|
Canadians hanging tough Going global not for faint-hearted; 84 Canadian firms have international stakes Gary Park For Petroleum News
No matter how uneasy they might feel about the misadventures of EnCana in Ecuador, Talisman Energy in Sudan, PetroKazakhstan in Kazakhstan and First Calgary Petroleums in Algeria, Canadian-based energy companies are not ready to walk away from global gambles.
Regardless of the high price some have paid for entering politically volatile regions, the potential prize is too great to ignore, especially for companies whose sole fortunes are tied to one particular region.
While EnCana and Talisman have pulled back from their worst trouble spots, there’s no shortage of Canadian companies willing to take a chance in foreign fields.
The most authoritative guide to Canadian companies operating abroad is compiled by Calgary analyst Ian Doig.
His 14th annual edition in 2007 listed the holdings of 84 Canadian E&P companies in 69 countries, 47 of them producing almost 781,000 barrels per day of oil and natural gas liquids in 32 countries, down 54,575 bpd from 2005, while 35 companies produced 2.54 billion cubic feet per day of gas in 22 countries, a gain of 292 million cubic feet per day.
Doig’s initial report in 1993 showed international output of 135,890 bpd of oil and 328 million cubic feet per day of gas.
The offshore oil and NGL volumes were 20 percent of what the companies produced in Canada, accounted for 16 percent of their capital budgets and claimed 15 percent of Alberta’s petroleum workforce.
U.S., Indonesia, UK top list The largest producing regions were the United States, Indonesia, the United Kingdom North Sea, Egypt and Malaysia-Vietnam.
The leading players were Talisman (with operations in the North Sea, Malaysia/Vietnam, Indonesia, North Africa, Trinidad and Tobago, Peru, Columbia and Qatar), Nexen (the Gulf of Mexico, Colombia, North Sea, West Africa and Yemen), Canadian Natural Resources (North Sea and West Africa), Petro-Canada (Netherlands, Norway, Denmark, Trinidad and Tobago, Venezuela, Syria, Libya, Algeria, Morocco and Tunisia) and Addax Petroleum, which acquired Pan-Ocean Energy in 2006 (Nigeria, Cameroon, Gabon and the Kurdistan region of Iraq).
EnCana, bolstered by its gas plays in the U.S., topped the list of Canadian companies with external reserves, posting 952 million boe. It was trailed by Talisman at 870 million, Canadian Natural 444 million, Petro-Canada 337 million, Nexen 318 million, Addax 149 million, Tanganyika Oil Company 92 million, Niko Resources 82 million and First Calgary Petroleums 52 million.
Others topping 30 million were Vermilion Energy Trust, Bankers Petroleum, Rally Energy and Arawak Energy.
Addax has been typical of those taking a chance in foreign fields and paying a high price. Its Nigerian operations have come under attack by militants and in early June one contract worker was killed and four others were injured.
But the independent is pressing ahead, taking a 40 percent interest in an offshore oil license along with two Nigerian partners and funding 80 percent of the program.
New report out in August Although Doig will not release his 2007 report until August, one of those that will feature on the list is TransGlobe Energy, which has made its mark in Yemen over the past decade and has expanded in Egypt by signing a binding sale and purchase agreement for the shares of privately held Dublin International Petroleum and Drucker Petroleum to acquire interests in eight development leases in the West Gharib Concession of Egypt. The working interests include 1,500 bpd of crude production and proved plus probable reserves of 6.3 million barrels. The eight leases cover 44,000 acres and have seven oil fields producing from 24 wells.
A different ploy is being tried by Bankers, taking a lead from the EnCana playbook and splitting itself into two distinct companies by separating its Albanian heavy oil assets from its United States shale gas properties.
The spinout’s principal U.S. asset is an interest in Oklahoma’s Tsihomino gas field, which produces about 3 million cubic feet per day.
In Albania, first-quarter production averaged 5,218 bpd of heavy oil, up 19 percent from a year earlier, from resources of 2.5 billion barrels.
Bankers Chairman Bob Cross said the distinct risk profiles of the two bases appeal to different types of investors and he believes overall value will be enhanced by allowing each company to develop its own shareholder base through the execution of distinct business plans.
Mark Heim, an analyst with Macquarie Capital Markets, said the strategy has the same rationale as the blockbuster separation of EnCana’s assets.
But James Somerville, an analyst with Genuity Capital Markets, doubts other juniors will follow suit, largely because they tend to be narrowly focused.
Negative attention a problem Whether larger companies may see value in rationalizing their global assets is another matter.
The bigger challenges accompanying international forays have, as they often do, gained more negative attention than positive in recent times, dominated by an upheaval at First Calgary with its chief executive officer being hounded from his post by a group of Russian-led investors, who had grown frustrated with a decline in market capitalization from C$5 billion to under C$600 million and a nosedive in share prices, despite unlocking what could be a mother lode of oil and gas resources.
For a decade ousted CEO Richard Anderson, who has garnered considerable respect among his colleagues, campaigned without much success for investor support in North America.
He struggled to make a case for First Calgary’s operations base in the Sahara Desert of Algeria, 1,200 miles from the Mediterranean Ocean in his search for $2 billion to fund his company’s portion of a production agreement with state-owned Sonatrach.
The plans called for the Menzel Ledjmet East field, with gross proved plus probable reserves of 1.76 trillion cubic feet of gas (with upper estimates at 12 tcf) and 292 million barrels of liquids, to come on stream in 2010 at 260 million cubic feet per day of gas and 20,000 bpd of oil and liquids.
First Calgary estimated that output, without even touching other highly prospective plays, would yield cash flow of C$450 million a year for eight years.
Regardless of that potential, Anderson, who took over First Calgary in 1997 when it was a shell company with no business, finally had to place his future in the hands of Russian investors, led by former Russian oil minister Yuri Shafranic.
In fall 2004, First Calgary tried to attract a partner or a buyer, driving its shares to C$24 in the process on the London Stock Exchange’s junior arm, the Alternative Investment Market.
The process yielded a bid for only C$8.50 per share, forcing Anderson to pursue other options, including a tentative joint venture partnership with Spain’s Repsol that also fell through.
By now, the Russians, operating through London-based Waterford Finance and Investment, which owns 9.4 percent of First Calgary, and another dissident group Midocean Holdings, were losing patience as they watched their investment flounder, putting Anderson under increasing attack.
Waterford founder Michael Kroupeev said that while his private equity group was certain about the size of First Calgary’s assets, the company “needs strategic guidance” on how to bring those into production.
“I’m a long-standing investor who is not happy with what (Anderson) is doing,” he said. “I’m not willing to pay for his learning curve.”
CEO of First Calgary quit under pressure from shareholders The fight moved to the brink of a showdown in late March when Anderson, despite a high-profile, five-month campaign to save his job, decided to quit after conceding shareholders wanted him to back off.
He said the dispute had disrupted the morale of staff and the stability of First Calgary’s shares and expressed the hope that First Calgary would be able to resume its focus on building a business and closing the gap between its real value and prevailing share price.
Whatever the engineers of Anderson’s downfall had anticipated, First Calgary shares have remained in a funk.
In the view of some analysts that reflects disquiet over the constant internal tensions within Algeria, First Calgary’s dependence on Sonatrach and the Algerian government to bring its assets to production and a feeling that Russia itself may be pulling strings in First Calgary, with plans to turn Algeria into an LNG exporter to Europe.
How the next chapter for First Calgary unfolds, or unravels, could be a matter of special interest in small-time Canadian companies with dreams of playing in world-wide leagues.
| 