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

To: VisionsOfSugarplums who wrote (8463)	9/17/2001 9:47:03 PM
From: Richard Saunders	Read Replies (1) \| Respond to of 24905

toowit - more vague comments - Called & talked to a gas weighted jr. situation today & asked similar question about the ceiling test writedown possibility. The answer was more or less similar to what you've indicated. Prices used in the jr.'s reserves for 2001 were obviously "high" ($7.70 aeco) vs reality and 2002 number is also debatable ($5.50). From there pricing backed down to the lower $4 range. The thought given was that possibly there would be some erosion in "value" (net asset value calculation?) however reserves were probably still going to be intact. As you also mentioned, the thought too was that drilling programs should also be adding to reserves so net effect possibly wouldn't be all that vicious. Of more interest (imo) was that there seemed to be gloom given the current gas prices and the effects that it was going to be having upon cashflow. As near as I could figure annual estimates previously being bandied about only a few months ago were going to be significantly missed. What's significant? Rough calculation on the probable miss would seem to put it somewhere upwards of 20 - 25% if current gas pricing strip stays for the remainder of this year. I haven't really seen press releases confirming above however I suspect that capital programs for many of the gassy situations will shortly (if they haven't already been) be reduced to reflect reduced cashflows. The situation I was looking at was indicating that projects would likely be re-looked at using $3.50 to $3.75 gas compared to upwards of $6.00 previously being modelled. One other comment was loud and clear -- BALANCE SHEETS NEED TO BE CLOSELY WATCHED. The rapid erosion of gas pricing has suddenly (relative?.....) put some of the debt levered companies in precarious situations. Companies that previously have done cash/debt acquisitions of gas assets and have used expectations of much higher gas prices are likely to become takeover fodder before all is said-'n-done. Uncertain and uneasy times, especially with the global trembles happening.......... Jack be nimble?