ConocoPhillips swings to a profit in Canada as netbacks at Surmont greatly improve

ConocoPhillips swings to a profit in Canada as netbacks at Surmont greatly improve

ConocoPhillips (COP) reported a profit of US$47 million in the second quarter on its Canadian operations, much improved from a US$105 million loss in the first quarter of 2018.

Bitumen production averaged 63,000 bbl/day, up 11,000 bbl/day from the same time last year but down 3,000 bbl/day from Q1/2018. The company realized $32.38/bbl for its bitumen sales in Q2, more than double from the previous quarter.

The company says it is continuing to implement its alternative diluent program at the Surmont in-situ bitumen extraction facility.

Surmont currently produces Synbit, blending its bitumen product with synthetic crude oil (SCO) sourced from upgraders in the Fort McMurray region. Late last year, the company announced plans to modify its facilities to use condensate instead of SCO, producing a Dilbit (diluted bitumen) of similar quality. ConocoPhillips says the added flexibility will improve operating margins, particularly when SCO prices spike during unscheduled shutdowns.

The first phase of Surmont began operations in 2007, while a second phase of expansion was brought online in 2015. The steam-assisted gravity drainage (SAGD) facility averaged 118,000 bbl/day in 2017, but capacity has been expanded to 150,000 bbl/day due to continuous improvement projects.

 

BITUMEN PRODUCTION PROFILE & STEAM-TO-OIL RATIO (SOR) AT SURMONT

 

MAP COURTESY CONOCOPHILLIPS

Sumont is a 50/50 joint-venture with French energy major Total.

The company sold its 50% stake in the Christina Lake and Foster Creek SAGD operations to partner Cenovus Energy last year for $17.7 billion. COP also negotiated contingency payments if Western Canadian Select (WCS) prices climb higher than $52/bbl, set at $6 million per quarter for every $1. WCS averaged over US$46 in June, or about $60/bbl.

ConocoPhillips also holds a 100% interest in the non-producing Thornbury, Crow Lake, McMillan Lake and Saleski oil sands assets, also located in the Athabasca region.


SOURCES:
CONOCOPHILLIPS • SECOND-QUARTER 2018 DETAILED SUPPLEMENTAL INFORMATION • JUL 2018
CONOCOPHILLIPS • ANALYST AND INVESTOR PRESENTATION • MAY 2018
CONOCOPHILLIPS • CANADA - FACT SHEET • MAR 2018
CRUDE MONITOR • SURMONT HEAVY BLEND
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