Producers' profits mixed despite higher energy prices

Suncor Energy CEO Rick George waits to addresses shareholders at the company's annual meeting in Calgary on Thursday.(Jeff McIntosh/Canadian Press)

Three giant Calgary-based energy companies reported much higher second-quarter revenues Thursday because of higher oil and natural gas prices, but their profit pictures vary depending on their circumstances.

Petro-Canada, an oil and gas producer and retailer, did so well it boosted its quarterly dividend to 20 cents a share, up 54 per cent from the previous level of 13 cents. But its profit jump was boosted by a huge tax gain from deals signed with Libya.

Encana, an integrated oil and unconventional natural gas company, reported lower profit because of its hedges. It also appeared to have missed a lot of the rise in natural gas prices, realizing $8.54 US a 1,000 cubic feet (including hedges), compared with the New York Mercantile Exchange (NYMEX) price of $10.93 in the second quarter.

Energy companies second-quarter profit (millions of dollars) 2008 2007Petro-Canada 1,498 845Encana 1,220 1,450Suncor 829 738Source: Company reports

Suncor, an oilsands producer, reported a profit increase but said it was hobbled by production problems that raised costs and cut output.

Encana raises outlook

Despite the hedging charge, Encana raised its cash-flow prediction for the full year to $10-11 billion from $9.6-10 billion based on its performance to date and "natural gas production and commodity price expectations for the remainder of the year."

It said profit for the three months ended June 30 was $1.22 billion ($1.63 a diluted share), compared with $1.45 billion ($1.89) a year earlier.

The profit drop was "primarily due to unrealized mark-to-market losses on risk management activities of $235 million after-tax," while in 2007, there was a $47 million gain on hedges.

Revenue was $7.32 billion, compared with $5.61 billion.

Suncor cuts outlook

Suncor said it was cutting its 2008 production forecast to 240,000 to 250,000 barrels per day (bpd) from 275,000 to 285,000 bpd. With lower production, the cash cost per barrel has increased to $35 to $36 Cdn from $26 to $27.

"Oilsands cash operating costs in the second quarter of 2008 averaged $50.85 per barrel, compared to $32.70 per barrel during the second quarter of 2007," the company said, reflecting higher operating expenses, lower volumes, and increased purchases off bitumen from third parties.

"A combination of a very cold winter, unplanned maintenance issues and tight bitumen supply made for a difficult start to the year," Rick George, president and CEO, said in a news release.

Profit for the second quarter was $829 million (87 cents a diluted share), compared with $738 million (78 cents) in 2007. Higher crude prices fueled the increase.

Revenue was $7.96 billion, compared with $4.41 billion.

Tax gain boosts Petro-Canada

The company said its international arm recorded a $230 million future income tax recovery in the quarter due to the ratification of exploration and production sharing agreements with Libya.

That helped raise profit to $1.50 billion ($3.07 a diluted share) in the second quarter of 2008, compared with $845 million ($1.70) in 2007.

Revenue was $7.65 billion, compared with $5.48 billion.

In Toronto Stock Exchange trading, Suncor fell 74 cents to $52.91, Encana added 20 cents to $73.41 and Petro-Canada fell 56 cents to $46.04.

HandR Block gets bump from subprime offload

Oil prices push Husky profit

Bombardier restores dividend as profits triple