Q4/17 results – modest CFPS miss on higher opex; production beat, lower capex

Canadian Market Summary

February 6, 2018

  • IMO announced Q4/17 results with CFPS coming in 3% below consensus ($1.11/sh vs $1.15/sh), while production came in 2% above consensus at 399 mboe/d (vs 393 mboe/d). Capex for Q4/17 was $216M, 27% below consensus of $294M. The CFPS miss was mainly due to higher operating costs: total production expenses of $1,460M were 9% higher than our estimate of $1,337M.
  • Production. Kearl Q4/17 production came in at 176 mbbl/d gross, or 125 mbbl/d IMO’s share, 4% below our estimate of 130 mbbl/d (net to IMO). Q4/17 Kearl production was affected by planned turnaround activity (~25 mbbl/d gross, 18 mbbl/d net). IMO expects Kearl production to be 200 mbbl/d gross in 2018 and reach 240 mbbl/d by 2020. The production increase will be made possible partially by a $400M (IMO’s share) investment in supplemental crushing capacity and front-end flowline redundancy, which will improve reliability. This work is expected to be complete by year-end 2019. We currently estimate Kearl production of 134 mbbl/d in 2018, ramping up to 161 mbbl/d in 2021 (net to IMO), and operating costs of C$30/bbl dropping to ~C$26/bbl from 2018 to 2021 respectively. In Q4/17, Cold Lake production of 168 mbbl/d was within 1% of our estimate, while Syncrude volumes of 81 mbbl/d (IMO’s share) were previously disclosed.

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