Far from the chest-thumping of Parliament Hill and the breastbeating of Bay Street, a gas station operator in tiny Blackfalls, Alta., may have made the best economic assessment of Petro-Canada’s take-over last week of Petrofina. Mike Blackmore, who leases his business from Petrocan, remarked how his sales jumped 25 per cent after he changed his sign from “Pacific 66” last fall. “Sure there are people who complain [about Ottawa], and complain bitterly,” observed Blackmore. “But over-all this has been a real good deal for me. Basically it’s patriotism. People are saying we finally have something and we should jump at it.” Wilbert Hopper, Petro-Canada’s chairman, counts on patriotism continuing to sell well. Petrofina is not a large petroleum producer. It is a major marketer with about 1,100 gas stations east of Manitoba. Blackmore’s success was typical of what occurred at the 366 Pacific Petroleum stations in Western Canada after Petro-Canada took over in 1979. With the Petrofina deal the Crown corporation has doubled its revenue and jumped to fifth from seventh place among oil companies in Canada.
Hopper’s take-over went through like a freight train. There had been some spark of a deal in December, but that cooled until late January when the Bel-
gian owners had an apparent change of heart. After a weekend-long delay to sort out Belgian tax problems, the deal was announced Feb. 3, amid the perfunctory squawks from Canadian financial circles that Hopper had paid through the nose: $120 a share for a company that traded at half that amount just five months ago. (The total cost was $1.46 billion.) To this plaintive chorus, the Petrocan brain trust—Hopper and his financial vice-president, Joel Bell—needed only to point to their two preceding take-overs. The Pacific Petroleum assets (purchased for $1.5 billion) have more than doubled in value in two years, while the $340 million spent on Atlantic Richfield Canada has nearly quadrupled in four. Richard Hallisey, at First Marathon Securities in Toronto, is one of a long line of oil analysts nodding approval for the price, if not the ideology, of the take-over. “This will look darn good in three years, I can assure you,” Hallisey believes. “As long as the Arabs keep raising prices, all these bids will come onside.”
For Marc Lalonde, his grim embattled January has brightened into a balmy February. The energy minister had expected to wait until summer for a major take-over. To soothe his impatience, aides even discussed expropriation. At least two private take-overs of U.S. oil companies were unexpectedly killed by New York boards of directors and word was reaching Lalonde that the multinationals planned to hang tough
behind the skirts of the Reagan administration and await a more benign regime in Canada.
The mood has changed dramatically. The government now sees Petrofina as just the start. Two and maybe three more major take-overs are expected to be announced before February is out. Lalonde is actively courting Seagram, the giant Montreal distiller, to invest the $3-billion proceeds from the sale of its U.S. oil subsidiary last spring. More promising, though, is action from Nova Corporation’s acquisitive president, Bob Blair, possibly in conjunction with his brother-in-law, Robert Bandeen, president of Canadian National. Last fall, CN quietly proposed to Ottawa that it combine with Gulf Canada to explore some of its promising western property. The word came back: “Think bigger.” Also talked about as a major investor is CN’s $2-billion employee pension fund, already wetted in oil. The fund’s take-
over with Dome Petroleum of Siebens Oil and Gas has reaped a 100-per-cent return in two years. Of the rumored targets, Gulf Canada would seem too big a bite for anyone—$5 billion or so. But analysts suggest something like BP Canada would “fit” nicely into Nova’s structure. Its eastern gas stations would complement Nova’s “Husky” outlets in the West.
Lalonde must keep in mind that while Canadians favor economic nationalism by a wide margin, they don’t want to sacrifice for it. An unreleased public opinion poll done by Decima Research and Public Affairs International indicates support for Lalonde’s Canadianization program by a 3 to 1 majority, while two out of three Canadians support his initiative in purchasing at least one multinational oil company. But Canadians balk at paying for a take-over via a gasoline tax, the poll suggests. The Petrofina deal will be in part financed through a gas surtax of about one cent a litre, paid by drivers.
Bit by bit, even the industry appears to be bending to Lalonde’s will. Last week’s announcement by Shell Canada that it would expand its exploration spending off the East Coast despite a cut in incentives was “a very big boost,” a Lalonde adviser says. To compensate, Shell will cut back its exploration spending in Alberta. The week before, Dome Petroleum’s Jack Gallagher voiced qualified approval of Lalonde’s energy program and got the federal goahead for his plan to make the exploration arm of his company at least 75-percent Canadian.
Obviously, there has been no thaw in the icy relations between Edmonton and Ottawa. No real push is expected until Premier Lougheed makes the first of his oil production cuts on March 1, in
retaliation for the tax Lalonde imposed on natural gas revenues. Talks will also wait for the largest province, Ontario, to elect a premier on March 19. For Ottawa, the impetus to settle the matter may have been strengthened during the East’s record cold days in December and January. Despite soothing public words from Lalonde, Canadian oil stocks fell alarmingly and the energy department was ordered to plan emergency supply allocations for the country. With the warming trend in late January, the impending crisis was resolved. Lalonde breathed easier and the nation slept on, blissfully unaware.
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