CANADIAN STORIES IN THE NEWS (Part 1) - WEDNESDAY A.M. 10/21/98
Chevron <CHV.N> Canada in hunt for gas acquisition
CALGARY, Oct 19 - Chevron Corp.'s <CHV.N> Canadian unit, faced with declining oil and gas production in the country's west, is aiming to make a corporate acquisition within a year that could double its natural gas output, its president said on Monday.
Calgary-based Chevron Canada Resources, a wholly owned subsidiary of the San Francisco-based oil major, is in the market to buy a Canadian company producing as much as 250 million cubic feet of gas a day, subsidiary president Bill Edman said.
The move would bolster production at Chevron Canada, which has little appetite for new exploration in western Canada amid growing spending on its marquee operations on the country's East Coast offshore, where it has a 28-percent stake in the big Hibernia oil development.
"I would like to add 150-250 million a day more," Edman told reporters at a natural gas markets conference. "That's very arbitrary, but we're not talking about just a few million, we're talking about 10s of millions that I'd like to add."
The outlook for Canada's gas industry has improved considerably in recent months with stronger prices thanks to new pipeline capacity to rich U.S. markets and current low drilling rates.
The unit currently produces about 250 million cubic feet of gas a day in western Canada, which is not viewed as a major growth area in the Chevron world.
Edman, whose company operates with little fanfare in western Canada, offered no potential dollar value of a deal.
"We'd go down to the corporation in San Francisco and outline to them what we have. If they think it's attractive given the other opportunities they have to acquire reserves in North America or worldwide, then we'd go for it," he said. In total oil and gas output, Chevron Canada produces about 90,000 barrels of oil equivalent a day in western Canada, but that has declined by five-eight percent annually over the past few years, he said.
Canadian Occidental Petroleum suffers loss from lower oil prices, output
CALGARY - Canadian Occidental Petroleum Ltd. , one of the country's biggest oil and gas producers, Tuesday blamed stubbornly weak world crude prices and lower production for its third quarterly net loss of 1998. Calgary-based CanOxy reported a third-quarter loss of C$19 million or C$0.14 a share, compared with a profit of C$31 million or C$0.23 a share in 1997.
Cash flow, a key indicator of an oil company's ability to finance upcoming exploration and development, was C$137 million or C$1 a share, down 36 percent from C$213 million or C$1.56 a share in last year's third quarter. Revenues totaled C$396 million, down from C$475 million.
CanOxy, 30-percent owned by Los Angeles-based Occidental Petroleum Corp. , is Canada's largest producer of foreign crude oil and a major producer of domestic heavy oil.
The company has an interest in the Syncrude Canada Ltd. oil sands operation in northeastern Alberta and runs a manufacturing division that produces bleaching chemicals for the pulp and paper industry.
This year's depressed oil prices pushed CanOxy into losses in the first and second quarters as well.
For the third quarter of 1998, its average crude oil sales price was C$15.31 a barrel, down 31 percent from the same period last year.
Company-wide oil production during the period averaged 191,000 barrels a day, down from 208,700 in 1997, while natural gas output was 396 million cubic feet a day, down from 421 million.
Several factors led to the decline, including the sale of properties producing 15,000 barrels oil and 40 million cubic feet of gas a day and weather-related shut-downs of production in the U.S. Gulf of Mexico.
CanOxy said it also shut the valves on some of its Canadian heavy oil to cope with extremely low prices for the tar-like crude, which is slapped with a discount compared to light oil.
In Canada, the company signed deals to jettison more properties producing 4,100 barrels of oil and 27 million cubic feet a day for proceeds of C$157 million, it said.
The sales, expected to close during the next 2-1/2 months, will generate cash to help pay down CanOxy's large debt, which at the end of September stood at C$2.4 billion. Much of the debt was taken on in 1997 to finance its C$2 billion takeover of Canadian heavy oil producer Wascana Energy.
Meanwhile, the company said drilling at its prolific Masila Block development in Yemen kept exceeding expectations.
CanOxy, which operates the block and owns a 52-percent interest, drilled seven successful wells during the quarter and four were on stream producing a total of 19,000 barrels a day.
Total output from the block is currently 205,000 barrels a day, of which 106,600 is CanOxy's share, it said.
Its stock in Toronto closed up C$0.75 Tuesday to C$25.50.
As reported by Financial Post - CanOxy posts $19M loss as production slips
Senior oil and gas producer Canadian Occidental Petroleum Ltd. posted a $19-million loss (14¢ a share) in the third quarter, down from profit of $31 million (23¢) last year. The company said yesterday the loss was largely the result of lower production stemming from asset sales and low crude prices.
Cash flow for the period was $137 million ($1), down 36% from $213 million ($1.56).
Despite weak results, CanOxy, one of Canada's top three producers, is poised for "an exciting phase of new growth," president and chief executive Victor Zaleschuk said.
Production and reserve additions are expected from core areas in Nigeria, Australia, Yemen, the Syncrude oilsands plant in Alberta, in which CanOxy is a partner, and the recent Hay River oil discovery in northeastern British Columbia.
CanOxy, which is 30% owned by Occidental Petroleum Corp. of Los Angeles, said it sold $103 million in assets in the first nine months, and has locked in agreements to sell another $157 million in conventional oil and gas assets by yearend.
Proceeds from the sales are being used to reduce debt, which stood at $2.4 billion at Sept. 30. Debt went up last year with the $1.7-billion acquisition of Wascana Energy Inc.
Because of the asset sales, crude production fell to 191,000 barrels a day in the quarter from 208,700 b/d last year. Natural gas production averaged 396 million cubic feet a day, down from 421 million. Shut-in heavy oil production and a maintenance turnaround at Syncrude also contributed to the output decline.
CanOxy shares (CXY/TSE) closed yesterday up 75¢ at $25.50.
Petro-Canada profit falls 79% on low crude prices
CALGARY - Petro-Canada blamed sharply lower crude oil prices for the 79 percent drop in third quarter profits it posted Tuesday.
Calgary-based Petro-Canada, Canada's second-largest integrated oil and gas company, said net earnings for the three months ended September 30 were C$15 million or C$0.06 a share, down from C$73 million or C$0.27 a share last year.
Revenues fell to $C1.2 billion from C$1.5 billion in the third quarter of 1997.
The company's oil and natural gas exploration and production division suffered most, posting a loss of C$4 million against a profit of C$24 million last year.
Petro-Canada garnered an average C$18.02 a barrel for its crude oil and and natural gas liquids in the third quarter, down 26 percent from last year's price of C$24.24 a barrel.
The refining and marketing division fared better, recording net earnings of C$52 million, although this was still down 29 percent from last year's C$73 million.
"The strength of Petro-Canada's downstream business will mitigate the impact of this year's low crude oil prices on our overall 1998 results," said Chief Executive Jim Stanford in a statement.
The company's shares were off C$0.15 to C$19.15 Tuesday in moderate trade on the Toronto Stock Exchange, as the investment community reacted to the results with little more than a collective shrug.
"The results are about what we expected," said Wilf Gobert, analyst with Calgary-based brokerage Peters & Co. Ltd.
"Petro-Canada's been prepping the street for 10 days on the numbers."
Petro-Canada was the second major Canadian integrated oil company to report third-quarter results. Last week, Suncor Energy Inc. also blamed low crude oil prices for its 22 percent decrease in profits, which fell to C$49 million from C$63 million.
Imperial Oil Ltd. , Canada's biggest oil company, is scheduled to report third-quarter results Wednesday and Shell Canada Ltd. the following Wednesday.
As reported by Financial Post - PetroCan profit plunges 79%
Petro-Canada posted lower third-quarter earnings and cash flow yesterday because of sharply lower crude oil prices and softer margins from its chain of gasoline stations.
The Calgary-based firm, which explores for oil and natural gas, and refines and markets petroleum products, warned low oil prices may be here for another two years and is adjusting its strategies accordingly.
Third quarter earnings were off 79% at $15 million (6¢ a share) from $73 million (27¢) last year. Cash flow was down 37% to $174 million (64¢) from $278 million ($1.03). Analysts polled by First Call Corp. had expected earnings of 10¢ a share.
Petro-Canada shares (PCA/TSE) closed down 10¢ yesterday at $19.20.
"While we believe crude oil prices will eventually increase, we are basing our plans on the assumption that prices will remain at current levels for the next two years," said president and chief executive Jim Stanford. "We intend to live within our means and maintain our financial strength and flexibility. Accordingly, we are adjusting Petro-Canada's strategies and asset portfolio to maximize the company's financial performance during this period."
Spokesman Rob Andras said PetroCan plans to maintain annual capital spending of about $1 billion for the next two years, the same as in 1998. But it will look for discretionary spending reductions outside core projects like Hibernia and Terra Nova in the East, or oilsands in northern Alberta. It is also still interested in new international opportunities.
Exploration and production were badly hurt by low crude prices. The unit lost $4 million, compared with last year's profit of $24 million.
Production for the quarter averaged 172,600 barrels of oil equivalent daily, an increase of 8,300 b/d, and including an average of 17,000 b/d from Hibernia. The company received an average price of $18.02 a barrel of oil, down from $24.24 a year ago. The average natural gas price was $1.82 per thousand cubic feet, up from $1.32 last year.
Operating earnings from PetroCan's chain of gasoline stations, its three refineries and lubricant plant were also down, dropping to $52 million from $73 million because of price wars in eastern Canada and British Columbia.
As reported by The Globe & Mail - Petrocan profit plunges 80% Poor third-quarter performance prompts second-biggest oil firm to cut capital spending by $300-million
Calgary -- Third-quarter earnings at Petro-Canada plummeted 80 per cent as weaker oil prices continued to bleed earnings from the country's second-biggest petroleum company.
Petrocan reported a profit of $15-million or 6 cents a share for the three months ended Sept. 30, down from $73-million or 27 cents a share for the same period last year.
The third-quarter earnings include a $6-million loss on the sale of assets.
The company also announced it expects oil prices to remain low through 2000, and is cutting its planned capital spending budget by $300-million over the next two years, or 10 per cent each year.
"While we believe that crude oil prices will eventually increase, we are basing our plans on the assumption that prices will remain at current levels for the next two years," Petrocan president Jim Stanford said in a statement. "We intend to live within our means."
Petrocan officials said they are betting on an average benchmark West Texas intermediate crude price of between $15 (U.S.) to $16 a barrel over the next two years. Petrocan will still spend about $1-billion annually in capital spending in each of 1999 and 2000, company officials said.
Weak oil prices, down 30 per cent from the same period a year ago because world supply is exceeding demand, hammered Petrocan's upstream or production earnings into the red during the third quarter.
The company reported a $4-million (Canadian) loss from upstream operations for the quarter, down from a $24-million profit.
Petrocan received an average price of $18.02 a barrel for crude oil and natural gas liquids during the quarter, down 26 per cent. The average price it fetched for gas rose, however, by 38 per cent to $1.82 per thousand cubic feet.
The company's downstream, or refining and retail gas operations, helped dampen the impact of poor crude prices. Refining and retail operation earnings were nevertheless down at $52-million, 26 per cent less.
Petrocan faced a squeeze on downstream margins in the third quarter as it received lower prices for refined products amid a glut of supply, and endured a gas price war in British Columbia's Lower Mainland with giant Los Angeles-based oil concern Atlantic Richfield Co.
The price war is pushing gas prices to as low as 37 cents a litre, down from to 50 to 60-cent range. The decline cost Petrocan $1-million to $2-million in the third quarter after taxes.
"It's fairly intense," Petrocan spokesman Robert Andras said of the price war.
Petrocan's cash flow, a key measure of an energy company's ability to finance growth, fell 37 per cent to $174-million.
The company's revenue dropped 17 per cent to $1.24-billion from $1.49-billion.
Wilf Gobert, an oil and gas analyst at Peters & Co. Ltd. in Calgary, said Petrocan's crude forecast is a "prudent" response to what's estimated to be longer-than-expected price volatility.
"A lot of international oil economists are sounding the warning that oil prices may trade in a lower price band than we have seen during most of this decade . . . because of the global demand situation," Mr. Gobert said.
He said the price spread economists are forecasting ranges from $13 (U.S.) to $18 for the benchmark West Texas intermediate (WTI) crude.
Petrocan shares lost 10 cents yesterday to close at $19.20 on the Toronto Stock Exchange.
Another Canadian integrated petroleum company, Imperial Oil Ltd. of Toronto, is expected to report earnings today.
Union Pacific Resources Inc. canadian divestiture program nearly complete
Fort Worth, Texas-Oct. 20 -Union Pacific Resources Group Inc. (UPR) today announced that its Canadian subsidiary, Union Pacific Resources Inc. (UPRI), has nearly completed its 1998 property divestiture program.
The company expects to close on the final Canadian property in the original offering later this year and projects that its 1998 non-core property sales program will top $143 million.
The Canadian divestiture program, part of UPR's larger deleveraging program announced earlier this year, was well received by the market. Several purchasers expressed strong levels of interest in the properties offered; unit prices from the sales averaged more than $6 per proved barrel of oil equivalent.
New life pumped into energy field
Oil and gas industry rides turmoil
Calgary Sun
It's a case of 'musical chairs and rock 'n' roll' in the depressed Canadian oil and gas industry as companies and assets change hands.
That was the word yesterday from Ronyld Wise, director of PLS Canada and PLS USA, to delegates attending the Canadian Deal-Makers Exposition at the Calgary Convention Centre.
It also came as Petro-Canada, the nation's second-largest oil company, announced third-quarter profits dropped 72% -- and Canadian Occidental Petroleum said it had a third-quarter loss of $19 million.
Petro-Can said profit from operations dropped to $21 million from $76 million because of low oil prices and weak consumer demand.
Despite the bleak news, Wise, whose company along with Energy Communications Inc. of Calgary are sponsoring the exposition, suggested the industry isn't in quite the bad shape that some people think.
The same was said by a number of other speakers from the industry, and from bankers and stock brokerage houses.
Wise, whose company acts as a multiple-listing service for oil and gas properties, said while it's a time of "action" in the industry and it has been a "weird" year, many of the trends have been overstated.
For instance, U.S. companies are not buying Canadian companies at firesale prices.
Other companies are pulling their properties off the market because prices are too low.
And many of the deals going through are large corporate transactions, such as the British Petroleum takeover of Amoco. Such large multi-billion-dollar mergers have exaggerated the state of the industry.
Wise, pointing to fears that U.S. companies are buying up Canadian companies, said if a U.S. company bought a Canadian company a year ago, the fall in the Canadian dollar since then may have cost it 10% of its value.
Jerry Swank, of the Connecticut-based analytical company, John S. Herold Inc., said although oil prices are down and capital has dried up for many companies, the industry is healthier than it may appear.
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