MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING MONDAY, FEBRUARY 9, 1998 (2)
TOP STORY
Gulf Canada Resources Shares Dip As Bryan Departs.
Appointment Of 22-Year Company Veteran Indicates Shift In Strategy
Claudia Cattaneo Calgary Bureau Chief The Financial Post
J.P. Bryan, the cultured Texan who in three years revived and rebuilt Gulf Canada Resources Ltd. after its near bankruptcy, is handing over the reins to a new boss he says is better suited to manage its post-acquisition growth.
"No CEO wants to admit he can't do everything. But I have come to realize I can't. Detail, budgetary process - they're not my strengths," Bryan said yesterday.
News of his departure came as such a surprise it left many wondering whether his bold, controversial style may have been too much to take for the board of the Calgary-based international oil company.
The changing of the guard was finalized at a board meeting on Friday, and relayed by Bryan to the staff at Gulf's Calgary headquarters yesterday.
"He leaves with much half done, and without fully realizing the vision that he had for the company," said Andrew Byrne, a Boston-based oil and gas analyst with John S. Herold Inc.
Bryan wanted to build the company into one of the world's top oil and gas producers by 2006 - the 100th anniversary of Gulf and its predecessors.
He and his associates took over the company in January 1995, after acquiring a bank syndicate's 25% of Gulf's stock for $296 million.
Bryan's exit yesterday battered Gulf's stock to its 52-week low. Its shares (GOU/TSE) closed at $7.60, down 60›.
Bryan, who holds options to buy four million shares - of which he's exercised (but not sold) 1.3 million - is being replaced as chief executive and president by Gulf veteran Richard Auchinleck.
Although he admitted to having less flair than Bryan, Vancouver-born Auchinleck is a 22-year company veteran. He has a degree in chemical engineering and has, at different times, run operations such as heavy oil, major international projects, marketing and acquisitions.
Gulf will now shift its attention to reducing its $2.7 billion in debt by selling between $400 million and $500 million of non-core assets over the next 12 to 24 months, Auchinleck said.
"We have been very transaction oriented in the last three years," said Auchinleck. "A lot of people ... have been having some difficulty understanding the company. We are going to bring some focus on becoming an exploration and production company."
Assets on the block include so-called midstream processing facilities, which may be funnelled into a royalty trust for a net gain to Gulf of about $200 million, as well as international assets obtained through the acquisition last year of Britain's Clyde Petroleum PLC.
Gulf will continue to do the groundwork required to set up a heavy oil subsidiary, Auchinleck said, but will wait for more favorable market conditions before launching an IPO for it.
The company is looking into some heavy oil upgrading technology, which, if acquired, would accelerate the heavy oil spinoff, he said.
Gulf is planning more than $1 billion in capital expenditures this year, the same as last year.
If weak commodity prices continue, analysts said the company is facing a struggle because of its financial leverage.
"With their higher debt load, lower prices and the heavy oil exposure, it does look like it could be difficult," said Byrne.
Christopher Lee, ratings analyst with Standard & Poor's in Toronto, said Gulf's new focus on bringing down debt and internal growth is healthy.
"We think $2.7 billion is too high for a company of that calibre," he said.
Martin Molyneaux, analyst with First Energy Capital Corp. in Calgary, has a neutral rating on the stock because of Gulf's oil-focused production. But he said he will review it. The stock price, "gets a lot more intriguing at these levels."
Like many others, Molyneaux wondered whether Bryan's exit was accelerated by a disagreement with the board.
Bryan said the board believed that at this point, Gulf needed to be headed by a leader with operational focus and who is more adept at working in a structured environment.
"I am the kind of guy who likes to feel the wind in his face. I like to be like an unbridled horse."
FEATURE STORY
Syncrude President Hospitalized
Irene Thomas Fort McMurray Today
Syncrude Canada's president and chief operating officer was rushed via air ambulance to an Edmonton hospital early Sunday morning.
Jim Carter remains in intensive care today, a release said this morning. The cause of his illness was notdisclosed.
"Jim is receiving the best of medical care and the prognosis is good for a full recovery and return to work," said Eric Newell, company chairman and CEO. "I know I speak for everyone at Syncrude when I say that our prayers and best wishes are with him and his family."
Company spokesman Peter Marshall said they hope to make more details about Carter's condition public in the next few days.
Newell will assume Carter's responsibilities in the interim. Carter, 50, was named Syncrude's president in September, taking over the post Newell held since August 1989.
He was appointed the oilsand giant's chief operating officer in June, 1994 and was vice-president of operations since August 1989, responsible for mining, extraction, upgrading and utilities areas of the oilsands plant.
Carter is married and has lived in Fort McMurray since 1979 when he began his career at Syncrude as manager of overburden operations.
In 1981, Carter was appointed assistant general manager of mining responsible for overburden, tailings and mine mobile maintenance areas. Two years later, he assumed further responsibilities for dragline operations, bucketwheel/conveyor-feeder breaker operations and mine maintenance.
Appointed general manger of maintenance and operations service in 1986, Carter was promoted the following year to vice-president of administration.
Prior to Syncrude, Carter worked for McIntyre Mines Ltd. and the Iron Ore Company of Canada.
He has a mine engineering degree from the Technical University of Nova Scotia and is also a graduate of the advanced management program at Harvard Graduate School of Business Administration.
FEATURE STORY
Saskatchewan Trims Resource Taxes
Ian McKinnon The Financial Post
Saskatchewan announced yesterday royalty and tax changes for the energy and potash industries that are expected to boost capital spending in the province by $3.5 billion and create thousands of jobs. The initiatives, made after months of discussions with both industries, were politely applauded by those affected.
"These are not great big steps, but they certainly show sensitivity to the industry," said Jim Hope-Ross, vice-president of corporate affairs of Wascana Energy Inc., a subsidiary of Canadian Occidental Petroleum Ltd. He said Saskatchewan will earn respect from the oilpatch because it is also feeling the pinch of low oil prices in the form of reduced royalties.
Provincial officials expect the moves to spark an extra $3.5 billion in capital spending, $3 billion of it in the oil and gas sector, and create 15,000 person-years of work over the next decade.
The Saskatchewan resource credit was increased to 2.5% from 1% for all new vertical wells and a lower tier of royalties was introduced for new gas wells.
A royalty-reducing incentive for heavy oil was doubled to cover the first 4,000 cubic metres of production. A new program will be started to encourage oil wells in the Swift Current region.
OIL & GAS
NYMEX
Crude Oil
Crude oil prices closed lower Monday as many traders stepped to the sidelines amid continuing uncertainty about a possible U.S. military strike against Iraq.
At the New York Mercantile Exchange, crude oil for March delivery closed seven cents a barrel lower at $16.63. March heating oil ended 0.38 cent lower at 45.95 cents a gallon and March gasoline 0.31 cent lower at 50.85 cents a gallon.
"The market is stuck between weak fundamentals and the Iraq quagmire and it's holding dealers at bay because nobody wants to be caught on the wrong side," said Scott Ryll, trader and analyst with GSC Energy in Atlanta.
There were no major developments in the U.S.-Iraq situation. On Monday, the United States repeated that chances were ebbing for a diplomatic solution to the problem of Iraq's standoff with United Nations inspectors who are charged with finding and destroying its suspected weapons of mass destruction.
The possibility of military action in the Middle East Gulf, the source of a large portion of world oil exports, should continue to make sellers nervous, traders said.
But the oil market remains amply supplied. Besides heating oil being in surplus due to low demand, quota-busting output by the Organization of Petroleum Exporting Countries continues to ensure heavy oil flows.
OPEC's January production jumped 510,000 barrels a day from December's level to 28.05 million barrels daily, oil industry sources said. OPEC raised its official production target in November by 10 percent to 27.5 million barrels a day.
In addition, the mild winter continues to temper heating oil demand in the key market of the U.S. Northeast. The National Weather Service has forecast temperatures in the region to be much above normal through the middle of February.
Natural Gas
Natural gas futures prices slumped Monday as the country's major heating regions continued to enjoy unusually warm winter temperatures, sapping demand for heating fuels at a time of ample supplies.
Natural gas prices have plunged more than 30 percent on the New York Mercantile Exchange this winter as the Northeast and Midwest, which use the fuel the most for heating, have generally had temperatures substantially above normal.
The National Weather Service on Friday -- and again after trading had ended Monday -- predicted most of the country would see temperatures remain above normal through Feb. 19. The relatively mild winter has helped suppliers build inventories to levels that are 19 percent higher than last year.
Natural gas for March delivery to Henry Hub, La., fell 13.8 cents, or 3.8 percent, to $2.221 for each 1,000 cubic feet. It was the sharpest one-day decline since the beginning of January. April settled 11.2 cents lower at $2.254. Other months ended down by 2.4 to 9.5 cents.
"It (the selloff) was a little bit technical and a little bit fundamental. Friday's close (lower in March) was negative, and there's still no (cold) weather," said one East Coast trader, noting March failed to follow through to the upside Friday after breaking technical resistance Thursday.
Chart traders agreed March's weak close Friday neutralized the recent move up and likely triggered some long liquidation today. Key support was still pegged at $2.18, with minor support in the $2.215-2.22 area. More buying was likely at $2.03.
Minor March resistance was expected in today's $2.32-2.35 gap, with major selling expected at the recent high of $2.435 and then in the $2.50 area. Further resistance was pegged at prominent highs in the low-$2.70s.
In the cash Monday, Gulf Coast swing quotes skidded about a dime to the $2.20 area. Midcon pipes slipped a similar amount to the low-to-mid teens. Chicago city gate gas was almost 10 cents lower in the mid- $2.20s, while New York fell about the same to the high-$2.40s.
The NYMEX 12-month Henry Hub strip skidded 7.5 cents to $2.371. NYMEX said an estimated 68,643 Hub contracts traded, up slightly from Friday's revised tally of 67,505.
OIL & GAS PRICE REFERENCES
Charts:
oilworld.com
oilworld.com
NYMEX Reference:
quotewatch.com
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