Canadian Hunter CEO Says Gas-Rich Acquisitions on Radar
With a top-notch team in place to find and produce natural gas and an intense determination to pursue and create value for shareholders, Canadian Hunter CEO Steve Savidant said last Thursday that his company may go after some of the "significant and substantial opportunities" he expects to see in the next few months. With almost no debt currently, Savidant said, "we intend to keep the powder dry," but "there are acquisitions on the radar."
Speaking in Toronto at the fifth annual Canadian Oil and Gas Conference sponsored by Peters & Co. Ltd., Savidant also remained optimistic that gas prices would level out in the US$3-4 range, a range the company forecast last year, even during escalating price swings. Canadian Hunter has a higher stake in natural gas prices because its production is in the 90% area.
"As we all know, prices started out extraordinarily high, but no one believed gas prices from last winter were sustainable," he said. While prices were stagnant in the 1990s, then jumped dramatically a few months ago, Savidant said a long-term sustainable level will fall below $4. "The major difference is drilling economics," he said. "If we can make money on $2 gas prices, then we can do it on $3 or $4 U.S. gas prices. It offers opportunity to skilled explorers."
As far as acquisitions on the horizon, Savidant said that with the rollback in share prices for many companies, it is becoming more attractive for sales. The only limits Canadian Hunter has is size, and Savidant said possible buys would have to be of similar size, have synergy with existing assets -- most likely in the Western Basin -- and upside exploration potential, access to data, and most important, a natural gas bias.
Still on target to achieve a 20% growth rate in 2001, Savidant said that "past 2001, we believe a more sustainable growth rate is 10-12% annually through the drill bit" and within the company's cash flow scheme. One thing that will hinder extraordinary growth isn't tied as much to prices as it is to exploration and production, he said.
"The cheap and easy gas has already been found. New opportunities come from higher prices and new technology...and this is the beginning of a new age in the Western Canadian basin," where the company holds the majority of its assets. The Deep Basin, in fact, contributes 60% of Canadian Hunter's current production, which he said is more costly, but can yield higher rewards. "It is far more challenging geology, and we see this as Canadian Hunter's type of opportunity." He said the resources will be more "technically challenging and more expensive" to find and produce.
However, the company prepared for the challenges last year, upping its capital spending in 2001 almost 40% and increasing its "people resources" by 20% per year to execute its exploration strategy. "We believe we have a team in place to find and produce gas."
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