OPTI Canada Underscores Q1 2009 Results

OPTI Canada announced today the Company's financial and operating results for the quarter ended March 31, 2009.

The Long Lake Project (the Project) is the first to use OPTI's integrated OrCrude(TM) process. Our proprietary process is designed to substantially reduce operating costs compared to other oil sands projects while producing a high quality, sweet synthetic crude.

"We are pleased to have successfully produced and sold our first upgraded premium synthetic crude this quarter, and to have demonstrated that our technology works," said Chris Slubicki, President and Chief Executive Officer. "We expect that improvements being made to the water treatment system will significantly enhance steam injection, and therefore bitumen production, in the second quarter."


In the first quarter of 2009, OPTI reached a significant milestone with the production and sale of first PSC(TM) from the Long Lake Project. We have recently produced approximately 15,000 barrels per day (bbl/d) gross of on-spec, high quality PSC(TM), upgraded from low-value bitumen. All major process units in the Upgrader are operational, and preparation is underway to transition gasifier feed from vacuum residue to ashphaltenes, the final step in OrCrude(TM) commissioning. Synthesis gas from the Upgrader has been used in SAGD operations, decreasing operating costs by reducing the requirement for purchased third-party natural gas. During the initial operating period, we expect periods of downtime but anticipate that the stability of operations will continue to improve. Upgrader reliability is improving with 4 days of operation in February, 16 days of operation in March and 20 days of operation to date in April. We expect Upgrader capacity during ramp-up will be capable of processing all of the forecasted SAGD volumes and we expect the Project to reach full capacity of approximately 58,500 bbl/d of PSC(TM) and other products by late 2010.

The Long Lake reservoir continues to perform as expected given the amount of steam that has been injected into the reservoir. Steam generation has been limited by the ability to treat water during the ramp-up period. At full production, approximately 90 to 95 percent of the water injected into the reservoir is recycled. During ramp-up, it is necessary to add cold source water to the recycled hot produced water in order to increase our overall steam volumes over time. Temperature limitations in the water treating system have limited the ability to materially increase steam volumes. A number of changes to the water treating system have been implemented, which include adding supplementary heat to the hot lime softeners and improvements to the filtration system. We expect this will increase steam injection rates and bitumen production.

Steam generation in the first quarter totalled approximately 66,000 bbl/d day, with bitumen production averaging approximately 13,400 bbl/d. With certain changes to the water treating system recently implemented, recent steam volumes have averaged approximately 80,000 bbl/d. As a result, bitumen volumes have begun to ramp-up and April volumes to April 25 averaged approximately 16,000 bbl/d. Given steaming constraints, allocation of steam is necessary and accordingly only 40 of 81 well pairs are presently in production mode. With inconsistent steam injection the average steam to oil ratio (SOR) for these wells ranges between 4.0 and 5.0. We continue to expect a long term SOR of 3.0. As further improvements are made to the water treatment system and steam generation increases, all remaining wells will be brought on. We expect SAGD volumes to increase consistently from current production to full capacity of 72,000 bbl/d by late 2010. During the SAGD ramp-up period in 2009 and 2010, we also expect to process up to 10,000 barrels per day of third party bitumen.


On January 27, 2009, OPTI announced that we had significantly enhanced our liquidity with the completion of the sale of a 15 percent working interest in our joint venture assets to our partner Nexen for $735 million. Effective January 1, 2009 , OPTI has a 35 percent working interest in all joint venture assets, including Phase 1 of the Project, all future phase reserves and resources, and future phases of development. All Project and operating employees who accepted offers from Nexen were transitioned effective April 1, 2009.


OPTI also announced today the appointment of Kiren Singh to Vice President and Treasurer. Ms. Singh, who joined OPTI in 2008 as Treasurer, has over 20 years of experience in corporate and project finance and corporate insurance with Canadian and international energy leaders including Mobil and ExxonMobil. Ms. Singh holds an MBA from the University of Calgary and a Chartered Financial Analyst designation.

As a result of OPTI's ongoing corporate transition to that of a non-operating entity, Bill King, formerly VP Development, is no longer with the company. OPTI's senior management consists of: Chris Slubicki, President and Chief Executive Officer; Travis Beatty, VP Finance and CFO; Joe Bradford, VP Legal and Administration and Corporate Secretary; Kiren Singh, VP and Treasurer; and Al Smith, VP Marketing.


Phase 1 of the Long Lake Project is essentially complete as of March 31, 2009. The remaining capital costs relate to the completion of the steam expansion project, expected later this year, and the ash processing unit in 2010. The cost to complete these two projects is approximately $35 million net to OPTI, most of which will be incurred in 2010.

For the three months ended March 31, 2009 we incurred capital expenditures of $85 million. Our $13 million share of the Phase 1 expenditures for Upgrader and SAGD were primarily related to the ongoing construction of the steam expansion project. Sustaining capital expenditures of $21 million related primarily to engineering and resource delineation for future Phase 1 well pads. Our share of capitalized operations of the Upgrader was $22 million related to commissioning costs, offset by $4 million of PSC(TM) sales.

Effective July 1, 2008, we no longer capitalize our share of the net SAGD operations. However, we continue to capitalize net Upgrader operations as the Upgrader is not ready for intended use for accounting purposes. For the three months ended March 31, 2009, we incurred expenditures of $5 million for engineering and $18 million for resource acquisition and delineation for future phases. In conjunction with Nexen, we expended $14 million to acquire the petroleum and natural gas rights and oil sands rights on lands adjacent to our properties. We expended $4 million on corehole delineation and seismic costs associated with future phases of development.

Capitalized interest for the three months ended March 31, 2009 includes interest of $28 million on our senior secured notes (Notes) and $1 million with respect to our revolving credit facilities. We have allocated our interest costs between the SAGD and Upgrader portions of the project based on book value. The reduction in other capital of $19 million in the period related to a reduction in the balance of Upgrader inventories and the write-off of previously capitalized transaction costs in connection with the working interest sale to Nexen.

First Quarter Operational Overview

Our overall results in the first quarter of 2009 reflected the inconsistent performance of the SAGD and Upgrader operation and resulting relatively low SAGD volumes. Although we expect a resolution to many of the surface water treating issues in the near term, we were not able to generate sufficient steam on a consistent basis during the first quarter to increase our SAGD production volumes. As a result of the low and variable SAGD volumes, and minor operational interruptions for the Upgrader, the Upgrader was producing PSC(TM) for only 29 days during the quarter. As the water treating issues are resolved and steam production increases and becomes more reliable, we expect that the resulting higher SAGD volumes will result in more on-stream days for the Upgrader as well. We define our net field operating margin as sales that include petroleum product and power sales minus operating expenses, diluent and feedstock purchases and transportation costs (see "Non GAAP Financial Measures"). This margin was a loss of $31 million during the period as compared with a loss of $56 million in the preceding quarter. As most of our SAGD and Upgrader operating costs are fixed, we expect that rising SAGD volumes and an increasing number of days that the Upgrader operates will lead to improvements in our net field operating margin. This expected improvement would be attributable to higher PSC(TM) sales and lower diluent costs.

Total Revenue

For the three months ended March 31, 2009, we earned Premium Synthetic Heavy (PSH) revenue of $27 million. Our share of PSH sales averaged 7,700 bbls/day at a price of approximately $39.50/bbl. In the same period, we had power sales of $2 million representing 23,503 MW of electricity sold at an average price of $69.87/MW. In the first quarter of 2008, revenue of $2 million was entirely comprised of interest income.



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