No changes at Landmark if Sceptre bags Oakwood

After a 2-year effort to restructure the $320-million debt load of its 48%-owned affiliate Oakwood Petroleums, Landmark Corp. (TSE) has finally found a buyer for the beleaguered company.

If creditors and preferred shareholders give the go-ahead at a meeting on Dec 15, Oakwood will become a wholly-owned subsidiary of Calgary based Sceptre Resources (TSE). Oakwood is also based in Calgary, while Landmark is based in Toronto.

In addition to the antimony mine, Dominion also has a 22% stake in Joutel Resources (TSE) which holds a number of exploration gold properties in the Mishibishu Lake, Ont. and Casa Berardi, Que. regions.

In a bid to reduce a long-term debt load that will increase to $278 million from $56 million after the take-over is approved, Sceptre is expected to sell off a number of non-strategic assets.

When asked if he would retain Oakwood’s 16% stake in Landmark, Sceptre President Richard Gusella said he couldn’t comment until he owns the company.

“In the long run, Sceptre is going to be in the oil and gas business,” he said.

Under the proposed agreement, creditors will receive about $237 million comprised of $192 million in cash, $21 million in Sceptre unsecured debentures, and seven million Sceptre common shares from treasury. Landmark has agreed to vote its shares of Oakwood in favor of the plan.

Oakwood common and Class A non-voting common shareholders are to be treated as equivalent for the transaction and will receive 1.75 million Sceptre common shares and 2.25 million Sceptre share purchase warrants on the basis of 0.179 Sceptre common shares and 0.230 Sceptre share purchase warrants per outstanding share.

The combined assets of both companies will make Sceptre one of Canada’s largest independent oil companies with an asset base of $775 million. Its assets will include 77.7 million bbl of crude oil and natural. gas liquids and 965 billion cu ft of proven and probable natural gas reserves, virtually all in western Canada.

While Landmark chairman Robert Granger said the takeover bid is preferable to allowing Oakwood to go into bankruptcy, he will regard Sceptre’s acquisition of Oakwood as a significant defeat.

Landmark holds 48% of Oakwood’s common shares while Oakwood retains a 16% stake in Landmark.

Until the takeover was announced, Oakwood was regarded by Landmark as the oil and gas wing in a portfolio of assets which includes a 76% stake in Toronto antimony producer Dominion Explorers (TSE).

“It is a major blow for us,” said Granger “We struggled diligently to steer the company into a safe harbor.”

The Oakwood restructuring was originally scheduled to centre around United Energy Corp. of Bristol, Va., but the U.S. oil company backed off. However, Granger said a successful takeover bid would have no effect on either Landmark or Dominion Explorers. Dominion will continue to operate its profitable antimony mine in New Brunswick which accounts for more than 10% of the world’s production. Revenues from the mine during the first six months of 1988 were almost $4.4 million.

Brian Ekstrom who resigned as president of Oakwood when the takeover bid was announced, has been succeeded by vice-president Nolan Blades. “He (Blades) will assume responsibility for the Oakwood assets for a period of time after which he may wish to pursue other business interests,” said Gusella.