Oil & Gas Job Listings
Cash flow from operations was $906 million for the quarter and $2,155 million for the first nine months of 2006, up $220 million and $29 million respectively from the same periods in 2005.
Capital and predevelopment expenditures amounted to $592 million in the third quarter and $1,488 million for the first nine months of 2006, excluding the BlackRock acquisition, compared with $410 million and $1,006 million respectively for 2005.
"Strong earnings reflect our drive for operational performance in an environment of falling commodity prices," said Clive Mather, President and Chief Executive Officer, Shell Canada Limited. "Production at the Athabasca Oil Sands Project is back above design rates following its first major turnaround in the second quarter. While we focus on operational excellence at our existing operations, we continue to lay the foundation for growth in our Oil Sands and unconventional gas businesses. In addition, the Company launched a new venture in the road transport sector, which further strengthens our Oil Products business."
Earnings ($ millions) Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 417 526 457 614 447 475 581 Cash Flow ($ millions) Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 637 803 686 930 722 527 906 Capital Expenditures(x) ($ millions) Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 269 327 410 709 404 492 592 (x) Excludes BlackRock purchase price SHELL CANADA LIMITED MANAGEMENT'S DISCUSSION AND ANALYSIS
Total Company
Shell Canada Limited earnings for the third quarter of 2006 were $581 million, up from $457 million for the corresponding quarter of 2005. Higher crude oil prices and refining light oil margins were offset by lower natural gas prices. The impact of the Company's Long Term Incentive Plan (LTIP) resulted in a $102 million increase to third-quarter 2006 earnings compared with an $83 million charge for the corresponding quarter in 2005. Prior year results included benefits totalling $41 million related to tax adjustments. Total hydrocarbon production for the quarter was 234,000 barrels of oil equivalent per day (BOE/d), level with production for the same quarter in 2005.
Earnings for the first nine months of 2006 were $1,503 million compared with $1,400 million for the corresponding period in 2005. The increase was mainly due to higher crude oil prices, refining light oil margins, a favourable adjustment resulting from changes to federal and Alberta corporate tax rates, and the LTIP. These were offset by reduced production and upgrading associated with the Athabasca Oil Sands Project (AOSP) turnaround.
Exploration & Production
Exploration & Production (E&P) earnings in the third quarter of 2006 were $113 million compared with earnings of $149 million reported for the same period in 2005. Earnings were down due to lower natural gas prices, partially offset by an LTIP uplift of $26 million and lower dry hole expenses. Previous year earnings included a $17 million favourable tax adjustment and a $12 million insurance settlement, offset by a charge of $24 million for the LTIP. Natural gas production grew as a result of increases in production from Tay River and basin-centred gas (BCG). 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.
E&P earnings for the first nine months of 2006 increased to $443 million from $404 million for the same period in 2005. This increase was due to higher natural gas volumes, the impact of the LTIP, and a favourable adjustment resulting from changes to the federal and Alberta corporate tax rates.
The BCG program continues to grow, achieving natural gas sales volumes of 23 million cubic feet per day (mmcf/d) for the quarter. Significant discovered volumes remain constrained by the lack of infrastructure. BCG is expected to deliver 100 mmcf/d by the end of 2007, with the previously announced gas plant expansion and requisite regulatory approvals. Drilling operations continue on the large land holdings, with six rigs currently deployed.
In northeast British Columbia, the Foothills business successfully completed two new wells, which will be tied into new facilities under construction at Wolverine River. However, limitations in the main gathering system and processing facility will restrict gas sales from this region in the near term.
Progress continued on the Sable Offshore Energy Project compression project, and planned outages were taken in the third quarter to facilitate tie-in of the new compression facilities. Startup of these facilities is expected late in the fourth quarter.
Offshore Newfoundland, the first deepwater exploration well in the Orphan Basin was spudded in the third quarter and completion is expected in the fourth quarter. Shell Canada has a 20 per cent interest in eight exploration licenses in the Orphan Basin.
Oil Sands
Oil Sands earnings in the third quarter of 2006 were $262 million, up from $235 million for the corresponding period of 2005. The improvement was mainly due to higher prices and an LTIP uplift of $22 million. Third-quarter earnings in 2005 included a charge of $14 million for the LTIP. The Company's share of AOSP bitumen production for the third quarter averaged 98,700 barrels per day (bbls/d) compared with 99,100 bbls/d for the same period in 2005.
Oil Sands earnings for the first nine months of 2006 were $493 million, compared with $592 million for the same period in 2005. The reduction in earnings is mainly due to the major scheduled turnaround of both the AOSP mine and upgrader in the second quarter. Effective January 1, 2006, earnings from the Peace River in situ operations are included in both current and prior period earnings.
Unit cash operating costs for the AOSP in the third quarter were $18.93 per barrel. This was $5.32 per barrel lower than the corresponding period last year. The improvement was mainly due to lower natural gas prices and a recovery related to LTIP. The Company realized an average synthetic crude price for the quarter of $68.37.
The Company will make a final investment decision for the AOSP Expansion 1 in the fourth quarter of 2006. Expansion 1 is a fully integrated expansion of the existing AOSP facilities, with both new oil sands mining operations on Lease 13 and associated additional bitumen upgrading at Scotford. As previously disclosed, Shell Canada received conditional approval from the Alberta Energy and Utilities Board for the proposed expansion of the Scotford Upgrader. A regulatory hearing was also completed in September for the expansion of the Muskeg River Mine and a decision is anticipated in the fourth quarter of 2006. On July 28, 2006, Shell Canada issued the formal expansion notice to the other AOSP joint venture owners, to which they have 90 days to respond.
In the third quarter, the Company decided to defer the upstream portion of the Production Optimization Project (POP), in light of the planned AOSP Expansion 1. A write-down of $15 million is included in earnings for the quarter. The timing and scope of the downstream components of POP, which are a mix of asset integrity and reliability projects at the upgrader, are currently being evaluated.
The Company decided to exercise its right to acquire a 20 per cent working interest in Chevron Canada's Ells River in situ leases, which are located about 50 kilometres northwest of Fort McMurray. This right to participate in the Ells River in situ leases results from the AOSP agreements.
In situ production for the third quarter was 15,300 bbls/d, of which approximately 6,600 bbls/d was due to new volumes from the assets acquired with the purchase of BlackRock Ventures Inc. (BlackRock). New thermal production from two additional well pads at Peace River came on stream in the third quarter of 2006 under budget and ahead of schedule.
The Company plans to file an application for its Carmon Creek project at Peace River later this year. In addition, construction work is progressing on the 10,000 bbls/d first phase of the Orion steam-assisted gravity drainage (SAGD) project at Hilda Lake, acquired in the BlackRock transaction. Building on the BlackRock experience, plans to further increase in situ cold production in the Peace River area are progressing, with the construction of two new cold production well pads and the filing of a regulatory application for a 100- well, cold production program. The Company has decided to divest the assets and properties in the Lloydminster area that were acquired with BlackRock.
Oil Products
Oil Products earnings in the third quarter of 2006 were $201 million, up from $81 million for the third quarter of 2005 due to improved refining margins and better refinery utilization, lower operating expenses and an LTIP uplift of $27 million. Stronger distillate, benzene and black oil margins were offset by weaker liquid petroleum gas margins. Refinery yield was lower in the third quarter of 2006 mainly due to some feedstock limitations at both the Scotford and Montreal East refineries as well as unplanned maintenance at the Sarnia Refinery. Refinery utilization improved as the third quarter 2005 was marked by a planned turnaround at the Scotford Refinery. Third-quarter 2005 earnings were also affected by high spot price purchases of gasoline to meet supply disruptions caused by Hurricanes Katrina and Rita, a charge of $25 million for the LTIP, and a favourable prior year tax adjustment of $25 million.
Oil Products earnings for the first nine months of 2006 were a record $560 million compared with $332 million in 2005. Improved refining light oil margins and an LTIP uplift offset reduced refinery yield.
The previously announced joint venture between Shell Canada's national cardlock network and Flying J's Canadian travel plazas is expected to contribute to increased network efficiency beginning in the fourth quarter. The company is now formed and working on an ambitious site development program, which will feature Shell fuels.
A major turnaround is scheduled to take place at the Sarnia Refinery between mid-October and mid-November.
Corporate
Corporate earnings for the third quarter of 2006 were $5 million compared with negative $8 million for the corresponding period in 2005. The change was due to an LTIP uplift of $27 million offset by higher debt charges, while the corresponding quarter in 2005 had an LTIP charge of $20 million. Corporate earnings for the first nine months of 2006 were $7 million compared with $72 million for the corresponding period in 2005. The change was mainly due to a favourable adjustment in 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.
Cash Flow and Financing
In the third quarter, cash flow from operations increased by $220 million to $906 million from $686 million for the same period last year. The increase is largely attributable to higher earnings and an increase in non-cash items. Cash flow from operations for the first nine months of 2006 was $2,155 million, an increase of $29 million from the same period in 2005.
Capital and predevelopment expenditures amounted to $592 million in the third quarter and $1,488 million for the first nine months of 2006, excluding the acquisition of BlackRock, compared with $410 million and $1,006 million respectively for 2005. The increase reflects an increased level of investment in growth projects including predevelopment work at the AOSP. Total capital and predevelopment expenditures for the year, excluding the BlackRock purchase price of $2.4 billion net of cash acquired, are expected to be in line with the announced investment plan of $2.7 billion for 2006.
Total debt outstanding at the end of the third quarter of 2006 was $1,459 million, which includes $954 million of commercial paper issued under the Company's $1.5 billion program, borrowings of $299 million against a $1 billion syndicated facility established in the second quarter of this year and $206 million for the mobile equipment lease. This compares 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 third quarter of 2006 were $0.11 per common share totalling $90 million. This same level of dividend was paid in the first and second quarters of 2006 and reflects a 22 per cent increase in the dividend paid in the third quarter of 2005.
Share Information
At October 15, 2006, the Company had 825,541,514 common shares outstanding (July 15, 2006 - 825,464,564 common shares and 100 preference shares) and there were 22,333,630 employee stock options outstanding, of which 11,256,400 were exercisable or could be surrendered to exercise an attached share appreciation right (July 15, 2006 - 22,557,058 outstanding and 11,474,136 exercisable).
Effective September 30, 2006, the previously outstanding 100 preference shares were redeemed by the Company for cash consideration in accordance with their terms.
------------------------------------------------------------------------- Stock Trading Information Third Quarter 2006 2005 ------------------------------------------------------------------------- Share Prices (dollars)(1) - High 42.50 41.62 - Low 29.51 33.30 - Close (end of period) 31.35 40.65 Shares traded (thousands)(1) 30,262 22,362 ------------------------------------------------------------------------- (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, future capital and other expenditures, drilling, development and expansion plans, construction activities, increased network efficiency, maintenance turnaround schedules, the submission of regulatory applications, the timing of investment decisions, 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, constraints on infrastructure, the uncertainties involving geology of oil and gas deposits, the uncertainty of reserves estimates, the receipt of regulatory approvals, 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)
Third Quarter Nine Months
2006 2005 2006 2005
-------------------------------------------------------------------------
Earnings 581 457 1 503 1 400
Revenues 4 028 3 956 11 225 10 351
Cash flow from operations(1) 906 686 2 155 2 126
Return on average common
shareholders' equity (%) - - 24.7 22.4
Per common share (dollars) (Note 6)
Earnings - basic 0.70 0.55 1.82 1.70
Earnings - diluted 0.70 0.55 1.80 1.68
Dividends paid 0.110 0.090 0.330 0.257
Results by Segment (Note 2)
Earnings
Exploration & Production 113 149 443 404
Oil Sands 262 235 493 592
Oil Products 201 81 560 332
Corporate 5 (8) 7 72
-------------------------------------------------------------------------
Total 581 457 1 503 1 400
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Revenues
Exploration & Production 487 642 1 669 1 740
Oil Sands 1 034 953 2 339 2 447
Oil Products 3 156 2 952 8 726 7 794
Corporate 4 30 74 61
Inter-segment sales (653) (621) (1 583) (1 691)
-------------------------------------------------------------------------
Total 4 028 3 956 11 225 10 351
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash flow from operations(1)
Exploration & Production 235 236 769 668
Oil Sands 341 421 600 1 051
Oil Products 315 50 748 315
Corporate 15 (21) 38 92
-------------------------------------------------------------------------
Total 906 686 2 155 2 126
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital and predevelopment
expenditures
Exploration & Production 183 134 558 477
Oil Sands 315 134 677 230
Oil Products 88 139 216 293
Corporate 6 3 37 6
-------------------------------------------------------------------------
Total 592 410 1 488 1 006
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Return on average capital
employed (%)(2)
Exploration & Production - - 33.9 27.8
Oil Sands - - 16.3 20.8
Oil Products - - 26.9 19.6
-------------------------------------------------------------------------
Total - - 22.7 21.6
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SHELL CANADA LIMITED
Operating Highlights
(unaudited)
Third Quarter Nine Months
2006 2005 2006 2005
-------------------------------------------------------------------------
EXPLORATION & PRODUCTION (Note 2)
Production
Natural gas (mmcf/d)
Western Canada natural gas 414 393 417 389
Sable natural gas 116 124 107 118
---------------------------------------
Total natural gas - gross 530 517 524 507
- net 429 412 423 408
Ethane, propane and butane
(bbls/d) - gross 18 700 21 900 20 200 23 200
- net 15 100 17 300 16 200 18 600
Condensate (bbls/d) - gross 12 700 15 400 13 100 15 100
- net 9 900 12 200 10 300 11 700
Sulphur (tons/d) - gross 5 100 5 300 5 300 5 200
- net 5 100 4 600 5 100 4 700
Sales(3) - gross
Natural gas (mmcf/d) 517 523 516 506
Ethane, propane and butane
(bbls/d) 27 500 34 500 33 600 37 100
Condensate (bbls/d) 18 000 10 900 20 800 18 100
Sulphur (tons/d) 10 400 11 300 11 400 11 500
-------------------------------------------------------------------------
OIL SANDS (Note 2)
Production
Bitumen (bbls/d) - gross
Minable 98 700 99 100 74 400 92 300
In situ 15 300 11 400 9 700 9 000
---------------------------------------
Total 114 000 110 500 84 100 101 300
Bitumen (bbls/d) - net
Minable 97 700 98 100 73 600 91 400
In situ 14 200 11 200 9 300 8 800
---------------------------------------
Total 111 900 109 300 82 900 100 200
Sales(3)
Synthetic crude sales
excluding blend stocks
(bbls/d) 98 500 101 100 76 700 95 000
Purchased upgrader blend
stocks (bbls/d) 39 300 34 300 34 100 35 100
---------------------------------------
Total synthetic crude sales
(bbls/d) 137 800 135 400 110 800 130 100
Bitumen product excluding
diluent (bbls/d) 15 800 13 100 9 900 9 700
Purchased diluent (bbls/d) 2 900 2 100 2 000 1 900
---------------------------------------
Total bitumen products
(bbls/d) 18 700 15 200 11 900 11 600
In situ condensate (bbls/d) 2 200 2 000 2 600 2 200
Unit Costs(4)
Mining and upgrading operations
Cash operating cost
- excluding natural gas ($/bbl) 14.61 17.79 25.82 17.23
- natural gas ($/bbl) 4.32 6.46 5.45 5.65
---------------------------------------
Total cash operating cost ($/bbl) 18.93 24.25 31.27 22.88
Depreciation, depletion and
amortization ($/bbl) 6.43 5.69 5.87 6.02
---------------------------------------
Total unit cost ($/bbl) 25.36 29.94 37.14 28.90
In situ operations
Cash operating cost
- excluding natural gas ($/bbl) 13.50 13.81 16.20 14.22
- natural gas ($/bbl) 5.09 6.47 8.10 10.91
---------------------------------------
Total cash operating cost ($/bbl) 18.59 20.28 24.30 25.13
Depreciation, depletion and
amortization ($/bbl) 5.31 4.82 8.03 4.63
---------------------------------------
Total unit cost ($/bbl) 23.90 25.10 32.33 29.76
-------------------------------------------------------------------------
OIL PRODUCTS
Sales(3)
Gasolines (m3/d) 21 100 21 500 20 800 21 100
Middle distillates (m3/d) 20 300 20 400 19 900 20 400
Other products (m3/d) 6 900 7 800 6 500 7 000
---------------------------------------
Total Oil Products sales (m3/d) 48 300 49 700 47 200 48 500
Crude oil processed by Shell
refineries (m3/d)(5) 47 100 45 100 44 700 46 100
Refinery utilization (per cent)(6) 90 87 87 89
Earnings per litre (cents)(7) 4.5 1.8 4.4 2.5
-------------------------------------------------------------------------
Prices
Natural gas average plant gate
netback price ($/mcf) 5.81 7.98 6.88 7.09
Ethane, propane and butane
average field gate price ($/bbl) 34.79 33.63 35.20 31.15
Condensate average field gate
price ($/bbl) 76.69 72.98 74.81 66.22
Synthetic crude average plant
gate price ($/bbl) 68.37 66.37 63.98 57.77
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Ethane, Propane Synthetic
Natural Gas Avg. and Butane Condensate Crude
Price (Plant Avg. Price Avg. Price Avg. Price
Gate Netback) (Field Gate) (Field Gate) (Plant Gate)
($/mcf) ($/bbl) ($/bbl) ($/bbl)
-------------------------------------------------------------------------
Q3 05 7.98 33.63 72.98 66.37
-------------------------------------------------------------------------
Q4 05 11.53 44.41 68.30 56.99
-------------------------------------------------------------------------
Q1 06 8.29 38.04 72.30 57.04
-------------------------------------------------------------------------
Q2 06 6.53 31.84 76.78 67.72
-------------------------------------------------------------------------
Q3 06 5.81 34.79 76.69 68.37
-------------------------------------------------------------------------
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.
(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 $531 million in
the first nine months of 2006 and $134 million in the third quarter
of 2006. Cash cost items included in COGS were $123 million in the
first nine months of 2006 and $39 million in the third quarter of
2006.
Unit cash operating cost for in situ operations is defined as:
operating, selling and general expenses plus inter-segment purchases
of natural gas, divided by bitumen product sales excluding diluent.
Operating, selling and general expenses associated with in situ
operations were $42 million in the first nine months of 2006 and
$18 million in the third quarter of 2006. Inter-segment purchases of
natural gas were $22 million in the first nine months of 2006 and
$7 million in the third quarter of 2006.
Unit DD&A cost for Oil Sands mining and upgrading is defined as:
DD&A cost divided by synthetic crude sales excluding blend stocks.
Unit DD&A cost includes preproduction costs, which were written off
over the first three years of the project life (2003-2005).
Unit DD&A cost for in situ operations is defined as: DD&A cost
divided by bitumen product sales excluding diluent.
(5) Crude oil processed by Shell refineries includes upgrader feedstock
supplied to Scotford Refinery.
(6) Refinery utilization equals crude oil processed by Shell refineries
divided by total capacity of Shell refineries, including capacity
uplifts at Scotford Refinery due to processing of various streams
from the upgrader.
(7) Oil Products earnings per litre equals Oil Products earnings after-
tax divided by total Oil Products sales volumes.
SHELL CANADA LIMITED
Consolidated Statement of Earnings and Retained Earnings
($ millions, except as noted)
(unaudited)
Third Quarter Nine Months
2006 2005 2006 2005
-------------------------------------------------------------------------
Revenues
Sales and other operating revenues 4 012 3 925 11 145 10 146
Dividends, interest and
other income 16 31 80 205
-------------------------------------------------------------------------
Total revenues 4 028 3 956 11 225 10 351
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Expenses
Cost of goods sold 2 371 2 269 6 657 5 703
Operating, selling and general 424 694 1 634 1 756
Transportation 72 82 221 247
Exploration 25 42 86 98
Predevelopment 40 17 100 49
Depreciation, depletion,
amortization and retirements 230 203 590 566
Interest on long-term debt 3 2 7 6
Other interest and financing
charges 13 1 17 3
-------------------------------------------------------------------------
Total expenses 3 178 3 310 9 312 8 428
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings
Earnings before income tax 850 646 1 913 1 923
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Current income tax 175 190 430 441
Future income tax 94 (1) (20) 82
-------------------------------------------------------------------------
Total income tax 269 189 410 523
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings 581 457 1 503 1 400
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Per common share (dollars) (Note 6)
Earnings - basic 0.70 0.55 1.82 1.70
Earnings - diluted 0.70 0.55 1.80 1.68
Common shares outstanding
(millions - weighted average) 826 825 825 825
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Retained Earnings
Balance at beginning of period 8 430 6 784 7 690 6 011
Earnings 581 457 1 503 1 400
-------------------------------------------------------------------------
9 011 7 241 9 193 7 411
Common shares buy-back - - - 33
Dividends 90 74 272 211
-------------------------------------------------------------------------
Balance at end of period 8 921 7 167 8 921 7 167
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SHELL CANADA LIMITED
Consolidated Statement of Cash Flows
($ millions)
(unaudited)
Third Quarter Nine Months
2006 2005 2006 2005
-------------------------------------------------------------------------
Cash from Operating Activities
Earnings 581 457 1 503 1 400
Exploration and predevelopment - 29 80 80
Non-cash items
Depreciation, depletion,
amortization and retirements 230 203 590 566
Future income tax 94 (1) (20) 82
Other items 1 (2) 2 (2)
-------------------------------------------------------------------------
Cash flow from operations 906 686 2 155 2 126
Movement in working capital
and operating activities
Accounts receivable
securitization program - (150) - (150)
Other working capital and
operating items (219) 95 (444) (260)
-------------------------------------------------------------------------
687 631 1 711 1 716
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash Invested
Capital and predevelopment
expenditures (592) (410) (1 488) (1 006)
Acquisition of BlackRock
Ventures Inc. (Note 3) - - (2 428) -
Movement in working capital from
investing activities 62 40 162 16
-------------------------------------------------------------------------
Capital expenditures and movement
in working capital (530) (370) (3 754) (990)
Proceeds on disposal of properties,
plant and equipment 1 - 1 5
Investments and other (26) - (26) -
-------------------------------------------------------------------------
(555) (370) (3 779) (985)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash from Financing Activities
Common shares buy-back - - - (34)
Proceeds from exercise of common
share stock options 1 2 5 6
Preferred stock redemption (Note 8) (1) - (1) -
Dividends paid (90) (74) (272) (211)
Long-term debt and other - (1) - (135)
Short-term financing (42) - 1 253 -
-------------------------------------------------------------------------
(132) (73) 985 (374)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(Decrease) Increase in cash - 188 (1 083) 357
Cash at beginning of period - 296 1 083 127
-------------------------------------------------------------------------
Cash at September 30 (1) - 484 - 484
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental disclosure of
cash flow information
Dividends received 2 3 9 10
Interest received 3 4 53 34
Interest paid 18 3 26 10
Income tax paid 138 124 601 560
(1) Cash comprises cash and highly liquid short-term investments.
SHELL CANADA LIMITED
Consolidated Balance Sheet
($ millions)
(unaudited)
Sep. 30, Dec. 31,
2006 2005
-------------------------------------------------------------------------
Assets
Current assets
Cash and short-term investments - 1 083
Accounts receivable 1 718 1 821
Inventories
Crude oil, products and merchandise 696 535
Materials and supplies 100 92
Prepaid expenses 104 71
Future income tax 270 316
-------------------------------------------------------------------------
2 888 3 918
Investments, long-term receivables and other 726 671
Properties, plant and equipment 13 031 9 066
Goodwill (Notes 3 and 4) 234 -
-------------------------------------------------------------------------
Total assets 16 879 13 655
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities
Current liabilities
Short-term borrowings (Note 5) 1 253 -
Accounts payable, accrued liabilities and other 2 276 2 242
Income and other taxes payable 546 687
Current portion of asset retirement and
other long-term obligations 26 26
Current portion of long-term debt 5 11
-------------------------------------------------------------------------
4 106 2 966
Asset retirement and other long-term obligations 600 545
Long-term debt 201 200
Future income tax 2 523 1 730
-------------------------------------------------------------------------
Total liabilities 7 430 5 441
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Shareholders' Equity
Capital stock
100 4% preference shares (Note 8) - 1
825 541 514 common shares (2005 - 825 102 612) 528 523
Retained earnings 8 921 7 690
-------------------------------------------------------------------------
Total shareholders' equity 9 449 8 214
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total liabilities and shareholders' equity 16 879 13 655
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SHELL CANADA LIMITED
Segmented Information
($ millions)
(unaudited)
Third Quarter
Exploration
Total & Production Oil Sands
2006 2005 2006 2005 2006 2005
-------------------------------------------------------------------------
(Note 2) (Note 2)
Revenues
Sales and other operating
revenues 4 012 3 925 447 535 557 520
Inter-segment sales - - 38 85 471 433
Dividends, interest
and other income 16 31 2 22 6 -
-------------------------------------------------------------------------
Total revenues 4 028 3 956 487 642 1 034 953
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Expenses
Cost of goods sold 2 371 2 269 - - 283 216
Inter-segment purchases - - 57 63 128 118
Operating, selling
and general 424 694 64 135 152 194
Transportation 72 82 72 82 - -
Exploration 25 42 25 42 - -
Predevelopment 40 17 10 9 25 8
Depreciation, depletion,
amortization and
retirements 230 203 94 90 66 59
Interest on long-term debt 3 2 - - - -
Other interest and
financing charges 13 1 - - - -
-------------------------------------------------------------------------
Total expenses 3 178 3 310 322 421 654 595
-------------------------------------------------------------------------
Earnings (loss)
Earnings (loss) before
income tax 850 646 165 221 380 358
-------------------------------------------------------------------------
Current income tax 175 190 28 97 104 2
Future income tax 94 (1) 24 (25) 14 121
-------------------------------------------------------------------------
Total income tax 269 189 52 72 118 123
-------------------------------------------------------------------------
Earnings (loss) 581 457 113 149 262 235
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Third Quarter
Oil Products Corporate
2006 2005 2006 2005
---------------------------------------------------------
Revenues
Sales and other operating
revenues 3 007 2 844 1 26
Inter-segment sales 144 103 - -
Dividends, interest
and other income 5 5 3 4
---------------------------------------------------------
Total revenues 3 156 2 952 4 30
---------------------------------------------------------
---------------------------------------------------------
Expenses
Cost of goods sold 2 086 2 060 2 (7)
Inter-segment purchases 468 440 - -
Operating, selling
and general 229 318 (21) 47
Transportation - - - -
Exploration - - - -
Predevelopment 5 - - -
Depreciation, depletion,
amortization and
retirements 70 54 - -
Interest on long-term debt - - 3 2
Other interest and
financing charges - - 13 1
---------------------------------------------------------
Total expenses 2 858 2 872 (3) 43
---------------------------------------------------------
Earnings (loss)
Earnings (loss) before
income tax 298 80 7 (13)
---------------------------------------------------------
Current income tax 52 82 (9) 9
Future income tax 45 (83) 11 (14)
---------------------------------------------------------
Total income tax 97 (1) 2 (5)
---------------------------------------------------------
Earnings (loss) 201 81 5 (8)
---------------------------------------------------------
---------------------------------------------------------
Nine Months
Exploration
Total & Production Oil Sands
2006 2005 2006 2005 2006 2005
-------------------------------------------------------------------------
(Note 2) (Note 2)
Revenues
Sales and other operating
revenues 11 145 10 146 1 518 1 513 1 237 1 118
Inter-segment sales - - 146 202 1 096 1 197
Dividends, interest and
other income 80 205 5 25 6 132
-------------------------------------------------------------------------
Total revenues 11 225 10 351 1 669 1 740 2 339 2 447
-------------------------------------------------------------------------
Expenses
Cost of goods sold 6 657 5 703 - - 757 547
Inter-segment purchases - - 175 179 297 300
Operating, selling
and general 1 634 1 756 281 335 573 499
Transportation 221 247 221 247 - -
Exploration 86 98 86 98 - -
Predevelopment 100 49 29 30 60 19
Depreciation, depletion,
amortization and
retirements 590 566 271 255 145 169
Interest on long-term debt 7 6 - - - -
Other interest and
financing charges 17 3 - - - -
-------------------------------------------------------------------------
Total expenses 9 312 8 428 1 063 1 144 1 832 1 534
-------------------------------------------------------------------------
Earnings (loss)
Earnings (loss) before
income tax 1 913 1 923 606 596 507 913
-------------------------------------------------------------------------
Current income tax 430 441 158 248 83 45
Future income tax (20) 82 5 (56) (69) 276
-------------------------------------------------------------------------
Total income tax 410 523 163 192 14 321
-------------------------------------------------------------------------
Earnings 1 503 1 400 443 404 493 592
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total assets 16 879 12 610 3 366 2 971 8 296 4 169
Capital employed(1) 10 908 7 908 2 251 1 912 5 676 2 744
Oil Products Corporate
2006 2005 2006 2005
---------------------------------------------------------
Revenues
Sales and other operating
revenues 8 368 7 486 22 29
Inter-segment sales 341 292 - -
Dividends, interest and
other income 17 16 52 32
---------------------------------------------------------
Total revenues 8 726 7 794 74 61
---------------------------------------------------------
Expenses
Cost of goods sold 5 893 5 151 7 5
Inter-segment purchases 1 111 1 212 - -
Operating, selling
and general 768 829 12 93
Transportation - - - -
Exploration - - - -
Predevelopment 11 - - -
Depreciation, depletion,
amortization and
retirements 171 141 3 1
Interest on long-term debt - - 7 6
Other interest and
financing charges - - 17 3
---------------------------------------------------------
Total expenses 7 954 7 333 46 108
---------------------------------------------------------
Earnings (loss)
Earnings (loss) before
income tax 772 461 28 (47)
---------------------------------------------------------
Current income tax 196 285 (7) (137)
Future income tax 16 (156) 28 18
---------------------------------------------------------
Total income tax 212 129 21 (119)
---------------------------------------------------------
Earnings 560 332 7 72
---------------------------------------------------------
---------------------------------------------------------
Total assets 4 914 4 627 303 843
Capital employed(1) 2 657 2 299 324 953
(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 4.
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. 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 again to July 10, 2006,
and additional common shares were acquired. The Corporation completed its
acquisition of BlackRock and acquired all of the remaining common shares
by way of compulsory acquisition on July 11, 2006. BlackRock was engaged
in the development and production of heavy oil in Western Canada.
The Corporation'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 $108 million. Of
the consideration paid, $3,092 million was allocated to oil and natural
gas properties and $234 million was allocated to goodwill.
The acquisition was accounted for based on the purchase method and the
allocation was supported by a third-party valuation. A summary of the
purchase equation is presented as follows:
Net assets acquired ($ millions)
Oil and natural gas properties 3 092
Goodwill(1) 234
Working capital(2) 108
Other assets 1
Asset retirement obligations (11)
Future income tax liability (854)
---------
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.
4. 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.
5. 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 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 September 30, 2006, the outstanding balance on the revolving
credit facility was $299 million in the form of short-term borrowings
that had an effective interest rate of 4.43 per cent. At September 30,
2006, the outstanding balance on the commercial paper program was
$954 million at an effective interest rate of 4.40 per cent.
6. Earnings Per Share
Third Quarter Nine Months
2006 2005 2006 2005
-------------------------------------------------------------------------
Earnings ($ millions) 581 457 1 503 1 400
Weighted average number of
common shares (millions) 826 825 825 825
Dilutive securities (millions)
Options under Long Term
Incentive Plan 8 11 9 9
Basic earnings per share
($ per share) 0.70 0.55 1.82 1.70
Diluted earnings per share
($ per share) 0.70 0.55 1.80 1.68
7. 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:
Third Quarter
Pension Benefits Other Benefits
($ millions) 2006 2005 2006 2005
-------------------------------------------------------------------------
Current service cost 12 9 1 1
Employee contributions (1) (1) - -
Interest cost 32 32 3 2
Expected return on plan assets (37) (34) - -
Amortization of transitional
(asset) obligation (9) (9) - -
Amortization of net actuarial loss 22 18 1 -
-------------------------------------------------------------------------
Net expense 19 15 5 3
Defined contribution segment 7 4 - -
-------------------------------------------------------------------------
Total 26 19 5 3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nine Months
Pension Benefits Other Benefits
($ millions) 2006 2005 2006 2005
-------------------------------------------------------------------------
Current service cost 34 27 2 2
Employee contributions (3) (3) - -
Interest cost 96 96 8 7
Expected return on plan assets (110) (102) - -
Amortization of transitional
(asset) obligation (27) (27) 1 1
Amortization of net actuarial loss 66 54 3 -
-------------------------------------------------------------------------
Net expense 56 45 14 10
Defined contribution segment 20 10 - -
-------------------------------------------------------------------------
Total 76 55 14 10
-------------------------------------------------------------------------
-------------------------------------------------------------------------
8. Preferred Stock Redemption
Effective September 30, 2006, the Corporation redeemed the previously
outstanding 100 preference shares for cash consideration in accordance
with their terms.
For further information
Investor Inquiries: Ken Lawrence, Investor Relations, (403) 691-2175
Media Inquiries: Jan Rowley, Public Affairs, (403) 691-3899
Visit Shell Canada's Internet website: www.shell.ca
Source: Shell Canada Limited
