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Gold/Mining/Energy : KERM'S KORNER -- Ignore unavailable to you. Want to Upgrade?

To: Kerm Yerman who wrote (13121)	11/3/1998 4:04:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / Oil Industry Shakeup Rush To Consolidate Financial Post NEW YORK -- Not since the rough and tumble days of John D. Rockefeller has the oil industry faced such a fundamental shakeup. Even before the end of October, global oil mergers have topped $112-billion this year (all figures in US dollars), smashing previous records and more than the last two years combined, according to Securities Data Co. figures. Experts say there are three distinct forces driving the restructuring of the world's biggest industry, with this past year's oil price slump the least of them. For the top league of oil companies, size matters more than ever, as developing the all-important world class oil discoveries these days requires billions of dollars, years of commitment, and political clout. At the same time, analysts say, the consolidation of the refining and marketing sector has been driven by a need to cut costs to the bone in an era of chronic overcapacity. Meanwhile, among the smaller oil explorers, which are most exposed to oil price fluctuations, the financially strong are gobbling up the weak. Top of the industry agenda is the emerging Super League of companies valued at more than $100-billion. British Petroleum Co. PLC joined this exclusive club two months ago with its $55-billion takeover of Amoco Corp., creating a company with a market value of about $110 billion, and pitching it into the same class as Exxon Corp. and Royal Dutch/Shell Group, both valued around $150-billion. Such potential powerhouses bring back memories of Rockefeller's Standard Oil trust, a company the famed robber baron built up until it was forced by the courts to remove its stranglehold on the industry in 1911. Today's biggest oil companies, including Exxon and Amoco, can trace their geneaology to the Standard Trust. The BP-Amoco merger left the likes of Mobil Corp. and Chevron Corp. Rockefeller's east and west coast scions contemplating their futures and, possibly, a future together. Companies need to be able to take what BP chief executive John Browne has described as a Òdecisive stakeÓ in huge long-term projects, like those around the Caspian Sea, in RussiaÕs Sakhalin Island, or in the deepwaters off Angola. Big oil companies have also been busy combining their low-margin refining businesses to cut out billions in costs and, crucially, to gain market share. Some, like Unocal Corp., have sold off refineries and gas stations. Others, including Texaco Inc. and Phillips Petroleum Co., have effectively farmed out management and kept minority stakes. This has made room for the emergence of American companies like Tosco Corp. and Ultramar Diamond Shamrock Corp., top independent refiners created out of a series of acquisitions in the past few years. Though they don't volunteer it, a key goal is to reach a critical market share, which in the U.S. means around 10% or more. In the downstream, market share is vitally important, but something nobody will talk about because of anti-trust problems, says one banker.

To: Kerm Yerman who wrote (13121)	11/3/1998 4:21:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / Yukon Must Redo Oil Legislation Law Passed Before Ottawa Was Ready National Post When the Yukon legislature begins its fall session today, the NDP government will have to re-enact legislation it thought it had already passed. Ottawa has said the territory's landmark oil and gas law is invalid because Yukon legislators passed the bill before Parliament passed its own, related, legislation. The oil and gas act, which transfers responsibility for the resource from Ottawa to Whitehorse, was passed unanimously in the Yukon assembly last winter. But related amendments to the Yukon Act -- the federal legislation outlining the Yukon government's powers -- were supposed to be passed by the House of Commons first. So officials in the department of Northern Affairs are asking the 17-member legislature to re-enact its own law. "They knew full well we were passing the bill," said an angry Trevor Harding, the territory's Economic Development minister. "It's a terrible, bureaucratic approach to the Yukon," he added. An accord signed by First Nations, the Yukon government and the Northern Affairs department made it clear that the Yukon was to wait for Ottawa, said Liberal MLA Jack Cable. "As soon as practicable following the passage of legislation to amend the Yukon Act, Yukon shall introduce and support legislation that is in accordance with this accord," says the agreement, signed in 1993. "If he simply admitted he blew it and spent his energy sorting it out, we'd be a lot better off," said Mr. Cable.

To: Kerm Yerman who wrote (13121)	11/3/1998 4:27:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / Belt-Tightening Hits the Oilpatch Uncertainty forces companies to live within their cash flow Financial Post Calgary - Tough times are yielding creative budget approaches in Canada's energy patch, where producers are hunkering down to finalize 1999 spending plans in one of the most difficult oil price environments in two decades. Industry analysts said yesterday the companies are pledging to live within cash flow, cut costs, sell assets and hedge future gas production as the the direction of oil prices remains uncertain and the severe downturn that started last fall stretches into a second year. The sector is one of Canada's biggest industrial spenders. Last year, some $16-billion was funnelled into capital budgets, which include expenses on oil and gas drilling, land, and seismic data. While budgets aren't expected to be firmed up until later this year, analysts say some capital spending trends are already emerging: - Spending is being restricted to internally generated cash flow, rather than relying on new equity financings or higher debt. "Debt levels have run up and companies don't have as much flexibility. And in the absence of equity, almost by default people are going to have to spend no more than their cash flow," said Craig Langpap, oil and gas analyst at Peters & Co. in Calgary. Low oil prices have dried up access to equity this year, although there are signs the markets are again warming up to new issues. Alberta Energy Co. raised $200-million in new equity to fund the recently closed acquisition of Amber Energy Inc. Paramount Resources Ltd. and Berkley Petroleum Corp. each raised $45-million in the past few days. The offerings were oversubscribed. - The focus is on near-term, cash-generating opportunities. Spending on projects with a longer-term profit horizon is restricted to bigger players that have better access to debt. Petro-Canada, for example, is reducing capital spending next year, but big projects like Terra Nova and the Syncrude Canada Ltd. oilsands expansion are going ahead as planned. - Sale of midstream assets like natural gas processing facilities. Debt-stretched Gulf Canada Resources Ltd., for example, has been shopping its midstream assets and is expected to announce a deal in the near term. Gulf is reducing capital spending to the $500-million to $600-million range in 1999, down from about $800-million this year. - Forward selling next year's natural gas production to assure a basic level of cash flow. - Redirect spending to natural gas. The industry traditionally spends 60% of its capital on oil, and 40% on natural gas. In 1999, spending is expected to be 60% on natural gas and 40% on oil. That's because oil prices are down about 30% from last fall's levels, while natural gas prices are up sharply as new pipelines to the U.S. link Alberta prices to higher U.S. prices. - There's also great pressure to reduce costs. While massive layoffs have been absent in the current downturn, companies are spending their tight dollars on what makes most economic sense, said Martin Molyneaux, research director at FirstEnergy Capital Corp. in Calgary. The belt-tightening is in sharp contrast to the sector's big capital commitments of a little more than year ago. The industry, then supported by receptive equity markets and strong commodity prices, rolled out $20 billion in spending on various projects like Alberta's oil sands and heavy oil. Most of those projects are still going ahead, but in some cases implementation has been stretched out over more years. Analysts have mixed views about whether capital spending overall will increase or decline next year relative to 1998. Molyneaux is predicting a modest increase, based on oil prices trending up and the bullish outlook for natural gas. Victor Hughes, research director with CIBC Oppenheimer Corp. in Houston, Tex., is less optimistic, calling for cuts in the 10% to 25% range overall.

To: Kerm Yerman who wrote (13121)	11/3/1998 4:32:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / Partners Covet Feds' Stake In Hibernia It could fetch up to $350-million, analysts say Financial Post CALGARY - The federal government's stake in Hibernia's giant oilfield has become a coveted target among Canadian and international oil giants. Ottawa took over the 8.5% stake in Hibernia, the centrepiece of Newfoundland's booming offshore energy industry, at no cost in 1993 when Gulf Canada Resources Ltd. bailed out because it couldn't afford the development costs. Hibernia cost $5.8-billion to build, including $1.5-billion in Canadian tax dollars. At today's prices, the federal government's stake would fetch $250-million to $350-million, analysts say. Current project partners and other companies seeking a foothold on the East Coast are individually approaching Ottawa to let it know they want its stake - and that they'd like to see a sale soon, sources said. The project has turned around in five years from a money pit burdened by cost overruns, major technical risks and uncertainties about reserves and production, to an engineering wonder that is not only working well -- it's exceeding expectations, according to analysts and project partners. "The technical risk is gone," said John Tysall, oil and gas analyst with Standard & Poor's Inc. in Toronto. "The thing is up and operating. It's actually producing higher than initially forecast, and is getting close to full production. The costs are lower than originally projected." There is also further upside potential - production could increase to 185,000 barrels a day in 2000, from the current 100,000 b/d, in 2000, with further spending to lessen the bottleneck at the facility, said its largest shareholder, Mobil Oil. Mobil has a 33% interest. Other owners are Chevron Canada Resources with 26.87%, Petro-Canada (20%), Murphy Oil (6.5%), Norsk Hydro ASA (5%) and the federal government through Canada Hibernia Holding Corp. (CHHC). "If and when the federal government puts its share of Hibernia up for sale, we would be very interested in participating in that process," said Norm McIntyre, Petro-Canada executive vice-president. "The Grand Banks represent a key growth area for Petro-Canada, and we look for opportunities where we can add value by expanding our interest and our activities in the region." Mobil says it is not aware the government is officially shopping its stake. However, Andrew Adams, Mobil's vice-president of exploration and production for Newfoundland, said his company, too, is interested. "We think Hibernia is tremendous," said Charlie Stewart, Chevron spokes-man. "Chevron discovered it in 1979. We are there for the long term and we think that it's going to add significantly to our reserves and future value of the company." Chevron would not say whether it would bid for Ottawa's stake. Hibernia produced its first oil last November. With a daily production of 100,000 b/d, the Hibernia platform is producing as much as a mid-sized oil company CHHC was established to hold and eventually dispose of the government's interest, but Ottawa has been vague about its intentions. The federal government, which also holds an 18% stake in Petro-Canada, is said to want to wait until oil prices recover before selling its Hibernia stake, so it can get the best possible price possible.

To: Kerm Yerman who wrote (13121)	11/3/1998 4:45:00 AM
From: Kerm Yerman	Read Replies (6) \| Respond to of 15196

IN THE NEWS / Poco Petroleums Takes Over Pan East Petroleum In $163 Million Deal CALGARY (CP -- Poco Petroleums Ltd., a Calgary oil and gas company, is spending $163 million in cash and shares to take over Pan East Petroleum Corp. in a move to grow its energy business in Western Canada. Poco announced Monday it is offering a cash and share bid worth about $2.65 for each Pan East share -- about 11 per cent more than the company's closing stock market price last Friday. Poco said the deal has been endorsed by Pan East's board and the company's key shareholder, a group that owns about 20 per cent of the Calgary company. Calgary-based Poco's exploration program is focused in west-central Alberta, while Pan East also has nearby assets, producing 3,100 barrels of oil equivalent a day. Poco wants to expand its holdings in the area to increase production of natural gas. "The Pan East transaction is consistent with Poco's business plan, which continues to focus on the exploration, development and acquisition of natural gas assets in the deeper, more prolific portion of the western Canadian sedimentary basin," Poco said in a release. "Poco sees significant exploration potential in the Pan East assets and believes that this acquisition gives it a strategic advantage in expanding Poco's core area further west to a deeper, less explored part of the basin."

To: Kerm Yerman who wrote (13121)	11/3/1998 4:49:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / TransCanada Pipelines Reports Higher Quarterly Profits CALGARY (CP) -- TransCanada PipeLines Ltd. announced lower third quarter profits today and said it will record significant charges in the fourth quarter to account for its summer merger with Nova Corp. The Calgary company, Canada's largest natural gas pipeline, said it made $143 million or 31 cents a share for the period ended Sept. 30 -- before integration costs from its July merger with Nova. That's down from $157 million or 34 cents a share a year ago. The company incurred after-tax integration costs of $4 million during the July-September quarter. For the Nova-TCPL deal, integration costs are expected to total about $390 million before income taxes and regulatory recoveries. The balance of those costs are expected to be recorded in the fourth quarter, TransCanada said. For the nine months, TransCanada reported net profits from continuing operations of $430 million, down eight per cent from a year ago. Earnings per share fell to 93 cents, compared with $1.02 in the same 1997 period. "We are working hard to capture every benefit from the merger," said George Watson, TransCanada's president and chief executive. "These integration costs represent the business changes necessary to realize promised savings and capture future opportunities." TransCanada stock rose 20 cents to $23.30 on the Toronto stock market today on a trading volume of more than 643,000 shares.

To: Kerm Yerman who wrote (13121)	11/3/1998 5:01:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / TCPL Chopping 600 Jobs Plans $390-million charge for post-merger changes The Globe & Mail Calgary -- TransCanada PipeLines Ltd. is chopping up to 600 jobs as it streamlines operations in the wake of its $15.6-billion merger with Nova Corp. Calgary-based TransCanada said yesterday that it will take a onetime, pretax hit of $390-million in its fourth quarter to absorb the costs associated with cutting about 9 per cent of its payroll within the next 18 months. About $135-million of that will be used to implement a so-called restructuring plan that will involve a mix of layoffs, retirement packages and relocation expenses. The remaining $255-million represents the reduced value of assets ranging from duplicate computer systems to real estate-related transactions such as breaking leases and relocating offices. "These integration costs are necessary to ensure that we achieve the eventual savings promised from the merger with Nova," TransCanada spokesman Gary Davis said. Almost $100-million in annual operating savings and $50-million a year in capital "efficiencies" will begin accruing as early as 2000, Mr. Davis said. In a statement, TransCanada chief executive officer George Watson pointed out that his company will be keeping its quarterly dividend of 28 cents a share, and various changes will produce a stronger balance sheet. "We are working hard to capture every benefit from the merger." TransCanada stock gained 10 cents a share to close at $23.40 yesterday on the Toronto Stock Exchange. The natural gas pipeline company had offered assurances in January, when it first announced the blockbuster merger with Nova, that there wouldn't be any drastic cuts to the combined work force. However, TransCanada officials said yesterday that it became apparent after closer examination that the duplication of certain job functions was greater than anticipated. Employees in accounting and human resources will be among those affected by the job cuts. "When you're bringing two large companies together, which were operating as independent entities, you're bound to have duplication of certain things," said David Moneta, TransCanada's head of investor relations. "We don't need two of each." The anticipated cuts of 600 jobs include full-time employees, part-timers and consultants. TransCanada, the operator of the main natural gas line from Western Canada to Central Canada, now oversees Nova's Alberta gas pipeline network. Shareholders approved the TransCanada-Nova merger in late June, but Nova's petrochemicals division is now a separate, publicly traded entity based in Calgary. In the third quarter, TransCanada posted a $139-million profit from continuing operations, compared with $157-million for the same period last year. Revenue jumped to $4.43-billion from $3.91-billion, while share profit rose to 34 cents from 30 cents. The pipeline giant had to incur $4-million in after-tax, third-quarter costs related to the merger. For the nine months ended Sept. 30, the company made a profit of $430-million, compared with $467-million a year earlier. Nine-month revenue climbed to $12.6-billion from $12.1-billion. TransCanada said yesterday that it has already taken a $182-million charge to retained earnings for "third-party fees, costs and expenses related to the business combination" with Nova. Mr. Watson added that TransCanada is well positioned to thrive in North America with projects such as a further extension to the Northern Border gas pipeline network, which it co-owns with a group of U.S. companies. Internationally, the company posted a profit of $10-million for the three months ended Sept. 30, compared with a $5-million loss for the same period last year.

To: Kerm Yerman who wrote (13121)	11/3/1998 5:13:00 AM
From: Kerm Yerman	Read Replies (9) \| Respond to of 15196

IN THE NEWS / Syncrude Coker Shut Down Following Fire By CP FORT McMURRAY, Alta. -- A fire has forced the shut down one of two cokers at Syncrude Canada for at least 48 hours.. The coker withdraws coke from bitumen and starts the conversion process into upgraded crude oil. It's too soon to say how the shutdown will affect the oilsands company's production, spokesman Peter Marshall said yesterday. "The good news was nobody was hurt and all the other units in the plant are in stable mode," he said. No cause was given for the early morning fire. The coker underwent repairs for a circulation problem in early January. In July, it had problems again and was shut down until mid-August. The problems with the coker forced Syncrude to revise its year end production target to 77.5 million barrels, down from the previous forecast of 80 million barrels.