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Minnow swims with whales Canadian junior parlays good fortune into C$2.5 billion company, but could look for buyer in next year rather than seek capital to develop Algerian assets Gary Park Petroleum News Calgary Correspondent
It has no production, no revenue, keeps posting quarterly losses and isn’t even listed in Nickle’s Canadian Oil Register, the definitive guide to the industry.
But it has listings on the London and Toronto stock exchanges, it boasts market value of about C$2.5 billion on the Toronto exchange, where its shares have rocketed over the last five years from under C$2 to C$16 and it plays with global giants such as France’s Total in a tough league.
Before you get too familiar with the name First Calgary Petroleums you should also know that it is contemplating auctioning itself off.
Speaking to a Peters & Co. energy conference in Toronto in September, First Calgary President and Chief Executive Officer Richard Anderson confirmed that outright sale is an option, although he doubts a decision will be made before this time next year.
By then First Calgary’s sole natural gas assets in Algeria will need decisions and big money to enter the marketing and transportation phase.
Rather than grapple with the challenge of raising capital to develop the holdings, including 2.83 trillion cubic feet of proved and probable reserves, and get in over its head in negotiating either pipeline contracts to Europe or liquefied natural gas shipments to North America, First Calgary may choose to reap its rewards and move on to other pastures. Algerian entry defied the odds Just gaining entry to Algeria defied the odds in the first place.
It was the crowning moment for Anderson in more than 25 years of nurturing oil industry minnows in North America, then selling his creations.
In 1997 he retrieved First Calgary, which was founded in 1940, but was sitting on the shelf, with no employees and no assets.
Through a chance meeting, Anderson secured a contract from Sonatrach, Algeria’s national oil company, to conduct an 18-month study of Algeria’s little-explored Berkine basin, an anchor of Algeria’s hydrocarbon riches which are estimated at 9.2 billion barrels of oil and 160 trillion cubic feet of gas.
That gave First Calgary the foothold to snag an exploration block in 2000 and start drilling, with the financial backing of former Russian oil minister Yuri Shafranik, who Anderson told the Financial Post is “all above board.”
The Canadian junior has since added other concessions, notched a series of exploration successes that have been tested at cumulative daily flow rates of over 500 million cubic feet of gas and 40,000 barrels of oil. Development could cost US$1.2 billion But back in June Anderson told shareholders at the company’s annual meeting that it might cost US$1.2 billion to develop the Algerian reserves and tie them into a pipeline.
“I can backstop (an C$11-$12 stock price) with the reserves assigned to us” by Dallas-based reservoir engineers DeGolyer and MacNaughton, he said.
To keep the ball rolling, Anderson said in September that First Calgary is negotiating with two investment banks to acquire US$75 million in unsecured debt to cover its capital needs for the first half of 2005, indicating a deal is imminent.
To date, it has raised C$214 million in equity financings over the past three years to fund its exploration program.
In addition, the company is in talks with two Japanese financiers to spend C$1.3 billion taking its southeastern Algerian properties to the commercial stage.
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