ConocoPhillips says new energy policies could spur expansion of oil sands operations

ConocoPhillips Co. COP-N, one of the world’s largest oil companies, says a suite of new energy policies being developed by Ottawa and Alberta could prompt it to expand production in the oil sands.

Texas-based ConocoPhillips operates oil and gas facilities in North America, the Asia-Pacific, Europe, Africa and the Middle East. In the three months ending June 30, it produced 2.3 million barrels of oil a day.

Its Canadian assets include the Surmont oil sands operation in northeastern Alberta, roughly 55 kilometres south of Fort McMurray, and three other undeveloped leases in the region that contain substantial bitumen resources. It also has a processing facility in the liquids-rich Montney region in northeastern British Columbia.

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Andy O’Brien, ConocoPhillips’s chief executive, told analysts on a Thursday earnings call that an upcoming range of new fiscal policies aimed at increasing production in Canada mean that incremental investment in the country “may start to look more attractive.”

Talks between Ottawa, Alberta and the sector have been going on since the governments signed a non-binding MOU with five major oil sands companies in July to signal their support for new financial and regulatory frameworks that would “enable sustained and substantial oil sands development and production growth.” The resulting definitive agreements are due Nov. 15, but company CEOs said this week that the talks may go on longer.

The other companies negotiating with governments are Imperial Oil Ltd., Suncor Energy Inc., Cenovus Energy Inc. and Canadian Natural Resources Ltd., a Calgary-based producer that also reported earnings on Thursday. Together, they comprise an industry group called the Oil Sands Alliance.

Kirk Johnson, the executive vice-president of global operations at ConocoPhillips, said, “there’s a number of things going on here in Canada right now.” And although the definitive agreements are yet to be finalized, he said the fiscal, policy and regulatory agreements being negotiated are “really quite positive.”

Surmont is unique in ConocoPhillips’s global portfolio; like most oil sands sites, its reserves deplete slowly, giving it a particularly long lifespan.

It also demands less capital spending than many of the company’s other assets, Mr. Johnson said, giving ConocoPhillips the capacity to expand oil production at the site through modest investments.

A new well pad brought online at Surmont this past quarter was ahead of schedule, under budget and is “exceeding expectations” when it comes to production, Mr. Johnson said. (Well pads are surface sites from which multiple horizontal wells are drilled to extract bitumen.)

He said its performance underscored the strength and value of ConocoPhillips’s oil sands business more broadly, and illustrated how much Surmont will contribute to the company’s bottomline over the coming decade.

On Thursday, ConocoPhillips reported third-quarter earnings of US$4-billion or US$3.34 per share, compared with US$1.7-billion or US$1.38 a year ago. It raised its quarterly dividend by 11 per cent to 93 US cents per share.

The fiscal bump was primarily due to higher oil prices driven by the war in Iran – a common thread throughout Oil Sands Alliance earnings calls over the past week.

Canadian Natural beats profit estimates on higher oil prices, output

Canadian Natural CNQ-T, one of the country’s largest oil and gas companies, reported production of roughly 1.65 million barrels of oil equivalent a day. It reported a third-quarter profit of $3-billion or $1.45 a share, up from $600-million or 29 cents a year earlier.

Canadian Natural also achieved its $13-billion net debt target in the third quarter. Scott Stauth, Canadian Natural’s president, said in an interview that high oil prices enabled the company to pay down its debt at a faster pace than it otherwise would have.

Like other Oil Sands Alliance CEOs, he said that the definitive agreement negotiations with governments are progressing well.

“I’m positive that we’re going to get to the right answer at the right time, and that’s where the focus should be, with the secondary focus on an actual date of completion,” he said.