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PETRO-CAN ANNOUNCES PLAN TO IMPROVE PROFITABILITY AND 1992 CAPITAL EXPENDITURE PROGRAM

 PETRO-CAN ANNOUNCES PLAN TO IMPROVE PROFITABILITY
 AND 1992 CAPITAL EXPENDITURE PROGRAM
 CALGARY, Alberta, Jan. 27 /PRNewswire/ -- The following was released today by Petro-Canada:
 Products Division Rationalization Plan and Associated Write-down
 Petro-Canada today announced a major plan to rationalize its products division operations across Canada as a key element in its drive to improve profitability. As a result, the company has written down the book value of certain refining and marketing assets and recorded a charge against its 1991 fourth quarter earnings of $369 million after tax.
 The rationalization plan follows completion of a comprehensive analysis of projected business conditions and the company's competitive position. The industry's domestic sales of refined petroleum products fell about 7 percent in 1991 on top of a reduction of 2.7 percent in 1990. This severe drop in demand has created spare refining capacity in all regions of Canada and reduced throughputs and revenues in wholesale and retail marketing facilities. The company does not expect immediate improvement in Canadian products demand when economic recovery begins.
 Petro-Canada's refining and marketing business lost $106 million in the nine months ending Sep. 30, 1991. After returning to profitability in the third quarter, the division is now expected to record a small operating loss, before the special charge, in the fourth quarter of 1991. The Petroleum Monitoring Agency reports that the Canadian downstream industry lost $305 million in the first six months of 1991 following a five year period in which its return on capital employed averaged on 6.4 percent.
 "Most of the factors leading to the changes we are planning only became clear as 1991 progressed," said W.H. Hopper, chairman and chief executive officer. "We are not counting on a major recovery in demand for refined petroleum products and we expect continued intense competition for refined product market share. The capacity of the Canadian downstream industry, and Petro-Canada, exceeds the demands of Canadian consumers. This program will size our business to meet current and future realities. The focus of our plan is to achieve greater profitabilty through our own actions, rather than wait and hope for changes in business conditions."
 The pre-tax value of the fourth quarter special charge is $637 million. Related income tax recoveries are $268 million, leaving an after-tax charge of $369 million. Included in this amount is an after-tax provision of about $120 million to cover all the costs related to the closure, mothballing, and cleanup of the affected facilities.
 The company will pursue possible joint venture arrangements, outright sales or changes in the configuration and operations of several downstream facilities. Specifically, over the next 6-18 months Petro-Canada will convert its refinery at Port Moody, British Columbia, into a products receipt and handling facility to accept refined products from its Edmonton refinery. The Port Mooday refinery will be mothballed.
 The fuel products units at the Lake Ontario Mississauga plant will be taken out of operation and the plant reconfigured to an asphalt and lubricants manufacturing and packaging operation. This change will increase efficiency of the overall Ontario refining operation. Several steps are being taken to increase the performance of the lubes business to improve profitability. The company is also pursuing joint venture options for the lubricants operations.
 When completed, the changes in operation at the Port Moody and Lake Ontario Mississauga refineries are expected to result in a reduction of 80,000 barrels per day of refining capacity.
 In addition, Petro-Canada is pursuing the sale or joint venture of its Montreal refining operations. Joint venturing arrangements could include the company's marketing assets in eastern Canada.
 The company is embarking on a country-wide program of rationalizing retail service stations, wholesale outlets and related facilities. It is expected that over the next two to three years the company will close or divest more than one-third of its marketing network of 3,200 retail and 340 wholesale outlets.
 "In light of recent market developments, the downstream business is not sufficiently profitable the way it is constituted today," said Products division President Jim Pantelidis. "With global competition and the increasing environmental costs of running refineries, we cannot profitably operate all our assets. We must improve our refinery utilization and efficiency by reducing excess capacity. We must also cut back on our existing wholesale and retail networks to lower costs, improve profitability and meet consumer demand in the most efficient way. Although the complex tasks ahead of us won't be accomplished overnight, the urgency to rationalize is clear."
 Petro-Canada will announce the number of positions affected by the rationalization of these facilities at a later date.
 1992 Capital Expenditure Program
 In addition, Petro-Canada announced its capital expenditure program for 1992.
 "We will continue our commitment to live within our means," Hopper stated. "In spite of the difficult year, we were able to make adjustments to meet that goal in 1991. We now expect our cash flow for the year to be less than $300 million, half our original plan. However, we were able to cut our capital expenditure program from a planned $860 million to about $650 million for 1991, and generate proceeds from asset divestitures of about $300 million. We were able to lower Petro- Canada's debt by some $600 million as a result of these measures and by applying the proceeds of Petro-Canada's initial public offering of $523 million completely to debt reduction."
 Planned 1992 expenditures on property, plant and equipment and exploration are $470 million. Other corporate needs will require further capital expenditures of about $40 million. The company has earmarked $190 million, net of government grants, for the Hibernia offshore oil project.
 Proceeds from asset divestitures in 1992 are expected to amount to approximately $140 million:
 "This level of capital expenditure is consistent with our expected cash flow and proceeds from disposals," concluded Hopper. "I also believe that the continuing concerted efforts of all Petro-Canada's employees to realize efficiencies in our operations wherever possible will result in considerable savings in operating and overhead costs in the order of $100 million in 1992."
 Petro-Canada expects to release its audited year-end results for 1991 following a meeting of its board of directors on Feb. 20, 1992.
 -0- 1/27/92
 /CONTACT: Bob Foulkes, VP of public affairs, 403-296-5850 or; Paul Cox, manager, investor relations, 403-296-4000, both of Petro-Canada/ CO: Petro-Canada ST: Alberta IN: OIL SU:


AL -- LA014 -- 3734 01/27/92 12:06 EST
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Date:Jan 27, 1992
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