Canadian Oil Sands Ltd. once again chopped its production guidance for 2013, marking the third time it has axed its forecast this year.
Canadian Oil Sands will need very healthy production results in the fourth quarter if it is to meet its new target, despite the most recent downward revision. The company said its third-quarter results were stymied by trouble with major pieces of machinery – a boiler and a coker – at Syncrude Canada Ltd., the giant oil sands mining consortium. Canadian Oil Sands previously blamed its weak production revision on the same problems.
Canadian Oil Sands is the largest shareholder in Syncrude, controlling 36.74 per cent of the project. As a result, Canadian Oil Sands' predictions for Syncrude give investors a glimpse of how other owners, including Suncor Energy Inc., Imperial Oil Ltd., and two major Chinese oil outfits, will be hurt. Canadian Oil Sands, however, is reliant on Syncrude for its fortunes while its major partners have other projects on the go.
Canadian Oil Sands expects Syncrude to produce between 97 and 100 million barrels of oil this year, according to its third-quarter results released Wednesday. In July, Canadian Oil Sands predicted the mining project would churn out between 100 and 104 million barrels for 2013, down from its April prediction of between 100 and 110 million barrels of oil. Canadian Oil Sands, when it set out its 2013 budget late last year, expected Syncrude to produce between 105 million to 115 million barrels of oil in 2013. (The latest revision means Canadian Oil Sands expects its share of Syncrude's production will total between 36 million and 37 million barrels of oil in 2013.)
"It has been a particularly challenging year for Syncrude operations with maintenance issues in our extraction facilities and an extended coker turnaround in the third quarter," Marcel Coutu, Canadian Oil Sands' chief executive officer, said in a statement containing the company's third-quarter results. "Syncrude is continuing to work through the implementation of reliability systems, and improving reliability remains ours and Syncrude's main focus."
Canadian Oil Sands said the "single-point estimate" of 98 million barrels in 2013 requires Syncrude to produce an average of 313,400 barrels per day in the fourth quarter. This would require smooth – and strong – operations given that Syncrude has averaged 253,400 barrels of oil per day between January and September in 2013.
April is the only month in 2013 where Syncrude's average daily production totalled more than 300,000 barrels. It produced an average of 317,800 barrels per day that month. Syncrude's weakest month was July, clocking in at 183,000 barrels per day.
Syncrude planned to perform maintenance on coker 8-1 in the second half of 2013, but this schedule was accelerated because of an unplanned outage at a related boiler unit. These mechanical woes are what has been hurting Syncrude, Canadian Oil Sands said.
Canadian Oil Sands made $246-million or 51 cents per share in the third quarter, compared to $336-million or 69 cents per share. That marks a 26.7 per cent decline. The company's cash flow from operations dropped to $339-million in the quarter from $470-million in the same quarter last year. The drop, Canadian Oil Sands said, came as the unplanned outages and longer-than-expected downtime thanks to maintenance problems, dragged down sales. This was offset by higher realized selling prices, the company said.
The company maintained its 35 cent per share quarterly dividend.