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Canadian Press: Imperial Oil and Shell Canada pump out record third-quarter profits (


James Stevenson

Posted October 22, 2004


CALGARY (CP) - Two of Canada's biggest energy producers and gasoline retailers reported record third-quarter profits Thursday due to soaring oil prices, higher refining margins and increasing production.


Imperial Oil and Shell Canada will be able to use the record net earnings to bolster balance sheets in preparation for major new mega projects currently in the planning phase. The earnings reports were warmly received by investors, boosting share values in both companies.


Imperial (TSX:IMO) recorded the best third quarter in its 125-year history, with $539 million in profits representing $1.52 per share, a jump of nearly 44 per cent from a year earlier.


Shell (TSX:SHC) also had its most profitable third quarter on record, earning $451 million with a large boost from its relatively new oilsands operations.


Shell's earnings, worth $1.64 per share, were up 94 per cent from the same period in 2003.


Both companies have already announced multibillion-dollar plans for the oilsands in northern Alberta and are lead players in a consortium moving to construct a $7-billion natural gas pipeline from the Mackenzie Delta in the Northwest Territories.


"Regardless of short-term commodity prices, our focus remains on continually improving base operations while advancing major projects aimed at profitable growth in future production," Imperial's chairman and chief executive, Tim Hearn, said in a release.


Crude oil prices that averaged 44 per cent above year-earlier levels were the main reason for the record profits, as the price of natural gas fell slightly from the same period last year.


The rising price of crude greatly outweighed the negative impact of the rising Canadian dollar, which cost Imperial $55 million.


At Shell, earnings were powered by a very strong quarter for the Athabasca oilsands project, in which it holds a 60 per cent operating stake.


Shell's share of production averaged 92,500 barrels per day, up 33 per cent over last year and significantly above the design rate of the plant, which just started operating last year.


"These results reflect strong performance across all of our businesses," said Clive Mather, Shell Canada's president and chief executive. "I am particularly pleased with our oilsands business, which demonstrated sustained production at design levels."


Unfortunately for Shell, the company announced Wednesday that production will be lower in October due to repairs needed on one of two hydro-cracker units at its 60-per-cent-owned Scotford Upgrader on the eastern outskirts of Edmonton.


The mechanical failure in a catalyst pump is expected to take one of two trains at the upgrader out of service for an extended period.


"It's sort of disappointing from the perspective that this quarter really showed what they're trending towards - things were going very well within the basic business unit," said energy analyst Will Lacey with FirstEnergy Capital.


"And then, just to throw some water on the fire, it goes and they have a pump failure," Lacey said. "Now they have to cool the unit off, clean it out, go in and take a look at the pump and figure out whether it's a problem with the pump or with the design."


Another integrated energy company, Husky Energy, reported its third-quarter results late Wednesday, saying its profit rose 15 per cent to $286 million or 56 cents per share. Husky said it was hurt by $115 million in losses on its crude oil hedging program.


In trading on the Toronto stock exchange Thursday, Imperial shares (TSX:IMO) rose $1.04 to $71.74, while Shell Canada (TSX:SHC) gained 75 cents to $76. Husky (TSX:HSE) slipped five cents to $32.75. 

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