Oct. 28, 2009 (Canada NewsWire Group) --
CALGARY, Oct. 28 /CNW/ -- OPTI Canada Inc. (OPTI) announced today the Company's financial and operating results for the quarter ended September 30, 2009.
The Long Lake Project (the Project) is the first to use OPTI's integrated OrCrude(TM) process. Our proprietary process is designed to substantially reduce operating costs compared to other oil sands projects while producing a high quality, sweet synthetic crude oil.
"We had a good quarter operationally. Our objectives in the third quarter were to complete the planned turnaround and to start-up the final components of the Upgrader, which are the thermal cracker and the solvent deasphalter. Both of these objectives were successfully accomplished and the Project is now positioned to ramp-up with improved PSC(TM) yield and enhanced steam generation capabilities," said Chris Slubicki, President and Chief Executive Officer.
FINANCIAL HIGHLIGHTS
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Three months Nine months Year
ended ended ended
September 30, September 30, December 31,
In millions 2009 2009 2008
(as revised)
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Net earnings (loss) $ 12 $ (95) $ (477)(1)
Total oil sands expenditures(2) 31 128 706
Working capital (deficiency) 10 10 (25)
Shareholders' equity $ 1,523 $ 1,523 $ 1,471
Common shares outstanding
(basic)(3) 282 282 196
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Notes:
(1) Includes $369 million pre-tax asset impairment provision related to
working interest sale to Nexen.
(2) Capital expenditures related to Phase 1 and future phase development.
Capitalized interest, hedging gains/losses and non-cash additions or
charges are excluded.
(3) Common shares outstanding at September 30, 2009 after giving effect
to the exercise of stock options would be approximately 287 million
common shares.
OPERATIONAL UPDATE
Several important operational milestones were achieved in the third quarter. First, the previously announced turnaround at the Long Lake Project has been successfully completed, including valve replacement and maintenance on the water treatment plant intended to optimize steam production and enhance long-term production capacity. Improved water treatment operation has already been observed in the short period since restarting the SAGD facilities. Currently, steam injection is approximately 60,000 bbl/d and, while early in the ramp-up process, bitumen production has returned to pre-turnaround levels of approximately 10,000 to 12,000 bbl/d with 39 well pairs on production.
Another milestone was the completion of the steam debottleneck project that will increase the SAGD steam design capacity to over 230,000 bbl/d. The debottleneck train will start-up as needed to support SAGD ramp-up.
The final milestone was the successful testing of the solvent deasphalter and thermal cracking units in the Upgrader prior to the turnaround. These units will allow the Operator to transition from gasifying vacuum residue, which contains some lighter parts of the barrel, to gasifying the heaviest part of the barrel called asphaltenes. Once this transition is complete we expect PSC(TM) yields to increase to approximately 80%.
Bitumen production in 2009 has been limited by the ability to produce large amounts of steam consistently and over a sustained period. Bitumen production in the third quarter was lower than in previous quarters due to the previously announced intentional reduction of steam injection in order to address water chemistry issues in advance of the turnaround and downtime associated with the turnaround itself. As such, gross bitumen production in the third quarter averaged approximately 8,800 bbl/d (3,000 bbl/d net to OPTI).
Electric submersible pumps (ESPs) continued to be installed in a number of SAGD wells, which will allow us to have better pressure control and ultimately reduce the overall steam to oil ratio (SOR). We currently have approximately 42 well pairs with ESPs.
We expect that the improvements made to the SAGD facility in 2009 will result in a significant increase in bitumen production through 2010 and position the Project to achieve full design rates. We now expect that the Project will be at or near design rates later than our previous guidance of late 2010 and intend to gather post-turnaround operating experience in consultation with the operator prior to providing updated production guidance. Once the Project reaches full design rates, it is expected to produce 20,000 bbl/d of PSC(TM) net to OPTI for over 40 years.
RESULTS OF OPERATIONS
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Three Months Ended Nine Months Ended
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Sep 30 June 30 Sep 30 Sep 30 Sep 30
$ millions 2009 2009 2008 2009 2008
(as revised) (as revised)
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Revenue, net of
royalties $ 38 $ 34 $ 125 $ 101 $ 125
Expenses
Operating expenses 44 39 37 111 37
Diluent and
feedstock
purchases 29 20 89 78 89
Transportation 3 3 2 9 2
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Net field operating
margin (loss) (38) (28) (3) (97) (3)
Corporate expenses
Interest, net 46 42 18 107 14
General and
administrative 2 7 4 15 12
Financing charges 4 1 - 5 1
Realized loss
(gain) on hedging
instruments (5) (11) (4) (40) (8)
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Earnings (loss)
before non-cash
items (85) (67) (21) (184) (22)
Non-cash items
Foreign exchange
translation loss
(gain) (162) (171) 73 (258) 119
Net unrealized
loss (gain) on
hedging
instruments 82 137 (64) 198 (68)
Depletion,
depreciation and
accretion 5 7 6 16 7
Loss on disposal
of assets - 1 - 2 -
Future tax
(recovery) (22) (32) (4) (47) (13)
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Net earnings (loss) $ 12 $ (9) $ (32) $ (95) $ (67)
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Comparative amounts for the three and nine months ended September 30, 2008 have been revised to reflect the retroactive adoption of CICA Handbook section 3064 "Goodwill and Intangible Assets", effective January 1, 2009.
We define our net field operating margin as revenue related to petroleum products (net of royalties) and power sales minus operating expenses, diluent and feedstock purchases and transportation costs. See "Non-GAAP Financial Measures". This net field operating margin was a loss of $38 million during the three months ended September 30, 2009 as compared with a loss of $28 million in the preceding quarter. Our net field operating loss increased during the third quarter primarily due to the plant turnaround which resulted in higher operating expenses and lower Upgrader on-stream time than in the prior quarter. The Upgrader on-stream factor decreased from 46% in the second quarter to 15% in the third quarter, and as a result, in the third quarter we purchased more diluent, which is blended with bitumen to produce Premium Synthetic Heavy. Most of our SAGD and Upgrader operating costs are fixed, therefore we expect that rising SAGD volumes and an increasing Upgrader on-stream factor will lead to improvements in our net field operating margin. This expected improvement would result from higher PSC(TM) sales and lower diluent costs.
The results of operations for the nine month period ended September 30, 2009 include SAGD results for the entire period, as well as Upgrader results from April 1, 2009, the date we determined the Upgrader to be ready for its intended use for accounting purposes. The results for the nine month periods ended September 30, 2008 include SAGD results from July 1, 2008, the date we determined the SAGD facility to be ready for its intended use.
Results related to the Long Lake Project from 2008 are at a working interest share of 50%, whereas 2009 results are at a 35% working interest share due to the sale of 15% of our working interest to Nexen, effective January 1, 2009.
Revenue
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For the three months ended September 30, 2009, we earned revenue of $38 million, compared to $34 million in the three months ended June 30, 2009, and $125 million in the three months ended September 30, 2008. During the third quarter our share of PSC(TM) sales averaged 800 bbl/day (Q2 2009: 1,700 bbl/day; Q3 2008: nil) at an average price of approximately $74.75/bbl, while our share of Premium Synthetic Heavy (PSH) averaged 5,600 bbl/day (Q2 2009: 4,400 bbl/day; Q3 2008: 13,200 bbl/day) at an average price of approximately $62.25/bbl. Compared to the previous quarter, revenue increased due to higher PSH sales from bitumen blended with diluent, offset by lower PSC(TM) sales as a result of a lower Upgrader on-stream factor. Revenue earned during the three months ended September 30, 2008 consisted primarily of PSH sales when bitumen production averaged 5,200 bbl/day (Q3 2009: 3,000 bbl/day).
During the third quarter we received pricing for PSC(TM) in-line with or better than other synthetic crude oils. Due to the premium characteristics of our PSC(TM), we expect to increase the premium we receive relative to other synthetic crude oils as production, and therefore the availability of marketed PSC(TM), increases.
In the three months ended September 30, 2009, we had power sales of $1 million representing 36,848 megawatt hours (MWh) (Q2 2009: 17,167 MWh; Q3 2008: 74,737 MWh) of electricity sold at an average price of approximately $39/MWh, which is consistent with power sales of $1 million in the three months ended June 30, 2009. In the three months ended September 30, 2008 power sales were $5 million which was due to higher excess electricity available for sale and higher market prices.
For the nine months ended September 30, 2009, we earned revenue of $101 million, which was comprised of $83 million PSH sales, $15 million of PSC(TM) sales and $4 million of power sales, offset by $1 million of royalties. This compares to revenue of $125 million for the nine month period ending September 30, 2008, which was comprised primarily of PSH and power sales.
Expenses, gains and losses
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* Operating expenses
For all three and nine month periods, operating expenses were primarily comprised of natural gas, maintenance, labour and operating materials and services.
Operating expenses were $44 million for the three months ended September 30, 2009, compared to $39 million in the three months ended June 30, 2009 and $37 million in the three months ended September 30, 2008. Operating expenses in the third quarter were higher than the second quarter of 2009 due to maintenance work conducted as part of the turnaround in September. There were no Upgrader related operating expenses in the third quarter of 2008; these costs were capitalized as the Upgrader was not considered to be ready for its intended use.
Operating expenses were $111 million for the nine months ended September 30, 2009 compared to $37 million for the corresponding period of 2008. Operating expenses in 2009 include SAGD results for the entire period, as well as Upgrader results from April 1, 2009, whereas operating expenses in 2008 only include SAGD results from July 1, 2008.
* Diluent and feedstock purchases
Diluent and feedstock purchases were $29 million for the three months ended September 30, 2009, compared to $20 million in the three months ended June 30, 2009 and $89 million in the three months ended September 30, 2008. Third quarter 2009 diluent purchases increased from the second quarter of 2009 due to a lower on-stream factor for the Upgrader, requiring increased diluent to blend with bitumen to make PSH. In the third quarter of 2009 we purchased approximately 3,000 bbl/day of diluent at an average price of $73/bbl, compared to second quarter 2009 purchases of 1,900 bbl/day of diluent at an average price of $69/bbl. Diluent purchases in the third quarter of 2008 were higher than the third quarter of 2009 due to higher market prices for diluent, as well as increased volumes purchased since the Upgrader was not yet processing bitumen.
Diluent and feedstock purchases were $78 million for the nine months ended September 30, 2009 compared to $89 million the corresponding period of 2008. Diluent and feedstock purchases in 2009 include purchases for the entire period, whereas diluent and feedstock purchases in 2008 only include purchases from July 1, 2008, which is the date we determined the SAGD facility to be ready for its intended use.
* Transportation
Transportation expenses were $3 million for the three month periods ended September 30, 2009 and June 30, 2009, and $2 million for the three months ended September 30, 2008. Transportation expenses were primarily related to pipeline costs associated with PSC(TM) and PSH sales.
Transportation expenses were $9 million for the nine months ended September 30, 2009 compared to $2 million in the corresponding period of 2008. Transportation expenses in 2009 include expenses for the entire period, whereas transportation expenses in 2008 are only included from July 1, 2008, which is the date we determined the SAGD facility to be ready for its intended use.
* Net interest expense
Net interest expense was $46 million for the three months ended September 30, 2009, compared to $42 million in the three months ended June 30, 2009, and $18 million in the three months ended September 30, 2008. Interest expense increased in the third quarter of 2009 primarily due to higher average amounts owing on the revolving credit facility and higher borrowing rates on this facility, offset by lower interest costs on our U.S.-dollar-denominated debt due to the stronger Canadian dollar in the third quarter of 2009 compared to the previous quarter. Interest expense in the third quarter of 2008 only included borrowing costs attributable to the SAGD facilities, as the Upgrader was not yet ready for its intended use and borrowing costs related to the Upgrader were capitalized.
Net interest expense was $107 million for the nine months ended September 30, 2009 compared to $14 million for the corresponding period of 2008. Net interest expense in 2009 includes interest costs related to the SAGD facilities for the entire period as well as interest costs related to the Upgrader from April 1, 2009, whereas interest expenses in 2008 only includes interest related to the SAGD facilities from July 1, 2008, which is the date we determined the SAGD facility to be ready for its intended use.
* General and Administrative (G&A)
G&A expense was $2 million for the three months ended September 30, 2009, compared to $7 million in the three months ended June 30, 2009 and $4 million in the three months ended September 30, 2008. Second quarter 2009 expenses were higher due to one-time transition costs related to the re-organization of OPTI after the asset sale to Nexen. G&A expenses were lower in the third quarter of 2009 than prior periods because we have reduced our head office costs since we are no longer the operator of the Upgrader.
G&A expense was $15 million for the nine months ended September 30, 2009 compared to $12 million the corresponding period of 2008. The increase in 2009 is primarily due to one-time transition costs related to the re-organization of OPTI after the working interest asset sale to Nexen.
* Financing charges
Financing charges were $4 million for the three months ended September 30, 2009, compared to $1 million in the three months ended June 30, 2009 and $nil million in the three months ended September 30, 2008. Financing charges in third quarter of 2009 are due to the amendment to our revolving debt facility covenants, while the financing charges in the second quarter of 2009 relate to the evaluation of financing alternatives.
Financing charges were $5 million for the nine months ended September 30, 2009 compared to $1 million the corresponding period of 2008. Financing charges in 2009 relate to the amendment to our revolving debt facility covenants and evaluation of financing alternatives, while financing charges in 2008 relate to new debt facilities.
* Loss on disposal of assets
Loss on disposal of assets was $nil million for the three months ended September 30, 2009, compared to $1 million in the three months ended June 30, 2009 and $nil million in the three months ended September 30, 2008. The loss in the second quarter of 2009 relates to information technology write offs.
For the nine months ended September 30, 2009, loss on disposal of assets was $2 million, primarily for costs incurred during the first quarter related to the asset sale to Nexen and information technology write offs in the second quarter.
