Athabasca posts decent results for 2018, despite voluntary production cutbacks

Athabasca posts decent results for 2018, despite voluntary production cutbacks

Athabasca Oil Corp says it managed to produce almost 28,000 bbl/day of heavy oil last year, despite curtailments and a major maintenance turnaround.

The company operates two steam-assisted gravity drainage (SAGD) projects in the Athabasca Region - Leismer and Hangingstone.

Due to last year's wide discounts for Canadian heavy crude, output from the two facilities were voluntarily reduced by about 8,000 bbl/day in November and December. Athabasca now receives a monthly curtailment order from the Alberta government, which defines total production quotas for its oil sands facilities. 

MAP COURTESY ATHABASCA OIL CORP

LIESMER

The larger Leismer facility was acquired from Statoil in 2017, along with the adjacent undeveloped Corner lease. The SAGD plant averaged 18,926 bbl/day of bitumen last year, slightly below its nameplate capacity of about 20,000 bbl/day.

Aside from curtailments at the end of 2018, the plant underwent a major maintenance turnaround in May, which also dented production by about 2,000 bbl/day.

The turnaround was the largest in Leismer’s history, allowing for connection to Enbridge's Norlite diluent pipeline. The new connection should reduce operating costs by about $20 million annually.

A fifth steam generator was also installed, reducing downtime and providing excess steam capacity for future sustaining well pairs.

Athabasca also drilled five new well pairs with four observation wells. The company expects the new wells to begin steaming this summer, with production forecasted for the fourth quarter of this year.

Operating costs at Leismer averaged $7.68 a barrel in 2018, down 13% y/y. Ex-energy, costs declined to $3.21/bbl. The company says the breakeven at Leismer is about US$25.50 for Western Canadian Select (WCS).

HANGINGSTONE

The smaller Hangingstone SAGD facility is located 20 kilometres southwest of Fort McMurray. Bitumen production averaged almost 9,000 bbl/day last year, up about 1% from the previous year, despite voluntary cutbacks in the last quarter of the year. Hangingstone has a nameplate capacity of 12,000 bbl/day.

Operating costs declined 3% y/y to $13.97 per barrel, or $5.68 ex-energy. Athabasca says Hangingstone can breakeven at a WCS price of US$35.50 per barrel.

MARKETING PLAN

Aside from focusing on production, the company has been optimizing market access and realization prices for its diluted bitumen. 

Late last year, Athabasca sold its Leismer Infrastructure assets to Enbridge for $265 million. The company has been guaranteed space on the pipelines and access to 300,000 barrels of storage capacity at Cheecham, at a cost of about $26 million annually.

Athabasca also has access to 130,000 barrels of storage in Edmonton, allowing it to better manage timing of product sales. About 40% of the company’s dilbit is hedged at WTI/WCS differential of US$20.50 a barrel, while another 40% is sold directly to refineries, reducing exposure to spot prices.

The company has also secured 25,000 bbl/day on the planned Keystone XL pipeline to the Gulf Coast, and another 20,000 bbl/day on the planned Trans Mountain Expansion, which runs to Canada's West Coast.

 

IMAGE COURTESY ATHABASCA OIL CORP

 

2019 GUIDANCE

For this year, Athabasca says its thermal assets should produce between 27,500 to 29,000 bbl/day, inline with 2018 production levels, and taking into account mandated curtailments from the Alberta government. Capital spending was reduced to about $80 million this year, down from about $84 million spent in 2018.


SOURCES:
ATHABASCA OIL CORP • 2018 YEAR-END RESULTS
ATHABASCA OIL CORP • 2018 MD&A
ATHABASCA OIL CORP • MARCH 2019 CORPORATE UPDATE
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