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Canadian Press: Shell Canada posts $2 billion in profits for 2005

CALGARY — A lucrative earnings-report season for the Canadian oilpatch began Wednesday as Shell Canada Ltd. posted record annual profits of $2.01 billion, up 56 per cent over 2004 due to record energy prices and strong production growth in the oilsands.
Shell said it earned $614 million or 74 cents per share in the fourth quarter of 2005 — more than triple the $182 million, or 22 cents per share, it earned in the same period of 2004.
Chief executive Clive Mather said breaking through the $2-billion barrier in annual profits was a “tremendous achievement.''
The year's cash flow from operations was $3.06 billion, a boost of more than 40 per cent from the previous year.
The company's revenues soared by nearly $1 billion in the fourth quarter alone to $4.04 billion. Full year revenues were $14.4 billion, compared with $11.3 billion in 2004.
Shell Canada, 78 per cent owned by British-Dutch multinational Royal Dutch/Shell Group, is one of Canada's major integrated oil companies with 4,000 employees in oilsands operations near Fort McMurray, Alta., natural gas production in Western Canada and off the East Coast, refineries and a chain of gasoline stations.
“We've got a full slate of projects right across the board,'' Mather said in an interview.
Last November, Shell announced plans to boost capital spending in 2006 by 60 per cent to $2.7 billion in order to develop its oilsands and natural gas operations.
And it expects to spend upwards of $17 billion over the next five years — with the lion's share going to oilsands expansions.
While record oil and natural gas prices were key to 2005's record profits, the company also set production records at its Athabasca oilsands mine and upgrader, in which it owns a 60 per cent operating stake.
For the full year, the Athabasca project averaged 159,900 daily barrels of bitumen, nearly 5,000 barrels above its design capacity. Fourth-quarter production was even higher at 178,000 barrels per day and the company's Scotford upgrader on the outskirts of Edmonton also achieved production records.
Energy analyst Wilf Gobert with Peters & Co. in Calgary said the extra oilsands production enabled Shell to post better than expected results.
Gobert said he expects the company to use the extra cash to continue expanding its heavy oil production.
“They've got a pretty ambitious plan for the expansion of oilsands production.''
Last year, Shell announced that its first major expansion at Athabasca would cost about $7.3 billion, nearly twice as much as initially expected. Mather said Wednesday that the company will make a decision on whether to go ahead with the expansion later this year.
The expansion would provide an extra 100,000 barrels per day of production, along with intentional “over-building'' of infrastructure to make further expansions cheaper and easier.
Shell's partners in Athabasca are Chevron Canada and Western Oil Sands (TSX:WTO), each holding 20 per cent.
Mather said Shell is interested in boosting its oilsands presence further.
“Of course we'd love to have more oilsands exposure if we could get it, but at a price that offers value, and therein lies the challenge.''
One of the only declining businesses for Shell was its downstream oil products division, which reported annual earnings of $438 million, down from 2004's record earnings of $451 million.
Strong refining margins and improved light oil yields were offset by lower refinery utilization and higher expenses.
Although the North American gasoline market was marked by hurricane-induced supply disruptions and fuel price volatility last fall, Shell said it was “able to maintain a reliable supply to customers at competitive prices throughout.''
Shell Canada shares declined 93 cents, or two per cent, to $44.32 during the down day for energy issues on the Toronto Stock Exchange.

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