Petro-Canada
NYSE : PCZ
TSX : PCA

Petro-Canada

October 26, 2006 05:00 ET

Petro-Canada Delivers Solid Quarter; Production Growth Around the Corner

Highlights

  • Terra Nova turnaround completed and De Ruyter achieved first oil
  • Upstream projects remain on track to deliver near-term production growth
  • Downstream and Oil Sands deliver record operating earnings
  • Repurchased 2.9 million of the Company's shares in the quarter

CALGARY, ALBERTA--(CCNMatthews - Oct. 26, 2006) - Petro-Canada announced today third quarter operating earnings from continuing operations adjusted for unusual items of $564 million ($1.13/share), compared with $638 million ($1.23/share) in the third quarter of 2005. Third quarter 2006 cash flow from continuing operations was $1,085 million ($2.17/share), compared with $1,001 million ($1.93/share) in the same quarter of last year. Cash flow is before changes in non-cash working capital.

Net earnings were $678 million ($1.36/share) in the third quarter of 2006, compared with $614 million ($1.19/share) in the same period of 2005. Net earnings include unrealized gains or losses on derivative contracts, and gains or losses on foreign currency translation and disposal of assets.

"Our Downstream and Oil Sands businesses had their strongest quarters ever. Solid operations allowed us to capitalize on the business environment," said Ron Brenneman, president and chief executive officer. "At the same time, our upstream production is building with Terra Nova about to restart, the Syncrude expansion up and running, and new production coming on-stream from the North Sea."

Third Quarter Results


---------------------------------------------------------------------------
(millions of Canadian                Three months ended  Nine months ended
 dollars, except per share                 September 30,      September 30,
 and share amounts)                       2006     2005      2006     2005
---------------------------------------------------------------------------
Consolidated Results
Operating earnings adjusted
 for unusual items (1)                 $   564  $   659   $ 1,542  $ 1,651
Net earnings                               678      614     1,356    1,077
Cash flow                              $ 1,085  $ 1,063   $ 2,713  $ 2,851
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Results from Continuing
 Operations (2)
Operating earnings from
 continuing operations adjusted
 for unusual items (1)                 $   564  $   638   $ 1,524  $ 1,599
 - $/share                                1.13     1.23      3.01     3.08
Net earnings from
 continuing operations                     678      593     1,204    1,025
 - $/share                                1.36     1.14      2.38     1.97
Cash flow from continuing
 operations                              1,085    1,001     2,696    2,671
 - $/share                                2.17     1.93      5.33     5.14
Dividends - $/share                       0.10     0.08      0.30     0.23
Share buyback program                      135      115       961      257
 - millions of shares                      2.9      2.4      18.8      6.3
Capital expenditures for
 continuing operations                 $   777  $   774   $ 2,319  $ 2,746
Weighted-average common shares
 outstanding (millions of shares)        500.1    518.1     505.9    519.2
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Operating earnings adjusted for unusual items (which represent net
    earnings, excluding gains or losses on foreign currency translation
    and on disposal of assets and the unrealized gains or losses associated
    with the Buzzard derivative contracts), are used by the Company to
    evaluate operating performance.
(2) On January 31, 2006, Petro-Canada closed the sale of its Syrian
    producing assets. These assets and associated results are reported as
    discontinued operations and are excluded from continuing operations.

Operating Highlights

Third quarter production from continuing operations averaged 333,000 barrels of oil equivalent/day (boe/d) in 2006, down from 353,000 boe/d in the same quarter of 2005. The shutdown of Terra Nova and natural declines in the North Sea and in North American Natural Gas were partially offset by the addition of White Rose production and higher Oil Sands volumes.

"This quarter, we completed the bulk of the regulatory and reliability work on the Terra Nova FPSO, enabling us to improve performance going forward," said Mr. Brenneman. "In the North Sea, we achieved first oil at De Ruyter and are in the final stages of bringing on production from the L5b-C and Buzzard projects."

In the Downstream, solid reliability at the Edmonton and Montreal refineries allowed the Company to benefit from the business environment and deliver record operating earnings. In Oil Sands, strong prices combined with increased production delivered best ever operating earnings.


---------------------------------------------------------------------------
                                     Three months ended  Nine months ended
                                           September 30,      September 30,
                                          2006     2005      2006     2005
---------------------------------------------------------------------------
Upstream - Consolidated (1)
 Production before royalties
  Crude oil and natural gas liquids
   (NGL) production, net
   (thousands of barrels/day, Mb/d)      211.7    285.1     220.7    284.4
  Natural gas production, net,
   excluding injectants (millions
   of cubic feet/day, MMcf/d)              725      821       746      839
  Total production (thousands of
   barrels of oil equivalent/day,
   Mboe/d) (2)                             333      422       345      424
 Average realized prices
  Crude oil and NGL ($/barrel, $/bbl)    70.76    68.93     69.40    60.49
  Natural gas ($/thousand cubic
   feet, $/Mcf)                           6.06     8.01      7.07     7.26
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Upstream - Continuing Operations
 Production from continuing operations
  before royalties
  Crude oil and NGL production,
   net (Mb/d)                            211.7    219.9     213.9    217.3
  Natural gas production, net,
   excluding injectants (MMcf/d)           725      796       743      813
  Total production (Mboe/d) (2)            333      353       338      353
 Average realized prices from
  continuing operations
  Crude oil and NGL ($/bbl)              70.76    68.93     69.33    60.42
  Natural gas ($/Mcf)                     6.06     8.03      7.07     7.27
---------------------------------------------------------------------------
Downstream
 Petroleum product sales (thousands
  of cubic metres/day, m3/d)              54.4     53.6      52.0     52.8
 Average refinery utilization (%) (3)      101       98        93       95
 Downstream earnings from operations
  after-tax (cents/litre) (4)              3.5      1.9       2.7      2.0
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Includes discontinued operations.
(2) Total production includes natural gas converted at six Mcf of natural
    gas for one barrel (bbl) of oil.
(3) Includes Oakville capacity pro-rated to reflect partial operation of
    Oakville refinery prior to permanent closure, effective April 11, 2005.
(4) Before additional depreciation and other charges related to the closure
    of the Oakville refinery.

Outlook

Operational Updates

  • Terra Nova back on-stream in the fourth quarter
  • Syncrude Stage III expansion ramping up

Strategic Milestones

  • Achieve first production from new North Sea developments (L5b-C and Buzzard) by year end
  • Submit commercial application for Sturgeon Upgrader late in 2006
  • Receive regulatory decision on Gros-Cacouna re-gasification project early in 2007
  • Complete Fort Hills design basis memorandum in the first half of 2007

Petro-Canada is one of Canada's largest oil and gas companies, operating in both the upstream and downstream sectors of the industry in Canada and internationally. The Company creates value by responsibly developing energy resources and providing world class petroleum products and services. Petro-Canada is proud to be a National Partner to the Vancouver 2010 Olympic and Paralympic Winter Games. Petro-Canada's common shares trade on the Toronto Stock Exchange (TSX) under the symbol PCA and on the New York Stock Exchange (NYSE) under the symbol PCZ.

The full text of Petro-Canada's third quarter release, including Management's Discussion and Analysis (MD&A), can be accessed on Petro-Canada's website at http://www.petro-canada.ca/eng/investor/9259.htm and will be available through SEDAR at http://www.sedar.com.

Petro-Canada will hold a conference call to discuss these results with investors on Thursday, October 26, 2006 at 9:00 a.m. eastern daylight time (EDT). To participate, please call 1-866-898-9626 or 416-340-2216 at 8:55 a.m. Media are invited to listen to the call by dialing 1-866-540-8136 or 416-340-8010 and are invited to ask questions at the end of the call. Those who are unable to listen to the call live may listen to a recording of the call approximately one hour after its completion by calling 1-800-408-3053 or 416-695-5800 (pass code number 3200673). A live audio broadcast of the conference call will be available on Petro-Canada's website at http://www.petro-canada.ca/eng/investor/9259.htm on October 26, 2006 at 9:00 a.m. EDT. Approximately one hour after the call, a recording will be available on Petro-Canada's website.

NON-GAAP MEASURES

Cash flow, which is expressed as cash flow from operating activities before changes in non-cash working capital, is used by the Company to analyse operating performance, leverage and liquidity. Operating earnings represent net earnings, excluding gains or losses on foreign currency translation and disposal of assets and unrealized gains or losses on the mark-to-market valuation of the derivative contracts associated with the Buzzard acquisition. Operating earnings are used by the Company to evaluate operating performance. Cash flow and operating earnings do not have a standardized meaning prescribed by Canadian generally accepted accounting principles (GAAP) and, therefore, may not be comparable with the calculations of similar measures for other companies. For reconciliations of the operating earnings and cash flow amounts to the associated GAAP measure, refer to the tables on pages 9 and 20, respectively, of the MD&A.

LEGAL NOTICE - FORWARD-LOOKING INFORMATION

This quarterly report contains forward-looking information. Such statements are generally identifiable by the terminology used, such as "plan," "anticipate," "forecast," "believe," "target," "intend," "expect," "estimate," "budget" or other similar wording suggesting future outcomes or statements regarding an outlook. Forward-looking information includes, but is not limited to, references to business strategies and goals, outlook (including operational updates and strategic milestones), future capital, exploration and other expenditures, future resource purchases and sales, construction and repair activities, refinery turnarounds, anticipated refining margins, future oil and gas production levels and the sources of growth thereof, project development and expansion schedules and results, future regulatory approvals, future results of exploration activities and dates by which certain areas may be developed or may come on-stream, retail throughputs, pre-production and operating costs, reserves and resources estimates, royalties and taxes payable, production life-of-field estimates, natural gas export capacity, future financing and capital activities (including purchases of Petro-Canada common shares under the Company's normal course issuer bid program), contingent liabilities (including potential exposure to losses related to retail licensee agreements), and environmental matters. By its very nature, such forward-looking information requires Petro-Canada to make assumptions that may not materialize or that may not be accurate.

This forward-looking information is subject to known and unknown risks and uncertainties, and other factors which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such information. Such factors include, but are not limited to: imprecision of reserves estimates of recoverable quantities of oil, natural gas and liquids from resource plays and other sources not currently classified as reserves; general economic, market and business conditions; industry capacity; competitive action by other companies; fluctuations in oil and gas prices; refining and marketing margins; the ability to produce and transport crude oil and natural gas to markets; the effects of weather and climate conditions; the results of exploration and development drilling and related activities; fluctuation in interest rates and foreign currency exchange rates; the ability of suppliers to meet commitments; actions by governmental authorities, including changes in taxes, royalty rates and resource utilization strategies; decisions or approvals of administrative tribunals; changes in environmental and other regulations; risks attendant with oil and gas operations, both domestic and international; international political events; expected rates of return; and other factors, many of which are beyond the control of Petro-Canada. More specifically, production may be affected by such factors as exploration success, startup timing and success, ramp up progress, facility reliability, planned and unplanned gas plant shutdowns, success of restarts following turnarounds, reservoir performance and natural decline rates, success of non-conventional resource plays, water handling and production from coal bed methane (CBM) wells, and drilling progress and results. Capital expenditures may be affected by cost pressures associated with new capital projects, including labour and material supply, project management, drilling rig rates and availability, and seismic costs. These factors are discussed in greater detail in filings made by Petro-Canada with the Canadian provincial securities commissions and the United States (U.S.) Securities and Exchange Commission (SEC).

Readers are cautioned that the foregoing list of important factors affecting forward-looking information is not exhaustive. Furthermore, the forward-looking information contained in this quarterly report is made as of the date of this report and, except as required by applicable law, Petro-Canada does not undertake any obligation to update publicly or to revise any of the included forward-looking information, whether as a result of new information, future events or otherwise. The forward-looking information contained in this report is expressly qualified by this cautionary statement.

Where the term barrel of oil equivalent (boe) is used in this document, it may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (Mcf): one barrel (bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

(publie egalement en francais)

Contact Information