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Tough times for unconventionals; Canada’s Pengrowth, Crescent divest
Gary Park for Petroleum News
The walking wounded in Canada’s embattled oil community are checking in for lifesaving surgery.
The latest additions include Pengrowth Energy and Crescent Point Energy, once high on the list of investment darlings in the unconventional oil properties of British Columbia, Alberta and Saskatchewan.
For 10 years after the turn of the century, Pengrowth reached the heights - literally and figuratively - in Calgary, attaching its name to the landmark Saddledome, home ice of the National Hockey League’s Calgary Flames.
But the company started to crumble around 2010 and has lately been unable to renegotiate its working debt of C$715 million before working capital, forcing it to launch a strategic review of options that now include a for sale sign.
Crescent Point, once a lead player in Saskatchewan’s shale plays, has written down the value of its assets by C$2.7 billion, an amount that exceeds its current market capitalization of C$2.17 billion.
That shapes up as a damaging report card on its series of acquisitions funded by share issues that sent the company into a market tailspin.
Target of Cation Last year Crescent Point’s management and board were targeted by activist investor Cation Capital, which demanded the company install four of its own director nominees.
Cation failed in that attempt, but its message got through to many investors, leading to the resignation of founding Chief Executive Officer Scott Saxberg.
Crescent Point said March 7 it has started marketing some unconventional holdings in southeast Saskatchewan and some infrastructure assets.
Craig Bryksa, the new CEO, told analysts he believes the strategy “we’ve laid out ... is a good step (towards) moving forward.”
Fallout from end of trusts Pengrowth CEO Pete Sametz said his company is “open minded to a range of strategic and transactional alternatives (corporate sale, divestiture of assets, recapitalization or refinancing) to generate the best outcomes for our various stakeholders.”
Pengrowth was once among the largest and most prominent energy trusts but has floundered since the Canadian government put an end to trusts, forcing them to become regular corporations.
The company’s market capitalization has spiraled to C$367 million from C$4 billion in 2011 and it has unloaded some of its prime assets - the Lindbergh heavy oil project in Alberta and Montney natural gas properties in British Columbia - to focus on its main operations.
Pengrowth’s experience reflects the industry’s downturn in Canada from what was once a reliable debt- and equity-financing machine that has no difficulty attracting capital to grow its spending and acquire rivals.
But Pengrowth’s largest shareholder - Seymour Schulich, co-founder of Franco-Nevada - said he intends to build on his stake of 28.8 percent.
“If people want to throw the stock away, I’ll buy it,” he told the Globe and Mail, adding he is buying C$5 bills for C70 cents. “pretty good. That’s how I got rich.”
- GARY PARK
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