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

To: Kerm Yerman who wrote (13665)	11/20/1998 6:39:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / Fracmaster writes down most of its Russian operations Analysts think company tidying itself up for selloff The Financial Post CALGARY -- Energy service firm Fracmaster Ltd. has written off much of the value of its Russian operations, a step some analysts see as improving its attractiveness to potential buyers. Fracmaster, whose major shareholder put the company in play in September after 67% of instalment receipt holders defaulted on their second payment, reported big losses for the third quarter and nine months ended Sept. 30 as a result of the writedown. Fracmaster took a $126.1-million charge ($2.89 a share) to reflect the "significant downturn in the Russian oil industry and deterioration in the Russian operating environment," the firm said. The accounting charge is a smart move, given grim economic conditions in Russia, according to Miles Lich, a service stock analyst with Peters & Co. Ltd. in Calgary. "They've basically written off a big chunk of Russia," he said yesterday. "I think this is a step in the right direction to prepare your company for what's going on. It's a prudent thing to do from an accounting point of view." Mr. Lich did not attribute the writedown to the intended sale. He said it was another move, following the layoff of 75% of Fracmaster's staff in Russia, to ensure the problem area stands on its own and does not siphon off profits from North America. While Michele Weise agreed the charge was prudent, the special situations analyst with Canaccord Capital Corp. in Toronto said the step was also necessary to get bidders interested. "No one is going to pay up for those Russian assets," she said. "If they want to pretty themselves up for a sale, they might as well focus on assets that do have value." The Canadian and U.S. assets may not have much appeal because most service firms that might be buyers already have well-established operations in both countries, Ms. Weise said. Once one of the firm's bright lights, Russia has now proved to be a drain. Fracmaster lost $4.7-million there in nine months, a result of the devalued ruble, low oil prices, and reduced demand for services because of the ravaged economy. More than 60% of the charge relates to accounts and loan receivables the company doubts will be recovered. The reversal of the firm's Russian prospects, a bold venture in the early 1990s as communist rule retreated, and which contributed substantially to Fracmaster's growth and emergence as an international player, hit the company's stock hard. The shares peaked at $24.50 in April, then fell to a low of $3.50 on Oct. 7, a drop of 86% . Alfred Balm, the company's former chairman and majority shareholder, sold his 67.8% stake via an instalment offering in the fall of 1997, the height of the bull market for energy stocks. The oversubscribed issue allowed investors to initially put up $9.75, with an obligation to pay the same amount within a year. When investors saw the share price fall below the owed amount -- a June development that caused the TSE to halt trading -- many refused to make the second payment. As a result, Mr. Balm ended up with 43% of the shares, a holding the Geneva-based businessman did not want. He has said he wants a single buyer and his minimum price is the $9.75 owed on the receipts. "Not a chance," scoffed one analyst when asked if Mr. Balm's target was achievable. Difficult industry conditions are complicating the hunt for a buyer, analysts said. U.S. firms that might be interested in Fracmaster can't take advantage of their strong dollar because their financial results are also suffering from the oil sector's downturn.

To: Kerm Yerman who wrote (13665)	11/20/1998 9:32:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / OPEC losing battle to buoy oil prices Calgary Herald Oil hit a five-month low Wednesday after Mexico and Iran, two major producers within OPEC, said the 11-member group is unlikely to cut production further when it meets next week. The near-month crude contract on the New York Mercantile Exchange fell 39 cents to $12.14 US a barrel, and is off $1.43 a barrel this week as the price began to recede along with the immediate threat of a U.S.-led attack on Iraq. A return to oil price levels not seen since June has caught the public's attention. "It's the oil companies playing games again," said David Dyke, 73, a retired mechanical contractor who considers himself a typical Calgarian and pays pretty close attention to the fluctuations in oil prices. "They thought the price would go up with a war with Iraq." Industry analysts see a variety of reasons for the plunge -- including the newfound willingness of Iraq to co-operate with UN weapons inspectors -- and generally most aren't holding out hope for a quick recovery. "We're not very optimistic about a sudden turnaround," said Gord Currie, an analyst with Canaccord Capital Corp. "It's probably going to be a long, slow recovery. In fact, there's even a chance we're in a whole new paradigm of lower oil prices." There doesn't appear to be any immediate help coming from the Organization of Petroleum Exporting Countries. Adrian Lajous, chief executive of Pemex, Mexico's state oil company, told a London oil conference that OPEC won't cut supply. Iran's deputy oil minister, Mehdi Hosseini, said OPEC "has done its best" to prop up oil prices and probably won't do more. "The Mexicans had a statement and the Iranians said there won't be any extra oil cuts. The market is on its heels," said Tom Bentz, senior vice president-energy at Cresvale International LLC in New York. In the past year, days of forward supply of crude oil worldwide has increased from 81 to 87 days. About 75 million barrels are consumed daily around the globe. "That's a lot of surplus to work off," said Judith Dwarkin of the Canadian Energy Research Institute in Calgary, ". . . especially combined with Iraq saying it wants to produce like gangbusters and the outlook for demand next year of not much appreciable growth and for more sustained and systemic economic problems around the world." David Swain, managing director of global energies with CIBC World Markets, said the industry is well-equipped to deal with current woes -- noting it took advantage has of the access to debt and equity markets over the last four years. "They're capitalized in a manner that they can certainly work through this next phase whether it's 12 to 18 months before there's a significant move upwards in price," he said. "There's still a very, very healthy industry out there." Currie doesn't expect oil company shares to again drop dramatically as they did this summer. "The market discounted lower oil prices pretty quickly," he said. "We probably saw the lows in oil stocks right around the end of August when they got unbelievably cheap." Companies have already trimmed staff and spending plans to deal with the new price environment. Scott Inglis, an analyst with First Energy Capital Corp. of Calgary, said companies are unlikely scrambling to the books to revise budgets based on oil prices of between $14 and $16 a barrel. He also adds a note of support for Dyke's theory when he points to next Wednesday's OPEC meeting in Vienna. "(Oil prices) always seem to go really low right before an OPEC meeting," Inglis said. "The market tries to send a signal and that's the signal."