her rating to a "buy" from a "strong buy."
George Watson, president and chief executive, said while TCPL's gas transmission business showed a strong return, volatility in gas prices and narrower margins for natural gas liquids hit the gas marketing, gathering and processing businesses.
The transmission side had earnings of $86 million, up $7.9 million from last year, mainly because the Canadian main line delivered 677.4 billion cubic feet of natural gas, up from 662.4 bcf last year. The main line alone, which will expand capacity this year by 417 million cubic feet a day, had earnings of $67.3 million, up 10.3%.
Warm winter weather, however, affected TCPL's energy marketing side, which turned in a profit of $2.4 million, compared with $9.5 million a year ago. Energy processing's profit dropped to $10.5 million from $21 million, due to lower natural gas liquids prices that ride in tandem with oil prices.
TCPL sold 50.1 million barrels of crude oil, refined products and natural gas liquids in the first quarter, compared with 46.6 million barrels sold a year ago.
The company confirmed yesterday it will present its proposal to merge with Nova Corp. to shareholders on June 29, and, if it's approved, will complete the union in the first week of July.
Sable Island Pipeline Firm Battling With Provinces
The Financial Post
All is not well between the company building a 1,000-kilometre pipeline to transport Sable Island gas and the two provinces through which it will travel to New England.
Patrick Langan, president of the Maritimes & Northeast Pipeline project, has criticized Nova Scotia Premier Russell MacLellan for renegotiating a preferential price for N.S. companies that want to buy offshore natural gas delivered by his pipeline.
The "discount," financed through a $20-million fund established by Sable Island gas producers Mobil Oil Canada Ltd., Shell Canada Ltd. and Imperial Oil Ltd., superseded a deal on transportation costs the pipeline company had worked out with the Nova Scotia and New Brunswick governments.
"We found ourselves expending many, many hours working to appease provincial leaders and ministries who at times appeared focused on extracting maximum benefits from this initial project alone," Langan told an industry conference in Halifax this week.
"We have quickly gained insight into the regretful lack of regional teamwork which characterizes political relations between neighboring provinces in this region," he said. "This has hampered our project and unfortunately continues to do so."
The pipeline project is owned by Westcoast Energy Inc. (37.5%), Duke Energy Ltd. (37.5%) and Mobil Oil Canada (25%). However, Mobil has announced it is selling half its stake to N.S. Power Ltd. for $200 million.
The cost of building the main pipeline for Sable Island gas is pegged at $1.1 billion. At full capacity at the end of 1999, it will carry 530 million cubic feet a day, enough to heat a million homes on a cold winter day.
Michael Whalen, a spokesman for Maritimes & Northeast Pipeline, said the new deal for Nova Scotia has upped the ante in the pipeline's discussions with New Brunswick.
"New Brunswick is saying it won't grant Maritimes & Northeast the full easement [to build the pipeline over Crown land] until it has some comfort that pipelines will be built to deliver gas to northern New Brunswick," he said.
Carey Ryan, executive-director of Nova Scotia's Petroleum Directorate, said he was disappointed by Langan's comments and "Nova Scotia had barely asked anything from Maritimes & Northeast Pipeline."
However, Ryan said meetings between the province and the pipeline company were not as frequent or as open as he would like.
The province is opposing a request made by the pipeline to the U.S. Federal Energy Regulatory Commission that it be allowed to defer construction and operating costs on a section of U.S. pipeline to avoid environmental concerns.
"We have to decide whether to allow Phase 2 of the pipeline [to] pick up those costs or whether Maritimes & Northeast should eat [them]," said FERC spokesman Kevin Madden.
Although that leg of the pipeline - from Dracut, Mass., to Westbrook, Me. - is nearly complete, the company won't have any Sable Island gas to ship through it until November 1999. Nova Scotia claims the accounting manoeuvre could drive up gas transportation rates in 1999, as well as lower royalties from gas production.
BC Gas To Offer New Pipeline Plan
The Financial Post
BC Gas Inc. told shareholders Friday it is considering its alternatives after the rejection this month of its proposal to build a $350-million natural gas pipeline in British Columbia.
The B.C. Utilities Commission rejected a proposal by BC Gas to build its Southern Crossing pipeline to transport natural gas from Alberta into southern B.C., saying the project was too costly.
BC Gas argued the pipeline was needed to meet growing demand, especially in periods of peak use.
The company said it is working on an alternative plan with B.C. Hydro under which Hydro would agree to take some of the capacity of the proposed pipeline.
Following the annual meeting Friday, chief executive John Reid said he hopes the Utilities Commission will render a decision on the revised proposal by October.
BC Gas reported a profit of $51.9 million ($1.33 a share) on revenue of $313.5 million for the first quarter ended March 31. That compares with a year-earlier profit of $51.8 million ($1.26) when revenue was $342.9 million.
The company, the largest distributot of natural gas in B.C., said earnings reported in 1997 have been adjusted to reflect the impact of seasonal rates, which were discontinued on Jan. 1.
INTERVIEW - JP.P BRYAN
The Former Gulf Canada CEO Offers Some Choice Parting Words
Report On Business Magazine
STATUS: Resigned as president and CEO of Gulf Canada on Feb. 9. Currently between jobs.
SCENE: Having just stepped off the StairMaster in the study of his Houston, Tex., home, James Perry Bryan looks out on a garden that he hadn't seen much of until a couple of weeks ago. "It's nice and green," he says over the phone in a sleepy Texas drawl. He may sound relaxed, but at the moment he's dealing with some fresh news - Gulf Canada has already begun to sell off the assets he had so aggressively acquired during his three years there. This, and other issues, he discusses over the course of three conversations.
What was the best thing about working at Gulf?
BRYAN Well, I guess it was a realization of all my boyhood dreams. I had always thought about running a large company, and being able to put into place some of the things that I felt could work in a corporate environment.
What was the most difficult thing?
BRYAN [Pause] I think the hardest thing was probably realizing that there were a lot of people at Gulf, and in Canada, that never truly appreciated the magnitude of what was accomplished in three years..People who work at Gulf, and I think people outside the company, like to continue to say critical things. You know, "We're glad Gulf's gonna be dull, and maybe it needs to be boring. And it's saddled with all this debt." I mean, the people that are highly critical of me, and maybe I deserve it.
Why do you think they're so critical?
BRYAN I tend to, you know, say what's on my mind, and don't consult with a lot of people before I do something.. I'm sure that tends to make people uncomfortable, and so I guess I'd say that's just one of my failings.
Did that personality trait cause difficulties with the board?
BRYAN [laughing] I think it probably caused a difficulty all the way around.
Is there a moment you look back on and say, "I shouldn't have done that"?
BRYAN Certainly the remarks I made about sending all the secessionists back to France in a boat [he chuckles], I don't think won the hearts and minds of a lot of French Canadians. And I think that even people who agreed with me resented the fact that this American would come in and say something that brash.. I think that sort of set a tone. Everybody assumed that that comment explained me.
Do you think you've been misjudged?
BRYAN Yeah, I mean, it's interesting to see how you're portrayed in the press. I think I'm portrayed as sort of a brash, flamboyant, swashbuckling, tough, insensitive executive. And I'd say I'm anything but insensitive. I may do things that, unfortunately, because of my sort of personality type, have maybe ignored other people. But I'm very concerned about people's welfare.
Leading up to your departure, did you see a problem coming with the board?
BRYAN I fully appreciated the fact that, oh, for six months or so, the board - I could tell that they wanted things to slow down.
Do you think you tuckered them out?
BRYAN Yeah. Yeah, I think I wore people out. I really do..I wore myself out too, by the way. And I probably was the least aware of it until after this - until I got out of Gulf and realized how tired I really was.. I had been on the road a lot, I'd flown over 500,000 miles on Gulf's behalf. We did over $5 billion in transactions, which I think is almost unheard of for a company the size of Gulf, when you look back where it was three years ago. And that just took a pretty heavy toll on me. Plus, the personal sacrifice - I was separated from my friends and family, and that frankly was a sort of a rare assault on my life.
Did you conflict with the board?
BRYAN I'm getting a sense [people think] there must have been some big divisive issue here, and I really don't think there was. I guess I'm just saying, between us girls, I saw an opportunity to leave and be well compensated [laughing], and I took it, okay?
What was your compensation [reported at $3.3 million]?
BRYAN If you use $3.6 million, you won't be far off.
Do you feel a sense of betrayal over the fact that some of the assets you acquired are already being sold off?
BRYAN Betrayal would be a little strong [cough]. I just think it's a different strategy. I had the discussion with various members of management and various members of the board about selling off Gulf assets, and my stated position was that this isn't the time to be selling assets, in a declining commodity market - not the commodity assets. I would not have sold off the North Sea assets.
What would you say to the board now?
BRYAN I really have nothing else to say to them, except goodbye.
Really?
BRYAN Yeah.. If there's anybody wants to say anything to anybody, they could say somethin' to me. I have said what I wanted to say by what I did over the last three years. I think that makes as much of a statement as I could ever make. So the best thing I can do is, you know, go on to another phase of my life. I leave with no real rancour.
Is there anything you'll miss?
BRYAN Oh, yes. I love the excitement of doin' a deal. And I'll miss just being able to get an idea that you think may have importance, and be able to execute on it - for example, the Athabasca Oil Sands Trust. That was a transaction which everybody said, even people in Gulf, could not be done. And we got it done, against incredible odds.
Do you know something about the business that you think the people who remain at Gulf just don't get?
BRYAN I am very contrarian in a lot of the ways I respond to things. So I think what you have at Gulf now is a more traditional view of the way business is done. But right now, that's not necessarily wrong, because we've been three years on a very aggressive growth path, and at this point, what is needed is somebody who can come in there and harvest what's been sown. So I think Dick Auchinleck, whom I have a world of respect for, is the perfect person for that.
What are you going to do now?
BRYAN I have a ranch and a hotel out in West Texas which I've spent too little time at over the last years. I've got a historical book that I have got all the outlines for and chapters outlined, and I'm going to finish that. [and] I'd like to try my hand at a novel, just to see if I have any kind of that sort of talent.
What did you take from the office when you left?
BRYAN I was given a Colt pistol by some of the senior management, after we had completed a particularly difficult public offering for Gulf. And I took that back with a lot of fondness.
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