ApAche sells KitimAt lNG stAKe to

Woodside

Woodside Petroleum Ltd., Australia’s second-biggest oil and natural gas producer, agreed to buy Apache Corp.’s stake in the Wheatstone and Kitimat liquefied natural gas projects and associated reserves for $2.75-billion (U.S.).“I am confident that Woodside’s participation will have a positive impact in seeing these world-class LNG facilities through to first production,” G. Steven Farris, chairman and chief executive officer of Houston-based Apache, said in a statement. Apache will also get an estimated $1-billion for spending on the projects from June 30 until closing.The projects are among dozens under construction or consideration worldwide seeking to feed Asian markets hungry for gas. Both terminals are being done in partnership with Chevron Corp. The $24-billion Wheatstone facility in Western Australia, which is about halfway done, would be capable of shipping 8.9 million metric tons a year. The Kitimat project is one of several

proposed facilities that would ship gas from British Columbia to Asia.Woodside has said it was seeking acquisitions after its $2.7-billion plan to buy back shares from Royal Dutch Shell Plc was blocked by shareholders. Apache, facing pressure from activist hedge fund

Jana Partners LLC to cut spending and focus drilling in the U.S., announced in July it was seeking to exit the proposed Canadian project and the facility under construction in Australia. The company is also evaluating a sale or spinoff of its international operations to focus on North American shale wells.

Apache holds a 50 per cent stake in Kitimat and related acreage in the Horn River and Liard basins in British Columbia. The project has yet to reach a final investment decision.The sale is expected to close in the first quarter, Apache said. Apache rose 1.9 per cent to $57.50 in New York.

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Apache, which operates in the United States, Canada, Egypt, UK and Australia, will be reimbursed for its net spending on the two projects between June 30 this year and the closing date, which it estimated at $1-billion. More than a dozen LNG export projects have been proposed for British Columbia as energy companies from around the world race to export cheap Canadian gas to energy-hungry Asian markets. But uncertainties over taxation, the regulatory process and aboriginal consent, along with fierce competition from rival projects in the United States, have called into question whether any will ultimately be realized.Apache is selling a 13 per cent stake in Wheatstone and a 65 per cent interest in offshore gas fields that would supply it, as well as the Balnaves oil development. Production from the Wheatstone gas export project, slated to begin by 2016, was expected to generate more than $1-billion a year in free cash flow for Apache, Mr. Farris has said.The decision to sell the Wheatstone project was a mistake for Apache given the collapse in oil prices and how much cash flow the development would have generated over such a long period of time, Fadel Gheit, an analyst at Oppenheimer & Co. in New York, said today in a telephone interview.“This seemed to be a very good project long term,” said Gheit, who rates Apache the equivalent of buy and doesn’t own shares. “This project is running ahead of schedule, within budget, so I’m

not sure why Apache wants to monetize international assets.”

cANAdiAN dollAr pluNGes to 5-yeAr

loW As oil dips beloW $60

TSX bounces up from Thursday’s steep dropThe Canadian dollar plunged to below 87 cents US today in the wake of turmoil in oil and stock markets.The loonie was trading at a 5½-year low of 86.59 cents US, down 0.44 of a cent.After oil gained earlier in the day, it sank again in the afternoon, ending the day below $60, its lowest level since 2009. It’s had a steep decline in the last two weeks since OPEC decided not to cut back its production of 30 million barrels a day.West Texas Intermediate crude, the contract traded in New York, was down just 59 cents in late afternoon to $59.99 US a barrel, after falling by more than $2 Wednesday.Brent crude edged lower, down 47 cents, to $63.77 US. It is down 37 per cent over the last three months.The discount for the Canadian contract, Western Canada Select, has widened in the past six weeks as the extent of the oil glut became evident.The difference between WCS and the WTI contract, which was as low as $8 earlier this year, is now $18 with WCS trading at $42.51. But that’s less than a year ago, when the discount on Canadian oil was as high as $40.The boom in U.S. shale oil has led to

an over abundance of oil worldwide and has bit into the biggest market for Canadian oil — the U.S. WCS should be benefiting from the startup of major new pipelines such as Enbridge Inc.’s 600,000 barrel-a-day Flanagan South conduit to the U.S. Gulf Coast, but the turmoil in markets has companies looking at cutting back.While the loonie dropped, Toronto stocks recovered from Wednesday’s steep 343-point slide.The TSX was up 156 points to 14,009

at mid-afternoon as investors sought bargains among beaten-down stocks.Industrial, tech and financial stocks gained, but energy stocks remained laggards.Cenovus Energy announced Thursday it is cutting 2015 capital spending to between $2.5 billion and $2.7 billion, down about 15 per cent from 2014 levels. Its shares declined 18 cents to $20.92.The Dow Jones industrial average also moved higher, up 187 points to 17,711.

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U.S. retail sales perked up in November with the start of the holiday shopping season, rising 0.7 per cent, led by online buying and purchases of autos, clothing and electronics. That helped boost New York stocks.cANAdiAN oil Needs to decouple from

the AmericAN mArKet

U.S. President Barack Obama’s appearance on The Colbert Report this week confirmed that he has no qualms about leaving Canada in the lurch in current global energy glut.In the interview, Colbert observed that the Republican-controlled Congress would approve the Keystone pipeline, that polls show the American people favouring it, that the State Department review concluded any pollution would not be significant, and that it would create jobs for the U.S.workforce. In response to this “grilling”, Obama repeated his long-stated misgivings about the project.He further strongly implied that if the Keystone pipeline were built, then Canadian oil would not be consumed in the U.S. but exported from the Gulf of Mexico to world markets. He even implied that this was a reason not to build it.But why export it from there to world markets if it can be exported from Canada to world markets? The Energy East pipeline project is one that proposes to do this.It has been clear for several years that Canada must chart its own

path and cease being hostage to U.S. markets just because it has no other export pipelines. It must build its own pipelines.The interminable delays in the American approval and construction of the Keystone pipeline are not the only injuries that the Canadian energy sector has suffered from Washington over the past few years. Add the collateral damage from Obama’s falling-out with the Saudis.His “reversal of alliances” against Saudi Arabia and in favour of Iran(which continues nevertheless to see the U.S. as its own enemy!) ended Washington’s decades-long special relationship with Riyadh. But Washington has nothing to show for this.Spin doctors inside the Washington Beltway first tried to portray the new Saudi oil overproduction as a swipe at the Russians in line with Western sanctions. That is hardly the case since, for example, Gulf banks do not observe these sanctions.Such pundits now generally admit that the goal is to render U.S. shale oil uneconomical to produce, not least because the Saudis say this themselves.That is how Canada’s energy economy is very likely to suffer collateral damage from this epochal shift in U.S. foreign policy in the Middle East.If Obama had maintained the long-standing good American relations with Saudi Arabia, there would at least have been the possibility for dialogue between the two parties. There

would an outlook for cooperation of some kind between them regarding world energy markets.But having burnt his bridges in the Middle East, Obama has no chance to do that.If Canada suffers a recession because its energy is no longer competitive on world markets, then much of the responsibility will in fact be Obama’s.The American split with the Saudis and the Keystone impasse are both of his making.

World oil prices will recover in several years. So it may still make sense to develop some Canadian shale oil for the domestic market in the meantime, and with a view to future export to world markets.That would also create needed jobs during any recession in the current decade. Pipelines such as Energy East would then easily give Canada oil that is much more economical than the foreign imports landing in eastern Quebec, where Energy East would terminate.

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Obama’s appearance on the Colbert show confirmed his well-known ability to read a teleprompter to an admiring audience. It also confirmed that Canada must continue to chart its own path through the roiling seas of oil that now flood the planet.

cANAm closes trANsActioN to

Acquire A WesterN cANAdiAN frAc sANd

property

Further to a press release dated October 29, 2014, CanAm Coal Corp. (COE) COECF, -5.41% (RHE.F) (“CanAm” or the “Company”) today announced it has completed the acquisition of a 100% interest in an Alberta Metallic and Industrial Minerals Permit covering approximately 1,200 acres (567 ha) of land containing high quality silica sand (or Frac Sand) in Central Alberta (the “Property” or the “Transaction”). The aggregate purchase price of the acquisition is $1.5 million which will be settled by $215,000 in cash and the issuance of 25.7 million common shares of the Company at a deemed price of $0.05 per common share. At closing of the Transaction, and including the portion of the purchase price that was paid at signing of the binding letter of intent, $165,000 in cash was paid and 5,940,000 common shares were issued. The remaining portion of the purchase price, comprised of 19,760,000 common shares of the Company, were escrowed and will vest in accordance with the achievement of the following milestones and/or performance criteria: 4,940,000

common shares upon completion of a NI 43-101 resource report, 6,175,000 common shares upon completion of a Preliminary Economic Assessment and 8,645,000 common shares upon receipt of final permits. A final cash payment of $50,000 is due on February 1, 2015. The Transaction has received conditional approval by the TSX Venture Exchange. With the closing of this transaction, the Company has now secured a property that will allow it to diversify and broaden its energy portfolio into the growing frac sand market. The Property acquired by the Company has a number of compelling attributes: - Based on an historical resource calculation, the property may contain at least 10 million cubic yards of sand. This estimate however is non NI 43-101 compliant and therefore cannot, and should not be relied upon. - Initial tests, performed by Loring Laboratories (Alberta) Ltd. and Global Energy Laboratories, indicated that the sand meets the ISO/API criteria for frac sand which would make this a highly desirable product for the fracking industry. The Company has initiated further testing and will release additional results as soon as they are available. - The Property’s strategic location in Central Alberta provides it with a significant logistics cost advantage due to its relative proximity to major Western Canadian shale plays such as the Duvernay, Montney and Horn River. Industry experts estimate

that logistics (transportation and handling/transloading) can account for 60%+ of the delivered cost to the end consumer and such costs could be as high as $150/ton for sand imported from the US. Currently, the majority of the sand used in the Canadian market is imported from the US and can travel up to 3,000 km from the frac sand producing States of Wisconsin, Nebraska and Minnesota. The Company will now aggressively move forward with an exploration and development program with the objective of issuing a NI 43-101 resource report in Q2 of 2015.

Jos De Smedt, CEO of CanAm, commented: “We are excited about completing this transaction as we can now strategically move forward towards exploration, development and permitting of the Property. Our objective is to put our frac sand property in production within 2 years and secure ourselves an additional stream of revenue and cash flow.” Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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eNerGy boom: ActuAlly A bubble?

With the benefit of hindsight, it now appears that the energy boom of the past few years might have been a bubble, not just in the US, but worldwide. Booms have a tendency to turn into bubbles when they attract too much equity and debt capital, which leads to excess capacity. When the bubbles inflate, so do the prices that attract all the capital. When the resulting excess capacity leads to falling prices, the bubble bursts as capital dries up. The key characteristic of the tulip and other bubbles is expectations that tulip prices will continue to rise even as more tulips are produced. During the second half of the 1800s, we had the railroad boom in the US. During the early 1900s, the booms were in autos and appliances. The Great Depression ended with the defense spending boom of World War II. During the 1950s and 1960s, the expansion of the highway system stimulated the growth of suburbs. The resulting housing boom ended in a big bust at the end of the previous decade. The IT revolution stimulated the US economy during the 1990s. The energy industry was energized by the technological revolution, resulting in the fracking boom. Again, with the benefit of hindsight, it now seems that the fracking boom was a bubble financed by investors desperately seeking better returns available from high-yield bonds issued by energy companies and countries. The chart of US plus

Canadian oil production looks a bit like the chart of asset-backed commercial paper outstanding prior to the financial crisis of 2008. The high-yield bond market has been hard hit by the sudden risk aversion of investors, particularly those who bought energy-related bonds. Many have been seeking safety in lower-yielding US Treasuries. The Bank of America Merrill Lynch US high-yield corporate bond yield rose from the year’s low of 5.15% on June 24 to Friday’s 7.04%, the highest since July 27, 2012. The spread over U.S. 10-Year Treasury yields widened over this period by 237bps from 257bps to 494bps.

Joe oliver looKs oN the briGht side of

loW oil prices

Cheaper gas means more money for savings, consumer spending, and a boost for manufacturingIncreased consumer spending and additional money for savings are two of the benefits to lower oil prices, federal Finance Minister Joe Oliver has told CBC News, sounding a reassuring note about how plummeting oil prices will affect the Canadian economy.Oil prices have dropped dramatically this fall, with the West Texas Intermediate price dropping below $58 US on Friday for the first time in more than five years.The cost for a barrel of oil is more than $10 less than the estimate used by finance officials to put together the department’s projections in Oliver’s

fall 2014 economic update last month.The prices are also far below the estimates used by finance officials nearly two years ago, when the 2013 budget predicted a barrel of oil would be worth $96 in 2015 and trending up to $97 a barrel in 2017.In an interview with CBC News, Oliver said he’s still very comfortable the federal government will have a surplus in 2015. The fall economic update saw finance officials downgrade federal revenue by $2.5 billion a year for the next four years, but predicted a razor-thin surplus.

Oliver says he’s continuing to monitor oil prices and the accompanying decline in corporate tax revenue.“But you know it’s not a one-way street and it’s fairly complex, and we’re not making any projections about where it’s likely to settle or how long it will remain at a low level,” Oliver said.“Certainly people are seeing the advantages at the pump, and that will mean more money for consumption. It’ll be more money for savings. Clearly a number of industries including transportation and manufacturing

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will benefit from lower energy costs.”The low oil prices could also boost the global economy as consumers around the world see the same benefit Canadians will, said former parliamentary budget officer Kevin Page. “This is a lot of disposable income for people around the world that are not net exporters,” Page said in an interview with CBC News.Page agrees with Oliver that Canadian consumers will likely boost consumption, and added that by spending less on gas and other fuel, they can start tackling the high amounts of consumer debt that are a potential risk to the economy.“It’s probably for the most part a bit of a wash,” Page said.It’s likely the low oil prices won’t be sustained either, he said, and in another year they could be back up to $80 or $85.“I don’t think anybody that’s really rational thinks these prices are going to be sustained ... I think there will be

a balancing effect overall,” said Page.Provinces such as Alberta, Saskatchewan and Newfoundland and Labrador will see declining revenue because of lower oil company revenues, said Oliver, who spoke to CBC News ahead of a meeting with the provincial and territorial finance ministers in Ottawa on Monday.Asked whether he was going to tell his counterparts not to worry about the price of oil, Oliver laughed.“No ... I’m not going to put it in those terms. I am going to say we’re monitoring it, we’ll have a discussion about what the implications will be and, as you know, some of them are positive and others are negative.”There are a number of outside factors, including major economies including China and Europe, Oliver said. Low energy prices will benefit the United States, Europe, China and Japan.“Happily the United States is doing quite well,” the finance minister said. “They’re on a roll. It looks very much like their growth will be sustainable and that’s very important to Canada

because we have the biggest bilateral commercial relationship in the world with the United States.”Oliver said he will consult a group of private-sector economists prior to finalizing the 2015 federal budget.“There’s a lot of volatility and we’ll just see how it goes,” he said.

AustrAliAN spirit toWed iNto bedford

bAsiNShip carrying 675,000 barrels of crude oilAn oil tanker that was adrift off

Nova Scotia after losing its steering has arrived in Halifax Harbour.Jonathan Anthony of Teekay Corp., the Australian Spirit’s owner, says a local harbour pilot assisted the ship into the Bedford Basin.The operation required the use of four tugboats.The tanker, which is carrying 675,000 barrels of crude oil, began having trouble in heavy seas on Tuesday. It was travelling from Newfoundland to New York. Two tugboats were dispatched to tow the vessel to Halifax.

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