Unlocking the Arctic
Anderson leads the way with his Northern exposure
Claudia Cattaneo, Calgary Bureau Chief
Financial Post
Greg Fulmes, National Post
THE LAST OF CANADA'S MAVERICK ENERGY BARONS: J.C. Anderson on his ranch. "I'm a lucky guy. I landed in something that is very interesting to me, and I like doing it."
The energy riches of the Arctic have eluded Canadians for generations, locked in by conflict, economics, frost and distance. But history doesn't worry J.C. Anderson. The founder, chairman and chief executive of Anderson Exploration Ltd., who turns 70 this month, is leading the charge to find some of the frontier's 65 trillion cubic feet of natural gas reserves.
He may not be around at the end of the decade to watch Northern gas flow to energy consumers in Canada and the United States -- his favourite expression is that he no longer buys green bananas -- but he is sure there's a bright future for his firm.
"Since I am a senior citizen, [people] wonder what the hell I am doing up here," he jokes, unrolling maps of the Mackenzie Delta in his Calgary office, showing Anderson Exploration's newly acquired acreage.
"Although we are busy drilling here in Alberta, we are not increasing production," he lectures. "It's declining. Yet demand is going up. The same thing is going on in the U.S., except even more severely.
"So you ask yourself, 'Where are you going to get the gas to supply the North American market?' "
Last month, Anderson Exploration, already one of Canada's largest natural gas companies, became the largest holder of exploration licence acreage in the Canadian Arctic, pledging to spend about $325-million on exploration in the next five years. The commitment came only four months after the firm purchased Ulster Petroleums Ltd. for $970-million.
Investors have applauded Anderson's Northern exposure. The stock has been one of the top performers among energy companies on the Toronto Stock Exchange, soaring more than 80% since the beginning of the year. On Friday, it closed at a record high of $31.30. The firm's current market capitalization is about $4-billion, with Mr. Anderson and his family holding about 7%.
"All along they've been one of the premium companies," said Gord Currie, an analyst with Canaccord Capital Corp. "They are pretty consistent about growing from exploration, development and acquisitions."
The first large discoveries in the Mackenzie Delta were made in the early 1970s.
But development and further exploration were stalled when a federal inquiry recommended a 10-year moratorium on pipeline development in the MacKenzie Valley to allow for settlement of native land claims. Development remained uneconomic through the 1990s because of low commodity prices.
Tight supplies for the coming winter and native support have reignited plans for one or more pipelines, feeding a rush by many large oil companies to purchase the rights to explore for natural gas in the Mackenzie Delta and Beaufort Sea region. According to the Geological Survey of Canada, the region potentially holds 65 trillion cubic feet of natural gas -- enough to meet Canada's entire energy needs for the next three decades.
Mr. Anderson has been an oilpatch maverick and trail blazer all his life.
In an industry that often takes itself too seriously, Mr. Anderson stands out because of his dry, self-deprecating, off-the-top humour. While competitors build themselves big towers, Anderson Exploration's offices are utilitarian. In Mr. Anderson's own quarters, the signature piece is what he calls Big Blue -- a worn leather couch where he takes naps at noon. "I haven't been out to lunch twice in the last five years," he says.
And in a market that idolizes the young and the computer savvy, Mr. Anderson is highly regarded for his track record.
"I have known J.C. now for 20 years," says investment banker Tom Budd, president of Griffiths McBurney & Partners, who worked with Mr. Anderson on the Ulster deal. "He is as sharp and as keen now as he was 20 years ago. He's got a keen eye for the right acquisition and he's ready to pounce on them at the right opportunity. His energy level, his desire, his mind -- to me, he's as a young man."
His firm is so large some analysts regard it as one of the new crop of internationally bound Canadian super-independents. Mr. Anderson scoffs at the label.
"I think we are superly independent," he says.
"We have already arrived, OK? At the moment, we got more fish to fry in Canada than we got in the pan, so, rather than charge overseas, we have chosen to charge up north for our big deal."
Mr. Anderson, at six foot, three inches, is also one of the last of Canada's larger-than-life cowboy oilmen. He owns a 700-acre ranch two miles south of Calgary's Spruce Meadows horse jumping facility. A one-time horse breeder, his four children have competed for the Canadian national equestrian team in show jumping all over the world.
Mr. Anderson's love for the industry grew slowly. He was born in Oakland, Neb., a 1,200 resident rural community. His grandparents were farmers from Sweden. His father was a cashier in the local bank who retired at 83 -- after 54 years in the same job. He lived to be 100.
At first, he fancied a career as physical education instructor, mostly because he liked playing basketball. Then, not quite sure what to do with himself, he pursued other disciplines, ending up in petroleum engineering at the University of Texas at Austin, where he found his calling.
He served in the U.S. army in counter-intelligence for two years, then joined Amoco Production Co., as an engineer. In 1966, he moved to Calgary to become Amoco Canada's chief engineer.
Two years later he struck out on his own, starting a small oil development program with a $400,000 investment from six Texans.
In 1970, he made the discovery that got Anderson Exploration off the ground -- he found the Dunvegan field in the Peace River area of Northern Alberta.
The find was "the major turning point, the thing that got everything going, and that has kept the lights on for 30 years," he says. "We found over a trillion cubic feet. It was spectacular." He was 39 years old at the time, with two infants and twins on the way. The field is still producing at a rate of 66 million cubic feet a day.
"My original reserve number of 1.3 trillion cubic feet was pretty good. We'll get there before I take my gold watch," he says.
In 1982, Mr. Anderson bought out his partners and amalgamated all his holdings under Anderson Exploration.
The company went public in 1988, when B.C. Sugar, which had been taken as a partner, distributed half its interest in Anderson Exploration as a dividend to its shareholders.
Anderson Exploration's first big deal as a public company was in 1992, when it purchased for $106-million Columbia Gas Development of Canada Ltd., the Canadian unit of a U.S. utility that was under bankruptcy protection.
In 1993, it bought Amax Petroleum of Canada Inc. for $70-million, and two years later it took Home Oil Ltd. as a white knight for $1.2-billion, beating his old employer, Amoco Canada. It was the first time that a stock transaction beat a cash transaction.
In May, Anderson Exploration scooped up Ulster, which had been targeted in a hostile takeover by Hunt Oil Co. of Dallas.
Anderson Exploration's interests in the North include four parcels it won in a federal government auction two weeks ago -- the last land available in the Mackenzie Delta for the next five years. It acquired another two with Petro-Canada.
Four more parcels were acquired last year with Petro-Canada -- two in a federal government auction, and two in a land sale by the Inuvialuit First Nation.
Investors who about five to seven years ago were concerned about Anderson Exploration's succession plans, are so used to seeing him around they no longer fret about it, Mr. Currie said. For his part, Mr. Anderson says succession is well in hand.
"It's a much bigger company now than it was then," Mr. Currie says. "They made a couple of big acquisitions and presumably there are enough people there. If anybody got hit by lightning, the company would carry on."
Meanwhile, with 432 days of accumulated holidays he's not in a rush to take, Mr. Anderson is having the time of his life.
"I'm a lucky guy," he says. "I landed in something that is very interesting to me, and I like doing it."
ccattaneo@nationalpost.com |
