Sales growth and higher commodity prices produced stronger results for Canadian oil and natural gas companies during the first quarter of 2003. Improved refining margins benefited the downstream sector as well.
The collective earnings of the 24 Canadian producers and service and supply companies that OGJ sampled increased 250% on earnings that jumped 52% from the same period a year earlier.
Results are reported in Canadian dollars unless otherwise noted, and all companies discussed here are headquartered in Calgary.
Company results
Penn West Petroleum Ltd. reported record results for the quarter ended Mar. 31, as production volumes increased 7% from the same period in 2002. Net income was $135.6 million, up from $25.2 million a year earlier. Natural gas realizations were up 131% to $7.43/Mcf, and liquids pricing increased 50% to $41.34/bbl.
EnCana Corp. announced first quarter earnings of $1.2 billion vs. $133 million for the same period last year prior to its Apr. 5, 2002, merger that combined PanCanadian Energy Corp. and Alberta Energy Co. Ltd.
Brian Dutton, analyst with UBS Warburg LLC, said that EnCana's results exceeded expectations, as better than expected price realizations more than offset the impact of lower than expected production.
Compton Petroleum Corp. posted record revenue, cash flow, and net earnings for the most recent quarter. Gross oil and gas revenues increased 117% to $92.4 million, and cash flow increased 162% to $48.2 million. These increases resulted from a 6% increase in production and a solid increase in realized prices, the company said. Compton realized an average price of $39.73/boe for gas and liquids during the quarter as compared with an average price of $19.34/boe for the first quarter of 2002.
Compton's net earnings for the first quarter increased to $31.9 million from $3.5 million in the same quarter last year. In addition to increases in production and commodity prices, net earnings in the first quarter of 2003 benefited from an $18.2 million before-tax ($13.6 million after tax) unrealized exchange gain on the company's US dollar denominated bonds.
Compton's production growth is currently restricted in southern Alberta due to processing constraints. These constraints are temporary and with the acquisition of the Mazeppa and Gladys plants announced on May 21, the company has taken a major step forward in resolving this issue.
Compton has reached an agreement in principle with Border Midstream Services Ltd. for the purchase of certain midstream assets including the Mazeppa and Gladys gas plants plus related compression facilities and pipelines in the area for approximately $54 million. The acquisition will provide Compton with control over processing and infrastructure facilities in southern Alberta.
Shell Canada Ltd. Pres. and CEO Tim Faithfull said, "Significantly improved commodity prices and refining margins have contributed to very strong results for the first quarter. Earnings were more than double those of last year even with the costs of starting up our new oil sands operations."
Faithfull added that the firm has achieved fully integrated operation of the Athabasca Oil Sands Project's mine and upgrader and is producing synthetic crude oil from mined oil sands. Completion of the project marks the first new Canadian integrated oil sands operation in 25 years. Shell Canada is now focusing its efforts on ramping up production to full design rates in the third quarter, he said. Oil sands results for the first quarter reflected a loss of $105 million with start-up, operating, and other expenses significantly exceeding revenues, however.
