Oil Sands Mining
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Canadian Oil Sands Trust announced its Budget for 2010. Unless otherwise noted, all figures are based on Canadian Oil Sands' 36.74 per cent working interest in the Syncrude joint venture and all financial figures are in Canadian dollars.
- Canadian Oil Sands is budgeting Syncrude production of 115 million barrels with a 110 to 120 million barrel production range. The 115 million barrel Syncrude production estimate includes one planned coker turnaround in the second half of 2010 and an allowance for unplanned maintenance work.
- Revenues, net of crude oil purchases and transportation, are estimated at $3 billion, reflecting our single point production estimate and a $71 per barrel sales price.
- Per barrel operating costs in 2010 are anticipated to be $35 per barrel. Total budgeted 2010 operating costs of $1.5 billion reflect a $6 per gigajoule ("GJ") natural gas price assumption, consumption of one GJ per barrel, and continued use of contractors to supplement mining activities.
- Capital expenditures in 2010, which primarily relate to sustaining existing operations, are comprised of $408 million for maintenance of business and $133 million for the Syncrude Emissions Reduction (SER) project. This environmental project is designed to reduce sulphur compound emissions by approximately 60 per cent from current approved levels once the project is fully operational. The expected completion date is 2011.
- Cash from operating activities is estimated at $1 billion, or $2 per Trust Unit.
The 2010 budget can be impacted by a variety of factors. Some of the more significant variables include, without limitation:
- Crude oil prices: Canadian Oil Sands' 2010 production is currently unhedged. Accordingly, the Trust's cash from operating activities is highly sensitive to changes in crude oil prices and foreign exchange rates. Every US$1.00 per barrel change in the annual WTI crude oil price impacts cash from operating activities by about $33 million or $0.07 per Trust unit. Other key sensitivities are provided in our 2010 Guidance Document.
- Syncrude operational reliability and production: Timing of unit turnarounds and maintenance cannot be precisely scheduled and unplanned outages may occur. In addition to the impact on production, maintenance and turnaround activities affect operating costs because the costs associated with these activities are expensed in the period incurred. The effect on per barrel operating costs is amplified as the facility is generally producing at reduced rates when maintenance work is occurring. The reverse is also true, meaning per barrel operating costs decline with better operational reliability.
"We expect steadier operations in 2010 with production averaging 315,000 barrels per day, or about 90 percent of Syncrude's current design capacity," said Marcel Coutu, Canadian Oil Sands' President and Chief Executive Officer. "Syncrude's focus remains on improving operational reliability. The majority of Imperial Oil/ExxonMobil's systems have been introduced at Syncrude through the Management Services Agreement and the effort now is directed at fully integrating them into the operations as we drive to achieve Syncrude's design capacity of 350,000 barrels per day."
Mr. Coutu added, "2010 also marks our last year as an income trust. We do not expect our transition to a corporate structure to change our approach to the business. We intend to continue to use the cash generated in our business to sustain operations and help fund growth, with a disciplined approach to distributing excess cash through dividends. We thus expect our dividends will be variable, similar to the distributions we have paid as a trust, reflecting changes in crude oil prices and economic conditions, and Syncrude operating performance and capital commitments. We have the advantage of a long-life crude oil resource and the ability to expand production to support both asset growth and dividends."