MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING MONDAY, JANUARY 12, 1998 (2)
FEATURE STORY
Archer Resources could be on auction block
Canadian natural gas producer Archer Resources Ltd, the subject of takeover rumors recently, hired financial advisers possibly to find a buyer for the company, Chief Executive Grant Bartlett said on Friday.
Bartlett said Archer retained Calgary-based FirstEnergy Capital Corp to examine a range of options for the company, including finding a purchaser, arranging a merger or continuing its current operations.
''We're looking at ways to maximize shareholder value in a very volatile environment,'' Barlett told Reuters.
Shares in Archer have climbed nearly 28 percent in the last three weeks in trading driven by strong rumors that a takeover was in the offing, industry sources said.
However, Bartlett said his company was not currently in talks with any other companies.
Archer's rising price comes at a time when the stock of virtually every other Canadian energy company has been battered by investor jitters over weak oil and gas prices.
''I also heard the rumors,'' CIBC Wood Gundy analyst Peter Linder said earlier on Friday.
Shares in Calgary-based Archer on the Toronto Stock Exchange climbed as high as 6.80 on Friday, up from 5.25 on December 18. They closed at 6.50, down 0.10.
Linder said that if a bid was to be launched, C$7.50-C$8 a share would represent reasonable value for Archer. That would mean a price of C$150 million-C$160 million for the equity portion of a deal.
Sources said they had expected a transaction would be a friendly one, as opposed to a hostile takeover bid, and one company mentioned as a possible suitor was Renaissance Energy Ltd (Toronto:RES).
Renaissance, known for eschewing corporate acquisitions, had its stock price nearly halved in the past year amid failure to meet its own and analysts' production forecasts.
Renaissance stock was off 0.40 on Friday to 25.10, down from a year-high of 50.
One analyst, who asked not to be named, said he did not know if a deal between the two companies was in the works, but he said Archer, with its Alberta shallow natural gas properties, would make a good operational fit for Renaissance.
''(Renaissance is) a counter-cyclical company and they had a difficult time meeting investors' expectations in a bull market, because to do that you had to buy things at expensive prices. Now they're cheap,'' the analyst said.
Officials from Renaissance were not immediately available for comment.
Bartlett, who is also an owner of the National Hockey League Calgary Flames, said Archer expected to meet or exceed its 1997 cash flow and earnings targets and was successful in goals of growing its central Alberta asset value, aquiring properties outside its core operating area and demonstrating its exploration expertise.
''The board decided that we really should get an adviser once volatility entered the market,'' he said. ''I think Archer, since '94, has been viewed as a takeover candidate.''
FEATURE STORY
Lamond An Oil Patch Original
Globe & Mail
Mathew Ingram
Like any good wrestler, Orbit Oil & Gas founder Robert "Wee Bobby" Lamond planted his feet during the takeover battle for his company, and refused to budge. He gave as good as he got in the ritual exchange of press releases, the ones that call into question the tactics of the opposition. Then, like any good businessman, he accepted a higher offer from his adversary last week and bowed out. So will he just sit at home and count his money?
Not bloody likely. For one thing, the 53-year-old Scottish-born geologist says he wouldn't know what to do at home, since he "isn't qualified to operate a vacuum." For another thing, deal making and natural gas in particular are in his blood. Although he's keeping his head low during the current market turmoil, and plans to take a couple of months off and go "where they've never heard of 30 below," the oil patch hasn't heard the last of Robert William Lamond.
"I've got a group of guys together and we're working on a couple of things," he said last Friday. "In fact, we did a deal just this morning. I said I was going to take some time off, but it turned out to be about 10 minutes." Mr. Lamond said he will probably have something worth announcing in a few weeks, and that it will most likely be related to gas.
Looked at objectively, it's a bit surprising that Mr. Lamond gets as much attention as he does. To be blunt, even a few years ago when he ran both Czar Resources and Orbit Oil & Gas, his assets weren't terribly significant in the grand scheme of things. Both companies were fairly small gas producers, and neither had grown much -- either in assets or stock price -- for several years, with most of their energy devoted to paying down debt.
In 1995, Ranger Oil of Calgary managed to persuade Mr. Lamond to part with Czar Resources for $108-million. Last week, he agreed to sell Orbit to Sunoma Energy of Calgary for $82.8-million. In terms of dollar value, neither deal will register as more than a blip on the radar of most oil and gas industry watchers or institutional investors. And yet there was more attention paid to those two deals than to dozens of larger deals such as Northrock Resources' $134-million takeover of Paragon Petroleum last week.
The difference is simple: Robert Lamond. For one thing, Mr. Lamond is a charming Scot with a quick wit, he returns phone calls personally and he is often ready with a good quote. Being a savvy oil patch player, he knows that this is as important (or perhaps more important) than how many barrels a day you produce or what your cash flow is. He also knows that nothing attracts a crowd like a good brawl, and that's exactly what he provided when he fought off Gulf Canada's bid for Czar in 1995.
But Mr. Lamond isn't just your run-of-the-mill small-fry gas driller, despite the size of his companies. He is also an original -- one of the few active players who was there during the glory days of the 1970s. Bob even has his own section in Peter Newman's novel The Acquisitors , under the heading, "Some of the Calgary Establishment's heaviest hitters," right next to the likes of the Mannix family, Ron Southern of Atco and Bud McCaig of Trimac.
Mr. Lamond came to Calgary in 1965 from Scotland to work as a geologist for Imperial Oil, and took a gamble when he started Czar in 1974. He was one of the first to market drilling funds to European investors, and according to Mr. Newman's description, in 1981 his funds channelled more than $100-million a year into the oil patch. Two years after he started Czar, he bought the historic Coste mansion in Mount Royal for $780,000 -- a massive sum in Calgary back then. It came with a garage to park his Rolls, Corvette and Mercedes.
During the 1980s, however, Mr. Lamond's various funds suffered the same fate as much of the industry and almost collapsed under the weight of too much debt and sagging commodity prices. Most of the funds were consolidated into what became Orbit Oil & Gas, and both Orbit and Czar spent the next several years paying off the bankers who effectively controlled their destiny. As they were beginning to prosper again and prices were moving up, J.P. Bryan of Gulf Canada moved in with his debt-financed takeover strategy.
So what will Bob Lamond do now? Selling Czar and Orbit hardly leaves him with nothing. Not only does he come away with somewhere in the neighbourhood of $20-million, but he has always had a stable of other investments in the oil patch that have garnered less attention than Czar and Orbit. He owns stakes in half a dozen oil and gas exploration companies through his holding company, Humboldt Capital, which -- as an avid collector of books by famous explorers and military historians -- he named after the German explorer.
In fact, Vancouver Stock Exchange-listed Humboldt is a kind of energy mutual fund, with stakes in Alberta-listed juniors such as Algonquin Petroleum, Brittany Energy, Dundee Petroleum, Diaz Resources (which investment newsletter writer John Kaiser has said is one of his favourite small oil stocks), New North Resources, Green Maple Energy, Spire Energy (a holding worth $8-million that makes up about 35 per cent of Humboldt's assets), Trafina Energy and Nycan Resources.
"Humboldt will likely get even more active," Mr. Lamond says.
With that many small companies to play with, there's got to be the opportunity for at least one good knock-down, drag 'em out fight in there somewhere.
FEATURE STORY
Oilpatch Offerings Hit Record
Producers Raised $8B Last Year, Service Companies $1.1B
Claudia Cattaneo - The Financial post
Oil and gas producers and service companies raised a record $9.1 billion in equity last year - but lower commodity prices are expected to reduce the inflow of cash in 1998.
Producers collectively raised more than $8 billion in 248 offerings, up from $6.7 billion in 176 deals in 1996, according to figures compiled by Calgary-based oil and gas dealer Peters & Co. Ltd. Services companies raised another $1.1 billion in 36 offerings in 1997 - more than a five-fold increase from 1996, when they raised $191 million in 16 offerings.
Royalty trusts, obscure to most investors until 1994, raised 45% of all equity captured by producers - $3.7 billion, up from $2.4 billion a year earlier.
"Barring a major reversal of direction in commodity prices, we expect that the first quarter will be very quiet [for equity offerings]," said Bruce Fiell, Peters' managing director of corporate finance. "It could be a slow year, unless we see a significant recovery in commodity prices."
West Texas intermediate prices have been at a near freefall, he said, and "as long as we are in that environment, I don't think there are many companies happy with their share price and interested in raising equity. And I don't think investors are going to be receptive to new issues." Royalty trust offerings, in particular, will become less prominent in 1998, he predicted.
"Our view is that it's largely a retail investor market and it's driven mostly by the interest rate environment. With interest rates trending upward, and the overall equity market weakening, there is probably going to be a much smaller market for royalty trusts in 1998 than in 1997."
Both oil service companies and producers benefitted in 1997 from a stable commodity environment and receptive markets.
National investment dealers are expected to reduce exposure to the sector this year. In the past, a downturn in the sector resulted in oil and gas specialists like Peters increasing their market share, Fiell said.
Peters participated in 61 transactions that raised $2 billion last year. Its net interest in the financings was $359 million - probably the dominant market share among dealers that specialize in oil and gas.
Fiell wouldn't forecast the level of financing activity for 1998.
Amoco Quietly Working On Lease Plans
Irene Thomas - Fort McMurray Today
Amoco Canada has some ideas for its oilsands leases north of Fort McKay, but for now they're only in the idea stage.
"We don't know what our plans are," said Amoco spokesperson Gaye Robinson. The company is currently working to renew two of its three leases which are set to expire this year. "We have put together a (development) plan that would allow for production of all three of our leases," said Robinson. "We also have Lease 18 which is due to expire in the Year 2000."
Part of the process to renew leases is to file a development plan with Alberta Energy. Amoco has done that, she said, adding drilling results on the leases has been "promising."
Other than saying the plan Amoco may pursue involves a surface mine similar to Syncrude or Suncor, Robinson wouldn't reveal further details, saying it's too early to reveal anything.
"We feel this is about a five-year process to get to the point of doing the development ... This isn't something that we are going to make an announcement right away," she said.
Amoco is Canada's largest producer of natural gas and the second largest producer of heavy oil. In Alberta, one of its heavy oil plays includes the Primrose-Wolf Lake area near Cold Lake.
With no surface mining expertise, Robinson said if Amoco does entertain an oilsands mine it will likely consider taking on a mining partner, as Shell Canada has with BHP on its proposed $1-billion Muskeg River Mine.
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