IN THE NEWS / Exxon-Mobil would dominate energy industry in Canada
From the gas pump to offshore oil megaprojects, a merged Exxon Corp. <XON.N> and Mobil Corp. <MOB.N> would enjoy a commanding presence in Canada, where they already dominate numerous parts of the energy landscape.
Separately, the Canadian subsidiaries of the two U.S. oil majors sell the most gasoline in Canada, are involved in the biggest drilling ventures off its east coast and have among the richest investments in Alberta oil sands and heavy crude oil fields.
Analysts point out there is very little overlap of the two operations, meaning there would likely be few concerns raised by Canada's competition watchdog.
"The concept of these assets being put together makes a lot of sense," said analyst Duncan Mathieson of Scotia Capital Markets in Toronto.
Sources close to the U.S. companies say merger talks between Exxon, already the world's biggest publicly traded oil company, and Mobil, the second-largest U.S. oil company, are at an advanced stage, and a deal could come shortly.
Analysts say savings from a merger in which Mobil shareholders would receive Exxon stock would generate cost savings far greater than $2 billion just as the industry faces its worst conditions in 12 years.
Exxon is active in Canada through 69.6-percent owned Imperial Oil Ltd. <IMO.TO>,, Canada's biggest energy company.
Toronto-based Imperial, which had 1997 earnings of C$847 million on revenues of C$11 billion, is Canada's biggest seller of gasoline, which it produces at four refineries and markets nationwide under the Esso banner.
It is a 25-percent owner of the sprawling oil sands mining and synthetic crude operation Syncrude Canada Ltd., operates a huge heavy oil development at Cold Lake, Alberta, has a stake in the Sable natural gas project off the coast of Nova Scotia and pumps oil and gas from numerous fields in western Canada.
Imperial, which has about 7,000 employees, produced an average of 293,000 barrels of oil and 350 million cubic feet of gas a day during the third quarter.
Calgary-based Mobil Oil Canada Ltd., wholly owned by Mobil Corp. of Fairfax, Virginia, does not refine and market gasoline in Canada. But it is a major player in Sable, the multibillion-dollar Hibernia and Terra Nova oil projects off the coast of Newfoundland and has made several major oil and gas discoveries off the east coast.
The division produces an average of 95,000 barrels of oil and 500 million cubic feet of gas a day.
Mobil Canada, which employs 950, is also planning a C$2-billion oil sands mining development in northeastern Alberta.
"It would be an excellent fit and it would change the face of Imperial Oil," said John Clarke, analyst with Deutsche Morgan Grenfell.
Officials from the companies declined to comment.
It was not known how the Canadian assets would be put together, but industry observers said a takeover of Mobil Canada by cash-rich and debt-light Imperial within the larger Exxon-Mobil deal would make sense.
Clarke said he believed Mobil Canada, with growing production from Hibernia and Sable under development, could be purchased by Imperial for about C$4 billion in cash. "What that would allow would be the financial strengths of Imperial Oil to be accessed by Exxon in funding the overall acquisition, and it also puts the assets where they belong," Mathieson said. "You wouldn't have to go a stretch to get the Imperial Oil shareholders on board."
Investors already appeared to be excited by the concept, driving Imperial Oil shares up by C$1.20, or nearly 5 percent, to C$27.30 on the Toronto Stock Exchange on Thursday. |
