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

To: Kerm Yerman who wrote (14668)	1/7/1999 8:32:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / Petroleum Land Sales Slide Chris Varcoe, Calgary Herald Falling oil prices have turned Canadian petroleum producers into tightwads when it comes to buying new land. The sale of drilling rights on Crown-owned land in Alberta, British Columbia and Saskatchewan fell by half last year, as cash-strapped oil and gas companies spent about $748 million acquiring additional property. The new year should continue the downward slide unless crude prices rebound sharply, said Ted Lefebvre, president of the Canadian Association of Petroleum Landmen. "There isn't a whole lot of cash out there,'' said Lefebvre, whose organization represents 1,400 members who help acquire property for petroleum producers. "The knee-jerk reaction of industry is to back off at land sales and not buy as much, but that hurts you a year down the road if you don't have the inventory to work on." With oil prices falling almost one-third during the past year, many oil and gas companies have been choked by less cash flow and rising debt levels. In such a harsh environment, one of the first budget areas to be trimmed is money for additional land, which takes time to develop before new production comes on stream, said analyst Peter Linder of CIBC Wood Gundy. Lefebvre, vice-president of land at New Cache Petroleum Ltd., predicts Crown land sales in Western Canada will tumble another 20 per cent in 1999, while the price paid per hectare should drop about 10 per cent. John Thomson of Renaissance Energy Ltd., one of the most prolific explorers in the industry, said companies will earmark less capital for property out of necessity. "There is no cash in the system,'' said Thomson, senior vice-president at Calgary-based Renaissance. "Everyone must husband their cash resources. So expect reduced activity -- expect it from land sales, seismic activity and drilling," said Thomson. Less land under exploration means a drop-off in drilling. New figures released Tuesday by the Canadian Association of Oilwell Drilling Contractors shows 62 per cent of the 586 drilling rigs in Western Canada are working this week. In the same period last year, 91 per cent of the rigs were active. Falling land sales also means less money for provincial governments. Last year, Alberta netted $597 million from "bonus bids" from Crown land sales, a 48-per-cent drop from 1997 -- and the lowest level since 1993, according to the provincial Energy Department. In British Columbia, where demand for natural gas-prone property drives the industry, revenues from land sales plunged 56 per cent to $96.3 million. In Saskatchewan, viewed primarily as an oil-producing basin, bonus bids dropped 59 per cent, to $31 million. But land values aren't in a freefall. The prices of property acquired in Crown land sales decreased 12 per cent from 1997 levels in Alberta, hitting $198 per hectare. The biggest drop was for oilsands land, which fell to $85 per hectare last year from $497 in 1997. Heavy oil properties have fallen out of vogue, but Lefebvre said land agents remain interested in deep gas property, and clients are willing to pay top dollar. Substantial bargains are available for companies looking to take over smaller oil and gas producers or acquire farm-in interests, drilling on property that the existing owner isn't developing. "There are bargain-basement opportunities,'' said Lefebvre. "You will see a lot of companies making up reserves and new core prospect areas by acquiring their competitors. They will acquire land that way." Land sales Alberta petroleum, natural gas and oilsands Crown land sales (in millions of dollars) - 1998 $ 596.9 - 1997 $1,150.7 - 1996 $ 767.1 - 1995 $ 657.3 - 1994 $1,006.7 - 1993 $ 503.7 - 1992 $ 152.7 - 1991 $ 307.0 - 1990 $ 434.9