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Gold/Mining/Energy : Canadian Oil & Gas Companies -- Ignore unavailable to you. Want to Upgrade?

To: koan who wrote (7483)	8/22/2000 7:46:21 AM
From: Tomas	Respond to of 24939

Oil barons are on a roll, but the swagger's missing - The Globe & Mail, August 22 Brent Jang Calgary -- With strong oil and natural gas prices, you would think that Calgary financier Murray Edwards could finally afford to relax during the dog days of August. Think again. While commodity prices have indeed soared beyond the forecasts of industry analysts, Mr. Edwards and other oil barons are busy adjusting to a brave new world. Equity issues have dried up, conventional light oil is getting harder to find across the West and investors aren't willing to pay the premium they once did for energy shares. Those factors have combined to take the shine off what would otherwise be a sterling year for the industry. For those looking on from outside the West, the cautious mood in the boardrooms may seem overdone, considering how cash flow is pouring into corporate coffers. But remember, oil executives know all too well about boom-and-bust cycles. They also see that the Western Canadian Sedimentary Basin can't be a cash cow for all the players, especially junior and mid-sized producers. "This basin's changing," Mr. Edwards said. "In the past you had all these hundreds of little companies out there. But there's going to be fewer of them. This basin is maturing. I mean, it's a new world." Already, some notable names have disappeared this year in a wave of takeovers, including Ulster Petroleums, Newport Petroleum, Ranger Oil and, soon, Renaissance Energy. Canadian Natural Resources, in which Mr. Edwards is a large shareholder, scooped up Ranger two months ago for $1-billion. With it, Canadian Natural also took the plunge into the international game by inheriting Ranger's North Sea assets. Just last week, another producer in Mr. Edwards' $600-million portfolio, Rio Alto Exploration, confirmed that it had begun oil production and exploration in Argentina. Mr. Edwards, who made his fortune as a stay-at-home entrepreneur, has seen the writing on the wall in Western Canada for light oil and decided go globe-trotting. He's also recognized that the future of the West is shifting to the oil sands and heavy oil. Canadian Natural has ambitious plans to develop its Mic Mac properties in northern Alberta's oil sands for $6.5-billion. Diversification into the oil sands, heavy oil and natural gas is crucial to the survival of Canadian energy companies. For those with the nerves for added risk but who are also motivated by big rewards, there's the option of looking for oil in far-flung places. "If you want to grow 10 or 15 per cent a year, you're not going to do it solely out of this basin," Mr. Edwards warned. "It's prudent to have some diversification. It's a natural evolution as you grow." During a party in veteran Calgary oilman Bob Lamond's backyard on Friday night, guests talked about how much the oil patch has changed in the past year with the rise of technology stocks. They complained that Old Economy shares have been shunned or overlooked, even with frenzied drilling across the West and red-hot commodity prices. What intrigued Mr. Lamond's group of friends and colleagues most was how Alberta is prospering without the usual cockiness. In other words, the swagger found in the oil boom of the late 1970s and early 1980s is missing. One reason for the relatively subdued atmosphere is that energy companies both big and small can't raise much, if any, equity these days. Some institutional investors fret that oil and natural gas markets could be peaking, so why get on the roller-coaster ride now? Analysts widely view oil and gas shares as being vastly undervalued, but in the so-called logic of the market, investors don't seem to be willing to bid up shares unless commodity prices drop a bit and then stabilize. In the meantime, with little or no money coming in from equity issues, producers are having to find ways of spending their cash flow on fewer and fewer prospects. Those individual prospects aren't what they used to be, either. Instead of swinging for the fence in Western Canada, executives have to be content with banging out a few singles here and there. Renaissance specialized in drilling hundreds of wells every year, but its business model became outdated in the late 1990s. Punching a bunch of holes in the ground in the hope of hitting some gushers will still provide a decent livelihood for companies that want to borrow a page from Renaissance's dog-eared playbook. But the pressure is on these days for producers to do much more with much less. Investors are in a show-me mood, and that means the producers that diversify will get more attention than the one-trick ponies. Brent Jang's e-mail address is bjang@globeandmail.ca