(Adds CEO comments on Syncrude coker outages, reliability
By Nia Williams
CALGARY, Alberta, April 30 Solving reliability
issues at the Syncrude mining project in northern Alberta will
be more of a marathon than a sprint, the chief executive of
Canadian Oil Sands Ltd said on Wednesday, in the wake
of another unplanned coker outage.
The Syncrude project can in theory produce about 350,000
barrels per day but has a history of unplanned shutdowns due to
equipment malfunctions, particularly at its complex upgraders,
which convert tar-like bitumen stripped from the oil sands into
refinery-ready synthetic crude.
Last week Syncrude shut one of its two upgraders for
unplanned maintenance following a valve leak repair. Canadian
Oil Sands, which owns the largest stake in the project, was
forced to lower the annual production forecast to between 95 and
105 million barrels and shares in the company promptly dropped
around 6 percent.
Speaking after the company's annual general meeting,
Canadian Oil Sands Chief Executive Officer Ryan Kubik said
Syncrude had no more reliability problems than other oil sands
mining companies, but it was one of the issues management was
He said the expertise of Imperial Oil, which owns a
25 percent stake in Syncrude, and Imperial's majority owner
ExxonMobil Corp would help improve reliability at the
project but progress would take time.
"The methodical approach that Imperial and Exxon are
bringing in will really help us attack that. It's a bit of a
marathon as opposed to a sprint but long-term we think that's
the right strategy and we are starting to see some results,"
Coker 8-1, which was shut down on April 24, will be out of
action for approximately 30 days although the outage could last
longer as it will overlap with the planned shutdown on Coker
8-2. Kubik said that had been factored into production guidance.
"When you are doing both at the same time the complexity
increases, which increases the risk of an extension," he said.
NET INCOME FALLS
Canadian Oil Sands Ltd reported first-quarter net income
falling to C$172 million, or 35 Canadian cents per share, from
C$177 million, or 37 Canadian cents, in the first quarter of
Analysts, on average, expected it to report net income of 49
Canadian cents per share, according to Thomson Reuters I/B/E/S.
The company said its net income for the quarter was affected
by an increase in deferred tax expense and a larger unrealized
foreign exchange loss on long-term debt.
That offset higher sales volumes, which averaged 105,300
barrels per day, up 10 percent from 95,700 bpd in the year-prior
quarter when unplanned extraction and upgrader outages cut
Operating costs averaged C$445 million, compared with C$355
million in the first quarter of 2013, as a result of higher
natural gas prices, the timing of planned maintenance and
increased drilling activity.
The company said its Mildred Lake mine train replacement
project at Syncrude is 85 percent complete and the estimated
cost had dropped to $3.9 billion from $4.2 billion.
Canadian Oil Sands' cash flow, a measure of its ability to
pay for new projects, rose 30 percent to C$357 million, or 74
Canadian cents, from C$275 million, or 57 Canadian cents in the
same period a year earlier.
Canadian Oil Sands shares closed at C$23.76 on the Toronto
(Additional reporting by Scott Haggett; Editing by Bernard Orr
and Cynthia Osterman)