ANNUAL REPORT 2011 - Connacher Oil and Gas

More documents

Recommendations

Info

AR 2011 PG 26 UPSTREAM NETBACKS (1) Three months ended December 31 2011 2010 ($ per bbl / Mcf / boe) Oil sands Crude oil Natural gas Total Oil sands Crude oil Natural gas Total Revenues (2) $ 53.04 $ 89.57 $ 3.27 $ 52.96 $ 45.08 $ 66.72 $ 3.44 $ 44.09 Royalties (3.09) (14.17) 0.36 (3.24) (1.85) (19.76) (0.09) (2.76) Operating costs (19.62) (20.35) (2.07) (19.39) (18.96) (16.57) (1.50) (17.91) Netbacks (3) $ 30.33 $ 55.05 $ 1.56 $ 30.33 $ 24.27 $ 30.39 $ 1.85 $ 23.42 Year ended December 31, 2011 2011 2010 ($ per bbl / Mcf / boe) Oil sands Crude oil Natural gas Total Oil sands Crude oil Natural gas Total Revenues (2) $ 47.59 $ 82.44 $ 3.70 $ 47.41 $ 45.65 $ 65.63 $ 3.90 $ 44.13 Royalties (2.83) (16.40) 0.62 (2.92) (1.82) (17.72) (0.05) (2.93) Operating costs (20.08) (18.80) (1.93) (19.64) (20.15) (13.67) (1.63) (18.12) Netbacks (3) $ 24.68 $ 47.24 $ 2.39 $ 24.85 $ 23.68 $ 34.24 $ 2.22 $ 23.08 (1) Effective October 1, 2010, the capitalized costs relating to the company’s second oil sands project, Algar, were subjected to depletion and the revenues, expenses and finance charges associated with the project were reported in the statement of operations. Prior thereto, Algar was considered a major development project under construction and all costs, including related financing costs and operating expenses net of revenue, were capitalized. Accordingly, the above table does not include operating results for Algar prior to October 1, 2010. (2) Revenues are calculated after deducting diluent and transportation costs, but before royalties and risk management contract gains or losses. (3) Netbacks are a non-GAAP measure and are defined in the Advisory section of the MD&A. DOWNSTREAM - USA Connacher’s wholly-owned subsidiary, MRCI operates a 9,500 bbl/d heavy oil refinery located in Great Falls, Montana (the “Refinery”) which is strategically aligned with our oil sands business. It primarily processes Canadian heavy sour crude oil into a range of higher value refined petroleum products, thereby capturing more of the value chain in a produced barrel of oil. Accordingly, the Refinery provides a physical hedge for our bitumen revenue by recovering a portion of the heavy oil differential in its netbacks under normal operating conditions. In 2011, the refinery margin per barrel of bitumen sold was $8.67 (2010 - $9.70 per bbl), illustrating the positive contribution to overall corporate netbacks of owning the Refinery. The Refinery is located on an approximately 73 acre site and is a fully integrated refinery with reforming, isomerization and alkylation processes for formulation of gasoline blends, hydro-treating for ultra low sulphur diesel and fluid catalytic cracking for conversion of heavy gas oils to gasoline and distillate products. Also, it is a major supplier of paving grade asphalt, polymer modified grades and asphalt emulsions for road construction. The Refinery delivers products in Montana and to neighboring regions, including, Alberta, Canada, by truck and rail transport. Upon completion of the benzene removal project currently underway, the Refinery will also be able to access the southern Alberta market for gasoline. The Refinery is also a source of supply for a portion of our diluent requirements for oil sands operations. These intercompany purchases and sales have been eliminated on consolidation. The operating results of our Refinery are subject to a number of seasonal factors which cause production and sales to vary throughout the year. The Refinery’s primary asphalt market is paving for road construction, which is in greater demand during the summer. Consequently, the Refinery runs a higher proportion of lighter, higher cost crude in the October to March period to restrict asphalt production, and sales prices and volumes for asphalt are higher in the summer and lower in the colder seasons. During the winter, most of the Refinery’s asphalt production is stored in tankage for sale in the subsequent summer. Seasonal factors also affect the production and sale of gasoline, which has a higher demand in summer months. As a result, inventory levels, sales volumes and prices can be expected to fluctuate on a seasonal basis. The Refinery has approximately one million barrels of feedstock and product tankage. REFINERY THROUGHPUT Three months ended December 31 Year ended December 31 2011 2010 2011 2010 Crude charged – bbl/d (1) 10,295 10,137 9,890 9,693 Refinery production – bbl/d (2) 11,515 11,964 10,876 10,704 Sales of refined petroleum products – bbl/d (3) 10,330 9,068 11,141 10,080 Refinery utilization (4) 108% 107% 104% 102% (1) Crude charged represents the barrels per day of crude oil processed at the Refinery. (2) Refinery production represents the barrels per day of refined products yielded from processing crude and other refinery feedstock. (3) Includes refined products purchased for resale and blending. (4) Represents crude charged divided by total crude capacity of the Refinery of 9,500 bbl/d.
AR 2011 PG 27 SALES PRODUCT MIX (%) Three months ended December 31 Year ended December 31 2011 2010 2011 2010 Gasoline 45 49 41 45 Diesel 22 17 18 16 Jet fuel 4 5 5 7 Asphalt 27 25 34 30 Other 2 4 2 2 Total 100 100 100 100 In Q4 2011 and YTD 2011, the total sales volumes of refined petroleum products increased by 14 percent and 11 percent compared to Q4 2010 and YTD 2010, respectively, primarily due to the improved stability of refining operations, more favorable weather conditions for road paving activities that buoyed higher relative asphalt sales and increased demand for refined petroleum products in 2011. COMMODITY PRICES Three months ended December 31 Year ended December 31 2011 2010 % 2011 2010 % Average benchmark prices West Texas Intermediate (WTI) crude oil US$/barrel at Cushing $ 94.05 $ 85.16 10 $ 95.14 $ 79.51 20 Average realized crude oil input cost Crude Oil – US$/bbl at Refinery 90.05 72.00 25 84.28 69.33 22 Average realized refined product prices (1) Gasoline – US$/bbl 107.56 88.35 22 112.35 87.48 28 Diesel – US$/bbl 136.38 107.82 26 126.77 94.97 33 Jet fuel – US$/bbl 131.23 105.18 25 133.65 96.57 38 Asphalt – US$/bbl 87.77 79.22 11 87.99 81.49 8 Weighted average sales price – US$ per bbl $ 108.32 $ 89.13 22 $ 106.81 $ 86.02 24 Weighted average sales price, including realized gains/loss on risk management contracts – US$/bbl $ 109.43 $ 89.13 23 $ 107.06 $ 85.88 25 (1) Before risk management contracts gains and losses and after transportation costs. The Refinery operates in PADD IV and is exposed to niche-like markets that resulted in above average realized refined product prices in 2011. Sales of refined petroleum products are generally made on sales contracts negotiated with wholesalers, retailers and large end-users for gasoline, jet fuel and diesel and with construction contractors and road builders for asphalt. Frequently, sales contracts are for periods in excess of one month. General and local economic conditions affect refined product demand and pricing. We anticipate they will continue to influence our downstream financial results in the future. To mitigate some of the risk of lower future gasoline and diesel selling prices and margins, the company entered into certain risk management sales contracts. In Q4 2011, the company recorded a realized and unrealized gain of $1.0 million and $5.3 million, respectively (Q4 2010 - $nil). In YTD 2011, the company recorded a realized and unrealized gain of $1.0 million and $5.6 million, respectively (YTD 2010 - realized loss of $543,000). Currently, the following risk management contracts in place: • Gasoline swap – January 1, 2012 – March 31, 2012 – 1,000 bbl/d at WTI per barrel plus US$27.50/bbl; • Diesel swap – January 1, 2012 – December 31, 2012 – 1,000 bbl/d at WTI per barrel plus US$32.25/bbl; • Gasoline swap – April 1, 2012 – June 30, 2012 – 1,000 bbl/d at WTI per barrel plus US$21.25/bbl; • Gasoline swap – April 1, 2012 – June 30, 2012 – 815 bbl/d at WTI per barrel plus US$23.00/bbl. DOWNSTREAM REVENUE Three months ended December 31 Year ended December 31 2011 2010 2011 2010 Gross revenue (1) ($000) $ 107,010 $ 77,435 $ 441,143 $ 334,165 Transportation and handling cost (2) ($000) (1,899) (2,905) (12,282) (7,899) Downstream revenue ($000) $ 105,111 $ 74,530 $ 428,861 $ 326,266 Weighted average sales price ($ per bbl) (3) $ 110.60 $ 90.32 $ 105.47 $ 88.68 (1) Includes intersegment sales of $3.8 million in Q4 2011 and $15.2 million in YTD 2011 ($3.8 million in Q4 2010 and $14.3 million in YTD 2010), which were transacted at prevailing market prices and have been eliminated from the consolidated financial statements. The costs of these sales were $3.5 million in Q4 2011 and $13.7 million in YTD 2011 ($3.4 million in Q4 2010 and $13.0 million in YTD 2010). (2) Transportation cost is deducted in calculating above revenue whereas it is included in expenses in the consolidated statements of operations. (3) Per unit prices are calculated using revenue divided by volumes of refined products sold.
Page 1 and 2: ANNUAL REPORT 2011 WELL POSITIONED
Page 3 and 4: AR 2011 PG 1 02 HIGHLIGHTS 05 LETTE
Page 5 and 6: AR 2011 PG 3 Years ended December 3
Page 7 and 8: AR 2011 PG 5 Volatility in the oil
Page 9 and 10: AR 2011 PG 7 “Thanks to our liqui
Page 11 and 12: AR 2011 PG 9 Review of Operations I
Page 13 and 14: AR 2011 PG 11 proposals helped to p
Page 15 and 16: AR 2011 PG 13 reservoir description
Page 17 and 18: AR 2011 PG 15 Connacher Oil and Gas
Page 19 and 20: AR 2011 PG 17 the movement of wildl
Page 21 and 22: AR 2011 PG 19 MANAGEMENT’S DISCUS
Page 23 and 24: AR 2011 PG 21 reduced interest rate
Page 25 and 26: AR 2011 PG 23 Connacher’s bitumen
Page 27: AR 2011 PG 25 OPERATING COSTS (1) T
Page 31 and 32: AR 2011 PG 29 Depletion expense is
Page 33 and 34: AR 2011 PG 31 NEW NOTES We issued U
Page 35 and 36: AR 2011 PG 33 Compensation of key m
Page 37 and 38: AR 2011 PG 35 ACCOUNTING POLICIES A
Page 39 and 40: AR 2011 PG 37 The company classifie
Page 41 and 42: AR 2011 PG 39 Management is respons
Page 43 and 44: AR 2011 PG 41 The production outloo
Page 45 and 46: AR 2011 PG 43 QUARTERLY HIGHLIGHTS
Page 47 and 48: AR 2011 PG 45 Independent Auditor
Page 49 and 50: AR 2011 PG 47 Consolidated Statemen
Page 51 and 52: AR 2011 PG 49 Consolidated Statemen
Page 53 and 54: AR 2011 PG 51 Impairment of assets
Page 55 and 56: AR 2011 PG 53 Goodwill is allocated
Page 57 and 58: AR 2011 PG 55 3.11 Leases Agreement
Page 59 and 60: AR 2011 PG 57 IAS 1 Presentation of
Page 61 and 62: AR 2011 PG 59 Reconciliation of seg
Page 63 and 64: AR 2011 PG 61 8.1 Petroleum and nat
Page 65 and 66: AR 2011 PG 63 10. PROPERTY, Plant a
Page 67 and 68: AR 2011 PG 65 Accounts receivable a
Page 69 and 70: AR 2011 PG 67 December 31, 2010 - C
Page 71 and 72: AR 2011 PG 69 13.3 Refinancing of l
Page 73 and 74: AR 2011 PG 71 Changes in present va
Page 75 and 76: AR 2011 PG 73 The provision for inc
Page 77 and 78: AR 2011 PG 75 The following table s
Page 79 and 80:
AR 2011 PG 77 19. FINANCE Charges F
Page 81 and 82:
AR 2011 PG 79 Compensation of key m
Page 83 and 84:
AR 2011 PG 81 Estimates Hindsight w
Page 85 and 86:
AR 2011 PG 83 Reconciliation of Con
Page 87 and 88:
AR 2011 PG 85 27.3 Asset and Liabil
Page 89 and 90:
AR 2011 PG 87 The following table s
Page 91 and 92:
CORPORATE INFORMATION Board of Dire
show all

ANNUAL REPORT 2011 - Connacher Oil and Gas

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?