EARNINGS / Shell Canada Announces 1998 Earnings
CALGARY, Jan. 27 /CNW/ - Shell Canada Limited announced today earnings
for 1998 of $432 million or $1.49 per Class ''A'' Common Share compared to
earnings of $523 million or $1.69 per share for 1997. The 1997 record results
included a $67 million income tax settlement and related interest. Decreased
earnings in 1998 resulted primarily from lower commodity prices and reduced
volumes associated with asset divestments in Resources. Higher earnings from
increased sales volume in Oil Products partially offset the decrease.
Fourth quarter earnings were $115 million or $0.40 per share compared to
$93 million or $0.33 per share for the same period in 1997. Improvement in
margins and lower operating expenses in Oil Products were the main reasons for
the increase in earnings.
Cash flow from operations was $845 million for 1998 compared to $940
million in 1997. Capital and exploration expenditures were $796 million in
1998, up from $520 million in 1997. The increase was due primarily to spending
related to the development of the Sable natural gas project offshore Nova
Scotia.
''In terms of earnings from continuing operations, 1998 was the second
most profitable in our history. Our Oil Products performance and healthy
balance sheet will support our planned investment in future growth
opportunities,'' said C.W. Wilson, President and Chief Executive Officer,
Shell Canada Limited.
1999 Capital Expenditures
The approved capital and exploration expenditure program for 1999 is $735
million. The program includes $280 million for Shell's share of the Sable
offshore natural gas project and $65 million to complete pre-development work
on the Athabasca Oil Sands project. The capital program also includes $110
million for exploration, $115 million for Resources development projects and
$155 million for Oil Products. Additional expenditures of $195 million for
Oil Sands are contingent on project approval, which is expected during 1999.
SHELL CANADA LIMITED
SEGMENTED INFORMATION
Resources
Resources earnings for 1998 were $169 million compared to $264 million in
1997. The earnings declined primarily due to lower prices for crude oil and
natural gas liquids as well as reduced volumes resulting from asset sales.
Resources earnings for the fourth quarter of 1998 were $48 million compared to
$57 million for the same period last year. While volumes were lower in the
fourth quarter due to asset divestments earlier in the year, stronger natural
gas prices offset the impact of lower crude and liquids prices.
Oil Products
Oil Products achieved record earnings of $275 million in 1998 compared to
$252 million in 1997 primarily due to increased sales volume within the
marketing sector. Earnings for the fourth quarter were a record $81 million
compared to $45 million for the same period last year. The earnings
improvement resulted mainly from reduced operating expenses and lower crude
prices, which contributed to improved margins.
Oil Sands
The Oil Sands project progressed well during the fourth quarter of 1998.
Optimization of the bitumen extraction pilot plant on the Muskeg River mine
site continued. A sample batch of bitumen was successfully tested in an
upgrading pilot plant, which simulates the proposed Scotford upgrader. All the
test results to date have been within expected design parameters.
Public hearings were held for the Scotford upgrader and the Muskeg River
mine and regulatory decisions are expected in the first half of 1999.
Corporate
Corporate expenses in 1998 were $12 million compared to earnings of $7
million in 1997. The 1997 results included interest income on a tax settlement
while the decline in the Canadian dollar during 1998 led to incremental
foreign exchange losses on the Company's U.S. dollar debt. The 1998 results
were improved by a reduction in tax expense as a result of the acquisition of
business losses from a related company and the gain on the sale of the Shell
Centre office building in Calgary.
Earnings Cash Flow Capital Expenditures
($ millions) ($ millions) ($ millions)
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Q4 97 93 227 153
Q1 98 115 195 183
Q2 126 186 146
Q3 76 206 207
Q4 115 258 260
SHELL CANADA LIMITED
Financial Highlights
($ millions, except as noted)
(unaudited)
Fourth Quarter Total Year
1998 1997 1998 1997
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Earnings 115 93 432 523
Revenues 1 137 1 372 4 506 5 456
Cash flow from operations 258 227 845 940
Return on average common
shareholders' equity (%) - - 13.1 14.8
Return on average capital
employed (%) - - 12.6 13.5
Per Class ''A'' Common Share
(dollars)
Earnings 0.40 0.33 1.49 1.69
Cash flow 0.89 0.78 2.91 3.03
Dividends paid 0.18 0.18 0.72 0.66
Results by Segment
Earnings
Resources 48 57 169 264
Oil Products 81 45 275 252
Corporate (14) (9) (12) 7
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Total 115 93 432 523
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Revenues
Resources 202 240 741 969
Oil Products 960 1 180 3 885 4 621
Corporate 8 13 30 126
Inter-segment sales (33) (61) (150) (260)
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Total 1 137 1 372 4 506 5 456
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Cash flow from operations
Resources 99 110 386 513
Oil Products 149 109 440 399
Corporate 10 8 19 28
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Total 258 227 845 940
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Capital and exploration
expenditures
Resources 164 91 509 352
Oil Sands 13 6 57 15
Oil Products 81 55 171 150
Corporate 2 1 59 3
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Total 260 153 796 520
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Return on Average Capital Employed (ROACE): capital employed is a total
of equity and long-term debt including the current portion of long-term debt.
ROACE is earnings plus after-tax financing expense on debt divided by the
average of opening and closing capital employed for the twelve months to
December 31.
Certain amounts previously reported have been reclassified to conform
with the current year's presentation.
SHELL CANADA LIMITED
Operating Highlights
(unaudited)
Fourth Quarter Total Year
1998 1997 1998 1997
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Production
Natural gas - gross (mmcf/d) 564 690 587 667
Crude oil and bitumen -
gross (bbls/d) 22 700 22 200 22 900 26 500
Condensate - gross (bbls/d) 25 100 25 100 24 900 24 600
Ethane, propane and butane -
gross (bbls/d) 30 700 32 000 30 800 31 300
Sulphur - gross (tons/d) 6 400 6 900 6 600 6 600
Crude oil processed by Shell
refineries (m(3)/d) 42 100 42 700 41 800 41 200
Gas and Sulphur Sales
Natural gas sales from own
production - gross (mmcf/d) 555 673 581 647
Sulphur sales from own
production - gross (tons/d) 6 800 7 800 6 400 6 900
Oil Products Sales
Gasolines (m(3)/d) 20 700 20 500 20 600 19 900
Middle distillates (m(3)/d) 17 500 17 500 17 000 16 800
Other products (m(3)/d) 8 300 9 000 7 400 7 700
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46 500 47 000 45 000 44 400
Prices
Natural gas average plant
gate netback price ($/mcf) 2.46 1.81 1.89 1.86
Crude oil average field
gate price ($/bbl) 17.41 25.77 18.83 25.80
Condensate average field
gate price ($/bbl) 16.11 27.06 18.54 26.74
Ethane, propane and butane
average field gate price
($/bbl) 7.57 10.38 7.25 10.93
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Natural Gas Avg. Price Crude Oil Avg. Price Condensate Avg. Price
(Plant Gate Netback) (Field Gate) (Field Gate)
($/mcf) ($/bbl) ($/bbl)
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97 Q4 1.81 25.77 27.06
98 Q1 1.51 21.45 22.21
98 Q2 1.84 18.30 18.24
98 Q3 1.81 18.03 17.34
98 Q4 2.46 17.41 16.11
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SHELL CANADA LIMITED
Consolidated Statement of Earnings
($ millions, except as noted)
(unaudited)
Fourth Quarter Total Year
1998 1997 1998 1997
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Revenues
Sales and other operating
revenues 1 120 1 352 4 449 5 306
Dividends, interest and
other income 17 20 57 150
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1 137 1 372 4 506 5 456
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Expenses
Purchased crude oil, petroleum
products and other merchandise 568 815 2 372 3 066
Operating, selling and general 256 276 1 039 1 071
Exploration 21 29 57 62
Depreciation, depletion,
amortization and retirements 90 86 265 308
Interest on long-term debt 19 16 70 65
Foreign exchange on long-term
debt 17 7 52 20
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971 1 229 3 855 4 592
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Earnings
Earnings before income taxes 166 143 651 864
Income taxes 51 50 219 341
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Earnings 115 93 432 523
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Earnings per Class ''A''
Common Share (dollars) 0.40 0.33 1.49 1.69
Common Shares outstanding 289 290 290 310
(millions - monthly weighted average)
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Certain amounts previously reported have been reclassified to conform
with the current year's presentation.
SHELL CANADA LIMITED
Consolidated Statement of Cash Flows
($ millions)
(unaudited)
Total Year
1998 1997
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Cash from Operating Activities
Cash flow from operations (1) 845 940
Movement in working capital and other
related to operating activities (301) 43
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544 983
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Cash Invested
Capital and exploration expenditures (796) (520)
Proceeds on disposal of properties,
plant and equipment 253 169
Investments, long-term receivables
and other (85) (15)
Movement in working capital related
to investing activities 16 -
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(612) (366)
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Cash from Financing Activities
Common Shares buy-back (Note 1) (24) (976)
Proceeds from exercise of Common Share
stock options 1 8
Dividends paid (209) (206)
Long-term debt repayments and other 6 (14)
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(226) (1 188)
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Decrease in Cash (294) (571)
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Cash at beginning of year 619 1 190
Cash at December 31 (2) 325 619
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1. Cash flow from operations comprises earnings before exploration
expenses adjusted for deferred income taxes, depreciation, depletion,
amortization, retirements and other items not affecting cash.
2. Cash comprises cash and highly liquid short-term investments less
short-term borrowings.
Certain amounts previously reported have been reclassified to conform
with the current year's presentation.
SHELL CANADA LIMITED
Consolidated Statement of Financial Position
($ millions)
(unaudited)
Dec. 31, 1998 Dec. 31, 1997
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Assets
Current assets
Cash and short-term investments 325 619
Accounts receivable 627 717
Inventories 594 589
Prepaid expenses 122 114
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1 668 2 039
Investments, long-term receivables
and other 198 214
Properties, plant and equipment 3 946 3 713
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5 812 5 966
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Liabilities
Current liabilities
Accounts payable and accrued
liabilities 656 705
Income and other taxes payable 10 304
Current portion of site restoration
and other long-term obligations 21 28
Current portion of long-term debt 367 1
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1 054 1 038
Site restoration and other long-term
obligations 188 189
Long-term debt 425 740
Deferred income taxes 745 799
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2 412 2 766
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Shareholders' Investment
Capital stock
100 4% Preference Shares 1 1
289 178 840 Class ''A'' Common
Shares (1997 - 290 127 940) 468 469
Retained earnings 2 931 2 730
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Shareholders' Investment 3 400 3 200
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5 812 5 966
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>>
SHELL CANADA LIMITED
Notes to Consolidated Financial Statements
(unaudited)
1. Share Buy-Back
On July 29, 1998, Shell Canada Limited announced its intention to make a
normal course issuer bid, to repurchase for cancellation up to one per cent of
its 290,167,640 Class ''A'' Common Shares issued and outstanding as at July
28, 1998. The bid is to counter current and potential dilution of the common
shares under Shell's employee stock option program. The bid began on August
17, 1998 and will end on or before August 16, 1999. To date, 1,000,800 shares
have been repurchased at market prices for a total cost of $24 million.
Under an Issuer Bid in June, 1997, Shell repurchased 15,999,784 of its
Class ''A'' Common Shares at a price of $61.00 per share for a total cost of
$976 million.
2. Year 2000 Uncertainty
The Year 2000 issue arises because many computerized systems use two
digits rather than four to identify a year. Therefore, some date-sensitive
systems may fail to recognize the year 2000. As a result, many computer
systems, applications and field equipment that use two digits to identify the
year may produce errors when they try to process this information. In
addition, similar problems may arise in some systems that use certain dates in
1999 to represent something other than a date. The effects of the Year 2000
issue may be experienced before, on, or after January 1, 2000. If this issue
is not addressed, the impact on operations and financial reporting may range
from minor errors to significant systems failure, which could affect the
Corporation's ability to conduct normal business operations. Shell Canada
believes that its Year 2000 compliance activities are comprehensive and will
be completed by June 1999. However, it is not possible to be certain that all
aspects of the Year 2000 issue will be fully resolved, including those aspects
related to compliance by customers, suppliers or other third parties. The
total costs associated with these changes are expected to be less than $10
million before tax. |
