crude oil and NGL price from continuing operations ($/bbl) Average realized natural gas price
International Production and Realized Prices
72.69 7.64 103,600 150,500 75.90 6.46 (boe/d) ($/bbl)/ ($/Mcf) 157,200 98.25 10.15 operations (boe/d) from continuing operations ($/Mcf)
2008 Compared with 2007
International contributed a record $1,684 million of net earnings, up 350% compared with net earnings of $374 million in 2007. Higher realized prices and production were partially offset by higher exploration and DD&A expenses.
Net earnings from continuing operations in 2008 included a $227 million income tax recovery and an $88 million gain on the sale of non-core assets. Net earnings from continuing operations in 2007 included net losses on the derivative contracts associated with the hedged portion of Buzzard production of $331 million, a $30 million income tax recovery, a $9 million gain on the sale of non-core assets and $5 million in insurance proceeds from the Scott platform fire.
Late in 2007, the Company entered into derivative contracts to close out the hedged portion of its Buzzard production from January 1, 2008 to December 31, 2010. Under the terms of the contracts, the Company repurchased 30,688,000 bbls of Dated Brent crude oil at an average price of approximately $85.79 US/bbl, resulting in a reduction in cash flow of $1,145 million after-tax.
International production from continuing operations averaged 157,200 boe/d net in 2008, compared with 150,500 boe/d net in 2007. The increase was primarily due to additional North Sea production. International crude oil and NGL realized prices from continuing operations averaged $98.25/bbl and natural gas realized prices averaged $10.15/Mcf in 2008, compared with $75.90/bbl and $6.46/Mcf, respectively, in 2007. Operating and overhead costs from continuing operations averaged $7.33/boe in 2008, down 20% compared with $9.12/boe in 2007, due to lower operating expenses related to new EPSAs in Libya. International capital expenditures from continuing operations in 2008 were $2,115 million, with $281 million directed to the North Sea region, primarily for the Buzzard enhancement project, and $1,834 million invested in Other International, primarily related to the signature bonus payment in Libya and the Ebla gas development in Syria.
2008 Operating Review and Strategic Initiatives
2008 Operating Review
2008
2007 2006
Production from continuing operations net (boe/d)
North Sea
97,700
91,000 43,700
Other International
59,500
59,500 59,900
Total International production net
157,200
150,500 103,600
Average realized crude oil and NGL price from continuing
operations ($/bbl)
$
98.25
$
75.90 $
72.69
Average realized natural gas price from continuing operations ($/Mcf)
$
10.15
$
6.46 $
7.64
Operating and overhead costs from continuing operations ($/boe)
$
7.33
$
9.12 $
7.61
International Operating and Overhead Costs
0 2 4 6 8 10 06 07 08
International operating and overhead costs ($/boe)
7.61
9.12
($/boe)
North Sea
Petro-Canada's North Sea production averaged 97,700 boe/d net in 2008, compared with 91,000 boe/d net in 2007. Additional production from Buzzard and Saxon and full-year production from De Ruyter and L5b-C were partially offset by natural declines and problems with two producing wells in the Triton area. North Sea crude oil and NGL realized prices averaged $97.76/bbl and natural gas averaged $12.15/Mcf in 2008, compared with $75.12/bbl and $7.94/Mcf, respectively, in 2007.
During 2008, Petro-Canada continued to leverage its existing infrastructure through concentric development near core areas and through new discoveries.
In the U.K. sector of the North Sea, the Buzzard development, in which the Company has a 29.9% interest, achieved first oil in January 2007 and ramped up to peak production of 220,000 boe/d gross (65,700 boe/d net) in July 2007.
Sections of the Buzzard field contain higher than expected levels of hydrogen sulphide. In order to meet the crude quality requirements of the Forties pipeline system, the partners are installing additional sulphur handling equipment on the facility. This work is on schedule for installation in late 2010 or early 2011.
U.K. exploration success continued in 2008 with the non-operated Pink discovery, located in Block 20/1 North, where the non-operated Golden Eagle discovery was drilled in late 2006. Together with its joint venture partners, the Company is evaluating more exploration opportunities in the immediate area, with a view to optimizing the development plan for the discovered resources. Petro-Canada holds a 25% working interest in the Golden Eagle discovery and a 33% interest in the Pink discovery.
In the Netherlands sector of the North Sea, oil production comes from the Petro-Canada operated Hanze and De Ruyter platforms. The Company has a 45% working interest in Hanze and a 54.07% working interest in De Ruyter. At a current combined gross production rate of approximately 25,000 boe/d, these assets were the largest source of domestic oil in the Netherlands in 2008.
The major source of the Company’s natural gas production in the Netherlands is from the L5b-L8b non-operated natural gas area (Petro-Canada working interest of approximately 30%), with net production of approximately 33 MMcf/d.
In the Netherlands sector of the North Sea, the Company, as operator with a 50% working interest, drilled a successful exploration well in 2008: van Ghent. The Company drilled two successful exploration wells in 2007, van Nes and van Brakel, as operator with a 50% and 60% working interest, respectively. Both van Nes and van Brakel were suspended as gas discoveries. As all three wells are in the vicinity of the De Ruyter development, the potential to tie these wells back to De Ruyter is being assessed.
In the third quarter of 2008, the Company completed a sales and purchase agreement with Bayerngas Norge AS for the sale of all the Company’s interests in Denmark for net proceeds of $140 million, resulting in a $107 million ($82 million after-tax) gain on the sale of these assets. The sale of all of Petro-Canada’s interests in Denmark is consistent with the International & Offshore business unit strategy to optimize the portfolio by reducing participation in countries where the Company cannot foresee developing a material position.
In 2008, the Company was awarded four additional production licences in the 2007 Awards in Predefined Areas round in Norway. Petro-Canada is operator of five of the 17 licences in Norway.