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Imperial's Kearl Project Doubled Production from 2013

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   |    Friday,October 31,2014

Imperial Oil Announces Third Quarter 2014 Results.

Rich Kruger, Chairman, President and Chief Executive Officer, commented: "During the quarter, Imperial maintained its focus on safety and operational performance while continuing to advance major upstream growth projects. Specifically, the Downstream and Chemical businesses continued to deliver strong results, Kearl production increased and the Kearl expansion and Cold Lake Nabiye projects progressed as planned.

Earnings in the third quarter were $936 million, or $1.10 per share, up 45 percent from the same period in 2013.

Gross production averaged 307,000 oil-equivalent barrels per day, up 19,000 barrels versus 2013, due to increased Kearl production. Excluding the impact of divested assets, total production was up 12 percent in the quarter. Kearl averaged 78,000 barrels per day (55,000 barrels Imperial's share) in the quarter. Excluding the impact of major planned maintenance, which was executed over a two-week period in September, Kearl production averaged 92,000 barrels per day (65,000 barrels Imperial's share).

Refinery throughput totaled 409,000 barrels per day, up 17,000 barrels versus 2013, supported by 97 percent capacity utilization. Petroleum product sales were a record 502,000 barrels per day, up 35,000 barrels or seven percent versus the same period last year. Chemical earnings were also a record at $66 million, up nearly 70 percent versus the same period last year.

Third quarter capital and exploration expenditures totaled $1,434 million. Investments were primarily associated with upstream growth; most notably the Kearl expansion and Cold Lake Nabiye projects, which were 97 and 96 percent complete, respectively, at the end of the quarter. In addition, a decision was made to expand the initial capacity of the Edmonton Rail Terminal from 100,000 barrels per day to 210,000 barrels. The project, which continues to progress toward a first quarter 2015 start-up, will ensure access to highest value markets for equity production.

Contributions to the communities in which we live and work continued. In August, Esso became the Official Fuel and Convenience Store Supplier of the Toronto 2015 Pan Am/Parapan Am Games. Duly recognizing the location where Imperial was originally founded, donations totaling more than $120,000 were made in honor of the Sarnia Centennial. Funds will support local arts, community events, academic awards and support for Sarnia area schools."

Third quarter highlights

• Net income totaled $936 million or $1.10 per share on a diluted basis, up 45 percent from $647 million or $0.76 per share in the third quarter of 2013.
• Production averaged 307,000 gross oil-equivalent barrels per day, up seven percent from 288,000 barrels in the same period of 2013. Excluding the impact of divested conventional assets, total production was up 34,000 barrels per day or 12 percent.
• Petroleum product sales were a record 502,000 barrels per day, up 35,000 barrels in the third quarter, consistent with the company's strategy to grow sales in profitable Canadian markets.
• Capital and exploration expenditures of $1,434 million were primarily directed at the Kearl expansion and Cold Lake Nabiye upstream growth projects.
• Kearl bitumen production averaged 78,000 barrels per day (55,000 barrels Imperial's share) in the third quarter. Major planned maintenance was safely executed during the second half of September and included maintenance on the ore preparation plant, hydro-transport, extraction and solvent recovery systems, along with modifications to froth treatment instrumentation and control valve upgrades to enhance reliability. Excluding the impact of this 14-day shutdown, quarterly production averaged 92,000 barrels per day (65,000 barrels Imperial's share).
• Kearl expansion project advanced to 97 percent complete. The project continues to track ahead of schedule, relative to its originally planned late 2015 start-up. It is expected to ultimately produce 110,000 barrels per day gross (78,000 barrels Imperial's share). Lessons learned from the initial development have been incorporated.
• Cold Lake Nabiye project advanced to 96 percent complete. Initial steam injection remains targeted for year-end 2014 with initial bitumen production anticipated in the first quarter of 2015. Ultimate production of 40,000 barrels per day is expected.
• Edmonton Rail Terminal project progressed as planned. A decision was made to expand the initial capacity from 100,000 barrels per day to 210,000 barrels. The project will ensure access to highest value markets for equity production. Target start-up remains the first quarter of 2015.
• Retail partnership with Tim Hortons expanded to ensure essentially all of the approximately 470 company-owned Esso stations have a Tim Hortons offering. The expansion will be completed over the next several years.

Third quarter 2014 vs. third quarter 2013

The company's net income for the third quarter of 2014 was $936 million or $1.10 per share on a diluted basis, compared with $647 million or $0.76 per share for the same period last year.

Upstream net income in the third quarter was $532 million, $72 million lower than the same period of 2013. Earnings in the third quarter of 2014 reflected the impact of lower bitumen and synthetic crude oil realizations of about $200 million. Earnings also decreased due to higher royalties along with higher energy and other operating costs totalling about $90 million. These factors were partially offset by higher liquids volumes of about $140 million, primarily due to incremental contribution from Kearl production, and the impact of a weaker Canadian dollar of about $85 million.

The company's average realizations from the sales of synthetic crude oil decreased about 10 percent in the third quarter of 2014 to $102.58 per barrel versus $113.63 per barrel in the third quarter of 2013. The decreased realizations largely followed the West Texas Intermediate (WTI) crude oil benchmark price, which was down about eight percent to $97.25 per barrel, in U.S. dollars. The company's average bitumen realizations at $74.82 per barrel, also followed the trend of WTI, and were down about eight percent versus the third quarter of 2013. The company's average realizations on natural gas sales of $3.58 per thousand cubic feet in the third quarter of 2014 were higher by $0.92 per thousand cubic feet versus the same period in 2013.

• Gross production of Cold Lake bitumen averaged 149,000 barrels per day in the third quarter, up from 147,000 barrels in the same period last year.
• Gross production from the Kearl initial development in the third quarter was 78,000 barrels per day (55,000 barrels Imperial's share) up from 33,000 barrels per day (23,000 barrels Imperial's share) in the third quarter of 2013.
• The company's share of Syncrude's gross production in the third quarter was 61,000 barrels per day, up from 57,000 barrels in the third quarter of 2013. Increased volumes were due to lower maintenance activities.
• Gross production of conventional crude oil averaged 16,000 barrels per day in the third quarter, versus 22,000 barrels in the corresponding period in 2013. The lower production volume was primarily due to the impact of properties divested during the first half of 2014.
• Gross production of natural gas during the third quarter of 2014 was 149 million cubic feet per day, down from 211 million cubic feet in the same period last year, reflecting the impact of properties divested during the first half of 2014.
• Downstream net income was $343 million in the third quarter, $297 million higher than the third quarter of 2013. Earnings increased due to the impacts of improved refinery reliability and feedstock mix of about $110 million, along with higher industry refining margins of about $100 million, and higher marketing margins and sales volumes totaling about $70 million.

Nine months highlights

• Net income totalled $3,114 million, up from $1,772 million in the prior year.
• Net income per common share on a diluted basis was $3.66 compared to $2.08 in 2013.
• Cash generated from operating activities was $3,314 million, versus $1,633 million in 2013.
• Cash used in investing activities of $3,117 million, including proceeds of $814 million from the sale of assets, was down $3,184 million versus the same period in 2013.
• Gross oil-equivalent barrels of production averaged 308,000 barrels per day, up nine percent from 283,000 barrels from the same period in 2013.
• Refinery throughput averaged 402,000 barrels per day, up eight percent from 371,000 barrels in the same period last year, adjusted for the Dartmouth refinery shutdown.
• Per-share dividends declared during the year totalled $0.39, up $0.03 per share from 2013.
• Nine months 2014 vs. nine months 2013
• Net income in the first nine months of 2014 was $3,114 million, or $3.66 per share on a diluted basis, versus $1,772 million or $2.08 per share for the first nine months of 2013.
• Upstream net income for the first nine months of 2014 was $1,841 million, $540 million higher than the same period of 2013. Earnings in 2014 included a gain of $478 million from the divestment of conventional upstream producing assets. Earnings also increased due to the impacts of a weaker Canadian dollar of about $240 million and higher liquids volumes of about $150 million, primarily due to incremental contribution from Kearl production. These factors were partially offset by higher royalty costs of about $220 million and higher energy and other operating costs of about $100 million.
• The company's average realizations from the sale of synthetic crude oil increased about four percent in the first nine months of 2014 to $106.59 per barrel versus $102.98 per barrel in the corresponding period last year. The increased realizations reflected the increase in the WTI crude oil benchmark price, which was up about one percent, and the impact of a weaker Canadian dollar. The company's average bitumen realizations in Canadian dollars for the nine months to-date in 2014 were $72.11 per barrel versus $63.86 per barrel in the same period in 2013 as the price spread between light crude oil and bitumen narrowed. The company's average realizations on natural gas sales of $4.97 per thousand cubic feet in the first nine months of 2014 were higher by $1.76 per thousand cubic feet versus the same period in 2013.
• Gross production of Cold Lake bitumen averaged 145,000 barrels per day in the first nine months, down from 152,000 barrels from the same period last year. Lower volumes were primarily due to the cyclic nature of steaming and associated production and the impact of several unplanned third-party power outages in the first quarter.
• Gross production from the Kearl initial development in the first nine months of 2014 was 73,000 barrels per day (52,000 barrels Imperial's share) versus 13,000 barrels (9,000 barrels Imperial's share) in the same period of 2013.
• During the first nine months of 2014, the company's share of gross production from Syncrude averaged 62,000 barrels per day, compared to 63,000 barrels from the same period of 2013.
• Gross production of conventional crude oil averaged 18,000 barrels per day in the first nine months of 2014, versus 21,000 barrels from the same period in 2013. The lower production volume was primarily due to the impact of properties divested during the first half of 2014.
• Gross production of natural gas during the first nine months of 2014 was 171 million cubic feet per day, down from 201 million cubic feet in the same period last year. The lower production volume was primarily the result of the impact of divested properties.