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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Think4Yourself who wrote (69002)	6/30/2000 10:31:46 AM
From: Tomas	Respond to of 95453

Oil and gas firms must decide what to do with all that cash - Calgary Herald, June 30 By Chris Varcoe, Calgary Herald, with file from Reuters Awash in cash thanks to red-hot commodity prices, Canadian oil and natural gas producers are looking to give back some of their money to shareholders or find innovative ways to boost their stock prices. The oilpatch is expected to start releasing second-quarter financial results next week and the figures will show the impact of super-charged crude oil prices above $32 US a barrel and Western Canadian natural gas prices near all-time highs. With companies throwing off unprecedented levels of cash flow and earnings, industry observers are wondering where the torrent of dollars will go. "The issue is what do you do with all that cash . . . share buybacks, pay down debt or dividends?" Brian Prokop, an oil and gas analyst at investment firm Peters & Co. in Calgary, said Thursday. "There is too much money chasing too few prospects, so what are you going to do with all the money?" added analyst Jeff Fiell of Canaccord Capital Corp. In recent months, a handful of large producers have started buying back their own shares to increase stock prices. This group includes Talisman Energy Inc., Alberta Energy Co. Ltd., Anderson Exploration Ltd. and Crestar Energy Inc. Due to weak share prices relative to cash flow levels, many companies see a stock buy-back as an effective way to acquire their own reserves at bargain prices, bolstering their earnings per share. Talisman, for example, is projected to churn out $2 billion in cash flow this year and has spent about $18 million buying 500,000 of its own shares. Other oil companies, such as Gulf Canada Resources Inc., are busy paying off bankers. "Our first priority with the surplus cash for Gulf is to repay debt," said David Carey of Gulf, which expects to lower its debt load to $1.5 billion from $1.9 billion by the end of the year. "Beyond that, we've got lots of opportunities to spend the capital wisely." Analyst Martin Molyneaux of FirstEnergy Capital Corp. said the industry's debt load is "falling like a rock" this year and will potentially drop by $5 billion or $6 billion, a 15-per-cent dent in current outstanding debt levels. Another option for companies is to pay a special dividend to shareholders or increase the existing one. While a handful of the industry's bigger players -- including integrated producers such as Petro-Canada -- pay dividends to common shareholders, most exploration and production firms do not. Usually, they reinvest money in the ground to find additional oil and gas reserves. However, finding reserves is becoming increasingly difficult as the Western Canadian Sedimentary Basin becomes more mature and is well explored. "There are certainly not an unlimited number of projects out there and it's hard to nail down acquisition spending because that's something out of the ordinary," said J.C. Anderson, chief executive of Anderson Exploration. "We might even do something extraordinary, like giving money back to our shareholders." Boosting capital budgets and making corporate takeovers are other routes open to big spenders, although prices are beginning to rise on potential acquisitions. Most oilpatch investors want companies to find innovative ways to spend money, rather than rush out and buy a competitor or pay a one-time dividend, which does little to improve stock prices, said Fred Pynn, portfolio manager with Calgary-based Bissett & Associates Investment Management Ltd. "People don't buy oil and gas stocks, traditionally, to get income," he said. "I'd certainly rather see people buy back stock than make silly acquisitions." calgaryherald.com