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S&P: Strong 1Q Canadian Upstream Performance to Ensure Output Targets in '05

Larger upstream producers in Canada benefited from strong prices and healthy production levels in 1Q2005, which in turn should help the country's energy industry meet its natural gas and oil output targets this year, according to a report by Standard & Poor's (S&P).

First quarter performance among the Canadian explorers reflected the benefits of "asset and geographic diversification," as well as strong production, said analyst Michelle Dathorne. "The senior producers with large inventories of internal prospects, such as EnCana Corp. and Talisman Energy Inc., continue to generate drillbit related production growth, while some others, like Canadian Natural Resources Ltd., have augmented their production growth through recent acquisitions.

"We expect these Canadian producers will continue to generate meaningful production and reserves growth in the near term, as they proceed with a myriad of development projects," she said.

However, Dathorne cautioned that the operating performance of producers with a lot of assets in the Western Canadian Sedimentary Basin was unfavorably affected by "both very cold weather in the beginning of the year and an early spring breakup." Drilling activities also were affected, and some companies were unable to complete their targeted drilling programs in the quarter.

"We do, however, expect that forecast production levels will be met by yearend despite the setbacks realized," Dathorne wrote. "Development plans are also expected to remain on course for the smaller and midsize companies, with some announcing increases to their capital budgets, notably Paramount Resources Ltd. and Harvest Energy Trust."

For more information on the 10-page report, visit www.standardandpoors.com.

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