MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, FEBRUARY 12, 1998 (2)
TOP STORY
Tarragon Oil & Gas Talking With Unocal About Its Canadian Assets
Ian McKinnon The Financial Post
Tarragon Oil & Gas Ltd. is in discussions with Unocal Corp. for its Canadian assets, in a deal worth that could be worth up to $500 million, the Calgary-based company said yesterday.
Unocal put its Canadian assets, located mostly in northeast British Columbia and northern Alberta, on the block last fall.
Several analysts said rumors began circulating on the Street weeks ago about Tarragon as the buyer, but lack of news cooled speculation.
Other potential bidders named by analysts include Canadian Natural Resources Ltd., Ranger Oil Ltd., Poco Petroleums Ltd. and Talisman Energy Inc.
However, officials with most of the companies declined to comment.
Tarragon president Ed Chwyl, who earlier this week said nothing was imminent with Unocal, told Reuters news service that talks with Unocal are underway for either an equity swap or a joint venture deal.
Unocal spokesman Barry Lane said talks are continuing with Tarragon. He declined further comment.
One analyst, who declined to be named, said Unocal may be interested in swapping its properties in return for an interest in
Tarragon for tax reasons. Another said negotiations for a stock position in the Calgary intermediate in return for Unocal's properties could be difficult because Tarragon's value has plunged to around $10 a share from $16 in early October.
FEATURE STORY
Giant Terra Nova Project Delayed By Partners' Spat
Claudia Cattaneo The Financial Post
Partners in the proposed $2-billion Terra Nova oil project off Newfoundland yanked their scheduled announcement this week as they failed to resolve a dispute over tanker transportation.
Sources say some of the partners wouldn't sign off on Terra Nova, of which Calgary based Petro-Canada is the major stakeholder and operator, until all transportation issues are settled.
The spat stems from unresolved tanker transportation issues concerning Hibernia, the other major offshore oil project, which resulted in two lawsuits involving consortium members last year.
The postponement is said to have disappointed Newfoundland Premier Brian Tobin, particularly because of indications Inco Ltd. may delay or scale back another major development in his province, the Voisey's Bay nickel project.
"Terra Nova is important to us," said Tony Pargeter, director of communications at Petro-Canada. "But if the worst-case scenario happens, and it gets postponed for a year, this isn't a disaster.
"Obviously, it's a major development project that we had planned to have on stream by the end of 2000 and we would like to meet that target."
For now, Petro-Can, with a 34.2% share, doesn't anticipate being unable to meet that schedule, "but that's assuming we get an agreement quite soon."
Failure to resolve the issues before concluding the Hibernia agreement caused two of the smaller partners to go before the Alberta Court of Queen's Bench last year.
The suits revolved around how the two tankers shipping oil from Hibernia to a transshipment facility in Newfoundland would be shared, as well as ownership of the facility, scheduled to be built by 1999.
In a strange twist, one of the suits was launched by the federal agency that holds Ottawa's stake in Hibernia, Canada Hibernia Holding Co., against the Hibernia partners.
One of the major partners sued by CHHC is Petro-Can, the former Crown corporation still partially owned by the federal government.
The other lawsuit, also against the remaining Hibernia partners, was launched by Murphy Atlantic Offshore Oil Co., a division of Murphy Oil Corp. of El Dorado, Ark.
Murphy is a partner in both offshore projects, with 10.7%of Terra Nova and 6.5% of Hibernia.
In a statement of claim filed a year ago, CHHC says Mobil, Chevron and Petro-Can proposed to establish a new company that would own the facility, but would exclude CHHC and Murphy, contrary to previous agreements.
The Murphy suit was settled out of court last month, while the CHHC suit is expected to be settled, also out of court, in the next few days.
"Some of the partners just wanted closure on loose ends," said a source close to both projects.
"It's a transportation issue of how the crude is going to be transported. The owners want to make sure that all agreements are signed, including transportation," said another source.
Of the two shuttle tankers hauling oil from Hibernia to the shore, one is owned by the U.S.-based Hibernia partners, the other is chartered by Petro-Can and CHHC.
The transportation plan for Terra Nova involves a pooled arrangement with three tankers - the two vessels hauling Hibernia oil plus a third.
The massive Terra Nova field contains 406 million barrels of recoverable oil, making it second in size only to Hibernia, which started producing in November.
While Petro-Can has downplayed the dispute, others say settling the transportation issue is key to getting the project under way. Tanker transportation is as pivotal to offshore oil projects as pipeline transportation is for oil pools on land.
Discussions between partners are said to be continuing.
Pargeter said there's no cutoff date beyond which the project will not proceed.
Terra Nova is part of Petro-Can's strategy for continuing development of the Grand Banks.
"This is our next major offshore project and the only one that could be brought on stream within a few years. We want this to go ahead."
FEATURE STORY
Anderson Exploration Looks To '99
Low Commodity Prices Take Toll On Bottom Line In Fiscal First Quarter
Sydney Sharpe, Calgary Herald
It's next-year country for Anderson Exploration Ltd. The Calgary company, which is highly tilted toward natural gas, is expected to outperform in 1999, after new pipeline capacity comes on stream.
"Next year it will be Katie bar the door," says chief executive J.C. Anderson on his company's prospects.
Anderson performed his usual highly entertaining review of the company's year as well as future prospects before shareholders at its annual meeting Wednesday.
"I'm the only CEO left in town who goes by his initials," Anderson began, referring to J.P. Bryan, who abruptly resigned this week from Gulf Canada Resources Ltd.
Then Anderson gave his forecast for commodity prices.
"Last year I said oil prices wouldn't go south of $20 (US per barrel). This year I don't see them going north of $20," Anderson told his amused crowd. Oil prices have slid to $16.15 US on Wednesday from $23.15 last October.
He showed a slide of a barrel of oil at $16, crossed out from $24. He emphasized that oil is not only cheap, but "really cheap."
To bring his point home, Anderson then pulled out some highly selective prices for other "comparative" barrels, such as a barrel of olive oil or Budweiser beer.
The shareholders loved his show, even though they weren't as enamored with the slide in fiscal first-quarter earnings, for the three months ended Dec. 31. Low commodity prices are the culprit.
"The earnings are what we expected," said Craig Langpap, an industry analyst with Peters & Co.
For the remainder of this year, Anderson expects cash flow will be flat. "If we can achieve flat for the rest of our fiscal year, it's not all that bad," he said.
The company's profits dropped a dramatic 70 per cent to $11.3 million (nine cents per share) from $37.2 million (31 cents) in the same period of 1997. Cash flow was down 24 per cent to $90.8 million (74 cents) from $119.3 million (98 cents), while revenue declined 5.7 per cent to $195.2 million from $207.1 million.
The company is considered better positioned than most to take advantage of the new pipeline capacity for this fall.
Anderson is the seventh largest gas producer in the country, with 66 per cent of its production directed to natural gas (59 per cent) and natural gas liquids (seven per cent).
"If you want to own a gas company, Anderson has the most leverage to gas, plus J.C. is a well known name," said Langpap.
While Anderson's second quarter is also expected to be down compared to last year's, it won't feel the pain as much as oil-oriented producers.
"They will have a somewhat poorer second quarter," said Peter Linder, an analyst with CIBC Wood Gundy. "We think Anderson is one of the best to own among the senior producers."
Anderson and his wife equally own six per cent of the company, while Trimark owns 15 per cent.
While he acknowledged the company is a takeover target, Anderson noted that hostile moves are tough to do in this climate.
"If you're going to take over a company, the better part of valor is to take over a good one, and we're a good one," he said.
"If it happens, you can be sure we'll do our level best to reward our shareholders," Anderson added, implying there could be a tussle for the right price. |
