Marilyn Radler, Economics Editor
Laura Bell, Statistics Editor
A stronger Canadian dollar relative to the US dollar appears to have suppressed the first quarter earnings of most of the companies based in Canada that OGJ sampled. While production volumes may have been higher, realizations declined.
Collectively, the 17 Canadian producers, transporters, and service and supply companies in the group earned 27% less during the first 3 months, against 2% lower revenues, as compared with the same 2003 period.
All results are reported in Canadian dollars, and all companies profiled here are based in Calgary.
Integrated
Petro-Canada reported net income of $513 million for the quarter, down from $579 million a year earlier.
Petro-Canada said that during the quarter, the impact of the weakened US dollar on prices realized outweighed the impact of higher US dollar-denominated market prices. While West Texas Intermediate averaged 3.8% more than a year earlier, the Canadian dollar gained 14.5% on the US dollar. Combined, these changes decreased Petro-Canada's average realized Canadian dollar oil and liquids prices to $40.95/bbl from $45.83/bbl in the first quarter of 2003.
Petro-Canada's production of oil, gas, and NGLs averaged 476,700 boe/d during the quarter, up from 469,900 boe/d in the first 3 months of last year. The company said that lower North American gas production partially offset output gains from oil sands and oil produced from the Canadian eastern coast and international areas, including Libya.
The downstream sector of Petro-Canada posted earnings of $88 million vs. $130 million a year earlier. These earnings were hit by lower Canadian dollar-denominated realized margins, $13 million in charges related to the consolidation of the company's eastern refinery operations, and higher operating expenses due to unplanned outages at the company's Montreal refinery.
E&P
Canadian Natural Resources Ltd. (CNRL) announced earnings a bit lower than a year earlier as well, as commodity price realizations abated because of currency exchange rates.
The average sales price for oil and NGLs that CNRL realized during the quarter was $34.21/bbl vs. $39.37/bbl a year earlier. The company's average gas sales price dipped to $6.31/Mcf from $7.75/Mcf a year earlier.
CNRL's first quarter results include a $46 million unrealized foreign exchange loss on the company's US dollar-denominated debt compared with a $119 million unrealized foreign exchange gain in the prior year due to fluctuations in the value of the Canadian dollar.
CNRL also attributes its decline in first quarter earnings to an unrealized expense related to mark-to-market transactions of the company's financial instruments and as an expense related to stock-based compensation costs, partially offset by future income tax recovery due to provincial income tax rate reductions.
Midstream, service
Energy pipeline giant Enbridge Inc. reported improved first quarter earnings. Net income was $112.4 million vs. $103.8 million a year earlier. The company said that positive contributions from the Enbridge crude oil pipeline system, the company's gas distribution network, and positive fractionation margins at the Aux Sable liquids extraction plant are responsible for the earnings gain.
Strong market conditions lifted the earnings of Akita Drilling Ltd. The company reported net income of $7.4 million compared with $5.8 million for the first 3 months of 2003. Revenues jumped to $44.3 million from $39.3 million a year earlier.
During the quarter, Akita drilled 398 wells and achieved 2,301 operating days, representing 70% utilization for the period. A total of 338 wells were drilled over 2,295 operating days in the same 2003 period, for a 71% utilization rate.