MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING FRIDAY, FEBRUARY 27, 1998 (04)
FEATURE STORY
Canadian Occidental Petroleum Profit Hurt By Oil Prices
The Financial Post
Canadian Occidental Petroleum Ltd. said Friday lower oil prices and accounting charges related to last April's acquisition of Wascana Energy Inc. resulted in a lower 1997 profit of $139 million ($1.02 a share), down from $190 million ($1.40) a year earlier.
But cash flow from operations increased to $865 million ($6.34) for the year ended Dec. 31 from $766 million ($5.64) in1996.
Fourth-quarter results took an even bigger hit from lower oil prices. Net income for the period fell to $15 million (11›), down from $47 million (34›) in 1996.
Eighty per cent of CanOxy's production is oil, the remainder is natural gas. The company is active in Western Canada, Yemen, the U.S. and the North Sea.
Revenue was $1.68 billion for the year, up from $1.36 billion in 1996.
CanOxy beat out Talisman Energy Inc. in taking over Wascana. But the $1.7-billion acquisition pushed up long-term debt to $2.09 billion, from $463 million in 1996. Debt was reduced last year by $500 million from the sale of assets.
There are no plans for a major debt reduction program this year, said spokesman Kevin Finn. CanOxy is planning to end 1998 with $2 billion in debt. "We are comfortable with that level of debt. We have better places to use the money," he said.
The company is planning an $800-million capital spending program for 1998 - $200 million less than budgeted earlier. Last year, CanOxy spent $925 million, up from $632 million in 1996.
Despite the capital spending reduction and lower commodity prices - CanOxy is assuming oil prices will average US$17.50 a barrel this year - the company expects 1998 cash flow to remain at the same level as in 1997 because of production growth.
Average production was 258,000 barrels of oil equivalent daily in the fourth quarter (reflecting the addition of Wascana) and 235,000 boe/d for 1997. Production is expected to stay at that level in 1998, Finn said.
CanOxy's heavy oil production - 40,000 b/d - is still on stream because of relatively low production costs.
Low prices for heavy oil have forced some of its competitors to shut in wells.
FEATURE STORY
Falling Oil Prices Hit Renaissance Energy And Northstar Energy
The Financial Post
Increases in oil and natural gas production in 1997 for Renaissance Energy Ltd. were offset by falling oil prices and higher costs, cutting the firm's net income and cash flow.
Renaissance's profit fell 36% to $115 million ($1 a share) on revenue of $948 million, compared with $180 million ($1.66) on revenue of $953 million in 1996. Cash flow was off 8%, to $530 million.
The Calgary producer increased daily oil volume by 15% and gas output by 11%. Falling world prices and a widening differential in Canada between light and heavy crudes cut its average oil price by 18%.
Renaissance's finding and developments costs of $6.57 a proven barrel of oil equivalent impressed Calgary stock watcher Peter Linder of CIBC Wood Gundy Inc., who had expected a figure closer to $8 a BOE.
"The fact they replaced their production threefold, that to me is very encouraging and surprising." Linder has upgraded his rating to "hold" from "underperform" and has a 12-month target price of $30 a share.
Fourth-quarter profit fell 39% to $33 million (28›) on revenue of $251 million, compared with $54 million (47›) on revenue of $283 million a year earlier. Cash flow decreased $21 million, to $143 million.
Northstar Energy Ltd. reported Friday that its profit fell 19% to $50.1 million (68›) on revenue of $266.2 million, down from $62.1 million (72›) on revenue of $293.7 million in 1996. The 1996 figures reflect its merger last year with Morrison Petroleums Ltd. Cash flow slipped 19% in 1997 to $167 million.
David Holtby, analyst with L‚vesque Beaubien Geoffrion Inc. in Calgary, said Northstar's gas-oriented land holdings and drilling program may appeal to investors who believe pipeline expansions this year will boost prices. The company needs to show the market it has worked through the Morrison merger and can resume growth, he said. He has a "buy" call on the stock with a 12-month target of $11.
Fourth-quarter earnings plunged to $4 million (7›) on revenue of $71.6 million, far below the $27.8 (32›) million earned from revenue of $84.4 million the year before. Cash flow fell to $41.7 million from $61.9 million.
FEATURE STORY
Husky Digs In For Long Haul
Husky Oil officially opened its digs in St. John's Thursday and confirmed plans to resume assessment drilling this year and possibly begin a stepped-up production drilling program on the Whiterose field in the next couple of years.
The 250-million barrel Whiterose field will likely be the third major offshore development on the Grand Banks, after Hibernia and Terra Nova.
The temporary production drilling - which could produce more than 10,000 barrels a day while Husky tests the reservoir - is not yet an official project but Husky chief executive officer John Lau said it was still the plan.
Husky is making the Grand Banks a major focus for future growth, Lau said.
"The commitment of Husky and its partners is a clear demonstration of our confidence in the potential of the <b.Terra Nova, Whiterose, North Ben Nevis and Cape Race plays and other discovery licences," Lau said.
Sliding oil prices are a concern, Lau said, but Atlantic Canada remains an attractive region.
Brent crude, which trades at slightly less than Hibernia crude, closed at $13.83 Wednesday, down from a high of $21.50 last October.
"You have to look at oil prices in the long term," Lau said. "They tend to come in cycles. (Am I) concerned? Yes, everybody is concerned about it. In the medium term we are quite confident prices will return to a reasonable level."
Eastern Canada is a competitive exploration area, Lau said.
"There are definite commercial advantages here," he said.
Premier Brian Tobin said from a regulatory point of view he is not opposed to a test production drilling program, but added a detailed plan would have to be submitted by Husky. "Terra Nova and Hibernia are much larger fields," Tobin said. "What's really challenging now is developing the technology and capability of developing smaller fields."
Husky has said in the past it might set up a temporary rig and tanker system and establish a 250- to 350-day production test period leading up to a permanent rig and full production in 2002.
Delineation drilling - drilling to assess the potential productivity and size of the field - is scheduled to begin in September using the Global Marine rig.
The Bill Shoemaker rig, which ran into trouble and delays drilling the West Bonne Bay property for Amoco last year, will take over delineation in 1999.
Earlier in the day, Husky announced plans to support the establishment of a Petroleum Engineering Resource Centre at Memorial University.
Husky Oil Ltd. is a privately held Calgary-based company controlled by the Hong Kong-based Li Ka-Shing Group of Companies.
FEATURE STORY
More On Iraq.
Iraq Current Oil Exports 1.2 Mln bpd--Oil Minister
Reuters
Iraq is currently exporting 1.2 million barrels per day (bpd) of crude oil and has a production capacity of 2.3 mln bpd, Oil Minister Amir Muhammad Rasheed told a news conference on Saturday.
He said production capacity could be increased to 2.65 million bpd in two to three months if the United Nations agreed to supply Iraq with the spare parts its oil sector needed.
Rasheed said that under present circumstances Iraq would be unable to export more than $4 billion worth of oil under the third phase of its U.N. food for oil deal.
This would be well below the $5.256 billion allowed in the six-month period under a recent U.N. Security Council resolution designed to increase the amount of food and medicine Iraq could buy to alleviate problems faced by the Iraqi people as a result of U.N. sanctions.
Iraq was negotiating with the United Nations for the supply of spare parts for the oil sector, he said.
OIL & GAS
WORLD
Oil flat As Doubts Grow About OPEC Meeting
World oil prices were steady on Friday as oil dealers grew doubtful that OPEC can mount a quick rescue operation to help lift glutted global oil markets.
Brent blend, the world benchmark grade, spiked higher before the close with speculators keen to cover positions ahead of the weekend.
Brent rose to $14.25 a barrel but then eased back to end 14 cents firmer at $14.17.
This is more than $5 below the average price for last year and some $11 below a post-Gulf War peak hit about 16-months ago.
Key members of the Organisation of Petroleum Exporting Countries remain wide apart on what to do to stem the glut in oil supplies.
Venezuela, considered the leading violator of OPEC's output quotas, said on Friday it would not reduce oil production by even one barrel.
Saudi Arabia, the world's leading exporter, on its part appeared to maintain its cautious approach to collective OPEC action in the face of a call for an emergency meeting.
A Gulf source speaking to Reuters by telephone from the kingdom commented on Indonesian Mines and Energy Minister and OPEC President Ida Bagus Sudjana's Thursday call for an emergency meeting to discuss prices.
''There's nothing to it, first of all Saudi Arabia wants to figure out if the Indonesian minister is for, or not for an emergency meeting. A few days ago he said it was not necessary,'' the Gulf source said.
''I don't think Saudi Arabia will be bounced into a meeting,'' said Nigel Saperia, managing director of the oil trading desk at Bankers Trust International.
Saudi Arabian oil minister Ali al-Naimi said recently that his country was interested in ''meaningful efforts toward quota adherence'' from OPEC over producers before it would consider a variety of measures including attending an emergency OPEC ministerial meeting.
His Venezuelan counterpart Erwin Arrieta said on Friday that he was warm to the idea of an emergency OPEC meeting but that Venezuela would not reduce its output.
''We won't reduce oil production by even one barrel,'' he told reporters at Miraflores presidential palace.
Arrieta said he had not yet received an official invitation to an emergency but that he would like any talks broadened to include non-OPEC oil producers.
''Venezuela would agree to such a meeting and also suggest the need to invite non-OPEC independent producers, such as Mexico, Russia, Norway, Egypt and Oman,'' he said.
Venezuela pumped 3.35 million barrels per day (bpd) in February, more than 700,000 barrels above its quota.
But Arrieta said: ''There've been no official accusations of violating quotas.''
The price losses on Friday will be further worry for members of the 11-nation OPEC, whose revenues have suffered deep cuts from the $5 slide in oil prices over the last three months.
OPEC president Sudjana said on Friday that the group's production quota could be lowered if all members agree to do so, the official Antara news agency reported.
The current oil price weakness is partly due to OPEC's decision in November to raise its overall output ceiling by 10 percent to 27.5 million bpd.
Several members are already pumping above their quotas with OPEC January output seen at 28 million bpd.
The Asian economic crisis, combined with mild winter weather in the northern hemisphere, crimped global demand just as extra barrels became available, sending prices into a downward spiral.
''It would be a mistake to totally discount an (OPEC) agreement but prices will probably have to fall further before OPEC is galvanised into action,'' said brokers GNI in market comments on Friday.
Meanwhile, dealers are also awaiting a possible increase in the volume of Iraqi oil exports. The United Nations has approved an increase in the value of Baghdad's ''oil-for-food'' deal to $5.2 billion every six months from $2 billion.
Although Iraq says it lacks the technical capacity to export more than $4 billion every half-year, it says the aid distribution plan needed before any increase should be ready by the end of March.
The markets thus face the prospect of several hundred thousand extra barrels of unwanted oil.
|
