Petro-Canada Claps for 3Q Profit Increase

Petro-Canada has announced third quarter operating earnings of $1,242 million ($2.56/share), up 97% from $630 million ($1.29/share) in the third quarter of 2007. Third quarter 2008 cash flow from operating activities before changes in non-cash working capital was $2,116 million ($4.37/share), up 72% from $1,229 million ($2.52/share) in the same quarter of last year.

Net earnings were $1,251 million ($2.58/share) in the third quarter of 2008, compared with $776 million ($1.59/share) in the same quarter of 2007.

"Our businesses are running reliably and are generating solid cash flow to help fund our growth projects," said Ron Brenneman, president and chief executive officer.

"We've always been a financially conservative company - in the way we fund our operations and in how we evaluate and finance our growth projects," added Brenneman. "This prudent, long-term view positions us well during these volatile economic times."

Operating earnings increased 97% to $1,242 million ($2.56/share) in the third quarter of 2008, compared with $630 million ($1.29/share) in the third quarter of 2007. The increase in third quarter operating earnings reflected the positive impact of higher realized upstream prices ($610 million) and lower other expenses(1) ($180 million). The gains were partially offset by lower upstream production(2) ($(47) million), lower Downstream margins(3) ($(9) million) and higher operating, general and administrative (G&A) ($(94) million), and DD&A and exploration expenses ($(28) million).

The increase in third quarter operating earnings on a segmented basis reflected higher North American Natural Gas ($101 million), Oil Sands ($125 million), East Coast Canada ($104 million) and International ($281 million) operating earnings and lower Shared Services costs ($4 million). The results were partially offset by slightly lower Downstream operating earnings ($(3) million).

Net earnings in the third quarter of 2008 increased 61% to $1,251 million ($2.58/share), compared with $776 million ($1.59/share) during the same period in 2007. Net earnings in the third quarter of 2008 were higher than in the third quarter of 2007 due to higher operating earnings, gains on sale of assets, a recovery from the mark-to-market valuation of stock-based compensation and the benefit associated with settling the Buzzard derivative contracts in the fourth quarter of 2007. These factors were partially offset by losses on foreign currency translation of long-term debt.

During the third quarter of 2008, cash flow from operating activities before changes in non-cash working capital was $2,116 million ($4.37/share), up from $1,229 million ($2.52/share) in the same quarter of 2007. The increase in cash flow from operating activities before changes in non-cash working capital reflected higher net earnings.

Operating Highlights

Third quarter production averaged 424,000 barrels of oil equivalent/day (boe/d) net to Petro-Canada in 2008, down 3% from 436,000 boe/d net in the same quarter of 2007. Lower volumes reflected decreased East Coast Canada and International production, partially offset by increased Oil Sands production. North American Natural Gas production was relatively unchanged.

Outlook

Operational Updates

  • MacKay River achieved a new production record, averaging 29,700 barrels/day (b/d) for the month of September 2008.
  • No major turnarounds planned for the remainder of 2008 in North American Natural Gas, Oil Sands, East Coast Canada or the Downstream.
  • Buzzard had expected to commence its planned maintenance turnaround in August 2008 but, due to adverse weather conditions, this seven- to nine-day turnaround has been delayed to the fourth quarter of 2008.

Major Project Milestones

  • Construction of the Edmonton RCP was completed at the end of the third quarter and the refinery is on track for startup in the fourth quarter of 2008.
  • The Montreal coker investment decision is pending resolution of the labour dispute.
  • Engineering and fabrication of the North Amethyst portion of the White Rose Extensions project is being advanced, with the project on schedule to deliver first oil in late 2009 or early 2010.
  • The Syria Ebla gas project is 35% complete, with first gas expected in 2010. Field construction and detailed engineering is in progress. An appraisal well was drilled and tested in the third quarter of 2008, resulting in better than expected production rates, and a second rig was mobilized and 3D seismic operations began in August 2008.
  • With six new EPSAs signed by the Libya National Oil Corporation, implementation work is focusing on preparing the Amal field development program, capturing early opportunities to increase production and initiating the new exploration program. Three seismic crews were deployed by the end of the third quarter of 2008.
  • The MacKay River expansion project continues with design refinement and receiving and reviewing lump sum construction bid contracts. FID is expected in the first quarter of 2009.
  • The estimated all-in capital costs for the Fort Hills project, as currently conceived, are expected to increase by approximately 50% from the initial estimate of $18.8 billion (including third party costs) announced in June 2007. The partners are looking at different configurations and timing options to arrive at the best project combination. In the near term, the partners contemplate making an investment decision only with respect to the mining portion of the project and deferring a decision to construct the upgrader portion, which would substantially reduce project costs prior to first oil. The partners remain committed to mine production in 2011. Final regulatory decisions on the upgrader and the proposed amendment to the approved mine plan are anticipated by year-end 2008. With a definitive cost estimate, upgrader regulatory approval and partner approvals in place, a decision on how best to proceed is expected by year-end 2008.
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