In 2012 the price gap between WCS oil (Canadian Select) and WTI (Texas oil) increased in percentage terms after having narrowed in 2011 (by 11%). Also to consider is European Crude (brent crude) which exceeds WTI by $20 to $30.
Positive influences: 1. Enbridge reversing the direction of oil flow through its Seaway Pipeline (Oklahoma--> Gulf Coast 1.4 mbpd) which made it easier for buyers to access Canadian oil/reduced supply glut (as a result, WTI price revised upwards to $118 at JP Morgan). 2. Better heavy crude oil conversion in PADD II (Petroleum Administration for Defence Districts II in North-Central USA, the location of refineries which process over half of Canada's oil). 3. a wider gap provides powerful incentive for companies and governments to build the infrastructure needed to transport the oil to regions that earn a higher return. In Canada, spending by oil companies accounts for 3% of gdp. Negative influences: lack of refineries in western Canada, lack of pipelines from Western Canada to Eastern Canada, New England.
All of the data in the following tables comes from 2013, 2012, 2011 annual reports, 40-f filings, 10-k presentations, management discussion and analysis documents.
Also of interest: 44% of crude oil processed at Canadian refineries came from international sources, something that's bound to change given that much of the foreign oil is purchased at higher prices than oilsands oil and that oilsands producers are in need of Eastern Canada's oil refining capacity.
Canada oil reserves @175 billion barrels -2013 US Energy Admin.
Risks to Canadian production: Leadership changes in Venezuela (211b boe reserves) and Mexico (11 to 22b boe) could potentially make them stable, efficient suppliers. This is because so far, politics have kept foreign investment out, making it difficult for companies to upgrade to the technology needed to develop their oil which like Canada's, is unconventional. 2006-2012 US imports: Mexico (-30%), Venezuela (-41% to 1.0m boe/d)
Only top 9 shown. Canada is home many other major companies including MEG Energy (more reserves than all except CNRL, Suncor but MEG still qualifies as an exploration company (<60,000 boe/d); Pacific Rubiales Energy (shares interset in oil fields responsible for a third of Colombian production), Crescent Point Energy, etc. Calgary is home to over 2400 oil and gas companies. Caisse de depot et placement du Quebec which manages among other things the Quebec pension plan, owns 5.9% of Enbridge ($2.7 billion), total interest in oil sands companies is $5.4 billion.
Crescent Point Energy major moves in 2012 boost total output by 34% (crude +35% ->89,704 bbls/d, gas +25.7% -> 9,047 boe/d). 2012 deals: Jan 25 - adds 980 bpd in SW Manitoba, March 15 - Takeover of Wild Stream Exploration adds 5,400 bpd in Shaunavon, Saskatchewan, March 16 - Deal with PetroBakken involves 2,900 bpd light oil SE Saskatchewan, April 16 - Sells 900 boe/d 80% oil in Alberta, May 1 - Takeover of Reliable Energy Ltd and its 1,000 boe/d light oil resource in SW Manitoba, June 1 - Agreement closed involving 2,900 boe/d 98% oil, June 20 - Takeover of Cutpick Energy Inc and its 5,600 boe/d resource near Provost, Alberta (65% light oil), July 17 - Sells 225 boe/d natural gas assets. How did all the moves impact annual sales? 2012 oil revenue +24% $2.643b, gas -15% $51.813b. Total revenue +23% even though average price realized down: oil -8.1% -> $80.51, gas -32.6% -> $2.61, total -8.3% -> $74.57.
Syncrude April 30, 2013: Unplanned outages reduce 2013 full year production estimate by 5% to 100 and 110 million boe. Average daily production in the first quarter of 2013 was 260,400 boe/d (-12%). 2013 1q earnings down -44% on lower output and lower crude price (total revenue down -11% to $961m). The company is part owned by Sinopec. Core properties are joint ventures with Cnooc, Imperial Oil.
CNRL: 2012 reserve replacement ratio of 246% (5% increase in reserves equals 2.46X full year production); in 2011 the ratio was 390%. 2012 bitumen royalties of $4.34/bbl (+8.8%). synthetic crude oil sands output : 2012 86,077 bbls/d +45,643. fiscal 2012 production expense: company average : $13.14/bbl (+6%); oil liquids $16.11/bbl (+2%), gas $1.31/mmcf (+14%); oil prod exp highest in North Sea ($53.53 +44%) lowest in North America ($13.4 +1%); gas prod exp highest in North Sea ($3.75 +0.92) lowest in North America ($1.28 +0.16). profit down 3/4 of a billion dollars after rising $1b in 2011.
Husky Energy HUSKF: Major gas exploration project is in Liwan, China. Husky Energy is also contemplating exploration in Greenland. Has interests in White Rose (Canadian East Coast) which Suncor Energy owns 26.125% of. 2011 reserve replacement ratio: 180%. Reserve life index now at 10.3 years. Husky produces in western and atlantic canada. International production comes from China Wenchang (light oil and ngls) - 8,300 b/d 9m2012 (8.6 last year)
Talisman Energy TLM: 2011 reserve replacement ratio: 157% @ cost of $20/bbl. Replacement costs -50% last 3 years.
9M2012: gross production 437th b/d (up from 421th) vs 9m2011: net production 358,000 (up from 348,000).
production from assets sold: 9M2012: 5,000 bpd (gross), 4,000 bpd (net) 9M2011: 8,000 (gross), 7,000 (net)
Talisman Energy fiscal 2012 - sold 49% of British operations to Sinopec for $2.5 billion (North Sea). Also during the last three months of 2012 the company announced a major oil discovery in Kurdistan. For the 2012 year, cash flow (-12.0% to $3.022b), earnings (-83.0% to $132m) down significantly. Financials were down in 2012 due to 1) lower North Sea production 2) lower gas prices in North America 3) higher operating costs. gross production: Oil 162th (-16th) + N.Gas 1582 bcf (+91) = 426 boe (steady)
Imperial Oil Esso IMO: Between 2010 and 2011 the number of wells Imperial Oil had interests in declined significantly for natural gas (gross: 5372--> 2404, net: 2833--> 847) but went up for crude oil (gross: 883--> 1070, net 588--> 734). Bitumen wells down also (4358--> 4068). 2011 exit-year 60% of net proved reserves (3.191 billion boe) are at undeveloped properties up from 47% in December 2010. Today (2012) 77% of oil reserves are in bitumen, up from 70% in December 2010. Feb 26, 2013: IMO acquires a 50% working interest in assets formerly belonging to Celtic Exploration from ExxonMobil Canada ($1.55 billion). 76% of Celtic's 128m barrels of 2P reserves are in natural gas.
9m2012: earnings up +13.7%: $2366m --> $2690m or $2.77 --> $3.16 per share. gross production decreased (299,000 --> 281,000) due to planned maintenance at Cold Lake and Syncrude, and fewer natural gas assets than in 2011.
9m2012 gross -> net production: Cold Lake: 154 -> 120, Syncrude: 70 -> 67, Conventional: 20 -> 15, Natural Gas: 194 -> 197
Crescent Point Energy CPG: Market cap is larger than Nexen and Penn West however production is much lower. The company anticipates 2012 exit-year output of 93,000 boe/d, 90% light medium oil.
Encana ECA: On December 18, 2012 announced that it and Ferus LNG will build a 190,000 litre per day liquefied natural gas plant near grand prairie, Alberta. when operational end of 2013 will be the first in Canada to produce high quality LNG fuel for use in high horsepower vehicles.
Acquisitions: $361m worth of land in Canada and the United States (down from $468m last year)
Nexen Inc: Nexen's royalty rates paid on natural gas were highest in the USA, accounted for 7.9% of gross prod (126--> 116) vs 5.0% in Canada, 0% in UK. Oil Royalties: UK was virtually nothing (104.9 gross --> 104.8 net), long lake bitumen (15.9--> 15.1), syncrude (21.2--> 19.6) usa (9.9--> 9.0). Yemen remained the highest (41.3--> 23.1). Feb 24: 1st oil from Usan field, offshore W.Africa. 2011: Nexen invested $2,516 m in oil and gas activities, causing reserves to increase 73M boe for proved, 175m boe for probable.
PennWest Petroleum PWE: In early-mid 2012 the market price for Canadian oil (WCS) was as much as $25 lower than US oil prices making it more difficult for Canadian producers to adjust to lower overall prices. In it's second quarter (2012) Penn West cited that as the main reason why net income was down -13.3% that quarter; To adjust, the company layed out a new plan that involves capital spending cuts (-10%) and selling assets ($1.5 billion worth). 2012 full year production estimate was lowered from 168,500 - 172,500 bpd --> 165,000 - 168,500 bpd.
9M2012: liquids make up 66% of production mix up from 63%. netback -12.5% to $26.49 boe ($30.28). capex -27% to $1,053m ($1,443). risk lowered earnings from a gain of $138m in 3Q2011 to a loss of $67m in 3Q2012. Quarterly dividend of 27 cents has been unchanged for over 2 years.
Canadian Natural Resources CNQ: Production base is diverse and that enables it to withstand fluctuating commodity prices and regional production inconsistencies. In 2011 average sales price of crude oil (net of transportation and blending costs) was $77.46/bbl +17.7% vs 2010 ($65.81/bbl). Crude oil sales price was significantly higher in the 4q than the 3q ($85.28 vs $73.80) consequently royalties paid were also higher ($12.3/bbl over the fully year 2011 up from $10.09/bbl in 2010; $15.53 in 4q up from $11.52 in the 3q).
2011 natural gas sales price down 8.6% to $3.73/Mcf ($4.08 in 2010) but unlike crude oil, natural gas price declined in the last quarter from the quarter prior to it ($3.50 vs $3.76). Oil liquids netback increased in 2011 ($41.56--> $49.41) however ngas netback was lower ($2.79--> $2.40) pulled down mostly by 4q results (4q netback for gas was $2.17/Mcf). Overall oil + gas netback +14.7% to $36.62 for the year, +20% in the 4q ($37.95).
Crude oil and natural gas prices were highest in the North Sea ($108.56 up from $82.49) and Offshore Africa ($105.53 up from $78.93) but still very low in North America ($72.17 up from $62.28) and that brought the company average up only 17.7% to $77.46 (from $65.81 in 2010). Natural gas prices Offshore Africa were significantly higher at $9.56/Mcf ($6.63 in 2010) compared to only $3.64 and $4.07 in North America and North Sea, respectively.
CNRL profited nearly $1 billion more in 2011 than in 2010 ($2643 million +58%) even though revenue was up only +6.9% to $15.507b. For the year, the company paid $294 million more in royalties ($1421--> $1715).
CNRL reserves December 2011: 4.83 billion boe of proved reserves (+7%). 2P: natural gas +25% North Sea (134 Bcf), -6.5% Offshore Africa (129 Bcf), +5.7% North America (5838 Bcf). 96% of production happened in G8 countries making the company's assets fairly stable. 2012 quarterly dividend will go up 17% (0.09 to 0.105). In 2011 CNRL replaced 390% of its production and that caused a jump of 7% in proved reserves.
Note: Exports of natural gas from Canada require the approval of the NEB and Canadian government. Data in table is gross output before royalties. Pacific Rubiales Energy not listed because net production is much lower than it is for these nine companies (even though PRE gross production is greater than a few of them).
Cenovus Energy CVE: oil production anticipated to grow 14% in 2013, oil sands production up 44% in 3Q2012 to 95,000 bpd
table above: Canadian Natural Resources Ltd total proved bitumen reserves +9% to 1.066b (2P +23% 2.122b), oil sands production more than doubled to 86,077. Candian Oil Sands reserve life based on 2012 production is 42 years (110 million barrels 40.4m net). Cdn Oil Sands averaged 290th bpd output over last 6 years; 2012 production 286,500 bpd (104.9m barrels total) down from 288,400 (105.3m total) despite capex +68.9% to $1.086 billion. MEG Energy Christina Lake can support production capacity of 200th for 30 years, Surmont 100th for 20 years.
Updated March 2013