EARNINGS / PanCanadian Petroleum generates $600 million in cash flow
for the first nine months of 1998
CALGARY, Oct. 16 /CNW/ - PanCanadian announced today third quarter cash
flow of $196 million or $0.78 per share, down just nine percent from $216
million or $0.86 per share for the same period in 1997. The Company reported
net income of $16 million or $0.07 per share for the third quarter compared
with $57 million or $0.23 per share in 1997. The decrease in cash flow and
earnings from the third quarter of 1997 is primarily the result of
significantly lower crude oil prices.
During the third quarter of 1998, PanCanadian produced an average of 769
million cubic feet per day of natural gas, up seven percent from 718 million
cubic feet per day in 1997. Production of crude oil and natural gas liquids
averaged 136,946 barrels per day compared with 139,285 barrels per day in
1997. The decrease in crude oil production is the result of the economic
shut-in of heavy oil production.
Natural gas prices remained strong in the third quarter and averaged
$1.95 per thousand cubic feet, up 19 percent from $1.64 per thousand cubic
feet in the third quarter of 1997. PanCanadian received an average crude oil
price of $15.64 per barrel in the third quarter, down 23 percent from an
average of $20.28 per barrel in the same period in 1997. This decline is a
result of significantly weaker world prices.
''Despite continuing weak world oil prices, the Company's cash flow
during the third quarter remained strong. In part, this was driven by the
Company's success in lowering its unit operating costs by more than 19 percent
in 1998,'' said David Tuer, President and Chief Executive Officer of
PanCanadian. ''We are now significantly ramping up our natural gas volumes to
fill the additional pipeline capacity scheduled to start in the fourth
quarter. As well, we have fixed the sales price on approximately 260 million
cubic feet per day of our natural gas production at a field gate price of
approximately $2.60 per thousand cubic feet, from November 1998 through
October 1999 inclusive.''
During the first nine months of 1998, PanCanadian reported cash flow of
$600 million or $2.38 per share and net income of $95 million or $0.38 per
share, down from cash flow of $707 million and net income of $260 million
during the same period in 1997. Capital expenditures totaled $718 million for
the first nine months of the year with the drilling of 819 wells at an 85
percent success rate.
OUTLOOK
For the rest of 1998, the Company expects the price of West Texas
Intermediate crude oil to remain volatile, and to be lower on average than in
the fourth quarter of 1997. Differentials between light and heavy crude oil
narrowed significantly during the third quarter and the Company expects the
differentials to remain narrow for the balance of the year. With declining
heavy oil production, PanCanadian expects to produce an average of 141,000
barrels per day of crude oil and natural gas liquids for 1998.
Natural gas prices are expected to remain strong throughout the fourth
quarter of 1998 as expansions to the Northern Border and TransCanada pipeline
systems come onstream and increase demand. However, with the expected delay
of the expansion on the Northern Border system and the sale of the Company's
interest in the Waveney gas field, PanCanadian has lowered its average annual
forecast for natural gas production by 10 million cubic feet per day to 790
million cubic feet per day for 1998. PanCanadian will continue to pursue an
aggressive natural gas development program for the balance of 1998 and 1999.
COMPARATIVE HIGHLIGHTS
Three Months Nine Months
FINANCIAL Ended September 30 Ended September 30
-------------------- --------------------
(millions of dollars,
except amounts per share) 1998 1997 1998 1997
------------------------------------------------------------------------
Revenues $ 647.7 $ 758.1 $ 2,121.9 $ 2,339.6
Cash flow 196.1 216.2 600.1 706.9
Per share 0.78 0.86 2.38 2.81
Net income 16.3 56.9 94.9 260.3
Per share 0.07 0.23 0.38 1.04
Capital expenditures 203.7 349.0 718.3 753.9
(excludes net dispositions)
DAILY PRODUCTION
(before royalty)
------------------------------------------------------------------------
Crude Oil (barrels) 126,140 128,313 130,633 124,696
Field natural gas liquids
(barrels) 10,806 10,972 12,321 12,602
--------- --------- --------- ---------
Total crude oil and field
natural gas liquids 136,946 139,285 142,954 137,298
--------- --------- --------- ---------
Empress plants (barrels)
Production 12,800 12,083 13,326 12,911
Sales 11,306 10,325 12,265 12,155
--------- --------- --------- ---------
Natural gas (million cubic
feet)
Production 769 718 768 723
(x)Sales 749 697 748 704
--------- --------- --------- ---------
(x) Sales represent total gas production, less a portion that is upgraded
and sold as natural gas liquids.
OPERATIONAL HIGHLIGHTS
Canada:
Van Horne business unit reorganization
PanCanadian Resources has initiated a reorganization of its heavy oil
operations into two separate groups in order to maximize the value of the
distinctly different heavy oil assets. One group will focus on growing
production at Pelican Lake and developing high-volume growth assets that are
amenable to thermal recovery processes. The second group will focus on the
remaining heavy oil assets located in the Lloydminster area.
Authorization to export electricity
In September, PanCanadian Energy Services received authorization from the
U.S. Department of Energy to export electricity to Canada for a period of two
years. The authorization gives the Company the flexibility to market
electricity in Canada, which will allow electricity supply cost optimization
in the Company's operations.
Weyburn carbon dioxide supplier re-examines its investment options
In September, Dakota Gasification Co. (DGC) of North Dakota advised
PanCanadian that it is re-examining its investment options in relation to its
commitments to construct a pipeline to deliver CO(2) to the Weyburn project
and to supply CO(2) from its coal gasification facility. PanCanadian will
participate in DGC's review with respect to how DGC's decisions affect the
Weyburn project. The review by DGC could result in a delay of the start of
the CO(2) injection at Weyburn, which is scheduled for December 1, 1999.
East Coast
The Government of Newfoundland and Labrador has approved an application
by PanCanadian and its partners to drill an exploration well on Shoal Point on
the Port au Port Peninsula in West Newfoundland. Drilling is scheduled to
start in December and last approximately three months. PanCanadian is the
operator and holds a 37.5 percent interest.
International:
Gulf of Mexico
During the third quarter, the Company had two prospects being drilled in
the deep water Gulf of Mexico. Tropical storms and hurricanes delayed
drilling on both of these wells. The Elvis prospect is currently at a depth
of approximately 17,000 feet and should reach its target depth by the end of
October. The second well, called Sheba, did not result in a discovery and the
well is being abandoned.
The drilling of the first appraisal well of the Llano prospect is
expected to commence in early November.
Subject to approval by the United States government, PanCanadian and its
partners were the successful bidder on an additional four 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 35 blocks or
198,000 acres.
Ivory Coast
The Company acquired a 15 percent interest in exploration blocks CI-101
and CI-103 in West Africa. These deep water blocks cover about 5,600 square
kilometres and are located 30 kilometres offshore. Exploration work includes
the evaluation of existing and new seismic information in 1998 and 1999.
United Kingdom
PanCanadian has entered into an agreement to sell its 14.3 percent
interest in the Waveney gas field, located in the Southern North Sea. The
Waveney field holds estimated recoverable reserves of 84 billion cubic feet of
natural gas.
CORPORATE HIGHLIGHTS
Year 2000 systems preparation
The Company's 1997 Annual Report to Shareholders describes the process
and timeline being followed by PanCanadian in addressing its Year 2000
readiness. The Company defines Year 2000 readiness as the date when its
critical systems are remediated and the changes have been tested and
implemented, or there exist contingency plans or work around arrangements for
systems that have not been remediated. PanCanadian is progressing well in the
remediation, testing and implementation phases of its Year 2000 program for
many aspects of its computing environment. The Company's critical information
and business managed systems are expected to be Year 2000 ready by March
31, 1999. Additional details of PanCanadian's Year 2000 readiness will be
available in the Company's 1998 Annual Report to Shareholders.
Dividend payment
PanCanadian's Board of Directors approved a quarterly dividend of 10
cents per share, payable September 30, 1998 to shareholders of record as of
September 15, 1998.
AVERAGE SALES PRICES
Three Months Nine Months
Ended September 30 Ended September 30
-------------------- --------------------
(dollars per unit) 1998 1997 1998 1997
-----------------------------------------------------------------------
Crude oil (per barrel) $ 15.64 $ 20.28 $ 13.94 $ 21.71
Hedging (0.21) 0.52 1.88 (0.69)
--------- --------- --------- ---------
$ 15.43 $ 20.80 $ 15.82 $ 21.02
--------- --------- --------- ---------
--------- --------- --------- ---------
Field natural gas liquids
(per barrel) $ 11.19 $ 19.16 $ 14.00 $ 21.69
--------- --------- --------- ---------
--------- --------- --------- ---------
Empress plants (per barrel) $ 14.82 $ 21.72 $ 15.86 $ 23.83
--------- --------- --------- ---------
--------- --------- --------- ---------
Natural gas (per thousand
cubic feet) $ 1.95 $ 1.64 $ 1.95 $ 1.87
Hedging (0.10) 0.06 (0.04) 0.11
--------- --------- --------- ---------
$ 1.85 $ 1.70 $ 1.91 $ 1.98
--------- --------- --------- ---------
--------- --------- --------- ---------
CONSOLIDATED STATEMENT OF INCOME
(Unaudited) Three Months Nine Months
Ended September 30 Ended September 30
-------------------- --------------------
(millions of dollars) 1998 1997 1998 1997
-----------------------------------------------------------------------
REVENUES
Operating $ 349.3 $ 411.9 $ 1,107.7 $ 1,292.9
Crown royalties and
similar payments (19.9) (34.8) (72.8) (110.2)
Marketing 315.5 374.8 1,074.6 1,138.4
Interest 1.4 5.0 3.9 19.0
Miscellaneous 1.4 1.2 8.5 (0.5)
--------- --------- --------- ---------
647.7 758.1 2,121.9 2,339.6
--------- --------- --------- ---------
EXPENSES
Operating 97.0 120.2 303.7 347.0
Purchased product 308.1 371.8 1,054.6 1,121.1
Administrative 23.2 28.1 92.2 77.8
Interest 28.1 16.8 74.1 47.9
Depletion, depreciation and
amortization 165.2 143.5 457.0 394.5
--------- --------- --------- ---------
621.6 680.4 1,981.6 1,988.3
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 26.1 77.7 140.3 351.3
--------- --------- --------- ---------
PROVISION FOR INCOME TAXES
Current 4.2 9.4 10.4 43.8
Deferred 5.6 11.4 35.0 47.2
--------- --------- --------- ---------
9.8 20.8 45.4 91.0
--------- --------- --------- ---------
NET INCOME $ 16.3 $ 56.9 $ 94.9 $ 260.3
--------- --------- --------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN CASH POSITION
(Unaudited) Three Months Nine Months
Ended September 30 Ended September 30
-------------------- --------------------
(millions of dollars) 1998 1997 1998 1997
-----------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 16.3 $ 56.9 $ 94.9 $ 260.3
Amounts not requiring a
current outlay of cash 179.8 159.3 505.2 446.6
--------- --------- --------- ---------
Cash flow 196.1 216.2 600.1 706.9
Net change in deferred
items 10.8 (14.1) (10.4) (29.1)
Net change in non-cash
working capital 19.4 (7.5) (107.4) 170.2
--------- --------- --------- ---------
226.3 194.6 482.3 848.0
--------- --------- --------- ---------
FINANCING ACTIVITIES
Increase in long-term debt 96.1 164.9 275.4 123.2
Issue of common shares 0.1 0.2 0.9 9.3
Dividends (25.2) (25.2) (75.9) (75.5)
Net change in non-cash
working capital - 0.3 (44.3) 43.1
--------- --------- --------- ---------
71.1 140.2 156.1 100.1
--------- --------- --------- ---------
INVESTING ACTIVITIES
Petroleum, natural gas
and mineral properties (138.3) (252.5) (479.9) (554.5)
Plant, production and
other equipment (65.4) (96.5) (238.4) (199.4)
--------- --------- --------- ---------
(203.7) (349.0) (718.3) (753.9)
Net (acquisitions)
dispositions 1.8 (517.5) 48.1 (423.7)
Net change in non-cash
working capital - 26.1 (9.7) (5.1)
Net change in other assets (30.3) 18.1 (16.3) (18.4)
--------- --------- --------- ---------
(232.2) (822.3) (696.2) (1,201.1)
--------- --------- --------- ---------
INCREASE (DECREASE) IN CASH 65.2 (487.5) (57.8) (253.0)
CASH AT BEGINNING OF PERIOD (33.4) 589.7 89.6 355.2
--------- --------- --------- ---------
CASH AT END OF PERIOD $ 31.8 $ 102.2 $ 31.8 $ 102.2
--------- --------- --------- ---------
CONSOLIDATED CONDENSED BALANCE SHEET
As at September 30 As at December 31
(unaudited)
------------------------ -----------------
(millions of dollars) 1998 1997 1997
------------------------------------------------------------------------
ASSETS
Cash and short-term
investments $ 31.8 $ 102.2 $ 89.6
Other current assets 528.2 486.9 517.8
Property, plant and
equipment - net 5,048.4 4,560.3 4,800.2
Deferred charges and
other assets 253.7 142.7 202.2
----------- ----------- -----------
$ 5,862.1 $ 5,292.1 $ 5,609.8
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities $ 420.1 $ 444.0 $ 571.2
Long-term debt 1,425.1 1,025.1 1,133.7
Deferred credits and
liabilities 257.0 176.6 192.3
Deferred income taxes 1,120.5 1,070.9 1,093.2
Shareholders' equity 2,639.4 2,575.5 2,619.4
----------- ----------- -----------
$ 5,862.1 $ 5,292.1 $ 5,609.8
----------- ----------- -----------
Weighted average number of
shares outstanding
(millions) 251.7 251.5 251.5
1998 PRODUCT REVENUE VARIANCES FROM 1997
Three Months Nine Months
Ended September 30 Ended September 30
-------------------- --------------------
(millions of dollars) Price Volume Price Volume
-----------------------------------------------------------------------
Crude oil $ (62.1) $ (4.3) $ (185.6) $ 34.1
Field natural gas liquids (7.9) (0.3) (25.8) (1.7)
Empress plants (6.0) 2.0 (20.4) 0.6
Natural gas 9.6 9.0 (16.0) 24.2
Other (2.5) 0.0 5.5 0.0
--------- --------- --------- ---------
Total operating revenue $ (68.9) $ 6.4 $ (242.3) $ 57.2
--------- --------- --------- ---------
DRILLING SUMMARY
Three Months Nine Months
Ended September 30 Ended September 30
-------------------- --------------------
(gross number of working 1998 1997 1998 1997
interest wells drilled)
-----------------------------------------------------------------------
Crude oil 40 160 265 525
Natural gas 137 227 399 527
Service 8 50 28 78
Dry 30 74 127 143
--------- --------- --------- ---------
215 511 819 1,273
--------- --------- --------- ---------
--------- --------- --------- ---------
Success ratio 86% 86% 85% 89%
Average working interest 93% 93% 93% 94%
SELECTED FINANCIAL INFORMATION
12 Months
Ended September 30
------------------------
1998 1997
------------------------------------------------------------------------
Net debt to cash flow 1.6 0.9
Return on average shareholders' equity 6.3% 15.7%
Return on average invested capital 5.6% 12.3%
Debt to capital 26.2% 21.1% |
