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Gold/Mining/Energy : Canadian Oil & Gas Companies -- Ignore unavailable to you. Want to Upgrade?

To: VisionsOfSugarplums who wrote (6112)	2/25/1999 2:22:00 PM
From: Syncrude	Respond to of 24925

REL: Also remember this; "A proposed offering of securities led the Ontario Securities Commission on December 16,1998 to accept a statement filed by Nesbitt Burns and CIBC Wood Gundy that Remington "WAS NOT IN FINANCIAL DIFFICULTY" (see article 13)." This is SERIOUS stuff !

To: VisionsOfSugarplums who wrote (6112)	2/28/1999 1:27:00 PM
From: dumbo	Read Replies (1) \| Respond to of 24925

Rel: In reading the recent posts on Remington, there appear to be two issues: the first is whether the price of the take over is fair and the second is whether the reporting may have misled investors. In my view the issue of whether the price is fair is clear. It is fair because the company was well shopped. The deal with Dominion isn't some backroom arrangement involving self dealing by the directors. The company was put up for sale. Anyone interested had an opportunity to review the data and make a bid. The directors of REL got the best price available in the market today. That's the definition of a fair price. I don't like break fees when a company hasn't been marketed to all potential buyers but in this case the willingness of the sellers to pay a break fee likely means the buyer agreed to pay more than if there was no break fee. The second issue is the issue of reporting. Were the reserves presented fairly? Should the company have declared it was facing "financial difficulty" earlier? Hard to say. But conditions have changed fast. What I've relearned over the past 6 months is how punitive debt is to oil companies when commodity prices drop. Rel's directors are not accepting this bid because they like it. Obviously the banks are saying "pay us back the money we lent you or we'll take the assets and sell them". At oil prices $5 per barrel higher the banks can see that the companies can pay interest and return capital. At current oil prices, as some have pointed out, the debt/cash flow ratios are too high. In fact, some ratios exceed the reserve life on a proven basis. How do lenders get their money back when that happens? With it costing more to find new reserves than the cash generated from producing existing reserves, the banks know that most oil companies are in a death spiral. The banks will then demand that reserves be sold while there is still some equity under their loans rather than take the chance that oil prices stay low for an extended time period. One might blame the banks for not taking on that risk, or we can just face the fact that oil companies with debt go out of business when prices make the business uneconomic. The highest levered go first. There isn't a chance that legal action would get shareholder's more money and not tendering would just result in the company acquiring the stock under legal provisions that allow that after certain minimums have been acquired.