Canadian juniors in cross-hairs

There’s not a Canadian-owned junior active in foreign fields that isn’t takeover fodder and many of them, like those who stay at home, hope for nothing less.

Three that have figured in recent speculation are InterOil, Tanganyika Oil and Pear Exploration & Production.

Short of cash and surviving on lines of credit, InterOil has its legal headquarters in the Yukon, executive offices in Australia, is run by two Texans and counts the famous investor T. Boone Pickens among its investors.

Even though it produces no oil or gas, the company runs a fuel distribution network in Papua New Guinea and an oil refinery with capacity of 32,500 barrels per day and is pinning its major hopes on future gas production from two Papua New Guinea fields to underpin a planned $6 billion liquefied natural gas plant to start exports in 2012.

The question is whether it can hang on, having secured US$95 million by selling convertible debentures to fully repay a $70 million credit line with Merrill Lynch. Another credit line of $60 million is held by Swiss bank Clarion Finanzis.

Raymond James analyst Wayne Andrews said the private placement was “very positive for InterOil, as it completes the restructuring of (its) balance sheet.”

He said future key developments for the company include an independent assessment of the reserve potential from a gas discovery announced in May and the prospect of InterOil farming out equity in one of its gas fields to strategic partners.

Tanganyika has been identified as the likely target of a possible takeover bid by India’s ONGC Videsh, although Pearl also resembled the description of a mid-sized Canadian firm listed on the TSX Venture Exchange.

Tanganyika produces 4,000 bpd from its heavy oil fields in Syria, while Pearl produces about 10,500 boe per day of heavy oil and gas in Canada and the U.S.

A spokeswoman for both Vancouver-based companies denied that either had been approached by ONGC Videsh, but said both were open to any options that could maximize shareholder value.

ONGC Videsh is the wholly owned exploration arm of India’s largest petroleum company and operates in 17 countries.

It has already expressed a desire to make acquisitions in the billions of dollars in the Alberta oil sands, but has concentrated on expanding in Venezuela’s heavy oil plays.

—Gary Park