; co __ Casthagar News — orch'9, 1986 BUSINESS B.C. OIL PATCH HURT BY PRICES By MICHAEL BERNARD FORT ST. JOHN (CP) — The snow-covered muskeg rushing by the truck window looks like the last place in the world anyone would want to be in the dead of winter. But in past years, the more trips Berwyn Tucker made out to this inhospitable corner of the Peace River region of northeastern British Columbia, the happier he was. It meant he was making money. Tucker, who started out as a roughneck, uses his 35 years’ experience in the B.C. oil patch to advise companies how to drill for oil, And because the patch is most active when the soggy muskeg freezes up — allowing movement of heavy equipment from one drill to another — he and others who service the oil companies are at their busiest during the winter. This year, however, things are a little quieter. In fact they're too quiet. As spot crude oil prices have fallen below $20 U.S. and as low as $12.70, Tucker and others in this community's oil service industry have watched the promise of a busy drilling season vaporize as quickly as steamy breath in the -35 degree air. HEADED EAST Oil companies whose exploration projects kept local firms busy in December and January pulled up stakes and headed back to more certain ground in Alberta. Head office spokesmen for Petro-Canada, Texaco and a raft of other oil companies say there has not been a signifieant change in work on B.C. oil projects. However, they do say they are reviewing their drilling programs in both British Columbia and Alberta. But to Tucker and other local officials whose contracts with the oil industry are usually sealed by only a CALGARY (CP) — Canada’s petroleum industry is like a badly bruised boxer who fears another knockdown punch coming. Barely recovered from a devastating slump in the early 1980s, the industry has been sent reeling again by a 50-per-cent drop in world oil prices. A further-drop could put the oilpateh on its back. And whereas the 1981 downturn was largely due to domestic policies — a Liberal government intent on preserving Canadian ownership even if it meant turning away investors — the latest problems can't be avoided by pressuring Ottawa or electing a new government. The industry, and a large chunk of the Western Canadian economy, is entangled in what appears to be a power struggle in the Organization of Petroleum Exporting Countries. OPEC began dictating Canada's oil prices last June following the signing of the Western Accord between Ottawa and the producing provinces. Deregulated prices were supposed to spark a long-term revival in the oilpatch. But the current world price of less than $13 U.S. a barrel is a few dollars below what most companies say is their production cost. JOBS LOST Lingering hopes prices will rise mean only two major firms, Toronto-based Suncor and Ipsco Inc. of Regina, have started laying off staff. About 290 jobs will be lost at Suncor’s northern Alberta oi] sands plant, while Ipsco says 355 workers face layoffs at pipeline plants in Regina, Calgary, Edmonton and Port Moody. Alberta's other major oil sands plant, Syncrude, has cut its capital and operating expenses by $200 million. Analysts say almost all oil and gas firms will be forced to seale down 1986-87 exploration and production budgets if prices stay below $15 U.S. a barrel much longer. “A lot of decisions will have to be made within the next couple of months,” said Kent O'Connor, spokesman for Esso ees Canada. Alberta Premier Don Getty, whose government depends on $3.7 billion in oil and gas royalties for more Oil industry reeling than one-third of its annual budget, has criticized some companies for being hasty. “They can't tell what the price of oil and gas is going to be on any kind of stable basis,” Getty said. “To react to spot prices of speculators in New York . . . is foolish.” PANIC BUTTON But a company's ability to resist the panic button depends on its staying power. The ones with the least debt can hold out the longest. None can hold out forever. One sign of the times is the January-February total of $72 million — compared to $120 million in those two months in 1985 — for Alberta government permits to drill exploration wells on Crown land. The number of rigs operating in the province has dropped by 40 during the last week to 431. But Don Herring, general manager of the Canadian Association of Oilwell Drilling Contractors, said the decrease is due to an early spring break-up, when soggy conditions make drill sites inaccessable and force shut-downs. The break-up will probably shut down at least 250 more rigs in coming weeks, Herring said. By summer, when the rigs would normally start up again, the impact of declining prices should become obvious. Wilf Gobert, a Calgary investment analyst for Peters and Co., says even if prices rebound to near last November's level of $27 U.S. a barrel, “people have been 90 shaken by how much and how quickly prices came down that they're convinced the prices are going to stay down.” The price slide is also having an impact on stock markets, where the oil and gas index has slumped 25 per cent since November. Investors have already. panicked, Gobert said. “It's the same helplessness consumers felt when prices were spiralling up during the 1970s.” The oil industry could ask Ottawa to return to a regulated environment: establishing a floor price for crude. But federal Energy Minister Pat Carney has made it clear she's in no hurry to act. handshake or a telephone call — the exodus of oil was undeniable. _ . “We had eight weeks of work lined up for a major_oil company,” said Dan Wuthrich, president of North Cariboo Flying Services. “Then the phone call came and it was cut to three “Now they have left B.C.,” said Wuthrich, whose 11 airplanes and 45 employees rely on the oil patch for almost half their work. If the retreat to Alberta continues, he'll have to lay off up to 20 per cent of his employees and sell some of his planes. Like other local operators, Wuthrich took a beating when the area's last boom ended in 1980. At the time his company had swollen to 24 planes and 65 employees. STAYED ALIVE Ted Pickell kept his construction company alive after 1980 by paring his construction company's stock of bulldozers, trucks, back hoes and semi-trailers to 24 pieces from 80. Now, he is watching contracts to prepare drilling sites and move drilling rigs disappear. Tucker and his company, Trans West Ventures Inc., have made — and lost — a lot of money during the quarter century of booms and busts that characterizes British Columbia's oil patch Now he wonders whether it’s worth waiting for plummeting world oil prices to rise again. “It's not a question of going under, it's a matter of whether you are going to wait around until things get better.” “These low prices could last a few years and you have to ask yourself if it isn't time to get out, maybe try something else,” he said With the continuing soft market for natural gas, oil companies were lured to B.C. this season by the provincial government's royalty holiday on oil-well development. But as one executive with a junior resource company put it, “the royalty is on production and you have to make money first before you can save it.” Cal; ‘sat Your Doorstep When You Stay at The Westward Inn * 10% discount from regular rates with this ad Offer good until December 31, 1986: subject to availability. Located in the hub of Calgary's activity centre Only minutes away from the Saddledome Stampede Park and Lindsay Park Sports Centre. 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The bank issued a state- ment saying new $2 and $5 bills will start appearing this’ year and the other denomin- ations will follow. The size, cotton-fibre paper type and basic colors will stay the same, but changes are plan- ned to make the new bills harder to counterfeit and easier to sort by machine. The new denominations will also be easier to handle for the blind, and bills carry- ing portraits of the prime ministers will have the names engraved beside the likenesses. 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