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Syncrude vs Kearl: A hit-and-miss quarter for Imperial Oil

Syncrude vs Kearl: A hit-and-miss quarter for Imperial Oil

Imperial Oil reported record fourth quarter production at Syncrude, averaging 348,000 bbl/day of upgraded synthetic crude.

For the full year 2016, the mining giant produced 272,000 bbl/day, up from an average of 248,000 bbl/day in 2015. Syncrude had a stellar year reliability-wise, negating some of the effects of the forest fire outages back in May and June.

Syncrude is Alberta's largest oil sands mine and has the capacity to produce about 350,000 bbl/day of bitumen from its two mining operations - Mildred Lake and Aurora North. Bitumen produced at the mine is upgraded into light synthetic crude at the Mildred Lake upgrader.

The average selling price for Syncrude's upgraded oil was $57/bbl in 2016, down from $61 in 2015. Syncrude's Sweet Premium crude sells almost on par with West Texas Intermediate (WTI), which averaged $57.40/bbl last year (or US$43.50).

Imperial Oil owns 25% of the Syncrude operation. 

Unplanned maintenance activities take a bite out of Kearl's production

Better-than-expected results at Syncrude were more than offset with worse-than-expected performance out of the Kearl oil sands mine.

Gross bitumen production out of Kearl averaged just 169,000 bbl/day in Q4, down from 203,000 bbl/day for the previous year quarter. The miss was blamed on planned and unplanned maintenance activities. 

For the full year 2016, Kearl produced an average of 169,000 bbl/day, up from 152,000 bbl/day in 2015. The oil sands mine has a nameplate capacity of 220,000 bbl/day of bitumen, which is blended with condensate and sold directly to market without upgrading. Bitumen realization prices averaged $26.50/bbl in 2016, down from $32.50 in 2015. However, sale prices improved considerably through the end of 2016, averaging $34.66/bbl in the fourth quarter.

On a more positive note, production out of the Cold Lake thermal in-situ operation averaged 159,000 bbl/day in Q4, up from 155,000 bbl/day in Q4/2015. The improvement was attributed to the timing of steam cycles at Cold Lake, which uses cyclic steam stimulation (CSS) to extract bitumen from the ground. For the full year 2016, Cold Lake produced 161,000 bbl/day, up from 158,000 bbl/day in the previous year. Cold Lake has a nameplate capacity of 180,000 bbl/day. 

Imperial also reported that 2016 was its safest year on record, reflecting the lowest number of spills, incidents and workplace injuries.

Calculation of 2016 oil sands reserves still in progress

Back in October, Imperial and parent-company ExxonMobil warned investors it may need to de-book about 3.0 billion barrels worth of reserves due to the plunge in oil prices. As per SEC (Securities and Exchange Commission) regulations, lower oil prices should reduce the volumes that can be economically extracted from the oil sands. Imperial expects that will translate into a 2.6 billion barrel decline in bitumen reserves at Kearl and 200 million barrel reduction at Cold Lake.

However, if/when oil prices recover, some of those de-booked assets could end up being rebooked in the future.

Teck signs another First Nations participation agreement for Frontier Project

Teck signs another First Nations participation agreement for Frontier Project

Kinder Morgan continues to sharpen pencil on Trans Mountain Expansion

Kinder Morgan continues to sharpen pencil on Trans Mountain Expansion

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