Chris Varcoe <a href=www.canada.com>Calgary Herald Friday, May 09, 2003

Canada's second-largest oilfield services firm rode the wave of high commodity prices and drilling activity to post a one-third jump in first-quarter profits.

Calgary-based Ensign Resource Service Group reported Thursday that net income in the first quarter rose to $38.9 million, or 52 cents a share. During the same period a year earlier, Ensign made $29.2 million, or 40 cents per share.

Revenues during the first quarter jumped 40 per cent to $281 million, while cash flow increased 37 per cent to $62 million, or 83 cents per share.

"It was the second-best quarter in the history of our company," Ensign's chief financial officer Glenn Dagenais said in a conference call.

Ensign operates across Western Canada and the United States, and is one of the companies in the stable of oilpatch entrepreneur Murray Edwards.

Demand for oilfield services shot up this winter drilling as petroleum producers gained access to frozen land and searched for new oil and natural gas reserves.

Ensign said the number of wells completed in Western Canada has increased 14 per cent so far this year from 2002 levels.

More important, the number of well licenses issued -- reflecting intentions to drill wells -- has soared almost 55 per cent.

In Canada, Ensign's drilling fleet of 144 rigs operated at 69 per cent capacity during the quarter, compared with 53 per cent of rigs working a year earlier.

"The good news is that operators did not get all of the wells they wanted to drill in the first quarter, therefore we had a backlog going into the second quarter," said Ensign vice-president Bob Geddes.

Across the sector, Canadian oil companies are enjoying the benefits of strong commodity prices.

Crude oil averaged $33.80 US per barrel during the quarter, up 56 per cent, due to strife in Venezuela and the Middle East.

Tight inventory levels pushed spot prices for western Canadian natural gas up 129 per cent to $7.15 per gigajoule.

With oil and natural gas prices remaining relatively high, this trend should spur additional work for service firms such as Ensign and rival Precision Drilling Corp., analysts say.

"If the weather co-operates and gas prices get near where we expect them to be, the oilfield service sector is going to be a big winner," said analyst Todd Kepler of Griffiths McBurney Partners.

cvarcoe@theherald.canwest.com

By Ottawa Business Journal Staff Tue, May 6, 2003 8:00 AM EST

Gas prices in Ottawa flirted with their lowest level in more than year Monday even as the federal government decided against investigating recent price spikes.

In a report before the House of Commons industry committee, Competition Bureau chief Konrad Von Finckenstein said the run up in prices during the first three months of the year was consistent with the global situation and did not merit a formal investigation.

The report comes amid a fresh wave of allegations that Canadian gasoline producers conspire to fix gas prices.

According to Von Finckenstein, the spike in prices that peaked in mid-March accurately reflected events in motion around the world. He cited political troubles in oil exporter Venezuela, the build up to the U.S. invasion of Iraq and a severe winter across much of North America.

The Competition Bureau will only launch an investigation if it believes prices are being fixed or market players are attempting to illegally squeeze out competition. Von Finckenstein said he found no evidence of either.

In Ottawa, meanwhile, the price of regular unleaded gasoline fell below 58 cents on Monday, the lowest level since a brief flirtation with 52 cents in January 2002.

In the U.S., prices fell to the equivalent of about 60 cents last week. American consumers pay far fewer taxes on their gasoline.

The wholesale price of regular gas in Ottawa is about 60 cents a litre. Almost half of that price is federal and provincial tax.

In the first three months of this year, local motorists paid an average of 3.4 cents a litre more than the wholesale price.

Since mid-February the wholesale price has fallen by about 13 cents.

Spencer Knipping, an analyst with the Ontario energy ministry, believes wholesale prices will continue to fall over the next few weeks.

Apr. 30, 2003. 01:00 AM

But the stock fell nearly 2 per cent as Petro-Canada revealed it had delayed spending on a key part of its oil-sands strategy and had suffered some exploration setbacks.

The company said preliminary engineering work on retooling its Edmonton refinery to handle new Alberta oil-sands output determined costs would be much higher than hoped.

That prompted it to postpone some of the spending it budgeted this year for detailed engineering, the company said.

"Instead, management will evaluate possible changes to the project's scope, staging, and technology to improve economics. Petro-Canada expects to be in a position to decide on how to proceed toward the end of the year," it said.

Shares in Petro-Canada, known for its national chain of gas stations and exploration and production at home and in the North Sea, North Africa and South America, fell 86 cents to $47.68 in Toronto despite the huge first-quarter profit.

The company earned $584 million or $2.18 a share, up from a year-earlier profit of $88 million, or 33 cents.

Excluding gains from the effect of the strong Canadian currency on its U.S. dollar debt and proceeds of asset sales, earnings were $490 million, or $1.86 a share, beating an average estimate among analysts polled by Thomson First Call by 2 cents a share.

Peters & Co. Ltd. analyst Wilf Gobert said it could be argued that Petro-Canada beat the Street by a much wider margin because operating earnings included a $46 million writedown of assets in Kazakhstan that it has marked for sale.

Cash flow, giving a glimpse into an oil company's ability to fund development, more than tripled to $991 million, or $3.75 a share, from $287 million, or $1.09 a share.

With the major jump in profit, Petro-Canada joined its global industry rivals in benefiting from oil prices that surged 55 per cent as markets feared supply disruptions in the leadup to the U.S.-led war in Iraq while a strike in OPEC member Venezuela dragged on.

Oil firms also enjoyed natural gas prices that more than doubled.

<a href=www.thestar.com>TorontoStar.com May. 1, 2003. 07:31 AM KAZ NOVAK/THE SPECTATOR JOSH RUBIN STAFF REPORTER

  Filling up at the Esso station near Bathurst St. and Lake Shore Blvd. W. yesterday afternoon, Derrick Su couldn't wipe the smile off his face.

"This is great. I'm saving 10 or 15 bucks every time I fill up. I wish it would go even lower,'' said Su, pumping his sport-utility vehicle full of regular gasoline at 59.9 cents per litre.

For the first time in more than a year, gasoline prices around Toronto slipped yesterday below 60 cents per litre. Motorists were paying almost 80 cents per litre just a month ago as fears of war in Iraq pushed up the price of crude.

But by late afternoon, the price for regular gas at the Esso station had moved back up to 68.9 cents per litre.

The head of a Calgary-based oil-and-gas research firm cautioned that the price of crude is only one factor in the price at the pumps.

"You've got other things going on. In Toronto, it's a very competitive retail market and that can move the price,'' said Michael Ervin, president of Calgary-based oil and gas research firm M.J. Ervin and Associates.

According to Ervin, the price of gasoline could drop even lower in the short term. "You can talk about another 5 cents if you want to. There's still some room for downward momentum in gasoline prices.''

The price could drop as cheaper crude oil works its way through the refining system and shows up at pumps, said Ervin.

"In a bigger market like Toronto, the lag-time between oil getting pumped out of the ground and showing up at a gas station isn't all that long. It's normally three weeks or so,'' said Ervin. Any gasoline price drop would be tempered by the fact we're coming into peak driving season, Ervin warned. More demand for gasoline means higher prices, he said.

``The big driving season really starts in May, depending on how nice weather is.''

Over the past six weeks, crude prices slid from $39 (U.S.) per barrel to around $25 per barrel. In New York yesterday, light crude was at $25.24 per barrel, just 30 cents off an 11-month low.

The drop in the price of crude reflects a quick end to the U.S.-led invasion of Iraq and the end of a strike by oil workers in Venezuela, said Jim Rollyson, an oil analyst with Raymond James, a U.S. brokerage firm. It also reflects an increase in production by the Organization of Petroleum Exporting Countries cartel, Rollyson said.

Vol. 7, No. 13 Week of March 30, 2003 Gary Park PNA Canadian Correspondent

Province fears impact on energy trade from Canada’s opposition to Iraq war and federal minister’s anti-American comments; Alberta talking to OPEC about applying for observer status even though those seats are occupied by countries with state-owned production

Against a backdrop of growing cross-border tensions, the Alberta government is trying to separate itself from a stream of anti-American comments by senior Canadian politicians.

Alberta Energy Minister Murray Smith has called for federal Natural Resources Minister Herb Dhaliwal to either be fired or reassigned in cabinet.

Dhaliwal last week became the flash-point for a growing rift between Canada and the United States when he said the Iraq war reflected President George W. Bush’s failure as a statesman.

With the fallout from those remarks and Canada’s decision not to join coalition forces in Iraq spreading over the 49th parallel, Smith said March 27 that Dhaliwal “represents a serious, if not mortal liability for the oil and gas industry.”

He told the Financial Post that Dhaliwal will have “difficulty building confidence, close relationships, bilateral trade relationships, or anything of that nature” and suggested the federal minister has damaged energy trade worth C$50 billion a year to Canada.

Meantime, Smith said Alberta is “taking under active consideration” a solo international energy role for the province.

He said Alberta is speaking with members of the Organization of Petroleum Exporting Countries about gaining observer status at cartel meetings.

Alberta rebuked Smith told reporters March 25 that Alberta has no intention of consulting with the Canadian government, breaking with the traditional practice of provinces attending international forums in partnership with the federal government.

Last week, Alberta Premier Ralph Klein was rebuked by the Canadian government for sending a letter to Paul Cellucci, the U.S. Ambassador to Canada, supporting the U.S. “war on terrorism.”

A spokeswoman for Prime Minister Jean Chretien said Klein was “entitled to his own opinion … but foreign policy is decided by the federal government.”

The Alberta government shares the concerns of business leaders that Canada’s refusal to send troops to Iraq will have serious repercussions to bilateral trade, although Canada has three warships operating in the Persian Gulf and is sending 2,000 troops to Afghanistan to relieve the United States of that responsibility.

Cellucci expresses disappointment Cellucci, in a speech to business leaders March 25, took the rare step for a diplomat of expressing U.S. disappointment with Canada’s decision not to support the United States in Iraq.

“When Mr. Klein issues strong support for the United States, the Canadian government comes down hard on him,” Cellucci said. “When Mr. Dhaliwal makes totally inappropriate remarks about the president of the United States, they totally ignore it.”

However, Cellucci said it was not in the U.S. economic interests to punish Canada through trade agreements, but added “we’ll have to wait and see if there are any ramifications.”

The overriding Alberta concern is to maintain its access to U.S. energy markets. Currently, about 60 percent of all Canadian oil and natural gas production is shipped to the United States, making Canada one of the three largest sources of imported U.S. oil along with Saudi Arabia and Venezuela and the second largest exporter of gas in the world after Russia.

Alberta seeks observer status at OPEC Smith also said the federal government’s handling of the Kyoto Protocol on greenhouse gas emissions has prompted Alberta to seek observer status at OPEC, even though those seats have until now been occupied only by countries that have state-owned production, such as Russia, Mexico, Oman and Norway. Alberta regulates its petroleum industry, but has no control over prices or production.

Smith said Alberta would have no interest in joining OPEC decisions on regulating production levels, but he said closer collaboration would be valuable for Alberta.

“It’s important and beneficial for Alberta and Canadians to know as much as they can about their competition,” he said.

Mel Knight, a government member of the Alberta legislature who attended a meeting of the U.S. Energy Council last weekend, said the Venezuela ambassador to the United States mentioned the prospect of observer status for Alberta.

“On a world stage that would give us some recognition,” Knight said, noting that Alberta oil sands reserves of 175 billion barrels have just been included in the world’s oil reserves for the first time, reducing OPEC’s share of global reserves by 11 percent.

Alberta first flirted with OPEC 14 years ago, when it was offered “unofficial membership” in return for restraining production to prop up commodity prices.

The province at the time said the meetings it attended were only “technical,” although cabinet ministers argued at the time that development of the oil sands would only be possible if oil prices rose and were maintained. But the prospects of closer ties between Alberta and OPEC fizzled as quickly as they surfaced.