www.morningstar.ca 30 Jan 03(6:10 PM) |  E-mail Article to a Friend

By Jeffrey Jones

CALGARY, Alberta (Reuters) - Petro-Canada, the country's No. 3 oil producer, refiner and marketer, said on Thursday its fourth-quarter profit quintupled on high oil and gas prices and a hefty production jump after buying international assets.

Petro-Canada's <PCA.TO> better than expected showing was also fueled by strong results at its refineries, as industry-wide profit margins improved.

The company, which more than doubled output last year by acquiring the widespread assets of Veba Oil & Gas, earned C$356 million ($230 million), or C$1.34 a share, in the quarter, up from C$66 million, or 25 Canadian cents a share, a year earlier

That handily beat an average estimate of C$1.02 a share among analysts polled by Thomson First Call.

Cash flow, which gives a glimpse into an oil company's ability to fund projects, was C$807 million, or C$3.06 a share, up from C$307 million, or C$1.17 a share in the fourth quarter of 2001. Revenue rose to C$3 billion from C$1.8 billion.

For the year, profit rose 15 percent to C$974 million, or C$3.71 a share, from C$846 million, or C$3.19 a share.

"We of course got a big boost from commodity prices, but more fundamentally it was a year of successful execution across the board," chief executive Ron Brenneman said.

The stock rose 78 Canadian cents to C$50.52 in Toronto, just shy of its record high of C$50.80 set last week. It is up 9 percent since the start of the fourth quarter, beating the Toronto Stock Exchange's energy group, which slipped slightly.

Petro-Canada is known for its national gas station chain, western natural gas and oil sands developments, and offshore oil projects on the country's East Coast.

Last year it bought Veba for C$3.2 billion, giving it exploration and production projects in the North Sea, North Africa, the Middle East and South America.

Canada's integrated oil firms are awash in cash due to sky-high commodity prices.

Fears of war with Iraq and the protracted strike in major oil exporter Venezuela drove crude prices up 38 percent, while cold weather and dwindling inventories pushed Canadian natural gas prices up 67 percent in the quarter.

Petro-Canada has the top percentage gain in fourth-quarter profit among its peers.

"Price is a big component of that and, of course, the acquisition of Veba was a big component of that," said Gord Currie, analyst with Canaccord Capital Corp.

"But their (refining and marketing arm) has also been performing extremely well. Not only did they get some help from refining margins, but their refineries are running flat out and making darn near their cost of capital."

The exploration and production division earned C$343 million, up from C$52 million in the fourth quarter of 2001. With the Veba takeover and last year's startup of the Terra Nova oil project off Newfoundland, production more than doubled to 472,400 barrels of oil equivalent a day.

Refining and marketing earnings were C$78 million, up from C$48 million, partly due to improved refining margins, or the difference between the cost of crude and the wholesale price of petroleum products like gasoline wholesale, Petro-Canada said.

Brenneman, who has warned oil sands plans could be shelved over cost uncertainty created the Kyoto climate change accord, said he was heartened by Ottawa's recent measures to limit the industry's exposure. Canada ratified the treaty on cutting greenhouse gas emissions late last year.

However, Petro-Canada needed more clarification before embarking on its next oil sands expansion phase, he said.

The company is nearing a decision on going ahead with its 80,000 barrel a day Meadow Creek, Alberta, project and a refurbishment of its Edmonton refinery to process the supply. Meadow Creek could start production in 2007.

Ottawa's deal with the industry provides protection against emission-cutting costs for current operations, Brenneman said.

"What we're looking for from the federal government is ... a framework of principles that would govern the fiscal terms around these longer-term, larger projects," he said.

($1=$1.53 Canadian)

sg.biz.yahoo.com Friday January 31, 6:21 AM

NEW YORK (Dow Jones)--The 495,000 barrels-a-day Hovensa LLC refinery in the U.S. Virgin Islands received its first shipment of Venezuelan crude oil this past weekend since its joint venture partner, state-owned Petroleos de Venezuela SA (E.PVZ), declared force majeure on Dec. 6, Amerada Hess (AHC) officials said Thursday at the company's fourth-quarter earnings teleconference.

Force majeure is a situation in which contract obligations can't be met because of an extraordinary, unforeseen event.

The refinery had been running at approximately 350,000 to 360,000 b/d, down from its normal operating rate of 450,000 b/d, since the Venezuelan supply was cut, which, officials said, wasn't an economical level at which to operate.

From: Depart To: Return:  

AdultsHess officials said that while Hovensa isn't yet getting full shipments of crude oil from Venezuela in terms of contracted amounts, the refining margin is now in the profitable category. Now that Venezuelan shipments appear to have been restored, even at reduced levels, run rates will increase, an Amerada Hess official said during the teleconference. Hovensa LLC is a 50%-50% joint venture between Amerada Hess Corp. and Petroleos de Venezuela, SA.

-By Rose Marton, Dow Jones Newswires; 201-938-2059; rose.marton@dowjones.com

 GILLIAN LIVINGSTON Canadian Press Thursday, January 30, 2003

TORONTO (CP) - Four of Canada's biggest integrated oil companies nearly tripled their fourth-quarter profits to $1.3 billion thanks to higher oil and gas prices, but analysts say there won't likely be a repeat performance in 2003.

For Imperial Oil, Petro-Canada, Shell Canada and Suncor Energy, the fourth quarter in particular and 2002 overall was a bonanza as the threat of a U.S. war with Iraq and a major strike in Venezuela pushed oil prices above $30 US a barrel by year end.

Higher prices for oil and natural gas helped make 2002 a stellar year for the industry leaders, which also benefited from increased production from new projects in the Alberta oilsands, on Canada's East Coast, and from international acquisitions. Improved profits in gasoline refining and marketing gave an additional boost.

But Gord Currie, an analyst with Canaccord Capital, said it's "unlikely" that 2003 will be as strong as 2002 for Canada's big oil companies because prices are likely to dip as the Iraq situation is resolved.

"Whenever oil and gas prices are as high as they are today the balance of probabilities is that they're going to be lower," he said. "I think it's just a question of time - is it the second quarter or a year from now, we don't know. But it would be very difficult for 2003 to measure up."

The financial results released so far by four of Canada's biggest oil producers, refiners and gasoline marketers show that they're reaping the benefits of those higher prices while they have that option.

EnCana Corp. (TSX:ECA), the largest Canadian independent oil and gas producer following its creation last year by the merger of PanCanadian Energy and Alberta Energy, isn't due to release its fourth-quarter report until Feb. 20.

But Petro-Canada (TSX:PCA) issued vastly improved results Thursday when it reported a 440-per-cent increase in its fourth-quarter earnings - to $356 million from $66 million a year ago.

Higher energy prices were the main cause, although Petro-Canada also gained from its acquisition last year of the international assets of Veba Oil & Gas, whose production and exploration is focused in the North Sea, North Africa and northern Latin America.

Petro-Canada chief executive Ron Brenneman called 2002 "an outstanding year" as annual profits rose by 15 per cent over 2001 to $974 million.

"We of course got a big boost from commodity prices but more fundamentally, it was a year of successful execution across the board. We were really firing on all cylinders," he said on a conference call.

Shell Canada's earnings report Thursday echoed these events as its profits rose to $247 million in the fourth quarter from $170 million a year ago. However, full-year profits fell to $561 million from just over $1 billion a year ago, a period of extraordinarily high natural gas prices.

Last week, Calgary-based Suncor Energy reported that fourth-quarter profits soared nearly tenfold to $258 million from $26 million. For 2002, profits of $761 million were nearly double the year earlier.

Energy giant Imperial Oil more than doubled its fourth-quarter profits to $454 million as high oil prices helped it post its third-biggest annual profit ever.

For the full year, the Toronto-based company, a subsidiary of U.S.-based ExxonMobil, earned a profit of $1.2 billion compared with $1.24 billion in 2001.

Last year started with reasonable oil prices but then U.S. President George W. Bush unidentified Iraq as a possible target and "oil prices started a long gradual climb to $30 US and then, with a little help from Venezuela, pushed right through the $30 US level," Currie said.

The Venezuelan strike continues but production from the world's fifth-largest oil producer has recently gained ground, though it's still below the three million barrels per day it pumped before prior to the start of the strike on Dec. 2.

The main wildcard with oil prices this year, which have averaged nearly $33 US a barrel in January, is how the war on Iraq plays itself out, said Stephen Calderwood, an oil and gas analyst with Salman Partners Inc. in Calgary.

Calderwood is estimating the price of oil in 2003 will average about $25 US, and that's with the expectation that a war on Iraq will occur by the end of February and will be relatively quick.

"We still think there's going to be a war and we still think the oil price will take a huge nosedive after the event," Calderwood said.

However, Currie notes that there are a multitude of possible scenarios in Iraq.

Oil prices could stay high if it's a long and drawn-out conflict, or if the U.S. gives weapons inspectors a long time to complete their job, keeping uncertainty in the market, he said.

Canada's four major integrated oil companies nearly tripled their profits to $1.3 billion in fourth-quarter profits as they benefited from higher oil and natural gas prices and improved margins in gasoline refining.

Some facts:

Imperial Oil Ltd.

Quarterly Profits: $454 million, up from $194 million last year.

Company: Based in Toronto. Canadian arm of global energy giant ExxonMobil Corp. Operates (TSX:IMO) national chain of 2,500 Esso gasoline stations and a number of oil refineries. Is also a major heavy oil and natural gas producer.

Shell Canada Ltd.

Quarterly Profits: $247 million, up from $170 million last year.

Company: Based in Calgary. Major gas producer. Owns (TSX:SHC) national chain of Shell stations. Part of the European-based Royal Dutch Shell group of companies.

Petro-Canada Inc.

Quarterly Profits: $356 million, up from $66 million last year.

Company: Based in Calgary. Former Crown corporation. Now widely held although the federal government still owns about 18 per cent of company (TSX:PCA). Is a major oil and gas producer, with operations in Western Canada, off the East Coast and a growing international business. Operates national gas station chain.

Suncor Energy Inc.:

Quarterly Profits: $258 million, up from $26 million last year.

Company: Based in Calgary. Widely held. A major oilsands producer (TSX:SU) in northern Alberta. Has a chain of Sunoco gasoline stations in Ontario.

www.quicken.com Thursday, January 30, 2003 05:16 PM ET The Wall Street Journal Online

The economy is slowing, Iraq fears are growing, and profits are eroding.

That bearish refrain echoed on Wall Street again Thursday, making for another lousy trading day as weak gross-domestic-product and jobless reports plus news of a massive net loss at AOL Time Warner threw more water on the market.

Meanwhile, a coalition of European states said they'd throw their weight behind the U.S. in its effort to force Iraq to disarm, highlighting anew the immediacy of conflict.

Losses widened as the day dragged on, with the Dow Jones Industrial Average ending down 165.58 points, or 2%, at 7945.13, while the Nasdaq composite lost 35.71, or 2.6%, to 1322.35. Treasurys climbed.

Wall Street woke up on the wrong side of the bed with early news from the Commerce Department reporting a marked slowdown in fourth-quarter GDP growth. The total value of all goods and services produced in the economy limped forward 0.7%, compared with 4% growth in the third quarter. Economists had forecast an increase of 0.6%. For the full year, GDP grew 2.4%, compared with 0.3% in 2001.

While the results weren't spectacular, the market showed a muted reaction, and some even found encouragement in the details despite the weak headline number.

"This is something of a relief -- a negative number, with its attendant unpleasant optics, was possible," said Ian Shepherdson, chief U.S. economist for High Frequency Economics. "The big surprise here is that ... spending on equipment and software rose at a 5% pace. This is the third-straight gain ... it is very encouraging to see spending rise given the third-quarter drop in business confidence."

Meanwhile, initial jobless claims for the week ended Saturday rose 14,000, compared with a rise of 18,000 in the earlier week, the Labor Department said. Economists had forecast a smaller increase of 4,000.

After the close of trading Wednesday, AOL Time Warner posted a 2002 loss of $ 98.7 billion -- the widest annual corporate loss in history -- after taking a fourth-quarter charge of $45.5 billion, mostly to write down the value of its troubled America Online unit. The write-down was more than twice what Wall Street had anticipated. Its shares tumbled 14%.

The company also announced the resignation of Ted Turner as vice chairman, the latest in an exodus of senior executives.

Aside from AOL's news, equities traders are focusing on several major companies reporting earnings early Thursday.

Among them, Exxon Mobil reported a 53% jump in net income as concerns over unrest in Venezuela and war in Iraq lifted oil and gas prices and gave a considerable boost to the company's revenue. Its shares, which have shown strength of late, lost 2.3%.

After the close, earnings news continued to filter in. Dow component Walt Disney posted better-than-expected operating earnings, though net income sank to $256 million from $438 million.

AstraZeneca said its fourth-quarter profit fell 41% as the company put aside $ 350 million to cover a likely legal settlement. But sales at the Anglo-Swiss pharmaceutical company rose 12%. Its shares were up 3.9%.

After a rocky beginning Wednesday, the market turned higher to post a second straight day of gains. Traders got some help from a decision by Federal Reserve policy makers to leave target interest rates unchanged, and by the Fed's reassuring comment that, once geopolitical risks lift, the economy should improve. The Dow industrials, off almost 144 points early in the day, finished up 21.87. The Nasdaq composite, dominated by tech stocks, gained 1.2%.

In major U.S. market action Thursday:

Stocks sank. On the Big Board, where nearly 1.50 billion shares traded, 2,192 stocks fell and 1,081 rose. On the Nasdaq, where 1.44 billion shares changed hands, 2,230 stocks declined and 1,050 advanced.

Bonds were higher. The 10-year Treasury note gained about 3/8 point, or $3.75 for each $1,000 invested. The yield, which moves inversely to price, fell to 3.974%. The 30-year bond was up about 7/8 point to yield 4.858%.

The dollar was stronger. It traded at 119.01 yen, compared with 118.32 yen late Wednesday in New York, while the euro fell against the dollar to $1.0817 from $1.0841.

www.forbes.com Reuters, 01.30.03, 4:58 PM ET

NEW YORK, Jan 30 (Reuters) - Output at the Lyondell-Citgo refinery in Houston was at 265,000 barrels per day (bpd), or near capacity, according to officials at Lyondell Chemical Co. (nyse: LYO - news - people).

"Operating rates have recently been increased to 265,000 barrels per day, which is essentially full capacity," said Douglas Pike, Lyondell's director of investor services, in a conference call on Thursday.

From Dec. 27 until about mid-January, run rates at the 270,000 bpd plant, were reduced to approximately 130,000 bpd due to the disruption of crude oil supplies caused by a general strike in Venezuela.

Prior to the strike, Lyondell-Citgo received about 230,000 bpd of oil from Venezuela, the world's fifth largest exporter.

The company told an earnings conference call with analysts that the Lyondell-Citgo Refining LP refinery, maintained near capacity operating rates through Dec. 27 using inventories, shipments already in transit from Venezuela and spot purchases.

In mid-January supplies of crude oil from Venezuela and crude oil purchased on the spot market allowed the refinery to begin to ramp up output. In a Jan. 21 statement the company had said runs were between 220,000 and 230,000 bpd.

The company said in its fourth-quarter earnings release on Thursday that it is confident that it has established both Venezuelan and spot-market supplies to enable the refinery to operate "at high rates until the situation is resolved."

Now in the 60th day of the stoppage, Venezuela's striking oil workers have estimated oil production returning to 1.0 million bpd while the embattled government has estimated output at 1.4 million bpd.

Lyondell said that since the strike began, only 15 ships had set out from Venezuela to the refinery in Houston. Normally the refinery would have received 28 to 30 ships with 500,000 barrels capacity during this period, according to the company.

Analysts were told there is no significant maintenance work planned for the near term. There was some minor work done on the refinery when the facility was running at reduced rates. Total crude oil consumption for the fourth quarter 2002 averaged 250,000 bpd, the firm said.

Lyondell-Citgo is a joint venture between Lyondell and Citgo Petroleum Co., which is an indirect, wholly-owned subsidiary of Petroleos de Venezuela SA, the state oil company of Venezuela. (Reporting by Robert Gibbons, edited by Gary Crosse; Reuters Messaging: robert.gibbons.reuters.com@reuters.net; +1 646 223 6059; email: robert.gibbons@reuters.com)