Petro-Canada Reports Quarterly Loss on Currency, Oil

By David Wethe

Jan. 29 (Bloomberg) -- Petro-Canada, the country’s fourth- largest oil company, reported a quarterly loss on foreign currency translations, project delays and lower commodity prices.

The fourth-quarter net loss was C$691 million ($565.8 million), or C$1.43 a share, compared with net income of C$522 million, or C$1.07, a year earlier, the Calgary-based company said today in a statement. Sales dropped 3 percent to C$5.27 billion in the fourth quarter.

U.S. oil futures tumbled 56 percent in the quarter, ending the period more than $100 a barrel below the record set in July, as recessions around the world eroded fuel demand. Natural-gas futures on the New York Mercantile Exchange ended the year 59 percent below their July high.

The results were “well below expectations,” Randy Ollenberger, an analyst at BMO Capital Markets in Calgary, wrote in a research note dated today. “Higher operating costs and weak results from the downstream operations accounted for a large portion of the variance in earnings.”

He said backing out what he considered unusual items, the company had a net loss of 6 cents per share. That compares to his estimate of a 99-cent profit.

Petro-Canada booked charges from the deferral of its Fort Hills mining project in Alberta. The company said it’s revising costs for the venture “to take advantage of the current market environment.”

The company will wait on Fort Hills until prices rise, Chief Executive Officer Ronald Brenneman said on a conference call with analysts.

Currency, Costs

The earnings results also reflect “losses on foreign currency translation of long-term debt” and “the negative impact from declining crude oil feedstock costs,” Petro-Canada said in the statement.

The company said it plans to reduce 2009 capital spending from C$3.96 billion, which was announced Dec. 11, to a level that matches operating cash flow because of “persistently low commodity prices.”

Petro-Canada lowered its production forecast for this year to between 345,000 and 385,000 barrels of oil equivalent a day, citing cutbacks to planned capital spending and output constraints imposed by the Organization of Petroleum Exporting Countries. That compares with a December estimate of 360,000 to 395,000 barrels a day.

‘Grim 2009 Results’

“Fourth-quarter results are likely only going to be the first step toward even more grim 2009 results, with further weakening oil and natural-gas prices,” Chris Feltin, an analyst at Tristone Capital Inc. in Calgary, said in a telephone interview before the earnings were released. Feltin rates the shares “market perform” and doesn’t own any.

Production in the fourth quarter averaged 409,000 barrels a day net to Petro-Canada, little changed from the 410,000 barrels reported a year earlier. Output was “at the high-end of our guidance range,” Brenneman said in the statement.

The performance of Petro-Canada, the country’s second- largest refiner, was affected in part by the temporary shutdown of its Edmonton refinery in Alberta, Tristone’s Feltin said. The 125,000-barrel-a-day plant, which was expected to run at normal rates sometime this quarter, closed for an upgrade to process only synthetic crude derived from oil sands.

An explosion and fire yesterday at the plant halted a processing unit, spokeswoman Sneh Seetal said. The fire, in a hydrotreating unit, isn’t expected to affect any products and the company is assessing damage, Brenneman said on the call.

Petro-Canada fell C$1.08, or 3.8 percent, to C$27.62 as of 10:18 a.m. in trading on the Toronto Stock Exchange. The shares, which have eight “buy,” 11 “hold” and two “sell” ratings from analysts, fell 25 percent during the fourth quarter.

To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net.