Article from Kerm's Korner April 14
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A mouse roared in Canada's oil patch on Tuesday when a little-known energy firm launched offers for major
stakes in 40 rival companies in a curious C$2-billion bid to create a portfolio of undervalued stocks.
Calgary-based Westlinks Resources Ltd. (Alberta:WLX.AL), a tiny, Alberta Stock Exchange-listed concern, became the talk of the industry with its proposal to swap its shares for 25 percent stakes in the targeted oil and gas companies, which represent a Who's Who of the Canadian exploration and production sector.
The ambitious move was being interpreted by some observers as a way to force oil-company managers to respond to shareholder concerns over weak stock prices by cutting costs.
Energy executives, blindsided by the proposal on Tuesday, blasted it as a nuisance created by a company that doesn't have much money, only big plans to issue a huge number of shares.
''This is a genuine offer and we are going forward,'' said Tom Bamford, Westlinks' chief operating officer. The company had little else to say to reporters on Tuesday.
Westlinks is seeking interests in big names such as gas producers Anderson Exploration Ltd. (Toronto:AXL.TO), Poco Petroleums Ltd. (Toronto:POC.TO) and Crestar Energy Inc. (Toronto:CRS.TO) as well as small companies such as Player Petroleum Corp. (Vancouver:NWY.V), Raider Resources Inc. (Toronto:RAI.TO) and Calahoo Petroleum Ltd. (Toronto:CLX.TO)
It would swap as many as 1.6 billion of its own shares, using different exchange ratios. Some industry sources doubted the bids would succeed given its limited financial resources.
The company reported revenues of just $1.8 million and produced an average of 250 barrels of oil equivalent a day in 1998. That compares with Poco's 1998 revenues of $628 million and production of 89,000 barrels of oil equivalent a day.
''I don't think it's credible -- that's my initial reaction,'' said J.C. Anderson, chairman of targeted Anderson Exploration. ''But we are in a position where we have to see what falls out of this thing, and we may have to respond.''
Bewildered stock regulators said they would study whether the bids should be allowed to proceed. ''The proposal raises significant and novel regulatory considerations,'' the Ontario and Alberta securities commissions said in a joint statement.
Stock trading in the companies was halted on domestic and U.S. exchanges early on Tuesday in response to the bids from Westlinks, a company led by Peter Sekera, a Calgary energy and banking veteran.
''As a holder of some of the stocks in the group they're looking at, I'm a little cynical,'' said Irwin Michael, portfolio manager at ABC Funds in Toronto. ''It looks like a mutual fund. In that regard, where's the beef?''
Referring to its offers as ''multiple, simultaneous, hostile takeover bids,'' Westlinks said it did not want full control of any of the targets. Instead, it wanted to provide a vehicle for investors to acquire a cross-section of the energy industry.
''Such companies, in Westlinks' view, represent those who are most likely to survive the current downturn in the oil and gas sector,'' the company said in a complex press release.
Several oil executives described the move as frivolous, noting there weren't 40 different investment banking houses in Calgary to be financial advisers to each target firm.
''Do you know what it would cost to do a mailing (of bid documents) to 40 companies' shareholders? I think it's more than his entire company's asset base,'' said Ray Chan, chief financial officer of Baytex Energy Ltd. (Toronto:BTEa.TO), one of the firms targeted by Westlinks.
''If we would have received this news on April 1, we would have had an explanation, but today not being April Fool's Day, I have no idea why he did it.''
Westlinks stock last traded at $1.50 on April 8.
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