Unlike with the insurance industry, critics aren't calling EnCana Corp.'s $2.5-billion profit "obscene.”
And they'd better not.
EnCana - particularly CEO Gwyn Morgan - earned every dollar last year with a low-risk, long-term strategy that makes it a giant among North American natural gas producers.
The Calgary-based company reported a profit last year of $1.98 billion US, or $4.22 US per share - 41 per cent higher than in 2003.
Key to EnCana's strategy was its $3.6-billion Cdn purchase last spring of Denver-based natural gas producer Tom Brown Inc.
That acquisition gave EnCana access to large proven gas reserves in so-called tight geological formations along the U.S. Rocky Mountain front. The company excels at producing this unconventional gas from multiple wells drilled in an assembly-type operation.
In addition, EnCana's production of coalbed methane rose three-fold last year compared with 2003.
The resulting steady earnings propelled the company's stock to a 50-per-cent increase over the last six months. Those kinds of numbers are why EnCana is now looking to attract more investors through a proposed a two-for-one share split, to be voted on at its annual meeting April 27 in Calgary.
Morgan is confident that his company can grow its shares by 10 per cent a year for at least the next few years.
So, critics, bite your tongues - EnCana's dough is well deserved.
Canadian Natural Resources Ltd. (CNRL) also reported a record fourth-quarter profit of $577 million, or $2.15 per share - more than double the $250 million, or 93 cents, reported in the same period last year.
CNRL's earnings for the year totalled $1.41 billion, or $5.25 per share - up slightly from $1.4 billion last year but still a historical high. The company's shares have more than doubled in the past year and were still headed upward as of last week.
CNRL, which is counting on 10-per-cent growth in each of the next few years, will need its continued good fortune to pay for building its $10.8-billion Horizon oilsands project near Fort McMurray.
Oilfield-service companies are also hitching their stars to stellar commodity prices.
Mullen Transportation Ltd. reported a record fourth-quarter profit of $11.5 million, or 76 cents per share, compared with $8 million, or 53 cents, for the same period last year.
The Aldersyde-based hauler of crude oil is still mulling over - so to speak - reorganizing into an income trust.
Trican Well Service Ltd. also rode the wave of record-high drilling of 22,160 oil and gas wells last year.
The company, which works in Canada and Russia, reported profits of $59 million for 2004, or $3.10 per share, up from $36 million, or $1.94, the previous year.
Trican's fourth-quarter net income of $24.8 million - compared with $14.1 million for the same period last year - was its best quarter in the company's history.
World oil prices continue to climb what EnCana chief Morgan calls "a wall of worry," and they don't appear ready to climb back down any time soon.
The price of crude pushed past $50 US a barrel last week, fuelled in part by "the wall" - ongoing civil and political unrest in key oil-producing countries.
But other long-term forces in play are likely to keep oil prices high for the foreseeable future.
The demand for energy in China and other fast-growing developing nations shows no signs of abating, even as global oil reserves continue to fall. China is now the world's second-largest oil consumer after the U.S.
Moreover, the Organization of Petroleum Exporting Companies (OPEC) continues to hold over customers - like the sword over Damocles' head - another production cutback to keep prices above $45 per barrel. OPEC reduced production by about 600,000 barrels per day in January.
The Conference Board of Canada, in its Canadian Industrial Outlook: Canada's Oil and Gas Industry, released last month, forecasts that oil prices will fall gradually from the mid-$40 US over the next four years.
That price decline will bite into the Canadian industry's more than $22 billion in profits in 2004, the board says. "Beginning in 2005, profit levels are expected to decline each year through 2008, decreasing from $15.1 billion this year to $9 billion at the end of the forecast period."
Predictions, of course, are only as good as the crystal ball in which they're made.
Given ongoing geopolitical terrorism threats, the world's insatiable demand for energy, and how fast oil prices shot up last week, I wouldn't be betting on any crystal balls.
Alberta and British Columbia have joined a North American program aimed at permanently storing carbon dioxide underground, while at the same time using the greenhouse gas to recover more oil.
The U.S. Energy Department, which is leading the Regional Carbon Sequestration Program, has brought Alberta and B.C. into the fold.
The network of 216 public and private sector organizations will select technologies, regulations and infrastructure for future CO2 capture, storage and sequestration in different areas of the continent.
Alberta became part of the Plains CO2 Reduction Partnership, joining Saskatchewan, Manitoba and nine U.S. states in investigating opportunities to reduce greenhouse gases and recover more oil in the Plains region.
B.C. joined six states in the West Coast Regional Carbon Sequestration Partnership to pursue the same goals.
For Alberta and B.C., the move is a clear signal to Ottawa that both provinces prefer the U.S. approach to climate change - voluntarily developing new technologies to cut emissions - rather than adhere to the legally binding targets under the Kyoto treaty.
Those gremlins hobbling the oilsands plant also crept into my Feb. 10 Alberta oilpatch column and my front-page story in that edition.
The actual cost of the Alaska Highway pipeline project is $20 billion - not that bargain-basement price I mistakenly typed in my column.
Also, the last name of the environmental affairs director at the Alberta Forest Products Association is Murray - as in Keith Murray. Apologies to Keith for making his last name a moving target in my story.
And if you spot any of those gremlins, zap 'em for me, will ya?
(Mark Lowey can be reached at mark@businessedge.ca)
