Tulsa, OK-based Vintage Petroleum shares were down slightly Tuesday to $14.21 after the company announced that it might sell its Canadian reserves and exploration and production operations, which have provided disappointing returns. Vintage purchased the assets in 2001 through its acquisition of 100% of Genesis Exploration Ltd. The Canadian proved reserves at year-end 2003 represented about 3% its total proved reserves or about 13 MMboe.

Vintage said Monday that it was examining its strategic alternatives regarding the Canadian assets as a consequence of a recent management change and its stated goal of improving shareholder value, pursuing a growth strategy and maintaining financial flexibility. The company said it is reviewing the level of investment in Canada and time horizon required to maximize the value of its interests there.

“This action is consistent with our 2004 plan to position the company for improved performance and shareholder value through a balanced strategy of value-building acquisitions, coupled with exploitation of our inventory of projects, particularly in the United States and Argentina, and focus on bringing our inventory of exploration projects to production over the near term,” said Charles C. Stephenson Jr., Vintage co-founder who re-assumed the positions of president and CEO in February after Craig George resigned.

Vintage established Canada as a core area in 2001 with operations in Alberta, British Columbia and Saskatchewan. However, the results of its investment have been less than desired. Non cash charges for the impairment of oil and gas properties and goodwill resulting from negative reserve revisions to the company’s Canadian reserves at the end of 2003 resulted in a net loss of $240.9 million, or $3.76/share.

Its total estimated proved reserves worldwide at year-end 2003 were 447 MMboe, including 293 MMbbls of oil (65% of total reserves) and 926 Bcf of gas.

Standard & Poor’s Ratings Services said that the ratings and outlook on Vintage (BB-/Negative/–) would remain unchanged. However, S&P said it would view such a sale as favorable to Vintage’s credit quality, given the company’s very poor results in Canada following its costly acquisition of Genesis Exploration Ltd. in 2001.

“The potential sale would not likely be of sufficient magnitude to cause improvement in ratings on the company,” S&P said. “Most of the reserves associated with the acquisition have been written off Vintage’s books. In the longer term, management’s willingness to re-evaluate the company’s strategy and narrow its focus operationally could result in rating stability and eventually rating improvement.”

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