I wonder how many dollars the juniors would add to this number ...
Alberta oil barons hold $13-billionBy DAVE EBNER
Friday, October 28, 2005
From Friday's Globe and Mail
Calgary — Oil patch insiders are sitting on more than $13-billion in stock market wealth, almost double the Alberta government's projected surplus this year.
The eye-popping number, tallied by brokerage Tristone Capital Inc. and The Globe and Mail, is among the most concrete indicators that the energy windfall in Calgary has reached truly epic proportions.
But wealth on paper can be fleeting, as those enriched by the tech boom in the late 1990s and badly hurt by the 2000-02 bust can attest -- with Nortel Networks Corp. shareholders at the front of the line, to say nothing of those who went through the last oil patch bust.
The calculated wealth in the oil patch is something of a moving target. This one was made by adding up the value of options, shares, trust units and monthly distributions held by the oil and natural gas industry's executive vanguard.
"[Oil and natural gas] is a cyclical industry. This is a snapshot at a given point in time, the fifth year of a bull market," said Chris Theal, co-director of research at Tristone.
That volatility can be severe. As of Oct. 22, Tristone estimated the value of energy stock options to be $6.5-billion, a considerable figure, but it was down more than 15 per cent from an estimate of $7.7-billion less than two weeks earlier on Oct. 13, as the value of energy stocks fell.
Tristone compiled the figures for stock options from publicly available information on about 115 energy companies -- senior and junior producers, integrateds, drillers, pipelines, trusts -- listed on the Toronto Stock Exchange and mostly based in Calgary.
Ownership of actual shares is equally important in compiling an indication of the market wealth in oil and gas.
More so than in other industries, insiders in Calgary often own significant stakes in their companies, a get-rich strategy most successfully employed by Clay Riddell and Murray Edwards.
They are widely emulated. Today, for instance, insiders at a typical upstart junior explorer will own a fifth or a quarter of the company.
A tally of insiders' holdings rings up at $7.3-billion, which added to the options count reaches a total of $13.8-billion.
The $7.3-billion figure is based on insider stakes at the top 20 TSX energy companies ranked by market capitalization, as well as the top eight energy trusts, including distributions from those trusts. The results are based on holdings assembled by The Globe mostly from proxy circulars.
But while such billions are eye-popping numbers, the wealth is limited to a relatively small group of people in Calgary, the industry executives and the geoscientists with the entrepreneurial spirit that make energy profits flow.
So while the government of Alberta is planning to spend $1.4-billion to give 3.5 million or so Albertans a cheque for $400 apiece in January, that's the closest many residents of Canada's richest province will get to oil money.
The wealth tally for some individual Calgarians, compiled by The Globe, is significant but even the richest men in town rank far behind the old-school money in Toronto, with Ken Thomson leading the rich parade at $22-billion and Galen Weston coming in No. 2 at roughly $9-billion, according to Canadian Business magazine.
Still, Calgary's top entrepreneurs are moving up, riding the boom in energy. Clay Riddell, in his late 60s and worth $2.4-billion, now ranks among the 10 richest Canadians after ranking No. 50 several years ago. Mr. Riddell started Paramount Resources Ltd. in 1978 -- during the last massive boom -- and turned it public the same year with a $4.7-million IPO. He still owns 47.5 per cent of Paramount -- a natural gas pioneer -- and has big stakes in two trust spinoffs.
Mr. Riddell makes $148-million a year from trust distributions alone.
Murray Edwards, in his mid-40s, also started humbly. In 1988, he put $100,000 up to help recapitalize Canadian Natural Resources Ltd. with some partners, a company that is now the country's No. 2 oil and gas company. He has pulled off the same trick, though not quite as successfully, with other names such as Ensign and Penn West Energy Trust.
Simply running an oil and gas company is profitable as well.
Gwyn Morgan, CEO of EnCana, made $11.5-million in 2004, with about $5-million from stock options, and Jim Buckee, CEO of Talisman Energy Inc., made $10-million, with $7-million from options.
Magnificent Seven
Oil and natural gas entrepreneurs often take large stakes in their prospective upstarts, a strategy that can produce fabulous wealth as babies grow into giants. Here, reporter Dave Ebner provides a selection of seven Calgary players that survived the hard years and flourished during this unprecedented boom.
Clay Riddell
$2.4-billion
Paramount Resources Ltd., Paramount Energy Trust, Trilogy Energy Trust, Duvernay Oil Corp.
Murray Edwards
$1.4-billion
Canadian Natural Resources Ltd., Ensign Energy Services Inc., Penn West Energy Trust
Keith MacPhail
$310-million
Bonavista Energy Trust, Canadian Natural
Ed Sampson
$140-million
Niko Resources Ltd.
Hank Swartout
$120-million
Precision Drilling Corp., Highpine Oil & Gas Ltd., Harvest Energy Trust
Don Gray
$110-million
Peyto Energy Trust
Mike Rose
$110-million
Duvernay Oil
*Figures based on Oct. 25 TSX close. Includes market value of share and unit holdings and one year of dividends or annual trust distributions. Value of stock options not included. Information is compiled from company proxy circulars by The Globe and Mail. Mr. Edwards' Penn West stake as of July, 2004. All other holdings as of 2005. Mr. Swartout's result includes a Dec. 31, 2004 estimate of stock-option value, included because his Precision options vest as part of the company's planned energy trust conversion. Mr. MacPhail's result includes exchangeable shares.
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