Imperial Oil posted a sharp jump in earnings Thursday thanks to record oil production at two major oil sands projects and a rebound in North America's refining industry, all while nearing record spending in the first quarter.
Oil sands consortium Syncrude Canada Ltd. and Imperial's Cold Lake project both bested their past first-quarter oil production results, helping boost Imperial's earnings by 64 per cent over last year, the company said. Refining margins were fattened, while planned maintenance costs at these process facilities were lower, Imperial said.
The company's next oil sands effort, however, is what is occupying executives at the Calgary-based company, Bruce March, the company's chief executive officer, told reporters after its annual meeting Thursday.
Imperial, controlled by Exxon Mobil Corp., is counting on the Kearl oil sands mine to power much of its growth in the coming decade, and despite delays in getting pre-manufactured components for its bitumen processing facility to the site, Mr. March said it is still on track to start up in late 2012.
"We haven't had a good story of growth for many years," Mr. March said. "We've got that now."
The Kearl project, where 60 per cent of construction is complete, will suck up the "majority" of Imperial's 2011 budget, expected to total between $4-billion and $4.5-billion - a spending record for the company.
"I don't think that's going to be sustainable forever, but we feel good about the ability to progress the aggressive capital program that we've got," Mr. March said.
Expansion in oil sands has numerous companies, along with the Alberta and federal governments, pushing hard for a pipeline to the British Columbia west coast, a controversial Enbridge Inc. project.
Mr. March, however, provided only a tepid endorsement for the effort, instead arguing TransCanada Corp.'s Keystone XL expansion line to the Gulf Coast will ensure that production in the oil sands can proceed unfettered. The expansion, which is also facing criticism, has yet to receive regulatory approval south of the border.
"If you add Keystone XL to the existing spare takeaway capacity you've got now, there's no limitations to the growth of the oil sands we would see well past 2020, 2025," he said, arguing the Gulf Coast, while in the United States, is a new market for crude from Canada's oil sands.
Asked whether that means there is no need to build the Northern Gateway line to Kitimat, B.C., he said: "I think it is logical that at some point … to have more key market outlets than just what we've got in the United States. There's no argument [there]
"My comments are really around the capacity that exists today that allows growth in the oil sands for the next 10 to 20 years," he said. Imperial did not buy one of the $10-million units Enbridge sold in exchange for cheaper toll rate and a chance to invest in Northern Gateway, Mr. March said.
Imperial made $781-million or 91 cents per share in the quarter, compared to $476-million or 56 cents per share in the year-ago quarter. This disappointed some analysts, but Mr. March argued his company surpassed analysts expectations when its stock-based compensation plans and asset sales are considered.
"Earnings in the first quarter were higher than the same quarter in 2010 primarily due to stronger industry refining margins of about $175-million, higher Syncrude and Cold Lake volumes of about $100-million and lower refinery planned maintenance activities of about $85-million," the company said in a statement.
Imperial Oil (IMO)
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