Business

Riding High

Brian Bergman June 12 2000
Business

Riding High

Brian Bergman June 12 2000

Riding High

Business

J. C. Anderson, one of the last of Alberta's old-style oilmen, is on a roll as natural gas prices surge

By Brian Bergman in Calgary

After nearly five decades in the oil and gas trade, J. C. Anderson retains an almost boyish enthusiasm for the sheer sport of scouting out the next big find. “You are out there matching wits against Mother Nature,” says the 69-year-old founder and CEO of Calgary-based Anderson Exploration Ltd. “You’re trying to find this stuff that you can’t see, you can’t touch, that’s all below the surface. It’s exploration, in the true sense, and it’s a pretty exciting game.” Even the notorious fickleness of the industry—based on commodity prices that can implode as quickly as they ignite—fails to daunt the ebullient oilman. “You have to be able to survive the valleys

as well as the peaks,” says Anderson, his Nebraska-bred drawl still intact after 35 years in Canada. “And for sure, when you are on a peak, there will be another valley.”

J.C., as he is known to everyone in the oilpatch (the initials stand for James Carl), is definitely on a peak these days. The company he started as a one-man operation in 1968 has blossomed into the seventh-largest gas producer in Canada, employing 900. Ballooning natural gas prices are one key to his success, but so are a series of audacious takeover bids. In 1995, Anderson finessed the $ 1.2-billion acquisition of Home Oil Co. Ltd., then the subject of a hostile takeover bid by industry giant Amoco Canada Petroleum Co. Ltd. In May, he was at it again, successfully snatching the mid-sized Ulster Petroleums Ltd. from the clutches of another hostile bidder, Dallas-based Hunt Oil Co., for $970 million. The takeovers have consolidated Anderson’s position as a premier gas player in Western Canada—and in the potentially lucrative fields of the Far North. “Both acquisitions were brilliant,” says Peter Linder, a senior energy analyst with Calgary’s Harris Partners. “J.C. has the ability to see the big picture and he understands the natural gas business second to none.” Among senior producers, Anderson Exploration is the most heavily weighted towards natural gas: 67 per cent of its reserves and 7 5 per cent of current production are tied to the commodity. With spot gas prices in Alberta now soaring to more than $5 per gigajoule (an industry standard roughly equivalent to 1,000 cubic feet), that emphasis seems prescient. But it didn’t always look that way. When Anderson started his company, many still considered gas—then fetching a paltry 12 cents per gigajoule—an undesirable byproduct of oil. “He’s stuck with gas through it all,” notes Linder. “I remember him preaching in the mid-1990s to expect a very tight supply of natural gas by the end of the decade. We’re seeing it right now and, with it, record-high gas prices in North America for this time of year.”

Tight supplies, due to declining production, are one factor driving gas prices upward—and prompting some analysts to muse about an emerging Alberta “gaspatch” that threatens to unseat oil as the industry’s traditional linchpin. The other elements are increased pipeline capacity and escalating demand in the United States, where gas is becoming the fuel of choice for residential users and for gas-fired electric plants.

Anderson seems uniquely positioned to take advantage of the recent surge of interest in a resource he’s chased since the early 1950s, when he worked on roustabout gangs along the Texas gulf coast. Burly, blunt-spoken and armed with a dry wit, Anderson is, in many ways, a throwback to an earlier era of colourful oilmen who worked their way up from the ground floor—a far cry from the buttoned-down financiers now occupying many oilpatch executive offices. “He’s like one of these classic oilmen you see in the movies,” says Bob Lamond, chairman of Calgary-based Diaz Resources Ltd. and a fellow gas industry veteran. “If you phone him about a deal, you get an immediate answer back, whereas with many companies it just disappears into a committee. He’s a hands-on decision-maker, no-nonsense, but with this impish sense of humour. Of course, he’s a very large imp.”

Born and raised in Oakland, Neb.,

Anderson earned a degree in petroleum engineering at the University of Texas in Austin and was eventually hired by Amoco. He held several American postings before arriving in Calgary in January, 1966, as the company’s chief engineer for Canada.

Impressed by the amount of opportunity in Alberta, Anderson soon struck out on his own.

His first big success came in 1970 when he investigated the Peace River Arch area of northwestern Alberta, which others in the industry had drilled and dismissed as unproduc-

Burning bright

Anderson Exploration Ltd.

Headquarters....................................Calgary

1999 revenues.........................$800 million

1999 profits...............................$70 million

Market capitalization ..................$3.7 billion

tive. “I saw some indications of normal faulting, which is rare on the plains of Alberta,” he recalls. “That intrigued me because I had a lot of experience with the Gulf Coast, where normal faults often form the traps for hydrocarbons.” Anderson drilled and discovered 1.4 trillion cubic feet of gas, one of the largest fields in Canada at the time, and one that is still in production.

Over the years, Anderson continued to build his company through acquisitions and exploration. But his fortunes took a quantum leap in 1995 when, just before his 65th birthday, he engineered the Home Oil takeover. Anderson admits to several sleepless nights as he contemplated a deal that more than doubled the size of his operations—not to mention taking on his old employer Amoco, which had put Home Oil into play with a hostile bid. But Anderson moved quickly, trimming staff and executive frills at the debt-ridden company and aggressively developing some of Home Oil’s under-exploited properties, especially in the gas sector.

With Anderson’s purchase of Ulster Petroleums—he agreed to pay roughly 20 per cent more than what Hunt Oil offered—he reaffirmed his reputation as a man who loves the thrill of the chase. In both the Ulster and Home Oil cases, Anderson says his company had spent months investigating the prospective targets before the hostile bids precipitated a move. “If we were a white knight,” he adds, “we were a knowledgeable one and that’s a good position to be in.”

Despite his own caution that valleys inevitably follow peaks, Anderson believes that high gas prices are sustainable for the foreseeable future—much to the chagrin of consumers. And as long as prices hold, the company that has seen its profits soar by 286 per cent in the last two quarters is sitting pretty. Its next big play will likely be in the Mackenzie Delta, exploiting some Home Oil properties, if and when a long-delayed northern pipeline is finally constructed.

“People say, ‘What the hell are you doing up there, J.C., you’re already a senior citizen?’ ” says Anderson. “My answer is, ‘You know, I’ve quit buying green bananas, but I think there’s a future up there for this business.’ ”

So how long does the renowned workaholic plan to hang in there? The father of four grown children, none of whom entered the family business (“I guess they saw the old man working too hard”), Anderson notes that he has precious little time to enjoy his ranch south of Calgary. And yet? “I see myself here for some time in the future,” he says, tapping the desk in his 30th-floor office at the Home Oil Tower in downtown Calgary. “I enjoy it and I think I’m pretty good at it.” Pew would dispute the claim. CD