Canada's troubled Dome Petroleum suddenly looks attractive to others
One of Canada's richest companies has made a bid for one of the country's most debt-ridden. It might be the only thing standing between Dome Petroleum and bankruptcy. TransCanada PipeLines, a subsidiary of Bell Canada, has made a C$4.3 billion (US$3.3 billion) offer for Dome Petroleum of Calgary. Dome has huge holdings of oil and gas in western Canada, a total of 36.1 million acres. It has oil reserves of 263 million barrels and gas reserves of 3.9 billion cubic feet. A lot of those producing properties are in good locations, meaning close to pipelines.Skip to next paragraph
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``This is a piece of prime property as far as the oil and gas business goes,'' says Wilf Gobert of Peters & Co., a Calgary-based investment house. ``It just happens to have too much debt.''
Dome owes C$6.3 billion to about 60 creditors, including five of the six largest Canadian banks as well as a number of American and foreign banks. The company has been working on a restructuring of its debt. That plan has a deadline of July 1 and is to be tied to the world price of oil, which is fairly unsteady.
Dome acquired much of that debt in an ambitious expansion program in the late '70s and early '80s. It was heavily involved in drilling in the Beaufort and Arctic seas. That produced nothing in the way of cash flow. It also borrowed to buy other companies, including Hudson's Bay Oil and Gas. In all this, Dome was encouraged by the federal government in Ottawa and its National Energy Program, which was certain oil prices were going straight up for the rest of the '80s.
Last year Dome Petroleum had a loss of C$2.2 billion.
But part of Dome's financial picture is attractive. At the end of 1985 the company had tax loss credits worth C$2.5 billion. That means the company that buys Dome can apply those losses against any future profit should oil and gas prices move sharply higher. There may even be ways to transfer the tax losses to the new owner to write off against corporate profits.
The only suitor at this writing was Bell Canada Enterprises, a holding company which owns the biggest phone company in Canada and has assets in real estate, telecommunications, and other fields. It also owns 48 percent of TransCanada PipeLines and is backing the takeover financially.
TransCanada is the largest natural gas pipeline company in Canada, with about 6,200 miles of pipelines with lines connecting producing areas in the west with consuming provinces in the east.
Other companies reportedly are interested in Dome. They are said to be Imperial Oil, 70 percent owned by Exxon Corporation, Pan Canadian Petroleum, 87 percent owned by Canadian Pacific Ltd., British Petroleum and Royal Dutch/Shell.
The Canadian government is lurking in the wings because ownership of natural resources is a touchy political issue in Canada. Now Canada's oil industry is about 50 percent owned by Canadians. If Dome were sold to a foreign company, that percentage would drop to about 40.