Dome Petroleum given reprieve by Canadian banks
Toronto — Dome Petroleum has been given yet another stay of execution by Canadian banks. Dome was saved from what appeared to have been certain collapse when lenders agreed to an extension on more than $1 billion ($810 million US) worth of loans that came due last week. The extension is good until May 2, but it appears that the banks could extend that if necessary. As long as Dome continues to get its house in order, the banks are not interested in taking over or auctioning off an oil company.
Dome has been making its interest payments, and the banks see no reason to press matters. The Canadian oil company may even be able to rearrange its corporate affairs without making use of the harsh terms of a $1.5 billion (Can.) bailout arranged last year by the Canadian federal government and four big Canadian banks.
The managers and major shareholders are eager to get the company back on a sound financial footing without using the government and bank loan guarantees. They just might be able to pull it off. Analysts say that Dome has trimmed a lot of fat from its operations and has been working hard at reducing its debt load.
There have been management shake-ups, including the announced resignation of the founder of the company, Jack Gallagher, known in the Canadian oil business as ''smiling Jack.'' Mr. Gallagher will leave his job as chief executive officer but is expected to stay on as chairman of the board.
Under his leadership the company became the Cinderella of the Canadian oil business, but in latter years the company has made a number of high-priced acquisitions, creating the massive debt problem which resulted in the government's having to cosign the loans last year.
Since that deal was struck in September, Dome Petroleum's loans have been rolled over three times while the domestic and foreign banks haggled over terms. This has given Dome management breathing space and a chance to avoid the terms of the government-sponsored bailout package, which would give effective control of the company to Ottawa and the banks.
Falling interest rates have helped debt-ridden Dome Petroleum, as well as a sale of many of its assets in an attempt to reduce $7.5 billion (Can.) worth of debt. Dome is still selling assets. It is negotiating the sale of its share of Dome mines, which analysts say should bring in another half a billion dollars. It is selling its remaining holdings in Trans-Canada Pipelines, which should bring in $270 million (Can.) or more. In addition, Dome will raise an estimated their financial situation, according to Richard Hallisey of First Marathon Securities in Toronto.
Apart from debt problems, Dome and its creditors know that its ship has not come in on the Beaufort Sea, or at least its drilling ships there have proved a huge cash drain while putting no money in the bank. Ice conditions in the Arctic sea oil field are such that drilling can go on for only three months a year.
During the energy scare of the late '70s it was the prospect of a major Arctic oil and gas discovery that made Dome Petroleum such a high-flying stock on exchanges in Canada and the United States. It gave Dome the muscle it needed to make its huge borrowings. Now oil prices are falling and, even if a discovery were made in the Beaufort Sea, it would be a decade before the oil or gas could get to market and start reducing Dome's debt.