Pipelines sale gives debt-ridden Canadian oil company room to maneuver
Debt-ridden Dome Petroleum has been selling off its assets to try to keep its bankers happy. But Dome is not out of the woods yet. The latest helping hand came from Bell Canada. Late last year the Canadian communications giant bought 11.8 percent of TransCanadacq Pipelines from Dome Canada Ltd. for $167 million. Dome Canada is an affiliate that is 48 percent owned by Dome Petroleum. Because the companies are separate, the money won't go straight to Dome Petroleum.
Bell Canada, now reorganized as Bell Enterprises, actually got more of TransCanada Pipelines than it had bargained for. It had been looking for only 20 percent of the firm but ended up with 42 percent because so many shareholders decided to take it up on its offer. TransCanada Pipelines operates 6,200 miles of pipeline sending natural gas from western Canada to eastern Canada and the United States. It also has oil and gas properties along with other pipelines in western Canada. TransCanada Pipelines has assets of $4.7 billion compared with Bell Enterprises assets of $13.4 billion.
It is good news for Dome Petroleum, which is struggling to put its house in order by restructuring its debts without giving the Canadian federal government effective control of the company.
It appears a surprising thing for Bell to have done. Analysts in Toronto and Montreal say they are ''mystified by the purchase.'' However, one speculated that it could be a brilliant move if Bell uses the pipeline network to string fiber-optic lines for a new trans-Canada long-distance phone system.
But back to Dome. More than a month ago Dome put forward a $1.3 billion refinancing plan to its more than 250 lenders, which include banks in Canada, the United States, and Europe. In addition to the $1.3 billion financing, which would probably be a convertible bond issue, Dome plans to raise $700 million by issuing shares in what would be the largest equity issue ever attempted in Canada.
Some bankers, especially those from the US and Europe, are not so sure about Dome's repayment plan, which should be signed by the end of March. Many of the bankers do not agree with Dome's scenario, which has oil prices rising to $62.50 by 1990 and $95 a barrel by 1995. In addition, the company's drilling program in the Beaufort Sea area of the Arctic has yet to produce any money.
Dome is still struggling to reduce its debt. Last month Dome Petroleum sold all its oil and gas properties in the US to Texaco for an undisclosed price. Other properties that Dome has sold include its Indonesian assets and directly owned shares in TransCanada. Debt has been reduced from $7.1 billion in April 1982 to $6.2 billion today. Dome hopes to work out refinancing that would not involve the Canadian government.