January 29, 2009 / 11:53 AM / in 9 years

UPDATE 3-Petro-Canada "hunkers down" as oil sector sags

* Share loss C$1.43 vs profit C$1.08

* Production flat at 409,000 barrels

* Lowers 2009 production outlook (Recasts with CEO comments, details; changes dateline from Toronto)

By Jeffrey Jones

CALGARY, Alberta, Jan 29 (Reuters) - Petro-Canada PCA.TO will keep its multibillion-dollar oil sands venture and other major projects on ice until oil and financial markets improve, its chief executive said on Thursday after the company reported a fourth-quarter loss.

Canada's No. 4 oil producer and refiner also reduced its 2009 production target and warned that weak oil and gas prices could force it to cut spending more than it already has.

"I'm really not prepared to make any predictions about how things might unfold, and certainly not prepared to base a capital program on any particular outcome," CEO Ron Brenneman told analysts.

"So we've developed priorities for 2009 that will help us hunker down and ride this out until the picture for commodity prices and financial markets becomes a lot clearer."

That includes cutting discretionary spending and holding off on such big-ticket developments as the C$21 billion-plus ($17 billion-plus) Fort Hills oil sands venture, the expansion of another Alberta oil sands project called MacKay River and the addition of new equipment at its Montreal refinery.

"In the meantime, we're stepping back and reworking the costs to improve project economics and we're looking at ways to further reduce execution risk," Brenneman said.

The energy industry has gone from boom to bust in about six months, as oil prices sank to around $40 a barrel from a record above $147 last July. Petro-Canada is one of numerous companies that have deferred major oil sands projects.

Fort Hills also was pressured by surging costs. The company and its partners have put off a go-ahead decision for the first 60,000 barrel a day phase and said they may not build an upgrading plant until later phases.

Brenneman said French oil major Total SA's (TOTF.PA) C$617 million takeover bid for Fort Hills partner will not affect Project timing. Total launched the offer late Tuesday.

Project sanctioning is more dependent on extending the lease agreement with the Alberta government, success in cutting costs and strength in energy and financial markets, and that all may not occur this year, he said.

"We haven't really said, 'Come Hell or high water 2009.' We've said when all of those factors come into play and we're comfortable, then we'll make the decision."

Petro-Canada reported a fourth-quarter net loss of C$691 million, or C$1.43 a share, compared with a year-earlier profit of C$522 million, or C$1.08 a share.

Excluding one-time charges such as currency translation on long-term debt and costs of deferring Fort Hills, operating earnings rose 1 percent to C$518 million, or C$1.07 a share.

That beat a Reuters Estimates average of analyst forecasts by 15 Canadian cents a share.

UBS Securities attributed that to better-than-expected realized commodity prices and lower royalties for projects offshore Newfoundland.

Still, Petro-Canada shares were off 82 Canadian cents, or 3 percent, to C$27.88 on the Toronto Stock Exchange, with crude prices also down 3 percent on Thursday. They are down 40 percent in the past 12 months.

In the quarter, oil averaged $59.08 a barrel, down 35 percent from a year earlier. Canadian natural gas rose 9 percent to C$6.37 a gigajoule.

The company's production averaged 409,000 barrels of oil equivalent a day, about flat with a year earlier.

It now expects 2009 output of 345,000-385,000 barrels a day, down from its December outlook of 360,000-395,000. ($1=$1.22 Canadian) (Additional reporting by Ajay Kamalakaran and Scott Anderson; editing by Rob Wilson)

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