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Gold/Mining/Energy : Bearcat (BEA-C) & Stampede (STF-C) -- Ignore unavailable to you. Want to Upgrade?

To: Bearcatbob who wrote (494)	3/13/1998 11:31:00 AM
From: Jim P	Respond to of 2306

Hey Bearcatbob, article of possible interest, Calgary Herald gateway page Friday 13 March 1998 Oil plunge slows activity, natural gas the big hope Sydney Sharpe and Steve Ewart, Calgary Herald The oilpatch is putting a number of projects on the back burner as it braces for what could be a brutal spring and summer, says a study by Calgary oil and gas dealer Peters & Co. But plunging oil prices (the lowest in four years) are not prodding oil producers to push the panic button. "Nobody expects the $14 US (a barrel) oil price to remain," CIBC Wood Gundy analyst Peter Linder said Thursday. "If it's here two months from now, I think you will see a lot more fear, but for now there is clearly no mass paranoia." However, the study expects companies to cut back on land acquisitions, seismic activity, wildcat wells and heavy oil. "When you end up really wrong on your forecasting, you have to play catch-up," said Wilf Gobert, an industry analyst with Peters & Co. He predicted: "It will be pretty lean." Oil prices closed at $13.98 US Wednesday, before bouncing back to finish at $14.20 a barrel Thursday, up two cents from the previous day. (Alberta Treasurer Stockwell Day predicted in February that oil would average $17.50 US a barrel for the fiscal year April 1998 to March 1999.) A power play between members of the Organization of Petroleum Exporting Countries has resulted in a glut of oil on the global market. Oil prices are not expected to rebound until OPEC cuts production. Venezuela and Saudi Arabia are still at odds with each other, and it's uncertain whether an OPEC meeting scheduled for Monday in Vienna will take place. Still, analysts see a savior lurking in the wings -- natural gas. "For natural gas companies, the outlook is quite positive," said Gobert. "There's a big shift in cutting out heavy oil drilling and increasing natural gas drilling. That can't be done fast enough to offset what is going to happen in 1998." Everyone is bullish on natural gas because producers expect to receive higher U.S. prices once there is enough export pipeline capacity. But if the U.S. were to experience a slowdown or if El Nino severely affected the use of natural gas, prices could be affected. "If natural gas falls out of bed, this town will be in mourning," said Gobert. "Natural gas is the big hope and the big plus, and heaven help us if natural gas prices join the plunge." Heavy oil, which has become uneconomic to produce, is hardest hit. "Once they shut in heavy oil production and take the product off the market, the supply-demand ratio will improve, which should bolster prices where production will again be economic," said Linder. With oil prices cut in half from last year, oil producers are worried. "A lot of companies will be looking at all their cards after winter break-up," said J.C. Anderson, chief executive of Anderson Exploration Ltd. Anderson is one of the luckier companies, with an emphasis on natural gas production. But J.C. Anderson said companies are in much better financial shape than they were in 1986, when oil prices collapsed and the oilpatch followed suit. Better technologies, tighter budgets and strict management practices have led to healthier bottom lines this time. "The ability to weather a low commodity-price storm is much higher than it was 10 years ago," said Anderson. "But there will be some that suffer significantly. It is just the nature of the beast." Part of the problem is that the industry does the majority of its spending in the first three months of the year, often 40 per cent of the year's budget is spent during that time. "So for the remainder of the year the company must cut disproportionately because of the overspending in the first quarter of the year, compared to the slide in prices," said Gobert. Some companies will borrow more money to keep their spending up and will increase their lines of credit. "I think the fear over oil prices in the oilpatch is, to a large extent, mitigated by the strong gas price recovery everyone anticipates," said Linder. ------------------------------------------------------------------------ Calgary Herald New Media 1998 Contact us: online@theherald.southam.ca