Cuba Business

Cuban oil drilling company Sherritt increases fourth quarter profits

Posted March 07, 2008 by publisher in Cuba Business.

By Dale Crofts | Bloomberg

Sherritt International Corp., the company producing oil and gas off Cuba’s coast, said fourth quarter profit increased 6.2 percent as oil prices rose.

Net income rose to C$83.5 million ($84.6 million) from C$78.6 million a year earlier, Toronto-based Sherritt said today in a statement. Per-share profit declined to 36 cents from 47 cents after the company issued stock to buy Dynatec Corp. Sales climbed 6 percent to C$323.6 million.

Sherritt gained from crude-oil prices that averaged 50 percent higher in the fourth quarter than a year earlier, boosting profit excluding some costs in the oil and gas business by 29 percent to C$65.6 million. The gain helped the company overcome falling profit in its metals unit as nickel prices slid.

``Strong oil prices, steady production and operating efficiencies helped drive profitability growth,’’ Sherritt said in the statement. Nickel prices were ``lower than in the prior year, when stainless steel demand was stronger,’’ the company said. Nickel is a key ingredient in stainless steel production.

Crude oil rose as high as $105.97 a barrel today, the third day this week New York prices have reached a record, as the U.S. dollar tumbled to its lowest ever against the euro.

Sherritt rose 24 cents, or 1.6 percent, to C$15.57 at 3:59 p.m. in Toronto Stock Exchange trading. The shares climbed 17 percent this year.

Utility Expansion

Sherritt mines and processes nickel in Cuba in a joint venture with the socialist government and produces oil and gas off the island’s coast. The company also provides power to Cuba and is working on a 150-megawatt expansion at its Boca de Jaruco power plant, taking its total capacity in Cuba to 526 megawatts.

Boosting the island’s infrastructure will help protect the company from any change in the political regime, Sherritt has said. Raul Castro, 76, was named president last month, succeeding his brother, Fidel, who had headed Cuba since the 1959 revolution.

The company is also spending on assets outside Cuba as it seeks to reduce its dependence on the island.

Sherritt agreed to buy Dynatec in April for about C$1.6 billion in stock to triple nickel output after prices surged to a record. Sherritt now owns 40 percent of the Ambatovy project in Madagascar, which may produce 60,000 tons of nickel a year.

Sherritt plans to invest about C$1.32 billion in Madagascar and said today it signed an agreement with that country’s government to develop up to 100 megawatts of power generation.

The company produced 18,234 barrels of oil equivalent per day from its oil and gas businesses in Cuba, Spain and Pakistan. Prices for the company’s oil extracted in Cuba gained 36 percent, Sherritt said. Production in 2008 will be similar to the 19,154-barrel average of 2007, the company said.

To contact the reporter on this story: Dale Crofts in Chicago at .(JavaScript must be enabled to view this email address)

Member Comments

On March 07, 2008, publisher wrote:

By David Casallas | Business News Americas

Toronto-based Sherritt (TSX: S), which has hydrocarbons E&P operations in Cuba, this year expects oil capital expenditure to reach roughly Cdn$150mn (US$153mn), company CFO Dean Chambers said in a webcast.

Sherritt holds 40-100% indirect working interests in 10 production-sharing contracts in Cuba, according to the company website.

The Canadian firm’s net production last year in Cuba reached 18,248boe/d, up 9.13% from 2006. Companywide, net oil production in 2007 totaled 19,154boe/d with contributions from Pakistan and Spain.

Sherritt this year in the Caribbean country plans to drill 11 development wells and one exploratory well. The company also continues talks for an enhanced oil recovery concession and new exploration blocks in Cuba.

In 2008, production volumes are expected to be similar to last year, Chambers said.