IN THE NEWS / Remington Energy For Sale
Stephen Ewart, Calgary Herald
Remington Energy Ltd., which was a hotshot among up-and-coming Calgary oil companies, has put itself up for sale as slumping oil prices pushed its debt to an unmanageably high level more than six times its annual cash flow.
Remington joins a list of oil and gas producers that have announced this year they are exploring "strategic alternatives" as the oilpatch struggles under the financial weight of the lowest crude oil prices in 12 years.
That list includes now-departed Summit Resources Ltd., Archer Resources Ltd. and Arakis Energy Corp. Others, such as Amber Energy Inc., had the decision taken out of their hands when rivals launched hostile takeovers as their stock skidded to 52-week lows.
Remington chief executive Paul Baay said it wasn't easy to put a For Sale sign on the company his father started in 1984.
"This is definitely a business decision but it sure as heck doesn't make it any easier," he said Tuesday.
Baay said management at Remington are significant holders of the company stock and appreciate the concerns of shareholders
"In the end, I think it is the right decision," he said.
Remington has had a remarkable three-year run after it spudded a wildcat well near Fort St. John, B.C., just after Christmas 1995. It rose from a junior to mid-sized producer with 130 employees. Its stock peaked at $35 a share in August 1997.
The potential for a bidding war bumped Remington shares up 80 cents to $5.30 from their 52-week low on Monday. Almost four million shares were traded, making Remington one of the most active issues Tuesday on the Toronto Stock Exchange.
As part of its review of all options, Remington scrapped plans to sell $60 million of debt through convertible debentures. Baay said the move won't hurt day-to-day operations as the company was determined to live within its cash flow.
Remington projected 1999 cash flow of $50 million and has a debt of more than $300 million. Its market capitalization is about $140 million.
In 1997, spent $181-million for the assets of BC Star Partners. In August, it spent $127.5 million to acquire B.C. properties of Canadian Natural Resources Ltd.
Craig Langpap, an analyst at Peters & Co., said companies facing rising debt and falling cash flow have the option of cutting costs to the bone and trying to ride out the storm or putting themselves on the market.
"This is the impact of a long and painful downturn in oil prices," Langpap said. "You don't have a lot of options."
Remington has an enviable package of assets in the West Stoddard area of British Columbia. Langpap said there are six or seven companies competing with Remington in the area so it will likely prompt a great deal of interest.
"You're going to see an awful lot of this, with a major shock like the falling oil price," said John Kinsey, a portfolio manager at Caldwell Securities in Toronto. "Now, the main focus is to stay alive and, after that, the companies that are in good shape look around to do some cherry picking" and others look to find buyers. |
