PanCanadian's net income doubles for the second quarter of 2001.CALGARY, July 16 /PRNewswire/- PanCanadian Petroleum Limited announced today net income doubled to $432 million, or $1.69 per share, during the second quarter of 2001 compared to $213 million, or $0.84 per share, recorded during the same period in 2000. Cash flow increased 32 per cent to $678 million, or $2.65 per share, compared to $514 million, or $2.04 per share last year. A substantial increase in natural gas production during the quarter and strong realized prices for natural gas compared to the previous year led to this excellent financial performance. "PanCanadian had an outstanding second quarter. Earnings and cash flow continue to be very strong, with earnings over the past twelve months now exceeding $1.5 billion, and we announced a very significant discovery in the Central North Sea. Furthering this momentum, we have resumed exploration drilling off the East Coast of Canada," said David Tuer, President and Chief Executive Officer. "Our exceptional portfolio of opportunities and our track record of growing production profitably will position us well as we become a fully independent, publicly traded company publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. later in the year." During the second quarter of 2001, natural gas production increased 17 per cent to average 1,056 million cubic feet per day, up from 899 million cubic feet per day for the same period in 2000. Production of crude oil and natural gas liquids declined eight per cent to average 111,680 barrels per day Barrels per day (abbreviated BPD, bbl/d, bpd, bd or b/d) is a measurement used to describe the amount of crude oil (measured in barrels) produced or consumed by an entity in one day. from 121,930 barrels per day for the same period in 2000. The decline in oil production reflects the disposition of certain oil properties during the second half of 2000 and the first quarter of 2001. PanCanadian realized a second quarter average natural gas price of $6.77 per thousand cubic feet, an increase of 74 per cent over the average price of $3.90 per thousand cubic feet received in the same period of 2000. Realized crude oil prices averaged $28.60 per barrel in the second quarter, down 11 per cent from $31.97 per barrel for the same period last year due to wider differentials. For the first half of 2001, net income more than doubled to $927 million, or $3.62 per share, compared to $398 million, or $1.57 per share, recorded for the same period in 2000. Cash flow was up to $1,550 million, or $6.07 per share, for the six months ended 2001 compared to $975 million, or $3.87 per share, recorded in 2000. Consolidated capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. for the first half of 2001 totalled $831 million, and 1,212 wells were drilled at a success rate of 94 per cent. Net debt at June 30, 2001 was $178 million, down from $1.1 billion at year-end 2000. The results of commodity and currency hedges contributed $29 million in the quarter, primarily from the forward sale of 450 million cubic feet per day of natural gas at an equivalent AECO AECO Aeromedical Evacuation Control Officer AECO Advance Engineering Change Order AECO Architecture, Engineering, Construction and Owner-operated price of $8.57 per thousand cubic feet. PanCanadian recorded $153 million in Canadian cash taxes for the first half of 2001 compared to $2 million recorded in the same period last year. The Company expects to continue to incur significant amounts of Canadian cash taxes in 2001 due to the substantial increase in operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. . Future taxes have been decreased by $60 million in the second quarter of 2001 to reflect the reduction in the Alberta corporate tax rate for 2001. OUTLOOK PanCanadian's Board of Directors approved a $418 million increase in the capital budget for 2001 to total $1.9 billion, excluding acquisitions. The majority of this additional investment, approximately 51 percent, will be directed towards natural gas and crude oil exploration and development in the Western Basin. Approximately 26 per cent will be targeted towards high impact exploration, 18 per cent towards Marketing and Midstream mid·stream n. 1. The middle part of a stream. 2. The part of a course that is neither at the beginning nor at the end: the midstream of life. Noun 1. activities, and the remaining five per cent going towards other corporate activities. The increase in investment will allow PanCanadian to take advantage of new opportunities, and to pursue an aggressive plan of delivering further growth. While prices for crude oil and natural gas have softened soft·en v. soft·ened, soft·en·ing, soft·ens v.tr. 1. To make soft or softer. 2. To undermine or reduce the strength, morale, or resistance of. 3. during the past quarter, PanCanadian anticipates that prices for both commodities will continue to be strong throughout 2001 relative to historical average prices. The Company believes the long-term outlook for natural gas prices remains robust given the tight demand/supply fundamentals across North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. . The Company has hedged a significant portion of its natural gas production until the end of October 2001. As at June 30, 2001, the following hedges are in place: - 450 million cubic feet per day of natural gas at an average AECO equivalent of $8.66 per thousand cubic feet to October 2001, and approximately 128 million cubic feet per day of natural gas at an average AECO equivalent of $6.72 per thousand cubic feet from November 2001 to October 2002; - 45,000 barrels per day of Canadian crude at an average WTI WTI West Texas Intermediate WTI Western Transportation Institute (Montana State University) WTI World Tribunal on Iraq WTI With The Idea (used in chess to point to the idea behind a specific move) price of US$28.46 to December 2001; and, - 8,000 barrels per day of Scott/Telford production at an average dated Brent price Hartley Brent Price (born December 9 1968 in Shawnee, Oklahoma) is an American former professional basketball player in the NBA. He is the younger brother of former Cleveland Cavaliers point guard Mark Price. of US$24.19 to December 2001. << COMPARATIVE HIGHLIGHTS Three Months Ended Six Months Ended FINANCIAL June 30 June 30 ------------------ ---------------- ($ millions, except amounts per share) 2001 2000 2001 2000 ------------------------------------------------------------------------- Revenues $ 2,736 $ 1,461 $ 5,900 $ 2,839 Net income 432 213 927 398 Per share - basic 1.69 0.84 3.62 1.57 Cash flow 678 514 1,550 975 Per share - basic 2.65 2.04 6.07 3.87 Capital expenditures 450 288 831 568 (excludes net acquisitions / dispositions) Three Months Ended Six Months Ended DAILY PRODUCTION June 30 June 30 ------------------ ---------------- (before royalty) 2001 2000 2001 2000 ------------------------------------------------------------------------- Natural gas (million cubic feet) Production available for sale (x) 1,056 899 1,042 906 --------- --------- --------- --------- --------- --------- --------- --------- Crude oil (barrels) 98,188 107,882 100,873 108,477 Field natural gas liquids (barrels) 13,494 14,050 13,456 14,166 --------- --------- --------- --------- Total crude oil and field natural gas liquids 111,682 121,932 114,329 122,643 --------- --------- --------- --------- --------- --------- --------- --------- Empress plants (barrels) Production 17,170 25,816 17,939 26,736 Sales 14,531 23,587 21,195 30,311 --------- --------- --------- --------- --------- --------- --------- --------- (x) Production available for sale includes certain amounts used for internal consumption. Three Months Ended Six Months Ended DAILY MARKETED VOLUMES June 30 June 30 ------------------ ---------------- 2001 2000 2001 2000 ------------------------------------------------------------------------- Natural gas (billion cubic feet) 3.3 2.2 2.9 2.4 Crude oil (thousand barrels) 182 170 170 164 NGL NGL - A dialect of IGL. (propane propane, CH3CH2CH3, colorless, gaseous alkane. It is readily liquefied by compression and cooling. It melts at −189.9°C; and boils at −42.2°C;. , butane butane (by  `tān), C4H10, gaseous alkane, a hydrocarbon that is obtained from natural gas or by refining petroleum. , condensate condensate, matter in the form of a gas of atoms, molecules, or elementary particles that have been so chilled that their motion is virtually halted and as a consequence they lose their separate identities and merge into a single entity. )
(thousand barrels) 21 25 41 44 AVERAGE REALIZED SALES PRICES Three Months Ended Six Months Ended June 30 June 30 ------------------ ---------------- ($ per unit) 2001 2000 2001 2000 ------------------------------------------------------------------------- Natural gas (per thousand cubic feet) $ 6.38 $ 4.03 $ 8.20 $ 3.40 Hedging(xx) 0.39 (0.13) (0.41) (0.11) --------- --------- --------- --------- $ 6.77 $ 3.90 $ 7.79 $ 3.29 --------- --------- --------- --------- --------- --------- --------- --------- Crude oil (per barrel) $ 29.41 $ 33.91 $ 28.80 $ 34.52 Hedging(xx) (0.81) (1.94) (0.98) (1.38) --------- --------- --------- --------- $ 28.60 $ 31.97 $ 27.82 $ 33.14 --------- --------- --------- --------- --------- --------- --------- --------- Field natural gas liquids (per barrel) $ 33.74 $ 26.74 $ 36.65 $ 27.89 --------- --------- --------- --------- --------- --------- --------- --------- Empress plants (per barrel) $ 23.17 $ 21.62 $ 32.21 $ 21.82 --------- --------- --------- --------- --------- --------- --------- --------- (xx) Natural gas hedging activities include both currency and commodity hedging for 2001; 2000 hedging activity was predominantly currency hedging. Crude oil hedging activities include both currency and commodity hedging for 2001 and 2000. DRILLING SUMMARY Three Months Ended Six Months Ended June 30 June 30 ------------------ ---------------- (gross number of working interest wells drilled) 2001 2000 2001 2000 ------------------------------------------------------------------------- Natural gas 416 658 847 1,061 Crude oil 87 131 261 252 Service 17 14 26 23 Dry 34 26 78 80 --------- --------- --------- --------- 554 829 1,212 1,416 --------- --------- --------- --------- --------- --------- --------- --------- Success ratio 94% 97% 94% 94% Average working interest 85% 90% 83% 90% >> OPERATIONAL HIGHLIGHTS International: Discovery in the Central U.K. North Sea PanCanadian announced a very significant crude oil discovery in the U.K. Central North Sea on June 6, 2001. During testing, the "Buzzard buzzard, common name for hawks of the genus Buteo and the genus Pernis, or honey buzzard, of the Old World family Accipitridae. Honey buzzards feed on insects, wasp and bumblebee larvae, and small reptiles. " well flowed at 6,547 barrels per day of 31 degree gravity crude oil and 0.97 million cubic feet per day of natural gas on a 36/64th-inch choke (jargon) choke - To fail to process input or, more generally, to fail at any endeavor. E.g. "NULs make System V's "lpr(1)" choke." See barf, gag. . These rates were constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. by the limits of the testing equipment. A downdip sidetrack to the well, which penetrated the reservoir section 4,400 feet to the east of the discovery well, encountered the same high quality hydrocarbon hydrocarbon (hī'drōkär`bən), any organic compound composed solely of the elements hydrogen and carbon. The hydrocarbons differ both in the total number of carbon and hydrogen atoms in their molecules and in the proportion of hydrogen bearing reservoir sands as the original hole and has extended the oil column of the discovery to at least 750 feet. The discovery and sidetrack wells each contain more than 250 feet of hydrocarbon bearing sands with an average porosity porosity /po·ros·i·ty/ (por-os´it-e) the condition of being porous; a pore. po·ros·i·ty n. 1. The state or property of being porous. 2. of 24 per cent and a permeability permeability /per·me·a·bil·i·ty/ (per?me-ah-bil´i-te) the property or state of being permeable. per·me·a·bil·i·ty n. 1. The property or condition of being permeable. 2. of up to three Darcies. The results of these two wells support estimated recoverable oil of 200 to 300 million barrels in this part of the structure. PanCanadian is planning a two or three well appraisal program commencing in the early fall of this year to establish additional potential of the "Buzzard" field. PanCanadian holds a 45.01 per cent interest in this discovery. Exploration block acquired in Brazil PanCanadian was awarded an additional exploration and production license during Brazil's Round 3 auction in early June. PanCanadian acquired a 100 per cent interest in BM-PAMA-2, a deep-water block covering 570,000 acres off Brazil's Northeast coast. The block is adjacent to the BM-PAMA-1 block, in which PanCanadian holds a 50 per cent interest. Asset rationalization rationalization, in psychology: see defense mechanism. In June 2001, PanCanadian agreed to sell its 40 per cent non-operated working interest in the Woollybutt field development, located on the Northwest Shelf of Australia, for cash consideration. The sale is expected to close in August. East Coast of Canada: Offshore Nova Scotia Scotia (skō`shə), originally the Latin name for Ireland. In the Middle Ages, it was used to refer to Scotland, to which the Scots had migrated from Ireland. Today it is used poetically. Deep Panuke Deep Panuke is the name of an offshore oil and natural gas field. It is located off the coast of Nova Scotia, Canada. It is currently under development by the EnCana Corporation. development PanCanadian has taken several steps towards developing its Deep Panuke natural gas field. The Company has begun the engineering design work, and has appointed a Project General Manager with extensive experience and knowledge in offshore engineering, construction and project management. The contract for the front-end engineering design study for the project has been awarded, and the Development Plan Application, to be filed during the fourth quarter of 2001, is being prepared. Production from the field is anticipated to begin in the first quarter of 2005. The Company has signed a firm service agreement with Halifax-based Maritimes & Northeast Pipeline (M&NP) to transport up to 400 million cubic feet of natural gas per day for 10 years. Natural gas will be piped from the offshore development to shore to connect to M&NP's mainline mainline Drug slang verb To inject a drug at Goldboro, Nova Scotia. PanCanadian and its partners began the 2001 exploration program in July. Three wells will be drilled in shallow water See:
contingent upon, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent the results of the drilling program. The locations are testing four geological plays in close proximity to the Deep Panuke field. The first well, Lower Musquodoboit, began drilling a carbonate reef play on July 1. PanCanadian is the operator and holds a 74 per cent interest in this prospect. Western Basin: Causeway acquisition extends land holdings across Montana and Saskatchewan PanCanadian announced on June 15, 2001, that it had entered into an arrangement agreement to purchase the shares of Causeway Energy Corporation, pursuant to a plan of arrangement, for $65 million plus the assumption of $4 million of Causeway debt. Certain Alberta assets are excluded from the acquisition. The acquisition is subject to the approval of Causeway's shareholders. The acquisition adds nominal volumes of natural gas production and reserves estimated to be 80 billion cubic feet of gas on a proven and one-half probable basis. The principal assets acquired are approximately 210,000 net acres of undeveloped land in Montana and southern Saskatchewan and a 100 per cent interest in the cross-border Chinook Chinook, indigenous people of North America Chinook (shĭn  k`, chĭ–), Native American tribe of the Penutian linguistic stock. Pipeline. These assets expand PanCanadian's land position across
its core areas in the Western Basin, providing further opportunity for
the Company to deploy its industry-leading technologies and exploration
strategies to under-exploited, natural gas prone lands.
PanCanadian secures transportation for Christina Lake bitumen bitumen (bĭty `mən) a generic term referring to flammable, brown or black mixtures of tarlike hydrocarbons, derived naturally or by distillation from petroleum.
PanCanadian has signed a memorandum of understanding A Memorandum of Understanding (MoU) is a legal document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action and may not imply a legal commitment. with Enbridge Inc. to provide transportation and handling services for the Company's Christina Lake oilsands operation. Starting in late 2002, Enbridge will transport blended bitumen produced from the first phase of the thermal project. The arrangement secures reliable and cost-effective transportation, and has the flexibility to meet future transportation needs. Approximately 10,000 barrels per day of bitumen is expected to be produced during the first phase of the project. Gulf of Mexico Noun 1. Gulf of Mexico - an arm of the Atlantic to the south of the United States and to the east of Mexico Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east : Drilling at Llano lla·no n. pl. lla·nos A large, grassy, almost treeless plain, especially one in Latin America. [Spanish, plain, from Latin pl begins Drilling of the fourth Llano well in the Garden Banks Block 385 began in early June. The well is expected to drill to an estimated depth of 25,000 feet, and will test the western extent of the reservoir. Drilling is expected to be complete early in the fourth quarter of 2001. PanCanadian's interest increased to 22.5 per cent when Enterprise Oil assumed operatorship of the Llano field in May 2001. Llano was discovered in 1997, and two appraisal wells drilled in 1999 and 2000 confirmed the presence of high quality hydrocarbon bearing sands. Marketing and Midstream: Construction of a third power plant announced PanCanadian entered into a memorandum of understanding with Canadian Fertilizers Limited (CFL CFL Canadian Football League ) for the development of an 85 megawatt meg·a·watt n. Abbr. MW One million watts. meg  a·watt natural gas-fired cogeneration cogenerationIn power systems, use of steam for both power generation and heating. High-temperature, high-pressure steam from a boiler and superheater first passes through a turbine to produce power. plant to be located at CFL's nitrogen complex in Medicine Hat, Alberta Medicine Hat, known to locals as "The Hat", is a city located in the southeastern part of the province of Alberta, Canada. It is situated on the Trans-Canada Highway, the eastern terminus of the Crowsnest Highway, and the South Saskatchewan River. . The facility will be developed and owned by PanCanadian, and will provide steam to CFL. The project is contracted to be in service by December 2004. CORPORATE EVENTS Dividend payment A quarterly dividend of 10 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. was paid on June 29, 2001 to shareholders of record as of June 15, 2001. The Board of Directors has declared a quarterly dividend of 10 cents per share payable Friday September 28, 2001 to shareholders of record as of Friday September 14, 2001. Proxy mailing date Mailing Date A specific date set for the mailing of certain material to security holders such as interim reports, proxy material and dividend checks. set for Canadian Pacific (CP) reorganization PanCanadian currently anticipates that proxy material relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc CP's reorganization will be mailed to shareholders in mid-August for a meeting on September 26. The transaction is expected to be complete shortly thereafter, subject to certain conditions. On February 13, 2001, CP announced its intention to divide itself into five separate companies, all of which will be publicly traded. Under the proposed reorganization, CP will distribute to its shareholders its approximately 85 per cent interest in PanCanadian, which will result in PanCanadian becoming a fully independent company. The proposed distribution will be implemented through a plan of arrangement that will be subject to shareholder and court approvals, other requisite consents, and a Canadian advance income tax ruling. Subject to Board approval, it is proposed that a special dividend of approximately $1.18 billion, or $4.60 per share, be paid to all shareholders of PanCanadian prior to the reorganization. Quarterly report to shareholders The Ontario Securities Commission The Ontario Securities Commission (OSC) is a regulatory agency which administers and enforces securities legislation in the Canadian province of Ontario. The OSC is an Ontario Crown corporation which reports to the Ontario legislature through the Minister of Finance. now requires companies to include an interim Management Discussion and Analysis (MD&A) as part of the quarterly report to shareholders. The filing of the MD&A will accompany the filing of the interim financial statements. The interim financial statements together with the MD&A will be mailed to shareholders at the end of the month. Investor Hub launched PanCanadian has launched a new website, located at www.pancanadian.ca. The Investor Hub section of the site is dedicated to providing timely, comprehensive information about investing in PanCanadian, including access to Webcasts, investor presentations, financial reports and news releases. Visitors may also subscribe to Verb 1. subscribe to - receive or obtain regularly; "We take the Times every day" subscribe, take buy, purchase - obtain by purchase; acquire by means of a financial transaction; "The family purchased a new car"; "The conglomerate acquired a new company"; receive information via e-mail. Sheila McIntosh appointed Vice President Investor Relations Investor relations The process by which the corporation communicates with its investors. Sheila McIntosh was appointed PanCanadian's Vice President of Investor Relations in April 2001. She joins the Company with more than 12 years experience in Investor Relations, most recently as Vice President, Corporate Communications Corporate communications is the process of facilitating information and knowledge exchanges with internal and key external groups and individuals that have a direct relationship with an enterprise. and Investor Relations with Canadian Pacific Limited Canadian Pacific Limited was created in 1971 to own properties formerly owned by Canadian Pacific Railway, a transportation and mining giant in Canada. In October 2001, CP decided to spin-off the remaining businesses it had not recently sold off, thus creating separate companies . Ms. McIntosh will be spending approximately one-half of her time at Canadian Pacific until the reorganization is complete. ADVISORY - Certain information regarding the Company set forth above, including Management's assessment of the Company's future plans and operations, may constitute forward-looking statements under applicable securities law. The energy business necessarily involves risks associated with oil and gas exploration, development and production, generation of electricity, and marketing and transportation of energy. These risks include loss of market, volatility of prices, currency fluctuations, imprecision im·pre·cise adj. Not precise. im  pre·cisely adv. of reserves estimates, environmental
risks, competition from other producers and ability to access sufficient
capital from internal and external sources. As a consequence, actual
results may differ materially from those anticipated in the
forward-looking statements.
<< CONSOLIDATED BALANCE SHEET consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. (unaudited) As at June 30 As at December 31 ($ millions) 2001 2000 ------------------------------------------------------------------------- ASSETS Current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. Cash and cash equivalents $ 736.6 $ 197.3 Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying 1,342.0 1,312.4 Risk management assets (note 1) 620.7 - Inventories 88.0 117.7 ------------ ------------ 2,787.3 1,627.4 Property, plant and equipment - net 7,332.1 7,097.1 Deferred charges, net of amortization, and other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. 286.5 317.2 ------------ ------------ $ 10,405.9 $ 9,041.7 ------------ ------------ ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. Short-term financing $ - $ 250.0 Accounts payable and accrued liabilities 1,348.9 1,217.9 Risk management liabilities (note 1) 569.3 - Current portion of deferred credits and liabilities 41.1 73.0 Current portion of long-term debt Current Portion Of Long-Term Debt A portion of the balance sheet that represents the total amount of long-term debt that must be paid within the next year. The balance sheet has a liability section, which is broken down into long-term and current debt. 152.6 150.0 ------------ ------------ 2,111.9 1,690.9 ------------ ------------ Long-term debt 762.2 912.3 Deferred credits and liabilities 398.1 315.3 Future income taxes 2,249.0 2,094.5 Shareholders' equity Preferred securities 125.6 125.6 Common shares (note 3) 180.8 147.8 Paid in surplus 34.0 34.0 Retained income (note 2) 4,544.3 3,721.3 ------------ ------------ 4,884.7 4,028.7 ------------ ------------ $ 10,405.9 $ 9,041.7 ------------ ------------ ------------ ------------ See selected notes to consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge . CONSOLIDATED STATEMENT OF INCOME (unaudited) ($ millions, except per Three Months Ended Six Months Ended share amounts) June 30 June 30 ------------------ ---------------- 2001 2000 2001 2000 ------------------------------------------------------------------------ REVENUES Upstream $ 936.8 $ 660.0 $2,040.9 $1,258.9 Royalties and similar payments (88.4) (60.4) (182.1) (109.5) Marketing and Midstream 1,859.1 846.2 3,994.2 1,694.8 Interest and other 28.0 14.7 47.1 (5.7) -------- -------- -------- -------- 2,735.5 1,460.5 5,900.1 2,838.5 -------- -------- -------- -------- EXPENSES Upstream 115.3 87.7 219.0 173.3 Marketing and Midstream 1,796.9 809.9 3,849.2 1,604.5 Administrative 35.7 27.6 68.0 48.7 Interest on long-term debt 20.1 23.7 43.5 40.8 Depletion, depreciation and amortization 213.8 178.6 389.4 345.7 -------- -------- -------- -------- 2,181.8 1,127.5 4,569.1 2,213.0 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 553.7 333.0 1,331.0 625.5 -------- -------- -------- -------- PROVISION FOR INCOME TAXES Current 87.2 (0.8) 153.4 2.3 Future 34.3 120.5 251.1 224.9 -------- -------- -------- -------- 121.5 119.7 404.5 227.2 -------- -------- -------- -------- NET INCOME $ 432.2 $ 213.3 $ 926.5 $ 398.3 -------- -------- -------- -------- DISTRIBUTIONS ON PREFERRED SECURITIES, NET OF TAX (1.2) (1.2) (2.3) (2.3) -------- -------- -------- -------- NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 431.0 $ 212.1 $ 924.2 $ 396.0 -------- -------- -------- -------- -------- -------- -------- -------- NET INCOME ATTRIBUTABLE PER COMMON SHARE BASIC (note 1) $ 1.69 $ 0.84 $ 3.62 $ 1.57 -------- -------- -------- -------- -------- -------- -------- -------- DILUTED di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. (note 1) $ 1.65 $ 0.83 $ 3.55 $ 1.55 -------- -------- -------- -------- -------- -------- -------- -------- WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (millions) 255.9 252.3 255.6 252.1 -------- -------- -------- -------- -------- -------- -------- -------- CONSOLIDATED STATEMENT OF RETAINED INCOME Six Months Ended ---------------- (unaudited) June 30 ($ millions) 2001 2000 ------------------------------------------------------------------------ Retained income at beginning of period $3,721.3 $2,788.1 Net income 926.5 398.3 Dividends (51.2) (74.8) Distributions on preferred securities, net of tax (2.3) (2.3) Other adjustments (note 2) (50.0) - -------- -------- Retained income at end of period $4,544.3 3,109.3 -------- -------- -------- -------- See selected notes to consolidated financial statements. CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) ($ millions) Three Months Ended Six Months Ended June 30 June 30 ------------------ ---------------- 2001 2000 2001 2000 ------------------------------------------------------------------------ OPERATING ACTIVITIES Net income $ 432.2 $ 213.3 $ 926.5 $ 398.3 Amounts not requiring a current outlay of cash 245.7 300.6 623.7 576.8 -------- -------- -------- -------- Cash flow 677.9 513.9 1,550.2 975.1 Net change in deferred items (38.2) (17.1) (37.5) (48.6) Net change in non-cash working capital 34.7 15.5 154.8 (43.6) -------- -------- -------- -------- 674.4 512.3 1,667.5 882.9 -------- -------- -------- -------- FINANCING ACTIVITIES Decrease in short-term financing - - (250.0) - Decrease in long-term debt (94.4) (135.3) (155.4) (60.0) Distribution on preferred securities (2.2) (2.1) (4.2) (4.2) Issue of common shares, net 9.1 26.9 33.0 27.5 Dividends (25.6) (49.6) (51.2) (74.8) Net change in non-cash working capital 2.2 27.3 0.5 25.0 -------- -------- -------- -------- (110.9) (132.8) (427.3) (86.5) -------- -------- -------- -------- INVESTING ACTIVITIES Petroleum and natural gas properties (271.1) (209.5) (520.5) (411.5) Plant, production and other equipment (179.0) (78.7) (310.3) (156.4) -------- -------- -------- -------- (450.1) (288.2) (830.8) (567.9) Net (acquisitions) dispositions 25.9 7.4 178.2 (245.4) Net change in non-cash working capital (0.4) (4.5) (75.6) (44.2) Net change in other assets 18.7 3.9 17.8 (6.8) -------- -------- -------- -------- (405.9) (281.4) (710.4) (864.3) -------- -------- -------- -------- FOREIGN EXCHANGE (LOSS) GAIN ON CASH AND CASH EQUIVALENTS HELD IN FOREIGN CURRENCY (12.0) (0.3) 9.5 0.3 -------- -------- -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 145.6 97.8 539.3 (67.6) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 591.0 (33.0) 197.3 132.4 -------- -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 736.6 $ 64.8 $ 736.6 $ 64.8 -------- -------- -------- -------- -------- -------- -------- -------- SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION Interest paid $ 26.0 $ 27.3 $ 45.4 $ 40.9 -------- -------- -------- -------- -------- -------- -------- -------- Income taxes paid $ 8.0 $ 3.4 $ 21.8 $ 8.9 -------- -------- -------- -------- -------- -------- -------- -------- >> See selected notes to consolidated financial statements. SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Six months ended June 30, 2001 (unaudited) The interim consolidated financial statements include the accounts of PanCanadian Petroleum Limited and its subsidiaries, and are presented in accordance with Canadian generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . The interim consolidated financial statements have been prepared following the same accounting policies and methods of computation as the consolidated financial statements for the year ended December 31, 2000, except as described below. The disclosures provided below are incremental to those included with the annual consolidated financial statements. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto in the Company's annual report for the year ended December 31, 2000. Note 1. CHANGES IN ACCOUNTING POLICIES Net income attributable per common share In 2001, the Company retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin adopted the new Canadian New Canadian Noun Canad a recent immigrant to Canada Institute of Chartered Accountants earnings per share standard. The new standard relates to the computation, presentation and disclosure of earnings per share. Under the new standard, the treasury stock method is used instead of the imputed Attributed vicariously. In the legal sense, the term imputed is used to describe an action, fact, or quality, the knowledge of which is charged to an individual based upon the actions of another for whom the individual is responsible rather than on the individual's earnings method to determine the dilutive effect Dilutive effect Result of a transaction that decreases earnings per common share (EPS). of stock options and other dilutive instruments. Under the treasury stock method, only "in the money" dilutive instruments effect the diluted calculations. In computing the diluted net income attributable per common share, 5.5 million shares were added to the weighted average number of common shares during the quarter ended June 30, 2001 (2000 - 6.2 million shares) and 5.4 million shares for the six months ended June 30, 2001 (2000 - 5.6 million) for the dilutive effect of employee stock options and preferred securities. The distributions on preferred securities were added back to net income attributable to common shareholders in computing diluted per share amounts. Prior period diluted net income attributable per common share has been restated for this change. If the imputed earnings method had been used to calculate these amounts, there would not be a material dilutive effect on net income attributable per common share. Risk management Effective January 1, 2001, the Company adopted mark-to-market accounting for all the Company's financial and physical positions in the Marketing and Midstream business segment. This change in accounting policy was applied prospectively and the effect on earnings in the first six months is immaterial Not essential or necessary; not important or pertinent; not decisive; of no substantial consequence; without weight; of no material significance. immaterial adj. . The change is also immaterial to prior period earnings. The comparative period has not been restated for the change. Note 2. RELATED PARTY TRANSACTIONS In the second quarter of 2001, the Company accrued a $50 million provision relating to a previously contracted purchase price adjustment in respect of $200 million of capital losses acquired from Canadian Pacific Limited (the majority shareholder of the Company) in 1997. The purchase price adjustment is contingent on certain economic events, which are now viewed as likely. The $50 million provision has been recorded as a charge to retained income. << Note 3. COMMON SHARES The Company's authorized share capital consists of an unlimited number of common shares. Issued and Outstanding Number of Shares ($ millions) ------------------------------------------------------------------------ Balance at January 1, 2001 254,831,392 $ 147.8 Issued under stock option plan 1,265,900 33.0 ----------- --------- Balance at June 30, 2001 256,097,292 $ 180.8 ----------- --------- ----------- --------- >> The Company has a stock based compensation plan that allows certain key employees to purchase common shares of the Company. Options granted under the plan are generally fully exercisable after three years and expire five years after the grant date. Options granted under previous plans expire 10 years from the date the options were granted. Option exercise prices approximate the market price for the common shares on the date the options are issued. << Weighted Number of Average Continuity of stock options Options Exercise Price ------------------------------------------------------------------------ Outstanding at January 1, 2001 6,953,850 $ 22.61 Granted 4,355,250 48.39 Exercised (1,265,900) (26.08) Cancelled (63,050) (26.42) --------- -------- Outstanding at June 30, 2001 9,980,150 $ 33.40 --------- -------- --------- -------- Exercisable at June 30, 2001 2,008,010 $ 23.65 --------- -------- --------- -------- Note 4. SEGMENTED INFORMATION ($ millions) Three Months Ended June 30, 2001 ------------------------------------------------------------------------ Marketing & Corporate & Upstream Midstream Consolidation(x) Consolidated ------------------------------------------------------------------------ Additions to capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) , net $ 396.5 $ 47.4 $ - $ 443.9 -------- -------- --------- --------- Total identifiable assets $8,562.9 $1,843.0 $ - $10,405.9 -------- -------- --------- --------- Revenues $ 849.3 $2,966.7 $(1,080.5) $ 2,735.5 -------- -------- --------- --------- Income before interest expense and income taxes $ 507.8 $ 42.0 $ 24.0 $ 573.8 -------- -------- --------- Interest on long-term debt $ (20.1) Provision for income taxes $ (121.5) --------- Net income $ 432.2 --------- --------- ($ millions) Three Months Ended June 30, 2000 ------------------------------------------------------------------------ Marketing & Corporate & Upstream Midstream Consolidation(x) Consolidated ------------------------------------------------------------------------ Additions to capital assets, net $ 278.6 $ 2.2 $ - $ 280.8 -------- -------- --------- --------- Total identifiable assets $5,820.5 $1,102.5 $ - $ 6,923.0 -------- -------- --------- --------- Revenues $ 604.7 $1,669.0 $ (813.2) $ 1,460.5 -------- -------- --------- --------- Income before interest expense and income taxes $ 327.5 $ 20.1 $ 9.1 $ 356.7 -------- -------- --------- Interest on long-term debt $ (23.7) Provision for income taxes $ (119.7) --------- Net income $ 213.3 --------- --------- (x) The Corporate & Consolidation column is not an operating segment; it reflects only corporate activities and inter-company eliminations. ($ millions) Six Months Ended June 30, 2001 ------------------------------------------------------------------------ Marketing & Corporate & Upstream Midstream Consolidation(x) Consolidated ------------------------------------------------------------------------ Additions to capital assets, net $ 510.2 $ 71.3 $ - $ 581.5 -------- -------- --------- --------- Total identifiable assets $8,562.9 $1,843.0 $ - $10,405.9 -------- -------- --------- --------- Revenues $1,862.5 $6,337.9 $(2,300.3) $ 5,900.1 -------- -------- --------- --------- Income before interest expense and income taxes $1,228.4 $ 129.1 $ 17.0 $ 1,374.5 -------- -------- --------- Interest on long-term debt $ (43.5) Provision for income taxes $ (404.5) --------- Net income $ 926.5 --------- --------- ($ millions) Six Months Ended June 30, 2000 ------------------------------------------------------------------------ Marketing & Corporate & Upstream Midstream Consolidation(x) Consolidated ------------------------------------------------------------------------ Additions to capital assets, net $ 837.7 $ 3.7 $ - $ 841.4 -------- -------- --------- --------- Total identifiable assets $5,820.5 $1,102.5 $ - $ 6,923.0 -------- -------- --------- --------- Revenues $1,152.1 $3,101.6 $(1,415.2) $ 2,838.5 -------- -------- --------- --------- Income before interest expense and income taxes $ 616.3 $ 60.2 $ (10.2) $ 666.3 -------- -------- --------- Interest on long-term debt $ (40.8) Provision for income taxes $ (227.2) --------- Net income $ 398.3 --------- --------- (x) The Corporate & Consolidation column is not an operating segment; it reflects only corporate activities and inter-company eliminations. Note 5. FINANCIAL INSTRUMENTS Unrecognized gains(losses) on risk management activities: ($ millions) June 30, 2001 ----------------------------------------------------------------------- Natural gas $ 332.7 Crude oil 29.4 Power (1.0) Foreign currency (168.5) Interest rates 7.6 Preferred securities 2.1 ----------- $ 202.3 ----------- ----------- >> An additional 28 million cubic feet per day of natural gas was sold forward for the period November 2001 to October 2002 at an average AECO price of $6.06/mcf. The crude oil, currency, and interest rate hedge positions have not changed substantially from those reported in the December 31, 2000, consolidated financial statements and notes. << Note 6. SELECTED FINANCIAL INFORMATION 12 Months Ended June 30 (financial information for the 12 months ended June 30) 2001 2000 ------------------------------------------------------------------------ Return on average shareholders' equity 37.9% 20.8% Return on average capital employed Capital Employed 1. The total amount of capital used for the acquisition of profits. 2. The value of all the assets employed in a business. 3. Fixed assets plus working capital. 4. Total assets less current liabilities. 31.7% 16.4% Net debt to cash flow 5.8% 60.4% Debt to debt plus equity 15.8% 23.9% >> Note 7. RECLASSIFICATION Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. Certain information provided for prior years has been reclassified to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the presentation adopted in 2001. PanCanadian Petroleum Limited Wesley R. Twiss Executive Vice President and Chief Financial Officer PanCanadian Petroleum Limited Shares Listed - Symbol: PCP PCP abbr. 1. phencyclidine 2. primary care physician Pneumocystis carinii pneumonia (PCP) The Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. |
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