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

To: Richard Saunders who wrote (8454)	9/11/2001 2:23:39 PM
From: Bill McCabe	Read Replies (1) \| Respond to of 24905

Rich, Just got back from golf. Obviously US markets closed. Terrible tragedy. It appears TLM in Canada halted also. I see that is confirmed. TLM.TO was up to C$63.50 up C$1.50 and then down to C$60.50 down C$1.15. Oil is being quoted up 10%. Any thoughts or comments on the entire situation. Bill

To: Richard Saunders who wrote (8454)	9/17/2001 8:30:27 PM
From: VisionsOfSugarplums	Read Replies (1) \| Respond to of 24905

Ceiling Tests...hmmm, what impact will the recent tragedy and related, subsequent events have on pricing. Lots going on in this market. 2002 and onwards reserves are the relevant years for ceiling tests. Brief look at last year's reserve pricing for 2002: natural gas ~avg of $5.50 Cdn/mmbtu Alberta Index oil ~ avg of $24 US/Bbl (WTI at Cushing) Subsequent years lower, not by alot Current pricing: natural gas $3.125/Mmbtu, December forward at Henry Hub oil $29.13/Bbl, NYMEX forward As you say, risk is weighted this year to the natural gas producers. Predominant sentiment seems to be that we'll see adjustments in pricing in 6-9 months given high decline rates of current production, development drilling vs exploration, price disparity between crude/NG, etc. However, ceiling tests are done on a constant price basis so basically 2002 year end prices are the relevant ones. Companies at more risk: - have done more takeovers in prior years (most had to bump up the oil and gas asset on the balance sheet to reflect taxes) - have not hedged a large portion of their production at higher prices (hedged production is included in determining the constant year end price) - expenditures weighted to pipelines and infrastructure and/or moving PUDs to PDP or PDNP (ie/doesn't improve total proven reserves, which is used in the ceiling test) - higher operating cost companies Agree that companies with high leverage will be more capital constrained - particularly those that are already close to their line of credit limits, (unless they've added decent reserves in the year). So far, I imagine the banks will be more conservative on their pricing forecasts this year and stick more closely to guidelines of loaning on proven developed producing reserves. I probably would've watched VTU except for the fact that they've sold Boyer (on which, BTW, they'll be recording a $52 million pre-tax loss). Vague comments here, I know. Curious to see Q3s and how various companies have been managing their capital. Regards, t.