Earnings for Canadian oil and gas companies were weak in the first quarter, largely the result of lower oil and gas prices. Downstream earnings were impaired by mostly weak refining margins caused by depressed demand for products and a narrower light-to-heavy crude oil differential. It was not until the end of the quarter that commodity prices firmed and refining margins began to recover.
Of the 14 Canadian companies in OGJ's sample, only 4 had greater earnings than a year earlier. None of these were purely exploration and production companies.
Collective net income declined 58%, and revenues were off 28% from a year ago.
All results reported are in Canadian dollars.
Company results
BC Gas Inc., a provider of energy and utility services in western Canada, attributes its slight increase in earnings to the Jan. 1 acquisition of Centra Gas British Columbia Inc. Net income for BC Gas climbed 11%, while revenue was down 3%.
Pipeline operator Enbridge Inc. boosted earnings 75%, not only the result of strong performance by the company's transportation operations but also because of added results coming from a 25% equity investment in CLH SA, Spain's largest products transportation and storage business. The franchise area of Enbridge Consumers Gas continued to experience weak demand on significantly warmer-than-normal weather during the second quarter of its fiscal year. This will continue to negatively impact financial performance, the company said. The sale of the company's business operations that provide energy products and services to retail and commercial customers is expected to close in the second quarter. This move illustrates Enbridge's intention to focus on asset management, according to Pres. and CEO Patrick D. Daniel.
For Imperial Oil Ltd., improved heavy oil markets mostly offset lower production and prices for conventional oil and gas. While prices for natural gas averaged $3.26/Mcf in the quarter, down from $9.99/Mcf a year earlier, and conventional crude oil averaged $30.44/bbl vs. $39.40/bbl during last year's corresponding quarter, prices of Cold Lake bitumen were about 60% higher than year-ago levels.
Imperial's net income for the first 3 months was $106 million, down from $340 million. The company's petroleum products segment sustained a net loss of $37 million as a result of reduced product margins and decreased sales, as domestic demand for heating oil, diesel, and jet fuel shrank. The chemicals division earned $9 million for the quarter, as margins improved due to lower feedstock costs and higher sales volumes.
