MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING WED., JANUARY 14, 1998 (3)
FEATURE STORY
Inco Takeover Talk Fading - Analyst 1/15/98
St. Johns Evening News
Falling oil prices have helped calm rumors of a Noranda takeover of Inco, a Bay Street analyst says.
The rumors were sparked by Noranda's Nov. 18, 1997 announcement it was selling its 49 per cent interest in Calgary-based Norcen Energy Resources in order to generate capital for expansion into its mining and metallurgical operations.
They were fuelled by plunging Inco shares, which dipped so low in 1997 the total value of the world's largest nickel company was less than the $4.3 billion it paid for the nickel, copper and cobalt deposit at Voisey's Bay.
But now world oil prices have plunged to their lowest levels in years, making Norcen a less valuable commodity.
"In the last four weeks, oil has succumbed to the same disease as metal prices," said the analyst, who asked not to be named. "The takeover rumor is not as strong because Noranda would get less for the sale of Norcen. They may have implied they will be using the proceeds for making an acquisition, that was the main hint they dropped."
The market value of Norcen may have dipped in the last few months as oil prices have fallen to about $17 a barrel from more than $22.
But a Norcen official said the drop in oil prices hasn't affected the operation of selling the company.
"Any potential buyers would tend to be long-term investors who are sophisticated and make long-term plans," a spokeswoman said from Calgary.
A prospective buyer would also have to have a value of about $5 billion to $10 billion to pull off a deal, she said.
Noranda owns 46 per cent Falconbridge, Inco's chief rival - which challenged Inco for Voisey's Bay in a 1995 bidding war - and analysts have suggested a merger of the world's nickel giants makes sense.
A single company could save money by combining exploration and production operations in Sudbury, where the rivals often work almost side-by-side. It also makes economic sense for Falconbrdige to send nickel from its new Raglan, Que. mine to a smelter at Argentia, where Inco proposes to build a modern smelter and refinery for Voisey's Bay nickel.
Norcen produced oil, gas and petroleum products equal to about 160,000 barrels of oil per day last year.
FEATURE STORY
Vulcan Wins Bid For Exploration 1/15/98
Vulcan Minerals Inc. of St. John's has been awarded three offshore petroleum land parcels off the west coast of the province.
The company was informed Wednesday by the Canada-Newfoundland Offshore Petroleum Board that it was the successful bidder for the land parcels which cover about 1.2 million acres in the western Newfoundland sedimentary basin.
Vulcan will own a 100 per cent interest in the exploration licences after bidding $185,898 in work commitments to acquire the parcels.
Subject to both provincial and federal government approval, the CNOPB will issue exploration licences for each parcel. They will be for a nine-year term, divided into an initial period of five years in which the licence must be drilled to advance to the second four-year term.
Parcels five and six are at coastal blocks adjacent to St. Paul's and Parson's Pond on the Northern Peninsula where numerous oil seeps are reported onshore and historical production was recorded at the turn of the century from shallow reservoirs.
Parcel seven is also a coastal block abutting oil shows reported on the coast.
Vulcan said that last August the results of the Hunt Oil discovery well on the Port au Port Peninsula demonstrated the significant presence of high-quality sweet oil in aged reservoirs. Those rocks are at Vulcan's prime target on its three parcels in a structural setting similar to the Hunt discovery.
Vulcan Minerals president Pat Laracy said western Newfoundland presents potential for world class oilfields on the eastern seaboard of North America which has attracted the attention of several companies, including Mobil Oil, Hunt Oil and PanCanadian Petroleum as significant land owners, both onshore and offshore.
Laracy said Vulcan's acquisition of parcels five, six and seven will make it the largest net land owner in the entire Newfoundland offshore area, including the west coast and the Grand Banks area, home of the Hibernia oilfield.
FEATURE STORY
Storm keeps oil project on ice 1/14/98
St. Johns Enening News
Final approval for Newfoundland's second offshore oil project has been delayed a few more days by the ice storm in eastern Ontario and Quebec, sources say.
The Canada-Newfoundland Offshore Petroleum Board's decision report on the TerraNova offshore project is stuck in ice-bound Ottawa, waiting for Department of Natural Resources officials and cabinet ministers to get back to work and sign off on the project's last bureaucratic hurdle.
The federal minister of natural resources, Ralph Goodale, and Newfoundland's minister of mines and energy, Chuck Furey, are required to sign the report and return it, with or without changes, to the CNOPB for release.
The report was originally expected to be released in December 1997. No explanation has been given for the first delay.
Newfoundland has now signed off, sources say, but the federal government was further delayed by the devastating ice storm that brought the capital to a standstill. Emergency officials had asked people in Ottawa to stay away from work Friday and Monday.
CNOPB acting chairman John Fitzgerald said he expects to be in a position to release the document by the end of the week. A spokeswoman for the Department of Natural Resources said she expects the decision will be made shortly.
The owners of the estimated 400-million barrel Terra Nova field, led by Calgary-based Petro-Canada, will take a few days to examine the report, an official said.
"We'll probably respond to the decision report within a few days (of its release)," Terra Nova's Mona Rossiter said in St. John's Tuesday. "I'd say sanction would be a few weeks from the report. That's the last big piece of external information we're waiting on."
The Terra Nova oilfield, about 350 kilometres southeast of St. John's, will be produced using semi-submersible rigs and a Korean-built, ship-shaped, floating platform. Production is expected to begin in 2001.
FEATURE STORY
Worker shortage forecast as construction starts
Ft. McMurray Today
With more than $6 billion worth of oilsands expansion on the drawing board for Syncrude Canada, will the oilsands giant be able find workers to do the job? Eric Newell, Syncrude's chairperson and chief executive officer, agrees it will be a major challenge.
"Right now we are seeing a fairly tight supply in the engineering phases and it's tight but it's manageable," said Newell in an interview yesterday. "I think the trades will be an ever bigger concern for us once more of the construction is going on."
Construction on the Aurora mine, the company's first $1.5-billion first satellite mine, has already begun. When two phases of the mine are completed in 2001 and 2005, Syncrude's production will increase to more than 300,000 barrels per day.
Syncrude's $3-billion upgrader project, announced in November, brings the company's expansion to $6-billion. (The company still needs provincial approval for the upgrader expansion. It hopes to get the OK by late 1998.)
The massive investment will create more than 1,000 construction jobs over the next eight years, Syncrude says. Those jobs commence, north of McMurray at least, about one year from now. Peak upgrader construction is expected between 1999 and 2000.
But Syncrude isn't the only one expanding. Suncor Energy has $2.2-billion worth of plans on the drawing board to twin its existing operation. Both Shell Canada and Mobil Oil are proposing $1-billion oilsands mines north of McMurray. Mobil says it's considering McMurray as a possible site for an upgrader.
Newell is well aware of that fact and believes education is key to filling labor demands of the future.
He chairs a provincewide initiative called Careers: The Next Generation, a program giving students work experience and college credit while learning at school or on the job.
In McMurray, the program begins in February and is expected to be in full-swing in September. "We are going to 23 different Alberta communities and we've got industry coming to the table producing work experience opportunities to get our young people interested and actively pursing careers, not just in the trades but in a number of areas."
The program is part of a larger solution, said Newell. "It's not a panacea but certainly if you look locally you have already got 126, I think, young people in the co-op program and a number of others registered in the apprenticeship program so that will be a steady, on-going supply of a home-grown workforce."
Still those numbers won't be enough to keep up with labor demand, said Newell. Last March, during Syncrude's maintenance turnaround, welders from as far away as Newfoundland did some of the work.
Syncrude's CEO remains hopeful the oilsands industry can meet its labor requirements by working together. "We are identifying where we have tension points and we're working with the institutions and hopefully we can recruit across Canada," he said.
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