EARNINGS / Gulf Canada Q2 Results
GULF ANNOUNCES SECOND QUARTER RESULTS
CALGARY, July 30 /CNW/ -
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(All dollar amounts in this report are Canadian dollars)
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Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
---- ---- ---- ----
FINANCIAL (millions of
dollars)
Net oil and gas revenue 256 290 538 548
Cash generated from operations 83 106 188 246
Earnings (loss) for the period (55) (10) (102) 2
Capital expenditures and
exploration expenses 196 307 461 551
PER SHARE (x) (dollars)
Cash generated from operations 0.22 0.38 0.50 0.88
Earnings (loss) for the period (0.18) (0.06) (0.34) (0.03)
Average number of shares
(millions) 349 269 348 267
VOLUMES (gross sales)
Crude oil and liquids
(thousands of barrels
per day) 124 113 129 109
Natural gas (million cubic
feet per day) 482 472 485 461
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(x) Per share amounts are calculated after payment
of preference share dividends
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Gulf Canada Resources Limited reports an active second quarter as the
Company moved aggressively to implement its strategy of enhancing the value of
its assets through greater focus on its core areas.
In the second quarter of 1998, the Company divested non-core assets for
gross proceeds in excess of $600 million to reduce debt and fund investments.
The Company also made two, small strategic property acquisitions and announced
three international discoveries.
''At mid-year we have negotiated about $800 million worth, or 80 per
cent, of the non-core property divestitures announced in February'', said
Richard Auchinleck, President and CEO of Gulf Canada. ''We have made
substantial reductions to debt, completed transactions that clearly strengthen
the position of the Company in our core Netherlands and Australia regions, and
maintained a successful drilling program.''
''However, it was a disappointing quarter in terms of financial results
due to lower oil prices, so we are particularly pleased with the success of
Gulf employees in managing those factors within our control.''
Divestitures 80 Per Cent Complete; Strategic Acquisitions Made
The Company announced a plan in February 1998 to divest approximately $1
billion of non-core assets. By the end of the second quarter, approximately 80
per cent of the asset sales were negotiated. To date, the Company has received
$587 million in cash proceeds. Proceeds are primarily from the sale of
non-core holdings in the North Sea and Australia. In addition, the buyer of
the U.K. North Sea assets assumed $110 million of the Company's debt. At the
same time, the Company made acquisitions that increase its holdings in
prospective areas and add control over infrastructure.
Transactions negotiated during the quarter may be summarized as follows:
- Gulf Australia acquired a 50 per cent interest in the Jabiru and
Challis fields and production facilities located in the Timor Sea and
in close proximity to Gulf's recent Tenacious discovery;
- In Canada, the sale of non-core East Coast properties was negotiated
for $21 million; sales of northeast British Columbia properties and
oil sands leases were completed for $14 and $13 million, respectively;
- In Alberta, the purchase of an additional eleven per cent interest in
the Strachan gas processing plant increased Gulf's working interest to
61 per cent;
- In the Falklands, the sale of property interests for cash plus shares
in an emerging company enables Gulf to retain upside in this non-core
exploration area without the capital commitment.
Significant Progress in Debt Reduction
The Company is actively reducing debt in order to strengthen its balance
sheet and establish debt ratios that will better align the Company with its
peer group. Funds applied to reduce net debt during the quarter amounted to
nearly $500 million, a significant step in the 1998 program. The book value
of Gulf's US dollar-based debt increased by $77 million due to a weakening of
the Canadian dollar, partially offsetting the net debt balance. The remaining
difference between proceeds received and the reduction in net debt is
primarily attributable to draws from the Corridor project loan and bank lines
of credit to fund capital expenditures.
Exploration, Development and Production Results
Through the acquisition and divestiture transactions, Gulf is better
positioned to improve its performance in core areas.
The Company is maintaining an aggressive exploration and drilling
program. In Western Canada, 200 wells were drilled in the first half of this
year with notable success in the Steen, Musreau and west-central areas.
Internationally, Gulf announced natural gas discoveries in Indonesia and the
Netherlands and a liquids rich natural gas discovery in Algeria. Successful
delineation drilling on the Corridor block in Indonesia will result in
certification of additional reserves in the third quarter.
Sales volumes for the first half of 1998 were 16 per cent higher at
184,600 barrels of oil equivalent per day (boe/d) compared to the first half
of 1997 at 159,500 boe/d. Despite higher production and hedging benefits of
$25 million in the first six months of the year, low oil prices resulted in
significantly lower cash generation compared to the first half of 1997. Cash
generation is $188 million for the six month period, 24 per cent lower than
the same period in 1997. Lower oil prices were also the primary reason for a
loss in the first half of $102 million.
Western Canada sales volumes benefited from record sales of 21,000 b/d in
the second quarter from Gulf's 9.03 per cent ownership in Syncrude; however,
this was more than offset by several factors. Approximately 5,000 b/d of heavy
oil volumes were shut-in due to low commodity prices and in central Alberta,
three gas processing plants were temporarily closed for planned maintenance.
Outlook for the Second Half
Gulf will continue to improve the overall performance level of its asset
portfolio and, during the second half of 1998, will take other actions to
strengthen its financial capability. The next step in this program will be in
Western Canada where assets outside non-core areas have been identified for
sale in the second half of the year.
Also in the second half, Gulf will benefit from the start-up of the
Corridor Gas Project in Indonesia that will more than double production from
the area on a barrel of oil equivalent basis, and the Company will benefit
from reduced financing costs as a result of its debt reduction strategy.
The Company believes that it is likely oil prices will remain under
pressure for the remainder of 1998, and the business will be managed with that
in mind.
This report contains forward-looking statements within the meaning of
Section 27A of the United States Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including information about the Company's
reserves and expected results. Although Gulf believes that its expectations
are based on reasonable assumptions, these assumptions are subject to a wide
range of business risks and technical risks, including that inherent in
exploration for oil and gas and development of technology, and there is no
assurance Gulf's objectives will be achieved.
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CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
AND RETAINED EARNINGS
(Unaudited)
Three months Six months
ended June 30, ended June 30,
-------------------------------------------------------------------------
(millions of dollars) 1998 1997 1998 1997
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EARNINGS (LOSS)
Revenues
Net oil and gas $ 256 $ 290 $ 538 $ 548
Net gain on disposals 17 41 22 48
Other 38 11 74 35
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311 342 634 631
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Expenses
Operating - production 103 100 213 179
- other 29 3 49 5
Exploration 33 30 76 51
General and administrative 17 17 38 32
Depreciation, depletion and
amortization 120 115 252 206
Restructuring charges 2 4 3 5
Finance charges, net 62 58 120 103
Income tax expense 3 25 (9) 48
Minority interest (3) 0 (6) 0
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366 352 736 629
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Earnings (loss) for the period $ (55) $ (10) $ (102) $ 2
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RETAINED EARNINGS
Balance, beginning of period $ 127 $ 6 $ 181 $ 0
Earnings (loss) for the period (55) (10) (102) 2
Dividends declared on
preference shares (8) (5) (15) (11)
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Balance, end of period $ 64 $ (9) $ 64 $ (9)
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PER SHARE INFORMATION
(Unaudited)
Cash generated from operations
(dollars per share) $ 0.22 $ 0.38 $ 0.50 $ 0.88
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Earnings (loss)
(dollars per share) $ (0.18) $ (0.06) $ (0.34) $ (0.03)
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Certain amounts for 1997 have been reclassified to conform with the
presentation adopted for 1998.
Cash generated from operations per share and earnings (loss) per share
are after deduction of senior preference share dividends (but do not
include the special dividends for payment of arrears which have been
charged to contributed surplus). These per share amounts were calculated
based upon the following:
During the period ordinary shares outstanding (millions):
Average 348.8 268.8 347.9 266.7
(Note: As of June 30, 1998, Gulf had 348.9 million ordinary shares
outstanding.)
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months Six months
ended June 30, ended June 30,
-------------------------------------------------------------------------
(millions of dollars) 1998 1997 1998 1997
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OPERATING ACTIVITIES
Earnings (loss) for the
period $ (55) $ (10) $ (102) $ 2
Non-cash items included
in earnings (loss):
Depreciation, depletion
and amortization 120 115 252 206
Net gain on disposals (17) (41) (22) (48)
Amortization of deferred
foreign exchange losses 12 3 17 6
Exploration expense 33 30 76 51
Deferred income taxes (5) 13 (23) 27
Other (5) (4) (10) 2
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Cash generated from operations 83 106 188 246
Other long-term liabilities (7) (9) (6) (7)
Changes in non-cash working
capital 40 15 (28) 55
Other, net 1 0 (2) 1
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117 112 152 295
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INVESTING ACTIVITIES
Proceeds on disposals 512 55 587 73
Acquisitions (39) (7) (55) (1,066)
Capital expenditures and
exploration expenses (196) (307) (461) (551)
Changes in non-cash working
capital (9) (148) (6) (15)
Other, net (1) 5 (10) 72
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267 (402) 55 (1,487)
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DIVIDENDS
Regular dividends declared
on preference shares (8) (5) (15) (11)
Special dividends declared on
preference shares 0 (4) 0 (7)
Changes in non-cash working
capital 0 0 0 0
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(8) (9) (15) (18)
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FINANCING ACTIVITIES
Short-term loans (78) 175 (27) 791
Proceeds from issue of
long-term debt 49 122 146 429
Long-term debt repayments (367) (260) (377) (260)
Issue of equity 1 5 58 240
Other 0 0 0 1
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(395) 42 (200) 1,201
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Decrease in cash (19) (257) (8) (9)
Cash at beginning of period 199 301 188 53
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Cash at end of period (1) $ 180 $ 44 $ 180 $ 44
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(1) Comprises cash and short-term investments.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
June 30, 1998 Dec. 31, 1997
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(millions of dollars) (unaudited)
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ASSETS
Current
Cash and short-term $ 180 $ 188
Accounts receivable 338 346
Other 143 121
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661 655
Investments, deferred charges and
other assets 251 238
Property, plant and equipment 5,234 5,736
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$ 6,146 $ 6,629
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Short-term loans $ 24 $ 51
Accounts payable 336 420
Current portion of long-term debt 0 29
Current portion of other long-term
liabilities 59 37
Other 149 129
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568 666
Long-term debt 2,531 2,785
Other long-term liabilities 226 201
Deferred income taxes 209 307
Minority interest 214 220
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3,748 4,179
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Shareholders' equity
Share capital
Senior preference shares 577 577
Ordinary shares 1,718 1,660
Contributed surplus 35 35
Retained earnings 64 181
Foreign currency translation
adjustment 4 (3)
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2,398 2,450
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$ 6,146 $ 6,629
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SUPPLEMENTARY INFORMATION
(Unaudited)
Three months Six months
ended June 30, ended June 30,
1998 1997 1998 1997
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VOLUMES SOLD (1) (gross/net)
Crude oil and natural gas
liquids (thousands of
barrels per day)
North America
- Conventional light
crude oil 35.3/30.4 36.7/30.0 37.1/31.3 39.8/32.3
- Conventional heavy
crude oil 18.2/16.5 0.0/0.0 18.5/16.8 0.0/0.0
- Synthetic crude oil 21.0/21.0 15.8/17.2 18.6/18.6 16.3/16.0
- Condensate 6.0/4.2 5.0/3.2 6.1/4.3 5.5/3.7
- Other natural gas
liquids 9.8/7.4 8.8/6.9 10.7/8.4 10.1/8.3
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90.3/79.5 66.3/57.3 91.0/79.4 71.7/60.3
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International
- Indonesia 19.6/16.0 25.6/18.6 20.3/16.7 21.6/15.6
- United Kingdom 9.8/9.2 18.9/18.2 14.5/13.7 14.0/13.3
- Other 4.5/4.5 2.0/1.9 3.6/3.5 1.4/1.3
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33.9/29.7 46.5/38.7 38.4/33.9 37.0/30.2
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Total liquids 124.2/109.2 112.8/96.0 129.4/113.3 108.7/90.5
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Natural gas (millions of
cubic feet per day)
- North America 380/316 377/300 384/311 390/319
- Netherlands 68/67 70/69 74/73 53/52
- Other international 34/33 25/22 27/26 18/16
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Total natural gas 482/416 472/391 485/410 461/387
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Total barrels of oil
equivalent per day(2) 179.2/157.5 166.3/141.2 184.6/160.9 159.5/133.7
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(1) ''Gross'' sales include royalties; ''net'' sales are after royalties.
Volumes exclude:
- NGL re-injection
requirements (3.6) (4.2) (3.3) (4.3)
- inventory drawdown
/(build-up) (0.9) (2.3) 0.0 (1.0)
(2) Canadian gas converted at 10:1,
North Sea and other international at 6:1
GROSS AVERAGE PRICES
Crude oil and natural
gas liquids
(dollars per barrel)
North America
- Conventional light
crude oil 17.91 25.26 18.77 27.21
- Conventional heavy
crude oil 7.76 0.00 6.87 0.00
- Synthetic crude oil 20.43 27.15 20.85 28.68
- Condensate 20.22 27.55 22.80 29.25
- Other natural gas
liquids 10.24 17.52 12.32 20.36
International
- Indonesia 18.35 26.70 18.75 26.98
- United Kingdom 17.17 24.53 17.96 23.46
- Other international 21.58 28.47 19.73 29.16
Average
- unhedged 16.56 25.29 16.96 26.40
- hedged 17.36 24.80 18.02 25.37
Natural gas (dollars per
thousand cubic feet)
North America
- unhedged 1.90 1.61 1.92 1.92
- hedged 1.90 1.64 1.92 1.76
International 2.86 3.23 3.11 3.24
Average
- unhedged 2.10 1.94 2.17 2.12
- hedged 2.10 1.96 2.17 1.99
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AVERAGE EXCHANGE RATES
(Cdn$1) US$ 0.691 US$ 0.721 US$ 0.695 US$ 0.729
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SUPPLEMENTARY INFORMATION
(Unaudited)
Three months Six months
ended June 30, ended June 30,
1998 1997 1998 1997
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NET OIL AND GAS REVENUE
(millions of dollars)
Crude oil and natural
gas liquids
North America
- Conventional light
crude oil $ 61 $ 78 $ 142 $ 175
- Conventional heavy
crude oil 14 0 25 0
- Synthetic crude oil 39 39 70 85
- Condensate 11 13 25 29
- Other natural gas
liquids 9 14 24 37
Indonesia 33 63 69 106
United Kingdom 21 42 55 59
Other international 8 5 12 8
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196 254 422 499
Natural gas
North America 65 56 133 124
Netherlands 21 22 46 34
Other international 6 6 11 8
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92 84 190 166
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Sulphur 1 0 2 (2)
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289 338 614 663
Less: Royalties
North America - Conventional (25) (33) (59) (78)
- Synthetic 0 4 0 (2)
Indonesia (6) (16) (13) (30)
Other international (2) (3) (4) (5)
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Net oil and gas revenue $ 256 $ 290 $ 538 $ 548
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For further information: Gulf Canada Resources Limited, Investor
Relations and Public Affairs, (303) 813-3800 or (888) 345-4853 (GULF) |
