Imperial Oil’s Bitumen Versus Canadian Oil Sands’ Synthetic Crude

There has been a lot of action recently in the energy market because of Suncor Energy’s hostile takeover offer for Canadian Oil Sands. There has been speculation about the cost profile of Imperial Oil versus other oil sands peers. Indeed, the information released by the company isn’t very detailed. The major reason for this is the major shareholder of Imperial Oil (ExxonMobil). First, here is the cost profile of Canadian Oil Sands from Q3.

Canadian Oil Sands - Synthetic Crude Oil (C$/bbl)

Sales price60.20
Operating expenses40.49
Operating netback16.70

Source: Cadotte Capital Partners

Then, let’s estimate the operating costs of Imperial Oil’s upstream business using Canadian Oil Sands’ figures for operating costs and royalties per barrel.

Imperial Oil - Synthetic Crude Oil (C$M)

Sales price330
Operating expenses218
Operating netback95

Source: Cadotte Capital Partners

Then, we can determine the sales and operating costs that are related to non-Syncrude operations from the balance sheet of Imperial Oil.

Imperial Oil - Upstream Business (C$M)

Total sales1467
Syncrude sales330
Other sales1137
Total operating expenses1802
Syncrude operating expenses218
Other operating expenses1584

Source: Cadotte Capital Partners

The company produced 1.8 million barrels of oil equivalent, 31.7 million barrels of bitumen and 1.1 million barrels of oil from its legacy projects in the third quarter.

Using this production, the operating costs can be estimated by dividing the other opex by the total production. The operating costs amount to C$45.88 per barrel of bitumen using this method. If we say that the opex of the legacy operations are proportional to its higher sales price, the operating costs go down to C$43.91 per barrel of bitumen.

Therefore, the opex of Imperial Oil’s bitumen operations are estimated at C$43 to C$46 per barrels of bitumen. Of course, this figure includes both Kearl and Cold Lake projects. Also note that while the operating costs are somewhat comparable to Canadian Oil Sands’ opex, the latter has better pricing for its oil due to the upgrading of bitumen to synthetic crude oil. On the other hand, Imperial Oil being an integrated company, the company already has its own refineries.