Introduction

Financing the petroleum industry is now mare than ever a challenge and any paper must give some opening comments to the reader on the current political scene which hopefully will improve from the date of this paper. Unlike any other industry in this country the petroleum industry is faced with being totally restructured by politicians and any financing must take into account these potential changes as being more important in the financing equation, than the normal concerns of the market place. The challenge is now more than ever a true challenge because of the proposals of the National Energy Policy (NEP) and its potential effects of an all encompassing "grab" on not only the petroleum industry but the producing provinces especially Alberta which geographically is larger than any Western European country, including England, but has no national representation in the decision making process which effects its wellbeing.

The answer to the NEP initially is seen by the physical movement of rigs, now in excess of 100, leaving the country. Iron moves fairly easily, but a large portion of the iron that is moving is not going to return because it has been purchased by Americans and more importantly a growing number of professionals and technical people are now lost to this country.

Optimistically, the politicians should agree on realistic terms for the industry before the infrastructure of expertise totally slows down and moves from red political pastures to blue political pastures south of the border. Methods of financing are changing to meet the challenge for those corporations that foresee an optimistic settlement. FIRA, NEP and the changing market place have caused new financing structures from Restricted Ownership shares to Euro Joint Venture Companies.

Impact of the National Energy Program

The proposed National Energy Program has already had, and will continue to have a drastic impact on the Canadian petroleum industry and the consequent methods of financing.

Stock Market:

The Toronto Stock Exchange Oil Index has undergone major gyrations whenever the federal government becomes involved in proposals for the petroleum industry. Reviewing the last 10 Years the TSE Oil and Gas Index unden1ent a major bull market through 1971 – 1972, when the composite average rose from approximately 950 to over 1600 then followed by 1973 which saw the first major confrontation between Ottawa and Alberta which started in the fall of 1973 and continued until mid – 1975. The Oil and Gas Index lost over 50% of its total market value by the end of 1974. The market then continued for over two Years in an unsettled state due to the markets lack of confidence in the political interference. The period 1977 until early 1980 saw a substantial rise from the 1200 level to over 5000 with OPEC price increases, takeovers, West Pembina, Elmworth and then Hibernia. The election of last spring brought about a correction with the index falling quickly to 3400 then back to the 5000 level and then after the Budget the market has fall en approximately 20%.

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