Canadian integrated oil and gas company Petro-Canada (PCZ,PCA.TO) on Thursday reported a 95% plunge in profit for the second quarter from last year, hurt by a sharp drop in operating earnings, charges related to deferral of the Fort Hills project and impairment charges in the North American Natural Gas segment.
The company also reported lower oil and gas production during the quarter as compared to the year-ago period. Looking ahead, the company lowered its outlook for fiscal year 2009 capital expenditure.
The global economic downturn has sapped strength from the oil and gas market, with prices down nearly US$84 or 57% from the record highs of about US$147 a barrel reached in July 2008. Crude oil futures for September delivery closed at US$62.85 a barrel on the New York Mercantile Exchange on Wednesday.
Petro-Canada, which is in the midst of being acquired by Suncor Energy, Inc. (SU,SU.TO), also said it would cease to pay dividends as a result of the merger and added the future dividends would come from the merged entity. In March, Suncor Energy and Petro-Canada agreed to merge in an all-stock deal worth about C$15 billion. Both companies expect the proposed merger to be completed in the third quarter of 2009.
Second-Quarter Results
Calgary, Alberta-based Petro-Canada reported second quarter net earnings of C$77 million, or C$0.16 per share, down from C$1.50 billion, or C$3.10 per share, a year ago.
The results for the latest quarter include asset impairment charges of C$158 million and charges due to the deferral of the Fort Hills project of C$185 million. The year-ago quarter's results include a C$230 million future income tax recovery on the ratification of the Libya Exploration and Production Sharing Agreements, or EPSAs.
Excluding special items, operating earnings for the latest quarter plunged to C$99 million, or C$0.20 per share, from C$1.15 billion, or C$2.38 per share, in the year-ago period.
The 91% plunge in operating earnings for the quarter reflects lower realized upstream prices, decreased upstream volumes, decreased downstream margin and volumes, as well as higher DD&A and exploration as well as operating expenses.
Cash flow from operating activities in the second quarter, before changes in non-cash working capital, was C$634 million or C$1.31 per share, down 68% from C$1.98 billion or C$4.09 per share in the previous-year quarter. The decrease in cash flow from operating activities reflects significantly lower net earnings.
Ron Brenneman, president and chief executive officer of Petro-Canada, said, "We continued to manage our business in a prudent manner during the second quarter, as the downturn persisted. 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."
Peer Performance
Canadian oil and gas company EnCana Corp. (ECA,ECA.TO) last week reported an 80% fall in profit for the second quarter, hurt by unrealized mark-to-market hedging losses as well as lower natural gas and liquids prices. The company's net earnings for the quarter plunged to US$239 million, or US$0.32 per share, from US$1.22 billion, or US$1.63 per share, a year ago. Revenues for the quarter, net of royalties, plummeted to US$3.76 billion from US$7.42 billion in the comparable period a year ago.
Other Metrics
Total production, net before royalties, averaged 374 thousand boe/d during the quarter, down from 414 thousand boe/d in the same period of the prior year. The decline in volumes from the year-ago period reflects lower North American Natural Gas, East Coast Canada and International production, while Oil Sands production was relatively unchanged.
Capital expenditure during the second quarter totaled C$683 million, down from C$2.14 billion in the prior-year quarter. Segmental Details
In the upstream sector, North American natural gas reported a net loss of C$239 million, compared to net earnings of C$100 million last year. Operating loss for the quarter was C$81 million compared with operating earnings of C$206 million a year ago, due to lower realized prices, volumes and sulphur sales, in addition to higher exploration and DD&A expenses. Production averaged 608 million cubic feet of gas equivalent per day, or Mmcfe/d, down 8% from the same period last year, reflecting reduced capital spending and natural declines.
Oil Sands had a net loss for the quarter of C$188 million, compared to net earnings of C$177 million in the previous-year quarter. Operating loss for the quarter was C$4 million, compared to operating earnings of C$177 million a year ago, reflecting lower realized prices, lower production from Syncrude and higher operating expense. These were partially offset by an increase in production from Mackay River. Production during the quarter averaged 53,000 barrels per day, almost unchanged from 53,900 barrels per day in the previous-year quarter.
In International & Offshore, East Coast Canada's quarterly net earnings declined to C$137 million from C$385 million in the prior-year quarter. East Coast Canada production averaged 69,200 b/d in the quarter, down 23% from the year-ago period.
International net earnings were C$143 million, down sharply from C$672 million a year ago. Operating earnings dropped to C$148 million from C$389 million in the same period last year on lower realized crude oil prices, decreased production volumes and higher operating and DD&A expenses. International production declined 6% from the previous-year quarter to 150,600 boe/d, reflecting Organization of the Petroleum Exporting Countries, or OPEC, quota restraints imposed in Libya and natural declines in some North Sea assets.
In the Downstream sector, earnings were negatively impacted by a weaker business environment during the quarter. The sector reported net earnings of C$121 million for the quarter, down from C$300 million in the same quarter last year. Operating loss for the quarter was C$18 million, compared to nil operating earnings a year ago. The company's averaged realized price for crude oil during the quarter was C$65.37 per barrel, down from C$117.22 in the year-ago period. The company's average realized price for natural gas dropped 64% from a year ago to C$3.44 per thousand cubic feet.
Refining and Supply recorded an operating loss for the quarter of C$60 million, wider than loss of C$16 million in the year-ago period, reflecting lower distillate cracking margins, unfavorable crude price differentials and higher DD&A. Marketing recorded operating earnings of C$42 million, up from C$16 million a year ago, helped by higher margins and lower expenses, partially offset by lower overall volume demand.
Year-To-Date Results
For the first six months of fiscal year 2009, Petro-Canada's net earnings plummeted to C$30 million, or C$0.06 per share, from C$2.57 billion, or C$5.32 per share, in the year-ago period.
Operating earnings for the half year dropped to C$210 million, or C$0.43 per share, from C$2.10 billion, or C$4.33 per share, in the previous-year period.
Total operating return on capital employed for the half year was 11.3%, lower than 20.6% in the prior-year period.
Outlook
Petro-Canada forecasts full-year upstream production in a range of 355,000 boe/d-375,000 boe/d, in line with the prior production outlook of 345,000 boe/d-385,000 boe/d.
The company also lowered its outlook for full-year capital and exploration expenditure program to C$3.2 billion from the prior guidance of C$3.4 billion announced in April.
Dividends
Petro-Canada said that as a result of the merger with Suncor, it will not declare further dividends. Dividends will now be granted and paid by the new amalgamated company, subject to the approval of its new board of directors.
Stock Quotes
In Thursday's regular trading session, PCZ is trading at US$40.57, up US$1.50 or 3.84%. In the past 52-week period, the stock has been trading in a range of US$15.82-US$47.80.
PCA.TO closed Wednesday's regular trading session on the Toronto Stock Exchange at C$42.71, down C$1.63 on a volume of 1.77 million shares. In the past 52-week period, the stock has been trading in a broad range of C$20.01-C$50.24.
For comments and feedback contact: editorial@rttnews.com
June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.