* Quarterly oil production down 4 pct
* Cuts 2009 capex by C$600 mln to C$3.4 bln
* Shares fall less than 1 pct (Recasts with comments and details; updates share price)
By Scott Haggett
CALGARY, Alberta, April 28 (Reuters) - Petro-Canada PCA.TO, which is in the process of being acquired by Suncor Energy Inc (SU.TO), reported a first-quarter loss on Tuesday on plunging oil and natural gas prices.
The company lost C$47 million, or 10 Canadian cents per share, down from a profit of C$1.08 billion, or C$2.22 a share, in the year-earlier quarter.
Petro-Canada agreed last month to be bought by Suncor for shares initially valued at C$18.4 billion ($15.1 billion), to create Canada’s biggest energy company and a dominant player in the Alberta oil sands.
With the deal expected to be wrapped up later this year, Petro-Canada is putting restraints on spending and husbanding its cash as it looks to weather oil and gas prices that have been deflated by economic turmoil and waning demand.
“Our East Coast, international, natural gas and downstream business units all contributed reasonable cash flow even with lower commodity prices,” Ron Brenneman, the company’s chief executive, said on a conference call. “This combined with a reduction in our capital spending ... enabled us to maintain strong liquidity through a difficult first quarter.”
Petro-Canada’s operating profit, which excludes noncash charges and other one-time items, plunged 88 percent to C$111 million, or 23 Canadian cents a share, from C$899 million, or C$1.86 a share.
Petro-Canada had been expected to earn 53 Canadian cents a share on an operating basis, according to the average forecast of analysts surveyed by Reuters Estimates.
The weak results are not expected to result in a big drop in Petro-Canada’s share price since it’s backstopped by Suncor’s bid of 1.28 of its shares for each Petro-Canada share.
“Frankly everyone is just focused on the merger,” said William Lacey, an analyst at FirstEnergy Capital. “But operationally the quarter was just fine.”
The net loss included charges for stock-based compensation and losses on foreign currency as well as exploration expenses and charges racked up by the deferral of Petro-Canada’s Fort Hills oil sands project.
Work on the Fort Hills mining project was suspended last year when costs skyrocketed. However Brenneman said that the decision to defer construction has resulted in lower costs, as the tab for materials and labor has fallen.
Instead of the C$14 billion expected, the project’s budget could be reduced to C$10 billion or less as construction costs wane, he said.
“We’re seeing (cost) reductions of about 30 percent,” Brenneman said. “This is a combination of lower steel prices, lower pipe prices, lower wage rates ... and somewhat better productivity.”
Cash flow, a glimpse into an oil company’s ability to fund projects, was C$702 million, or C$1.45 a share, down 62 percent from a year earlier.
Petro-Canada said it would cut 2009 capital spending by C$600 million to C$3.4 billion.
During the quarter, oil prices averaged $43.31 a barrel, down 55 percent from the year before. Natural gas on the New York Mercantile Exchange averaged $4.47 per million British thermal units, down 49 percent.
Last week, Suncor reported a net loss due to weak prices and a series of one-time items, some related to shutting down work an a C$20.6 billion oil sands expansion project.
Petro-Canada said its overall production averaged 410,000 barrels of oil equivalent a day, down 4 percent from the first quarter of 2008 on lower output from its fields offshore Newfoundland and from its international operations as well as declining natural gas production.
The company’s shares fell 24 Canadian cents to C$37.34 midmorning on the Toronto Stock Exchange on Tuesday morning.
$1=$1.22 Canadian Additional reporting by Isheeta Sanghi; editing by Peter Galloway