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Canadian independents blaze trail to Arctic Smaller companies — Alberta Energy, Anderson Exploration, Canadian Natural Resources — filling vacuum left in Canada by majors Gary Park PNA Canadian Contributing Correspondent
First it was Alberta Energy Co., then it was Anderson Exploration leading the charge to the U.S. and Canadian Arctic by a feisty new breed of Canadian independents.
They’re part of a collection of trailblazers at the forefront of a top-to-bottom remaking of Canada’s oil patch that began two years ago when the majors started their flight from Western Canada’s shrinking conventional plays.
A bonanza of property deals flowed from a rationalization of holdings in the maturing Western Canada Sedimentary Basin as powerhouses such as Imperial Oil Ltd., BP, Shell Canada Ltd., Mobil Oil Canada Ltd., Chevron Canada Resources and Petro-Canada unloaded non-core holdings and shifted their focus to the Alberta’s oil sands and deep natural gas plays, the Arctic and the East Coast offshore.
The vacuum they left has been speedily filled by companies such as Alberta Energy, Anderson, Canadian Natural Resources Ltd., Penn West Petroleum Ltd., PanCanadian Petroleum Ltd., Canadian Hunter Exploration Ltd. and Crestar Energy Ltd., who boast some of the industry’s fastest rates of growth and richest stock prices. “Mr. Patient Money” But they haven’t been content simply picking up what the majors have unloaded. Like Canada’s integrated companies they have moved aggressively into the Arctic and East Coast offshore and a few have taken up the challenge of developing energy plays overseas.
The spirit of the new oil patch is reflected by financier Murray Edwards, a Canadian Natural director, chairman of Ensign Resource Service Group Inc., a founding partner in Calgary-based investment dealer FirstEnergy Capital Corp., a part-owner of the National Hockey League’s Calgary Flames and dubbed Mr. Patient Money, notwithstanding his C$575 million stock portfolio.
“Given the strong commodity price environment we’re in right now — and it looks like it will be there for a period of time — we want to accumulate assets now before the values escalate,” he said.
Canadian Natural has followed that credo in grand style, turning itself from a virtually defunct company in 1988 into one worth C$6 billion after taking over Sceptre Resources Ltd. for C$516 million and bankrupt Blue Range Resource Corp. for C$237 million, outwitting rivals by snatching BP’s Canadian oil unit for $1.06 billion and hauling in troubled Ranger Oil Ltd. for C$1.6 billion.
FirstEnergy analyst Scott Inglis said Canadian Natural has the highest annual growth rate of any senior independent in North America.
It is now negotiating with potential equity partners to develop a C$6.5 billion oil sands project in northern Alberta to produce 300,000 barrels per day of synthetic crude within seven to 10 years. Pursuit of “long life, low decline” assets Canadian Natural chairman Alan Markin said the Ranger purchase “gives us a toehold in the international arena (the North Sea, Angola and Ivory Coast) where we see significant opportunities as the major companies dispose of their smaller assets.”
Alberta Energy Co., with a market capitalization of about C$9 billion, has made some of the boldest moves in its 25-year history over the last six months, with a grand entry into the Arctic as company president Gwyn Morgan pursues “long life, low decline” assets in North America, supporting his belief that natural gas prices are destined to climb “much higher.”
Following its C$1.1 billion takeover of privately-held McMurry Oil of Denver in May, Alberta Energy turned to the north, where a series of land swaps and joint ventures have made it a leading player on both sides of the U.S.-Canada border.
AEC Oil & Gas president Randy Eresman said the initiatives ensure a “significant presence” in the fast-emerging gas frontier.
AEC Oil & Gas, a partnership of AEC West and Alberta Energy, has locked up rights to 400,000 net acres in the Mackenzie Delta by trading that for an Alberta oil sands interest with Husky Oil Ltd.
In then teamed up with Phillips Alaska Inc. and Chevron U.S.A. Inc. to explore and develop 150,000 acres of leases on Alaska’s McCovey and Grizzly Gomo exploration prospects.
Finally, an asset swap has given Alberta Energy a 33.3 percent working interest in Anadarko Petroleum Corp’s 3.1-million acre North Slope exploration license, while Anadarko brought a 37.5 percent interest in two Alberta Energy leases in the Mackenzie River Delta — a deal analysts valued at close to C$320 million.
Alberta Energy’s vice president for new ventures Guy James said gaining a foothold in both the United States and Canada will assure success over the intermediate and long term, whatever Arctic pipeline route is chosen.
FirstEnergy analyst John Mawdsley rated the transaction as a “good strategic move that reduces (AEC’s Arctic) risk while at the same time giving them a broader exposure.” “Northern Exposure” J.C. Anderson, founder and chief executive officer of Anderson Exploration, adopted a low-key style after masterminding a C$1.1 billion takeover of Home Oil Ltd. in 1995.
But he’s returned, in the words of one analyst, “as aggressive and growth-oriented” as ever, grabbing Ulster Petroleums Ltd. for C$970 million — fending off a hostile bid by Hunt Oil Co. — and pledging to spend C$325 million over the next five years to become the largest holder of exploration license acreage in the Canadian Arctic.
Investors have applauded Anderson’s “Northern Exposure,” boosting the company’s stock value by 80 percent this year, giving the company a market value of about C$4 billion.
For J.C. Anderson, there is no special magic or undue risk in entering the frontier, given that production is not matching drilling in Alberta or the Lower 48.
“So you ask yourself, ‘Where are you going to get the gas to supply the North American market?’”
In an industry that idolizes the young and computer savvy, Anderson, who just turned 70, represents a throwback to a larger-than-life cowboy image in Western Canada’s oil patch.
But investment banker Tom Budd, president of Griffiths McBurney & Partners, said Anderson has “got a keen eye for the right acquisition and he’s ready to pounce on them at the right opportunity. His energy level, his desire, his mind — to me he’s a young man.”
So young that Anderson has 432 days of accumulated holidays he is in no rush to take. “I’m a lucky guy,” he says. “I landed in something that is very interesting and I like doing it.”
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