Among a sample of oil and gas producers, transporters, and service and supply firms based in Canada, most companies reported much stronger earnings in the third quarter of 2005 than they did in the comparable 2004 quarter, primarily due to the strength of oil and gas prices. One company in the group incurred a loss for the quarter, and four posted declines from a year earlier. Like their US-based counterparts, some of these firms were hurt by hurricanes in the Gulf of Mexico.
Collectively, this sample of 22 Canadian companies posted a 65% increase in earnings during the third quarter of this year on 33% stronger revenues compared with the same period a year earlier. For the first 9 months of the year, the companies reported a 16% increase in net income from same 2004 period.
All results are reported in Canadian dollars, and all companies discussed here are based in Calgary.
Company results
EnCana Corp. posted a 38% decline in earnings for the third quarter, mostly as a result of an unrealized after-tax loss due to mark-to-market accounting of its hedges and an unrealized foreign exchange after-tax gain on translation of Canadian-issued US dollar debt. Of the hedging loss, about 60% relates to EnCana’s 2004 acquisition of Tom Brown Inc.
EnCana’s total natural gas sales in the third quarter climbed 3% from the third quarter of last year. Oil and natural gas liquids sales were down 16% from a year earlier, mainly due to divestitures of conventional oil properties in Canada and the UK North Sea and lower Ecuador sales.
Meanwhile, Precision Drilling Corp. reported its third quarter earnings were $1.38 billion, up from $43 million a year earlier. These results include a gain of more than $1 billion from the sale of the company’s energy services and international drilling divisions to Houston-based Weatherford International Inc..
Excluding this asset sale and reorganization activities, Precision Drilling Corp. said earnings increased 68% from the same 2004 quarter, reflecting a strong market for oil field services in Canada and favorable weather conditions allowing for more activity. Additionally, prices for the company’s services were up on greater demand.
Enbridge Inc. announced a decline in earnings for the quarter and the first 9 months of the year. The energy transporter said its $158.5 million decrease in the first three quarters’ earnings is primarily the result of the prior year’s having included an after-tax $97.8 million gain on the sale of its Altagas Trust Units as well as the resulting absence of earnings from this investment in 2005.
Also, Enbridge’s 2004 earnings were higher as a result of the change in the year-end of its gas distribution operations, which creates a lack of comparability between periods. Positive factors in 2005 include the earnings contribution from the recently acquired Enbridge Offshore Pipelines and lower interest expense.
Husky Energy Inc. reported net earnings of $556 million in the third quarter, an 87% increase from a year earlier. Included in these results is a net charge of $54 million related to stock-based compensation and a net gain of the same amount related to US dollar-denominated debt translation.
“Our strong operating results in the third quarter of 2005, bolstered by continuing high commodity prices, should lead to a record year for the company,” said John C.S. Lau, Husky’s president and chief executive officer.
Husky’s total crude oil and NGL production for the quarter was 190,000 b/d, compared with 208,100 b/d in the third quarter of 2004, while the company’s natural gas production was 679.2 MMcfd, down from 700.4 MMcfd a year earlier.
Lau attributed the production declines to wet weather in western Canada and operational issues at offshore Terra Nova field.
