Item 2.
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Managements discussion and analysis of financial condition and results of operations
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Operating results
First quarter 2019 vs. first quarter 2018
The companys net income for the first quarter of 2019 was $293 million or $0.38 per share on a diluted basis, compared to net income of $516 million or
$0.62 per share for the same period 2018.
Upstream net income was $58 million in the first quarter, up $102 million from the same period of 2018.
Improved results reflect the impact of higher Canadian crude oil realizations of about $160 million and higher Syncrude and Norman Wells volumes of about $80 million. Results were negatively impacted by higher operating expenses of about
$120 million and lower Cold Lake volumes of about $50 million.
West Texas Intermediate (WTI) averaged US$54.90 per barrel in the first quarter of 2019,
down from US$62.89 per barrel in the same quarter of 2018. Western Canada Select (WCS) averaged US$42.44 per barrel and US$38.67 per barrel for the same periods. The WTI / WCS differential narrowed during the first quarter of 2019 to average
approximately US$12 per barrel for the quarter, compared to around US$24 per barrel in the same period of 2018.
The Canadian dollar averaged US$0.75 in the first
quarter of 2019, a decrease of US$0.04 from the first quarter of 2018.
Imperials average Canadian dollar realizations for bitumen increased in the quarter,
supported by an increase in WCS and lower diluent costs. Bitumen realizations averaged $48.85 per barrel for the first quarter of 2019, up from $35.61 per barrel in the first quarter of 2018. The companys average Canadian dollar realizations
for synthetic crude declined generally in line with WTI, adjusted for changes in exchange rates and transportation costs. Synthetic crude realizations averaged $69.34 per barrel, compared to $77.26 per barrel in the same period of 2018.
Gross production of Cold Lake bitumen averaged 145,000 barrels per day in the first quarter, compared to 153,000 barrels per day in the same period last year. Lower
production was mainly due to production timing associated with steam management.
Gross production of Kearl bitumen averaged 180,000 barrels per day in the first
quarter (127,000 barrels Imperials share), compared to 182,000 barrels per day (129,000 barrels Imperials share) during the first quarter of 2018.
The
companys share of gross production from Syncrude averaged 78,000 barrels per day, up from 65,000 barrels per day in the first quarter of 2018. Higher production was mainly due to reduced downtime, partially offset by impacts from the
Government of Albertas production curtailment order.
Downstream net income was $257 million in the first quarter, compared to net income of
$521 million in the first quarter of 2018. Earnings decreased mainly due to lower margins of about $180 million and the impact of refinery reliability events of about $60 million.
Refinery throughput averaged 383,000 barrels per day, compared to 408,000 barrels per day in the first quarter of 2018. Capacity utilization was 91 percent,
compared to 96 percent in the first quarter of 2018. Reduced throughput was mainly due to reliability events at company facilities.
Petroleum product sales
were 477,000 barrels per day, compared to 478,000 barrels per day in the first quarter of 2018.
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