Canadian Oil Sands Ltd., which owns a significant interest in one of the country's flagship energy projects, has trimmed its budget, narrowed its production expectations, and posted a quarterly loss it attributed to lagging crude prices and Alberta's recent increase in corporate taxes.
The Calgary-based company, which owns the largest slice of Syncrude Canada Ltd., a joint venture project led by Imperial Oil Ltd. Canadian Oil Sands, said in a statement Thursday that it lost $128-million or 26 cents a share in the second quarter, down from a profit of $176-million or 36 cents a year ago.
Syncrude is Canada's second-oldest bitumen mine, behind Suncor Energy Inc.'s original effort. These established mines have a financial edge over their younger counterparts because major infrastructure investments were made years ago, keeping production costs low. Syncrude's so-called synthetic crude also fetches more favourable prices compared to the heavy oil many other oil sands projects produce.
But even with these advantages, Canadian Oil Sands has been unable to stave off the harm inflicted by depressed oil prices.
"We expect cash flow from operations to cover capital expenditures in 2015," Ryan Kubik, the company's chief executive officer, said in a statement. "Going forward, low sustaining capital over the next several years and a continued drive to reduce costs will demonstrate the resilience of the Syncrude operation in a lower crude oil price environment."
Canadian Oil Sands, in its detailed financial documents, said it lost money in the quarter because of low oil prices and as it "recorded an additional deferred tax expense" of $120-million in the quarter because the Alberta government increased corporate taxes to 12 per cent from 10 per cent as of July 1. The New Democratic Party, which took office in May, campaigned on the promise to raise corporate taxes. The company, however, said its "current tax expense" is down in 2015 as its income drops.
Canadian Oil Sands sold its synthetic crude for an average of $74.47 a barrel in the quarter, down from $112.04 in the same quarter last year. By way of comparison, the North American benchmark price of oil averaged $57.95 (U.S.) a barrel in the three months ending June 30, 2015, and $102.99 a barrel in the same period last year.
The firm's operating expenses hit $52.63 (Canadian) a barrel in the second quarter, down $7.01 from the same period last year. Canadian Oil Sands attributed the savings to lower "purchased energy" costs and lower "work force expenses."
Canadian Oil Sands predicts Syncrude will produce between 96 million and 107 million barrels in 2015, compared to its previous expectation of between 95 million and 110 million barrels. Canadian Oil Sands trimmed its 2015 capital budget to $422-million, down from $429-million.
The company owns 36.74 per cent of Syncrude. Suncor Energy Inc., which posted a profit of $729-million in the second quarter, controls 12 per cent of Syncrude; Imperial Oil, which is controlled by Exxon Mobil Corp., owns 25 per cent; Sinopec, a Chinese state-owned company, holds 9.03 per cent; CNOOC Ltd., another Chinese government-owned enterprise, owns 7.23 per cent; Mocal Energy Ltd., a Japanese out, owns 5 per cent; and Murphy Oil Corp. holds the remaining 5 per cent.
COS reported a net loss of $128 million ($0.26 per Share) for the quarter, reflecting the decline in the SCO realized selling price and additional deferred tax expense from the increase in the Alberta corporate tax rate to 12 percent from 10 percent.
- Our estimate for operating expenses remains about $1.5 billion, or just under $40 per barrel.