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

To: Kerm Yerman who wrote (6286)	4/22/1999 9:48:00 PM
From: Doug	Read Replies (1) \| Respond to of 24892

Oil Price / Kerm Congratulations on your new Assignment. Perhaps you will share what you consider is the Target price of WTI crude for 99. Thanks.

To: Kerm Yerman who wrote (6286)	4/27/1999 9:38:00 PM
From: Tomas	Read Replies (2) \| Respond to of 24892

Financial Times, London: Canada - Gas producers look to the south Financial Times, April 27 For several years, the holy grail for Canadian natural gas producers has been the impending completion of three pipelines to carry gas from western Canada to customers in the US midwest and north-east. Canadian gas companies have long been unable to take advantage of higher US prices because of limited export capacity. Instead, they have had to sell into the much smaller Canadian market, where intense domestic gas competition has kept prices 30 to 50 per cent lower than US prices. That situation is finally changing. The expansion of two pipelines completed last year, the Northern Border and TransCanada lines, has added 1.1bn cubic feet per day, or 15 per cent, to Canada's export capacity. The Alliance pipeline, which runs from north-eastern British Columbia and Alberta directly to Chicago, is scheduled for completion in October 2000 and will add a further 1.3bn cubic feet of capacity. For 30 years, Canadian gas has been discounted because of surplus domestic demand, says Gwyn Morgan, chief executive of Alberta Energy Company, Canada's largest independent natural gas producer. "Now the commodity in surplus supply is pipeline transportation, and gas has moved to a premium." The numbers bear out that conclusion. While AEC's realised gas prices were up only slightly in the first quarter of this year due to a mild US winter at C$2.04 (US$1.38) per thousand cubic feet, its contracts for delivery next winter are selling at an average C$3.10. The traditional differential between higher US gas prices and lower Canadian prices has shrunk by almost 80 per cent in the last year, largely due to the improved pipeline capacity. Canadian spot prices are up by 30 to 40 per cent over the same period a year ago. "The long-term fundamentals are in place," says John Clarke, oil and gas analyst at Deutsche Bank Securities in Toronto. "With any kind of normal winter, things will get pretty exciting." While such a positive outlook, coupled with the recent strengthening of oil prices, ought to be nothing but good news for Canada's energy companies, the picture is not quite so clear. Canadian oil and gas producers had been expecting higher gas prices this year, and have tried to accelerate their gas drilling programmes. But the cash crunch caused by last year's low prices has left few companies able to do so. Oil and gas drilling in the first quarter of 1999 was down by 38 per cent from the same period last year, according to First Energy Capital, the Calgary brokerage. In the US, the picture is much the same. In the absence of another unusually mild winter, drilling constraints across North America are expected to lead to supply problems later this year. First Energy is forecasting US demand will exceed supply, including domestic production and imports, by a minimum of 1.8bn cubic feet per day in 2000, resulting in "potentially much higher US natural gas prices". All of this is good news for the few companies that possess the rare combination of significant gas properties and strong cash flow. AEC, which has the largest storage facilities in Alberta, is busy accelerating its gas production while also stockpiling for delivery later this year. Its first-quarter deliveries were 910m cubic feet per day, up from an average 717m in 1998, and the company is planning to build inventory over the summer with a goal of delivering more than 1bn cubic feet per day in the fourth quarter and next year. Poco Petroleums has also followed a gas-oriented drilling programme, and is expected to increase production about 10 per cent to 550m cubic feet per day this year. The company's cash flow dropped only 1 per cent last year, despite low prices, and it even managed to raise C$170m on the capital markets. The cash crunch is also likely to accelerate takeovers in the sector, as companies with stronger cash positions acquire weaker competitors that lack the resources to accelerate their drilling programmes. Last year AEC paid C$777m for Amber Energy, which produces 100m cubic feet of gas per day, while Poco made several smaller gas-oriented acquisitions. US energy companies are looking north too, continuing an acquisition and investment spree that began two years ago. Unocal bought a stake in gas producer Northrock Resources last week, which will allow Northrock to increase exploration and development spending by one-third. Duke Energy has bought two gas gathering and processing facilities this year. However the money is raised, Canadian companies now have some assurance that if they can extract the gas, they can find the best price on the continent at which to deliver. "Canadian gas companies," says Gwyn Morgan, "have truly entered a new era of unrestrained access to US markets."