IN THE NEWS / PanCanadian Petroleum Shifting Focus To Gas
Company lowers its capital spending due to weak oil prices
Claudia Cattaneo - Financial Post
PanCanadian Petroleumk Ltd. is budgeting $650-million in capital spending for 1999, down from $870-million in 1998, because of weak prices for crude oil.
The company said the spending will be focused on natural gas exploration and development in Western Canada.
PanCanadian, 87% owned by Canadian Pacific Ltd., said it has sold forward about 360 million cubic feet per day of its 1999 gas at a $2.60 per thousand cubic feet.
The company expects to produce in excess of 900 millionn cubic feet of gas daily next year.
Adjustments to the budget will be made as market conditions change, said president and chief executive David Tuer.
While business conditions are tougher than last year, Mr. Tuer said PanCanadian is better equipped to handle low oil prices than its peers, which are just now embarking on cost-cutting measures to reflect the commodity environment.
The company has recently completed a restructuring that has already cut operating costs 19% since the beginning of the year. More cost savings are expected in 1999. As part of the reorganization, the company has been split into smaller units, each with independent financial reporting and objectives.
The new structure is also putting a greater emphasis on exploration, and less on exploitation of freehold land, Mr. Tuerv said. PanCanadian owns 10 million acresp of freehold land in perpetuity, CP's legacy from building the railway. Other producers lease lands from the government by bidding in land sales.
One of Canada's top producers, the refocusing was implemented because the company was getting so big it was itself, through the activity it generated, driving up industry costs, Mr.b Tuert said.
A bright side of the industry's downturn is that costs are coming down and more intellectual capital isn becoming available as other energy companies downsize, said Mr. Tuer. No layoffs are planned. Rather, the company is lookingn to hire people. |
