Westmin to expand petroleum sector

In terms of capital expenditures, the petroleum division of Westmin Resources (tse)has generally been its largest spender. Not that this should come as any surprise because the division has also tended to be its most profitable.

But after the oil crash, expenditures were cut back sharply from $95 million and $100 million in 1984-85 to $30 million and $15 million during the next two years. Things are about to change, however.

Addressing the company’s annual meeting in Vancouver recently, Paul M. Marshall, president, said that Westmin would “increase substantially our expenditures in this division in 1988.” Conceding that last year’s financial results (net earnings of $21.8 million or 12 cents per share) were “still far from satisfactory,” he noted they were far short of the 20 cents required to service the common share dividend which, incidentally, has been maintained.

Marshall said that total revenues in 1987 were almost identical to 1986 but the revenue mix was different. Petroleum revenues dropped about 17% even though gas production was virtually unchanged and oil and natural gas liquids output increased by approximately 9%.

Discussing the expansion program at Westmin’s Myra Falls operation on Vancouver Island, he predicted it would be completed in the third quarter. But he cautioned there will not be enough working places developed to ensure a constant production rate of 4,400 tons per day until year-end. The expansion program is budgeted at $26 million or 10% of the original project but it will increase output by 33.3%, he added. A recent drill hole returned ore grade mineralization beyond the limits of the existing H-W orebody which could extend mine life significantly.

Marshall said that 55% of the gold and silver production from the Premier gold project for the first four years of its life has been sold forward at $502(US) and $7.23. “These forward sales are sufficient to cover our share of the capital expenditures and our share of operating costs for the first four years of the mine’s operation,” he said

Expressing concern about the recent strength in the Canadian dollar, Marshall noted that each 1 cents increase costs the company 5 cents per share. ” But these matters are mainly outside our control,” he added. Arguing that Canada is attracting substantial interest from foreign investors because of the proposed freer trade arrangements with the United States, he suggested the Canadian dollar has probably anticipated the successful conclusion of the free trade talks. “We might expect an easing of the upward pressure on our dollar by year-end,” he predicted.”

Westmin Chairman J. Trevor Eyton also commented on the free trade agreement, saying that it was in the best interests of the company that it go through. During his somewhat lengthy and detailed discussion of the issue one shareholder lamented that Eyton should stop “politicking” and get on with business that was pertinent to Westmin shareholders.