Wednesday, February 26, 2014

Oil Companies 2013 Results Impacted By Oil Sands Production, Lower Refinery Margins, Kearl Project Christina Lake

2013 was a great year for three of my favorite oil companies - Suncor Energy (nyse:SU), Cenovus Energy (nyse:CVE) and Imperial Oil (nyse:IMO).  For the most part, production, revenue, earnings and dividends were up, however plummeting refining margins coupled with a stronger US dollar negatively affected an otherwise solid financial statement from Cenovus Energy.  I have read through the SEC filings from these companies and will give a brief synopsis of the results.

America Choosing Not To Renew Licenses For Coal Fired Power Plants Gives China, India Economies Competitive Advantage

Nearly 1200 coal fired power plants will be coming online around the world in 2014 ; a cost-benefit-efficiency analysis shows that coal fired power plants produce energy at a very low cost and that's giving US competitors China, India and other emerging markets a strategic advantage.  Another interesting thing to note is this - after a string of attacks on nuclear power plants, their vulnerability has been called into question.

Despite what the nay sayers are saying, US carbon emissions are at their lowest levels since 1994; the reason for this is simple - the so-called 'dirty energy' sources are producing at a very high level of efficiency (power plants fitted with sulfur and carbon scrubbers).

2013 Highlights From Suncor Energy, Cenovus Energy, Imperial Oil

Suncor Energy (SU) 2013 Highlights

Net earnings up significantly thanks in part to a strong fourth quarter; last year, 4Q loss was $574 million due to Voyageur incident / writedown on assets in Libya.  12-month net income: $3,911 million up from $2,740 million.  Hindering earnings is the strong US dollar:  fx loss of $157 million in 2013 vs fx gain of $521 million in 2012.
Capex of $6.380 billion is up marginally from $6.370 billion last year: capex on oil sands down 13% -> $4.311 billion; capex on refining and marketing up 38% -> $890 million.  Planned capital and exploration budget of $7.8 billion for 2014.

Concluded 2013 with record quarterly net production from the oil sands (409,600 bpd) up from 342,800 bpd in 4Q2012.

For the year, production was up at oil sands operations (+33,300 or 9.3% -> 392,500 bpd) but down in the exploration and production segment (189,900 -> 169,900).  Production mix is moving away from natural gas (only 6% from natural gas, down from 9%). Refinery utilization down in Western North America (100% -> 96%).  Price per barrel realized up:  oil sands: $84.22 (vs $82.75);  exploration and production: $91.44 (vs $84.05).

Operating Netback:  increases came from North America Onshore (+33.5% -> $2.51 / mcfe), Other International (+14.5% -> $47.85 / bbl), East Coast Canada (+12.0% -> $73.02 / bbl).  Strongest netback results from North Sea Buzzard where the company pays no royalties (netback @$101.50 (vs $99.74) on avg price realized of $109.95 (up from $108.46).  15% increase in quarterly dividend up to 23 cents.  Net earnings up significantly in the final quarter:  $443 million profit, up from $557 million loss.

Cenovus Energy 2013 Highlights