OGJ NEWSLETTER

U.S. Industry Scoreboard 2/20 (73332 bytes)

Canadian companies are reporting generally improved profits for 1994, planning hefty budget hikes for 1995. and in some instances facing restructuring.

TransCanada PipeLines had net income of $358.6 million (Canadian) last year, up from $355.6 million in 1993, despite a drop to 11.25% from 12.25% in return on deemed common equity for its Canadian main line. Imperial logged a profit of $359 million in 1994, up from $279 million in 1993, on the strength of higher prices for heavy oil, natural gas, and petrochemicals, partly offset by higher expenses for planned refinery maintenance and reduced refined products margins. Petro-Canada posted a record profit of $262 million in 1994, compared with $160 million in 1993, resulting from higher oil and gas prices, cost cutting, and greater downstream efficiencies. NOVA also reported record earnings at $575 million in 1994, triple 1993 income and bolstered by a $120 million after tax gain on the sale of Novalta Resources and a huge jump in petrochemical income to $292 million from $14 million in 1993. Methanex Corp., Vancouver, B.C., also enjoyed a huge earnings jump, to $442.7 million (U.S.) from $10.7 million in 1993, owing to methanol prices rocketing to $442 (U.S.)/metric ton in fourth quarter 1994 from $134/ton in 1993.

Petro-Canada plans capital spending of about $900 million this year, including $230 million for the Hibernia development project off Newfoundland, $340 million for E&P in western Canada and Algeria, $180 million for refining and marketing upgrades, and $45 million to expand a lube plant at Mississauga, Ont.

NOVA plans to spend about $1 billion in 1995, including $750-800 million to expand its Alberta gas transmission system and $60 million on restructuring that is expected to generate $130 million in savings in 1996.

Gulf Canada faces staff and budget cuts but may also seek a major acquisition worth $500 million-1 billion this year. Unconfirmed reports say cuts at Gulf Canada, which has a debt load of about $1.6 billion, could be 15-35% of its 1,000 employees. Gulf recently axed seven vice-presidents and disclosed cuts of $40-50 million in a $360 million 1995 operating budget.

Some of the impetus for these changes comes from Gulf's new CEO, J.P. Bryan, formerly of Torch Energy Advisors Inc., Houston, which closed a deal in January to acquire a 25% interest in Gulf for $296 million. He will use Torch's expertise in acquisitions and fund raising in a worldwide acquisition hunt.

Norcen expects a writeoff of more than $100 million after taxes against 1994 profits as part of a major restructuring and asset sale.

The company has about $1 billion in assets to restructure and recently sold a 134 mile Alberta natural gas pipeline, three processing plants, and gathering lines for $80.1 million; onshore oil and gas properties on the U.S. Gulf Coast for $30 million, with more onshore property sales to follow; and interests and notes in other companies for a combined $98.6 million.

Norcen also bought interests in two Offshore Louisiana fields with reserves of 23.3 bcf of gas and 3.3 million bbl of oil for $33 million.

Competition is heating among Argentina-Chile gas pipeline proposals. NOVA signed a memorandum of understanding to invest $57 million in a $143 million gas pipeline from Argentina's Neuquen province to Concepcion on Chile's Pacific coast. Its partners are Lone Star International Inc., Dallas, Santiago gas utility Gasco SA, and Chilean producer Copec SA. The 70 MMcfd capacity line is scheduled for completion in mid-1997.

NOVA also is participating 40% in the $1.3 billion GasAndes pipeline from Mendoza, Argentina, to Santiago, which is competing with a similar project proposed by a group of U.S., Chilean, and Argentine partners. NOVA has signed up two major customers for the GasAndes project, Empresa Electrica, Santiago, and Metrogas SA. NOVA also has a 24% interest in Methanex, which signed a $393 million deal to expand a methanol plant in southern Chile.

The Clinton administration plans to release a Commerce Department report that concludes increasing levels of oil imports are a threat to U.S. national security. In reacting to that finding, Clinton will propose increased use of alternate fuels, renewable fuels, and natural gas, improved energy efficiency, relaxed regulation of producers and refiners, and more energy R&D.

Clinton's package lacks any tax relief, and the administration still is considering tax credits for deepwater and marginal onshore wells and expensing of geological and geophysical costs. Sen. Don Nickles (R-Okla.) plans to file a bill that would grant industry tax and regulatory relief.

U.S. EPA Administrator Carol Browner has signed proposed guidelines to limit discharges from coastal oil and gas E&P operations into U.S. waters.

EPA said most coastal drilling operations have zero discharges and won't be affected. The rule, to apply to 224 production facilities and eight drilling operations that discharge 228 million lb/year of wastewater, would cost the companies $35-40 million/year to comply.

Moving toward 100% recyclable polypropylene (PP) auto interiors in the U.S. will help sustain the current high cycle for PP well into the late 1990s, says Phillips. A partnership of Phillips and a unit of Sumitomo is building a 270 million lb/year PP plant at Phillips' Pasadena, Tex., petrochemical complex that is to start up in mid-1996 and take advantage of what Phillips sees as 10%/year growth in PP demand the next 3-5 years. Recycling auto parts and materials is mandatory in Germany, an idea that is spreading in Europe.

A number of IEA members have signed an agreement covering electric vehicle technologies and programs (see related story, p. 25). First to sign on for the 5 year program were Austria, Canada, France, Italy, Japan, Netherlands, Sweden, Switzerland, U.K., and U.S. They will coordinate electric vehicle technology R&D, share data on infrastructure and testing methods, and pool results, with an idea to developing consumer-acceptable electric vehicles.

More governments are sweetening the pot for exploration.

India has approved plans for state owned Oil & Natural Gas Commission (ONGC) and Oil India Ltd. (OIL) to invest $2 billion in oil and gas exploration joint ventures with foreign companies the next 3 years in and outside India.

That sets the stage for a global tender to identify foreign partners that will participate for the first time in deepwater E&D off India. ONGC and OIL investments will go for 26-40% of the ventures' equity.

New Zealand is offering the first petroleum exploration permits under its sweetened petroleum/mineral royalty regime.

On offer are 36 blocks - 31 in onshore and offshore Taranaki basin, three in onshore Westland basin, and two in offshore Canterbury basin. No acreage has been released in 2 years as the government finalized its new tax regime, which includes basic changes in the way royalties are calculated.

Previously, royalties were charged 12% ad valorem with the government retaining an II% carried interest. The new regime has no government participation, and charges involve the greater of royalties at 5% ad valorem on the value of sales or 20% of accounting profits. Application deadline is July 31, and permits will be allocated on the basis on work programs submitted.

Responding to criticism that Pdvsa's proposed profit sharing oil and gas E&P contracts, now under review by Venezuela's congress. discriminate against underfinanced domestic companies. Pdvsa plans to sell shares of the joint venture companies eventually formed on stock exchanges in Caracas and Maracaibo. JV partners will be one of Pdvsa's three operating units holding as much as 35% equity and an international investor or group holding the rest.

Pdvsa also is considering forming a financial entity to help Venezuelan private sector companies with,experience in the oil and gas sector play a role in the profit sharing program.

Taiwan is stepping up exploration after a recent string of rare hydrocarbon strikes in the island nation. State owned Chinese Petroleum Corp.'s (CPC) recent discovery of the 85.4 bcf Chichang gas field about 100 km off Taiwan's southern coast brings total identified reserves in the area to 332 bcf-about the level needed for a development green light-after an outlay of $209.92 million.

Meantime, CPC has three undisclosed, highly prospective locations in Central Taiwan where exploration is under way.

BP and Amerada Hess have begun appraising Schiehallion oil discovery west of Shetlands. Dyvi Stena semi spudded 204/25a-3 appraisal well under charter to block operator Amerada, which proved last October that the 250-500 million bbl Schiehallion find extended into its block (OGJ, Nov. 14, 1994, p. 34).

BP plans to drill a Schiehallion appraisal on its acreage this summer and likely will follow that with an extended well test similar to the one carried out in nearby Foinaven prospect last year (OGJ, Oct. 31, 1994, p. 26).