Petro-Canada Pres. and Chief Executive Officer James M. Stanford has been the chief surgeon in a 4 year program of major corporate surgery.
Stanford, an engineer who joined the company in 1978 after a 19 year engineering and management career with Mobil Oil Canada Ltd., says a restructuring program is virtually complete and Petro-Canada is focused on growth. He headed the companys upstream operations before becoming chief executive.
Stanford has focused the company on four areas with strong potential for growth and profits in the medium to long-term. They are western Canada gas, an exploration and development project in Algeria with state owned Sonatrach, a doubling of its lubricants business and frontier assets, particularly off Canadas East Coast.
We have a wealth of upstream opportunities, Stanford told Oil & Gas Journal. What constrains us is our ability to fund growth projects because we are committed to fund largely out of our ability to generate cash flow.
Gas outlook
Stanford says despite todays low prices and pipeline capacity restraints, Petro-Canada has a very positive view of the potential for gas in the medium and long term. He expects to see evidence of a turnaround in the cyclical gas price pattern in 1997. Stanford notes there are plans to add pipeline capacity to the U.S. and thus uncork the present delivery bottleneck.
Stanford predicts deregulation of the North American electrical power industry also will have some interesting ramifications for the gas industry.
Initially, it is going to be tough for the gas industry. It will be more difficult, but once it is mostly ironed out there will be significant opportunities for strategic associations and alignments. They will allow the gas industry to work more closely with power generation.
Petro-Canada plans to spend about $200 million/year on gas exploration and development in low to medium risk projects. A sizable portion of the companys reserves are undeveloped, and there will be increasing emphasis on reserves replacement.
Petro-Canada has its own gas marketing operation and uses hedging techniques extensively to deal with cyclical swings in prices.
Our western Canada crude oil business is making good returns and is not a shabby place to be right now, Stanford said. But we do not see it as a significant growth business in the longer term.
East Coast offshore
Major additions to Petro-Canadas crude oil production will come from its substantial Canadian East Coast offshore interests and from Algeria, which Stanford views as a top prospect.
Hibernia oil field off Newfoundland is firmly on the development track toward production in late 1997, and technical and financial problems are largely behind it.
Stanford notes the Hibernia project is the first step in a string of fields that will go on stream production using North Sea off the shelf technology and feeding into the Hibernia production platform. They include Terra Nova, Nautilus, Mara, Nevis, and West Ben Nevis. Petro-Canada is a major participant in all of them.
There is on the order of 500 million bbl of oil discovered for Petro-Canadas account off the East Coast, Stanford said. Not one of those barrels is on our reserves report yet, and they wont be booked until a production system is in operation.
The Petro-Canada president is enthusiastic about the production and reserves potential of a joint venture in Algeria with Sonatrach.
His company holds a 70% interest in a 1994 oil discovery of 40-45 million bbl on the Tinrhert block, about 620-miles south of Algiers. A development plan has been filed for approval which would give Petro-Canada a 10,500 b/d production share early in 1996.
Stanford says five prospective targets were identified on the 2 million acre block before the first well was drilled.
Restructuring
The past 2 years of strong bottom line performance and a new focus on growth are the result of some painful decisions implemented by Stanford and his management team.
At the end of 1991, when we began some restructuring, we realized the degree of things we had to do was a lot greater than we had thought, and we were not focusing on growth, Stanford said.
The first step we took was defining what we wanted to be. The question we asked was, What would success look like for us? When we had that definition we could take a look at the gap from where we were. The things we had to do to get started became somewhat self-evident.
Since then, the restructuring program has included a sale of noncore assets, substantial staff cuts, and rationalization of downstream retail and refining operations.
Properties in which the company holds interests have been reduced from more than 550 in western Canada to about 165 at the end of 1994 with a $300 million gain for company coffers.
Stanford says another important decision in the turnaround process involved the elimination of Petro-Canadas international operations, now confined to Algeria. That involved shedding interests in a number of countries, including Colombia, Ecuador, Malaysia, Pakistan, Myanmar, and Viet Nam. New international ventures are likely, but they will depend on the companys ability to finance them. Copyright 1995 Oil & Gas Journal. All Rights Reserved.
