CANADIAN COMPANIES CUT COSTS AS PROFITS PLUNGE

Restructuring moves are helping turn financial results around in the gloomy Canadian oil and gas scene.

Canadian energy companies that have put noncore assets into separate management units have sharply cut overhead costs, a Calgary analyst says.

Overall, however, financial results for Canadian petroleum companies were depressed in 1991, says Canada's Department of Energy.

COST LOWERED

Sayer Securities Ltd. said a study of 16 Canadian petroleum firms showed overhead costs were 40% lower for separately managed noncore assets than for the parent companies.

"The successful companies have achieved this reduction mainly by changing administrative business practices so that the amount of work performed on the assets is less than that performed on core properties," Sayer said.

Among the companies surveyed were Amoco Canada Petroleum Ltd. and spinoff Crestar Energy Inc., Canadian Occidental Petroleum Ltd. and its Lift Lock Resources Ltd., and Saskatchewan Oil & Gas Corp. and its Pasqua Resources Inc. Sayer Pres. Frank Sayer expects other companies to follow the cost cutting procedure but noted not all companies have enough noncore assets to warrant separate management.

Sayer noted energy prices have fallen to the point where most companies want to unload some properties. But there are an estimated $4.3 billion (Canadian) in assets on the market and many companies are waiting for improved prices to sell.

DOE SURVEY

A survey of results of 154 companies showed they posted a net loss of $2.4 billion (Canadian) in 1991 vs. a profit of $2.3 billion in 1990, while cash flow fell 22% to $7.6 billion.

DOE said upstream and downstream sectors alike were hit by lower net income and cash flow. Upstream revenues fell by $2.8 billion to $18.1 billion in 1991, and downstream revenues fell 12% to $29 billion.

DOE said return on average shareholder equity for the industry in 1991 was - 6% compared with 5.6% in 1990.

Despite these results, overall capital spending in 1991 increased by 9.5% to $9.5 billion. The increase was accounted for by spending on several major projects such as the Hibernia oil field development off Newfoundland and Caroline gas field in Alberta.