Endress+Hauser has secured the Main Instrument Vendor (MIV) contract at a large Texas refinery. Endress+Hauser and its representative, Vector CAG, will support the refinery's project.
Suncor has reported strong performance during the second quarter of 2019, despite the ongoing impact of production curtailments in Alberta.
"This quarter, we delivered $3.0 billion in funds from operations, a new second quarter record, and $1.3 billion of operating earnings due to our team delivering solid operating performance while taking full advantage of our flexibility to maximize our cash flow, despite the impact of curtailments," said Mark Little, president and chief executive officer. "Strong cash flow generation and our commitment to capital discipline allowed us to return value to our shareholders through $658 million in dividends and $552 million in share repurchases while, at the same time, strengthening our balance sheet."
Funds from operations were $3.005 billion ($1.92 per common share) in the second quarter of 2019, compared to $2.862 billion ($1.75 per common share) in the prior year quarter, an increase of 10% per common share.
Cash flow provided by operating activities, which includes changes in non-cash working capital, was $3.433 billion ($2.19 per common share) in the second quarter of 2019, compared to $2.446 billion ($1.50 per common share) in the prior year quarter.
Net earnings were $2.729 billion ($1.74 per common share) in the second quarter of 2019, compared to $972 million ($0.60 per common share) in the prior year quarter and included a one-time deferred income tax recovery of $1.116 billion ($0.71 per common share) to reflect the staged reduction of Alberta's corporate income tax rate from 12% to 8% over the next four years.
Operating earnings were $1.253 billion ($0.80 per common share), compared to operating earnings of $1.190 billion ($0.73 per common share) in the prior year quarter, an increase of 10% per common share.
Total Oil Sands production during the second quarter of 2019 increased to 692,200 barrels per day (bbls/d), from 547,600 bbls/d in the prior year quarter. Despite being limited by production curtailments, Oil Sands achieved a new second quarter production record, with the increase due to improved Oil Sands utilization and an increase in Fort Hills production. Fort Hills production was 89,300 bbls/d, compared to 70,900 bbls/d in the prior year quarter.
Refining and Marketing (R&M) delivered strong financial results, despite the impact of planned maintenance in the quarter, due to improved refining margins and higher crude throughput. Quarterly funds from operations were $932 million and operating earnings were $677 million, compared to $892 million and $671 million, respectively, in the prior year quarter.
Exploration and Production (E&P) had 111,700 bbls/d of production in the second quarter, including improved Hebron production of 23,600 bbls/d, following the completion of the sixth production well during the quarter.
During the second quarter of 2019, the company issued $750 million of 3.10% senior unsecured medium term notes and repaid $1.3 billion of short-term debt and US$140 million of maturing higher interest long-term debt, further improving the company's liquidity and balance sheet flexibility.
The company paid $658 million in dividends and repurchased $552 million of its common shares during the quarter.
's second quarter 2019 operating earnings were $1.253 billion ($0.80 per common share), compared to $1.190 billion ($0.73 per common share) in the prior year quarter. The increase in operating earnings was primarily related to higher overall crude production and refinery crude throughput due to a less intensive, planned maintenance program at both Oil Sands and R&M, as compared to the prior year quarter. In addition, improved reliability at Syncrude and the ramp up of Fort Hills and Hebron production throughout 2018 further increased crude output during the second quarter of 2019, which was only partially offset by a decrease in production associated with the Alberta government's mandatory production curtailments. Other positive factors influencing operating earnings in the second quarter of 2019 were the impact of a weaker Canadian dollar on U.S. dollar denominated sales and improved refining margins.
Second quarter 2019 operating earnings were negatively impacted by lower WTI and Brent benchmark crude prices, an unfavourable first-in, first-out and intercompany inventory change, and an increase in royalties, operating and transportation expenses, consistent with the increase in production. In addition, depreciation, depletion and amortization (DD&A) expenses were higher than the prior year quarter, due primarily to the staged commissioning of Fort Hills in 2018 and the increase in depreciation associated with the transition to IFRS 16 Leases. Exploration expenses increased due to non-commercial drilling results off the east coast of Canada and in the United Kingdom North Sea.
Net earnings were $2.729 billion ($1.74 per common share) in the second quarter of 2019, compared to net earnings of $972 million ($0.60 per common share) in the prior year quarter. In addition to the factors impacting operating earnings discussed above, net earnings for the second quarter of 2019 included a one-time deferred income tax recovery of $1.116 billion associated with a staged reduction to the Alberta corporate income tax rate of 1% each year from 2019 to 2022, an after-tax gain of $139 million on the sale of the company's interest in Canbriam Energy Inc. (Canbriam) and a $221 million unrealized after-tax foreign exchange gain on the revaluation of U.S. dollar denominated debt. Net earnings in the prior year quarter included an unrealized after-tax foreign exchange loss of $218 million on the revaluation of U.S. dollar denominated debt.
Funds from Operations and Cash Flow Provided By Operating Activities
Funds from operations were $3.005 billion ($1.92 per common share) in the second quarter of 2019, compared to $2.862 billion ($1.75 per common share) in the second quarter of 2018, and were influenced by the same factors impacting operating earnings noted above, excluding the impact of DD&A and exploration expenses.
Cash flow provided by operating activities was $3.433 billion ($2.19 per common share) for the second quarter of 2019, compared to $2.446 billion ($1.50 per common share) for the second quarter of 2018. In addition to the items noted in funds from operations, cash flow provided by operating activities was further impacted by a source of cash associated with the company's working capital balances in the second quarter of 2019, as compared to a use of cash in the prior year quarter.
Suncor's total upstream production was 803,900 barrels of oil equivalent per day (boe/d) during the second quarter of 2019, compared to 661,700 boe/d in the prior year quarter, marking a second quarter production record. The increase was primarily due to lower planned Oil Sands maintenance, improved reliability at Syncrude and the ramp up of Fort Hills and Hebron production throughout 2018, partially offset by the impact of mandatory production curtailments in the province of Alberta, which began January 1, 2019.
During the second quarter of 2019, the company was able to leverage its broad asset base and operational flexibility to maximize the value of its allotted barrels under the mandatory curtailment program, focusing on higher value synthetic crude oil (SCO) production and helping to mitigate the impact of planned maintenance activities through the transfer of curtailment allotment among the company's assets. In addition, solid asset reliability and availability allowed the company to purchase 24,000 bbls/d of additional curtailment bitumen volumes from third parties, net of curtailment sales.
"Suncor's upstream assets produced more than 800,000 bbls/d of crude oil during the second quarter of 2019, marking a new second quarter production record, while planned maintenance was completed at many of our Oil Sands assets in the quarter," said Little. "In addition, the team was able to create significant value by opportunistically shifting production among our assets through this period of curtailment - another great example of the benefits that come from having a broad and flexible asset base."
Oil Sands operations production was 414,200 bbls/d in the second quarter of 2019, compared to 358,900 bbls/d in the prior year quarter. The increase in production was primarily SCO and resulted from a decrease in planned upgrader maintenance. Oil Sands operations upgrader reliability improved to 86% in the second quarter of 2019, compared to 69% in the prior year quarter. Production of non-upgraded bitumen from the company's In Situ assets was relatively flat quarter-over-quarter at 118,700 bbls/d during the second quarter of 2019, compared to 121,000 bbls/d in the prior year quarter, and continued to be impacted by mandatory production curtailment as the company favoured the production of higher value SCO barrels, in addition to the completion of major maintenance at Firebag. In addition, overall Oil Sands operations production was reduced by the yield loss associated with upgrading bitumen to SCO.
Oil Sands operations cash operating costs per barrel were $27.80 in the second quarter of 2019, compared to $28.65 in the prior year quarter, with both periods reflecting the impact of planned maintenance. The decrease in Oil Sands operations cash operating costs per barrel was due to the increase in production being partially offset by higher operating, selling and general costs and was further impacted by the yield loss associated with the increase in higher value SCO production. Total Oil Sands operations cash operating costs were $1.051 billion, compared to $940 million in the prior year quarter, due primarily to an increase in commodity consumption costs and higher ore preparation costs, partially offset by a decrease in natural gas prices.
Suncor's share of production from Fort Hills averaged 89,300 bbls/d in the second quarter of 2019 compared to 70,900 bbls/d in the prior year quarter, with the increase in production attributed to the ramp up of operations throughout 2018. The increase in production was partially offset by mandatory production curtailments, which the company limited the effect of through purchasing 6,500 bbls/d of curtailment credits from third-parties. Fort Hills cash operating costs per barrel were $22.50 in the second quarter of 2019, compared to $28.55 in the prior year quarter, with the improvement primarily attributed to the increase in production. Total Fort Hills cash operating costs were consistent at $183 million, compared to $185 million in the prior year quarter, despite the increase in production.
Suncor's share of Syncrude production was 188,700 bbls/d in the second quarter of 2019, compared to 117,800 bbls/d in the prior year quarter. The increase in production was primarily due to improved reliability at Syncrude due to the prior year quarter being impacted by extended planned maintenance and a power disruption. Production increases were partially offset by the impact of mandatory production curtailments, which Suncor and the other Syncrude partners helped to mitigate by allocating a portion of their curtailment allotment to Syncrude, on an opportunistic basis. In addition, Syncrude purchased other third-party curtailment allotments. The total curtailment credits received at Syncrude resulted in an estimated increase in SCO production of 21,000 bbls/d. Upgrader utilization at Syncrude improved to 93% in the second quarter of 2019, compared to 58% in the prior year quarter.
Syncrude cash operating costs per barrel were $34.90 in the second quarter of 2019, a decrease from $56.25 in the prior year quarter, due primarily to the increase in production. Total Syncrude cash operating costs were $599 million in the second quarter of 2019 and were comparable to $603 million in the prior year quarter.
Production volumes at E&P were 111,700 boe/d in the second quarter of 2019, compared to 114,100 boe/d in the prior year quarter. Increased production from Hebron and Oda, which began production in the first quarter of 2019, nearly offset natural declines in the United Kingdom, the continued staged return of White Rose towards full operations and the completion of planned maintenance at Terra Nova.
Refinery crude throughput was 399,100 bbls/d and refinery utilization was 86% in the second quarter of 2019, compared to 344,100 bbls/d and a utilization rate of 74% in the prior year quarter. Both periods were impacted by major planned maintenance, however, the maintenance completed in the current period had a less significant impact on production when compared to the second quarter of 2018, which included the first full turnaround of the Edmonton refinery, as well as additional turnaround activities at the company's other three refineries. Planned maintenance completed in the second quarter of 2019 included turnaround activities at the Sarnia and Montreal refineries, as well as major maintenance at the Edmonton and Commerce City refineries. Refined product sales increased in the second quarter of 2019 to 508,100 bbls/d, compared to 500,000 bbls/d in the prior year quarter, with the increase due to higher refinery crude throughput in the second quarter of 2019 and the associated increase in refined product availability. The prior period quarter included a significant draw of product inventory that was built up in advance of the planned turnaround of the entire Edmonton refinery in the second quarter of 2018.
Suncor's 2019 capital program is focused on the enhancement and optimization of the company's operating asset performance, safety and reliability, including projects focused on delivering increased earnings and funds from operations through further cost savings and structural margin improvements. In addition, the company is developing step-out opportunities and asset extensions within its offshore business in the E&P segment.
Excluding capitalized interest, the company incurred $1.336 billion in capital expenditures in the second quarter of 2019, a decrease from $1.737 billion in the prior year quarter. The decrease was due primarily to lower planned maintenance and turnaround capital due to the completion of a more significant planned maintenance program at both Oil Sands and R&M in the prior year quarter, as well as the decrease in capital associated with the staged completion and commissioning of the Fort Hills extraction plants in the first half of 2018.
Drilling activity at Hebron is ongoing and production continues to ramp up. Other E&P activity in the second quarter included development drilling at Hibernia, White Rose, Buzzard and Terra Nova, and development work on Fenja and the West White Rose Project.
During the second quarter of 2019, the company sanctioned the Terra Nova asset life extension. The project is expected to extend the life of Terra Nova by approximately a decade and is planned for execution in 2020. The company's previously issued 2019 capital guidance included development spending associated with this project.
In the second quarter of 2019, Suncor sold its 37% interest in Canbriam for total proceeds and an equivalent gain of $151 million ($139 million after-tax), which the company had acquired in the first quarter of 2018. In addition, Suncor sold land and several related natural gas wells held in northeast British Columbia to Canbriam for proceeds of $24 million, with this transaction closing early in the third quarter of 2019.
During the second quarter of 2019, the company issued $750 million of 3.10% senior unsecured medium term notes due in 2029. Also in the quarter, the company reduced its short-term debt balance by $1.281 billion and repaid US$140 million of maturing long-term debt, further improving the company's balance sheet flexibility.
In the second quarter of 2019, the company repurchased $552 million of its own shares for cancellation under the company's normal course issuer bid, and returned $658 million of cash to shareholders through dividends.
"Through our integrated model and focus on operational excellence, capital discipline and sustainability, we are well positioned for the future and continue to deliver increased returns to our shareholders," said Little. "We will continue to optimize and enhance our business through leveraging the talent of our people, a continued focus on innovation and the integration of advanced digital technology. To accelerate these efforts, we have assembled some of our most senior leaders into a dedicated project team to guide Suncor through the next phase of the company's evolution."
More from Industry News
CAS DataLoggers provided a unique gas monitoring and temperature monitoring solution for an international chemical company, where health and safety was an important consideration. Harmful gas detection was placed high on the list of priorities: hydrochloric acid gas was produced when a standard chemical made by the company leaked to the atmosphere as fumes, while chlorine was used as a raw material at the plant. Therefore, it was necessary to monitor and record both hydrochloric acid gas levels (HCL) and chlorine (CH2) levels.
Alberta Bill 14, the Alberta Indigenous Opportunities Corporation Act introduced recently, would set up a first-of-its-kind Crown corporation to facilitate Indigenous investments and job creation. The AIOC would make it easier for Indigenous communities to access funding, invest in major natural resources development projects and fuel their prosperity while helping to grow Alberta's natural resource sectors.
Honeywell announced that Ceyhan Polipropilen Üretim A.Ş. will use Honeywell UOP's C3 Oleflex technology to produce 457,000 metric tons per year of polymer-grade propylene for a new petrochemicals complex in Ceyhan, Turkey. Ceyhan Polipropilen Uretim is a joint venture of Rönesans Holding and the Algerian national energy company Sonatrach S.p.A. The new unit will be used to supply propylene for production of polypropylene, which is used to make a wide variety of plastic products that are growing in demand globally.
Baker Hughes, a GE company announced that the Baker Hughes international rig count for September 2019 was 1,131, down 7 from the 1,138 counted in August 2019, and up 127 from the 1,004 counted in September 2018. The international offshore rig count for September 2019 was 242, down 2 from the 244 counted in August 2019, and up 38 from the 204 counted in September 2018.
Baker Hughes Rig Count: U.S. -5 to 855 rigs
Husky Energy has reached an agreement for the sale of its Prince George Refinery to Tidewater Midstream and Infrastructure for $215 million in cash plus a closing adjustment for inventory, and a contingent payment of up to $60 million over two years.
TransAlta Corporation and SemCAMS Midstream ULC, a subsidiary of SemGroup Corporation, have entered into definitive agreements to develop, construct and operate a new cogeneration facility at the Kaybob South No. 3 sour gas processing plant. The Kaybob facility is strategically located in the Western Canadian Sedimentary Basin and accepts natural gas production out of the Montney and Duvernay formations. TransAlta will construct the cogeneration plant which will be jointly owned, operated and maintained with SemCAMS. The capital cost of the new cogeneration facility is expected to be approximately $105 million and the project is expected to deliver approximately $18 million in annual EBITDA. TransAlta will be responsible for all capital costs during construction and, subject to the satisfaction of certain conditions, SemCAMS will purchase a fifty percent (50%) interest in the new cogeneration facility as of the commercial operation date, which is targeted for late 2021.
Conventional oil and gas discoveries during the past three years are at the lowest levels in seven decades and a significant rebound is not expected, according to a new report by global business information provider IHS Markit.
Universal mCloud Corp. (TSX-V: MCLD) (OTCQB: MCLDF) ("mCloud" or the "Company"), a leading provider of asset management solutions combining IoT, cloud computing, artificial intelligence ("AI") and analytics, today announced the launch of a new AssetCare™️ solution under the banner of the "3D Digital Twin." This solution enables mCloud to take advantage of high-precision 3D laser scanners to create digital replicas of facilities along with a suite of capabilities designed to use these 3D models to streamline field work, minimize facility downtime, and eliminate unnecessary field visits.
Husky Energy continues to make steady progress towards a return to full operations at the Superior Refinery.
Smith Bits, a Schlumberger company, has introduced Aegis armor cladding that significantly improves bit body design flexibility and erosion resistance, increasing rate of penetration (ROP) and bit durability for longer runs. Composed of a proprietary tungsten carbide material, Aegis cladding increases bit erosion resistance by 400% and strength by 40% when compared to conventional matrix polycrystalline diamond compact (PDC) bits.
Sanjel Energy Services is proud to be celebrating three years in operation with significant achievements, including completing more than 18,500 service jobs for its extensive customer base and conducting a collaborative study with the University of Alberta on how stress affects well integrity.
Calgary based Melius Energy has successfully transported bitumen from Edmonton, Alberta to Prince Rupert, British Columbia, continuing to global markets in custom 20-foot shipping containers utilizing intermodal rail and vessel infrastructure. The shipment is the company's first BitCrude transportation process demonstration, proving the ability to move bitumen safely and efficiently, in adherence to Canada's regulatory framework.
The Impact Assessment Agency of Canada (the Agency) is conducting a federal environmental assessment for the proposed CNOOC International Flemish Pass Exploration Drilling Project, located approximately 400 kilometres offshore, east of St. John's, Newfoundland and Labrador.
Emerson will showcase its advanced Exploration & Production (E&P) software solutions for optimizing Production Modeling and Reservoir Engineering workflows at the Society of Petroleum Engineers Annual Technical Convention and Exhibition in Calgary, September 30 - October 2. Daily demonstrations at booth #819 will highlight Emerson's technologies for solving subsurface and surface challenges, to reduce uncertainty and enhance confidence in drilling decisions.
Tidewater Midstream and Infrastructure Ltd. has announced that it completed commissioning and start-up of the Pipestone Montney sour deep-cut gas processing complex. The Pipestone Gas Plant is designed to process approximately 100 MMcf/day of sour gas and includes an acid gas injection well, salt water disposal well, and pipelines that directly connect to Tidewater's Pipestone Gas Storage Facility. Additionally, the Pipestone Gas Plant is connected to both the Alliance and TC Energy pipeline network.
The Petroleum Services Association of Canada (PSAC) recently met with business leaders gathered and hosted by the Vaughan Chamber of Commerce for a roundtable discussion. The conversation focused on the benefits to all Canadians of supporting the energy industry.
The Impact Assessment Agency of Canada (the Agency) has accepted an initial project description for the proposed Cedar LNG Project, located near Kitimat, British Columbia.
Petro-Canada Lubricants, a HollyFrontier business, has expanded its TRAXON and DURON product lines with the launches of DURON Advanced 5W-30 and TRAXON Synthetic 75W-85. The introduction of the new oils demonstrate continued product innovation from Petro-Canada Lubricants to help fleets meet new and emerging market trends.
The initial 15% oil price jump resulting from the attacks in Saudi Arabia will not have any impact on the trajectory of 2019 U.S. shale production, IHS Markit says.
Recently at the SIS Global Forum 2019, Schlumberger, Chevron and Microsoft announced the industry's first three-party collaboration to accelerate creation of innovative petrotechnical and digital technologies.
TransAlta Corporation has introduced its Clean Energy Investment Plan, which includes converting its existing Alberta coal assets to natural gas and advancing its leadership position in renewable energy. The total cost of the plan is expected to be approximately $2 billion which includes approximately $800 million of renewable energy projects already under construction.
Schlumberger announced that its technology partnership with Microsoft to develop cloud-native solutions on Microsoft Azure and Azure Stack has been strengthened by new deployments being introduced at the SIS Global Forum 2019 in Monaco.
A persistent oversupply of natural gas will drive the 2020 average price at the Henry Hub down (in real terms) to a level not seen in decades, according to new report from IHS Markit. The oversupply—to be reinforced by a new surge in associated gas production from the Permian basin—will push the average price down below $2/MMBtu for the year, IHS Markit said. That is the lowest prices have averaged in real terms since the 1970s. In nominal terms, the last time that prices fell below $2 was 1995.
Hatch is pleased to announce that Upside Engineering Ltd. has joined Hatch Ltd., bringing together the largest oil and gas process team for complex upstream and downstream flowsheet development in Canada with a well-established local engineering firm that specializes in midstream hydrocarbon business.
The outlook for the uptake of personal and protective equipment (PPE) in the oil & gas (O&G) industry looks promising with the expansion of O&G activities through new global projects, improved stability and the presence of many occupational hazards. Vendors should focus on developing a global presence, multiproduct offerings, and close customer interactions to harness current growth opportunities. Frost & Sullivan expects the mature O&G PPE market to grow at a compound annual growth rate (CAGR) of 3.7% to reach $7.59 billion by 2023.
Encana Corporation has announced changes to its Executive Leadership Team, including the promotion of Michael McAllister to president, Brendan McCracken to executive vice president - corporate development and external relations and Greg Givens to chief operating officer. These changes are effective immediately.
Suncor is replacing its coke-fired boilers with two cogeneration units at its Oil Sands Base Plant. The cogeneration units will provide reliable steam generation required for Suncor's extraction and upgrading operations and generate 800 megawatts (MW) of power. The power will be transmitted to Alberta's grid, providing reliable, baseload, low-carbon power, equivalent to approximately 8% of Alberta's current electricity demand. This project will increase demand for clean natural gas from Western Canada.
North America is expected to drive global small-scale LNG liquefaction capacity growth from planned and announced (new-build) projects between 2019 and 2023, contributing around 47% of the total growth, according to GlobalData, a leading data and analytics company.
Baker Hughes, a GE company announced that the Baker Hughes international rig count for August 2019 was 1,138, down 24 from the 1,162 counted in July 2019, and up 130 from the 1,008 counted in August 2018. The international offshore rig count for August 2019 was 244, down 11 from the 255 counted in July 2019, and up 32 from the 212 counted in August 2018.
The world wants Canadian oil and natural gas, according to an updated international research survey by Ipsos, conducted on behalf of the Canadian Association of Petroleum Producers (CAPP).
Clariant has opened its next High Throughput Experimentation (HTE) Laboratory in Houston, Texas - the energy capital of the United States. The location is key as the new facility will be the first of its kind supporting the Oil & Gas industry, offering new and sophisticated solutions for customers. This lab is part of a global Clariant initiative to expand HTE capabilities to all Clariant Business Units, including direct support for Oil Services in North America, the Asia Pacific region, Latin America, Africa and the North Sea.
Bureau Veritas, a world leader in testing, inspection and certification services, is using cutting edge technology to reduce costs for clients - while increasing safety for engineers at the same time. This is a part of BV's ‘Twintelligence' campaign of twinning expertise with technology.
The PetroLMI Division of Energy Safety Canada has launched an enhanced website with added features to help Canadians pursue new or different career opportunities in the oil and gas industry.
Advantage Oil & Gas Ltd. reports that a significant Montney light oil pool has been discovered and appraised at Progress, Alberta, on the Corporation's 47 net section block of 100% owned lands. This discovery elevates the Progress asset to be a primary element of the Corporation's near-term liquids development program.