MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, APRIL 8, 1998 (7)
MISC NEWS ON KERM'S LISTED COMPANIES
Tarragon Oil & Gas to Amend its Shareholders Protection Rights Plan
Tarragon Oil and Gas Limited announced that after consultation with shareholders of the Corporation, other interested parties and Fairvest Securities Corporation, the board of Directors resolved to amend its Shareholders Protection Rights Plan (the "Plan"), subject to shareholder and regulatory approval. The Plan has been submitted for shareholders' approval and ratification at the special and annual meeting of the shareholders of the Corporation scheduled for April 15, 1998.
The Plan will be amended to provide that: (i) the Rights may only be redeemed by Tarragon with the consent of the shareholders of Tarragon; and (ii) except with the consent of shareholders of Tarragon, the Board of Directors of Tarragon may only waive the application of the Plan with respect to a take-over bid if such take over bid is made by way of a formal bid circular and such waiver shall only act as a waiver of other take-over bids if they are also made by way of a formal take-over bid circular.
The amendments of the Plan will also contain a number of amendments to the definitions of acquiring person, associate and beneficial ownership, all of which have the effect of providing additional certainty in the calculation of beneficial ownership of shares owned by shareholders in terms of the occurrence of certain triggering events under the Plan.
PIPELINES
Alliance Pipeline Prepared For Construction
Alliance Pipeline announced several key procurement measures that will enable start-up of Alliance system operations in the second half of 2000 as previously announced March 3, 1998.
''Commitments to contractors and suppliers are being made to ensure that we have all the people and materials in place, ready to go as soon as the regulatory process concludes,'' says Dennis Cornelson, President and Chief Executive Officer. ''We have signed agreements for the Canadian mainline pipe supply with IPSCO, Welland, CAMPIPE and Berg for about C$625 (US$455) million and for the American mainline pipe with NAPA and Berg for about US$500 (C$685) million. We have also signed agreements with Nuovo Pignone for supply of 17 mainline compressor packages totaling about US$120 (C$165) million. This totals to about C$1.475 billion or US$1.075 billion.''
Cornelson continues, ''Our partners have committed about US$950 million (C$1.3 billion) in equity to Alliance and a committed banking syndication involving 42 banks has been advanced to provide Alliance's required debt financing. The banking syndication has been over subscribed by over US$580 (C$800) million. Our three Canadian and seven American mainline construction contractors are in place and committed to our schedule. We are pressing forward with our regulatory process and will be ready to move rapidly once we receive all the appropriate permits to build and operate the Alliance Pipeline system. We remain the lowest-cost option for incremental natural gas transportation from Western Canada.''
Background
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Canadian mainline pipe purchase breakdown:
- 1152 km (716 miles) of 36'' pipe from IPSCO (TSE:IPS),
- 187 km (116 miles) of 42'' pipe from Welland Pipe Ltd. (a wholly owned subsidiary of Stelco Inc.; TSE:STE.A),
- 161 km (100 miles) of 42'' pipe from CAMPIPE (Camrose Pipe Company, a joint venture company owned by Oregon Steel Mills Inc.-60%; and Stelco Inc.-40%) and
- 74 km (46 miles) of 36'' pipe from Berg Steel Pipe Corp.
American mainline pipe purchase breakdown:
- 559 miles (900 km) of 36'' pipe from NAPA (Napa Pipe Corporation, a
subsidiary of Oregon Steel Mills Inc.; NYSE:OS) and
- 328 miles (528 km) of 36'' pipe and 13 miles (21 km) of 42'' pipe from Berg Steel Pipe Corp.
Canadian and American mainline compressor requirements:
- 17 mainline compressor packages will be supplied by Nuovo Pignone (90% equity owned by General Electric; NYSE:GE - however, it is legally and financially an independent and stand-alone entity).
Alliance is in the process of firming up orders for the balance of its pipe needs, its mainline block and station valves, its other mainline compressor station materials and equipment, and for its smaller lateral compressors.
Alliance is actively working with landowners in both Canada and the United States to ensure that all necessary rights-of-way are in place to permit construction to commence in a timely manner. Land agents are discussing issues specific to landowners' property and are making every effort to resolve concerns to the satisfaction of both the company and landowners. ''Alliance recognizes the importance of developing and maintaining long-term and cooperative relationships with our landowner communities,'' says Dan Hushion, Manager, Rights-of-Way. ''The land compensation program developed by Alliance ensures that all landowners, occupants and interested parties are treated with respect and in a fair and equitable manner.''
The Alliance Pipeline system is designed to carry natural gas from Western Canada to the Chicago-area market center for distribution throughout North America. The Alliance concept is one of ownership of the pipeline system by a group of companies with interests in the energy business. Limited partners currently include affiliates of:
- Coastal Corporation (NYSE:CGP) - 14.4%
- Duke Energy Corporation (NYSE:DUK) - 9.8%
- Fort Chicago Energy Partners LP (TSE:FCE.UN) - 26.0%
- IPL Energy Inc. (TSE:IPL) - 21.4%
- Unocal Corporation (NYSE:UCL) - 9.1%
- Westcoast Energy Inc. (TSE:W) - 14.5%
- Williams Companies Inc. (NYSE:WMB) - 4.8%
Nova-TCPL Merger Clears Two U.S. Regulatory Hurdles
A multi-billion-dollar merger between energy giants Nova Corp. and TransCanada PipeLines Ltd., has passed two critical hurdles on the road to approval, the companies said Tuesday.
Their plan received approval this week from the U.S. Federal Energy Regulatory Commission. That was required because of indirect interests held by the companies in U.S. electric utilities and power marketers.
The deal also survived a 30-day waiting period demanded by U.S. federal antitrust legislation. That expired Monday.
The approvals mean the merger plan is on track, the companies said.
"Essential additional approvals are still required," said George Watson, president of TransCanada, the country's major transporter of natural gas from Western Canada to Ontario and Quebec.
"Nonetheless, we are delighted to see these initial approvals being put into place. This keeps us on track in our target of finalizing the merger transaction around the end of the second quarter 1998."
Nova, a big Calgary gas pipeline and petrochemicals producer, and TransCanada agreed to the merger in late January.
They argued their plan to create the fourth-largest energy services company in North America will keep the Canadian firms out of the hands of American competitors.
If approved, the merger will create a company with about $16 billion in revenues, $21 billion in assets, 35,000 kilometres of pipeline and about 9,500 employees.
NOVA Gas Toll Plan Faces Producer Concern
Talks between NOVA Gas Transmission Ltd. and Canadian natural gas producers over a switch to a landmark new pipeline toll structure are slated to start next week, but a number of potential roadblocks to an agreement were already emerging.
NGTL, the Alberta gas pipeline unit of NOVA Corp., filed with Alberta's energy regulator a framework on Monday for a move to distance based tolls from an 18-year-old "postage stamp""system. Under the old system, producers pay the same to ship gas to Alberta's borders from anywhere within them.
NGTL president Bruce Simpson told reporters his company's proposal, devised after a year of unsuccessful talks with its customers on tolls, met a need to align costs of operating the network with rates charged and was a response to increased pipeline industry competition.
However, industry players say many producers were concerned the plan as proposed would mean higher costs for developing gas fields in the northern parts of Alberta, as well as far more complication in handling transportation contracts.
"Certainly, the initial reaction that I'm getting from our members is that it's adding a layer of complexity," said Greg Stringham, vice-president of markets and fiscal policy for the Canadian Association of Petroleum Producers.
Stringham also said producers, especially those whose transport costs would go up after the change, were surprised at the absence in the proposal of a transition time.
"They've made their investment decisions based on where they are at today, so if this were phased in over time, at least for the ones where the tolls are going up, that would help the situation," he said.
Under the proposal, a series of options with varying costs and service flexibility would be introduced. Each would be used for a different gas supply and market situation.
Transport prices for gas delivered within Alberta would range from C$0.04-C$0.27 per thousand cubic feet, compared to C$0.13 under the current one-size-fits-all rate. For gas delivered to the border, costs would range from C$0.17-C$0.40 per thousand cubic feet, which compares to the current C$0.26.
NGTL was also seeking to increase the minimum contract length to five years from one, a move Simpson predicted would be controversial but necessary for the company to make "prudent""pipeline expansion decisions.
"It's certainly going to be a big change for people and very hard to accept," Stringham said. "It's pretty hard to guess five years out exactly what production you're going to be getting out of a specific gas plant."
Under the current system, producers have to make shipping commitments for several years in order to have a new lateral pipeline built to ship gas to NGTL's mainlines. But when output becomes stable, renewal periods become shorter, he said.
Paul Mortensen, director of natural gas supply for the Canadian Energy Research Institute, said the new regime could raise costs for developing remote fields to the point where some would be viewed as too expensive.
"It's going to depend on where your gas is located in the province as to whether you're going to benefit or be hurt by the deal," he said.
Simpson disagreed, saying natural gas prices sometimes moved as much as C$0.50 in a day and that volatility did not force producers to scrap developments. "What we're talking about here is changing our transportation costs by C$0.05 or C$0.10, depending on how somebody manages their portfolio of contracts, so I don't think it would have an adverse impact on development," he said.
Also, with the coming increase in export pipeline capacity from the province and a supply shortfall that currently exists, producers would have to become even more active developing fields than they were today, he said.
Pembina Pipeline Income Fund and Northstar Energy Corporation announce the commissioning of Northstar's new eight inch diameter pipeline from Taylor, British Columbia to Dawson Creek, B.C. The Northstar Pipeline, with a capacity of 19,000 barrels per day, connects the major crude oil gathering systems in northeastern B.C. to Pembina's pipeline system at Dawson Creek and provides pipeline access to markets in Edmonton, Alberta. This connection is a major development, giving Northstar and Pembina the opportunity to provide pipeline transportation service to the rapidly expanding crude oil and condensate producing fields in northeastern B.C.
Pembina Pipeline Income Fund is a Canadian income trust fund engaged, through its wholly-owned subsidiary Pembina Pipeline Corporation, in the transportation of crude oil, condensate and natural gas liquids in Western Canada. The Fund's units trade as instalment receipts on the Toronto Stock Exchange under the symbol PIF.IR. The final instalment of $4.00 per unit is due October 23, 1998.
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