Nalcor Energy Reports Second Quarter Financial Results
August 11th, 2016
Nalcor Energy today released its financial update for the second quarter ended June 30, 2016.
“Nalcor’s overall financial performance year-to-date has been positive, with earnings up in most lines of business,” said Stan Marshall, CEO.
Mr. Marshall added, “Making adjustments on the Muskrat Falls Project to ensure that we are set up to execute effectively has been a priority over the last quarter. We are continuing to take the necessary steps to ensure the project is completed successfully in the interest of the people of the province.”
Key Second Quarter Highlights
– Profit for the quarter of $8.4 million, an increase of $16.2 million compared to the same period in 2015, primarily due to interim rates in Hydro Regulated, higher oil production and reduced operating costs, partially offset by lower commodity prices, higher depreciation, depletion and amortization and a reduced impact from hedging.
– YTD profit of $36.4 million increased by $14.9 million compared to the same period in 2015, largely due to interim rates in Hydro Regulated, higher oil production, favourable impacts from hedging and reduced operation costs, partially offset by increased costs associated with gas turbine fuel, lower commodity prices and higher depreciation, depletion and amortization.
– YTD operating profit was $7.0 million higher than YTD profit, due to the $7.0 million prudence order adjustment in Q1 2016.
– YTD capital expenditures, excluding Maritime Link, of $1.2 billion, an increase of approximately 15 per cent over the same period in 2015.
– Total assets grew $0.7 billion during the first six months of 2016 to a total of $13.0 billion.
Second Quarter Earnings and Capital Expenditures
Profit for the three months ended June 30, 2016 was $8.4 million, compared to a $7.8 million loss for the same period in 2015. The $16.2 million increase was primarily due to an improvement in Hydro Regulated’s loss by $17.7 million as a result of reduced operating costs and receiving interim rates from the Public Utilities Board (PUB), as well as increased profit in Oil and Gas of $9.3 million as a result of higher production volumes, partially offset by a lower average Brent price. These increases were partially offset by a decrease in profit in Churchill Falls of $2.3 million due to lower energy sales and a decrease of $8.6 million in Energy Marketing due to the settlement of commodity hedges and decreased revenue from lower export market sales.
Profit for June 30, 2016 year-to-date was $36.4 million, compared to $21.5 million for the same period in 2015. The $14.9 million increase was primarily due to an improvement in Hydro Regulated’s loss of $16.5 million due to reduced operating costs and interim rates, partially offset by higher costs associated with gas turbine fuel and adjustments related to the Prudence Order and an increase in Oil and Gas of $8.8 million due to higher production volumes, partially offset by a lower average Brent price. These increases were partially offset by a decrease in Churchill Falls profit of $3.0 million as a result of lower energy sales and a decrease of $8.3 million in Energy Marketing due to the settlement of commodity hedges and decreased revenue from lower export sales.
Capital expenditures for the three and six months ended June 30, 2016, excluding the Maritime Link, totaled $706.7 million and $1,162.6 million, respectively. Nalcor’s assets continue to grow, totaling $13.0 billion as at June 30, 2016. The company’s Statement of Financial Position remains strong, with a debt to capital ratio of 62.5 per cent as at June 30, 2016.
Hydro is awaiting a final General Rate Application (GRA) order from the PUB in response to Hydro’s filing of final arguments during Q1. The outcome of this application may have a significant financial impact for Hydro Regulated in 2016.
Over the last several months, a number of measures have been taken to ensure the Muskrat Falls Project is positioned for success and risks are managed effectively, including reviewing project management and implementing some changes to the organizational structure. As well, Nalcor recently negotiated a bridge agreement with Astaldi, the main contractor for the powerhouse and intake construction, which lays out firm production targets, expectations of the contractor, and financial incentives over the next several months as work progresses on those components.
Newfoundland and Labrador Hydro continues to make investments in the provincial electricity system to ensure reliability for customers. Throughout Q2, and continuing into Q3, the company is focused heavily on the execution of annual maintenance and capital work in preparation for Winter 2017.
In Nalcor’s Oil and Gas business, as part of a multi-year exploration strategy, work continued in the second quarter to evaluate the province’s offshore slope and deep water basins for resource potential in advance of future license rounds continued. The resource assessment of the 2016 license round in the Orphan Basin is close to completion and the results will be publicly announced in Q3 ahead of the closing of the 2016 Call for Bids in November.
As an equity partner, Nalcor is continuing to evaluate options for the White Rose Extension Project, including both subsea and wellhead platform concepts. Drilling at the White Rose field resumed in Q2, while at Hibernia Southern Extension, drilling and completion operations continue on the remaining subsea water injectors to support production from new and existing oil producers.
Nalcor’s second quarter webcast will take place today at 10:30 a.m. NDT. A copy of the Q2 report and a recording of the webcast will be available at www.nalcorenergy.com.
Nalcor Energy’s business includes the development, generation, transmission and sale of electricity; the exploration, development, production and sale of oil and gas; industrial fabrication and energy marketing. Focused on sustainable growth, the company is leading the development of the province’s energy resources and has a corporate-wide framework which facilitates the prudent management of its assets while continuing an unwavering focus on the safety of its workers and the public. Nalcor has six lines of business: Newfoundland and Labrador Hydro, Churchill Falls, Oil and Gas, Lower Churchill Project, Bull Arm Fabrication and Energy Marketing.
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