Petro-Canada
NYSE : PCZ
TSX : PCA

Petro-Canada

January 26, 2006 23:59 ET

Strong 2005 Financial Results And Solid Growth Portfolio For The Future

Highlights

  • Achieved record operating earnings adjusted for unusual items of $2.4 billion and cash flow of $4.0 billion in 2005
  • Met production targets and replaced 195% of proved plus probable reserves over five years
  • Strengthened portfolio with the Fort Hills acquisition, first oil at White Rose and an agreement to sell mature Syrian assets

CALGARY, ALBERTA--(CCNMatthews - Jan. 26, 2006) - Petro-Canada (TSX:PCA) (NYSE:PCZ) - Petro-Canada announced today fourth quarter operating earnings adjusted for unusual items of $714 million ($1.38/share), up 58% from $451 million ($0.87/share) in the same quarter of 2004. Fourth quarter 2005 cash flow was $1,181 million ($2.29/share), compared with $1,007 million ($1.93/share) in the same quarter of last year. Cash flow is before changes in non-cash working capital.

Net earnings for the fourth quarter in 2005 were $714 million ($1.38/share), compared with $441 million ($0.85/share) in the same period of 2004. Net earnings include unrealized gains or losses on derivative contracts, gains or losses on foreign currency translation and disposal of assets.

"We closed the year with record earnings and cash flow for the quarter and the year. We also strengthened our portfolio by adding long life projects like Fort Hills and divesting mature assets in Syria," said Ron Brenneman, president and chief executive officer.

During the quarter, Petro-Canada reached an agreement to sell the Company's producing assets in Syria. These assets and associated results are reported as discontinued operations and excluded from continuing operations. As a result, in the fourth quarter of 2005, operating earnings from continuing operations adjusted for unusual items were $666 million ($1.29/share), compared with $444 million ($0.85/share) in the fourth quarter of 2004. Net earnings from continuing operations for the fourth quarter in 2005 were $668 million ($1.29/share), compared with $434 million ($0.83/share) in the same period of 2004. Fourth quarter 2005 cash flow from continuing operating activities was $1,116 million ($2.16/share), compared with $966 million ($1.85/share) in the same quarter of last year.

Fourth Quarter Results

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                                    Three months ended     Year ended
($ millions, except per                December 31,        December 31,
 share amounts)(1)                    2005      2004      2005      2004
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Consolidated Results
Operating earnings adjusted
 for unusual items(2)              $   714   $   451   $ 2,365   $ 1,901
Net earnings                           714       441     1,791     1,757
Cash flow                          $ 1,181   $ 1,007   $ 4,032   $ 3,629
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Results From Continuing Operations
Operating earnings from
 continuing operations adjusted
 for unusual items(2)              $   666   $   444   $ 2,265   $ 1,842
  - $/share                           1.29      0.85      4.37      3.48
Net earnings from continuing
 operations                            668       434     1,693     1,698
  - $/share                           1.29      0.83      3.27      3.21
Cash flow from continuing
 operations                          1,116       966     3,787     3,425
  - $/share                           2.16      1.85      7.31      6.47
Dividends - $/share                   0.10      0.07      0.33      0.30
Share buyback program                   89       159       346       447
  - millions of shares                 2.0       4.8       8.3      13.7
Capital expenditures for
 continuing operations             $   884   $   938   $ 3,630   $ 4,573
Weighted average common shares
 outstanding (millions of shares)    516.2     521.2     518.4     529.3
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(1) Per share amounts are quoted on a post-stock dividend basis.
(2) Operating earnings adjusted for unusual items (which represent net
    earnings, excluding gains or losses on foreign currency translation
    and on disposal of assets, the unrealized gains or losses associated
    with the Buzzard derivative contracts and, adjusted for unusual
    items) is used by the Company to evaluate operating performance.


Operating Highlights

Fourth quarter production was 426,200 barrels of oil equivalent/day (boe/d) (continuing operations 359,800 boe/d) in 2005, compared with 437,200 boe/d (continuing operations 362,500 boe/d) in the same quarter of 2004. The decrease in production reflects lower volumes from Western Canada and Syria. This was partially offset by higher volumes in East Coast Oil from improved performance at Terra Nova, strong reliability at Hibernia and first oil at White Rose.

In 2005, production of crude oil, natural gas liquids (NGL) and natural gas averaged 424,700 boe/d (continuing operations 354,600 boe/d), in line with guidance.

Petro-Canada's upstream average production from continuing operations is expected to increase and be in the range of 365,000 to 390,000 boe/d in 2006. The expected growth in 2006 production is largely due to additional volumes from White Rose, the Syncrude Stage III expansion, the De Ruyter startup, and a new well pad at MacKay River.

"We are at a very positive inflection point. Production from continuing operations is expected to grow 8% to 11% per year on average over the next three years," said Mr. Brenneman. "At the same time, our Downstream investments are shifting to growth with the completion of regulatory projects."

During the fourth quarter, the Downstream continued to deliver strong reliability at the Montreal and Edmonton refineries, with improved safety at the Edmonton refinery surpassing the four-million-hour mark without a lost- time injury. In Retail, convenience store sales continued to grow and were up more than 15% compared with the same period last year. In Lubricants, the proportion of sales from high margin products increased in the fourth quarter of 2005, compared to the same period in 2004 and approached the annual target of 75%.


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                                    Three months ended     Year ended
                                       December 31,        December 31,
                                      2005      2004      2005      2004
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Upstream - Consolidated
  Production before royalties
    Crude oil and natural gas
     liquids production,
     net (thousands of barrels/
     day, Mb/d)                      292.3     288.7     286.4     305.7
    Natural gas production, net,
     excluding injectants
     (millions of cubic feet/day,
     MMcf/d)                           803       891       831       873
    Total production (1) (thousands
     of barrels of oil equivalent/
     day, Mboe/d)                      426       437       425       451
  Average realized prices
    Crude oil and natural gas
     liquids ($/barrel, $/bbl)       61.27     48.41     60.79     46.89
    Natural gas ($/thousand cubic
    feet, $/Mcf)                     11.27      6.64      8.16      6.41
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Upstream - Continuing Operations
  Production from continuing
   operations before royalties
    Crude oil and natural gas
     liquids production, net (Mb/d)  229.9     217.9     220.5     230.0
    Natural gas production, net,
     excluding injectants (MMcf/d)     779       868       806       852
    Total production (1) (Mboe/d)      360       362       355       372
  Average realized prices from
   continuing operations
    Crude oil and natural gas
     liquids ($/bbl)                 60.50     48.99     60.48     46.95
    Natural gas ($/Mcf)              11.40      6.69      8.21      6.45
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Downstream
    Petroleum product sales
     (thousands of cubic metres,
     m3/d)                            52.9      55.4      52.8      56.6
    Average refinery
     utilization (2) (%)                99        96        96        98
    Downstream earnings from
     operations after-tax (3)
     (cents/litre)                     2.2       2.0       2.1       1.7
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(1) Total production includes natural gas converted at six Mcf of gas
    for one bbl of oil.
(2) Includes Oakville capacity pro-rated to reflect partial operation of
    Oakville refinery prior to permanent closure, effective
    April 11, 2005.
(3) Before additional depreciation and other charges related to the
    closure of the Oakville refinery.


Outlook

Operations Update

  • Fire-related damage experienced in January 2006 will reduce lubricants production by almost half for approximately two months
  • Edmonton refinery turnaround is scheduled for the spring of 2006
  • The Edmonton diesel desulphurization project remains on schedule and on budget for June project completion
  • Terra Nova 70- to 90-day turnaround, starting in July 2006

Strategic Milestones

  • Further definition of Fort Hills development plans
  • Complete the sale of Syria producing assets and direct the proceeds to the share buyback program
  • Syncrude Stage III expansion on-stream in mid-2006

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. Its common shares trade on the Toronto Stock Exchange under the symbol PCA and on the New York Stock Exchange under the symbol PCZ.

The full text of Petro-Canada's fourth quarter release, including the Management's Discussion and Analysis, can be accessed on Petro-Canada's web site at http://www.petro-canada.ca/eng/investor/9259.htm, and will be available through SEDAR.

Petro-Canada will hold a conference call to discuss these results with investors on Thursday, January 26, 2006 at 9:00 a.m. Eastern Time. 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 it approximately one hour after its completion by calling 1-800-408-3053 or 416-695-5800 (passcode number 3168271). A live audio broadcast of the conference call will be available on Petro-Canada's web site on January 26 at 9:00 a.m. Eastern Time. Approximately one hour after the call, a recording of the call will be available on the 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, which represent net earnings excluding gains or losses on foreign currency translation, disposal of assets and unrealized gains or losses on the mark-to- market of the derivative contracts associated with the Buzzard acquisition, 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 cash flow and operating earnings amounts to the associated GAAP measure, refer to the tables on page 25 of the fourth quarter Management's Discussion and Analysis.

Legal Notice - Forward-Looking Information

This quarterly release contains forward-looking statements. Such statements are generally identifiable by the terminology used, such as "plan," "anticipate," "intend," "expect," "estimate," "budget" or other similar wording. Forward-looking statements include, but are not limited to, references to future capital and other expenditures, drilling plans, construction activities, refinery turnaround, the submission of development plans, seismic activity, refining margins, oil and gas production levels and the sources of growth thereof, 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, reserves life, natural gas export capacity and environmental matters. These forward-looking statements are 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 statements. Such factors include, but are not limited to: 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 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 increases in taxes; decisions or approvals of administrative tribunals; changes in environmental and other regulations; risks attendant with oil and gas operations; 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, facility reliability, planned and unplanned gas plant shut downs, success of restarts following turnarounds, reservoir performance and natural decline rates, water handling and production from coal bed methane wells, and drilling progress. Capital expenditures may be affected by cost pressures associated with new capital projects, including labor 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 Securities and Exchange Commission.

Readers are cautioned that the foregoing list of important factors affecting forward-looking statements is not exhaustive. Furthermore, the forward-looking statements contained in this quarterly release are made as of the date of this release 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 statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this release are expressly qualified by this cautionary statement.

Contact Information

  • INVESTOR AND ANALYST INQUIRIES:
    Gordon Ritchie
    Investor Relations
    (403) 296-7691

    or

    Pamela Tisdale
    Investor Relations
    (403) 296-4423

    or

    MEDIA AND GENERAL INQUIRIES:
    Michelle Harries
    Corporate Communications
    (403) 296-3648
    Website: www.petro-canada.ca