MARKET ACTIVITY/ TRADING NOTES FOR DAY ENDING THURS. JUNE 10 1998 (3)
TOP STORIES
Petro-Canada Pullout Sparks Buyout Rumors
Calgary Sun
Rumors Petro-Canada may be shopping for a major purchase hit the streets yesterday after the company quietly bowed out of the city's most prestigious deal-making conference.
PetroCan officials confirmed late yesterday the company would not be attending the Canadian Association of Petroleum Producers Investment Symposium, to take place in Calgary June 22-24.
"Yes, we have dropped out of the symposium," PetroCan spokesman Rob Andras said.
He declined to explain why the company would not attend.
Because companies are compelled to disclose forward-looking information at the CAPP symposium, analysts said yesterday it's a good bet they don't want to tip the market off to a big deal in the works.
The announcement, and PetroCan's silence, spark-ed a riot of rumors about who might be on the selling block.
Among the top picks in investment houses and oilpatch boardrooms were integrated giant Gulf Canada Resources Ltd.and Ranger Oil Ltd.
Other rumors suggested the company is looking at Shell Canada Ltd.'s western producing assets or another company's North Sea assets.
Petroleum Show Ends On A High
Calgary Sun
They started to take down the tents at the National Petroleum Show on the Stampede Grounds last night. Some 98 of them.
Yet not before the head count for registered and non-registered visitors was headed for the 50,000 mark.
And not before it pumped $20 million into our city. Show manager Peter Faloon used the word "outstanding" to describe the world's largest oil and gas show.
"But that's not my word," Faloon insisted. "It's the most frequent quote we've been hearing from exhibitors and decision-makers." It's estimated the show will spur $6 billion worth of deals, though few were actually signed at the event.
"The big deals take place in the next 12 months. Exhibitors make an awareness of their products here, make contact with potential buyers, and build a preferential impression."
One of many companies already happy with their impact is McElhanney Land Surveys Ltd., an employee-owned firm, formed in 1910, which has done work in some 70 countries on every continent on the globe.
"We've received some really excellent leads for local jobs, and expect to be working on significant projects as a result," said business development manager Larry Loomes.
"Also, there's potential of a contract in Guatemala, which would be very beneficial to both our company and our client."
Economic Development Minister Pat Nelson spent three days on the grounds meeting with business leaders, politicians and diplomats from some 90 nations, and said they all were impressed by the Alberta oil and gas industry's technology.
"What really impressed them, too," said Nelson, "was how our province can be such an industrial powerhouse and yet have such clean air and water.
I think our environmental technology and expertise will become a growing part of our export market."
On the grounds, Norm Tocher, assembly supervisor for Weatherford Compression, said his team would start dismantling one of the largest exhibits on the grounds at 5:30 a.m. this morning.
That's the mammoth 205,000-lb., 24-ft.-wide and 46-ft.-long, Superior WH 64 compressor frame driven by a Superior 2406 gas engine, built for PanCanadian.
Pricetag? About $1.5 million.
Though it looks like a permanent fixture, Tocher explained because of its design and technology -- which in layman's terms might be referred to as akin to an interlocking jigsaw puzzle -- the compressor will be gone by tomorrow Saturday morning.
So will the other 1,100 exhibits.
Any bugs in the show?
"Well, chuckled Faloon, "every show manager has a list of things he wished he had done, and things he will do in the future, but the only real problem was that we had so many visitors our shuttle buses couldn't get around the grounds as quickly as they hoped."
So, listening to Faloon and others, it seemed "outstanding" success was the only thing creating any problems.
By the way, at 10 a.m. this morning Faloon and his team will meet to start planning for the year 2000 National Petroleum Show.
That will be held in conjunction with the World petroleum Congress.
Western oil services firms hunt for bargains
The Financial Post
Plunging oil prices are not discouraging two Calgary-based service firms from growing through expansion or acquisition.
Anadime Corp. said yesterday it has received approval from Saskatchewan to build a $2-million oilfield waste plant at Wilmar in southeast Saskatchewan.
"You have to take a long-term view in our business because it can take 12 months to permit and build a facility," said president and chief executive Owen Pinnell.
The company will keep a close eye on crude prices during the next 90 days, he said, adding if things don't improve, it may put the plant on hold until they recover.
The petroleum waste management firm runs five plants in Alberta and is building three more in the province. Wilmar will be its first operation in Saskatchewan.
Anadime is also looking to California's onshore and offshore oil industry for opportunity. It bought a waste disposal plant in Ventura County near Los Angeles and is developing a second site at Bakersfield, in the Central Valley. Pinnell said California produces nearly one million barrels of oil a day. Primary processing of waste will be done at Ventura and the leftover sludges will receive additional treatment at Bakersfield.
Anadime shares (AEM/TSE) rose 2c to close at 47c.
Meanwhile, Bonus Resource Services Corp. will use U.S. funds to help buy the assets of Alberta Gold Well Servicing Corp. Ltd. The balance will be in the form of 1.4 million common Bonus shares. The value of the deal is about US$50 million, a company spokesman said.
The cash portion, which was not disclosed, was funded from reserves on hand and a subordinated promissory note from a subsidiary of Houston-based EnSerCo. LLC. The note, which carries a minimum principal of US$22.5 million and a maximum of US$25 million, has a one-year term. EnSerCo. was formed by affiliates of Enron Capital & Trade Resources Corp. and SCF Partners to provide capital to service firms.
Alberta Gold owns 42 service rigs operating in north-central Alberta and British Columbia. Bonus has 204 service rigs, used to complete or refurbish wells, in Canada and seven in Australia.
Bonus shares (BOU/TSE) closed at $4, down 1c.
Meltdown -World Oil Prices Take Another Beating
Calgary Sun
Oil prices took another beating yesterday as markets signalled their dismay at the latest round of promises to curb world crude output.
West Texas Intermediate light crude lost 55 cents on the New York Mercantile Exchange spot market to land at a 10-year-plus low of $12.88.
Continued concerns about a world oversupply and renewed fears that demand in Asia could weaken further were seen as major factors in the fall.
Futures markets also stumbled, with July contracts plunging 73 cents to close at $12.74 in New York and August contracts losing 47 cents to finish trading at $13.92.
Oil contracts have lost nearly 10% of their value since Monday and are trading at an average $6 a barrel less than a year ago.
The drop has left market watchers wondering how much lower oil prices can slide.
Traders have been skeptical the world's oil producers are serious about curbing output.
Three major producers last week tried in vain to stem the bleeding, vowing in a joint pact signed in Amsterdam to collectively cut production by 450,000 barrels a day.
The move was meant to supplement the 1.25 million barrels in daily reductions agreed to in March by countries inside and outside the Organization of Petroleum Exporting Countries.
But recent reports suggest it's still too little, too late.
An industry survey released this week concluded Asia's demand for oil will drop by 250,000 bpd in the second quarter of the year. Another suggested worldwide demand could sink by 500,000 bpd.
Those grim forecasts will weigh heavy on the minds of OPEC when it meets later this month.
The 11-member group, which controls 40% of the world's oil output, will meet in Vienna June 24 to discuss new production cuts.
Overseas oil output from Canada firms seen growing
Depressed oil prices have not dampened Canadian energy companies' enthusiasm for overseas projects, which are expected to pump out record levels of oil and gas in 1998, analysts said this week.
''There is a lack of opportunities for significant Canadian discoveries, but there are opportunities for those discoveries in other places,'' said Peter Adams, president of the Canadian Institute for Petroleum Industry Development, an organization that aids companies operating outside Canada's borders.
The rate of spending growth by Canadian firms on overseas developments was expected to slow this year, as corporate cash flow tightened because of weak crude oil prices. But production should still continue to rise, Adams said.
A new study by Calgary-based oil and gas analyst Ian Doig showed international oil and gas production from 138 Canadian companies surged to record levels last year.
Crude oil production jumped by more than 150,000 barrels a day to almost 480,000 barrels a day in 1997, an increase of 47 percent over 1996. Natural gas output, meanwhile, rose by 21 million cubic feet a day to 597.3 million cubic feet a day, up 3.6 percent over the year-ago figure.
The big increase is due in part to acquisitions, Gulf Canada Resources Ltd.'s (GOU.TO - news) C$1.3 billion takeover of Britain's Clyde Petroleum in early 1997, for instance. Clyde brought with it production in Australia, Indonesia and the North Sea.
The study showed Canadian companies with the most overseas oil production in 1997 were Canadian Occidental Petroleum Ltd. (CXY.TO), which produced 116,000 barrels a day outside of Canada, Talisman Energy Inc., (TLM.TO), which produced 79,000 barrels a day, and Hurricane Hydrocarbons Ltd., which pumped out nearly 46,000 barrels a day.
Doig, publisher of the energy industry newsletter Doig's Digest, estimated that two out of every 10 oil industry employees in Canada are working on -- or evaluating -- international projects.
Production levels in Doig's study -- which only tracks Canadian-owned firms -- could be adversely affected in 1998 by foreign takeovers of Canadian companies, he said.
Several companies with foreign production have been acquired by U.S.-based companies in the past year. Among them is Norcen Energy Resources Ltd., bought by Fort Worth, Texas-based Union Pacific Resources Group Inc. (UPR). Norcen produced 41,400 barrels a day outside of Canada in 1997, according to the study.
One of the biggest obstacles Canadian companies face in establishing international ventures is convincing investors to buy in when several similar initiatives have recently proved unsuccessful.
Companies like Abacan Resource Corp. (ABC.TO) and Chauvco Resources International Ltd. (CHV.TO), both of which operate in Africa, missed production targets and reserve estimates by wide margins, resulting in sharp drops in their stock prices.
''There are a lot of companies that won't work off the continent because of these concerns,'' said Adams. ''Some Canadian companies have had good experiences, some have had horrible experiences. But companies will go if the opportunities are there.''
To counter investor wariness and enhance the credibility of overseas projects, some companies have taken to hiring well-known Canadian engineering firms to perform reserve valuations on prospects, Doig said.
Cuba pitches oil exploration to Canadian companies
Cuban governmentofficials held court with oil executives in Canada's energy capital on Thursday to press home the message that the Caribbean nation was ripe for foreign exploration.
The delegation urged oil companies to ignore threats of U.S. sanctions and consider joint ventures with Cuba's national oil company to help boost the island's oil production, which now represents only a small fraction of its demand.
Canada is already one of the largest foreign investors in Communist-ruled Cuba. The economy has struggled since the collapse of the Soviet Union amid a continuing embargo imposed by the United States.
''Last year, we paid over $1.2 billion for crude oil and byproducts in the international market -- it's very difficult for a small country to pay this large amount of money,'' Manuel Marrero Faz, senior petroleum industry advisor to Cuba's minister of basic industry, told Reuters after the presentation.
''One of the first targets of the Cuban government today is to increase the native production by means of cooperation with foreign companies.''
Officials said Cuba, which opened its oil industry to foreigners in 1990, produces about 33,000 barrels of oil a day, equal to just 17 percent of its consumption. Canada, by contrast, produces about two million barrels of oil a day.
Through production-sharing contracts -- arrangements between foreign oil companies and state-owned firm CUBAPETROLEO (CUPET) -- Cuba hopes to move toward energy self-sufficiency to feed its four refineries, Marrero said.
The Canadian oil audience was attracted to the event by opportunities on 23 blocks of onshore and offshore acreage, as well as by free Cuban cigars and a lunch.
Fifteen oil companies from Canada, Britain, France, Sweden, Germany and Spain currently operate in Cuba.
The most prominent Canadian firm producing oil and gas in the country is Toronto-based Sherritt International Corp. (S.TO), which also operates in other areas of Cuba, such as in mining, tourism and power generation.
Sherritt Chief Executive Ian Delaney gained international attention two years ago as one of several executives barred from the United States after doing business with Cuban President Fidel Castro's government.
Marrero said the U.S. embargo and the Helms-Burton Act, which seeks to punish foreign companies operating in Cuba, actually presented unique opportunities for small Canadian oil explorers anxious to enter a new arena.
Marrero said the embargo had not stopped a spate of U.S. firms from contacting CUPET in hopes of securing business in case the political climate between the two countries improved.
Tom Bugg, president of small oil producer Beau Canada Exploration Ltd. (BAU.TO), said Cuba was attractive because the fiscal terms were favorable, it was largely unexplored and the potential exists for big oil finds.
Beau Canada is involved in Cuba through its recently acquired 75-percent ownership in Genoil Inc.
''One of the biggest benefits is that the Cubans are very honest, the administration committee has been very flexible and fair,'' Bugg said. ''Our block is under explored, so what we're doing is taking modern seismic, modern drilling technology and trying to shoot for a home run.''
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