Strong Operations, Solid Liquidity Position Petro-Canada Well for Merger
Petro-Canada announced second quarter operating earnings of $99 million ($0.20/share), down 91% from $1,151 million ($2.38/share) in the second quarter of 2008. Second quarter 2009 cash flow from operating activities before changes in non-cash working capital was $634 million ($1.31/share), down 68% from $1,979 million ($4.09/share) in the same quarter of last year.
Net earnings were $77 million ($0.16/share) in the second quarter of 2009, compared with $1,498 million ($3.10/share) in the same quarter of 2008.
"We continued to manage our business in a prudent manner during the second quarter, as the downturn persisted," said Ron Brenneman, president and chief executive officer. "Staying the course we charted for ourselves at the beginning of this year has us in a strong position heading into our merger with Suncor."
As a result of the merger between Petro-Canada and Suncor, Petro-Canada will not be declaring further dividends. Dividends will now be granted and paid by the new amalgamated Company, subject to the approval of its new Board of Directors.
(millions of Canadian dollars, after-tax)
Operating earnings decreased 91% to $99 million ($0.20/share) in the second quarter of 2009, compared with $1,151 million ($2.38/share) in the second quarter of 2008. The decrease in second quarter operating earnings reflected lower realized upstream prices ($(768) million), decreased upstream volumes(1) ($(184) million), decreased Downstream margin and volumes(2) ($(10) million), and higher DD&A and exploration ($(47) million), operating, general and administrative (G&A) ($(28) million) and other(3) ($(15) million) expenses.
(1) Upstream volumes included the portion of DD&A expense associated with changes in upstream production levels.
(2) Downstream margin included the estimated current cost of supply adjustment.
(3) Other mainly included changes in the elimination of profits in the upstream business units for crude oil sales to Downstream, where the crude oil still resides in Downstream's inventories ($(56) million), decreased sulphur sales ($(28) million), foreign exchange ($(14) million) and upstream inventory movements ($77 million).
Operating Earnings by Segment
(millions of Canadian dollars, after-tax)
The decrease in second quarter operating earnings on a segmented basis reflected lower operating earnings in East Coast Canada ($(248) million) and International ($(241) million), a decrease from operating earnings to an operating loss in North American Natural Gas ($(287) million, Oil Sands ($(181) million) and Downstream ($(18) million), and higher Shared Services and Eliminations costs ($(77) million).
Net earnings in the second quarter of 2009 were $77 million ($0.16/share), compared with $1,498 million ($3.10/share) during the same period in 2008. Net earnings in the second quarter of 2009 were lower than in the second quarter of 2008 due to significantly lower operating earnings, expenses from the deferral of the Fort Hills project, impairment charges in North American Natural Gas and a smaller current cost of supply adjustment in the Downstream. Net earnings for the second quarter of 2008 included a $230 million future income tax recovery on the ratification of the Libya EPSAs. These factors were partially offset by lower expenses from the mark-to-market valuation of stock-based compensation, smaller losses on the sale of assets and foreign currency translation gains on long-term debt during the second quarter of 2009, versus foreign currency translation losses in the same period of the prior year. During the second quarter of 2009, cash flow from operating activities before changes in non-cash working capital was $634 million ($1.31/share), down significantly from $1,979 million ($4.09/share) in the same quarter of 2008. The decrease in cash flow from operating activities before changes in non-cash working capital reflected significantly lower net earnings.
2009 Consolidated Net Production and Capital Expenditure Outlooks
The Company updates its annual production and capital and exploration expenditure outlooks at mid-year. Full-year upstream production is expected to be in the 355,000 barrels of oil equivalent/day (boe/d) to 375,000 boe/d range in 2009, in line with the 345,000 boe/d to 385,000 boe/d production outlook previously provided. The 2009 capital and exploration expenditure program is expected to be $3.2 billion, down $200 million from the prior guidance of $3.4 billion announced on April 28, 2009.
Second quarter production in 2009 averaged 374,000 boe/d net to Petro-Canada, down from 414,000 boe/d net in the same quarter of 2008. Volumes reflected decreased North American Natural Gas, East Coast Canada and International production while Oil Sands production was relatively unchanged.
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