Third Quarter 2005
CALGARY, Oct. 25 /CNW/ - Shell Canada Limited announces quarterly
earnings of $457 million or $0.55 per common share for the third quarter of
2005, up $6 million from $451 million or $0.55 per common share for the
corresponding period in 2004. Earnings for the first nine months of 2005 were
$1,400 million compared with $1,104 million for the same period in 2004.
Cash flow from operations reached $686 million for the quarter and a
record $2,126 million for the first nine months of 2005, up $37 million and
$434 million respectively from the same periods in 2004.
Capital, including capitalized exploration and pre-development
expenditure, was $410 million for the third quarter and $1,006 million for the
first nine months of 2005 compared with $294 million and $626 million for the
same periods in 2004.
"Both the Exploration & Production (E&P) and Oil Sands businesses
delivered higher operational earnings in the third quarter," said Clive
Mather, President and Chief Executive Officer, Shell Canada Limited. "In E&P,
results from the basin centered gas drilling program have been encouraging and
we will continue to invest in this significant growth area. Oil Sands achieved
its second straight quarter of production above the design rate and added to
its land base in the Athabasca region. And, in spite of maintenance activities
at two of its refineries, Oil Products performed well in what has been a
challenging environment."
<<
Earnings ($ millions)
Q3 04 Q4 04 Q1 05 Q2 05 Q3 05
451 182 417 526 427
Cash Flow ($ millions)
Q3 04 Q4 04 Q1 05 Q2 05 Q3 05
649 588 637 803 686
Capital Expenditures ($ millions)
Q3 04 Q4 04 Q1 05 Q2 05 Q3 05
294 325 269 327 410
SHELL CANADA LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS
Total Company Earnings
Shell Canada Limited earnings for the third quarter of 2005 were
$457 million, up $6 million from $451 million for the same period in 2004.
Continuing strong commodity prices and refining margins contributed to the
results. The impact of the Company's Long Term Incentive Plan (LTIP) resulted
in an $83 million charge to earnings due to strong appreciation in the share
price during the quarter. Third-quarter results included favourable after-tax
benefits related to prior year tax adjustments of $41 million in 2005 and
$55 million in 2004.
Earnings for the first nine months of 2005 were $1,400 million compared
with $1,104 million for the corresponding period in 2004 as stronger commodity
prices and refining margins compensated for higher costs. After-tax LTIP
charges of $146 million for the first nine months of 2005 were more than
offset by the use of non-capital losses available to the Company in 2005 and
by additional proceeds from insurance settlements to those in 2004.
Exploration & Production
Exploration & Production earnings in the third quarter of 2005 were
$157 million compared with earnings of $129 million reported for the same
period in 2004. The gains from strong commodity prices were partially offset
by lower volumes. Expenses in the quarter included an after-tax charge of
$24 million related to the LTIP. Exploration expenses were in line with
expenditures incurred in the same quarter of 2004, while pre-development costs
increased by $7 million after-tax. In the quarter, a favourable tax adjustment
of $17 million and a favourable insurance settlement of $12 million after-tax
were recorded.
Exploration & Production earnings for the first nine months of 2005 were
$402 million compared with $376 million for the same period in 2004, due to
strong commodity prices offset by lower volumes and increased costs. Results
in 2005 reflect favourable tax adjustments of $39 million and an insurance
settlement of $12 million, offset by an after-tax charge of $42 million
related to the LTIP.
The Sable Offshore Energy Project natural gas volumes were higher in the
third quarter of 2005 compared with the third quarter of 2004 and the second
quarter of 2005 due to increased production from the South Venture field.
Natural gas production volumes in Western Canada were lower in the third
quarter of 2005 than in the same period of 2004 due to normal field decline
and operational issues. The Tay River well, which started production in the
second quarter of 2005, was re-tubed during September and came back on stream
October 18, 2005. The increased tubing size is expected to increase well
production to more than 50 million cubic feet per day from 30 million cubic
feet per day. While the Company expects Western Canada production to increase
in the fourth quarter, a scheduled outage at the Jumping Pound facility will
partly offset the improvement. This will include the installation of an
additional unit to increase sulphur recovery rates.
Peace River volumes for the third quarter of 2005 increased from the
prior quarter and were in line with production levels for the same period of
2004. Drilling of two additional well pads began in the third quarter and the
resulting new production is expected to come on stream in late 2006.
The proponents of the Mackenzie Gas Project (MGP) have been working
diligently to resolve certain areas critical to the project in advance of the
public hearings phase of the proposed project. Progress has been made in all
key areas, with some having been largely resolved. However benefits and access
agreements have not been concluded and the fiscal framework for the project
has not been agreed with governments. The regulators will be advised in
November 2005 of the MGP's decision on whether or not to proceed with a public
hearing.
Exploration drilling has yielded encouraging results for the Company's
basin centered gas (BCG) program and a multi-rig program is planned for the
upcoming winter drilling season. Pending access to third-party processing
facilities, initial production from existing wells is expected in the fourth
quarter of 2005. Infrastructure options are being evaluated for additional BCG
production over the longer-term, including a possible new gas plant. The
Company is currently working through the public and industry consultation
process.
Oil Sands
Oil Sands achieved earnings of $227 million in the third quarter of 2005
compared with $173 million for the corresponding period in 2004. The increase
was mainly due to higher prices and volumes, offset in part by increased unit
costs. Earnings in the third quarter of 2005 include an after-tax charge of
$14 million related to the Company's LTIP. Third-quarter 2004 earnings
included a $21 million contribution from a prior year tax adjustment. After
adjusting for an $82 million insurance settlement in the second quarter,
earnings in the third quarter of 2005 were up 25 per cent from the prior
quarter. This was the result of higher prices and volumes offsetting increased
costs.
Oil Sands earnings for the first nine months of 2005 were $594 million,
up significantly from $365 million for the same period in 2004 as higher
prices and volumes more than offset increased costs. Higher proceeds from
insurance settlements in 2005 also contributed to the earnings increase.
In the third quarter of 2005, underlying commodity prices and the average
synthetic crude oil price were significantly stronger than in the prior
quarter and the same period last year. Heavy oil market differentials narrowed
somewhat during the third quarter but remained much wider than those
experienced in the third quarter of 2004. The average synthetic crude oil
price differential relative to Edmonton light crude improved by about $1.35
per barrel from the second quarter of 2005 but was almost $3.00 per barrel
wider than in the third quarter of last year.
The Company's share of bitumen production in the third quarter of 2005
averaged 99,100 barrels per day (bbls/d) compared with 92,500 bbls/d for the
same period of 2004. Total bitumen production in the third quarter of 2005
averaged 165,100 bbls/d, a new quarterly production record even with the
planned maintenance work undertaken and completed during September. Bitumen
production was often well above the design rate during the quarter, at times
prompting the blending and sale of additional heavy product at the upgrader.
Total bitumen production for the first nine months of 2005 averaged 153,800
bbls/d, approaching the calendar day design rate of 155,000 bbls/d.
Unit cash operating costs in the third quarter of 2005 were $24.25 per
barrel. This was up $3.79 per barrel from the preceding quarter and up $5.47
per barrel versus the corresponding period last year due mainly to LTIP
charges, planned maintenance costs and increased energy costs. Higher natural
gas and LTIP costs accounted for more than 75 per cent of the year-over-year
increase. Improvements in unit cash operating costs related to higher
reliability and production are being offset by increased costs for energy,
materials and services in the current high commodity price environment. With
West Texas Intermediate crude oil prices in a range of $40 to $60 per barrel,
unit cash operating costs (excluding LTIP and major maintenance costs) are
targeted to range from $16 to $20 per barrel.
During the third quarter, the Company's investment in Oil Sands continued
with the acquisition of additional oil sands leases with mining potential in
the Athabasca area. Four leases were acquired through Alberta Crown land sales
with a combined area of 18,560 hectares for a total value of $72 million. This
included Leases 351 and 352 acquired at the August 24th land sale and Leases
631 and 632 at the September 21st sale.
Oil Products
Oil Products earnings for the third quarter were $81 million compared
with $114 million for the same period in 2004. This decrease was primarily
related to maintenance activities at the Montreal East and Scotford
refineries. An after-tax LTIP charge of $25 million in the third quarter was
offset by a prior year tax adjustment of $25 million. Third-quarter 2004
earnings included a favourable prior year tax adjustment of $11 million and
after-tax provision for the loyalty program of $23 million.
A previously announced planned turnaround at the Scotford Refinery near
Edmonton was completed at the end of September and the refinery resumed
operations in the first week of October. At the Montreal East Refinery,
unplanned maintenance work on a compressor in a hydro-cracker unit resulted in
reduced throughputs and higher black oil yields. Work on this compressor is
expected to be completed by late October.
The quarter was marked by supply disruptions and unprecedented volatility
in fuel prices in North America following hurricanes Katrina and Rita.
Nevertheless the Company was able to ensure a reliable supply to customers at
competitive prices. Market factors also compounded the impact of maintenance
activities during the third quarter. While light oil refining margins remained
strong, black oil and benzene margins were below those realized earlier in the
year. It was also necessary to purchase additional supplies of gasoline at
high spot prices to meet customer needs and marketing margins continued to be
severely compressed for most of the third quarter. As a result, the Company
was unable to take full advantage of the strong market for light oils.
Operating expenses rose in the third quarter of 2005 compared with the
same period in 2004. The increase was due to higher costs associated with the
maintenance and turnaround activities at the refineries, increased costs
associated with price sensitive items and LTIP charges.
Oil Products earnings for the first nine months of 2005 were $332 million
compared with $342 million for the same period in 2004. Improved refinery
yield and margins, sales volumes and larger favourable tax adjustments were
partially offset by higher costs. Operating expenses rose over the same period
last year mainly due to the LTIP charges of $45 million, higher advertising
expenses for the launch of Shell V-Power(TM) gasoline, and higher refinery
turnaround and maintenance costs. The launch of Shell V-Power(TM) gasoline in
June of 2005 continues to have a positive impact on the retail business with
increased sales of premium gasoline in the third quarter of 2005 compared with
the previous 12-month trend.
(TM) Trademark of Shell Canada Limited. Used under licence by Shell
Canada Products.
Corporate
Corporate earnings for the third quarter of 2005 were negative $8 million
compared with earnings of $35 million for the corresponding period in 2004.
Third-quarter earnings included a $20 million after-tax charge related to the
LTIP. The corresponding quarter in 2004 included a $23 million benefit from a
prior year tax adjustment.
Corporate earnings for the first nine months of 2005 were $72 million
compared with earnings of $21 million for the same period in 2004. In 2005,
results were improved by $99 million after-tax due to the use of non-capital
losses and negatively impacted by $35 million due to the after-tax LTIP
charge. In 2004, the prior year tax assessments increased the nine-month
corporate earnings.
Cash Flow and Financing
In the third quarter of 2005 and for the comparative periods, the Company
has reflected certain exploration expenses as a reduction of cash flow from
operations. These expenses were previously reflected as investing activities
in the consolidated statement of cash flow. The impact for the nine-month
period of 2005 is a reduction of cash flow from operations of $67 million
(2004 - $54 million) and, in the third quarter of 2005, a reduction of cash
flow from operations of $30 million (2004 - $18 million).
Cash flow from operations was $686 million for the third quarter of 2005
and a record $2,126 million for the first nine months of 2005. This represents
an increase of $37 million over the same quarter last year, and $434 million
higher than for the corresponding nine-month period in 2004. This increase is
largely attributable to higher commodity prices.
During the third quarter, the remaining $150 million balance under the
accounts receivable securitization program was reduced to zero and the Company
elected to terminate the program. Significant cash generation also allowed for
the reduction of $284 million in medium-term debt as well as accounts
receivable securitization in the first nine months of 2005. Corporate debt at
the end of the third quarter is now limited to the $217 million for the mobile
equipment lease.
Capital, exploration and pre-development expenditures for the third
quarter were $410 million and $1,006 million for the first nine months of
2005. This compares with $294 million and $626 million for the same periods in
2004 respectively. The main drivers for this increase were expenditures on the
ultra-low-sulphur diesel projects and higher exploration expenditures related
to the BCG program. Total capital expenditures for the year are expected to be
approximately ten per cent below the original capital expenditure plan of
$1.8 billion for 2005. Plans to capitalize a lease arrangement for large
mobile equipment at the Muskeg River mine were not implemented, accounting for
the majority of this change.
Dividends paid in the third quarter were $0.09 per common share totalling
$74 million. This reflected an eight per cent increase over the dividend per
share paid in the second quarter. In the first nine months of 2005, the
Company paid $211 million in dividends on its common shares.
The third-quarter-end cash balance of $484 million has been invested in
short-term money market investments.
Outstanding Shares
At October 15, 2005, the Company had 825,074,112 common shares and 100
preference shares outstanding (July 15, 2005 - 824,992,312 common shares and
100 preference shares) and there were 21,544,416 employee stock options
outstanding, of which 10,163,103 were exercisable or could be surrendered to
exercise an attached share appreciation right (July 15, 2005 - 22,340,611
outstanding and 10,939,801 exercisable).
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.
This document contains "forward-looking statements" based upon current
expectations, estimates and projections of future production, project startup
and future capital spending. Forward-looking statements include, but are not
limited to, references to future capital and other expenditures, drilling
plans, construction activities, the submission of regulatory applications,
refining margins, oil and gas production levels, resources and reserves
estimates.
Readers are cautioned not to place undue reliance on forward-looking
statements. Forward-looking statements involve numerous 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), demand for oil, gas and related products, disruptions
in supply, project schedules, 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,
commercial negotiations, changes in law or government policy, and other
factors, many of which are beyond the control of the Company.
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.
SHELL CANADA LIMITED
Financial Highlights
($ millions, except as noted)
(unaudited)
Third Quarter Nine Months
2005 2004 2005 2004
-------------------------------------------------------------------------
Earnings 457 451 1 400 1 104
Revenues 3 956 3 058 10 351 8 212
Cash flow from operations(1)
(Note 3) 686 649 2 126 1 692
Return on average common
shareholders' equity (%) - - 22.4 21.8
Per common share (dollars)
(Note 4)
Earnings - basic (Note 5) 0.55 0.55 1.70 1.34
Earnings - diluted (Note 5) 0.55 0.54 1.68 1.33
Dividends paid 0.090 0.083 0.257 0.230
Results by Segment
Earnings
Exploration & Production 157 129 402 376
Oil Sands 227 173 594 365
Oil Products 81 114 332 342
Corporate (8) 35 72 21
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Total 457 451 1 400 1 104
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Revenues
Exploration & Production 670 559 1 777 1 616
Oil Sands 873 625 2 293 1 627
Oil Products 2 952 2 308 7 794 6 155
Corporate 30 32 61 51
Inter-segment sales (569) (466) (1 574) (1 237)
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Total 3 956 3 058 10 351 8 212
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Cash flow from operations(1)
(Note 3)
Exploration & Production 255 221 689 654
Oil Sands 402 262 1 030 614
Oil Products 50 127 315 399
Corporate (21) 39 92 25
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Total 686 649 2 126 1 692
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Capital, exploration and
predevelopment expenditures
(Note 3)
Exploration & Production 155 125 524 323
Oil Sands 113 87 183 141
Oil Products 139 79 293 155
Corporate 3 3 6 7
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Total 410 294 1 006 626
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Return on average capital
employed (%)(2)
Exploration & Production - - 25.6 28.4
Oil Sands - - 22.0 12.6
Oil Products - - 19.6 18.4
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Total - - 21.6 19.3
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SHELL CANADA LIMITED
Operating Highlights
(unaudited)
Third Quarter Nine Months
2005 2004 2005 2004
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EXPLORATION & PRODUCTION
Production
Natural gas (mmcf/d)
Western Canada natural gas 393 416 389 415
Sable natural gas 124 118 118 129
-------------------------------------------
Total natural gas - gross 517 534 507 544
- net 412 447 408 450
Ethane, propane and butane
(bbls/d) - gross 21 900 26 500 23 200 24 900
- net 17 300 20 800 18 600 19 800
Condensate (bbls/d) - gross 15 400 15 400 15 100 15 200
- net 12 200 11 800 11 700 11 800
Bitumen (bbls/d) - gross 11 400 11 300 9 000 8 600
- net 11 200 11 200 8 800 8 500
Sulphur (tons/d) - gross 5 300 5 600 5 200 5 600
- net 4 600 5 400 4 700 4 900
Sales(3) - gross
Natural gas (mmcf/d) 523 536 506 541
Ethane, propane and butane
(bbls/d) 34 500 46 700 37 100 43 800
Condensate (bbls/d) 13 600 18 400 18 700 19 100
Bitumen products (bbls/d) 15 200 14 900 11 600 12 100
Sulphur (tons/d) 11 300 10 200 11 500 10 800
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OIL SANDS
Production
Bitumen (bbls/d) - gross 99 100 92 500 92 300 86 400
- net 98 100 91 600 91 400 85 600
Sales(3)
Synthetic crude sales
excluding blend stocks
(bbls/d) 101 100 93 500 95 000 88 500
Purchased upgrader blend
stocks (bbls/d) 34 300 38 900 35 100 38 400
-------------------------------------------
Total synthetic crude sales
(bbls/d) 135 400 132 400 130 100 126 900
Unit Costs(4)
Cash operating cost -
excluding natural gas
($/bbl) 17.79 14.16 17.23 15.28
Cash operating cost -
natural gas ($/bbl) 6.46 4.62 5.65 5.37
-------------------------------------------
Total cash operating cost
($/bbl) 24.25 18.78 22.88 20.65
Depreciation, depletion
and amortization ($/bbl) 5.69 4.92 6.02 5.03
-------------------------------------------
Total unit cost ($/bbl) 29.94 23.70 28.90 25.68
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OIL PRODUCTS
Sales(3)
Gasolines (m3/d) 21 500 21 800 21 100 20 700
Middle distillates (m3/d) 20 400 19 200 20 400 18 800
Other products (m3/d) 7 800 8 600 7 000 7 100
-------------------------------------------
Total Oil Products sales
(m3/d) 49 700 49 600 48 500 46 600
Crude oil processed by Shell
refineries (m3/d)(5) 45 100 48 400 46 100 44 500
Refinery utilization
(per cent)(6) 87 93 89 88
Earnings per litre (cents)(7) 1.8 2.5 2.5 2.7
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Prices
Natural gas average plant gate
netback price ($/mcf) 7.98 6.24 7.09 6.41
Ethane, propane and butane
average field gate price
($/bbl) 33.63 28.70 31.15 27.45
Condensate average field
gate price ($/bbl) 72.98 51.94 66.22 48.62
Synthetic crude average plant
gate price ($/bbl) 66.37 48.95 57.77 44.71
-------------------------------------------------------------------------
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Ethane, Propane
Natural Gas Avg. and Butane Condensate Synthetic Crude
Price (Plant Avg. Price Avg. Price Avg. Price
Gate Netback) (Field Gate) (Field Gate) (Plant Gate)
($/mcf) ($/bbl) ($/bbl) ($/bbl)
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Q3 04 6.24 28.70 51.94 48.95
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Q4 04 6.72 32.24 55.70 44.53
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Q1 05 6.36 30.26 63.45 51.46
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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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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, including unit cash operating and unit depreciation,
depletion and amortization (DD&A) costs, for Oil Sands is a non-GAAP
measure. Unit cash operating cost for Oil Sands 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. Cash cost items included in COGS are
$132 million in the first nine months of 2005 and $48 million in the
third quarter of 2005.
Unit DD&A cost for Oil Sands is defined as: DD&A cost divided by
synthetic crude sales excluding blend stocks. Unit DD&A cost includes
preproduction costs, which are being written off over the first three
years of the project life (2003-2005), and account for $1.67 per
barrel of the total unit DD&A cost in the first nine months of 2005,
$1.55 per barrel in the third quarter of 2005.
(5) Crude oil processed by Shell refineries includes upgrader feedstock
supplied to Scotford Refinery.
(6) Refinery utilization equals crude oil processed by Shell refineries
divided by total capacity of Shell refineries, including capacity
uplifts at Scotford Refinery due to processing of various streams
from the upgrader.
(7) Oil Products earnings per litre equals Oil Products earnings after-
tax divided by total Oil Products sales volumes.
SHELL CANADA LIMITED
Consolidated Statement of Earnings and Retained Earnings
($ millions, except as noted)
(unaudited)
Third Quarter Nine Months
2005 2004 2005 2004
-------------------------------------------------------------------------
Revenues
Sales and other operating
revenues 3 925 3 042 10 146 8 136
Dividends, interest and
other income 31 16 205 76
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Total revenues 3 956 3 058 10 351 8 212
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Expenses
Cost of goods sold 2 269 1 654 5 703 4 293
Operating, selling and general 694 483 1 756 1 402
Transportation 82 72 247 231
Exploration and predevelopment 59 47 147 130
Depreciation, depletion,
amortization and retirements 203 179 566 526
Interest on long-term debt 2 4 6 14
Other interest and financing
charges 1 2 3 8
-------------------------------------------------------------------------
Total expenses 3 310 2 441 8 428 6 604
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Earnings
Earnings before income tax 646 617 1 923 1 608
-------------------------------------------------------------------------
Current income tax 190 179 441 532
Future income tax (1) (13) 82 (28)
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Total income tax 189 166 523 504
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Earnings 457 451 1 400 1 104
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Per common share (dollars)
(Notes 4 and 5)
Earnings - basic 0.55 0.55 1.70 1.34
Earnings - diluted 0.55 0.54 1.68 1.33
Common shares outstanding
(millions - weighted average) 825 825 825 825
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Retained Earnings
Balance at beginning of period 6 784 5 556 6 011 5 045
Earnings 457 451 1 400 1 104
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7 241 6 007 7 411 6 149
Common shares buy-back (Note 7) - 15 33 36
Dividends 74 69 211 190
-------------------------------------------------------------------------
Balance at end of period 7 167 5 923 7 167 5 923
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SHELL CANADA LIMITED
Consolidated Statement of Cash Flows
($ millions)
(unaudited)
Third Quarter Nine Months
2005 2004 2005 2004
-------------------------------------------------------------------------
Cash from Operating Activities
Earnings 457 451 1 400 1 104
Exploration and predevelopment
(Note 3) 29 29 80 76
Non-cash items
Depreciation, depletion,
amortization and retirements 203 179 566 526
Future income tax (1) (13) 82 (28)
Other items (2) 3 (2) 14
-------------------------------------------------------------------------
Cash flow from operations 686 649 2 126 1 692
Movement in working capital
and operating activities
Accounts receivable
securitization program
(Note 8) (150) (65) (150) (431)
Other working capital and
operating items 95 153 (260) 102
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631 737 1 716 1 363
-------------------------------------------------------------------------
Cash Invested
Capital, exploration and
predevelopment expenditures
(Note 3) (410) (294) (1 006) (626)
Movement in working capital
from investing activities 40 24 16 (15)
-------------------------------------------------------------------------
Capital expenditures and
movement in working capital (370) (270) (990) (641)
Proceeds on disposal of
properties, plant and equipment - - 5 2
Investments and other - 1 - (1)
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(370) (269) (985) (640)
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Cash from Financing Activities
Common shares buy-back (Note 7) - (16) (34) (37)
Proceeds from exercise of common
share stock options 2 10 6 29
Dividends paid (74) (69) (211) (190)
Long-term debt and other (1) (249) (135) (362)
Short-term financing - (136) - (149)
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(73) (460) (374) (709)
-------------------------------------------------------------------------
Increase in cash 188 8 357 14
Cash at beginning of period 296 6 127 -
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Cash at September 30(1) 484 14 484 14
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Supplemental disclosure of
cash flow information
Dividends received 3 5 10 10
Interest received 4 8 34 25
Interest paid 3 7 10 24
Income tax paid 124 52 560 259
(1) Cash comprises cash and highly liquid short-term investments.
SHELL CANADA LIMITED
Consolidated Balance Sheet
($ millions)
(unaudited)
Sep. 30, Dec. 31,
2005 2004
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Assets
Current assets
Cash and short-term investments 484 127
Accounts receivable 1 747 1 213
Inventories
Crude oil, products and merchandise 611 501
Materials and supplies 89 83
Prepaid expenses 103 85
Future income tax 346 314
-------------------------------------------------------------------------
3 380 2 323
Investments, long-term receivables and other 657 549
Properties, plant and equipment (Note 2) 8 573 8 034
-------------------------------------------------------------------------
Total assets 12 610 10 906
-------------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable, accrued liabilities and other 1 965 1 683
Income and other taxes payable 571 657
Current portion of asset retirement and other
long-term obligations 34 35
Current portion of long-term debt 1 136
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2 571 2 511
Asset retirement and other long-term obligations 460 417
Long-term debt (Note 2) 217 1
Future income tax 1 672 1 448
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Total liabilities 4 920 4 377
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Shareholders' Equity
Capital stock
100 4% preference shares 1 1
825 074 112 common shares (2004 - 825 727 686) 522 517
Retained earnings 7 167 6 011
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Total shareholders' equity 7 690 6 529
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Total liabilities and shareholders' equity 12 610 10 906
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SHELL CANADA LIMITED
Segmented Information
($ millions)
(unaudited)
Third Quarter
Exploration
Total & Production Oil Sands
2005 2004 2005 2004 2005 2004
-------------------------------------------------------------------------
Revenues
Sales and other
operating revenues 3 925 3 042 602 544 453 278
Inter-segment sales - - 46 12 420 347
Dividends, interest
and other income 31 16 22 3 - -
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Total revenues 3 956 3 058 670 559 873 625
-------------------------------------------------------------------------
Expenses
Cost of goods sold 2 269 1 654 - - 216 158
Inter-segment
purchases - - 53 45 76 74
Operating, selling
and general 694 483 151 95 178 119
Transportation 82 72 82 72 - -
Exploration and
predevelopment 59 47 54 47 5 -
Depreciation,
depletion,
amortization and
retirements 203 179 96 90 53 42
Interest on long-
term debt 2 4 - - - -
Other interest and
financing charges 1 2 - - - -
-------------------------------------------------------------------------
Total expenses 3 310 2 441 436 349 528 393
-------------------------------------------------------------------------
Earnings (loss)
Earnings (loss)
before income tax 646 617 234 210 345 232
-------------------------------------------------------------------------
Current income tax 190 179 100 110 (1) 13
Future income tax (1) (13) (23) (29) 119 46
-------------------------------------------------------------------------
Total income tax 189 166 77 81 118 59
-------------------------------------------------------------------------
Earnings (loss) 457 451 157 129 227 173
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Third Quarter
Oil Products Corporate
2005 2004 2005 2004
-------------------------------------------------------
Revenues
Sales and other
operating revenues 2 844 2 196 26 24
Inter-segment sales 103 107 - -
Dividends, interest
and other income 5 5 4 8
-------------------------------------------------------
Total revenues 2 952 2 308 30 32
-------------------------------------------------------
Expenses
Cost of goods sold 2 060 1 498 (7) (2)
Inter-segment
purchases 440 347 - -
Operating, selling
and general 318 261 47 8
Transportation - - - -
Exploration and
predevelopment - - - -
Depreciation,
depletion,
amortization and
retirements 54 46 - 1
Interest on long-
term debt - - 2 4
Other interest and
financing charges - - 1 2
-------------------------------------------------------
Total expenses 2 872 2 152 43 13
-------------------------------------------------------
Earnings (loss)
Earnings (loss)
before income tax 80 156 (13) 19
-------------------------------------------------------
Current income tax 82 74 9 (18)
Future income tax (83) (32) (14) 2
-------------------------------------------------------
Total income tax (1) 42 (5) (16)
-------------------------------------------------------
Earnings (loss) 81 114 (8) 35
-------------------------------------------------------
-------------------------------------------------------
SHELL CANADA LIMITED
Segmented Information
($ millions)
(unaudited)
Nine Months
Exploration
Total & Production Oil Sands
2005 2004 2005 2004 2005 2004
-------------------------------------------------------------------------
Revenues
Sales and other
operating revenues 10 146 8 136 1 644 1 554 987 709
Inter-segment sales - - 108 57 1 174 887
Dividends, interest
and other income 205 76 25 5 132 31
-------------------------------------------------------------------------
Total revenues 10 351 8 212 1 777 1 616 2 293 1 627
-------------------------------------------------------------------------
Expenses
Cost of goods sold 5 703 4 293 - - 547 405
Inter-segment
purchases - - 164 118 198 216
Operating, selling
and general 1 756 1 402 372 272 462 369
Transportation 247 231 247 231 - -
Exploration and
predevelopment 147 130 134 130 13 -
Depreciation,
depletion,
amortization and
retirements 566 526 268 268 156 122
Interest on long-
term debt 6 14 - - - -
Other interest and
financing charges 3 8 - - - -
-------------------------------------------------------------------------
Total expenses 8 428 6 604 1 185 1 019 1 376 1 112
-------------------------------------------------------------------------
Earnings (loss)
Earnings (loss)
before income tax 1 923 1 608 592 597 917 515
-------------------------------------------------------------------------
Current income tax 441 532 242 296 51 27
Future income tax 82 (28) (52) (75) 272 123
-------------------------------------------------------------------------
Total income tax 523 504 190 221 323 150
-------------------------------------------------------------------------
Earnings 1 400 1 104 402 376 594 365
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total Assets 12 610 10 472 3 195 2 831 3 945 3 830
Capital Employed(1) 7 908 6 834 2 068 1 644 2 588 2 942
Nine Months
Oil Products Corporate
2005 2004 2005 2004
-------------------------------------------------------
Revenues
Sales and other
operating revenues 7 486 5 847 29 26
Inter-segment sales 292 293 - -
Dividends, interest
and other income 16 15 32 25
-------------------------------------------------------
Total revenues 7 794 6 155 61 51
-------------------------------------------------------
Expenses
Cost of goods sold 5 151 3 885 5 3
Inter-segment
purchases 1 212 903 - -
Operating, selling
and general 829 733 93 28
Transportation - - - -
Exploration and
predevelopment - - - -
Depreciation,
depletion,
amortization and
retirements 141 135 1 1
Interest on long-
term debt - - 6 14
Other interest and
financing charges - - 3 8
-------------------------------------------------------
Total expenses 7 333 5 656 108 54
-------------------------------------------------------
Earnings (loss)
Earnings (loss)
before income tax 461 499 (47) (3)
-------------------------------------------------------
Current income tax 285 233 (137) (24)
Future income tax (156) (76) 18 -
-------------------------------------------------------
Total income tax 129 157 (119) (24)
-------------------------------------------------------
Earnings 332 342 72 21
-------------------------------------------------------
-------------------------------------------------------
Total Assets 4 627 3 841 843 (30)
Capital Employed(1) 2 299 2 212 953 36
(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 dated December 31, 2004, except as
described in note 2 and note 3.
Certain other information provided for prior periods has been
reclassified to conform to the current presentation.
2. Change in Accounting Policy
Variable Interest Entities
Effective January 1, 2005, the Corporation adopted Accounting Guideline
15, "Consolidation of Variable Interest Entities". The standard mandates
that certain entities should be consolidated by the primary beneficiary.
Accordingly, the Corporation has consolidated a lease arrangement for
large mobile equipment (trucks, scrapers and shovels) used at the
Athabasca Oil Sands Project's Muskeg River Mine.
The standard has been applied retroactively without prior period
restatement of the financial statements. The impact of this change on the
September 30, 2005, Consolidated Balance Sheet is an increase in accounts
receivable of $16 million, an increase in property plant and equipment of
$178 million, a decrease in accounts payable of $27 million and an
increase in long-term debt of $217 million. Adoption of this standard did
not have a material impact on the Corporation's Consolidated Statement of
Earnings and Retained Earnings.
3. Accounting Reclassification
In the third quarter of 2005 and for the comparative periods, the
Corporation has reflected certain exploration expenses as a reduction of
cash flow from operations. These expenses were previously reflected as
investing activities in the Consolidated Statement of Cash Flow. The
impact for the nine months of 2005 is a reduction of cash flow from
operations of $67 million (2004 - $54 million) and, in the third quarter
of 2005, a reduction of cash flow from operations of $30 million (2004 -
$18 million).
4. Common Shares Split
On June 21, 2005, the common shares of the Corporation were split on a
three-for-one basis for shareholders of record on June 23, 2005. Common
share data and per share information have been restated to reflect the
impact of the share split.
5. Earnings Per Share
Third Quarter Nine Months
2005 2004 2005 2004
-------------------------------------------------------------------------
Earnings ($ millions) 457 451 1 400 1 104
Weighted average number of
common shares (millions) 825 825 825 825
Dilutive securities (millions)
Options under Long Term
Incentive Plan 11 6 9 6
Basic earnings per share
($ per share) 0.55 0.55 1.70 1.34
Diluted earnings per share
($ per share) 0.55 0.54 1.68 1.33
6. Employee Future Benefits
The Corporation's pension plans are described in the notes to the
Consolidated Financial Statements dated December 31, 2004. The components
of the total net benefit costs included in total expenses in the
Consolidated Statement of Earnings are as follows:
Third Quarter
($ millions) Pension Benefits Other Benefits
2005 2004 2005 2004
-------------------------------------------------------------------------
Current service cost 9 8 1 1
Employee contributions (1) - - -
Interest cost 32 29 2 2
Expected return on plan assets (34) (32) - -
Amortization of transitional
(asset) obligation (9) (9) - -
Amortization of net actuarial
loss 18 17 - 1
-------------------------------------------------------------------------
Net (income) expense 15 13 3 4
Defined contribution segment 4 3 - -
-------------------------------------------------------------------------
Total 19 16 3 4
-------------------------------------------------------------------------
Nine Months
($ millions) Pension Benefits Other Benefits
2005 2004 2005 2004
-------------------------------------------------------------------------
Current service cost 27 24 2 1
Employee contributions (3) (1) - -
Interest cost 96 88 7 8
Expected return on plan assets (102) (96) - -
Amortization of transitional
(asset) obligation (27) (27) 1 1
Amortization of net actuarial
loss 54 51 - 2
-------------------------------------------------------------------------
Net (income) expense 45 39 10 12
Defined contribution segment 10 9 - -
-------------------------------------------------------------------------
Total 55 48 10 12
-------------------------------------------------------------------------
7. Common Shares Buy-Back
On April 30, 2004, Shell Canada Limited announced its intention to make a
normal course issuer bid, to repurchase for cancellation up to one per
cent of its issued and outstanding common shares as at April 27, 2004.
The bid began on May 4, 2004, and expired on May 3, 2005. The bid was
used to counter dilution resulting from the issuance of common shares
under the Corporation's Long Term Incentive Plan. Under this bid, a total
of 3,557,241 shares were repurchased and cancelled at market prices for a
total cost of $88 million, which includes $34 million of shares purchased
in 2005.
8. Accounts Receivable Securitization Program
During the third quarter of 2005, the remaining $150 million balance
under the accounts receivable securitization program was reduced to zero
and the Corporation elected to terminate the program. This contributed to
the increase in accounts receivable on the Consolidated Balance Sheet as
at September 30, 2005.
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