Skip to main content

A bucket loader digs for oil sands at the Syncrude Canada Ltd. mine in this aerial photograph taken near Fort McMurray, Alta., on June 4, 2015.

Ben Nelms/Bloomberg

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.

Story continues below advertisement

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.

Story continues below advertisement

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.
Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter