The near-record geyser of oilpatch earnings expected in the second quarter is turning out to be more of a burble.
Profits by heavyweights such as Imperial Oil Ltd., Shell Canada Ltd., Husky Energy Inc. and Nexen Inc. all fell short of analysts’ forecasts.
Imperial blamed a drop in production at its Cold Lake oilsands project and a lack of one-time gains for cutting earnings to $454 million or $1.26 per share, compared with record second-quarter profits of $514 million or $1.38 per share in 2003.
Shell Canada’s profits for this year’s second quarter rose to $285 million or $1.04 per share, compared with $175 million or 64 cents per share in the same quarter last year. But the company still missed analysts’ estimates by writing off $28 million sunk into the failed Weymouth well off Nova Scotia.
Husky’s second-quarter profits trickled in at $239 million or 54 cents per share, a steep drop from $441 million or $1.09 per share in the same quarter in 2003. But a year ago, a tax-related gain and a rise in the loonie’s value bumped up the company’s earnings.
Husky also missed $121 million in profits for the second quarter this year after deciding to hedge production that then sold below world oil prices for the quarter.
So is the bloom off the oilpatch rose? I wouldn’t get the pruning shears out just yet.
The quarterly figures tell us more about analysts’ inability to predict the future than they do about the companies’ strategies or what their production will look like the rest of the year.
Canadian Oil Sands Trust, for example, reported quarterly earnings of just under $98 million or $1.12 per trust unit, compared with $63.7 million or 80 cents per trust unit for the same 2003 period.
The Calgary-based oilsands operator benefited from rising oil prices and production and a higher stake in the Syncrude oilsands project near Fort McMurray.
In fact, every oil and gas company in Canada made money from oil prices of $38.28 US per barrel for the quarter – a record for the April-to-June period.
As long as prices stay high for the third quarter – and there’s no reason to think they won’t – the oilpatch rose will continue to bloom well past the summer.
For A Fistful of Dollars
The province ain’t big enough for both Two-Gun Gordie and the Kyoto Kid.
There’s a high-noon showdown looming over offshore oil and gas development in B.C. after Victoria MP David Anderson – a.k.a. the Kyoto Kid – got booted out of Prime Minister Paul Martin’s Over-the-Hill Gang.
Premier Gordon Campbell – Two-Gun Gordie as he’s known in the Wild West – has a hair-trigger finger that’s itchin’ to plug the ocean skyline with a few dozen drilling rigs.
But don’t expect Anderson to ride off quietly into the sunset. The former environment minister is already vowing ‘Hang ’em high!’ to anyone who blithely lifts Ottawa’s 30-year ban on offshore oil and gas development.
The Kyoto Kid can still round up a sizable posse, too, from the constituents who elected him to the 5,000- member Haida Nation that opposes offshore development and considers Anderson a friend.
Better hang onto your hats. This shootout at the West Coast corral is bound to be good, bad and ugly.
R&D Lip Service
Given that no fewer than 14 major energy associations belong to the newly formed Energy Dialogue Group, the coalition’s first major public document strikes me as being a little thin and self-serving.
The coalition presented its submission,Time for a New Focus for Energy in Canada, to the annual meeting of the Council of Energy Ministers in Iqaluit, Nunavut, in July.
The 14 associations cover energy production, transmission, delivery and end use of oil, natural gas and electricity. There are some big players – all based in Calgary – including the Canadian Association of Petroleum Producers, the Canadian Energy Pipeline Association, the Canadian Association of Oilwell Drilling Contractors, the Petroleum Services Association of Canada and the Coal Association of Canada.
The coalition’s presentation, minus the appendices of Power Point slides, amounts to a little over nine pages. Much of it consists of words that should be obvious to a national council of energy ministers.
Here’s just one example: “Canadians and their governments need to work together to continue developing real sustainable solutions to our energy and environmental challenges.”
Good thinking! “Real” solutions are much preferable to phoney ones.
But what irks is the coalition’s insistence that in developing “a new energy framework for Canada,” the first priority should be investment – in energy supply, demand management and developing new technologies.
Yet nowhere in the nine pages – and not in the accompanying 28 pages of Power Points, either – is there even a mention of the dismal state of private sector investment in fossil energy research and development.
In 2002, according to Statistics Canada, total domestic oil and gas R&D amounted to only $121 million.
So in making investment its No. 1 priority, the Energy Dialogue Group should encourage its members to lead by example and give near-comatose corporate R&D funding a long-overdue fiscal transfusion.
Miffed In Montana
B.C. just wanted to sell some coalbed methane (CBM) drilling leases, not create an international incident.
Gov. Judy Martz of Montana has gone over Gordon Campbell’s head and asked the federal government to do a full-scale environmental study on proposed CBM development in southeast B.C. just north of Glacier National Park.
Montana is concerned that salt-contaminated wastewater produced along with the natural gas in coal seams would find its way into the U.S.
portion of the Flathead River Basin, degrading the wilderness river’s water quality.
Over Martz’s protests, the B.C. government began auctioning the CBM leases in early July. Derek Doyle, head of B.C.’s Oil and Gas Commission, says the regulator will then sit down with each company that buys the exploration rights and examine all possible effects before any drilling starts.
But Martz argues that if different companies win the tenures on the different parcels offered now and in the future and start drilling, the opportunity to do a comprehensive assessment would be lost.
The governor has a point, especially since B.C.’s regulatory system – unlike Alberta’s – has no Energy and Utilities Board where the pros and cons of major developments can be aired at a public hearing.
International incident or not, the worst way to try to grow Western Canada’s fledgling coalbed methane industry would be through piecemeal development.
