EARNINGS / PanCanadian Resources reports 1st 3 months Results
CALGARY, April 20 /CNW/ - PanCanadian announced today that during the
first quarter of 1998, production of natural gas averaged 787 million cubic
feet per day, up eight percent from 729 million cubic feet per day in 1997.
Production of crude oil and natural gas liquids averaged 150,893 barrels per
day, up seven percent from 141,379 barrels per day in the same period in 1997.
For the first quarter of 1998, PanCanadian reported net income of $45
million or $0.18 per share and cash flow of $210 million or $0.84 per share.
For the same period in 1997, the Company reported net income of $135 million,
or $0.54 per share, and cash flow of $280 million, or $1.12 per share. The
decrease in earnings and cash flow from the first quarter of 1997 is a result
of significantly lower crude oil and natural gas prices.
The price received by PanCanadian for its natural gas averaged $1.88 per
thousand cubic feet in the first quarter, down 21 percent from an average of
$2.38 per thousand cubic feet in the same period in 1997. Crude oil prices
averaged $13.05 per barrel before hedging, down 46 percent from $24.28 per
barrel in the first quarter of 1997 as a result of significantly weaker world
prices and wider differentials between light and heavy crude oil. During the
quarter, hedging activities had a favourable impact on crude oil prices,
raising the average price received by $4.19 per barrel to $17.24 per barrel.
''The weak crude oil price environment has had an adverse impact on the
Company, particularly in the heavy oil area, resulting in a reduction in our
planned capital program for 1998,'' said David Tuer, President and Chief
Executive Officer of PanCanadian. ''The Company is focused on value added
growth - we will continue to exploit our gas-rich fee lands in order to add
increasingly valuable gas production and to fill the additional pipeline
capacity coming onstream late in the year.''
OUTLOOK
At the beginning of the year, natural gas prices were relatively weak
because of the warm winter. Prices have subsequently strengthened and are
expected to continue to strengthen throughout the remainder of 1998 as
expansions to the TransCanada and Northern Border pipeline systems come
onstream. PanCanadian continues to pursue an aggressive natural gas program
for 1998 and plans to exit the year with production 10 percent higher than its
estimated annual average volume of 800 million cubic feet per day.
For the balance of 1998, the Company expects crude oil prices to continue
to be volatile, and to be significantly lower than in 1997. Currently,
PanCanadian's planned capital program for 1998 is $960 million, but this is
under continual review in light of the prevailing commodity price environment.
The Company will manage its capital expenditures as market fundamentals
dictate. With this planned capital budget, average crude oil and liquids
production is expected to be approximately 148,000 barrels per day.
<<
COMPARATIVE HIGHLIGHTS
FINANCIAL
Three Months Ended March 31
(millions of dollars, except ---------------------------
amounts per share) 1998 1997
-------------------------------------------------------------------------
Revenues $ 735.8 $ 867.8
Cash flow 210.3 280.5
Per share 0.84 1.12
Net income 44.9 135.3
Per share 0.18 0.54
Capital expenditures (x) 291.5 163.6
(excludes acquisitions and dispositions)
(x) For the first quarter of 1998, capital expenditures were
significantly higher than the same period in 1997 because of the carryover
of activities from the latter part of 1997 and lower than normal capital
spending in the first quarter of 1997 due to severe weather conditions.
DAILY PRODUCTION AND SALES
(before royalty)
-------------------------------------------------------------------------
Crude oil (barrels) 137,670 127,548
Field natural gas liquids (barrels) 13,223 13,831
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Total crude oil and field natural gas liquids 150,893 141,379
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Empress plants (barrels)
Production 13,846 14,273
Sales 12,472 12,278
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-------- --------
Natural gas (million cubic feet)
Production 787 729
(x)Sales 765 726
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-------- --------
(x) Sales represent total gas production, less a portion that is upgraded
and sold as natural gas liquids.
>>
OPERATIONAL HIGHLIGHTS
Canada:
Recent significant discoveries in deeper zones
Six significant discoveries were drilled in deeper zones in Alberta in
late 1997 and early 1998. Four of these discoveries were oil and two were
natural gas. In the Ferrier area, liquids-rich natural gas wells flowed at
stabilized test rates of 17 million cubic feet per day. Testing and evaluation
of these wells are ongoing.
Farmout activities
In March, PanCanadian entered into a three-year farmout agreement with
Compton Petroleum Corporation. The farmout covers a 300,000-acre area, and
requires a significant drilling commitment. Compton will provide processing
for all of PanCanadian's natural gas production in the area. In order to
extend the Company's exploration program, PanCanadian will continue to review
additional farmout and joint venture opportunities on its lands.
PanCanadian Energy Services
In March, PanCanadian Energy Services was formed through the
consolidation of PanCanadian's wholly owned partnership, National Gas &
Electric L.P., and its natural gas marketing group. The establishment of
PanCanadian Energy Services reflects PanCanadian's commitment to provide
seamless energy services from the source to the customer. PanCanadian Energy
Services markets more than two billion cubic feet of gas per day and is
headquartered in Houston, Texas.
International:
Gulf of Mexico
Late in 1997, drilling was suspended on the Llano well at a depth of
25,342 feet, due to limitations of the semi-submersible rig. In March of this
year, a second and larger offshore rig was brought on site in order to deepen
the well to the target depth of 28,000 feet. Drilling commenced in early
April, and further information is expected late in the second quarter.
PanCanadian holds a 20 percent interest in Llano.
Also in March, a second well was spudded in Green Canyon in the deep
water Gulf of Mexico. This prospect, called Sheba, in which PanCanadian holds
a 28 percent interest, has a target depth of 28,000 feet. Drilling should be
completed by the end of the second quarter.
Subject to approval by the United States government, PanCanadian and its
partners were the successful bidder on an additional eight blocks in the deep
water Gulf of Mexico at a recent sale. These blocks will increase
PanCanadian's position in the deep water Gulf of Mexico to 30 blocks.
Australia
In January, the first Woollybutt appraisal well on Australia's Northwest
Shelf was cased and suspended, without logging, following favourable coring
results. Evaluation of 3D seismic is ongoing, and further appraisal drilling
is required to delineate the extent of the field. PanCanadian holds a 40
percent interest in Woollybutt.
Venezuela
In late March, PanCanadian was given approval for the development plan
for the reservoir reactivation of block B2X-70/80 in Lake Maracaibo,
Venezuela. PanCanadian is discussing the timing of the development plan with
its partners. The Company currently has a 50 percent interest in this project.
CORPORATE EVENTS
Workforce Reduction:
In February, due to weak world oil prices and higher differentials
between light and heavy oil, the Company reduced its permanent and contract
workforce by approximately 10 percent and announced that it will reduce its
efforts in heavy oil production. Reductions in operational costs and staff
occurred in all units of the Company and will result in the closure of two
field offices at Elk Point and Provost, Alberta.
Financial Developments:
In March, PanCanadian issued $200 million in medium term notes in two
tranches. The first tranche of $100 million five-year notes, carries a coupon
rate of 5.5 percent, and matures March 17, 2003. The second tranche of $100
million 10-year notes, carries a coupon of 5.8 percent and matures June 2,
2008. The proceeds will be used for general corporate purposes.
PanCanadian's Board of Directors approved a quarterly dividend of 10
cents per share, payable on June 30, 1998 to shareholders of record as of June
15, 1998.
Organizational Developments:
Effective January 1, 1998, PanCanadian consolidated its operations
business units under a single entity, PanCanadian Resources. PanCanadian
Resources is comprised of five domestic business units: Palliser, South
Central Alberta, Van Horne (Heavy Oil), Weyburn and East Coast.
Michael A. Grandin and Dennis A. Sharp were elected to the Board of
Directors of the Company at the Annual General Meeting held on April 16, 1998.
Mr. Grandin is the Executive Vice President and Chief Financial Officer of
Canadian Pacific Limited, and Mr. Sharp is the Chairman and Chief Executive
Officer of United Tri-Star Resources Ltd. PanCanadian welcomes Mr. Grandin
and Mr. Sharp to the Board of Directors.
<<
AVERAGE SALES PRICES
Three Months Ended March 31
---------------------------
(dollars per unit) 1998 1997
-------------------------------------------------------------------------
Crude oil (per barrel) $ 13.05 $ 24.28
Hedging 4.19 (2.95)
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$ 17.24 $ 21.33
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Field natural gas liquids (per barrel) $ 18.03 $ 23.57
-------- --------
-------- --------
Empress plants (per barrel) $ 18.24 $ 28.21
-------- --------
-------- --------
Natural gas (per thousand cubic feet) $ 1.88 $ 2.38
Hedging (0.02) 0.21
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$ 1.86 $ 2.59
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-------- --------
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended March 31
---------------------------
(millions of dollars) 1998 1997
-------------------------------------------------------------------------
REVENUES
Operating $ 402.4 $ 488.7
Crown royalties and similar payments (25.9) (42.1)
Marketing 358.1 421.9
Interest and other 1.2 (0.7)
-------- --------
735.8 867.8
-------- --------
EXPENSES
Operating 107.4 108.5
Purchased product 354.4 414.0
Administrative 40.8 24.4
Interest 21.6 15.3
Depletion, depreciation and amortization 144.1 125.1
-------- --------
668.3 687.3
-------- --------
INCOME BEFORE INCOME TAXES 67.5 180.5
-------- --------
PROVISION FOR INCOME TAXES
Current 3.6 25.7
Deferred 19.0 19.5
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22.6 45.2
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NET INCOME $ 44.9 $ 135.3
-------- --------
-------- --------
CONSOLIDATED STATEMENT OF CHANGES IN CASH POSITION
(Unaudited)
Three Months Ended March 31
---------------------------
(millions of dollars) 1998 1997
-------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 44.9 $ 135.3
Amounts not requiring a current
outlay of cash 165.4 145.2
-------- --------
Cash flow 210.3 280.5
Net change in deferred items (2.1) 1.3
Net change in non-cash working capital (12.1) 86.4
-------- --------
196.1 368.2
-------- --------
FINANCING ACTIVITIES
Increase in long-term debt 119.2 0.7
Issue of common shares 0.2 4.9
Dividends (25.2) (25.1)
Net change in non-cash working capital (44.3) -
-------- --------
49.9 (19.5)
-------- --------
INVESTING ACTIVITIES
Conventional
Petroleum, natural gas and
mineral properties (201.8) (134.0)
Plant, production and other equipment (89.7) (29.6)
-------- --------
(291.5) (163.6)
Net dispositions 2.2 11.5
Net change in non-cash working capital (1.6) 3.6
Net change in other assets (2.1) (4.5)
-------- --------
(293.0) (153.0)
-------- --------
INCREASE (DECREASE) IN CASH (47.0) 195.7
CASH AT BEGINNING OF PERIOD 89.6 355.2
-------- --------
CASH AT END OF PERIOD $ 42.6 $ 550.9
-------- --------
-------- --------
CONSOLIDATED CONDENSED BALANCE SHEET
As at March 31
(Unaudited) --------------
(millions of dollars) 1998 1997
-------------------------------------------------------------------------
ASSETS
Cash and short-term investments $ 42.6 $ 550.9
Other current assets 368.3 502.3
Property, plant and equipment - net 4,956.6 3,778.9
Deferred charges and other assets 190.0 113.3
-------- --------
$ 5,557.5 $ 4,945.4
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 363.6 $ 355.3
Long-term debt 1,250.9 898.5
Deferred credits and liabilities 191.5 163.7
Deferred income taxes 1,112.2 1,021.6
Shareholders' equity 2,639.3 2,506.3
-------- --------
$ 5,557.5 $ 4,945.4
-------- --------
-------- --------
Weighted average number of shares
outstanding (millions) 251.7 251.3
1998 PRODUCT REVENUE VARIANCES FROM 1997
Three Months Ended March 31
---------------------------
(millions of dollars) Price Volume
-------------------------------------------------------------------------
Crude oil $ (50.4) $ 19.1
Field natural gas liquids (6.7) (1.2)
Empress plants (10.3) 0.5
Natural gas (50.3) 9.3
Other 3.6 0.1
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Total operating revenue $ (114.1) $ 27.8
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-------- --------
DRILLING SUMMARY
Three Months Ended March 31
(gross number of working ---------------------------
interest wells drilled) 1998 1997
-------------------------------------------------------------------------
Crude oil 190 181
Natural gas 119 95
Service 9 7
Dry 86 40
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404 323
-------- --------
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Success ratio 79% 88%
Average working interest 97% 94%
SELECTED FINANCIAL INFORMATION
12 Months Ended March 31
------------------------
1998 1997
-------------------------------------------------------------------------
Net debt to cash flow 1.4 0.3
Return on average shareholders' equity 9.3% 16.8%
Return on average invested capital 7.7% 13.0%
Debt to capital 24.1% 19.6%
>>
Note: This news release contains forward-looking information. Actual
future results may differ materially. The risks, uncertainties and other
factors that could influence actual results are described in PanCanadian's
annual report to shareholders.
PanCanadian Petroleum Limited
Mackenzie M.L. Kwan
Senior Vice President and Chief Financial Officer
PanCanadian Petroleum Limited
Shares Listed - Symbol: PCP
The Toronto Stock Exchange
Montreal Exchange
The Alberta Stock Exchange |
