Black Thursday
Reuters
Investors pound Canadian oil firms for poor results
Thursday January 29, 2:25 pm ET
By Jeffrey Jones
CALGARY, Alberta, Jan 29 (Reuters) - Petro-Canada (Toronto:PCA.TO - News) and Shell Canada Ltd. (Toronto:SHC.TO - News), two of the country's biggest oil companies, pumped out fourth-quarter results on Thursday that fell far short of expectations despite sky-high oil and gas prices, sparking a major sell-off in the stocks.
Investors were blindsided by weak profits and operational issues, including a lower-than-expected production forecast from Petro-Canada and a third big reserve cut at Shell Canada's East Coast natural gas project, analysts said.
Shares in Petro-Canada, the country's No. 2 oil producer and refiner, skidded 13 percent, and Shell Canada, the No. 3 player, fell nearly 5 percent.
That dragged the Toronto Stock Exchange's (News - Websites) oil and gas group down more than 4 percent after months of sharp gains.
"We've been carried upward by higher and higher prices every quarter," said analyst Tom Ebbern of Calgary-based Tristone Capital Corp. "Now that we're up there, we still have great prices but operations have to carry the day, and that's what was disappointing."
The bright spot was Suncor Energy Inc. (Toronto:SU.TO - News), the fourth-largest integrated oil firm, whose quarterly profit beat expectations due to gains in its marquee oil sands business.
Petro-Canada, known for its national gas station chain, oil sands production and international oil operations, earned C$200 million ($150 million), or C$0.75 a share, down from year-earlier C$356 million, or C$1.34 a share.
Earnings were cut by an C$82 million writedown after it scrapped a plan to build an oil sands upgrader at its Edmonton, Alberta, refinery, and a C$51 million charge from higher tax rates in Ontario.
Excluding onetime items, profit was C$285 million, or C$1.07 a share, still far short of an average estimate of C$1.37 a share among analysts polled by Reuters Research.
Some of the drop was due to last year's 17 percent surge in the Canadian dollar against the greenback, which wiped away the impact of higher oil and gas prices and squeezed refinery profit margins.
Most disappointing was the company's projection that it will produce 450,000 barrels of oil equivalent a day in 2004, down from fourth-quarter output of 471,500 bpd, Ebbern said.
He said the drop raises questions about short-term production growth from international operations after the company scaled back its Canadian oil sands strategy late last year.
The stock tumbled C$8.70 to C$57.90, translating into a drop of nearly C$2.5 billion in Petro-Canada's market value.
MORE RESERVE TROUBLES FOR SHELL
Shell Canada's quarterly profit fell a worse-than-expected 23 percent to C$190 million, or 69 Canadian cents a share, down from year-earlier C$247 million, or 89 Canadian cents a share. It blamed a write-off of the cost of an East Coast well, higher operating expenses and weaker refining margins.
The company revised down its estimate of reserves at the Sable Offshore Energy Project off Nova Scotia by 60 percent -- the third time it cut the numbers.
Reserves are an extremely touchy subject after its parent, Anglo-Dutch oil major Royal Dutch/Shell Group (Amsterdam:RD.AS - News; London:SHEL.L - News), early this month removed 3.9 billion barrels from its "proven" category, sparking a drop in the share price and legal action.
Shell Canada, which owns 31.3 percent of the 500 million cubic feet a day Sable project, said a review of its Glenelg Tier 2 expansion showed it was not currently economically viable.
That prompted the firm to chop the reserves to 300 billion cubic feet from 730 bcf. However, Shell Canada's overall reserves rose, due mostly to last year's start-up of its C$5.7 billion Alberta oil sands project.
Shell Canada's stock fell C$2.97 to C$59.58.
Suncor's quarterly profit rose to C$300 million, or 67 Canadian cents a share, from C$258 million, or 56 Canadian cents a share, as oil sands production rose 3.3 percent to 235,200 barrels a day and costs came in as expected.
However, its shares got caught in the sector-wide downdraft, falling C$1.14, or 3 percent to C$33.07.
Reuters
UPDATE - Toronto stocks drop 100 points as energy slumps
Thursday January 29, 1:56 pm ET
(Updates with details)
TORONTO, Jan 29 (Reuters) - Toronto stocks slumped more than 100 points on Thursday afternoon in a broad-based retreat led by the energy sector, which was felled by disappointing earnings from big oil names.
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The Toronto Stock Exchange's S&P/TSX composite index (Toronto:^GSPTSE - News) dropped 100.59 points, or 1.18 percent, to 8,435.12 in early afternoon trade.
"It's wild and woolly, mostly because of the currencies and bad earnings," said Tom Green, a trader at Commission Direct.
Six of the 10 TSX index subgroups were lower, led by a 4.11 percent drop in the energy sector.
Investors punished energy companies Petro-Canada (Toronto:PCA.TO - News) and Shell Canada (Toronto:SHC.TO - News) on Thursday after they reported weaker than expected earnings and missed key targets.
Energy stocks were also hurt by a dip in oil prices, which fell on speculation the long winter rally had run out of momentum.
Petro-Canada shares fell C$8.54, or 12.78 percent, to C$57.96, while Shell Canada stock shed C$3.04, or 4.86 percent, at C$59.51.
The gold-mining sector slumped 3.13 percent as bullion prices slid to a two-month low in New York as the U.S. dollar surged on speculation the U.S. Federal Reserve may be closer to raising interest rates.
In Toronto, Placer Dome (Toronto:PDG.TO - News) lost 76 Canadian cents, or 3.57 percent, at C$20.50, while Meridian Gold (Toronto:MNG.TO - News) fell 80 Canadian cents, or 4.76 percent, at C$16.02.
The broader materials group fell 2.9 percent.
Modest gains by the consumer staples, industrials, financials and health-care sectors were not enough to stem the slide.
The health-care group was up 1.38 percent, buoyed by QLT Inc. (Toronto:QLT.TO - News), which soared after U.S. health authorities expanded patient reimbursement for the company's Visudyne therapy to treat age-related blindness.
QLT shares rose C$5.14, or 21.64 percent, to C$28.89.
($1=$1.33 Canadian) |
