MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, JANUARY 6, 1997 (5)
FEATURE STORY
Canada Keeps Second Spot As Source For U.S. Petroleum Imports
Producers and marketers exported an average of 1.46 million bbls a day of crude and refined products between January and September to the United States, maintaining Canada as the second leading supplier.
This year's average was a gain of five per cent from the 1996 tally of 1.39 million bbls per day, according to U.S. Department of Energy statistics for September, the most recent data available.
The total kept Canada ahead of traditional rivals Saudi Arabia, which averaged 1.42 million bbls a day, and Mexico, whose sales amounted to 1.37 million bbls a day. However, Venezuela topped the list with exports to the U.S. of 1.72 million bbls a day.
Daily exports of Canadian refined products climbed 25,000 bbls to 362,000 bbls this year, and crude volumes surged 60,000 bbls a day to 1.11 million bbls a day, about 55% of total Canadian production.
Increased access to American markets through additional pipeline capacity and a robust economy were two factors driving the numbers higher.
On the raw oil side, Canada trailed Saudi Arabia, which averaged 1.3 million bbls a day, Venezuela, at 1.33 million, and Mexico, with 1.35 million, according to data compiled by the Energy Information Administration, part of the DOE.
Exports of Canadian crude and refined products to the United States continued to climb in the third quarter, with total exports up more than eight per cent from a year ago.
Sales of refined products averaged 359,000 bbls a day in the quarter, a 16% hike from the 309,000 bbls a day sold in the same period in 1996. Crude exports averaged 1.14 million bbls per day between July and September, up from 1.05 million bbls a day one year earlier.
Quarterly exports of Canadian oil and refined products averaged 1.47 million bbls versus 1.35 million bbls in the comparative 1996 interval.
FEATURE STORY
Drilling Fleet Sets New Record in 1997
The winter peaks were higher, the spring break-up valley less deep and shorter lived than usual and the May through December stretch was full throttle climbing as drilling rig activity set a new record in 1997.
Records show an average of 424 drilling rigs were at work in 1997, up 32% from 321 active the previous year, and 23% more than the previous record year of 1985 when 344 rigs were active.
Even though the Canadian fleet grew by 42 rigs to an average of 503 for the year (the highest since 1989), the torrid drilling pace set by operators pushed the utilization rate to 84%, up 14 percentage points from 1996 and seven percentage points more than the previous record year in 1994 when fleet utilization hit 77%.
To keep pace with demand, Canadian Association of Oilwell Drilling Contractors members continued to add new rigs to the fleet and had 544 available by the end of the year, up from 477 a year earlier.
Alberta and Saskatchewan set the pace in 1997 with both provinces setting new activity records. Alberta had an average of 310 rigs at work during the year, up from 241 in 1996, while Saskatchewan had 75 active rigs during 1997 with peak activity in the summer, up from 51 rigs the previous year.
British Columbia contractors employed an average of 35 rigs during 1997, up eight from 1996 and the highest since 1994 when 35 rigs were active.
Elsewhere, both Manitoba and Northern Canada kept an average of two rigs busy during 1997 while East Coast activity picked up in the second half of the year as Hibernia drilling began.
FEATURE STORY
Nova, TCPL Dismiss Talk Of A Takeover
Financial Post
Officials at Nova Corp. and TransCanada Pipelines Ltd. played down rumors circulating across North America yesterday that pipeline giant TCPL is working on an all-share takeover of Nova.
But analysts said the rumors began before Christmas and a transaction could be announced soon.
TCPL, which owns a national natural gas transmission network outside Alberta, is said to be interested in Nova because of its monopoly in gas transmission in the province.
Analysts say TCPL may want to get first crack at Nova before it carries out its previously announced restructuring mid-year. With about $10 billion in assets, Nova is planning to split its two major units, the natural gas transmission division and the petro-chemical division, into separate, publicly traded companies.
Because Nova's stock has traded at low levels compared to its peers, there has been speculation the two units will be easy takeover targets once they're traded independently.
Despite the overall market downturn, TCPL's stock (TRP/TSE) has soared in the past two months, closing at $13.05 yesterday, down 5›.
Nova stock (NVA/TSE) jumped $2 to the $13.50 level when the split was announced in November. It closed yesterday at $13.50, up 20›.
"We don't comment on rumors. That's our policy," said Tony McCallum, TCPL's director of public affairs.
"We don't comment on rumors," echoed Heather Douglas, Nova's director of public affairs.
But industry analysts said a takeover would make sense because the two companies' pipeline businesses are compatible.
Nova supplies more than 90% of TCPL's gas at the Alberta border, McCallum said.
"Nova operates the intra-Alberta pipeline infrastructure and has a monopoly at this point, and TCPL operates the largest single extra Alberta natural gas pipeline," said Gord Currie, oil and gas analyst with Canaccord Capital Corp. in Calgary.
A takeover may even pre-empt Nova's plan to split. "It may be why TCPL might contemplate a takeover now. They think they could buy it for X, and split it off," he said.
"It wouldn't surprise me that they would be interested in [the natural gas transmission] side, and it certainly could be a good fit," said Win Fruehauf, an analyst in Toronto with L‚vesque Beaubien Geoffrion Inc. "TCPL doesn't have pipelines operations in Alberta, and it would expand the coverage and deal with the same group of producers."
Both companies are on the same side in opposing the proposed Alliance Pipeline Ltd.'s project to transport gas between Western Canada and Chicago, which would compete against both systems.
Hearings for regulatory approval of the Alliance proposal started yesterday before the National Energy Board in Calgary.
A union of the two should not affect the Alliance proposal, said Jack Crawford, Alliance's vice-president of public affairs. "They are already ganged up against us," he said.
Douglas said Nova's planned split is progressing well and is on track to be completed in the second quarter.
TCPL is a partner in the proposed Viking Voyageur natural gas pipeline.
FEATURE STORY
Alliance Pipeline Proposal Faces Tough Road To Approval
Canadian Press
Business and the environment are making strange bedfellows at a hearing into a proposal for a massive natural gas pipeline stretching 3,000 kilometres from northeast British Columbia to Chicago.
Alliance Pipeline Ltd. - a consortium of some of Canada's largest gas producers and pipeline companies - wants to spend $3.7 billion to build a high-speed pipeline to ship gas from B.C. and Alberta to markets in the United States.
National Energy Board hearings into the proposal resumed Tuesday and quickly saw an Alliance competitor allied with an environmental group.
Mike Sawyer of the Rocky Mountain Ecosystem Coalition was supported by Nova Gas Transmission Ltd. when he said Alliance's application was incomplete. He said it didn't meet the board's guidelines for providing evidence that there will be enough gas to fill the new pipeline.
The panel handling the application said the supply issue will be dealt with during the hearing and isn't serious enough to justify a delay.
"The irony of that (Nova support) has not escaped us," said Sawyer, whose sports jacket and blue jeans stood out in a sea of dark business suits. "Nothing makes better friends than a common enemy. "To some extent we're on the same side because we all believe this pipeline is not necessary, but we believe it for entirely different reasons. Nova is there to protect their business interests, and we're here because we think the pipeline's environmental costs are too high."
Sawyer said all of the issues his group will raise at the Alliance hearings -which travel to Regina, Fort St. John, B.C., and Edmonton in February - apply equally to Nova.
Nova, which ships gas within Alberta, and TransCanada PipeLines Ltd. oppose the project because it would mean competition for them in an area where they've enjoyed a near monopoly for 25 years.
Alberta gas producers have long complained about that and believe a competitive pipeline system would allow them to export more gas.
Environmental issues surrounding the project are twofold, said Sawyer.
First there are questions about the effects of building a pipeline that would slash across Alberta and Saskatchewan before dipping into the U.S.
There are also concerns over increased drilling activity to find gas to fill the line.
Sawyer said it's estimated 2,000 new gas wells would have to be drilled each year to meet projected annual shipments of 500 billion cubic feet of gas. Bob Schmidt of Nova Gas Transmission said the company isn't opposed to the Alliance pipeline outside Alberta.
"We're opposed to the duplication within Alberta of the $1 billion of unnecessary facilities and the concern of the gas supply," Schmidt said.
"Is there sufficient deliverability for these two pipelines?" Schmidt chuckled when asked about his company's support of Sawyer's position.
"We agree with them on gas supply. I don't believe in my mind that Alliance has complied with the board's requirements for gas supply."
Alliance hopes to get approval in time to begin construction this summer and start shipments to Chicago by late 1999. The consortium is led by IPL Energy Inc. of Calgary and includes PanCanadian Petroleum Ltd. and Gulf Canada Resources.
FEATURE STORY
Ontario Teachers Fund Buys Stake In U.S. Energy Company
The Financial Post
The Ontario Teachers Pension Plan Board and a huge U.S. pension fund have bought into a major U.S. energy company that has based its growth in large part on deregulation of the U.S. energy market.
Enron Corp. of Houston sold 7% of its retail energy business, known as Enron Energy Services, to Teachers and the California Public Employees' Retirement System for US$130 million.
"This investment by two of the largest pension funds in North America confirms the very significant value being created in our retail business," Kenneth Lay, Enron's chief executive, said.
Analyst Bob Christensen of Gerard Klauer Mattison investment banker in New York, said the relationship between Enron and Teachers may be an indication of Enron's interest in the Canadian energy market, which is also taking steps toward deregulation.
"It gets them further along. I don't see what would preclude them from doing business in Canada at a later date on a retail basis."
Bill Hyler, an analyst at CIBC Oppenheimer Corp. in New York, said Enron is well-positioned to be a leader in the US$200-billion retail energy market in the U.S.
"Enron will be a big player. Enron will be one of the top players when the smoke clears in five years."
Karen Denne, an Enron spokeswoman, said the company would not reveal how much each partner invested.
Teachers declined to comment about the investment.
Enron Energy Services has about 1,100 employees out of Enron's total workforce of 17,000. It provides natural gas and electricity directly to residential and business customers in states where deregulation is opening up power monopolies once held by local utilities.
Teachers has about 155,000 members and total assets over $50 billion.
Enron shares (ENE/NYSE) closed yesterday at US$383/4 down US$11/4.
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