Hedging strategies cause Canadian companies loss in `96

CALGARY, Alberta -- Canadian oil and gas companies lost as much as C$800 million (US$578 million) in revenue from their hedging strategies in 1996, according to accounting firm Price Waterhouse.

Of the top 100 companies, 55 lost bets they placed on the outlook for crude oil and it appears that most companies now are rethinking their hedging strategies, said Rick Roberge, who heads the Canadian Energy Group for Price Waterhouse.

In his annual report on the industry, Roberge also said higher oil and gas prices through 1996 fueled an "exceptional" year for the 100 biggest producers. He said 1997 will also be a good year for the industry, which will undergo a record amount of mergers and acquisitions. As a group, the top 100 generated a record C$22.3 billion (US$16.2 billion) of revenue in 1996, or 30 percent more than in 1995. In addition, earnings rose 67 percent to C$3.5 billion. Roberge said mergers and acquisitions activity will reach a record this year after a record C$4.9 billion in the first quarter. Takeovers and mergers reached a record C$10.1 billion in 1996, easily surpassing the previous high of C$7.5 billion in 1995, according to figures compiled by Sayer Securities Ltd. Canadian Occidental Petroleum Ltd. is set to complete its takeover of Wascana Energy Inc. later this month and earlier this month Gulf Canada Resources Ltd. announced plans to bid for CS Resources Ltd. Roberge said he expects the companies to post strong results this year because of steady commodity prices. "The industry remains in a vibrant phase," he said. "Competition for capital has increased significantly and investors will continue to show limited patience for companies who do not achieve high growth levels in short periods of time," Roberge said.

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