CANADIAN INDUSTRY'S 1989 PROFITS PLUMMET

A steep drop in profits and return on investment jolted Canada's petroleum industry in 1989. Ottawa's Petroleum Monitoring Agency (PMA) said industry's net income plunged 39% to $1.3 billion from $2.2 billion in 1988 despite an increase in revenues to $50.2 billion from $47 billion. Average rate of return on equity fell to 3.3% in 1989 from 5.5% in 1988. PMA, which gathers financial data from 120 companies representing 90% of industry revenues, blamed the poor performance in 1989

July 23, 1990

2 min read

A steep drop in profits and return on investment jolted Canada's petroleum industry in 1989.

Ottawa's Petroleum Monitoring Agency (PMA) said industry's net income plunged 39% to $1.3 billion from $2.2 billion in 1988 despite an increase in revenues to $50.2 billion from $47 billion. Average rate of return on equity fell to 3.3% in 1989 from 5.5% in 1988.

PMA, which gathers financial data from 120 companies representing 90% of industry revenues, blamed the poor performance in 1989 on higher interest rates and increased operating costs.

PMA Chairman Pierre Camu said continuing uncertainty over crude oil prices and rationalization of operations by asset sales and takeovers caused a decline in reinvestment rates to 85% from 96% in 1988.

Domestic ownership of Canada's petroleum industry rose to 43.4% from 42.1% in 1988, and Canadian control increased to 39% from 37.6%.

The agency said about $8 billion in oil and gas assets changed hands in 1989, including a $5 billion takeover of Texaco Canada Inc. by Imperial Oil Ltd.

Canadian Petroleum Association Vice Pres. Hans Maciej noted the poor rate of return for a high risk business, particularly compared with an average 8% return for other nonfinancial Canadian businesses in 1989.

Maciej said the outlook for the rest of 1990 is not bright because of uncertain oil prices, soft natural gas prices, and regulatory delays that could jeopardize projects designed to hike gas sales to the U.S.