Oil Rigs Oil Pricing Refineries Proven Reserves Exports Imperial Oil Capital Expenditures

1. Oil and Gas – Canada – June
2016
By: Paul Young, CPA, CGA
July 3, 2016

2. Disclaimer
• This presentation is on view of the oil and gas sector for Canada

3. Paul Young - Presenter
Bio
• CPA/CGA
• 25 years of experience in Academia, Industry and Financial solutions
• Youtube Channel -
https://www.youtube.com/channel/UCAArky1bAXPSuV2NLtUnyLg

4. Agenda
• Oil Rigs
• Oil Pricing
• Imports and Exports
• Refineries
• Proven Reserves
• Exports
• Imperial Oil
• Capital Expenditures

5. Oil Rigs
• Source – Baker Hughes

6. Oil Pricing
Source: BMO

7. Oil (Exports and Imports)

8. Oil / Canada

9. Oil Refinery
Canada produced 19.5 million cubic metres
(122.6 million barrels) of crude oil and equivalent
products in March, up 0.2% compared with the
same month in 2015.
http://www.statcan.gc.ca/daily-
quotidien/160615/dq160615c-eng.pdf

10. Proven Reserves
• The U.S. holds more oil reserves than anyone else in the world, including Saudi Arabia, Russia, and Venezuela.
• That conclusion comes from a new independent estimate from Rystad Energy, a Norwegian consultancy. Rystad
estimates that the U.S. holds 264 billion barrels of oil, more than half of which is located in shale. That total exceeds
the 256 billion barrels found in Russia, and the 212 billion barrels located in Saudi Arabia.
• The findings are surprising, and go against conventional wisdom that Saudi Arabia and Venezuela hold the world’s
largest oil reserves. The U.S. Energy Information Administration, for example, pegs Venezuela’s oil reserves at 298
billion barrels, the largest in the world. Rystad Energy says that these are inflated estimates because much of those
reserves are not discovered. Instead, Rystad estimates that Venezuela only has about 95 billion barrels, which
includes its estimate for undiscovered oil fields.
• Moreover, Rystad argues that there are not uniform ways of measuring oil reserves from country to country. Some
countries report proven reserves, using conservative estimates from existing oil fields. Other countries, like
Venezuela, report undiscovered reserves. But Rystad applied similar metrics to all countries in its report to make
comparisons easier. “An established standard approach for estimating reserves is applied to all fields in all countries,
so reserves can be compared apple to apple across the world, both for OPEC and non-OPEC countries. Other public
sources of global oil reserves, like the BP Statistical Review, are based on official reporting from national authorities,
reporting reserves based on a diverse and opaque set of standards.” The latest assessment, Rystad argues, paints a
more accurate portrait.
• The U.S., then, sits atop with its oil reserves. Rystad notes that Texas alone could have 60 billion barrels of oil.

11. Exports

12. Capital Expenditures
• Canadian oil production will grow by 28
percent to hit 4.9 million barrels per day
(bpd) by 2030, the Canadian Association of
Petroleum Producers said in its annual
report.
• The estimate is lower than CAPP's previous
forecast of 5.3 million bpd by 2030, and
comes amid a two-year rout in global oil
prices that continue to hammer Canadian
oil companies, which have slashed billions
in capital expenditures.
• Production from Alberta's oil sands, the
world's third-largest crude reserves and
No. 1 source of U.S. oil imports, will hit 3.7
million bpd by 2030, the industry group
said on Thursday.
• CAPP expects conventional oil production
in Western Canada, including condensates,
to fall to 1.1 million bpd by 2018 from 1.3
million bpd in 2015 and is expected to
remain relatively stable to 2030.

13. Imperial Oil
• Upstream, Imperial reported the early start-up of its Kearl oilsands mining expansion project, and the successful start-up of the Cold Lake Nabiye thermal
project drove an 18 per cent production increase in 2015.
• Overall production averaged 400,000 gross boe/d in the final quarter of 2015, an increase of 27 per cent from 315,000 barrels in the same period of 2014,
and it is now at its highest level in more than two decades.
• Despite the highest production in a generation, low prices resulted in a $700-million upstream loss for Imperial in 2015 compared to a net income of $2.05
billion the previous year.
• “Consistent with our long-standing approach, we continue to focus on what we can control,” says Kruger. “As a result, we reduced operating and capital costs
by $1.5 billion relative to earlier plans. Most notably, since bringing on new production, upstream unit cash costs were 25 per cent lower in the second half of
2015 than our 2014 annual average. Disciplined operating and capital cost management continue to be a priority.”
• Much of Imperial’s success in cutting capital costs has come from focusing on its construction supply chain, Kruger said in a recent Q&A with Oilsands
Review staff writer R.P. Stastny.
• “Our strategy is to capture cost savings and efficiencies that can be sustained for the long term. Working with our contractors, we initially focused on price:
voluntary reductions, rebidding and procuring in different ways. Thereafter, we significantly shifted our efforts toward partnering with contractors to bring
about productivity improvements,” he said. “We’ve taken some of our Alberta contractors to elsewhere in ExxonMobil’s world and shown them ideas for
improvements. Doing this can result in productivity improvements that will benefit all of industry, making our contractors healthier and more competitive,
both in the current environment and in the future. We believe many of our cost reductions and other improvements will be structural in nature. What we are
trying to do is implement cost efficiencies in the most sustainable way for the long-term health and well-being of the business.”
• The company is now focused on operational excellence.
• “Over the past several years, we have gone through a period of significant growth, particularly in the upstream. Our priority now is ensuring we get the full
value of those recent investments, focusing on base business operating fundamentals and delivering significant cost reductions in a challenging business
environment,” said Kruger.
• While upstream was in the red, Imperial’s downstream net income in 2015 was $1.59 billion, around the same as in 2014. Earnings decreased due to the
impact of lower refinery margins of about $590 million and higher operating costs of about $70 million mainly associated with the Edmonton rail terminal.
The decline, however, was partially offset by the favourable impact of a weaker Canadian dollar of about $390 million, higher fuels marketing margins and
volumes of about $170 million, lower energy costs of about $80 million and a 2015 gain of $17 million from the sale of assets.
• Chemical net income was a record $287 million in 2015, an increase of $58 million over the same period in 2014, primarily due to the impact of a weaker
Canadian dollar, lower feedstock costs and higher sales of polyethylene.
• “Looking ahead, the company has a significant oil and gas resource base and a large inventory of potential projects that position us well for future growth,”
said Kruger.

14. Policies / issues
• Carbon Tax/Pricing (Alberta/Ontario)
• Shift to clean technology (i.e. electrical cars, wind, solar, biomass)
• CPP expansion
• Fort McMurray Fire
• Lack of capacity (pipelines)