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

To: Kerm Yerman who wrote (14943)	1/21/1999 7:08:00 AM
From: Kerm Yerman	Respond to of 15196

REPORT / Canadian Energy Weather As of 07:35 GMT, 21 JAN 1999 SUMMARY- Temperatures 10-15F (5-8C) above normal. IMPACT- Well above normal temperatures and well below normal heating demand are likely into early next week though there may be a significant snow/ice event in the area Friday-Saturday. FORECAST- 48 HOUR...Temperatures 10-15F (5-8C) above normal today, 6-12F (3-6C) above normal Friday. 3 TO 5 DAY...Temperatures 10-20F (5-10C) above normal Saturday-Monday. 6 TO 10 DAY...Temperatures are likely to begin a cooling trend but should remain above normal. Source: Weather Services Corporation

To: Kerm Yerman who wrote (14943)	1/21/1999 9:04:00 AM
From: Kerm Yerman	Respond to of 15196

KORNER REPORT / Crude Oil Canadian oil price spreads tighten with supplies CALGARY, Jan 20 - Declines in Canadian conventional oil production and higher demand in key refining markets led to unseasonably narrow discounts for Canadian crudes in business for February, marketers said on Wednesday. Big cutbacks in drilling and still-large numbers of shut-in wells among Canadian producers stung by depressed benchmark West Texas Intermediate crude prices have led to the tight supplies, as did a draw on Canadian light and heavy blends during a major U.S. pipeline outage early this year. Price discounts for Canadian crudes, especially sour and heavy blends, are normally much wider in winter, a Canadian crude trader said. "There's hardly any seasonality. It's indicative of the tight sour markets," the trader said. Deals for light sweet crude at Edmonton were talked this week at $0.75-$0.85 a barrel under WTI for February trade, representing a $0.05-$0.10 jump in value from January. Differentials for light sour blends were talked at about $1 a barrel under, or as much as $0.35 narrower than last month. In heavier crudes, Bow River Blend was assessed at roughly $2.50 a barrel under WTI for February, compared with as much as $3.25 under WTI for January, while Lloydminster Blend traded at about $3.25 a barrel under. Lloyd Blend fetched $3.75-$4.00 under WTI a month earlier. A marketer for a refiner noted the late-December, early-January outage of the Capline, the main crude oil pipeline linking the U.S. Gulf Coast and the Midwest, forced buyers into the market for alternative supplies from Canada. The 1.1-million-barrel-a-day Capline was shut down for six days beginning on Dec. 31 after a small spill. "If you take away six days and have a few more days at reduced rates, you've taken six (million) or seven million barrels out of the market. When the pipelines are projected to be full for the next few months...you can't catch up," the marketer said. "So, that's bid up the Canadian market." The tightness in supply was reflected on Tuesday when Enbridge Pipelines announced it had no need to ration space on any of its pipelines that run to U.S. Midwestern and southern Ontario refining markets from the western Canadian producing region World oil price slips on expected U.S. stockbuild LONDON, Jan 20 - World oil markets slipped on Wednesday amid expectations of a rise in U.S. crude inventories and predictions of unseasonably mild weather in key heating oil consumption centres in the coming days. International benchmark Brent oil futures ended 33 cents lower in late afternoon in London at $10.48 per barrel, still struggling to recover from a chronic global overhang in world oil supplies which drove prices to 12 year lows last December. Weekly data from the American Petroleum Institute due out later on Wednesday were expected to exacerbate the supply concerns, with traders predicting a rise in the top world oil consumer's levels of crude oil in storage. "There are some expectations that there will be a build in crude oil stocks as oil firms are likely to replenish lost supplies in the new tax year," said one broker. Other dealers attributed the soft market tone to mild weather in the key heating oil regions in Europe and the United States. They said the markets would need to see a good heating oil stock draw in the U.S. data to avoid further price declines. Ministers from the Organisation of the Petroleum Exporting Countries have so far failed this year to agree any new price rescue measure prior to their scheduled meeting in Vienna on March 23, having vowed last June to cut output by 2.6 million barrels from the cartel's daily production. Inaction by OPEC and other lead oil producers, coupled with the Asian recession and warmer temperatures in the northern hemispere last year, has been blamed for the lowest annualised crude price in 1998 in over 25 years. Meanwhile, market wild card Iraq continues to increase its export levels under the U.N. sponsored "oil-for-food" programme, which allows the major oil producer to sell $5.26 billion of oil every six months under U.N. supervision to help pay for humanitarian supplies. Iraq has sold crude worth about $700 million so far in the latest phase of the programme, the United Nations said in a statement on Wednesday. The statement said in the week to January 15, Iraq exported 13.3 million barrels of oil worth an estimated $124 million. Data on Tuesday showed that Iraq has been loading some 1.85 million bpd this month for delivery to world markets. NYMEX crude, products down at close on forecasts NEW YORK, Jan 20 - The expiring February front-month crude contract extended losses near the close Wednesday, last trading below $12 a barrel -- the first time it finished below that level this year. Battered by expectations of a stockbuild in the latest weekly data due out later in the day, the front month crude last traded at $11.72, down 36 cents, and also its intraday low. In the early going, the contract struck a high of $12.08. March crude last traded at $11.85, down 34 cents, after moving below $12 in late trade. The contract traded between $11.85/12.20. February heating oil last traded at an intraday low of 31.30 cents a gallon, down 0.92 cents. The contract's session high was 32.45 cents. February gasoline deepened its losses as it last traded at 33.60 cents a gallon, falling 1.59 cents.b ydropp1.30, an intraday low and In a Reuter poll, traders and analysts forecast a crudestockbuild of 3.2 million barrels for the week ending Jan. 15. They also forecast a drop in distillate stocks, which include heating oil, of 2.0 million barrels and an increase in gasoline stocks of 1.7 million barrels. ACCESS energy market up on API data LOS ANGELES, Jan 20 - U.S. energy futures prices rose slightly in after-hours ACCESS trade on Wednesday after inventory data showed a draw in U.S. crude oil stocks, traders said. March crude oil futures on ACCESS were up about 15 cents a barrel to $12.03 a barrel at 4.00 p.m. PST (7.00 p.m EST). Some 2,090 crude oil lots were traded, with 1,513 for the front-month. Traders said the crude market was lifted by the American Petroleum Institute's report showing a draw of 2.16 million barrels for last week. Crude oil futures fell in regular trade to below $12 a barrel on expectations that the report would show a large build in stocks. On ACCESS, the February heating oil contract also edged up, gaining 0.36 cent to 31.70 cents a gallon. Some 317 lots traded for all heating oil contracts, with 190for February. The February unleaded gasoline contract rose 0.17 cent a gallon to 33.90 cents. Some 262 lots were traded, 141 for the front-month. However, traders said they expected gasoline to come down after the API report showed a build of 5.44 million barrels.

To: Kerm Yerman who wrote (14943)	1/21/1999 9:05:00 AM
From: Kerm Yerman	Respond to of 15196

KORNER REPORT / Natural Gas NYMEX gas mostly ends higher, ACCESS gains on AGAs NEW YORK, Jan 20 - NYMEX natgas futures, buoyed by shortcovering after yesterday's strong close, mostly ended higher Wednesday in moderate trade, then gained more on ACCESS after a supportive weekly inventory report, sources said. In the day session, February climbed one cent to close at $1.827 per million British thermal units after trading between $1.80 and $1.86. On ACCESS, the spot contract traded up to $1.864 shortly after the AGA storage report. Earlier, March settled 1.4 cents higher at $1.839. Most other deferreds ended up 0.1 to 1.5 cents. "People must have been dumping gas out of storage last week. It's a pretty supportive number," said a Midwest trader. AGA said Wednesday U.S. gas stocks fell last week by 203 bcf, well above Reuter poll estimates in the 165-175 bcf range. Total stocks slipped to 372 bcf, or 20 percent, over year-ago. Eastern inventories fell 135 bcf to 65 percent of capacity and remained just two percent over last year. Consuming region west storage, which lost 12 bcf for the week, was up 55 percent from 1998 levels. Stocks in the producing region dropped 56 bcf and stood 49 percent over year-ago. WSC expects Northeast and Mid-Atlantic temperatures to range from six to 16 degrees F above normal through Sunday. Florida and the Southeast will climb to as much as 20 degrees above normal Wednesday and Thursday, then cool to three to six degrees above by the weekend. Midwest readings will average 10-20 degrees above seasonal Wednesday through Saturday, then slip to five to 10 degrees above by Sunday. In Texas, the mercury will hit 20 degrees above normal Wednesday before cooling to normal or slightly above by the weekend. The West will see above normal midweek temperatures cool to seasonal or below seasonal levels later in the period. Technical traders pegged February support first in the $1.73-1.74 area, which are recent lows and the contract low from last week. Key support was expected at $1.61, the 1998 spot continuation low set in August. Feb resistance was seen in the $1.86-1.88 area, with psychological selling likely at $2.00. Major resistance was at $2.085. In the cash Wednesday, Henry Hub swing quotes firmed three to four cents to the $1.81 area. In the West, El Paso Permian was flat to up slightly in the low-$1.70s. Midcon pipes on average were up two cents to the mid-$1.70s, while gas at the Chicago city gate was slightly higher in the mid-$1.80s. New York city gate quotes on Transco were in the $2.10 area, off about a dime on the mild weather still in the region. The NYMEX 12-month Henry Hub strip gained one-half cent to $1.995. NYMEX said an estimated 62,993 Hub contracts traded today, up from Tuesday's revised tally of 59,812. U.S. spot natural gas prices rise early with NYMEX NEW YORK, Jan 20 - U.S. spot natural gas prices treaded higher Wednesday, in line with a firmer futures market, but mild weather and ample storage suppressed a sharper rally, industry sources said. "Early it (cash market) tried to run up with the screen, but then it came off at the end. Overall, it was probably up a couple cents," one Midwest trader said, adding he anticipated little movement in prices for the remainder of this week. Cash prices at Henry Hub were quoted mostly at $1.79-1.82 per mmBtu, compared with Tuesday's levels of $1.75-1.78. In south Texas, prices for delivery Thursday were quoted widely in the mid-$1.60s to mid-$1.70s as near-80 degree temperatures triggered some air conditioning demand. Sonat's Destin Pipeline reported it will replace a 36-inch valve on the Main Pass 260 junction platform. The outage, which is expected to last for about four days, will begin Thursday. As a result, gas will not flow through the 260 platform during the outage, and service will be interrupted from Point 993010 Shell-VK 780, Point 993040 Viosca Knoll Gathering System and Point 993060 CNG-MP 279, the company said in a statement. In the Midcontinent, prices on Panhandle, NGPL and ANR settled in the mid-$1.70s, while Northern at Demarcation gas traded mostly around $1.76-1.80 and Chicago city-gate was assessed at $1.85-1.86. In the East, Appalachian prices on Columbia Gas followed Gulf values higher despite the mild weather now in the region. Deals were reported done for Thursday at $1.94-1.96. New York city prices on Transco were quoted at $2.08-2.12 as temperatures in the region were expected to post a high of about 50 degrees today. In the west Texas markets, both Permian and San Juan prices held in the high-$1.60s to low-$1.70s, while Southern California border prices were seen at $1.84-1.86. El Paso's Gallup C turbine will be down for about 12 hours today starting at 0700 MST for emergency repairs. As a result, capacity out of the San Juan Basin will be cut by 200 million cubic feet per day (mmcfd), the pipeline company said. Also, the Lincoln Station will be down through Friday due to a vibration problem. The San Juan Crossover capacity will be reduced by about 90 mmcfd. El Paso also reported the outage at the Blanco C turbine, which is expected to have a minimal impact on capacity, has been postponed to Feb. 22-23. Also, the Roswell 1 Station will be down February 1 and February 2, which will likely reduce capacity of the San Juan Crossover by about 30 mmcfd, El Paso said. Forecasts called for a continuation of significantly warmer-than-normal weather this week across most of the nation, though temperatures in the Chicago area are expected to cool slightly to about five to 10 degrees above normal by Sunday. Dallas temperatures are forecast to ease to near normal by Friday, according to Weather Services Corp. Colder-than-normal weather is expected to surface in the western U.S. Friday and then slowly move eastward. Withdrawal estimates for today's weekly AGA storage report range from 139 bcf to 210 bcf, with most seen at 165-175 bcf. For the same week last year, stocks declined 159 bcf. Canada spot natural gas rises as cold weather approaches CALGARY, Jan 20 - Canadian spot natural gas prices were mostly higher on Wednesday on forecasts for colder weather in the west later this week which will boost heating demand, trading sources said. Temperatures in Alberta are expected to fall by about 10 degrees Celsius on average by Friday from current values of about -6 Celsius. Spot gas at the AECO storage hub in Alberta was quoted at C$2.31/2.32 per gigajoule, up about six cents from Tuesday. AECO gas for February delivery also rose six cents to about C$2.33 per GJ. The increase came after storage withdrawals in the west declined on Tuesday to about 730 million cubic feet a day, from 900 million the day before, a Calgary-based marketer said. At the borders, gas at Sumas, Wash. was discussed in the mid-US$1.70s per million British thermal units, up about five cents from Tuesday. Gas for export at Niagara in southern Ontario, meanwhile, was about three cents higher to US$1.93 per mmBtu, a movement another Canadian trader attributed to a similar rise in the NYMEX February contract on Wednesday.

To: Kerm Yerman who wrote (14943)	1/21/1999 9:06:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / Layoffs Loom In Canadian Oil Patch CALGARY, Jan 20 - Workers in Canada's oil patch are bracing for layoffs in the coming weeks as major companies cut costs to weather the lowest oil prices in 12 years. At least three big energy companies -- Canadian Occidental Petroleum Ltd. (CXY.TO) and the Canadian subsidiaries of London based BP Amoco Plc (BPA.L) and San Francisco based Chevron Corp. (CHV.N) -- have served notice job cuts are imminent. The extent of the cutbacks will pale in comparison to the thousands announced over the past few months in the U.S. oil industry, but that comes as cold comfort to hundreds of Canadian employees facing pink slips. Calgary-based CanOxy said its layoffs will total fewer than 200 people, or about 10 percent of its workforce. The company was completing a review of its operations and costs following major oil and gas property sales aimed at cutting debt -- taken on in 1997 to fund its takeover of heavy oil producer Wascana Energy -- amid the depressed oil market, spokesman Kevin Finn said. Finn declined to give a date for when the review would be completed, but said it would be "sooner rather than later" in the first quarter. "We sold C$1 billion worth of properties in Canada in the last two years and we haven't made any reductions in our overhead to reflect that," he said. "We are currently going through a major study of our business in Canada." Amoco Canada Petroleum is set to announce staff cuts at the end of January rumored to be in the neighborhood of about 200 people, or roughly 10 percent of the unit's employees, although it has yet to detail official numbers. Amoco Canada spokesman Rich Smith said the majority of the cuts will be among Calgary head office staff and are being driven by both low oil prices and a review of costs that began following the worldwide merger of British Petroleum and Amoco. "This is a difficult time for Amoco in Canada," Smith said. "We consider our employees to be top-notch, and obviously we regret that this has to happen." Meanwhile, Chevron Canada Resources, the Canadian arm of Chevron Corp., will lay off 80 western Canadian field and head office staff by the end of February, Chevron Canada's manager of strategic planning Jim Causgrove said. Causgrove said the cuts, which will represent about 10 percent of the unit's staff, were more related to cost-cutting following the sale of about C$100 million worth of oil and gas assets than low oil prices. "The real driver here is really the changing business in western Canada for us," he said. Chevron's western Canadian oil and gas business is largely used to fund operations on Canada's east coast as well as other parts of the Chevron world, and relatively few dollars are targeted to exploration. About 30 workers have been offered early retirement. The layoffs are expected to be completed by the end of February and the number that will leave involuntarily will depend on how many accept the early retirement packages, Causgrove said.

To: Kerm Yerman who wrote (14943)	1/21/1999 9:08:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWW / Big Bear Exploration Gets A Big Surprise Thursday, January 21, 1999 Mathew Ingram Calgary -- It's a standard takeover tactic to disparage your target's financial and operational attributes in order to ensure that you don't wind up paying too much for them. But from the available evidence, it looks like Jeffery Tonken of Big Bear Exploration got a lot more -- or rather, less -- than he bargained for in his takeover of Blue Range Resources. Following the traditional takeover playbook, Mr. Tonken said when he launched his hostile bid in November that he thought Blue Range's estimates of its asset value were on the high side, and that the stock wasn't worth the $6.50 it was trading at. Instead, Big Bear's share-swap offer (which amounted to simply an offer to replace management) worked out to about $5.72 a share, plus the assumption of $105-million in debt. Among other things, Mr. Tonken said his team at Big Bear -- many of whom also worked with the former lawyer at Stampeder Exploration, which was sold to Gulf Canada for $1-billion in stock and debt last year -- figured Blue Range's reserves were 20 per cent lower than earlier estimates. Even the company's own internal figures showed that a reserve writedown was likely. At a special meeting of Big Bear shareholders on Tuesday, however, Mr. Tonken said the issues at Blue Range were a lot thornier than he had anticipated, and that this will make the company even more of a challenge than he expected when he launched the bid. He admits that even though he was skeptical about the company's value when he made his offer, he was still "surprised by the magnitude" of what Big Bear is dealing with. As information has leaked out of the "data room" Blue Range set up in November and December to try and solicit competing bids for the company, the market has shown its surprise as well: The shares have plummeted to a close yesterday of $3.50 from the $6.50 level when Big Bear made its offer public. In total, the stock has lost more than 45 per cent of its value -- a stock Blue Range management insisted in November was worth at least $8. At the special meeting, Mr. Tonken said Big Bear has already notified analysts that the company's production numbers were on the high side. Blue Range said when the takeover was launched that it was producing 12,000 barrels of oil equivalent (boe) of oil and gas a day, and expected production to be as high as 16,000 by March of this year. As it turned out, current production has proven to be more like 10,000 boe a day. Mr. Tonken also confirmed widespread speculation in the industry, saying that a writedown of reserve values is likely. "We will be taking a reserve writedown -- we don't know the size of it yet, but there will be one," he said. That is on top of a "ceiling-test" writedown the new company will be taking, which is an accounting mechanism used to reflect the lower value of reserve assets in the current low oil price environment. That isn't all, however. Mr. Tonken also said that the company had $138-million in debt but added: "I suspect there will be more." How much more, he couldn't say. In part, that's because of some confusion about the value of capital versus operating leases for things like gas plants -- seemingly a picayune accounting question, but one that is important when it comes to a company's financial and operational health. Analysts say some of Blue Range's lease arrangements appear to have been recorded on the books as operating leases instead of capital leases. Since capital leases are considered part of a company's debt, this would make the company's debt load look smaller. Mr. Tonken said, however, that there has been no suggestion of any "improper behaviour." Finally, Mr. Tonken said the company's undeveloped land position looks to have been overestimated as well. He said records show Blue Range holds 440,000 acres of undeveloped land in Alberta and northern British Columbia -- however, he added, "I think that's a little overstated. I would say for the benefit of any analysts that those numbers are a little bit suspect, and we will be restating them -- I don't know by how much." Despite all the surprises, Mr. Tonken was adamant that his company made the right move by acquiring Blue Range. He said his team "can deal with the debt, we can deal with the leases . . . there are some issues to deal with, but we will clean those up." He also pointed out that he and other Big Bear shareholders are better off than they were before the acquisition, when their stock was 70 cents and production was 2,200 boe a day. Blue Range shareholders, however -- including the large institutions who backed Mr. Tonken's initial bid -- are looking at a vastly different company than the one they thought they owned shares in. Now the pressure is on Mr. Tonken to get them, and the other long-suffering Blue Range shareholders, back to where their investment is no longer under water.

To: Kerm Yerman who wrote (14943)	1/21/1999 9:09:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / Imperial Oil Limited Director Announcement Thursday, January 21, 1999 The Board of Directors of Imperial Oil Limited has appointed Lynton R. Wilson as a director of the company, effective January 1, 1999. Mr. Wilson was born in Port Colborne, Ontario. He holds a bachelor of arts degree from McMaster University and a master of arts from Cornell University. Mr. Wilson is chairman of the board of BCE Inc., and serves on the board of directors of Bell Canada, Bell Canada International Inc., BCE Mobile Communications Inc., Northern Telecom Limited, Teleglobe Inc., Chrysler Canada Ltd., DaimlerChrysler AG (supervisory board and shareholder committee), Tate & Lyle PLC (London, England), CAE Inc., Ontario Power Generation Inc., C.D. Howe Institute, and the Canadian Institute for Advanced Research. He is deputy chairman (non-executive) of Tate & Lyle PLC; is chair of the Team Canada Inc. Advisory Board; a member of The Trilateral Commission; International Council, J. P. Morgan & Co., (New York); Board of Trustees, Montreal Museum of Fine Arts Foundation. He is also governor of the Canadian Olympic Foundation. The Board of Directors of Imperial Oil Limited has also appointed K. C. Williams as senior vice-president, resources division, and a director of the company, effective January 1, 1999. A native of Dallas, Texas, Mr. Williams is a graduate engineer of the University of Texas at Austin. He joined Exxon U.S.A. in 1972 and held a variety of production-related assignments in Texas and Louisiana. In 1984, he joined Exxon Corporation in the New York headquarters as deputy manager of production, and in 1986 was named corporate production advisor. In 1992, he was appointed vice-president -- production for Exxon Company International, with responsibility for Exxon's oil and gas drilling, development and new business ventures outside North America. Mr. Williams has served or currently serves on the board of directors of Exxon Production Research Company, Exxon Exploration Company, Abu Dhabi Oil Company, and NAM in the Netherlands. He is a registered professional engineer (Texas) and a member of the American Petroleum Institute and the Society of Petroleum Engineers.

To: Kerm Yerman who wrote (14943)	1/21/1999 9:09:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / Enterprise To Start North Sea Pierce Oil In Days LONDON, Jan 21 - Enterprise Oil (ETP.L) will start up its delayed Pierce oilfield in the central North Sea in the next few days, a company spokesman said on Thursday. "We're just getting the last bits and pieces in place. We should see first oil in the next few days and certainly by the end of the month," the spokesman said. The Pierce field, in the British sector of the sea, should rise to a planned 45,000 barrels per day plateau relatively quickly, he added. The field was originally due to start last August. Meanwhile, repair work to a production vessel is holding up the imminent start of another Enterprise project, the 60,000 bpd central North Sea Banff field. "We're still repairing the floating production vessel from the damage it sustained in the Christmas storms, " said a spokesman for Banff operator Conoco (COC.N). "We'll see first oil sometime in the first quarter, but I wouldn't like to be pinned down as to when." Other members of the consortium said that production could start by the end of January. Banff's start-up will allow Ranger Oil to press on with starting its 20,000 bpd Kyle field, currently slated to come on stream in June. Exports from Kyle will be channelled through Banff facilities. Enterprise's 73 percent stake in the Pierce project accompanies AGIP (ENI.MI) 3.7284 percent, MOC Exploration 3.7544 percent, Ranger Oil (RGO.TO) 15.6 percent and Petrobras (PETR4.SA) 2.925 percent.

To: Kerm Yerman who wrote (14943)	1/21/1999 9:11:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / Low Oil Prices Could Hurt States It's a frightening sign for folks in the nation's oil patch: A gallon of gasoline around here costs 79 cents, less than the bottled water on gas station shelves. ''In towns like ours throughout Oklahoma, either a brother, a sister, a mother, father, aunt, uncle -- somebody works in oil,'' said William Ricketts, the public works director in Pawhuska. ''If it goes much lower, everything will come to a standstill.'' The same fear can be heard from Louisiana to Alaska. With oil prices at some of their lowest levels since the Depression, jobs are disappearing, businesses are folding and states have less money to spend on citizens who need more. In Oklahoma, where the governor has called a special legislative session beginning today to consider $29 million in tax relief for the industry, spending on everything from welfare and Medicaid to prisons and roads may have to be cut. ''Instead of tightening our belt another notch, we may have to go another couple of notches,'' said state Sen. Kelly Haney, chairman of the Appropriations Committee. ''It's not going to be easy or comfortable, but we really don't have any other choice.'' Gas that sells for 70 to 80 cents a gallon in Oklahoma is a blessing for drivers but a curse for independent oil producers like Dean Eyler. He has laid off all six of his employees, shut down 15 wells and is beginning to sell assets to stay afloat. Like others here in Pawhuska, 50 miles northwest of Tulsa, he's not sure anyone out there cares. ''I feel like we have subsidized the rest of the economy,'' he said. Across the state, the pump jacks that usually bob up and down, drawing crude from the ground, sit idle, and producers fear an estimated 10,000 oil industry jobs in Oklahoma could be lost if prices don't pick up. Alaska, which loses $95 million for every $1 drop in the price of oil per barrel, had to draw nearly $1 billion from cash reserves this year to balance its budget. The gap is expected to widen in the next few years. Gov. Tony Knowles was expected today to propose an income tax -- something Alaska hasn't had since 1980, when the oil money started pouring in -- and dip into the Alaska Permanent Fund, the $24 billion oil royalty savings account that pays a yearly dividend to every state resident. Louisiana faces a possible budget deficit of $15 million to $60 million, though most of the problem is tied to a college tuition program that is more costly than expected. Gov. Mike Foster has responded with a six-month freeze on hiring and purchases. Texas, the biggest oil state, has remained financially strong despite the price drop. The state is projecting big surpluses during the next two years, and Gov. George W. Bush wants to reduce taxes by $2.7 billion. After oil prices took a similar drop in the 1980s, Texas and other oil-producing states diversified their economies to become less dependent on oil. In Oklahoma, for example, oil taxes made up 20 percent of the revenue in 1982. Now they account for less than 1 percent. Even so, state officials and oil producers say damage is being done. Largely because of a glut of foreign oil, Oklahoma oil prices crashed to $8 a barrel in December and stood at $9.75 as of Friday. When the state budget was drawn up last spring, it assumed an average price of $17.02 a barrel. E.W. Carter, an Oklahoma oilman since the 1960s, said this downturn is ''100 times worse'' than the bust of the 1980s. Even giants like Phillips Petroleum haven't been spared. The company just announced 900 layoffs in Bartlesville. In nearby Hominy, Joyce Whitewing points out a restaurant, an antiques store, a variety store and an oil equipment supplier that have closed in the past year. Some restaurants in Pawhuska stopped serving dinner because no one shows up. ''I think everybody has been slow in responding,'' said Mrs. Whitewing, executive vice president of the Osage Producers Association. ''This is a crisis.'' Eyler, meanwhile, hopes the worldwide oil glut will pass. ''We're just almost down to a week-by-week basis,'' said Eyler, who wears overalls stained by work he and his son now do alone. ''We're hanging on for a little higher prices.''

To: Kerm Yerman who wrote (14943)	1/21/1999 9:12:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / U.S. Oil Industry Debt Outlook Dismal - Analysts NEW YORK, Jan 19 - Credit downgrades and defaults in the beleaguered U.S. oil industry will probably deliver bond investors at least as much pain this year as they did in 1998, debt and ratings analysts predicted. "If oil prices remain at relatively low levels, there will be a significant number of downgrades and additional defaults," said Josh Gonze, credit analyst at Standard & Poor's. Last month, S&P cut its credit ratings for five oil-related companies, placed seven on creditwatch with negative implications, and lowered the outlook on another 26. Even these bleak predictions, debt analysts said, assume that oil prices will stop falling, and will manage a slight rebound in the next 12 months. "For some companies price relief may be too late," said a rating analyst who asked not to be named. Analysts generally expect crude oil to trade in the low teens per barrel this year, but with surprises more likely on the downside than on the upside. U.S. oil companies have faced brutal competition from cheaper imports in the last 18 months. Crude oil imported into the U.S. averaged $18.98 per barrel in 1996, dropped nearly 7 percent to $17.67 in 1997, then plunged another 33 percent to $11.79 in the first 10 months of 1998, according to U.S. Commerce Department figures. Analysts added that some clear winners, longer-term, will also emerge from the current price slump. The industry will eliminate capacity, benefiting the most diversified and efficient companies including virtually all the giants in the industry, such as Exxon Corp. <XON.N> and Texaco <TX.N>, analysts said. The Paris-based International Energy Agency recently reinforced the belief that oil prices won't spike up any time soon by predicting a slim 1.5 percent gain in world oil demand this year, down from a prior forecast of 2 percent. The weakest companies in the energy sector are the most leveraged and least diversified exploration and production companies (E&Ps), analysts said. Many E&Ps shoulder much more debt now than they did a year ago, magnifying the impact of swings in oil prices, analysts said. "A leveraged E&P company is one of the most difficult things on earth to deleverage," the rating analyst said. E&Ps are finding it more difficult to protect themselves against oil price dips through hedging because there are fewer investors willing to take the opposite side of a trade, Gonze said. An infusion of equity capital may be the only thing that saves the weakest of the E&Ps, analysts said. But this could create the unusual situation where existing bond holders have to accept less than par to attract new investors, analysts said. "You aren't going to throw your good money in to bail out the bonds if you don't see an upside," the credit analyst said. Bond provisions stipulating redemption only at par could further complicate new money coming into the most troubled companies, they added. Despite recent weakness of the natural gas business, oil companies with significant operations in that sector will likely fare better in the current crisis and thereafter, predicted David Finkelstein, fixed-income analyst with Williams Capital Group in New York. "Natural gas has a totally different supply and demand dynamic than oil," he said. "Those (companies) are the ones that will do better." Natural gas is the favored energy source for new power plants, Finkelstein added.

To: Kerm Yerman who wrote (14943)	1/21/1999 9:58:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / Petro-Canada Hits Gas Jackpot In Foothills Chris Varcoe, Calgary Herald Calgary-based Petro-Canada says it has made a major natural gas find in the shadow of the Rocky Mountains about 90 kilometres northwest of Calgary. The new Benjamin Creek well tested at flow rates of 35 million cubic feet per day. Initial production is expected to be 20 million to 25 million cubic feet per day -- making it one of the company's best gas wells ever drilled in Western Canada. The average natural gas well in the province produces about one million cubic feet per day, while one in the foothills typically generates five million to 10 million cubic feet per day. "It's quite a prolific area . . . " John Percic of Petro-Canada, the country's second-largest integrated oil producer, said Wednesday. "We're very pleased at the potential that's there." The company will drill eight to 10 wells in the foothills region this year to tap into the Turner Valley formation, at a cost of about $5 million per well. Petro-Canada owns 74 per cent of the Benjamin Creek well, while EBOC Energy Ltd. of Calgary has the rest. In the past three years, Petro-Canada has completed 18 wells in the Wildcat Hills-Benjamin Creek area, where it produces about 80 million cubic feet of gas per day. Benjamin Creek is about 20 kilometres north of Wildcat Hills, where Petro-Canada announced a significant new gas play last March. "It sounds like an exciting well with the potential for some decent reserve additions," said Doug Gowland, an analyst with First Marathon Securities in Toronto. "That has been a good, prolific region." "Clearly, that type of flow rate is a pretty attractive well," said one Calgary energy analyst who did not want to be identified. "This is a core area for Petro-Canada, together with gas in British Columbia." The price for gas Wednesday was $2.31 per gigajoule. A gigajoule is about 1,000 cubic feet.

To: Kerm Yerman who wrote (14943)	1/21/1999 10:10:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / Oil Firms' Assets Sales Offer Bonanza For Rivals LONDON, Jan 21 - Oil companies with cash to spare could enjoy a wealth of opportunities this year as struggling rivals are forced to sell off assets, consultants Wood Mackenzie said on Thursday. "Given the low oil price environment 1999 is likely to prove a year of significant opportunity in the global upstream asset market for those companies with both the financial strength and corporate vision," the Edinburgh-based firm said in a new report. As companies write down the book value of upstream oil assets to account for the price slide, so they will be forced to shed assets to avoid recording book losses. Many firms will simply dispose of non-core assets either to rationalise or to free up capital for remaining activities, the report said. The price fall would also force some firms to pull out entirely from some areas or countries to sharpen focus on key areas, it predicted. Firms will also choose to farm out part of existing projects, allowing them to keep an interest in key assets while cutting capital commitments. But the industry's current financial woes mean there be less buyers than sellers, enhancing the appeal of asset swaps and deferred payment or farm-outs, the report said. Wood Mac identified Eastern and state-owned Gaz de France in the UK, and TransCanada Pipelines in the Netherlands as becoming increasingly active in expanding their upstream business. "These companies have the funds to take advantage of the depressed upstream asset market in order to develop increasingly integrated energy businesses (the gas value chain in particular)," the report said.

To: Kerm Yerman who wrote (14943)	1/21/1999 10:26:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / Sable Island Progress Report High-Class Sable Digs $17-million modules offer range of facilities By Bruce Erskine / Business Reporter New living quarters for Sable gas-drilling crews are a step up from the camps Glen Lawther knew in northern Alberta and British Columbia. "This is a little smaller, but the quality here is higher," Mr. Lawther, of Sable Offshore Energy Inc.'s operations group, said Wednesday. He was commenting during a media tour at MM Industra in Dartmouth of two accommodations modules that will house 64 Sable personnel. The $17-million, stainless steel modules, which include sleeping quarters, gyms, galleys and medical facilities, as well as lounge areas with pool tables, television and video, were built by Fabco/CKT Design and Fabrication ltd., a Nova Scotia-Dutch partnership. "They're the first of these types of facilities built in Canada," said Fabco/CKT president Len Thompson. "They're world-class units." The 520-tonne, four-storey Thebaud module, to be located 10 kilometres southwest of Sable Island, will house 40 crew. The 370-tonne, three-storey Venture module will be 13 kilometres east of Sable and accommodate 24. The modules, which include helicopter pads, will be shipped to Teeside, England early next month for installation on gas processing platforms for the $3-billion Sable project. The Thebaud and Venture platforms, and a third for the North Triumph field which won't have permanent living quarters, are to arrive at the Sable fields in August and September, when they will be installed on wellhead jackets. Mr. Lawther, who has never lived offshore but who will spend time on the modules, said his industry experience in remote parts of Western Canada has prepared him for the two- to three-week shifts he will work on the Atlantic. "I have some experience with isolation," he said. The modules, which feature 110-square-foot bed-sitting rooms with attached bathrooms, are larger than similar facilities used in the Gulf of Mexico and are built to rigorous North Sea standards, said project manager Jan van Kempen. He said there will be some noise and vibration from drilling, but the living units will be at the far end of the platform away from drilling equipment and will be separated by insulated, blast-resistant walls. "It (noise and vibration) will be on the low level." Mr. Thompson said as many as 230 workers, most of them Nova Scotians, worked on the modules during the 12-month construction phase. He said completion of the project, on time and within budget, was a proud moment that bodes well for the future. "We now have the experience, along with an excellent workforce, to enable us to compete internationally." Halifax Engineers Take Head Of Line Whitman Benn leads design work for Sable pipeline By Bruce Erskine / Business Reporter A Halifax engineering firm is leading the partnership that is designing the Sable energy project's gas liquids line to Point Tupper. "It's the first gas pipeline design done here of this size," Ian Tillard, senior project manager with the Whitman Benn Group, said in an interview Wednesday. The 55-kilometre underground line will carry gas liquids from the processing plant in Goldboro, Guysborough County to the gas fractionation plant in Point Tupper, where products like ethane and propane will be separated. Mr. Tillard said Whitman Benn began doing geotechnical work for the Sable project last year, concentrating on the challenges of putting a gas line across the Strait of Canso. "One thing led to another," he said, and the company became more involved in the pipeline design process, forming the East Coast Offshore Alliance. Whitman Benn, which has designed stages for the world famous Cirque du Soleil, as well as naval facilities in British Columbia, has lots of in-house expertise for the pipeline initiative, said Mr. Tillard, who spent three months in the Sable project's Calgary office working on ideas for the gas separation line. The trench for the gas liquids, which will share a $21-million gas lateral to Cape Breton, poses interesting engineering problems, Mr. Tillard said. The most significant challenge is crossing the strait, where two methods are being considered - drilling an underwater channel or laying pipe on a protected bottom. Direct drilling is expensive and unpredictable, since it isn't always known what will be encountered. Bottom lays run the risk of running afoul of boat anchors and can disrupt marine life, although some studies suggest a well protected bottom lay, using appropriate rock cover, can actually enhance habitat for species like lobster. Mr. Tillard said no decision has been reached on a construction method, although his firm has been able to minimize the risks associated with a bottom lay. "We've designed around that. The risk of bottom lay is as good a risk as any other part of the operation." Ground heave is another potential problem with the onshore part of the pipeline, which is about a metre underground. "It's a cold line, it runs -5C, which could drive the line out of the ground." To combat that, "we're insulating the entire trench" using styrofoam and backfill material. "It will stop the frost from getting underneath the pipeline." Mr. Tillard said Whitman Benn sees great potential in oil and gas off Nova Scotia and plans to be a long-term player in the field.