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 

• Net earnings down 33% -> $662 million : after tax unrealized risk management loss of $310 million vs +$43 million gain in 2012; realized foreign exchange loss of $146 million.
• Capital expenditures of $3.262 billion which is down -3% due to decreased spending on Lower Shaunavon (sold July 2013) and Pelican Lake.  Drilling and construction on a dewatering pilot was completed in 3Q2012.  Higher capex at Narrows Lake.  
• Net oil sands production up 14% -> 102,500 bpd.  Foster Creek averaged 106,380 bpd gross / 53,190 bpd net (-8%); Christina Lake 98,620 gross / 49,310 net (+55% vs +173% in 2012).
• On track to produce 525,000 bpd (435th crude) total net oil output by 2023.
• Capital investment (capex) to average between $3.0 and $3.7 billion over the next ten years.
• Refinery operations processed 463,000 bpd of gross refined output up from 433,000 bpd in 2012.
• Crude oil output +8% to 179,275 bpd; conventional crude production +1% -> 76,775 bpd thanks to higher Pelican Lake production.
• Total crude oil production by year: 2013: 179,275 bpd  2012: 165,403 bpd  2011: 134,239 bpd.
• In 2013 12,764 of the 13,872 bpd rise in crude output came from oil sands operations (foster creek / christina lake expansion).
• Total natural gas production by year: 2013: 529 mmcf   2012: 594 mmcf    2011: 656 mmcf
• Royalties paid per barrel fell considerably -> this helped netbak (margins) stabilize at a time when operating expenses increased.
• * $/bbl :  price 67.01 (vs 65.79), royalties 5.01 (vs 6.29), operating expenses 15.65 (vs 13.90), netback 42.75 (vs 42.39).
• Price of natural gas up 32% vs 2012 ($3.20 vs $2.42) but still down 12.3% vs 2011 ($3.65).
• Revenue +11% -> $18,657 million:  upstream revenue +$787 million or 14%; refining and marketing revenue $731 million -> $1,350 million.
• Dividend:  2013 96.8c, 2012 88.0c, 2011 80.0c.
• Reserves before royalties:  proved plus probable: bitumen 2529m (+136m); heavy oil 319m (+30m); light and medium 165m (-6m); natural gas 1165 Bcf (-128 Bcf).

Imperial Oil (IMO) 2013 Highlights

• Production up due to the Kearl project and Celtic Energy acquisition
• Gross crude oil production: 261,000 bpd (vs 250,000 bpd); natural gas production: 201 mcfpd (vs 192 mcfpd) = 295,000 boepd (vs 282,000 boepd).
• Net crude oil production: 227,000 bpd (vs 210 bpd); natural gas production: 189 mcfpd (vs 195 mcfpd), total net oil equivalent production: 259,000 bpd (vs 243,000 bpd).
• Refinery throughput down in the 4q (468,000 bpd -> 387,000 bpd) as a result of closure of the Dartmouth refinery in the 3q2013 + maintenance at Nanticoke refinery.
• Kearl project output up to 52,000 bpd in 4Q (vs 37,000 bpd) with gross production rates of 71,000 bpd (Imperial's 70% share). Kearl expansion now 72% complete on track for startup by 2015.  Expansion will add 78,000 bpd to gross output for Imperial Oil.- Nabiye project 65% complete - start up will be 4q2004 production will be 40,000 bpd.
• 4q2013 gross output now 329,000 bpd (vs 285th 4q2012

Imperial Oil Full Year

• Dividends paid = 49 cents (+$0.01).
• Net earnings 2,828 million (-24.9% vs $3,766 million) or $3.32 per share (vs $4.42) :  profit down due to : lower refinery margins (affected profit by -$700 million),  after tax charge of $280 million from conversion of Dartmouth refinery to terminal, Kearl project (costs up $180 million), lower output from Syncrude and Cold Lake (-$240 million).
• Earnings upstream amounted to $1.712 billion (down -9.3%) decrease is attributable to higher project costs; offset by fx rate ($125 million), higher liquids realization (+$125 million).
• Earnings downstream amounted to $1,052 million (vs $1,772 million) thanks to lower refinery margins, $280 million cost of converting Dartmouth refinery to terminal;  marketing margins and refinery maintenance costs helped offset these losses (+$210 million).
• Chemical segment earned $162 million (vs $165 million).
• Capex of $8.020 billion, $1.894 billion of which stems from takeover deals (Celtic, Clyden) - capex in 2014 expected to be much lower at $5.5 billion.
• Refinery capacity utilization rate up to 88% (+2%); 92% in 4q2013 (steady).  refinery throughput down 9th bpd -> 426,000 bpd (going forward this will be closer to the 4Q number of 387,000 bpd due to the closure of the 70th bpd Dartmouth refinery (3q2013).
• Total gross production @295,000 bpd (vs 282,000 bpd) : Cold Lake contributed 153,000 bpd (+1,000 bpd), Syncrude 67,000 bpd (vs 72,000 bpd), Kearl 16,000 bpd (new output), conventional oil 21,000 bpd (+1,000 bpd), natural gas 201 mcfpd (vs 192 mcfpd).
• note : 37.3% ($1.056 billion) of Imperial's net income last year came in the fourth quarter.  2013 also featured the worst earnings quarter since 2009 (2q2013: $327 million only).
• Price realized:  conventional crude: $82.41 (vs $77.19); bitumen: $60.57 (vs $59.76); synthetic: $99.69 (vs $92.48); natural gas $3.27 (vs $2.33).

1929 Market Crash All Over Again ?

A market chart reveals just how close a relationship the current Dow Jones random walk has to the movement in the exchange that preceded the crash of 1929.

Germany Bundesbank to repatriate 700t of gold reserves

Since first announcing the plan, it has received only 35 tonnes from the US (the Fed) but contrary to conspiracy theorists, the German central bank wants this to be a 7 year plan, says it's in no rush to get its gold back from the US (& Paris), and actually has interests in keeping some of its gold abroad (for global transactions).

more on gold.. In 2013 investors bought 31 million ounces of gold, that's down from 41 million ounces in 2011 & 2012.

notes to table: suncor earnings rebounded in the 4Q after 2012 included a writedown on assets in Libya; Imperial Oil loses revenue in 4Q2014 due to closure of 70th bpd Dartmouth refinery; july 2013 cenovus exits lower shaunavon

	production mboe/d		dividend C$		revenue milC$		earnings milC$
Fiscal	2013	2012	2013	2012	2013	2012	2013	2012
Suncor	562.4	549.1	0.89	0.52	13,089	11,502	2,040	468
oil sands	392.5	359.2
Cenovus	267.4	264.4	0.968	0.880	18,657	16,842	1,478	995
christina lake	49.310	31.903
Imperial Oil	295.0	282.0	0.49	0.48	32,929	31,188	2,828	3,766
kearl project	16.0	nil