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Imperial Oil reports $188M loss as COVID-19 hits workers, slows work schedule

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CEO Brad Corson

Imperial Oil Ltd. is slowing or deferring maintenance work throughout its operations as it tries to ensure employee safety in the wake of a COVID-19 outbreak that has infected 83 workers at its Kearl oilsands mine in northern Alberta.

The Calgary-based company said Friday it will start a planned one-month maintenance shutdown of one of its two production trains at Kearl in a few days and extend it by an extra month to late June or early July to allow more distancing between workers.

The extension means production at Kearl will fall from the record average of 226,000 barrels per day in the first quarter – and 238,000 bpd in March – to about 150,000 bpd in the second quarter, CEO Brad Corson told a conference call on Friday.

“This allows us to progress at a more measured pace and greatly reduce the number of people we have working at site at any given time and without affecting the overall scope,” he said.

“It also allows us to complete the work at a time of likely low prices so we can have the asset fully up and running as and when prices recover.”

He said the company has also reduced the scope of maintenance at its Sarnia, Ont., refinery, will defer planned work at its Sarnia chemical plant and is postponing planned maintenance at its Nanicoke, Ont., and Strathcona (Edmonton) refineries until after this year.

Twenty-two of the Kearl workers stricken with the coronavirus have recovered and the others are being monitored or treated as necessary, Corson said.

Work at the project is continuing with enhanced physical distancing, cleaning and health screening, along with supplying face masks and moving fewer workers on transport airplanes and buses.

Kearl is owned by Imperial at 71% and its parent company, ExxonMobil, with 29%.

The record output at Kearl thanks to the introduction of supplemental ore crushers drove overall Imperial production to about 419,000 barrels of oil equivalent per day in the first three months of 2020, up from 388,000 boe/d in the same period last year.

Record throughput at its Strathcona refinery helped take its overall processing total to 383,000 barrels per day, the same as a year ago.

Corson said demand for jet fuel and gasoline fell significantly in March, while diesel demand dropped by a more moderate amount, due to measures taken to limit the pandemic. However, there are signs demand may be slowly recovering, he added.

Imperial reported a net loss of $188 million in the first quarter due to lower commodity prices and non-cash charges of $301 million, with $281 million of that due to a reduction in the value of its inventory as crude oil prices plunged in March and $20 million from a goodwill impairment.

It had a net profit of $293 million in the same quarter last year.

Fellow oilsands producers Husky Energy Inc. and Cenovus Energy Inc. both reported writedowns and losses earlier this week.

Imperial’s revenue and other income totalled $6.69 billion in the quarter, down from $7.98 billion in the first quarter of 2019.

Imperial’s average realized bitumen price averaged $18.08 per barrel in the first quarter of 2020, compared to $48.85 per barrel in the first quarter of 2019.

Crude-by-rail shipments averaged 97,000 bpd from its co-owned Edmonton rail terminal in the first quarter of 2020, up from 53,000 bpd in the fourth quarter of 2019.

Shipments by rail fell to about 10,000 bpd in April and are being phased out as pipeline space is freed up amid industry-wide production cutbacks due to current low oil prices, said Corson.

Analysts said Imperial beat their expectations on production and on cash flow, the latter thanks to higher profits from its refining and marketing sector.

Imperial cut its 2020 capital spending plan at the end of March by $500 million to between $1.1 billion and $1.2 billion and targeted a reduction in expenses by $500 million compared with 2019 levels in an effort to deal with impact of the pandemic.

 


Incoming Suncor president and CEO Mark Little addresses shareholders. Photo: Jeff McIntosh Canadian Press

Suncor CEO predicts slow recovery for sector from pandemic demand crunch

Incoming Suncor president and CEO Mark Little addresses shareholders. Photo: Jeff McIntosh Canadian Press

Suncor president and CEO Mark Little. File photo: Jeff McIntosh Canadian Press

CALGARY – Consumer demand for fuel is growing slightly after a sudden decline due to measures to deal with the COVID-19 pandemic but the CEO of Suncor Energy Inc. says he doesn’t expect a full recovery for his company or the Canadian energy sector until at least 2022.

The Calgary-based oilsands and refining giant surprised analysts by cutting its quarterly dividend by 55% to 21 cents per share as it reported a first-quarter net loss of $3.525 billion on Tuesday.

It had 18 years of consecutive annual dividend increases, with the latest announced in February.

The cut was necessary as the company resets its target of breaking even at a West Texas Intermediate price of US$35 per barrel, down from the previous mark of US$45, said CEO Mark Little on a conference call on Wednesday.

“Although we expect the crude market to substantially recover by 2022, the risk of an extended period of economic uncertainty, translated into weaker commodity prices and higher volatility, remains possible,” he said.

“In the second quarter, we know our industry is being challenged by … a significant supply and demand imbalance which has resulted in the largest collapse in crude prices ever. These market conditions require decisive leadership and action.”

The company, which sells fuel across Canada through its Petro-Canada network, has seen a reduction in demand of 50% for gasoline, 70% for jet fuel and 20% for diesel, Little said.

As North American oil storage fills to near capacity, any rebound in upstream oil production must be led by recovery in the downstream and that means it depends on when governments reopen the economy and consumers feel confident about travelling again, Little said.

There will be further delays as the high level of crude inventories is drawn down, he added.

Chief financial officer Alister Cowan said on the call he expects that Suncor’s gross debt of about $20 billion will grow by $2 billion or $3 billion this year, but the company will break even on a cash flow basis in 2021.

In a report, analyst Michael Dunn of Stifel FirstEnergy estimated the dividend cut will save Suncor about $1.56 billion per year.

“While not altogether surprising, the cut was not a sure thing given Suncor’s liquidity and track record of dividend increases. We agree with the move,” he said.

Suncor’s capital spending plan for 2020 is being cut to $3.8 billion, a further reduction of $400 million compared with its recent guidance and down $1.9 billion or about one-third compared with its original 2020 plan.

It added it intends to cut operating costs by $1 billion or 10% this year compared with 2019 levels.

Suncor registered an impairment charge of $1.38 billion on its 54.1% share of the Fort Hills oilsands mine it operates and $422 million against its share of the East Coast offshore White Rose and Terra Nova assets.

Suncor also recorded a $397-million after-tax inventory writedown, as well as a $1-billion unrealized after-tax foreign exchange loss on U.S. dollar denominated debt.

Due to lower demand for refined products, Suncor is reducing its outlook for refinery throughput to between 390,000 and 420,000 barrels per day from the previous goal of between 440,000 and 460,000 bpd.

 

 


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Oilsands producer Cenovus aims for ‘net zero’ GHG emissions by 2050

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Oilsands producer Cenovus Energy Inc. said Thursday it will aim to achieve “net zero” greenhouse gas emissions by 2050, joining a recent cavalcade of oil companies trumpeting their environmental aspirations.

The Calgary-based firm also announced it intends to reduce its emissions per barrel by 30 per cent by 2030, while keeping flat its total emissions.

Reaching the 2050 goal will require advances in technologies including carbon capture and storage that are not currently economically practical, conceded Al Reid, executive vice-president in charge of sustainability, in an interview.

But he said the company has a clear path forward to the 2030 target, adding the announcement is designed to draw the attention of both internal and external stakeholders.

“It’s aimed at a very broad audience to say … we’re so committed we’re going to set targets and we’re going to report on those targets on a year-over-year basis,” he said.

Cenovus has delayed planned expansions at its thermal oilsands projects in northern Alberta, which use steam to produce heavy bitumen from wells, because of delays in the construction of new export pipelines.

Reid said the company is hopeful that its commitments – which include ramping up spending by $1.5 billion with Indigenous businesses and reclaiming 1,500 decommissioned well sites by 2030 -will help make peace with opponents and allow growth to take place.

Cenovus’ commitment is a step in the right direction but the industry needs to say less about emissions intensity and do more to address its absolute emissions, said senior analyst Benjamin Israel of the environmental Pembina Institute.

“Flat is a good first step but more needs to happen and potentially before 2030,” he said.

“We need to start to have conversations about … credible plans to get to carbon neutral potentially before 2030.”

Cenovus’ plan echoes Prime Minister Justin Trudeau’s promise during last fall’s federal election that Canada would cut its national GHG emissions to net zero by 2050.

Israel and Greenpeace Canada campaigner Keith Stewart both pointed out that plans to cut emissions in the upstream energy sector do little to reduce emissions in the downstream, where burning fuel creates more than 70 per cent of the emissions.

Cenovus said its 2030 emissions target will be reached via a multi-pronged approach including operational optimization, incorporating electricity cogeneration capacity into future oilsands phases, more use of solvent technology to reduce steam needed to produce bitumen, methane emissions reductions in its conventional drilling operations and through increased use of data analytics.

GHG emissions at its oilsands operations have been reduced by 27%t per barrel over the past 15 years, it added.

Production went from 1.97 million cubic metres in 2014 to 21 million in 2018 while GHG emissions per cubic metre fell from 0.44 tonnes of carbon dioxide equivalent to 0.322, Cenovus said. Total emissions rose from 871,000 tonnes in 2014 to about 6.8 million tonnes in 2018.

Financial analysts welcomed the plan, which they said add to Cenovus’ reputation as one of the lowest GHG intensity producers in the oilsands.

Fellow oilsands producer Canadian Natural Resources Ltd. has also pledged to work toward a zero-emissions target without giving a specific date, using technology to improve efficiency and through its carbon capture and storage operations.

It says it has lowered emissions per barrel from its oilsands mining operations by 37% since 2012.

Calgary-based Suncor Energy Inc. set a target in 2016 of reducing GHG emissions intensity by 30 per cent below 2014 levels by 2030.

In September, it said it would spend $1.4 billion to install two cogeneration units at its Oil Sands Base Plant in northern Alberta, thus reducing greenhouse gas emissions by 25 per cent.

In December, it gave approval to build a $300-million wind power plant in southern Alberta.

Spanish energy giant Repsol, which produces oil and gas in Canada, also announced late last year it would try to achieve net zero emissions globally by 2050 through technology, increases in the production of biofuels and chemicals with low carbon footprint and expansion of low-carbon electricity generation.

 


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Climate change debate polarization shows lack of leadership, says oilsands CEO

Polarization of the climate change debate as it relates to the role of the Canadian energy industry indicates an “extreme” lack of leadership from all political parties in Canada, says the CEO of oilsands producer MEG Energy Corp.

Speaking at the Natural Resources Summit in Calgary, Derek Evans said he’s frustrated by the wide gulf in views exhibited by parties in the run-up to the Oct. 21 election.

“Some of us have banged on the prime minister’s door and said, ‘I would like to talk to you,’ but I can’t get in. Either I’m not big enough, I’m not loud enough, I don’t represent enough people,”’ he said.

“We’re not shying away from trying to get in there and create those conversations but I’ll go out on a limb and say I have never seen such an extreme lack of leadership across all parties about something that is as central and as critical to the jobs and the economy of this country.”

With polls showing the front-running Liberals and Conservatives in a close race, some observers have suggested a minority government might have to rely on support of the NDP or the Green Party, both of which have signalled they will not support expanding the Trans Mountain pipeline that Ottawa bought last year for $4.5 billion.

Evans told reporters later he couldn’t expand on his views of the leadership issue because of new election rules that could result in him being fined if he says too much during the campaign.

Both Evans and Steve Laut, vice-chairman of Canadian Natural Resources Ltd., said they are working toward an ultimate goal of taking their companies to “net zero” in terms of greenhouse gas emissions.

MEG will accomplish that through efficiencies in using steam and solvents at its oilsands works and with carbon capture and storage, Evans said.

“It’s a multitude of technologies, a multitude of process changes that we’re working on,” said Laut, citing continuous improvements in oilsands extraction, carbon capture and storage and carbon capture and conversion, where new products are made from captured carbon.

Neither would provide a timeline to reach their goals.

Claims of cleaner Canadian energy are suspicious, said Jesse Firempong of Greenpeace Canada, citing studies that show the industry is fourth-most greenhouse gas intensive in the world and that average emissions per barrel increased between 1990 and 2017.

Canadian Natural says it cut its corporate GHG intensity per barrel by 20 per cent between 2014 and 2018.

The summit, held to examine how the energy sector is dealing with rising environmental opposition such as last Friday’s climate strike, was hosted by the Canadian Global Cities Council, a group of eight metro chambers of commerce and boards of trade from across Canada.

The Toronto Region Board of Trade supports oil and gas because of the economic benefits the country as a whole gains from having a healthy energy sector, said CEO Jan De Silva.

“Jobs solve a lot of challenges for everyone in our communities,” she said.

“These are not Alberta’s issues alone. How Canada can be a leader in natural resources and lead the world in clean tech matters greatly to Toronto and to the entire country.”