Alberta Energy says 88 per cent of Amber shareholders accept offer
CALGARY (CP) -- Alberta Energy Inc. says an overwhelming majority of Amber Energy Inc. shareholders have accepted the company's $782 million takeover offer announced last month.
Alberta Energy said Monday that shareholders representing 88 per cent of Amber's shares tendered to the takeover bid, which originally expired Friday but has now been extended until Nov. 4.
Alberta Energy made its cash and share offer for Calgary-based Amber last month in a bid to acquire Amber's large reserves of tar-like heavy oil in the Pelican Lake region of northern Alberta.
"We are very pleased with the success of our offer and we are confident that the integration of Amber assets and people will further strengthen AEC," Alberta Energy president Gwyn Morgan said in a release.
"The Amber assets are concentrated, high working interest holdings that overlap principally with AEC's own natural gas operations near Primrose and its oil assets at Pelican Lake in northeastern Alberta."
Alberta Energy's $7.50 a share offer also includes the assumption of more than $300 million of Amber's debt.
AEC boss reassures Amber staff
Final touches put on $782-million takeover bid
Calgary Sun
It is often the employees who get played in today's high-stakes game of corporate mergers and takeovers.
But not so in the latest takeover in Canada's oilpatch, says the president of Alberta Energy Co. (AEC) -- who put the finishing touches yesterday on a deal to take over fellow Calgary oil and gas producer Amber Energy.
Gwyn Morgan told the Sun he has every intention of holding onto most of Amber's approximately 90 staff.
"It's going to be highly unlikely that there will be a significant number of (Amber) employees who won't find an opportunity with AEC," said Morgan who had just returned from a meeting with Amber staff.
"Hopefully there has been some of that immediate concern alleviated."
AEC announced yesterday 88% of Amber shareholders voted to accept AEC's $782-million takeover bid.
Alberta Energy made its cash and share offer for Calgary-based Amber last month in a bid to acquire Amber's large reserves of tar-like heavy oil in the Pelican Lake region of northern Alberta.
But as a side benefit to Amber's heavy oil assets, the acquisition should also make AEC the top publicly traded natural gas producer in Canada -- a distinction that is sure to be a profitable one as natural gas prices are expected to rise with pipeline expansions to come on stream next month.
"As a result of our aggressive gas development program and the Amber acquisition, our forecast 1999 pro-forma gas sales will now increase nearly 30%," said Morgan.
Alberta Energy's $7.50 a share offer also includes the assumption of more than $300 million of Amber's debt.
The race goes to the swift
Globe & Mail
Calgary -- Alberta Energy CEO Gwyn Morgan has shown with his recent lightning-fast hostile takeover bid for Amber Energy that the current oil patch environment is an example of corporate Darwinism at its least forgiving. No one cares what your stock was trading at six months ago -- if it drops below your asset value, or even gets close, you're someone's lunch.
As Canaccord Capital analyst Gord Currie pointed out at a conference last week, there are a number of ways to make sure that you wind up the entrée of the week in the oil patch buffet. Amber helped illustrate one of these, which is to concentrate on a single commodity -- in its case, heavy oil from the Pelican Lake area of northern Alberta.
Although heavy oil prices have staged a recent rebound, thanks to the fact that many producers have shut down some of their operations, until a couple of months ago the price of heavy oil was in the tank. Last year, when everyone wanted to own heavy oil companies, Amber's stock traded as high as $27. Gwyn Morgan just bought it for $7.50.
It doesn't even matter that Amber's stock was close to $10 just a week before Alberta Energy launched its bid. As Amber CEO Rick Lewanski protested after the offer was announced, the stock's sharp drop made Mr. Morgan's bid look a lot more attractive than it actually was. Amber investors seemed happy just to take the money and run anyway.
Elan Energy also bet everything on heavy oil, and was bought last year by Ranger Oil for $566-million. Baytex Energy, which, Mr. Currie speculated, is a takeover target, has become so by promising more than it has delivered and by betting on acquisitions to help meet its estimates. In its case, it compounded the error by buying heavy oil assets.
The analyst said jokingly that one other way of ensuring that your company isn't around in the next year or two is to sponsor a chuckwagon at the Calgary Stampede -- a reference to several companies, including Archer Resources, Morrison Petroleums and Hurricane Hydrocarbons, which have been prominent sponsors of the annual chuckwagon races.
Archer Resources was bought by Dominion Energy, Morrison Petroleums was bought by Northstar Energy (which has since agreed to merge with Devon Energy) and Hurricane Hydrocarbons recently said that CEO John Komarnicki had stepped down and that the company "is considering alternatives for maximizing shareholder value" -- industry shorthand for "We're for sale."
On the same note, Mr. Currie said a company looking to be taken over could always put its name up on a big office building -- like the Dome building, the Home Oil building and the Canterra Tower. "Canterra didn't even get to move in," he noted, telling the audience that "when you see the name go up on the side of a building, short the stock."
On a serious note, the analyst said a list of takeover targets would have to include companies like Numac Energy, Renata Resources, Baytex Energy, Cabre Exploration and Summit Resources. Summit has already acknowledged that it, too, is "seeking strategic alternatives," etc., etc., but hasn't concluded a deal yet. "You put yourself up for sale and there are no bids -- how does that make you feel?" Mr. Currie asked rhetorically.
When it comes to responding to a takeover bid, the Canaccord analyst had a few recommendations, including identifying potential "white knights" who might want to enter a competing bid, in order to achieve your fiduciary duty of trying to get the best value for shareholders. Then "get call-screening and memorize Gwyn Morgan's phone number," he said.
A list of white knights might include some of the U.S. companies that have shown interest in the Canadian oil patch -- such as Pioneer Resources, "which paid up for Chauvco" according to Mr. Currie, or Union Pacific, Devon Energy, Apache or Marathon Oil & Gas (the analyst helpfully included in his presentation a list of phone numbers).
Mr. Currie also had a few words of advice for the acquirers, including the fact that they should make sure not to pay too much. Northstar Energy, for example, borrowed $300-million to pay Morrison shareholders some cash as part of the offer, then found that this impaired their balance sheet to the point where they became a takeover target.
Talisman Energy, meanwhile, bought Pembina Resources from the Mannix family last year at just the wrong time, according to the Canaccord analyst. "They bought at the top of the market from smart people who were selling out," he said. "They paid $8.50 [per barrel of oil equivalent], and that was top dollar." That has hurt Talisman's earnings.
Mr. Currie had a final piece of advice: "It's like snooker. When you make a shot, think where the cue ball will end up -- will it leave you a second shot, or will it give your opponent a shot?"
No cash for Athabasca holders
The Financial Post
Athabasca Oil Sands Trust announced Friday it will not distribute any cash to its investors for the third and fourth quarters because of weak oil prices, lower output and increased capital spending.
The Calgary-based trust owns 11.74% of Syncrude Canada Ltd., which produces synthetic crude from the oilsands of northern Alberta near Fort McMurray.
The trust reported net income of 20¢ a unit in the third quarter, but elected not to make any distribution. The trust paid its supporters 50¢ in the third quarter of 1997 and $1.15 in the first nine months of that year. To the end of September, investors received 5¢.
Besides a 28% drop in the average price of its oil in the third quarter, Athabasca was hurt by lower volumes. An unexpected coker shutdown sliced production. The problem caused Syncrude to reduce its target for the year to 77.5 million barrels, a drop of 2.5 million.
Brian Ector, an analyst who follows royalty trusts for CIBC Wood Gundy Securities Inc. in Calgary, said Athabasca's news was not a big surprise. He had forecast the trust would pay another 5¢ for the year, with the strong possibility the distribution would be suspended.
"We could see further price weakness [in the units] as investors realize this income vehicle will not be generating any income for the next year," Ector said.
The news came after markets had closed Friday. Athabasca units (AOSu/TSE) closed at $17.95, up 20¢.
The trust should have little difficulty financing its portion of expansion at Syncrude, which is spending billions to open a new mine and boost production in the next few years, if oil prices recover to US$16 a barrel in 1999 and US$18 in following years, Ector said.
Athabasca's share of capital expenditures was $15 million in the third quarter, up $4 million from a year ago, and $42 million at the end of nine months.
In the past 52 weeks, its royalty units have traded from a low of $14, set on Sept. 1, to a high of $26.70 on Oct. 22, 1997. The trust is managed by Athabasca Oil Sands Investments Inc.
Cleaner gasoline will cost jobs: industry
The Financial Post
New regulations to drastically reduce the amount of sulphur in gasoline could lead to the closing of one-fifth of Canada's refineries and the loss of hundreds of jobs.
The rules threaten the survival of as many as four of Canada's 19 refineries, according to an independent panel commissioned by Canada's federal and provincial environment ministers.
Slashing the sulphur content of gasoline requires an investment in new technology that the industry estimates at $2 billion. It may be cheaper in some cases to import low-sulphur gas than to convert a plant, said Brendan Hawley, vice-president of the Canadian Petroleum Products Institute.
"It's a global market in petroleum products. You could look at imports if they were more cost-effective."
Hawley said the industry supports lower sulphur levels, but is concerned with the aggressive timetable announced Friday in Toronto by federal Environment Minister Christine Stewart.
"The reduction of sulphur in Canadian gas doesn't come without a cost," warned Donna Kraus-Hagerman, spokeswoman for Shell Canada Ltd.
Sulphur content will be reduced to 150 parts per million by 2002 and to an average of 30 parts per million by 2005. The U.S. has yet to set its new targets.
"If you create a situation where Canada becomes a unique market, then that hits hard at competitiveness and what sort of investment decisions you make," Hawley said.
Ottawa is determined to reduce the levels because of evidence that emissions of sulphur dioxide and sulphate particles pose a health risk. Another federal-provincial panel on the issue estimated low sulphur gasoline would prevent 2,100 premature deaths, 93,000 cases of bronchitis in children, and other ailments.
"Canadians, especially the young and the elderly, are suffering from bad air in our cities and need this regulation," Stewart said.
Sulphur levels in Canadian gasoline are among the highest in the world, averaging 360 million parts per million. Ontario's average was 530 million parts per million last year. The proposed regulation would bring Canada into line with California, which has the most stringent emission standards in North America.
Kraus-Hagerman said the industry is depending on the U.S. to develop the technology needed to eliminate sulphur. If U.S. levels, expected to be announced by the end of the year, come in higher, costs may mount.
The government estimates the changes will add 1¢ per litre to the cost of gas at the pumps.
Shell may be one of the better-placed companies to weather the new rules among Canada's downstream -- refining and retailing -- industry. It already uses more synthetic crude, which is lower in sulphur, than many other companies.
The Canadian industry had wanted Stewart to wait until the U.S. made public its targets so the two countries could be harmonized. It also is worried about whether the technology can be put in place in time.
"What we felt we needed was another 18 to 24 months to get to the 30 parts per million level," Hawley said. "We just don't know if the technology will be available." He said a minimum of three years is required to develop and install the technology once it is commercially viable.
Lower sulphur requirements will also hit independent gas retailers, who need access to alternative supplies.
The government says Europe provides 84% of imported gas in Eastern Canada and the proposed regulations are consistent with standards that come into effect in Europe in 2000 and 2005. But the independents also buy from the U.S. and that avenue would be cut off to them if the two countries aren't harmonized.
Petro-Canada announcement/ruling reaction
Petro-Canada responds to announcement of new sulphur in gasoline standards
TORONTO, Oct. 23 /CNW/ - Petro-Canada today expressed concern over the federal government's announced levels regulating sulphur content in gasoline sold in Canada. The proposed regulations would reduce sulphurcontent to an average of 150 ppm by 2002 and 30 ppm by 2005.
Petro-Canada has consistently stated its support for lower levels of sulphur in gasoline as part of the need to improve air quality. However, our concerns are with the timing and extent of these regulations,'' commented Boris Jackman, Executive Vice-President of Petro-Canada. There is a need to harmonize with U.S. standards to avoid placing Canadian refiners at a competitive disadvantage and these U.S. standards have not yet been determined,'' he said.
Petro-Canada is working to assess the impact of this announcement and will look for creative solutions to address the investment and technological requirements to respond to these regulations.
NDP slams gas deals
Premier says agreements will lower consumer costs
Halifax - Business Reporter
The NDP wonders how many sweet deals on natural gas will be signed before the provincial government releases its long-awaited gas distribution regulations.
"How many more of these deals are going to be cut before the regulations come down and are put into effect?" John Holm, the party's energy critic, asked at a news conference Monday at Province House. "And what's going to be left for the average consumers across this province?"
Opposition leader Robert Chisholm said last week's announcement of a five-year deal by Mobil Oil Canada to sell natural gas directly to Stora Port Hawkesbury and CGC Inc. (Canadian Gypsum) flies in the face of Premier Russell MacLellan's recent commitment to have the costs of natural gas distribution shared by all consumers.
"The Liberal government is allowing large industrial users of natural gas to bypass the province's gas distribution system," he said. "This is contrary to the specific promise of the premier that industry would pay its fair share of the distribution costs."
But Mr. MacLellan said the deals will help the average Nova Scotian.
Stora and CGC Inc. "will be offsetting a lot of the transportation charges homeowners have to make," the premier said Monday night at the legislature.
He said the Stora agreement guarantees that gas will be purchased in the Strait area.
Mr. MacLellan downplayed speculation that Stora will build its own pipeline, saying this would be a very
expensive venture for the Point Tupper company.
It's more likely Stora will negotiate a lower toll rate, the premier said.
But Mr. Holm said similar deals are being made by other industrial users, and they point out the urgent need for distribution regulations.
"Maybe they will say bypasses are not permitted after the fact," he suggested. "I have heard some of those companies who have agreements are going to be taking much more gas than that which is being announced."
Mobil is the lead company in the $3-billion Sable Offshore Energy Project, which is to bring gas ashore in Goldboro, Guysborough County, in November 1999. It will be piped across Nova Scotia and New Brunswick to New England, with lateral lines running to Halifax, Point Tupper and Saint John.
Gas to Stora and CGC Inc. will run through the Point Tupper lateral, which will be scrutinized by the National Energy Board in November.
"Under the deal signed by the premier, the Halifax and Point Tupper laterals aren't defined as part of the distribution system," Mr. Chisholm said. "This permits industry to bypass a distribution system by buying directly off those bypass lines, forcing all other industries and towns to pick up a larger share of the distribution costs."
Mr. Holm said the special deals will undermine whatever gas distribution system is developed in the province.
"When you're doing that, you're taking major loads of the system, which will make other distributions to neighbouring communities less cost-effective and more difficult to develop."
Mr. Holm said he didn't know what Stora or CGC were paying for their gas, but he presumed they would be getting a good deal. "These large purchasers tend to get a discount."
The NDP leader said he had no axe to grind with the companies involved.
"We're not attacking the companies, we're attacking the government for presenting a mixed message to Nova Scotians," he said.
"If that's the deal and that's the position the province is taking, then let's be clear that the government is going to cut a special deal with large industrial users, which means everybody else down the line is going to pay a greater cost."
Tory Leader John Hamm sent letters to both Mr. MacLellan and Mr. Chisholm, stressing the need for an all-party plan to get the greatest benefits for Nova Scotians.
Sulphur stink grows
Consultations crucial to emission standard
Calgary Sun
Ottawa should scrap its new standards for sulphur levels in gasoline and start over by consulting with industry, Premier Ralph Klein said yesterday.
"We're always looking for ways to cut down on emissions, but there are ways of going about this and that's through consultation," he told the Sun.
"You just can't arbitrarily say, 'This is what is going to be done' without consultation with the industry, without gaining some consensus, without putting in a program to make sure that there's not going to be a financial hardship to one particular area," he added.
"Let's go back to square one, let's see if we can get an industry - government buy-in and let's see if we can establish standards that are achievable."
Last week, federal Environment Minister Christine Stewart announced new regulations that would cut sulphur in gasoline by 90% by the year 2005.
The move is expected to cost oil refiners millions of dollars to make the changes.
"This again is an example of the feds acting so unilaterally in an area that could have severe consequences for the province of Alberta and the development of our resource industry," Klein said.
In the Commons yesterday, the Reform Party accused the government of hiding the true cost of the new emissions standards.
Reform Revenue critic Jason Kenney asked why Canadians should believe Stewart's assurance that the new standards will only add one cent a litre when the chairman of the Liberals' own caucus committee on gas pricing estimates the tab will be 15 cents a litre.
ATCO Group's profits surge
Calgary Sun
ATCO Group chairman Ron Southern and his team have once again demonstrated their golden touch.
The Calgary-based company yesterday reported substantially higher third-quarter profits.
The company said it made $14.2 million for the three months ended Sept. 30, up from $11.6 million in the same period last year.
Sales for the period rose to $407.3 million from $404 million.
For the nine months, ATCO reported profits increased to $66.4 million from $60.5 million.
ATCO spokeswoman Kathy Drever said the company hasn't yet earmarked where the extra profits will go, but plans to funnel some of it towards new co-generation power projects.
"There are a number of companies and activities in the ATCO group and obviously they will have access to some of it," she said.
At the same time, ATCO said its total revenues for the nine-month period actually declined to $1,430.4 million from $1,500.5 million in 1997.
The decline in revenue was primarily due to lower natural gas costs, which the company said had a negligible effect on earnings as the costs were incurred on a 'flow-through' basis for customers.
ATCO is involved in everything from electrical power generation and distribution to natural gas gathering and transmission.
Post Energy warrants
CALGARY - Post Energy Corp. (TSE/PSN) announced it intends to offer two groups of special warrants for proceeds of $10.54 million to fund the company's ongoing exploration and development activities. In a news release, Post Energy announced it has entered into a bought-deal financing with a syndicate of Canadian underwriters. The syndicate will issue 1.06 million special warrants at $4.75 for each warrant. The total proceeds of this special warrant will be $5.04 million.
Westcoast financing
VANCOUVER - Westcoast Energy Inc., Canada's third-largest pipeline company, will sell $201.5 million in stock and use the proceeds to retire debt and make investments. The company will sell 6.65 million common shares priced at $30.30 each through a group headed by CIBC Wood Gundy Securities Inc. Westcoast has 104.8 million shares outstanding. It wants to pay off commercial paper or other debt and have cash on hand for joint ventures, acquisitions or capital spending.
|
