Surging production from its Kearl oil sands mine after an unplanned two-week outage, along with a better-than-targeted drop in capital and operational spending, helped Imperial Oil Ltd. beat expectations with a small profit in the third quarter.
The Calgary-based company posted Friday net earnings of $3 million on $5.96 billion in revenue, down from a profit of $424 million in the same quarter last year on revenue of $8.74 billion.
“While $3 million may not seem like a big number, it’s a positive number and that speaks volumes in this business environment,” CEO Brad Corson told a conference call with financial analysts on Friday.
Analysts had expected a loss of $79 million on revenue of $5.7 billion, according to data firm Refinitiv. Imperial lost $526 million on revenue of $3.7 billion in the second quarter.
Oilsands rivals Suncor Energy Inc., Cenovus Energy Inc., Husky Energy Inc. and MEG Energy Corp. all reported third-quarter losses earlier this week due to lower oil prices – all but Cenovus reported lower production as well.
Like the others, Imperial has been focused on cutting costs.
“At the end of March, we committed to deliver spending reductions totalling $1 billion, which included a $500-million reduction in capital spending as well as $500 million in lower expenses,” said Corson.
“As of the end of the quarter, our production and manufacturing expenses are down $813 million versus the first nine months of 2019 … and our capital spending is down over 50 per cent, a savings of $700 million.”
Imperial revised its capital spending for 2020 to $900 million, down about $250 million from the midpoint of its last guidance update, though Corson said it will likely rise in next year’s budget.
Production averaged 365,000 barrels of oil equivalent per day in the third quarter, compared with 407,000 boepd in the same period of 2019, but up from 347,000 boepd in the second quarter, the company said.
Its Kearl oilsands mine in northeastern Alberta was forced to shut down for two weeks in September after the Polaris diluent pipeline was taken off-line to repair a leak. That prevented Kearl from receiving the light petroleum it needs to dilute heavy bitumen so that it will flow in a pipeline.
Corson said the mine’s output jumped to a record of 313,000 barrels of bitumen per day during the four weeks after restarting and it averaged 300,000 bpd in October, well above the 280,000 bpd capacity expected after supplemental ore crushers were added last year.
Alberta’s announcement last week that it will suspend oil production quotas in December was welcomed by Corson, but he said the province’s retaining of the right to bring the quotas back in 2021 creates an “overhang of uncertainty.”
Imperial’s shares are 70% owned by American energy giant ExxonMobil, which announced Thursday 1,900 employees in the U.S. will lose their jobs as part of its plan to cut its worldwide workforce by about 15%t.
It is also evaluating potential job cuts in Canada but a spokeswoman said Thursday it was “premature” to talk about that, adding it intends to communicate with employees of ExxonMobil Canada in coming weeks.
Corson said on the call that Imperial has reduced the number of contractors it employs without saying how many or indicating whether full-time staff have been affected by cost-cutting.
Earlier this week, Cenovus and Husky said they will cut as many as one in four jobs, potentially more than 2,000 workers, if their merger announced last Sunday is closed as expected early next year.
Suncor announced in early October it will cut as many as 1,930 jobs over 18 months to reduce total staff by 10 to 15%.
Job cuts are also expected in the Canadian operations of Royal Dutch Shell, which announced in September it would eliminate between 7,000 and 9,000 jobs worldwide by the end of 2022, and, to a lesser extent, from BP, which said in June it would cut around 10,000 jobs from its global workforce.