Oil & Gas Job Listings
Shell Canada Announces Quarterly Earnings
Tuesday July 25, 9:19 am ET
Cash flow from operations was $527 million for the quarter and $1,249 million for the first six months of 2006, down $276 million and $191 million respectively from the same periods in 2005.
Excluding the acquisition of BlackRock Ventures Inc., capital and predevelopment expenditures amounted to $492 million in the second quarter and $896 million for the first six months of 2006 compared with $327 million and $596 million respectively for 2005.
"The acquisition of BlackRock in the second quarter was an important step forward in our growth strategy," said Clive Mather, President and Chief Executive Officer, Shell Canada Limited. "The first major turnaround at the Athabasca Oil Sands Project is now behind us and we are looking for a strong second half from our Oil Sands business. Our Oil Products business achieved record results for the second consecutive quarter and the E&P business remains on track with good development prospects in both the Foothills and basin-centred gas."
Earnings ($ millions) Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 526 457 614 447 475 Cash Flow ($ millions) Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 803 686 930 722 527 Capital Expenditures ($ millions) Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 327 410 709 404 492(x) (x) Excludes BlackRock acquisition Visit Shell Canada's Internet website: www.shell.ca SHELL CANADA LIMITED MANAGEMENT'S DISCUSSION AND ANALYSIS
Total Company
Shell Canada Limited earnings for the second quarter of 2006 were $475 million, down from $526 million for the corresponding quarter of 2005. In the second quarter of 2006, a favourable adjustment of $222 million resulting from changes to federal and Alberta corporate tax rates and strong refining margins were offset by high maintenance costs and lower production associated with the first major scheduled turnaround of the Athabasca Oil Sands Project (AOSP). The impact of the Company's Long Term Incentive Plan resulted in a $28 million charge to second quarter 2006 earnings compared with a $38 million charge for the corresponding quarter in 2005. This charge was due primarily to the conversion of stock options, under the previous long-term incentive program, to share appreciation rights, which necessitated a charge to expenses that reflects mark to market valuation. Total hydrocarbon production for the quarter was 170,100 barrels of oil equivalent per day (BOE/d) compared with 226,600 BOE/d in the second quarter of 2005.
Earnings for the first six months of 2006 were $922 million compared with $943 million for the corresponding period in 2005. Higher commodity prices and margins and a favourable adjustment resulting from changes to federal and Alberta corporate tax rates were offset by reduced bitumen volumes and utilization associated with the AOSP turnaround and belt failure at the Muskeg River Mine, and higher operating costs.
During the second quarter of 2006, the Company made an offer to purchase BlackRock Ventures Inc. (BlackRock) for $2.4 billion, net of $142 million of cash, and acquired control of the company on June 21, 2006. The acquisition is now complete and as at July 11, 2006, the Company holds 100 per cent of the BlackRock shares. This acquisition will augment the Company's overall oil sands portfolio by providing Shell Canada with access to significant additional resources.
Exploration & Production
Exploration & Production (E&P) earnings in the second quarter of 2006 were $157 million compared with $119 million for the corresponding period in 2005. Second-quarter earnings in 2006 include a gain of $47 million resulting from changes to federal and Alberta corporate tax rates, and a beneficial $15 million pipeline toll settlement from Maritime and Northeast Pipeline (M&NP), retroactive to January 1, 2005. E&P earnings for the first half of 2006 were $330 million compared with $255 million in 2005, mainly due to commodity price increases and the changes to federal and Alberta corporate tax rates. Effective January 1, 2006, the Peace River business was transferred from E&P to the Oil Sands business unit. Prior period E&P earnings have been adjusted to exclude Peace River operations
In the second quarter of 2006, natural gas prices were lower than in the same period of 2005. The resulting decrease in earnings was partially offset by the M&NP settlement and higher prices for natural gas liquids. Total natural gas production exceeded that in the corresponding quarter of 2005 primarily due to new volumes from basin-centred gas (BCG) and Tay River.
The Foothills business made another exploration discovery in northeast British Columbia in the second quarter. This discovery, together with recent successful wells, prompts the Company to begin construction on a gas gathering system and central sour gas dehydration facility at Wolverine River to handle approximately 50 million cubic feet per day (mmcf/d) of raw gas production potential (Shell share approximately 35 mmcf/d). The new wells are expected to be tied in and producing by the end of 2006, while drilling continues on two additional wells. However, gas sales from the region will remain constrained by lack of firm capacity within the main gathering and processing facilities.
Construction on the Sable Offshore Energy Project (SOEP) compression project is on track for startup in fourth quarter 2006. SOEP volumes are below those for the corresponding period in 2005 due to an unplanned outage at the gas processing plant in April and the work involved with the compression project tie-in.
Rising costs and schedule pressures on the Mackenzie Gas Project and Shell's Niglintgak field development have necessitated a re-examination of project cost estimates.
Oil Sands
Oil Sands earnings in the second quarter of 2006 were $111 million, an expected significant decrease from $259 million for the corresponding period in 2005. The 2006 results included a favourable adjustment of $144 million primarily resulting from changes to federal and Alberta corporate tax rates, which was offset by maintenance costs and lower production associated with the first major scheduled turnaround of both the AOSP mine and upgrader.
Oil Sands earnings for the first half of 2006 were $231 million, including the $144 million adjustment, compared with $357 million in 2005, which included an $82 million insurance settlement. The earnings reduction for the first half was mainly due to the scheduled maintenance turnaround and higher maintenance costs, as well as lower average volumes in the first quarter of 2006 due to a tear in the mine conveyor belt. Effective January 1, 2006, the Peace River business was transferred from E&P to the Oil Sands business unit. Earnings from the Peace River in situ operations are included in both current and prior period earnings.
The Company's share of AOSP bitumen production for the second quarter averaged 46,800 barrels per day (bbls/d) compared with 98,500 bbls/d for the same period in 2005. The variance in bitumen production year over year is primarily a result of the major scheduled turnarounds at both the mine and upgrader. The turnaround is now complete and both the mine and upgrader are producing in excess of 96,000 bbls/d (Shell share) after a smooth startup.
Unit cash operating costs for the AOSP in the second quarter were $67.29 per barrel as a result of the maintenance costs and lower production volumes associated with the turnaround. Unit cash operating costs are expected to return to the $15- to $22-per-barrel range with the completion of the turnaround in July 2006. This guidance is premised on normal production within a wide range of oil and gas prices.
Peace River in situ bitumen production for the second quarter of 2006 was below that for the same period in 2005 due to steam phasing and a facilities turnaround. The Company expects new production from two additional well pads to come on stream late 2006. Plans to increase in situ production at Peace River are progressing, with filing of regulatory applications expected later this year.
As previously released, a conference call will be held July 28, 2006, to provide an Oil Sands strategy update, including AOSP expansion plans.
Oil Products
Oil Products achieved record quarterly earnings of $205 million compared with $128 million for the same period in 2005. The improvement was mainly due to strong refining margins and a favourable adjustment of $43 million resulting from changes to federal and Alberta corporate tax rates, partially offset by reduced refinery yield and utilization. Stronger distillate and gasoline margins offset weaker benzene, black oil and liquid petroleum gas margins.
Refinery yield and utilization were lower in the second quarter of 2006 mainly due to maintenance at Montreal East Refinery and slowdowns at Scotford Refinery related to limited availability of alternative feedstock during the planned maintenance turnaround at the Scotford Upgrader. Supply to customers was maintained during this period. Light oil volumes were three per cent lower than in the second quarter of 2005, mainly due to the effects of wet spring weather on agricultural demand in the Prairies.
Oil Products earnings for the first half of 2006 were a record $359 million compared with $251 million in 2005. Improved refining margins offset reduced refinery yield and utilization, and costs associated with higher commodity prices.
A major turnaround is scheduled to take place at the Sarnia Refinery in the fourth quarter of 2006.
The Company is also evaluating the expansion of its manufacturing capabilities in Eastern Canada to maximize value from increased bitumen production.
Corporate
Corporate earnings for the second quarter of 2006 were $2 million compared with $20 million for the corresponding period in 2005. The change was primarily due to a favourable adjustment in the second quarter of 2005 related to the use of non-capital losses available to the Company resulting from the acquisition of an affiliated company, Coral Resources Canada ULC. Corporate earnings for the first half of 2006 were $2 million compared with $80 million for the corresponding period in 2005, mainly for the same reasons.
Cash Flow and Financing
In the second quarter of 2006, cash flow from operations was $527 million, down $276 million from $803 million for the same period last year. The decrease is largely attributable to maintenance costs and lower production associated with the first major scheduled turnaround of the AOSP. Cash flow from operations for the first six months of 2006 was $1,249 million, down $191 million from the same period in 2005. Higher commodity prices and margins were offset by reduced bitumen volumes and utilization associated with the AOSP turnaround and belt failure at the Muskeg River Mine, and higher operating costs.
Excluding the acquisition of BlackRock during the second quarter of 2006, capital and predevelopment expenditures amounted to $492 million in the second quarter and $896 million for the first six months of 2006 compared with $327 million and $596 million respectively for 2005. The increase is in support of the Company's growth plans including predevelopment work at the AOSP.
This purchase of BlackRock used all of the cash previously held on the balance sheet. In addition, the Company issued $797 million in commercial paper under its existing $1.5 billion program and borrowed $498 million against a new $1 billion syndicated revolving credit facility. The unused portions of these facilities are available for general corporate purposes. Total debt outstanding at the end of the second quarter 2006 was $1,501 million including the mobile equipment lease of $205 million, compared with debt on the balance sheet of $211 million, mainly comprised of the mobile equipment lease as at December 31, 2005.
Dividends paid in the second quarter of 2006 were $0.11 per common share totalling $91 million. This reflected an equivalent dividend per share to that paid in the first quarter of 2006, and an increase of 32 per cent over the dividend paid in the second quarter of 2005.
Share Information
At July 15, 2006, the Company had 825,464,564 common shares and 100 preference shares outstanding (April 15, 2006 - 825,367,662 common shares and 100 preference shares) and there were 22,557,058 employee stock options outstanding, of which 11,474,136 were exercisable or could be surrendered to exercise an attached share appreciation right (April 15, 2006 - 22,850,139 outstanding and 11,757,122 exercisable).
------------------------------------------------------------------------- Stock Trading Information Second Quarter 2006 2005 ------------------------------------------------------------------------- Share prices (dollars)(1) - High 45.99 34.39 - Low 37.15 26.84 - Close (end of period) 41.50 32.89 Shares traded (thousands)(1) 24,311 21,961 ------------------------------------------------------------------------- (1) Toronto Stock Exchange quotations. -------------------------------------------------------------------------
Additional Information
Additional information relating to Shell Canada Limited filed with Canadian and U.S. securities regulatory authorities, including the Annual Information Form and Form 40-F, can be found online under the Company's profile at www.sedar.com and www.sec.gov.
Cautionary Note
This document contains "forward-looking statements" based upon management's assessment of the Company's future plans and operations. These forward-looking statements include references to the Company's plans for growth, results of acquisition activity, future capital and other expenditures, drilling, development and expansion plans, construction activities, maintenance turnaround schedules, the submission of regulatory applications, project costs and schedules and oil and gas production levels.
Readers are cautioned not to place undue reliance on forward-looking statements. Although the Company believes that the expectations represented by such forward-looking statements are reasonable based on the information available to it on the date of this document, there can be no assurance that such expectations will prove to be correct. Forward-looking statements involve numerous known and unknown risks and uncertainties that could cause actual results to differ materially from those anticipated by the Company. These risks and uncertainties include, but are not limited to, the risks of the oil and gas industry (including operating conditions and costs), market competition, demand for oil, gas and related products, disruptions in supply, project schedules and execution, labour availability, material and equipment shortages, the uncertainties involving geology of oil and gas deposits, the uncertainty of reserves estimates, fluctuations in oil and gas prices and foreign currency exchange rates, general economic conditions, changes in law or government policy, and other factors, many of which are beyond the control of the Company.
The forward-looking statements contained in this document are made as of the date of this document and the Company does not undertake any obligation to update publicly or revise any of the forward-looking statements contained in this document, whether as a result of new information, future events or otherwise, except as required by law. The forward-looking statements contained in this document are expressly qualified by this cautionary note.
Certain financial measures are not prescribed by Canadian generally accepted accounting principles (GAAP). These non-GAAP financial measures do not have any standardized meaning and, therefore, may not be comparable with the calculation of similar measures of other companies. The Company includes as non-GAAP measures return on average capital employed (ROACE), cash flow from operations and unit cash operating cost because they are key internal and external financial measures used to evaluate the performance of the Company.
Certain volumes have been converted to barrels of oil equivalent (BOE). BOEs may be misleading, particularly if used in isolation. A conversion of six thousand cubic feet of natural gas to one barrel of oil, as used in this document, is based on the energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead
SHELL CANADA LIMITED
Financial Highlights
($ millions, except as noted)
(unaudited)
Second Quarter First Half
2006 2005 2006 2005
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Earnings 475 526 922 943
Revenues 3 748 3 390 7 197 6 395
Cash flow from operations(1) 527 803 1 249 1 440
Return on average common
shareholders' equity (%) - - 24.5 23.6
Per common share (dollars) (Note 7)
Earnings - basic 0.58 0.64 1.12 1.14
Earnings - diluted 0.57 0.63 1.10 1.13
Dividends paid 0.110 0.083 0.220 0.167
Results by Segment (Note 2)
Earnings
Exploration & Production 157 119 330 255
Oil Sands 111 259 231 357
Oil Products 205 128 359 251
Corporate 2 20 2 80
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Total 475 526 922 943
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Revenues
Exploration & Production 523 534 1 182 1 098
Oil Sands 572 926 1 305 1 494
Oil Products 2 958 2 516 5 570 4 842
Corporate 53 11 70 31
Inter-segment sales (358) (597) (930) (1 070)
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Total 3 748 3 390 7 197 6 395
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Cash flow from operations(1)
Exploration & Production 224 205 534 432
Oil Sands 81 416 259 630
Oil Products 201 149 433 265
Corporate 21 33 23 113
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Total 527 803 1 249 1 440
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Capital and predevelopment
expenditures
Exploration & Production 184 202 375 343
Oil Sands 209 28 362 96
Oil Products 72 95 128 154
Corporate 27 2 31 3
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Total 492 327 896 596
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Return on average capital employed
(%)(2)
Exploration & Production - - 37.9 26.0
Oil Sands - - 15.7 18.1
Oil Products - - 22.7 21.5
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Total - - 22.3 22.1
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SHELL CANADA LIMITED
Operating Highlights
(unaudited)
Second Quarter First Half
2006 2005 2006 2005
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EXPLORATION & PRODUCTION (Note 2)
Production
Natural gas (mmcf/d)
Western Canada natural gas 411 372 418 387
Sable natural gas 97 115 103 115
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Total natural gas - gross 508 487 521 502
- net 416 393 420 405
Ethane, propane and butane
(bbls/d) - gross 20 000 23 500 21 000 23 900
- net 15 800 18 600 16 800 18 900
Condensate (bbls/d) - gross 12 200 14 900 13 300 15 000
- net 9 500 11 200 10 500 11 400
Sulphur (tons/d) - gross 5 300 5 000 5 500 5 200
- net 4 900 4 200 5 100 4 500
Sales(3) - gross
Natural gas (mmcf/d) 499 481 516 497
Ethane, propane and butane
(bbls/d) 30 000 35 800 36 600 38 500
Condensate (bbls/d) 18 100 15 200 22 200 18 900
Sulphur (tons/d) 12 700 12 500 11 900 11 600
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OIL SANDS (Note 2)
Production
Bitumen (bbls/d) - gross
Minable 46 800 98 500 62 000 88 800
In situ 6 400 8 500 6 900 7 700
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Total 53 200 107 000 68 900 96 500
Bitumen (bbls/d) - net
Minable 46 400 97 500 61 400 87 900
In situ 6 200 8 300 6 800 7 500
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Total 52 600 105 800 68 200 95 400
Sales(3)
Synthetic crude sales excluding
blend stocks (bbls/d) 45 600 102 300 65 700 92 000
Purchased upgrader blend stocks
(bbls/d) 22 600 39 900 31 400 35 500
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Total synthetic crude sales
(bbls/d) 68 200 142 200 97 100 127 500
Bitumen product excluding
diluent (bbls/d) 6 400 8 700 6 900 8 000
Purchased diluent (bbls/d) 600 1 600 1 500 1 800
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Total bitumen products (bbls/d) 7 000 10 300 8 400 9 800
In situ condensate (bbls/d) 2 900 1 800 2 800 2 400
Unit Costs(4)
Mining and upgrading operations
Cash operating cost
- excluding natural gas ($/bbl) 60.88 15.84 34.36 16.91
- natural gas ($/bbl) 6.41 4.62 6.30 5.20
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Total cash operating cost ($/bbl) 67.29 20.46 40.66 22.11
Depreciation, depletion and
amortization ($/bbl) 7.29 5.52 5.44 6.21
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Total unit cost ($/bbl) 74.58 25.98 46.10 28.32
Unit Costs(4)
In situ operations
Cash operating cost
- excluding natural gas ($/bbl) 25.18 15.44 19.31 14.56
- natural gas ($/bbl) 11.06 15.68 11.59 14.61
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Total cash operating cost ($/bbl) 36.24 31.12 30.90 29.17
Depreciation, depletion and
amortization ($/bbl) 11.19 4.29 11.17 4.47
---------------------------------------
Total unit cost ($/bbl) 47.43 35.41 42.07 33.64
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OIL PRODUCTS
Sales(3)
Gasolines (m(3)/d) 21 100 21 300 20 600 20 800
Middle distillates (m(3)/d) 18 600 19 100 19 700 20 400
Other products (m(3)/d) 6 700 7 300 6 300 6 600
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Total Oil Products sales (m(3)/d) 46 400 47 700 46 600 47 800
Crude oil processed by Shell
refineries (m(3)/d)(5) 43 200 46 500 43 300 46 600
Refinery utilization (per cent)(6) 86 90 85 90
Earnings per litre (cents)(7) 4.8 3.0 4.3 2.9
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Prices
Natural gas average plant gate
netback price ($/mcf) 6.53 6.89 7.43 6.62
Ethane, propane and butane average
field gate price ($/bbl) 31.84 29.87 35.34 30.08
Condensate average field gate
price ($/bbl) 76.78 63.98 74.09 63.67
Synthetic crude average plant
gate price ($/bbl) 67.72 54.44 60.81 53.13
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Ethane, Propane
Natural Gas Avg. and Butane Condensate Synthetic Crude
Price (Plant Avg. Price Avg. Price Avg. Price
Gate Netback) (Field Gate) (Field Gate) (Plant Gate)
($/mcf) ($/bbl) ($/bbl) ($/bbl)
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Q2 05 6.89 29.87 63.98 54.44
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Q3 05 7.98 33.63 72.98 66.37
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Q4 05 11.53 44.41 68.30 56.99
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Q1 06 8.29 38.04 72.30 57.04
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Q2 06 6.53 31.84 76.78 67.72
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SHELL CANADA LIMITED
Financial and Operating Highlights
(unaudited)
Non-GAAP Measures
Certain financial measures are not prescribed by Canadian generally
accepted accounting principles (GAAP). These non-GAAP financial measures do
not have any standardized meaning and, therefore, may not be comparable with
the calculation of similar measures for other companies. The Corporation
includes as non-GAAP measures return on average capital employed (ROACE), cash
flow from operations and unit cash operating cost because they are key
internal and external financial measures used to evaluate the performance of
the Corporation.
Definitions
(1) Cash flow from operations is a non-GAAP measure and is defined as
cash flow from operating activities before movement in working
capital and operating activities. See note 3 to the Consolidated
Financial Statements.
(2) ROACE is a non-GAAP measure and is defined as the last four
quarters' earnings plus after-tax interest expense on debt divided by
the average of opening and closing common shareholders' equity plus
preferred shares, long-term debt and short-term borrowings.
(3) Exploration & Production and Oil Products sales volumes include sales
to third parties only. Oil Sands sales volumes include third-party
and inter-segment sales.
(4) Total unit cost for Oil Sands, including unit cash operating and unit
depreciation, depletion and amortization (DD&A) costs, is a non-GAAP
measure. Unit cash operating cost for Oil Sands mining and upgrading
is defined as: operating, selling and general expenses plus cash cost
items included in cost of goods sold (COGS), divided by synthetic
crude sales excluding blend stocks. Operating, selling and general
expenses associated with mining and upgrading were $399 million in
the first half of 2006 and $249 million in the second quarter of
2006. Cash cost items included in COGS were $84 million in the first
half of 2006 and $29 million in the second quarter of 2006.
Unit cash operating cost for in situ operations is defined as:
operating, selling and general expenses plus intersegment purchases
of natural gas, divided by bitumen product sales excluding diluent.
Operating, selling and general expenses associated with in situ
operations were $22 million in the first half of 2006 and $13 million
in the second quarter of 2006. Intersegment purchases of natural gas
were $15 million in the first half of 2006 and $6 million in the
second quarter of 2006.
Unit DD&A cost for Oil Sands mining and upgrading is defined as: DD&A
cost divided by synthetic crude sales excluding blend stocks. Unit
DD&A cost includes preproduction costs, which were written off over
the first three years of the project life (2003-2005).
Unit DD&A cost for in situ operations is defined as: DD&A cost
divided by bitumen product sales excluding diluent.
(5) Crude oil processed by Shell refineries includes upgrader feedstock
supplied to Scotford Refinery.
(6) Refinery utilization equals crude oil processed by Shell refineries
divided by total capacity of Shell refineries, including capacity
uplifts at Scotford Refinery due to processing of various streams
from the upgrader.
(7) Oil Products earnings per litre equals Oil Products earnings after-
tax divided by total Oil Products sales volumes.
SHELL CANADA LIMITED
Consolidated Statement of Earnings and Retained Earnings
($ millions, except as noted)
(unaudited)
Second Quarter First Half
2006 2005 2006 2005
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Revenues
Sales and other operating revenues 3 716 3 238 7 133 6 221
Dividends, interest and other
income 32 152 64 174
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Total revenues 3 748 3 390 7 197 6 395
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Expenses
Cost of goods sold 2 364 1 766 4 286 3 434
Operating, selling and general 692 583 1 210 1 062
Transportation 70 86 149 165
Exploration 16 32 61 56
Predevelopment 32 14 60 32
Depreciation, depletion,
amortization and retirements 178 181 360 363
Interest on long-term debt 2 2 4 4
Other interest and financing
charges 4 1 4 2
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Total expenses 3 358 2 665 6 134 5 118
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Earnings
Earnings before income tax 390 725 1 063 1 277
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Current income tax 74 128 255 251
Future income tax (159) 71 (114) 83
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Total income tax (85) 199 141 334
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Earnings 475 526 922 943
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Per common share (dollars) (Note 7)
Earnings - basic 0.58 0.64 1.12 1.14
Earnings - diluted 0.57 0.63 1.10 1.13
Common shares outstanding
(millions - weighted average) 825 825 825 825
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Retained Earnings
Balance at beginning of period 8 046 6 333 7 690 6 011
Earnings 475 526 922 943
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8 521 6 859 8 612 6 954
Common shares buy-back - 7 - 33
Dividends 91 68 182 137
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Balance at end of period 8 430 6 784 8 430 6 784
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SHELL CANADA LIMITED
Consolidated Statement of Cash Flows
($ millions)
(unaudited)
Second Quarter First Half
2006 2005 2006 2005
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Cash from Operating Activities
Earnings 475 526 922 943
Exploration (Note 3) 1 12 20 19
Predevelopment 32 14 60 32
Non-cash items
Depreciation, depletion,
amortization and retirements 178 181 360 363
Future income tax (159) 71 (114) 83
Other items - (1) 1 -
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Cash flow from operations 527 803 1 249 1 440
Movement in working capital and
operating activities
Working capital and other
operating items 91 33 (225) (355)
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618 836 1 024 1 085
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Cash Invested
Capital and predevelopment
expenditures (Note 3) (492) (327) (896) (596)
Acquisition of BlackRock Ventures
Inc. (Note 4) (2 428) - (2 428) -
Movement in working capital from
investing activities 25 (32) 100 (24)
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Capital expenditures and movement
in working capital (2 895) (359) (3 224) (620)
Proceeds on disposal of properties,
plant and equipment - 1 - 5
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(2 895) (358) (3 224) (615)
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Cash from Financing Activities
Common shares buy-back - (7) - (34)
Proceeds from exercise of common
share stock options 3 1 4 4
Dividends paid (91) (68) (182) (137)
Long-term debt and other 1 1 - (134)
Short-term financing 1 295 (109) 1 295 -
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1 208 (182) 1 117 (301)
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(Decrease) Increase in cash (1 069) 296 (1 083) 169
Cash at beginning of period 1 069 - 1 083 127
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Cash at June 30(1) - 296 - 296
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Supplemental disclosure of
cash flow information
Dividends received 5 4 7 7
Interest received 25 14 50 30
Interest paid 5 3 8 7
Income tax paid 147 111 463 436
(1) Cash comprises cash and highly liquid short-term investments.
SHELL CANADA LIMITED
Consolidated Balance Sheet
($ millions)
(unaudited)
Jun. 30, Dec. 31,
2006 2005
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Assets
Current assets
Cash and short-term investments - 1 083
Accounts receivable 1 804 1 821
Inventories
Crude oil, products and merchandise 631 535
Materials and supplies 98 92
Prepaid expenses 100 71
Future income tax 332 316
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2 965 3 918
Investments, long-term receivables and other 696 671
Properties, plant and equipment 12 619 9 066
Goodwill (Notes 4 and 5) 234 -
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Total assets 16 514 13 655
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Liabilities
Current liabilities
Short-term borrowings (Note 6) 1 295 -
Accounts payable, accrued liabilities and other 2 460 2 242
Income and other taxes payable 470 687
Current portion of asset retirement and other
long-term obligations 27 26
Current portion of long-term debt 5 11
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4 257 2 966
Asset retirement and other long-term obligations 590 545
Long-term debt 201 200
Future income tax 2 486 1 730
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Total liabilities 7 534 5 441
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Non-controlling interest (Note 4) 22 -
Shareholders' Equity
Capital stock
100 4% preference shares 1 1
825 449 564 common shares (2005 - 825 102 612) 527 523
Retained earnings 8 430 7 690
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Total shareholders' equity 8 958 8 214
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Total liabilities and shareholders' equity 16 514 13 655
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SHELL CANADA LIMITED
Segmented Information
($ millions)
(unaudited)
Second Quarter
Exploration
Total & Production Oil Sands
2006 2005 2006 2005 2006 2005
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(Note 2) (Note 2)
Revenues
Sales and other
operating revenues 3 716 3 238 478 476 354 343
Inter-segment sales - - 43 56 218 452
Dividends, interest
and other income 32 152 2 2 - 131
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Total revenues 3 748 3 390 523 534 572 926
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Expenses
Cost of goods sold 2 364 1 766 - - 218 205
Inter-segment
purchases - - 57 57 83 95
Operating, selling
and general 692 583 113 112 262 159
Transportation 70 86 70 86 - -
Exploration 16 32 16 32 - -
Predevelopment 32 14 7 9 19 5
Depreciation,
depletion,
amortization and
retirements 178 181 87 82 37 55
Interest on long-
term debt 2 2 - - - -
Other interest and
financing charges 4 1 - - - -
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Total expenses 3 358 2 665 350 378 619 519
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Earnings (loss)
Earnings (loss)
before income tax 390 725 173 156 (47) 407
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Current income tax 74 128 49 56 (75) 47
Future income tax (159) 71 (33) (19) (83) 101
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Total income tax (85) 199 16 37 (158) 148
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Earnings 475 526 157 119 111 259
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Oil Products Corporate
2006 2005 2006 2005
-------------------------------------------------------
Revenues
Sales and other
operating revenues 2 855 2 422 29 (3)
Inter-segment sales 97 89 - -
Dividends, interest
and other income 6 5 24 14
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Total revenues 2 958 2 516 53 11
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Expenses
Cost of goods sold 2 148 1 550 (2) 11
Inter-segment
purchases 218 445 - -
Operating, selling
and general 292 282 25 30
Transportation - - - -
Exploration - - - -
Predevelopment 6 - - -
Depreciation,
depletion,
amortization and
retirements 51 44 3 -
Interest on long-
term debt - - 2 2
Other interest and
financing charges - - 4 1
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Total expenses 2 715 2 321 32 44
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Earnings (loss)
Earnings (loss)
before income tax 243 195 21 (33)
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Current income tax 96 90 4 (65)
Future income tax (58) (23) 15 12
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Total income tax 38 67 19 (53)
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Earnings 205 128 2 20
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First Half
Exploration
Total & Production Oil Sands
2006 2005 2006 2005 2006 2005
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(Note 2) (Note 2)
Revenues
Sales and other
operating revenues 7 133 6 221 1 071 978 680 598
Inter-segment sales - - 108 117 625 764
Dividends, interest
and other income 64 174 3 3 - 132
-------------------------------------------------------------------------
Total revenues 7 197 6 395 1 182 1 098 1 305 1 494
-------------------------------------------------------------------------
Expenses
Cost of goods sold 4 286 3 434 - - 474 331
Inter-segment
purchases - - 118 116 169 182
Operating, selling
and general 1 210 1 062 217 200 421 305
Transportation 149 165 149 165 - -
Exploration 61 56 61 56 - -
Predevelopment 60 32 19 21 35 11
Depreciation,
depletion,
amortization and
retirements 360 363 177 165 79 110
Interest on long-
term debt 4 4 - - - -
Other interest and
financing charges 4 2 - - - -
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Total expenses 6 134 5 118 741 723 1 178 939
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Earnings (loss)
Earnings (loss)
before income tax 1 063 1 277 441 375 127 555
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Current income tax 255 251 130 151 (21) 43
Future income tax (114) 83 (19) (31) (83) 155
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Total income tax 141 334 111 120 (104) 198
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Earnings 922 943 330 255 231 357
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Total assets 16 514 11 873 3 262 2 774 8 003 4 172
Capital employed(1) 10 459 7 524 2 158 1 797 5 381 2 937
Oil Products Corporate
2006 2005 2006 2005
-------------------------------------------------------
Revenues
Sales and other
operating revenues 5 361 4 642 21 3
Inter-segment sales 197 189 - -
Dividends, interest
and other income 12 11 49 28
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Total revenues 5 570 4 842 70 31
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Expenses
Cost of goods sold 3 807 3 091 5 12
Inter-segment
purchases 643 772 - -
Operating, selling
and general 539 511 33 46
Transportation - - - -
Exploration - - - -
Predevelopment 6 - - -
Depreciation,
depletion,
amortization and
retirements 101 87 3 1
Interest on long-
term debt - - 4 4
Other interest and
financing charges - - 4 2
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Total expenses 5 096 4 461 49 65
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Earnings (loss)
Earnings (loss)
before income tax 474 381 21 (34)
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Current income tax 144 203 2 (146)
Future income tax (29) (73) 17 32
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Total income tax 115 130 19 (114)
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Earnings 359 251 2 80
-------------------------------------------------------
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Total assets 4 936 4 451 313 476
Capital employed(1) 2 603 2 199 317 591
(1) Capital employed is the total of equity, long-term debt and short-
term borrowings.
SHELL CANADA LIMITED
Notes to Consolidated Financial Statements
(unaudited)
1. Accounting Policies
These financial statements follow the same accounting policies and
methods of computation as, and should be read in conjunction with, the
Consolidated Financial Statements for the year ended December 31, 2005,
except as described in notes 2, 3 and 5.
Certain other information provided for prior periods has been
reclassified to conform to the current presentation.
2. Segmented Information
Effective January 1, 2006, the Peace River business was transferred from
Exploration & Production to the Oil Sands business unit. Segmented
information for the relevant business units has been reclassified for the
prior periods.
3. Accounting Reclassification
The Corporation reclassified certain exploration expenses ($37 million in
the first half of 2005 and $20 million in the second quarter of 2005)
from investing to operating activities in the Consolidated Statement of
Cash Flows.
4. Acquisition of BlackRock Ventures Inc.
On June 21, 2006, the Corporation acquired more than 92 per cent of the
outstanding common shares of BlackRock Ventures Inc. (BlackRock). The
original offer was extended to June 27, 2006, and additional common
shares were acquired. In total the Corporation held in excess of 98 per
cent as at June 30, 2006. BlackRock was engaged in the development and
production of heavy oil in Western Canada.
Shell's total consideration for the transaction was $2,570 million
($2,428 million net of cash acquired) including acquisition costs of
$12 million and working capital of $130 million. Of the consideration
paid, $3,092 million was allocated to oil and natural gas properties and
$234 million was allocated to goodwill.
The purchase price allocation of the acquisition is subject to
refinement. The acquisition was accounted for based on the purchase
method and the allocation was supported by a third party valuation. A
summary of the preliminary purchase equation is presented as follows:
Net assets acquired ($ millions)
Oil and natural gas properties 3 092
Goodwill(1) 234
Working capital(2) 130
Other assets 1
Asset retirement obligations (11)
Future income tax liability (854)
Non-controlling interest (22)
---------
2 570
---------
---------
(1) The $234 million of goodwill has no tax basis and was allocated to
the Oil Sands business unit.
(2) Working capital acquired includes cash of $142 million.
5. Goodwill
The goodwill is entirely due to the timing difference created between the
tax basis of the assets compared to the fair value. Goodwill is not
subject to amortization, but is tested for impairment on an annual basis,
or more frequently if events occur that could result in impairment, by
applying a fair value based test.
6. Short-term borrowings
The Corporation entered into a $1 billion revolving credit facility ("the
facility") during the second quarter of 2006. The facility was arranged
with a syndicate of banks resident in Canada and matures on June 15,
2008.
This facility, along with the already established $1.5 billion commercial
paper program, provided the Corporation with $2.5 billion of borrowing
capacity. At June 30, 2006, the outstanding balance on the revolving
credit facility was $498 million in the form of short-term borrowings
that had an effective interest rate of 4.5 per cent. At June 30, 2006,
the outstanding balance on the commercial paper program was $797 million
at an effective interest rate of 4.4 per cent.
7. Earnings Per Share
Second Quarter First Half
2006 2005 2006 2005
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Earnings ($ millions) 475 526 922 943
Weighted average number of common
shares (millions) 825 825 825 825
Dilutive securities (millions)
Options under Long Term
Incentive Plan 9 8 10 8
Basic earnings per share
($ per share) 0.58 0.64 1.12 1.14
Diluted earnings per share
($ per share) 0.57 0.63 1.10 1.13
8. Employee Future Benefits
The Corporation's pension plans are described in the notes to the
Consolidated Financial Statements for the year ended December 31, 2005.
The components of the pension expense in the Consolidated Statement of
Earnings are as follows:
Second Quarter
Pension Benefits Other Benefits
($ millions) 2006 2005 2006 2005
-------------------------------------------------------------------------
Current service cost 11 9 - -
Employee contributions (1) (1) - -
Interest cost 32 32 3 3
Expected return on plan assets (37) (34) - -
Amortization of transitional
(asset) obligation (9) (9) 1 1
Amortization of net actuarial loss 22 18 1 -
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Net expense 18 15 5 4
Defined contribution segment 7 3 - -
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Total 25 18 5 4
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First Half
Pension Benefits Other Benefits
($ millions) 2006 2005 2006 2005
-------------------------------------------------------------------------
Current service cost 22 18 1 1
Employee contributions (2) (2) - -
Interest cost 64 64 5 5
Expected return on plan assets (73) (68) - -
Amortization of transitional
(asset) obligation (18) (18) 1 1
Amortization of net actuarial loss 44 36 2 -
-------------------------------------------------------------------------
Net expense 37 30 9 7
Defined contribution segment 13 6 - -
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Total 50 36 9 7
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For further information
Investor Inquiries: Ken Lawrence, Investor Relations, (403) 691-2175
Media Inquiries: Jan Rowley, Public Affairs, (403) 691-3899
Source: Shell Canada Limited
