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Petro-Canada Earnings Tumble 91% on Eve of Suncor Merger

In its final quarterly earnings report before completing its merger with Suncor Energy Inc., Petro-Canada Corp. said Thursday continuing effects of the economic recession led it to a 91% quarterly earnings tumble, with 2Q2009 earnings of C$99 million (20 cents/share), compared with C$1.15 billion ($2.38/share) in 2Q2008.

"We continued to manage our business in a prudent manner during the second quarter as the downturn persisted," said CEO Ron Brenneman. "Staying the course we charted for ourselves at the beginning of this year has us in a strong position heading into our merger with Suncor."

In March Suncor and Petro-Canada announced plans to merge in an all-share transaction worth about C$19.6 billion, which would create Canada's largest energy company (see NGI, March 30). The transaction, which includes around C$2.66 billion in assumed debt, would give Suncor shareholders 60% of the merged company, which would operate under the Suncor name. Petro-Canada shareholders would hold 40% of the company, receiving around 1.28 common shares of the merged company for each Petro-Canada common share they own; Suncor's shareholders would receive one share of the new company for each share of Suncor they own. Combined, the merged companies would achieve an estimated C$300 million in operating synergies and an additional $1 billion in capital synergies by sharing infrastructure.

Petro-Canada and Suncor expected the merger to be completed on Saturday (Aug. 1). Shareholders of both Calgary-based companies overwhelmingly approved the deal earlier this summer.

Petro-Canada, which has assets spread across the globe, has long been a major North American gas explorer, and it also markets natural gas in North America. In 2Q2009 Petro-Canada's production was 374,999 boe/d, down from 414,000 boe/d in 2Q2008, reflecting decreased North American natural gas, East Coast Canada and international production, while oilsands production was relatively unchanged, Brenneman said. Petro-Canada expects full-year production of 355,000-375,000 boe/d. The 2009 capital and exploration expenditure program is expected to be C$3.2 billion, down C$200 million from the prior guidance of C$3.4 billion.

Suncor is considered by some to be strictly an oilsands producer, but it also develops gas projects throughout western and central Alberta and in northeastern British Columbia. It also has substantial investments in renewable energy projects.

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