Some major Canadian oil and gas companies reporting fourth quarter and full year 2000 earnings have shown record gains.
Alberta Energy Co. Ltd. (AEC), Calgary, said that increased production and strong commodity prices were major factors in the company's record cash flow, earnings, and product sales for fourth quarter and full year 2000. (All subsequent monetary unit references to Canadian companies' operations and financial results are in Canadian dollars.)
Westcoast Energy Inc., Vancouver, BC, reported a 53% increase in 2000 earnings over 1999 to a record $340 million on $8.95 billion in revenues.
Husky Energy Inc., Calgary, reported an increase in fourth quarter profits to $232 million from $47 million in the same period in 1999.
Anderson Exploration Ltd., Calgary, reported net earnings rose in fourth quarter 2000 to $174 million from the same period a year earlier.
Nexen Inc., Calgary, reported fourth quarter 2000 profits of $147 million, up from $72 million for the same period in 1999. Nexen formerly was Canadian Occidental Petroleum Ltd.
Elsewhere, two of the biggest Russian oil firms are laying the groundwork for growth:
- Tyumen Oil Co. is marking progress on growth strategies following completion of its privatization.
- Lukoil plans to invest at least 130 billion rubles ($4.5 billion) in northwestern Russia over the next 10 years.
Meanwhile, the push by some oil and gas companies to build production through the purchase of strategically selected assets continues apace.
Among the latest transactions are:
- Phillips Petroleum Co., through two subsidiaries, agreed to acquire an additional stake in the $2.5 billion (Aus.) Greater Sunrise development in Australia's Bonaparte basin from Woodside Petroleum Ltd.
- ATP Oil & Gas (UK) Ltd., a wholly owned subsidiary of Houston-based ATP Oil & Gas Co., agreed to buy two properties in the UK North Sea from BP for an undisclosed amount.
- Venture Production Co. Ltd. said its production would rise by 14,000 b/d following the signing of an asset acquisition deal with TotalFinaElf Exploration PLC involving eight fields in the central and southern North Sea.
In other company news:
- Brazilian company Maritima Petroleo e Engenharia Ltda., which had contracts for the construction of semisubmersibles and for drilling wells canceled by Petroleo Brasileiro SA (Petrobras) is suing the Brazilian state firm for $3 billion in Brazilian and UK courts.
- Bredero-Shaw, a joint venture of Shaw Industries Ltd., Toronto, and Halliburton Co., has signed a letter of intent to acquire Thermotite AS from Eupec PipeCoatings GMBH.
AEC
AEC Pres. and CEO Gwyn Morgan said the company in 2000 generated cash flow of $2.2 billion, up 136% from 1999. Net earnings before acquisition amortization were $1.1 billion, up 294% from 1999. Revenues net of transportation, royalties, and production taxes were $5.3 billion, up from $2.8 billion in 1999.
In fourth quarter 2000, AEC generated cash flow of $925 million. Net earnings before acquisition amortization were $507 million, and net earnings were $472 million, up more than 580% from the same period in 1999.
Morgan said AEC has entered a new era of financial performance: "Last year, we earned a return on equity of 21%, a 15% return on capital employed, and our stock yielded a total return to shareholders of 60%," he said.
"Our company's current earning power is dramatically illustrated by comparing the last 3 months of 2000 with all of 1999. Our fourth quarter 2000 profit was $472 million, upellipsefrom the $180 million earned during all of 1999."
AEC reported more than 20% growth in upstream production and more than doubling midstream operating cash flow. The company added 451 million boe to reserves, or 4.6 boe of proved and probable reserves for every barrel produced.
Natural gas sales grew in 2000 by 18% to an average 1.07 bcfd. Oil and natural gas liquids production increased 23% to an average 118,200 b/d, for a combined gas and liquids production in 2000 of 297,000 boe/d.
The company is forecasting a 28% increase in 2001 gas sales to 1.35-1.4 bcfd, which does not include reserves additions from a gas discovery made in the Ladyfern region of northeastern British Columbia (OGJ Online, Feb. 21, 2001).
Oil and liquids sales are forecast to increase to 140,000-145,000 b/d.
Westcoast
Michael Phelps, Westcoast's CEO, said his company had significantly improved results from its Union Energy energy marketing division, from new pipelines it is operating, and from its international operations.
Union Gas, Westcoast's Ontario gas utility unit, also had revenue gains from increased gas demand this winter.
Westcoast said its service business, including energy marketing, earned $45 million in 2000, compared with a loss of $32 million in 1999.
Phelps said the company will use most of its internally generated funds for investment opportunities, which would include pipeline expansions, increased storage and transmission capacity at Union Gas in Ontario, and expansion of facilities in British Columbia.
The company plans capital spending of $725 million in 2001-about 50% of 2000's level-due to completion of major projects last year.
Husky
Husky's profits for 2000 reached $546 million, up from $160 million in 1999, on cash flow of $1.4 billion, up from $517 million in 1999.
Husky attributed gains to higher oil prices and a takeover last August of Calgary-based Renaissance Energy Ltd.
The fourth quarter was the first in which Renaissance assets were included for the entire period.
The company said revenues increased to $1.77 billion from $908 million and profit from oil and gas production increased to $326 million.
Husky said gas production rose to 575 MMcfd from 245.3 MMcfd and average oil production reached 174,900 b/d.
The company reported profits from refinery operations and its 600 retail stations of $19 million. This compares with a loss of $3 million for the same period in 1999.
Formerly a private company, Husky is 70% owned by Hong Kong businessman Li Ka-Shing and members of his family.
Husky said it plans to spend $1.09 billion on exploration and development in 2001, up from $700 million in 2000. Spending will include $860 million in western Canada, $130 million on the East Coast, where Husky has substantial interests off Nova Scotia and Newfoundland, and $100 million for projects outside Canada.
The company said it wants to increase production to 490,000 boe/d by 2005 from 270,000 boe/d in fourth quarter 2000.
CEO John Lau said the increase in Husky's cash flow will finance longer-term growth projects and strengthen the company's balance sheet through debt repayment, both of which will add shareholder value.
Anderson
Anderson, now Canada's fifth largest exploration and production firm after several recent acquisitions, forecast strong performance in 2001 based on continuing high natural gas prices and strong demand.
Anderson recently completed an $825 million takeover of Calgary-based Numac Energy Inc., which increased its gas production by 28% and its crude production by 42% (OGJ, Jan. 29, 2001, p. 32). It also acquired Ulster Petroleums Ltd., also of Calgary, in a $512 million takeover last spring.
Chairman J.C. Anderson said company cash flow could exceed $1 billion in 2001 for the first time. He estimated cash flow at $400 million in first quarter 2001 and said the second quarter is expected to be as good or better.
Anderson's fourth quarter gas production last year increased 19% from the year before, to 680 MMcfd; oil and gas liquids production reached 49,550 b/d, an increase of 40%.
The company has extensive operations in western Canada, weighted towards gas. It has acquired a large land portfolio in the Mackenzie Delta and Beaufort Sea regions of Canada's Arctic, where exploration is increasing and a gas pipeline is being considered.
Nexen
Nexen's cash flow increased 63% in the fourth quarter to a record $439 million from the same period in 1999.
As a whole, profits for 2000 increased to a record $602 million from $100 million in 1999, boosted by higher prices and increased oil and gas production. Cash flow for 2000 reached $1.57 billion, up from $780 million in 1999.
Nexen CEO Victor Zaleschuk said the strongest oil and gas prices in a decade were a major factor in the strong financial results. But he said that growing production volumes, exploration success, and low unit depletion rates as a result of low finding and development costs also contributed to the profit increase.
Nexen has substantial oil production in Yemen and western Canada, as well as interests in the Gulf of Mexico, Australia, Colombia, and Nigeria. It is also a partner in the Syncrude Canada Ltd. oilsands consortium in northern Alberta.
The company said it expects oil production to average 220,000 b/d in 2001, up 5% from 2000. It forecasts a 14% increase in gas production to 310 MMcfd.
Nexen plans $1.3 billion in capital outlays this year-$770 million of which will be spent on reserves development and the balance on exploration projects. Key exploration areas will include the Gulf of Mexico, Nigeria, and Colombia.
Tyumen privatization
Tyumen, one of Russia's four largest oil companies, has been fully privatized, a step the company said would improve its ability to attract more investment.
Based on the terms of a December 1999 privatization auction, government-set investment requirements totaling $185 million were met.
The Russian Federal Property Fund certified that Tyumen had spent the $185 million on two oil projects and transferred the government's 49.8% shareholding to Tyumen private owners.
"The completion of our privatization helps advance Tyumen Oil into the leagues of world-class companies," said chief financial officer Joseph Bakaleinik. "This milestone will allow us to consolidate our subsidiaries, increase transparency, and take other steps to prepare for entry into international capital markets."
New Priorities, a company formed by Tyumen's shareholders, won a privatization auction for the government's 49.85% stake on Dec. 22, 1999. In addition to a base payment, the government required New Priorities to invest $185 million in the company, which was spent on first- stage modernization of the company's principal oil refinery at Ryazan, Russia, and rehabilitation of oil wells and pipelines in giant Samotlor oil field in Western Siberia. Tyumen is also investing additional funds in those projects.
Tyumen said that, among the more immediate effects of its privatization is that it facilitates the merger of the company's subsidiaries. Shareholders of four crude oil production subsidiaries were voting whether to reorganize by ex- changing stock with that of Tyumen Oil, their parent company.
Lukoil plans
Lukoil notes that, while exploration and development outlays will account for most of its northwestern Russia spending, expansion of the region's transportation infrastrucfture is just as critical as expanded E&D is.
"The company supports creation of the Baltic Transportation System that will allow [development of] the southern group of the Timan Pechora oil fields. And Lukoil will adjust its field pipelines, including construction of the pipeline between the Kharyaga field and the Usinsk Headworks, accordingly," said a statement.
However, Lukoil said an analysis prepared by Lukoil and Conoco Inc. concluded transportation by sea is more advantageous. The proposed system will include onshore and offshore pipelines tied to a stationary ice-resistant sea terminal.
This program also envisages construction of ice-going tankers, development of ice-going other vessels, enhancement of a transshipment base of the northern fleet, construction of an oil refinery in the Murmansk region, and use of the Varandei sea terminal. In 2000, efforts aimed at improvement of the transportation system resulted in construction of the transshipment terminal in Kaliningrad.
Phillips acquisition
Phillips will acquire 16.39% of the Greater Sunrise fields-Sunrise, Sunset, and Troubadour, in Australia's Bonaparte basin-and will pay Woodside $176 million (Aus.) to cover its capital costs.
The proposed acquisition, which would bring Phillips's holding to 30%, is subject to preemptive rights held by Osaka Gas Co. Ltd., a partner in the project. Shell Development Australia Pty. Ltd. agreed to waive its preemptive right, said Woodside.
This agreement is part of a pact sealed last year between Woodside and Phillips to pursue cooperative development of Timor Sea gas resources in the Greater Sunrise and Bayu-Undan projects (OGJ Online, Nov. 30, 2000).
The companies also announced they have finalized principles for that cooperative agreement, which include supply of gas and marketing of LNG, pipeline infrastructure, and field optimization.
Under the agreement, Bayu-Undan could begin gas production in 2004 and Greater Sunrise as early as the second half of 2006.
Phillips noted that, with the acquisition of Petroz NL, it controls a 58.5% interest of the Bayu-Undan field and is the operator.
If Shell succeeds in its quest to control Woodside, Phillips said it will be given an option to acquire a further 15% interest in Greater Sunrise, subject to preemptive rights of other participants.
By the time a final agreement is signed by all stakeholders in mid-2001, the Greater Sunrise participants plan to execute agreements to supply gas to a diverse customer base including an LNG plant and a Methanex Corp.-owned methanol venture.
Phillips Petroleum Co. Australia Pty. Ltd. Pres. Stephen Brand said, "Sharing of offshore pipeline infrastructure and coordination of offshore and onshore operations will reduce the gas development costs of Bayu-Undan and Greater Sunrise fields while meeting the short and long-term requirements of a large customer base in the Northern Territory and the eastern and southern Australian states, as well as LNG customers."
Participants with Phillips in the Greater Sunrise development following this transaction are operator Woodside, with 33.44%; Shell Development Australia, 26.56%; and Osaka Gas, 10%.
Phillips also agreed to buy a 25% interest in Evans Shoal gas field in the eastern Timor Sea from Shell. Phillips estimates Evans Shoal contains 6.6 tcf of dry gas resources.
ATP purchase
ATP will acquire a 50% interest in Venture field on Block 49/21a. The deal is subject to partner and UK Department of Trade and Industry approval. Conoco Inc. holds 50%.
The acquisition also includes BP's 100% interest in the Block 47/10 discovery area, which surrounds the 47/10-1 discovery made by BP in 1984. This transaction has been approved by DTI, said ATP.
The properties are in less than 120 ft of water. Both are planned for development in 2002.
The company operates 53 of its 56 offshore wells. It owns 21 platforms and operates nine subsea wells in the Gulf of Mexico.
Venture buy
Under Venture's asset purchase agreement-the value of which was not disclosed-Venture will get an interest in the producing Tiffany, Toni, Thelma, Southeast Thelma, and Mallard oil fields, and Audrey, Ann, and Alison gas fields, along with a number of undeveloped discoveries on the UK Continental Shelf. The assets are located on Blocks 16/13, 16/17, 21/19, 49/6, and 49/11. Venture said its production from interests in various North Sea assets was 10,000 b/d.
"The acquisition of the package of assets from TotalFinaElf significantly increases Venture's position in the North Sea," said company chief executive Bruce Dingwall.
Venture expects to complete the sale in the second quarter.
Brazilian contracts
Petrobras said the contracts with Maritima were canceled due to delay in the delivery of the contracted equipment.
Last year, the oil company canceled the contracts of the Amethyst 4 and 5 semisubmersibles, which are still being built, and the Amethyst 6 and 7, now Pride Brazil and Pride Carlos Walter. The Pride Carlos Walter was en route to Brazil by way of South Africa, while the Pride Brazil was scheduled to leave South Korea on Feb. 9 along the same route. The rigs are expected to complete acceptance testing and to be ready for work by June or July, officials said. (OGJ Online, Jan. 29, 2001).
Petrobras inked new contracts with the US company Pride International Inc. (a partner of Maritima in the Amethyst venture) to charter the Brazil and Carlos Walter.
Maritima just delivered the P-38 and P-40 vessels, built in Singapore to operate in the Campos basin, off Rio de Janeiro state. These vessels are being tested by Petrobras technicians and will be installed in Marlim Sul field. The P-40 is a semisubmersible platform with the capacity to produce 150,000 b/d of crude, and the P-38 is a floating production, storage, and offloading vessel.
Bredero-Shaw acquisition
Thermotite specializes in custom designed flow assurance insulation systems for subsea and deepwater pipeline applications, based on polypropylene plant technology. "Thermotite owns mobile pipe insulating technology, the strategic use of which can greatly enhance multijoint insulation economics," said Bredero-Shaw. The joint venture is a leading pipeline coatings solutions provider.
The acquisition will allow Bredero-Shaw to strengthen capability at a deepwater base being built at Mobile, Ala.
Thermotite will operate as a separate division.
