Petro-Canada has provided a production and operational update for the quarter and year ended December 31, 2008.
2009 Upstream Consolidated Production Outlook
Subsequent to the release of the 2009 guidance on December 11, 2008, the Company is reducing 2009 production guidance as a result of cutbacks to 2009 planned capital expenditures that are affecting near-term production as well as OPEC quota restraints in Libya. Revised production guidance is now expected to be in the range of 345,000 barrels of oil equivalent/day (boe/d) to 385,000 boe/d. The production guidance range has been expanded to reflect market uncertainty in the current environment and the potential impact on near term production if low commodity prices persist or worsen and further reductions to capital expenditures are needed.
In 2008, production of crude oil, NGL and natural gas averaged 418,000 boe/d net which was at the high end of our 2008 guidance. Upstream production for 2009 is expected to decrease from 2008, primarily due to natural declines in Western Canada, East Coast Canada and International OPEC quota restraints in Libya, and large facility turnarounds in East Coast Canada and International. These turnarounds are being undertaken to enhance production growth in the future and maintain reliable operations. Partially offsetting these decreases are additional volumes from Oil Sands and base business investments, which moderate the natural declines. With deferred production from turnarounds back on-stream at the end of 2009, the exit rate is expected to be closer to the high end of the range.
Fourth quarter production averaged 409,000 boe/d net to Petro-Canada in 2008, relatively unchanged compared with 410,000 boe/d net in the same quarter of 2007. Volumes reflected decreased International production and relatively unchanged North American Natural Gas production, offset by increased East Coast Canada and Oil Sands production.
In 2008, production of crude oil, natural gas liquids (NGL) and natural gas averaged 418,000 boe/d net, at the high end of our 2008 guidance and unchanged from 418,000 boe/d in 2007.
Petro-Canada's strategy is to create shareholder value by delivering long-term, profitable growth and improving the profitability of the base business.
Petro-Canada's capital program supports bringing on six major projects over the next several years to deliver long-term profitable growth. The Company anticipates upstream production will significantly increase when these major growth projects come on-stream. The major projects, Syria Ebla gas, Libya EPSAs development and the White Rose Extensions, are proceeding on schedule and have been sanctioned by the Company. The other three projects, MacKay River expansion, Fort Hills mining project and the Montreal coker, are not sanctioned and are on hold until commodity prices and financial markets strengthen.
Petro-Canada continually works to strengthen its base business by improving the safety, reliability and efficiency of its operations and is focused on delivering upstream production in line with guidance.
Major Project Milestones
Oil Sands had an operating loss of $8 million in the fourth quarter of 2008, compared with operating earnings of $73 million in the fourth quarter of 2007. Lower realized Syncrude prices, higher operating costs and losses on the sale of crude oil inventories were partially offset by increased production, higher realized MacKay River prices and lower DD&A expenses.
Oil Sands production averaged 63,100 barrels/day (b/d) in the fourth quarter of 2008, up 22% from 51,700 b/d in the fourth quarter of 2007. Increased production primarily reflected increased reliability and capacity at MacKay River, partially offset by the completion of a planned 45-day turnaround of Coker 8-2 and bitumen production constraints at Syncrude.
In 2008, the Company replaced 135%(1) of production on a proved plus probable basis. Proved plus probable reserves additions totalled 206 MMboe, excluding 2008 production of 153 MMboe net. As a result, total proved plus probable reserves increased from 2,409 MMboe at year-end 2007 to 2,462 MMboe at year-end 2008. The proved plus probable RLI was 16.1(1) at year-end 2008, compared with 15.8(1) at year-end 2007.
Petro-Canada's overall objective is to replace proved plus probable reserves on a rolling five-year basis. Petro-Canada's proved plus probable reserves replacement on a consolidated basis was 149%(1) over the last five years.
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