MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING FRIDAY, FEBRUARY 13, 1998 (3)
FEATURE STORY
Dominion Suitor Says Tactics Tricky
Robert Gibbens - The Financial Post
American Eco Corp. Friday accused Dominion Bridge Corp.'s management of "deceptive practices" in this week's takeover negotiations.
Michael McGinnis, president of American Eco, said his company "will continue to work toward a transaction, but continued resistance by Dominion management will likely result in damage to the company's value and could substantially reduce the ultimate purchase price."
Dominion shares (DBCO/NASDAQ) closed Friday at US$12-5/32, down 11/32, reflecting doubts about the outcome of the bid. American Eco offered US$93 million for Dominion's shares, including US$5 million cash in exchange for its treasury shares.
Dominion said late Thursday the US$5 million was assured by the 5 p.m. deadline, but because other unspecified conditions were not met, talks had ended.
Sources near the talks said the main sticking point is Dominion management's claim for compensation for being ousted under the bid.
"We'll proceed with a US$16-million to US$20-million private placement by Sweden's Sanda Investment Group to provide working capital for our North American operations and continue to evaluate strategic alternatives," Dominion said.
FEATURE STORY
Interview - Follow Up To Article Featured Yesterday
Apache On The Hunt In Canada
Reuters
Apache Corp. is on the hunt for more Canadian acreage after encouraging initial oil exploration on its properties in that country's western sedimentary basin, Chief Executive Raymond Plank said on Friday.
He said in an interview that Apache may sell $100-$200 million of U.S. properties this year and look at some small acquisitions to maintain its domestic production base and cashflow.
"Canada is a potential exception in North America, our appetite for more acreage there is voracious," Plank said. He plans to double Canadian oil production within three years from 1997's average of 2,120 barrels per day.
Plank said that the small size of fields in the lower 48 United States and the high cost of drilling rigs militated against a dramatic domestic expansion.
Citing Apache's Wonnich find offshore western Australia, which comes onstream in 1999, Plank said it will take just one well to empty 170 billion cubic feet of natural gas, whereas in the U.S. it could take 80-100 wells, thus raising costs.
"In the U.S., the squirrel has to go pretty fast in its cage in order to stand still," Plank said.
Apache added 152 million barrels of reserves in 1997, of which 55 percent came from its overseas operations, which are in Australia, Egypt and China.
Of its $611 million cashflow in 1997, 28 percent came from overseas operations, compared with 11 percent in 1996. Plank expects that figure to rise above 30 percent this year, depending on oil and gasprices.
He said that falling oil prices, down 25 percent from the $20-plus of 1997, would have an impact on Apache's $700 million capital spending and that the company would revise its figures every quarter to ensure it could fund the plans from cashflow.
"As we move into the second quarter we will pull in the reins a bit and that rate will be lower," Plank said.
He added that the decline in oil prices had enabled Apache to negotiate a $1,000 per day reduction in rates charged for some of its onshore rig contracts in the U.S., but that rates were still far too high in the current price environment.
In the first half of this year, Apache will see production from its Stag field offshore Western Australia, in which it has a a third stake, which will produce 25,000-30,000 barrels per day.
While major oil companies need a 100 million barrel plus field to make any impact, Apache is looking for fields up to 100 million barrels, but anything over that is a real bonus, Plank said.
"It's like fishing for sunfish and all of a sudden you get a big one," he added.
In Egypt, Apache will appraise its East Beni Suef, Legendre and Reindeer fields and in China it will consider expanding its acreage from its base in Bohai Bay.
He said that most of the oil to be produced in Egypt would be consumed locally and that another oil refinery was being built there as the country attempts to meet the energy demands of its burgeoning population, after that the domestic natural gas infrastructure will be built up.
Over the next five years, the independent will invest up to $100 million in its recently acquired Polish acreage, but does not anticipate early production.
He said that speculation that Apache would take a run at Seagull Energy Corp. , its partner in two Egyptian fields, or that Seagull had approached it, were not true.
He said was keen to keep money other than its own invested in Egypt, although if Seagull did become constrained by cashflow, Apache might then look.
"We do not want to just get bigger out of any sense of arrogance," Plank said.
FEATURE STORY
A Promising Wildcat Points To Turner Valley Two
Reproduced from the Alberta Report, February 8, 1998
Oil scouts have kept a close eye on two wells near Turner Valley, one operated by Berkley Petroleum Corp. and the other a rare exploration effort by Imperial Oil Resources Limited. Both companies farmed into a land position assembled by Bearcat Explorations Ltd. and Stampede Oils Inc., a pair of juniors run by Jack McLeod. The Berkley probe, though apparently not a commercial success, is said to have been geologically exciting and another well is in the works. Imperial, on the other hand, is said to be unreservedly elated with its preliminary results.
With crown land sales coming up, all parties remain tight-lipped about the rebirth of the historic Turner Valley play. Berkley CEO Mike Rose started fretting when disturbingly accurate information began showing up on an Internet chat website called Silicon Investor in December and January. A contributor calling himself Joe Sax would not identify which birdies in the "Berkley pub" were singing to him because "I'm not a stool pigeon."
Now Imperial and Berkley have joined the hunt for a Mississippian formation underlying the overthrusted fields that produced the bulk of Canada's crude oil before the Leduc discovery in 1947. In the mid-1990's, Bearcat-Stampede drilled five costly tests with little success, utterly destroying the play's creditability with investors. (Bearcat, for example, slid from a peak of $3.50 per share to 20 cents. It closed at 53 cents Friday.)
Two industry sources say the Imperial well's initial samples look so good that the play is arguably already out of the speculative stage and into development. Perhaps. But the geological risk remains considerable until a full production test is run, which is now said to be scheduled sooner rather than later. The partners' full land position is large, extending from Longview to north of Turner Valley. If geologist McLeod's original concept of a vast, more or less contiguous reservoir proves prophetic, Turner Valley II could become Canada's largest on-land crude discovery in several decades.
After payout, interests are as follows:
On oil, Imperial Oil / Berkley Petroleum 65%, Bearcat Exploration 18.541%, Stampede Oils 9.271%, Panda 5.000% and Curlew Lake 2.187%.
On gas,Imperial Oil / Berkley Petroleum 79.000%, Bearcat Explorations 11.125%, Stampede Oils 5.562%, Panda 3.000% and Curlew Lake 1.312%.
FEATURE STORY
Oil Prices May Limit Growth Plans
Asia Not A Worry
Emily Church, CBS MarketWatch
Oil companies may be forced to trim their growth plans if already low oil prices go any lower, executives of several major companies said last Tuesday.
"You can ask anybody about their contingency plans (in the event that oil starts dipping below $16 a barrel), and they will all tell you the same thing: 'We are looking at our capital budget, and seeing what we can slip to the right side if we have to,'" Texaco CEO Peter Bijur told a roomful of industry analysts at conference sponsored by Paine Webber.
Most major companies, like Texaco, conservatively base their billion-dollar exploration and production spending plans on an historically low price of oil. In Texaco's case, Bijur said the budgets were done with a $15-per-barrel price of oil.
Oil prices are now below $16.00 a barrel on the New York Mercantile Exchange. Yet, they slid dangerously close to the key $15 level in recent months before the Iraq crisis began heating up in January, driving oil up to a peak $18.06.
Analysts say the market is waiting for news from Iraq and the possibility of U.S air strikes, and that the futures contract is primed for a "break-out" to the upside. Oil prices shot higher during the Gulf War. Yet, even with renewed tensions in the region, oil prices have been surprisingly flat.
"I'm not sure I understand the market right now," Bijur said, adding that it appears to have found its current level by factoring in abnormally warm weather in the short-term and a slackening of demand from Asia in the medium-term.
As a general rule, analysts expect the slowdown in Asia has translated into a 200,000 bpd drop in worldwide oil demand.
Unocal CEO Roger Beach said that if oil drops $2-3 more, "we'll have to take a look at our capital budget. But, we are not near that problem now."
The long term
Oil majors have been spending heavily in Asia over the past few years, attracted by the "Asian miracle" growth rates and by the exploration potential of oil and gas reserves in places like Indonesia and Thailand.
Bijur told analysts that, simply, oil companies cannot ignore Asian demand. He gave as an example that China alone is expected to have 500 million cars on the road in the next 15 years, which is about the number of automobiles worldwide today. His company is forecasting an Asian slowdown lasting 1-2 years, he said.
Asian growth was one reason he cited for Texaco to keep investing in downstream operations at its Caltex unit unlike competitor Unocal, which is concentrating on upstream operations.
We see a lot of growth potential ahead in privatization and exploration. We're in it for the long-term in Asia.
Roger Beach - Unocal CEO
Unocal's Beach outlined the company's ambitious exploration and development plans for the next couple of years, and a lot of it is concentrated in countries hardest hit by the Asian currency crisis like Indonesia and Thailand, what he called the company's "crowned jewels" in Asia.
"Our Indonesian team is exceedingly excited," Beach said. The company expects to have 38 wells in by the end of the year in Indonesia, with two rigs operating in deepwater drilling. "This is just the beginning," he said.
"We see a lot of growth potential ahead in privatization and exploration," Beach said. "We're in it for the long-term in Asia."
The company continues to receive payments from its natural gas network in Thailand, and Beach said that after-tax margins have remained steady throughout the financial turmoil there. In Myanmar, Beach is expecting 11 percent a year growth in gas sales, and that the company is "looking to significantly expand our activities in Bangladesh. The country is exceedingly gas rich."
Unocal is forecasting gas sales from Thailand and Myanmar to reach a combined 955 million cubic feet/day in 2001, up from 623 mmcf/d in 1997. Net international oil and gas production is seen rising to 425 million barrels of energy a day, up from 264 a day last year.
When asked what was Unocal's biggest impediment to growth, Beach responded: "People. Staffing enough qualified people."
The Asian crisis, in the meanwhile, has not significantly impacted revenue growth. In fact, the company is enjoying "an embarrassing windfall" in terms of lower local taxes as a result of the currency devaluations, he said.
|
