Everyone / Private Companies
I would like to bring Richard Saunders post # 8542 to attention of all who visit this location. This is great stuff. I ( along with everyone here) would appreciate more postings of this nature. Please do not hesitate to post these type of articles as you find them. In doing so, just give due credit to the originator of the information.
Here is Richard's Posting.
Monday September 10, 4:55 pm Eastern Time
Canadian energy execs start over, in private firms
By Ian McKinnon
CALGARY, Alberta, Sept 10 (Reuters) - Top executives driven from their jobs by the frantic pace of mergers in Canada's energy sector are starting over, but this time around many are tapping private funds to avoid volatility in the equity markets.
In the latest move, former executives of Berkley Petroleum, a firm taken over by Anadarko Petroleum Corp. (NYSE:APC - news) early this year, recently raised a Canadian record C$66.5 million ($42.5 million), including C$28 million from their own wallets, to launch Duvernay Oil Corp.
Named after a geological formation known for generating oil and natural gas deposits, the firm will concentrate on drilling in northwestern Alberta and northeastern British Columbia.
The five-person company has already inked an exploration deal with Anadarko, the white knight that paid C$1.14 billion for Berkley, beating Hunt Oil Co.'s hostile bid.
``The exploration cycle is quite long and I think the private vehicle is ideal for two or three years because it gives us the front end to very patiently build our exploration and development inventory,'' Berkley's former chief executive, Mike Rose, said. ``I think we'll be much more effective by being private for awhile.''
Small public companies have been a mainstay of the Canadian oil and gas industry for decades, particularly in the early 1990s, but in the past three years stock investors have eschewed them due their risky natures and a few high-profile failures.
Rose said less pressure to meet quarterly targets was one welcome change of operating a private company. But he promised not to forget lessons learned in the public market, including a sharp focus on profitable growth.
``When we look back at Berkley and when it was the most fun for us to run, that was when it was about 20 to 25 people growing production from 7,500 BOE (barrels of oil equivalent) to 12,500 BOE per day,'' he said. ``That also, not surprisingly, was when it was also best for our shareholders.''
Other names in the Canadian oil patch have taken a similar path. Clayton Woitas, previously the head of Renaissance Energy, raised C$30 million for Profico Energy Management Ltd., while Uldis Upitis, the former boss of Newport Petroleum, gathered C$22 million for Sentra Resources Corp.
Renaissance was bought last fall by Husky Energy Inc. (Toronto:HSE.TO - news) for C$4 billion and Newport was scooped up in early 2000 by Hunt for C$489 million.
EXPERIENCE PAYS OFF
Bruce Fiell, a principal with brokerage Peters & Co., which handled Duvernay's popular private placement, said proven management success is critical to tapping private funds.
Low trading multiples afforded small public firms, a reflection of shareholder desire for larger and more liquid companies, is one reason driving the change, he said.
``We think that (Duvernay) is the largest private equity financing for an energy start-up in Canada,'' he said. ``There will be more start-ups and we think they may be larger in size. We see at least another half-dozen firms that are thinking about raising money or are in the process of raising money.''
Private companies are popular with institutions and affluent individuals because patient investors who get in early can see a big return on their money.
Stylus Exploration Inc., founded in late 1999, more than doubled the value of investors' stakes in its first year.
Stylus chief executive Dave Monachello said success let the company take in another C$21.6 million, mainly from existing shareholders, to add to the C$11 million raised initially.
Many new private firms concentrate on exploration, where there is less competition from bigger players but more risk.
``The biggest lift in the dollar (for investors) is through the drill bit,'' Monachello said. ``If you're in exploration, you can actually change a dollar into two or three dollars upon success.''
Scott Inglis, analyst with Calgary brokerage FirstEnergy Capital Corp., said he had mixed feelings about the emergence of private producers.
``It's always good to have quality management operating assets and ultimately some of those firms may end up in the public market,'' he said. ``It's a loss, in my view, for a lot of (ordinary) investors who aren't able to play in private deals. Those deals get done by a few players.''
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At one time or another, I held shares in some of these companies that the above people were involved with. I would not hesitate to reinvest in these companies if they were ever to go public - better yet - a private placement prior to going public.
With that said, I have a question - Is anyone familiar with a private company named Birchill Energy. |
