Canadian oil-industry treasury financings totaled C$10 billion in 2002, up 23% from 2001 and slightly higher than the record C$9.6 billion in 1995, according to Calgary-based investment-banking firm Sayer Securities Ltd. The financings last year were driven primarily by a growth in debt, the firm surmises. As for equity deals, these totaled C$1.54 billion in 2002, compared with C$1.28 billion in 2001. "Real" equity money was entering the market, as opposed to "tax" equity money, since an increase for straight equity was coupled with a decrease for flow-through issues, the firm reports. Straight equity was up 32% from 2001, while flow-throughs decreased 10% in value. "Contributing to the solid growth of equity financings were the new start-up companies that have surfaced in the last few years. As a group, they completed 48% of the value of straight equity issues in 2002, up from 44% in 2001," says Frank J.D. Sayer, principal. Meanwhile, equity financings by senior E&P companies were nonexistent in 2002, except for a C$80-million deal by Bonavista Petroleum Ltd. As for debt deals, these reached a record high of C$7.02 billion; the previous record was C$5.45 billion in 2001. "Low and continually decreasing interest rates were the major factor," Sayer says. "For example, A-rated corporate bonds opened 2002 at 6.83% and closed in December at 6.57%." Many senior E&P companies chose to fix their long-term debt costs in 2002. "Another major change in the debt market in 2002 was the large increase in convertible debt issues by royalty trusts. Four entities chose this route for a total of C$239.4 million," he adds. The last deal was in 1999 by NCE Energy Trust for C$16.1 million. "While it was the larger trusts that did the straight-debt issues, it was the smaller royalty trusts that chose the convertible-debt route." The four issuers were Viking Energy Royalty Trust (C$75.0 million), Provident Energy Trust (C$64.4 million), Advantage Energy Income Fund (C$55.0 million) and Acclaim Energy Trust (C$45.0 million). "While trusts continue to proliferate, several are now starting to pull away from the pack in a significant way," Sayer concludes. "Size, for these issuers, is becoming a contributing factor in their ability to raise money in the capital markets, decreasing even further their cost of funds compared with other, smaller trusts." -A&D Watch