Imperial Oil continues to grow its oil sands production
Imperial Oil reported a 55% drop in first quarter earnings thanks to a substantial drop in oil prices. Production rose a modest 1% to 333,000 barrels of oil equivalent per day (boe/d). Strong operational performance in its oil sands divisions helped offset production losses from divested conventional oil and natural gas properties. However, Imperial expects significant production growth through the end of 2015 as several major oil sands projects are expected to come online and ramp up to full capacity.
The company spent approximately $1 billion in capital expenditures for the first quarter, spent mostly on the completion of the Nabiye and Kearl Expansion plants. Capital expenditures are expected to decline in the near term as construction for both major projects come to an end. Imperial Oil also owns 25% of Syncrude, which contributed 73,000 bpd of light oil to the company's bottom line.
KEARL OIL SANDS MINE*
- Production at the Kearl Oil Sands Mine averaged 95,000 barrels per day (bpd) in the first quarter, up from 70,000 bpd for the same period last year. The company now successfully operates all three trains simultaneously, enabling them to approaching the design capacity of 110,000 bpd. Operating costs for the operation were not disclosed.
- The Kearl Expansion plant is essentially complete and expected to start-up by the middle of the year. Once fully operational, the expansion plant will add another 110,000 bpd to Kearl's total oil sands production.
- A new 85 MW cogeneration (cogen) unit was started up earlier this year and connected to the Alberta electricity grid. Cogen plants produce both steam and electrical power; any electricity not needed by the plant can be sold to the Alberta power grid, generating additional revenue for the owner. Cogen plants reduce overall greenhouse gas emissions since they help offset electricity generated by coal-fired power plants commonly used in the Alberta power grid.
*Note that Kearl is 71% owned by Imperial Oil and all figures quoted are gross for the facility (with 71% net to Imperial).
COLD LAKE IN-SITU
- Cold Lake's heavy oil production grew to 152,000 bpd, up 3% for the same period last year. Cold Lake is a thermal in-situ facility which uses cyclic steam-stimulation (CSS) to extract bitumen.
- The newly built Nabiye expansion reached 12,000 bpd by the end of March. The 40,000 bpd facility began steaming in February and should ramp up to full production by the end of the year. The facility is also equipped with a 150 MW cogen plant which will be connected to the Alberta power grid later this year.
EDMONTON RAIL TERMINAL
As part of a joint venture with Kinder Morgan, Imperial announced completion of a rail loading terminal near their Strathcona Refinery, southeast of Edmonton. The project has a rail loading capacity of 100,000 bpd, with the potential to expand to 250,000 bpd in the future, if required. The terminal is still in the initial start-up phase with the first rail car loaded in late April. Crude-by-rail is part of Imperial's strategy to get its growing heavy oil production to market in light of current pipeline constraints.
NEW RESEARCH FACILITY
Imperial announced plans to build a new research facility earlier this year. The company's current research facility (The Calgary Research Centre) is located at the University of Calgary Research Park and employs approximately 50 scientists and technicians. The new research facility will be located near the company's new headquarters in Quarry Park (in southeast Calgary), and is expected to be fully occupied in 2017. Imperial is still in the process of moving 2,500 head-office employees from Calgary city centre offices to the new Quarry Park campus. This relocation is expected to continue through to 2016.
CONVENTIONAL OIL AND NATURAL GAS
The company has been slowly divesting of its conventional and natural gas assets across western Canada. Conventional oil production dropped to only 15,000 bpd in Q1, down from 22,000 bpd for the same period last year. Natural gas production in the first quarter was reported at 146 million cubic feet per day, down from 205 million cubic feet per day for Q1 of 2014.
Imperial Oil is Canada's second largest integrated oil company. The company owns and operates 475 Esso branded gas stations across Canada, with another 1700 locations operated by independent retailers. Imperial stock (IMO) trades on the TSX and NYSE and currently yields a 1% dividend. The company is 69.6% owned by US parent ExxonMobil.