A sample of oil and natural gas firms based in Canada reported a collective decline in first quarter earnings as compared with the same period a year earlier.
Collectively, the 17 Canadian producers and transporters that OGJ sampled earned 54% less during the first quarter of 2005 on 11% stronger revenues as compared with the same period a year earlier. Earnings declines were due to a variety of reasons, which in many cases offset higher production volumes and prices.
All results are reported in Canadian dollars, and all companies discussed here are based in Calgary unless otherwise noted.
Company results
Nexen Inc. reported a large decline in first quarter earnings as a result of a decline in the market value of the company’s crude oil put options. The increase in forward crude oil prices during the quarter resulted in an expense of $173 million.
Nexen’s income was further reduced by $125 million-$83 million after tax-as a result of stock-based compensation for its employees, as the company’s stock price gained 36% during the quarter.
Petro-Canada announced that its earnings for the first 3 months of 2005 declined to $118 million from $513 million in the same 2004 period. Production of oil, gas, and NGLs declined to 430,800 boe/d from 476,700 boe/d a year earlier, and the company said that it incurred an unrealized loss on the mark-to-market of the derivatives contracts associated with its acquisition of an interest in Buzzard field in the North Sea.
In spite of increased sales, higher natural gas and liquids prices, and strong operating performance during the first quarter, EnCana Corp. posted a $151 million loss.
EnCana reported that its first quarter earnings were impacted by an unrealized aftertax loss due to mark-to-market accounting of its hedges, which run primarily through 2006.
About one third of the mark-to-market loss is attributed to price hedges put in place in the spring of 2004, relating to the acquisition of Tom Brown Inc. First quarter results also include an aftertax unrealized loss due to translation of US dollar denominated debt issued in Canada.
TransCanada Corp. announced net income for first quarter 2005 of $232 million, down from $214 million a year earlier.
The company primarily attributes the gain to the sale of 3.5 million common units of TC PipeLines, LP. The sale generated an aftertax gain of $48 million.
Partially offsetting this gain was a $35 million reduction in income from the company’s power segment.