Net income for Canadian oil companies fell 7% in first half 1989 compared with the same period in 1988, a federal agency reports.
Ottawa's Petroleum Monitoring Agency (PMA) reported net income fell to $1.1 billion despite higher oil prices, increased gas sales, and lower royalty payments, A slight increase in revenues raised industry cash flow in the first half by 4% from the same period in 1988.
The PMA report said profits rose in the upstream sector to $515 million in the first half and increased by 16% in downstream operations to $685 million.
But gains were canceled by losses of $172 million in the integrated sector, compared with a profit of $65 million in first half 1988.
An increase in the value of the Canadian dollar to 84 U.S. from 80 U.S. during January-June 1989 was a factor in the net income drop. The industry's financial performance also was affected by increases in debt as a result of large mergers and higher interest rates.
CAPITAL SPENDING
PMA reported industry's capital spending in the first 6 months dropped by 20% to $3.5 billion.
PMA Chairman Pierre Camu said uncertainty about oil prices caused by wide fluctuations during the past 4 years had a dampening effect on spending. Cuts in federal and provincial government incentive programs also were a factor in industry's spending decisions.
Return on equity in first half 1989 fell to 5.3% from 6.3% in the same period of 1988. Industry's reinvestment rate fell to 73% of cash flow during first half 1989 from 94% in the same period of 1988.
The agency report is based on data provided by 127 companies accounting for about 90% of Canadian industry revenues.
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