HUSKY ENERGY INC. | |||
By: | /s/ James D. Girgulis | ||
James D. Girgulis | |||
Senior Vice President, | |||
Date: | October 24, 2019 | General Counsel & Secretary |
• | Funds from operations of $1 billion, compared to $1.3 billion in the year-ago period |
• | Cash flow from operating activities of $800 million, compared to $1.3 billion in the third quarter of 2018 |
• | Net earnings of $273 million, compared to net earnings of $545 million in Q3 2018 |
• | Capital spending of $868 million was directed towards advancing the Saskatchewan thermal portfolio, the Lima crude oil flexibility project, and progressing construction of the Liuhua 29-1 field offshore China and the West White Rose Project in the Atlantic region. Capital expenditure guidance for 2019 remains unchanged at $3.3-$3.5 billion |
• | Free cash flow, before dividends, of $153 million |
• | Successful startup of the 10,000 barrel-per-day Dee Valley thermal bitumen project, which came in ahead of schedule and under budget |
• | Overall Upstream production averaged 294,800 barrels of oil equivalent per day (boe/day), which takes into account the return to full production at the White Rose field in the Atlantic region, mandated production quotas in Alberta and maintenance at the Liwan Gas Project and the BD Project in the Asia Pacific region; production was approximately 310,000 boe/day at end of the third quarter |
• | Downstream throughput of 356,400 barrels per day (bbls/day), compared to 350,600 bbls/day in the third quarter of 2018 |
• | Construction commenced on the Superior Refinery rebuild project; full operations expected to resume in 2021 |
• | Reached an agreement to sell the Prince George Refinery for $215 million in cash plus a closing adjustment for working capital, and a contingent payment of up to $60 million over two years; sale is expected to close in the fourth quarter of 2019 subject to closing conditions |
Three months ended | Nine months ended | |||||
Sept. 30 | June 30 | Sept. 30 | Sept. 30 | Sept. 30 | ||
2019 | 2019 | 2018 | 2019 | 2018 | ||
Upstream production, before royalties | ||||||
Total equivalent production (mboe/day) | 295 | 268 | 297 | 283 | 298 | |
Crude oil and natural gas liquids (mbbls/day) | 211 | 189 | 210 | 200 | 215 | |
Natural gas (mmcf/day) | 503 | 475 | 520 | 498 | 497 | |
Upgrader and refinery throughput (mbbls/day) | 356 | 340 | 351 | 343 | 368 | |
Revenue, net of royalties ($mm) | 5,313 | 5,303 | 6,194 | 15,190 | 17,260 | |
Operating Margin1 ($mm) | 976 | 942 | 1,414 | 3,090 | 3,910 | |
Integrated Corridor | 710 | 703 | 1,028 | 2,356 | 2,774 | |
Offshore | 266 | 239 | 386 | 734 | 1,136 | |
Funds from operations1 ($mm) | 1,021 | 802 | 1,318 | 2,782 | 3,421 | |
Per common share - Basic ($/share) | 1.02 | 0.80 | 1.31 | 2.77 | 3.40 | |
Cash flow - operating activities ($mm) | 800 | 760 | 1,283 | 2,105 | 2,821 | |
Capital expenditures ($mm) | 868 | 858 | 968 | 2,538 | 2,313 | |
Free cash flow1 ($mm) | 153 | (56) | 350 | 244 | 1,108 | |
Net earnings ($mm) | 273 | 370 | 545 | 971 | 1,241 | |
Per common share - Basic ($/share) | 0.26 | 0.36 | 0.53 | 0.94 | 1.21 | |
Net debt1 ($ billions) | 3.9 | 3.7 | 2.6 | 3.9 | 2.6 | |
Net debt to trailing funds from operations1 (times) | 1.1 | 1.0 | 0.6 | 1.1 | 0.6 |
2019 | Capacity (Husky W.I.) | Timing/ Completion | Status |
Turnarounds | |||
Upstream | Q2 ’19 | Completed | |
Downstream | Q2 ’19 | Completed | |
White Rose infill production wells online | +6-8,000 bbls/day | Q2 ’19 | Completed |
White Rose drill centres on full production | Q3 ’19 | Completed | |
Dee Valley thermal project | 10,000 bbls/day | Q3 ’19 | Completed |
Liuhua 29-1 initial pipeline laying | Q3 ’19 | Completed | |
Lima Refinery crude oil flexibility project | 40,000 bbls/day | ~YE ’19 | 95% complete |
Prince George Refinery sale | Q4 ’19 | Announced | |
Strategic review of fuels/retail business | ’19 | In progress |
2020+ | Capacity (Husky W.I.) | Timing/ Completion | Status |
Lloyd Upgrader diesel capacity increase | 6,000 -> 9,800 bbls/day | ’20 | 45% complete |
Spruce Lake Central thermal project | 10,000 bbls/day | 2H ’20 | 85% complete |
Spruce Lake North thermal project | 10,000 bbls/day | ~YE ’20 | 55% complete |
Liuhua 29-1 project | 45 mmcf/day gas 1,800 bbls/day liquids | YE ’20 | 65% complete |
Superior Refinery rebuild | 50,000 bbls/day | ’21 | In progress |
Spruce Lake East thermal project | 10,000 bbls/day | ~YE ’21 | In progress |
MDA-MBH & MDK fields | 10,000 boe/day | ’21 | In progress |
Edam Central thermal project | 10,000 bbls/day | ’22 | In progress |
West White Rose Project start up | 52,500 bbls/day | ~YE ’22 | 52% complete |
Dee Valley 2 thermal project | 10,000 bbls/day | ’23 | In planning |
• | Upstream production averaged 232,100 boe/day compared to 223,300 boe/day in Q3 2018 |
• | Operating margin of $710 million, compared to $703 million in Q2 2019 and $1.03 billion in Q3 2018 |
• | First oil achieved at the Dee Valley thermal bitumen project in Saskatchewan, which has reached its 10,000 bbls/day nameplate capacity |
• | Downstream throughput of 356,400 bbls/day compared to 350,600 bbls/day in the third quarter of 2018 |
• | Overall average net production of 62,700 boe/day, compared to 73,400 boe/day in the third quarter of 2018 |
• | Operating netback of $55.53 per boe |
◦ | Asia Pacific operating netback of $62.59 per boe |
◦ | Atlantic operating netback of $41.64 per barrel |
• | White Rose field returned to full operations |
Share Series | Dividend Type | Rate (%) | Dividend Paid ($/share) |
Series 1 | Regular | 2.404 | $0.15025 |
Series 2 | Regular | 3.368 | $0.21223 |
Series 3 | Regular | 4.50 | $0.28125 |
Series 5 | Regular | 4.50 | $0.28125 |
Series 7 | Regular | 4.60 | $0.28750 |
To listen live: Canada and U.S. Toll Free: 1-800-319-4610 Outside Canada and U.S.: 1-604-638-5340 | To listen to a recording (after 10 a.m. MT on Oct. 24): Canada and U.S. Toll Free: 1-800-319-6413 Outside Canada and U.S.: 1-604-638-9010 Passcode: 3602 Duration: Available until November 23, 2019 Audio webcast: Available for 90 days at www.huskyenergy.com |
• | with respect to the business, operations and results of the Company generally: general strategic plans and growth strategies; and expected capital expenditures guidance for 2019; |
• | with respect to the Company’s thermal developments, the expected timing of completion of the Spruce Lake Central, Spruce Lake North, Spruce Lake East, Edam Central and Dee Valley 2 projects; |
• | with respect to the Company’s Western Canada resource plays, the expected timing of production at 10 Montney wells at Wembley and Karr; |
• | with respect to the Company’s Offshore business in Asia Pacific: the expected timing of first production at Liuhua 29-1; target production volumes at Liuhua 29-1 when fully ramped up; the expected timing of first production from the combined MDA-MBH and MDK fields; and expected production capacity at the MDA-MBH and MDK fields; |
• | with respect to the Company’s Offshore business in Atlantic, expected production capacity and the expected timing of first oil at the West White Rose Project; and |
• | with respect to the Company’s Downstream operations: the expected timing of resumption of full operations at the Superior Refinery, expected throughput capacity once full operations have resumed and expected insurance recoveries related to the rebuild costs; the contingent payment of up to $60 million as part of the consideration for, the expected timing of closing of and the expected use of proceeds from the sale of the Prince George Refinery; the expected timing of completion of the crude oil flexibility project at the Lima Refinery and the expected heavy oil processing capacity resulting therefrom; the expected timing of completion of the strategic review of the potential sale of the Canadian retail and commercial fuels business; and the expected timing of completion of the Lloydminster Upgrader diesel capacity project, and the expected increase in diesel production resulting therefrom. |
Three months ended | Nine months ended | |||||||||
Sept. 30 | June 30 | Sept. 30 | Sept. 30 | Sept. 30 | ||||||
($ millions) | 2019 | 2019 | 2018 | 2019 | 2018 | |||||
Net earnings | 273 | 370 | 545 | 971 | 1,241 | |||||
Items not affecting cash: | ||||||||||
Accretion | 26 | 26 | 23 | 79 | 72 | |||||
Depletion, depreciation, amortization and impairment | 703 | 643 | 672 | 1,976 | 1,929 | |||||
Exploration and evaluation expenses | — | 23 | — | 23 | 7 | |||||
Deferred income taxes | 22 | (250 | ) | 156 | (185 | ) | 371 | |||
Foreign exchange gain | (1 | ) | (2 | ) | (6 | ) | (15 | ) | (7 | ) |
Stock-based compensation | (9 | ) | 13 | 40 | 11 | 94 | ||||
Gain on sale of assets | (3 | ) | — | — | (5 | ) | (4 | ) | ||
Unrealized mark to market loss (gain) | 4 | (4 | ) | (22 | ) | 57 | (134 | ) | ||
Share of equity investment gain | (19 | ) | (23 | ) | (18 | ) | (64 | ) | (53 | ) |
Gain on insurance recoveries for damage to property | (13 | ) | — | — | (13 | ) | — | |||
Other | 5 | 5 | (2 | ) | 1 | 19 | ||||
Settlement of asset retirement obligations | (73 | ) | (41 | ) | (45 | ) | (186 | ) | (116 | ) |
Deferred revenue | (7 | ) | (5 | ) | (25 | ) | (28 | ) | (70 | ) |
Distribution from equity investment | 113 | 47 | — | 160 | 72 | |||||
Change in non-cash working capital | (221 | ) | (42 | ) | (35 | ) | (677 | ) | (600 | ) |
Cash flow - operating activities | 800 | 760 | 1,283 | 2,105 | 2,821 | |||||
Change in non-cash working capital | 221 | 42 | 35 | 677 | 600 | |||||
Funds from operations | 1,021 | 802 | 1,318 | 2,782 | 3,421 | |||||
Capital expenditures | (868 | ) | (858 | ) | (968 | ) | (2,538 | ) | (2,313 | ) |
Free cash flow | 153 | (56 | ) | 350 | 244 | 1,108 | ||||
Weighted average number of common shares outstanding | 1,005.1 | 1,005.1 | 1,005.1 | 1,005.1 | 1,005.1 | |||||
Funds from operations | ||||||||||
Per common share - Basic ($/share) | 1.02 | 0.80 | 1.31 | 2.77 | 3.40 |
Three months ended | |||||||||
Sept. 30, 2019 | June 30, 2019 | Sept. 30, 2018 | |||||||
($ millions) | Integrated Corridor | Offshore | Total | Integrated Corridor | Offshore | Total | Integrated Corridor | Offshore | Total |
Revenue, net of royalties | 5,488 | 362 | 5,850 | 5,527 | 328 | 5,855 | 6,241 | 474 | 6,715 |
Less: | |||||||||
Purchases of crude oil and products | 4,043 | — | 4,043 | 4,074 | — | 4,074 | 4,470 | — | 4,470 |
Production and operating expenses | 638 | 88 | 726 | 662 | 81 | 743 | 662 | 78 | 740 |
Selling, general and administrative expenses | 97 | 8 | 105 | 88 | 8 | 96 | 81 | 10 | 91 |
Operating margin | 710 | 266 | 976 | 703 | 239 | 942 | 1,028 | 386 | 1,414 |
Nine months ended | ||||||
Sept. 30, 2019 | Sept. 30, 2018 | |||||
($ millions) | Integrated Corridor | Offshore | Total | Integrated Corridor | Offshore | Total |
Revenue, net of royalties | 15,711 | 1,012 | 16,723 | 17,252 | 1,389 | 18,641 |
Less: | ||||||
Purchases of crude oil and products | 11,106 | — | 11,106 | 12,343 | — | 12,343 |
Production and operating expenses | 1,969 | 254 | 2,223 | 1,878 | 224 | 2,102 |
Selling, general and administrative expenses | 279 | 25 | 304 | 257 | 29 | 286 |
Operating margin | 2,356 | 734 | 3,090 | 2,774 | 1,136 | 3,910 |
Sept. 30 | June 30 | Sept. 30 | ||||
($ millions) | 2019 | 2019 | 2018 | |||
Short-term debt | 200 | 200 | 200 | |||
Long-term debt due within one year | 1,393 | 1,382 | 388 | |||
Long-term debt | 4,635 | 4,598 | 4,964 | |||
Cash and cash equivalents | (2,362 | ) | (2,512 | ) | (2,916 | ) |
Net debt | 3,866 | 3,668 | 2,636 |
(millions of Canadian dollars) | September 30, 2019 | December 31, 2018 | |||
Assets | |||||
Current assets | |||||
Cash and cash equivalents | 2,362 | 2,866 | |||
Accounts receivable | 1,661 | 1,355 | |||
Income taxes receivable | 25 | 112 | |||
Inventories | 1,508 | 1,232 | |||
Prepaid expenses | 167 | 123 | |||
5,723 | 5,688 | ||||
Restricted cash (notes 4, 9) | 141 | 128 | |||
Exploration and evaluation assets (note 5) | 987 | 997 | |||
Property, plant and equipment, net (note 6) | 25,915 | 25,800 | |||
Right-of-use assets, net (note 7) | 1,395 | — | |||
Goodwill | 670 | 690 | |||
Investment in joint ventures | 1,224 | 1,319 | |||
Long-term income taxes receivable | 212 | 243 | |||
Other assets | 345 | 360 | |||
Total Assets | 36,612 | 35,225 | |||
Liabilities and Shareholders’ Equity | |||||
Current liabilities | |||||
Accounts payable and accrued liabilities | 3,107 | 3,159 | |||
Short-term debt (note 8) | 200 | 200 | |||
Long-term debt due within one year (note 8) | 1,393 | 1,433 | |||
Lease liabilities (note 7) | 133 | — | |||
Asset retirement obligations (note 9) | 218 | 202 | |||
5,051 | 4,994 | ||||
Long-term debt (note 8) | 4,635 | 4,114 | |||
Other long-term liabilities (note 10) | 531 | 1,107 | |||
Lease liabilities (note 7) | 1,352 | — | |||
Asset retirement obligations (note 9) | 2,143 | 2,222 | |||
Deferred tax liabilities | 2,965 | 3,174 | |||
Total Liabilities | 16,677 | 15,611 | |||
Shareholders’ equity | |||||
Common shares (note 11) | 7,293 | 7,293 | |||
Preferred shares (note 11) | 874 | 874 | |||
Contributed surplus | 2 | 2 | |||
Retained earnings | 10,841 | 10,273 | |||
Accumulated other comprehensive income | 913 | 1,160 | |||
Non-controlling interest | 12 | 12 | |||
Total Shareholders’ Equity | 19,935 | 19,614 | |||
Total Liabilities and Shareholders’ Equity | 36,612 | 35,225 |
Three months ended | Nine months ended | ||||||||||
September 30, | September 30, | ||||||||||
(millions of Canadian dollars, except share data) | 2019 | 2018 | 2019 | 2018 | |||||||
Gross revenues | 5,359 | 6,132 | 15,246 | 17,025 | |||||||
Royalties | (81 | ) | (106 | ) | (235 | ) | (285 | ) | |||
Marketing and other | 35 | 168 | 179 | 520 | |||||||
Revenues, net of royalties | 5,313 | 6,194 | 15,190 | 17,260 | |||||||
Expenses | |||||||||||
Purchases of crude oil and products | 3,506 | 3,949 | 9,573 | 10,962 | |||||||
Production, operating and transportation expenses (note 12) | 725 | 740 | 2,221 | 2,102 | |||||||
Selling, general and administrative expenses (note 12) | 149 | 187 | 477 | 542 | |||||||
Depletion, depreciation, amortization and impairment (notes 6, 7) | 703 | 672 | 1,976 | 1,929 | |||||||
Exploration and evaluation expenses | 41 | 26 | 157 | 96 | |||||||
Gain on sale of assets | (3 | ) | — | (5 | ) | (4 | ) | ||||
Other – net | (203 | ) | (150 | ) | (262 | ) | (149 | ) | |||
4,918 | 5,424 | 14,137 | 15,478 | ||||||||
Earnings from operating activities | 395 | 770 | 1,053 | 1,782 | |||||||
Share of equity investment income | 19 | 18 | 64 | 53 | |||||||
Financial items (note 13) | |||||||||||
Net foreign exchange gain (loss) | (8 | ) | (9 | ) | 24 | 16 | |||||
Finance income | 24 | 15 | 60 | 48 | |||||||
Finance expenses | (84 | ) | (80 | ) | (272 | ) | (238 | ) | |||
(68 | ) | (74 | ) | (188 | ) | (174 | ) | ||||
Earnings before income taxes | 346 | 714 | 929 | 1,661 | |||||||
Provisions for (recovery of) income taxes | |||||||||||
Current | 51 | 13 | 143 | 49 | |||||||
Deferred | 22 | 156 | (185 | ) | 371 | ||||||
73 | 169 | (42 | ) | 420 | |||||||
Net earnings | 273 | 545 | 971 | 1,241 | |||||||
Earnings per share (note 11) | |||||||||||
Basic | 0.26 | 0.53 | 0.94 | 1.21 | |||||||
Diluted | 0.25 | 0.53 | 0.92 | 1.21 | |||||||
Weighted average number of common shares outstanding (note 11) | |||||||||||
Basic (millions) | 1,005.1 | 1,005.1 | 1,005.1 | 1,005.1 | |||||||
Diluted (millions) | 1,005.1 | 1,007.4 | 1,005.1 | 1,006.2 |
Three months ended | Nine months ended | ||||||||||
September 30, | September 30, | ||||||||||
(millions of Canadian dollars) | 2019 | 2018 | 2019 | 2018 | |||||||
Net earnings | 273 | 545 | 971 | 1,241 | |||||||
Other comprehensive income (loss) | |||||||||||
Items that will not be reclassified into earnings, net of tax: | |||||||||||
Actuarial gain on pension plans | — | — | — | 1 | |||||||
Items that may be reclassified into earnings, net of tax: | |||||||||||
Derivatives designated as cash flow hedges (note 15) | (1 | ) | (1 | ) | (6 | ) | (2 | ) | |||
Equity investment - share of other comprehensive income | 1 | 1 | (4 | ) | 1 | ||||||
Exchange differences on translation of foreign operations | 119 | (166 | ) | (328 | ) | 295 | |||||
Hedge of net investment (note 15) | (32 | ) | 51 | 91 | (94 | ) | |||||
Other comprehensive income (loss) | 87 | (115 | ) | (247 | ) | 201 | |||||
Comprehensive income | 360 | 430 | 724 | 1,442 |
Attributable to Equity Holders | ||||||||||||||||
AOCI(1) | ||||||||||||||||
(millions of Canadian dollars) | Common Shares | Preferred Shares | Contributed Surplus | Retained Earnings | Foreign Currency Translation | Hedging | Non-Controlling Interest | Total Shareholders’ Equity | ||||||||
Balance as at December 31, 2017 | 7,293 | 874 | 2 | 9,207 | 559 | 21 | 11 | 17,967 | ||||||||
Net earnings | — | — | — | 1,241 | — | — | — | 1,241 | ||||||||
Other comprehensive income (loss) | ||||||||||||||||
Actuarial gain on pensions plans (net of tax of less than $1 million) | — | — | — | 1 | — | — | — | 1 | ||||||||
Derivatives designated as cash flow hedges (net of tax recovery of less than $1 million) | — | — | — | — | — | (2 | ) | — | (2 | ) | ||||||
Equity investment - share of other comprehensive income | — | — | — | — | — | 1 | — | 1 | ||||||||
Exchange differences on translation of foreign operations (net of tax of $27 million) | — | — | — | — | 295 | — | — | 295 | ||||||||
Hedge of net investment (net of tax recovery of $15 million) (note 15) | — | — | — | — | (94 | ) | — | — | (94 | ) | ||||||
Total comprehensive income (loss) | — | — | — | 1,242 | 201 | (1 | ) | — | 1,442 | |||||||
Transactions with owners recognized directly in equity: | ||||||||||||||||
Dividends declared on common shares (note 11) | — | — | — | (277 | ) | — | — | — | (277 | ) | ||||||
Dividends declared on preferred shares (note 11) | — | — | — | (26 | ) | — | — | — | (26 | ) | ||||||
Balance as at September 30, 2018 | 7,293 | 874 | 2 | 10,146 | 760 | 20 | 11 | 19,106 | ||||||||
Balance as at December 31, 2018 | 7,293 | 874 | 2 | 10,273 | 1,154 | 6 | 12 | 19,614 | ||||||||
Net earnings | — | — | — | 971 | — | — | — | 971 | ||||||||
Other comprehensive income (loss) | ||||||||||||||||
Derivatives designated as cash flow hedges (net of tax recovery of $3 million) (note 15) | — | — | — | — | — | (6 | ) | — | (6 | ) | ||||||
Equity investment - share of other comprehensive income (net of tax recovery of $1 million) | — | — | — | — | — | (4 | ) | — | (4 | ) | ||||||
Exchange differences on translation of foreign operations (net of tax recovery of $34 million) | — | — | — | — | (328 | ) | — | — | (328 | ) | ||||||
Hedge of net investment (net of tax of $12 million) (note 15) | — | — | — | — | 91 | — | — | 91 | ||||||||
Total comprehensive income (loss) | — | — | — | 971 | (237 | ) | (10 | ) | — | 724 | ||||||
Transactions with owners recognized directly in equity: | ||||||||||||||||
Dividends declared on common shares (note 11) | — | — | — | (377 | ) | — | — | — | (377 | ) | ||||||
Dividends declared on preferred shares (note 11) | — | — | — | (26 | ) | — | — | — | (26 | ) | ||||||
Balance as at September 30, 2019 | 7,293 | 874 | 2 | 10,841 | 917 | (4 | ) | 12 | 19,935 |
(1) | Accumulated other comprehensive income. |
Three months ended | Nine months ended | ||||||||||
September 30, | September 30, | ||||||||||
(millions of Canadian dollars) | 2019 | 2018 | 2019 | 2018 | |||||||
Operating activities | |||||||||||
Net earnings | 273 | 545 | 971 | 1,241 | |||||||
Items not affecting cash: | |||||||||||
Accretion (notes 9, 13) | 26 | 23 | 79 | 72 | |||||||
Depletion, depreciation, amortization and impairment (notes 6, 7) | 703 | 672 | 1,976 | 1,929 | |||||||
Exploration and evaluation expenses (note 5) | — | — | 23 | 7 | |||||||
Deferred income taxes | 22 | 156 | (185 | ) | 371 | ||||||
Foreign exchange | (1 | ) | (6 | ) | (15 | ) | (7 | ) | |||
Stock-based compensation (notes 11, 12) | (9 | ) | 40 | 11 | 94 | ||||||
Gain on sale of assets | (3 | ) | — | (5 | ) | (4 | ) | ||||
Unrealized mark to market loss (gain) (note 15) | 4 | (22 | ) | 57 | (134 | ) | |||||
Share of equity investment income | (19 | ) | (18 | ) | (64 | ) | (53 | ) | |||
Gain on insurance recoveries for damage to property | (13 | ) | — | (13 | ) | — | |||||
Other | 5 | (2 | ) | 1 | 19 | ||||||
Settlement of asset retirement obligations (note 9) | (73 | ) | (45 | ) | (186 | ) | (116 | ) | |||
Deferred revenue | (7 | ) | (25 | ) | (28 | ) | (70 | ) | |||
Distribution from equity investment | 113 | — | 160 | 72 | |||||||
Change in non-cash working capital (note 14) | (221 | ) | (35 | ) | (677 | ) | (600 | ) | |||
Cash flow – operating activities | 800 | 1,283 | 2,105 | 2,821 | |||||||
Financing activities | |||||||||||
Long-term debt issuance (note 8) | — | — | 1,000 | — | |||||||
Long-term debt repayment (note 8) | — | — | (402 | ) | — | ||||||
Debt issue costs (note 8) | — | — | (9 | ) | — | ||||||
Dividends on common shares (note 11) | (125 | ) | (126 | ) | (377 | ) | (277 | ) | |||
Dividends on preferred shares (note 11) | (9 | ) | (9 | ) | (26 | ) | (26 | ) | |||
Finance lease payments (note 7) | (58 | ) | — | (174 | ) | — | |||||
Other | — | (4 | ) | — | (10 | ) | |||||
Change in non-cash working capital (note 14) | 10 | 64 | 29 | 139 | |||||||
Cash flow – financing activities | (182 | ) | (75 | ) | 41 | (174 | ) | ||||
Investing activities | |||||||||||
Capital expenditures | (868 | ) | (968 | ) | (2,538 | ) | (2,313 | ) | |||
Capitalized interest (note 13) | (46 | ) | (29 | ) | (130 | ) | (76 | ) | |||
Corporate acquisition | — | (6 | ) | — | (15 | ) | |||||
Proceeds from asset sales | 5 | 1 | 4 | 3 | |||||||
Investment in joint ventures | (1 | ) | — | (38 | ) | (40 | ) | ||||
Other | 26 | (7 | ) | (1 | ) | (12 | ) | ||||
Change in non-cash working capital (note 14) | 104 | 148 | 68 | 179 | |||||||
Cash flow – investing activities | (780 | ) | (861 | ) | (2,635 | ) | (2,274 | ) | |||
Increase (decrease) in cash and cash equivalents | (162 | ) | 347 | (489 | ) | 373 | |||||
Effect of exchange rates on cash and cash equivalents | 12 | (14 | ) | (15 | ) | 30 | |||||
Cash and cash equivalents at beginning of period | 2,512 | 2,583 | 2,866 | 2,513 | |||||||
Cash and cash equivalents at end of period | 2,362 | 2,916 | 2,362 | 2,916 | |||||||
Supplementary Cash Flow Information | |||||||||||
Net interest paid | (52 | ) | (66 | ) | (239 | ) | (195 | ) | |||
Net income taxes received (paid) | 44 | 70 | (34 | ) | 10 |
Upstream | Downstream | Corporate and Eliminations(3) | Total | ||||||||||||||||||||||||||||||||||||
Three months ended September 30, | Exploration and Production(1) | Infrastructure and Marketing(2) | Total | Upgrading | Canadian Refined Products | U.S. Refining and Marketing | Total | ||||||||||||||||||||||||||||||||
($ millions) | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||
Gross revenues | 1,241 | 1,319 | 676 | 601 | 1,917 | 1,920 | 464 | 534 | 871 | 1,001 | 2,644 | 3,198 | 3,979 | 4,733 | (537 | ) | (521 | ) | 5,359 | 6,132 | |||||||||||||||||||
Royalties | (81 | ) | (106 | ) | — | — | (81 | ) | (106 | ) | — | — | — | — | — | — | — | — | — | — | (81 | ) | (106 | ) | |||||||||||||||
Marketing and other | — | — | 35 | 168 | 35 | 168 | — | — | — | — | — | — | — | — | — | — | 35 | 168 | |||||||||||||||||||||
Revenues, net of royalties | 1,160 | 1,213 | 711 | 769 | 1,871 | 1,982 | 464 | 534 | 871 | 1,001 | 2,644 | 3,198 | 3,979 | 4,733 | (537 | ) | (521 | ) | 5,313 | 6,194 | |||||||||||||||||||
Expenses | |||||||||||||||||||||||||||||||||||||||
Purchases of crude oil and products | — | — | 658 | 567 | 658 | 567 | 360 | 328 | 706 | 834 | 2,319 | 2,741 | 3,385 | 3,903 | (537 | ) | (521 | ) | 3,506 | 3,949 | |||||||||||||||||||
Production, operating and transportation expenses | 399 | 398 | 4 | 2 | 403 | 400 | 57 | 52 | 69 | 66 | 197 | 222 | 323 | 340 | (1 | ) | — | 725 | 740 | ||||||||||||||||||||
Selling, general and administrative expenses | 78 | 71 | — | 1 | 78 | 72 | 7 | 2 | 13 | 12 | 7 | 5 | 27 | 19 | 44 | 96 | 149 | 187 | |||||||||||||||||||||
Depletion, depreciation, amortization and impairment | 497 | 461 | 4 | — | 501 | 461 | 29 | 30 | 32 | 29 | 117 | 129 | 178 | 188 | 24 | 23 | 703 | 672 | |||||||||||||||||||||
Exploration and evaluation expenses | 41 | 26 | — | — | 41 | 26 | — | — | — | — | — | — | — | — | — | — | 41 | 26 | |||||||||||||||||||||
Loss (gain) on sale of assets | — | 2 | — | — | — | 2 | — | — | (4 | ) | (2 | ) | 1 | — | (3 | ) | (2 | ) | — | — | (3 | ) | — | ||||||||||||||||
Other – net | (18 | ) | (42 | ) | — | (1 | ) | (18 | ) | (43 | ) | — | — | — | — | (163 | ) | (107 | ) | (163 | ) | (107 | ) | (22 | ) | — | (203 | ) | (150 | ) | |||||||||
997 | 916 | 666 | 569 | 1,663 | 1,485 | 453 | 412 | 816 | 939 | 2,478 | 2,990 | 3,747 | 4,341 | (492 | ) | (402 | ) | 4,918 | 5,424 | ||||||||||||||||||||
Earnings (loss) from operating activities | 163 | 297 | 45 | 200 | 208 | 497 | 11 | 122 | 55 | 62 | 166 | 208 | 232 | 392 | (45 | ) | (119 | ) | 395 | 770 | |||||||||||||||||||
Share of equity investment income | 15 | 12 | 4 | 6 | 19 | 18 | — | — | — | — | — | — | — | — | — | — | 19 | 18 | |||||||||||||||||||||
Financial items | |||||||||||||||||||||||||||||||||||||||
Net foreign exchange loss | — | — | — | — | — | — | — | — | — | — | — | — | — | — | (8 | ) | (9 | ) | (8 | ) | (9 | ) | |||||||||||||||||
Finance income | — | 2 | — | — | — | 2 | — | — | — | — | — | — | — | — | 24 | 13 | 24 | 15 | |||||||||||||||||||||
Finance expenses | (39 | ) | (29 | ) | (2 | ) | — | (41 | ) | (29 | ) | (1 | ) | (1 | ) | (4 | ) | (3 | ) | (5 | ) | (4 | ) | (10 | ) | (8 | ) | (33 | ) | (43 | ) | (84 | ) | (80 | ) | ||||
(39 | ) | (27 | ) | (2 | ) | — | (41 | ) | (27 | ) | (1 | ) | (1 | ) | (4 | ) | (3 | ) | (5 | ) | (4 | ) | (10 | ) | (8 | ) | (17 | ) | (39 | ) | (68 | ) | (74 | ) | |||||
Earnings (loss) before income taxes | 139 | 282 | 47 | 206 | 186 | 488 | 10 | 121 | 51 | 59 | 161 | 204 | 222 | 384 | (62 | ) | (158 | ) | 346 | 714 | |||||||||||||||||||
Provisions for (recovery of) income taxes | |||||||||||||||||||||||||||||||||||||||
Current | (9 | ) | (46 | ) | — | 14 | (9 | ) | (32 | ) | 12 | 47 | 35 | 15 | 10 | 2 | 57 | 64 | 3 | (19 | ) | 51 | 13 | ||||||||||||||||
Deferred | 42 | 114 | 13 | 43 | 55 | 157 | (9 | ) | (14 | ) | (21 | ) | 1 | 25 | 44 | (5 | ) | 31 | (28 | ) | (32 | ) | 22 | 156 | |||||||||||||||
33 | 68 | 13 | 57 | 46 | 125 | 3 | 33 | 14 | 16 | 35 | 46 | 52 | 95 | (25 | ) | (51 | ) | 73 | 169 | ||||||||||||||||||||
Net earnings (loss) | 106 | 214 | 34 | 149 | 140 | 363 | 7 | 88 | 37 | 43 | 126 | 158 | 170 | 289 | (37 | ) | (107 | ) | 273 | 545 | |||||||||||||||||||
Intersegment revenues | 451 | 422 | — | — | 451 | 422 | 58 | 77 | 28 | 22 | — | — | 86 | 99 | — | — | 537 | 521 | |||||||||||||||||||||
Expenditures on exploration and evaluation assets | 11 | 56 | — | — | 11 | 56 | — | — | — | — | — | — | — | — | — | — | 11 | 56 | |||||||||||||||||||||
Expenditures on property, plant and equipment | 586 | 659 | — | — | 586 | 659 | 13 | 9 | 23 | 23 | 196 | 196 | 232 | 228 | 39 | 25 | 857 | 912 |
(1) | Includes allocated depletion, depreciation and amortization related to assets in Infrastructure and Marketing as these assets provide a service to Exploration and Production. |
(2) | Includes $41 million of revenue (three months ended September 30, 2018 - $49 million) and $41 million of associated costs (three months ended September 30, 2018 - $38 million) for construction contracts, all of which relates to contracts in progress accounted for under the percentage of completion method. |
(3) | Eliminations relate to sales and operating revenues between segments recorded at transfer prices based on current market prices. Segment results include transactions between business segments. |
Upstream | Downstream | Corporate and Eliminations(3) | Total | ||||||||||||||||||||||||||||||||||||
Nine months ended September 30, | Exploration and Production(1) | Infrastructure and Marketing(2) | Total | Upgrading | Canadian Refined Products | U.S. Refining and Marketing | Total | ||||||||||||||||||||||||||||||||
($ millions) | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||
Gross revenues | 3,677 | 3,687 | 1,734 | 1,681 | 5,411 | 5,368 | 1,321 | 1,443 | 2,329 | 2,591 | 7,718 | 9,004 | 11,368 | 13,038 | (1,533 | ) | (1,381 | ) | 15,246 | 17,025 | |||||||||||||||||||
Royalties | (235 | ) | (285 | ) | — | — | (235 | ) | (285 | ) | — | — | — | — | — | — | — | — | — | — | (235 | ) | (285 | ) | |||||||||||||||
Marketing and other | — | — | 179 | 520 | 179 | 520 | — | — | — | — | — | — | — | — | — | — | 179 | 520 | |||||||||||||||||||||
Revenues, net of royalties | 3,442 | 3,402 | 1,913 | 2,201 | 5,355 | 5,603 | 1,321 | 1,443 | 2,329 | 2,591 | 7,718 | 9,004 | 11,368 | 13,038 | (1,533 | ) | (1,381 | ) | 15,190 | 17,260 | |||||||||||||||||||
Expenses | |||||||||||||||||||||||||||||||||||||||
Purchases of crude oil and products | — | 1 | 1,745 | 1,590 | 1,745 | 1,591 | 992 | 818 | 1,880 | 2,123 | 6,489 | 7,811 | 9,361 | 10,752 | (1,533 | ) | (1,381 | ) | 9,573 | 10,962 | |||||||||||||||||||
Production, operating and transportation expenses | 1,199 | 1,139 | 12 | 19 | 1,211 | 1,158 | 163 | 144 | 221 | 198 | 628 | 602 | 1,012 | 944 | (2 | ) | — | 2,221 | 2,102 | ||||||||||||||||||||
Selling, general and administrative expenses | 226 | 224 | 3 | 3 | 229 | 227 | 12 | 6 | 40 | 36 | 23 | 17 | 75 | 59 | 173 | 256 | 477 | 542 | |||||||||||||||||||||
Depletion, depreciation, amortization and impairment | 1,349 | 1,342 | 10 | 1 | 1,359 | 1,343 | 86 | 87 | 99 | 86 | 355 | 348 | 540 | 521 | 77 | 65 | 1,976 | 1,929 | |||||||||||||||||||||
Exploration and evaluation expenses | 157 | 96 | — | — | 157 | 96 | — | — | — | — | — | — | — | — | — | — | 157 | 96 | |||||||||||||||||||||
Loss (gain) on sale of assets | (2 | ) | (2 | ) | — | — | (2 | ) | (2 | ) | — | — | (4 | ) | (2 | ) | 1 | — | (3 | ) | (2 | ) | — | — | (5 | ) | (4 | ) | |||||||||||
Other – net | 97 | (11 | ) | — | 1 | 97 | (10 | ) | — | — | — | — | (347 | ) | (130 | ) | (347 | ) | (130 | ) | (12 | ) | (9 | ) | (262 | ) | (149 | ) | |||||||||||
3,026 | 2,789 | 1,770 | 1,614 | 4,796 | 4,403 | 1,253 | 1,055 | 2,236 | 2,441 | 7,149 | 8,648 | 10,638 | 12,144 | (1,297 | ) | (1,069 | ) | 14,137 | 15,478 | ||||||||||||||||||||
Earnings (loss) from operating activities | 416 | 613 | 143 | 587 | 559 | 1,200 | 68 | 388 | 93 | 150 | 569 | 356 | 730 | 894 | (236 | ) | (312 | ) | 1,053 | 1,782 | |||||||||||||||||||
Share of equity investment income | 42 | 33 | 22 | 20 | 64 | 53 | — | — | — | — | — | — | — | — | — | — | 64 | 53 | |||||||||||||||||||||
Financial items | |||||||||||||||||||||||||||||||||||||||
Net foreign exchange gain | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 24 | 16 | 24 | 16 | |||||||||||||||||||||
Finance income | — | 12 | — | — | — | 12 | — | — | — | — | — | — | — | — | 60 | 36 | 60 | 48 | |||||||||||||||||||||
Finance expenses | (121 | ) | (80 | ) | (2 | ) | — | (123 | ) | (80 | ) | (1 | ) | (1 | ) | (12 | ) | (9 | ) | (14 | ) | (11 | ) | (27 | ) | (21 | ) | (122 | ) | (137 | ) | (272 | ) | (238 | ) | ||||
(121 | ) | (68 | ) | (2 | ) | — | (123 | ) | (68 | ) | (1 | ) | (1 | ) | (12 | ) | (9 | ) | (14 | ) | (11 | ) | (27 | ) | (21 | ) | (38 | ) | (85 | ) | (188 | ) | (174 | ) | |||||
Earnings (loss) before income taxes | 337 | 578 | 163 | 607 | 500 | 1,185 | 67 | 387 | 81 | 141 | 555 | 345 | 703 | 873 | (274 | ) | (397 | ) | 929 | 1,661 | |||||||||||||||||||
Provisions for (recovery of) income taxes | |||||||||||||||||||||||||||||||||||||||
Current | 24 | (251 | ) | — | 161 | 24 | (90 | ) | 41 | 128 | 42 | 59 | 17 | 6 | 100 | 193 | 19 | (54 | ) | 143 | 49 | ||||||||||||||||||
Deferred | 55 | 400 | 44 | 5 | 99 | 405 | (23 | ) | (22 | ) | (20 | ) | (21 | ) | 106 | 71 | 63 | 28 | (347 | ) | (62 | ) | (185 | ) | 371 | ||||||||||||||
79 | 149 | 44 | 166 | 123 | 315 | 18 | 106 | 22 | 38 | 123 | 77 | 163 | 221 | (328 | ) | (116 | ) | (42 | ) | 420 | |||||||||||||||||||
Net earnings (loss) | 258 | 429 | 119 | 441 | 377 | 870 | 49 | 281 | 59 | 103 | 432 | 268 | 540 | 652 | 54 | (281 | ) | 971 | 1,241 | ||||||||||||||||||||
Intersegment revenues | 1,278 | 1,054 | — | — | 1,278 | 1,054 | 184 | 227 | 71 | 100 | — | — | 255 | 327 | — | — | 1,533 | 1,381 | |||||||||||||||||||||
Expenditures on exploration and evaluation assets | 37 | 196 | — | — | 37 | 196 | — | — | — | — | — | — | — | — | — | — | 37 | 196 | |||||||||||||||||||||
Expenditures on property, plant and equipment | 1,745 | 1,562 | 1 | — | 1,746 | 1,562 | 29 | 53 | 100 | 52 | 527 | 369 | 656 | 474 | 99 | 81 | 2,501 | 2,117 | |||||||||||||||||||||
As at September 30, 2019 and December 31, 2018 | |||||||||||||||||||||||||||||||||||||||
Total exploration and evaluation assets, property, plant and equipment, net | 18,041 | 17,814 | 48 | 51 | 18,089 | 17,865 | 1,017 | 1,074 | 1,182 | 1,208 | 6,280 | 6,336 | 8,479 | 8,618 | 334 | 314 | 26,902 | 26,797 | |||||||||||||||||||||
Total right-of-use assets, net | 712 | — | 93 | — | 805 | — | — | — | 127 | — | 168 | — | 295 | — | 295 | — | 1,395 | — | |||||||||||||||||||||
Total assets | 19,956 | 19,175 | 1,619 | 1,301 | 21,575 | 20,476 | 1,219 | 1,149 | 1,663 | 1,431 | 8,799 | 8,566 | 11,681 | 11,146 | 3,356 | 3,603 | 36,612 | 35,225 |
(1) | Includes allocated depletion, depreciation and amortization related to assets in Infrastructure and Marketing as these assets provide a service to Exploration and Production. |
(2) | Includes $134 million of revenue (nine months ended September 30, 2018 - $114 million) and $202 million of associated costs (nine months ended September 30, 2018 - $100 million) for construction contracts, all of which relates to contracts in progress accounted for under the percentage of completion method. |
(3) | Eliminations relate to sales and operating revenues between segments recorded at transfer prices based on current market prices. Segment results include transactions between business segments. |
Upstream | Downstream | Corporate and Eliminations | Total | ||||||||||||||||||||||||||||||||||||
Three months ended September 30, | Exploration and Production | Infrastructure and Marketing | Total | Upgrading | Canadian Refined Products | U.S. Refining and Marketing | Total | ||||||||||||||||||||||||||||||||
($ millions) | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||
Primary Geographical Markets | |||||||||||||||||||||||||||||||||||||||
Canada | 1,011 | 1,040 | 676 | 601 | 1,687 | 1,641 | 464 | 534 | 871 | 1,001 | — | — | 1,335 | 1,535 | (537 | ) | (521 | ) | 2,485 | 2,655 | |||||||||||||||||||
United States | — | — | — | — | — | — | — | — | — | — | 2,644 | 3,198 | 2,644 | 3,198 | — | — | 2,644 | 3,198 | |||||||||||||||||||||
China | 230 | 279 | — | — | 230 | 279 | — | — | — | — | — | — | — | — | — | — | 230 | 279 | |||||||||||||||||||||
Total revenue | 1,241 | 1,319 | 676 | 601 | 1,917 | 1,920 | 464 | 534 | 871 | 1,001 | 2,644 | 3,198 | 3,979 | 4,733 | (537 | ) | (521 | ) | 5,359 | 6,132 | |||||||||||||||||||
Major Product Lines | |||||||||||||||||||||||||||||||||||||||
Light & medium crude oil | 202 | 296 | — | — | 202 | 296 | — | — | — | — | — | — | — | — | — | — | 202 | 296 | |||||||||||||||||||||
Heavy crude oil | 165 | 162 | — | — | 165 | 162 | — | — | — | — | — | — | — | — | — | — | 165 | 162 | |||||||||||||||||||||
Bitumen | 594 | 499 | — | — | 594 | 499 | — | — | — | — | — | — | — | — | — | — | 594 | 499 | |||||||||||||||||||||
Total crude oil | 961 | 957 | — | — | 961 | 957 | — | — | — | — | — | — | — | — | — | — | 961 | 957 | |||||||||||||||||||||
NGL | 57 | 100 | — | — | 57 | 100 | — | — | — | — | — | — | — | — | — | — | 57 | 100 | |||||||||||||||||||||
Natural gas | 223 | 262 | — | — | 223 | 262 | — | — | — | — | — | — | — | — | — | — | 223 | 262 | |||||||||||||||||||||
Total exploration and production | 1,241 | 1,319 | — | — | 1,241 | 1,319 | — | — | — | — | — | — | — | — | — | — | 1,241 | 1,319 | |||||||||||||||||||||
Total infrastructure and marketing | — | — | 676 | 601 | 676 | 601 | — | — | — | — | — | — | — | — | — | — | 676 | 601 | |||||||||||||||||||||
Synthetic crude | — | — | — | — | — | — | 406 | 453 | — | — | — | — | 406 | 453 | — | — | 406 | 453 | |||||||||||||||||||||
Gasoline | — | — | — | — | — | — | — | — | 245 | 320 | 1,472 | 1,631 | 1,717 | 1,951 | — | — | 1,717 | 1,951 | |||||||||||||||||||||
Diesel & distillates | — | — | — | — | — | — | 57 | 74 | 274 | 342 | 930 | 1,135 | 1,261 | 1,551 | — | — | 1,261 | 1,551 | |||||||||||||||||||||
Asphalt | — | — | — | — | — | — | — | — | 191 | 177 | 72 | 69 | 263 | 246 | — | — | 263 | 246 | |||||||||||||||||||||
Other | — | — | — | — | — | — | 1 | 7 | 161 | 162 | 170 | 363 | 332 | 532 | — | — | 332 | 532 | |||||||||||||||||||||
Total refined products | — | — | — | — | — | — | 464 | 534 | 871 | 1,001 | 2,644 | 3,198 | 3,979 | 4,733 | — | — | 3,979 | 4,733 | |||||||||||||||||||||
Total revenue | 1,241 | 1,319 | 676 | 601 | 1,917 | 1,920 | 464 | 534 | 871 | 1,001 | 2,644 | 3,198 | 3,979 | 4,733 | (537 | ) | (521 | ) | 5,359 | 6,132 |
Upstream | Downstream | Corporate and Eliminations | Total | ||||||||||||||||||||||||||||||||||||
Nine months ended September 30, | Exploration and Production | Infrastructure and Marketing | Total | Upgrading | Canadian Refined Products | U.S. Refining and Marketing | Total | ||||||||||||||||||||||||||||||||
($ millions) | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||
Primary Geographical Markets | |||||||||||||||||||||||||||||||||||||||
Canada | 2,914 | 2,849 | 1,734 | 1,681 | 4,648 | 4,530 | 1,321 | 1,443 | 2,329 | 2,591 | — | — | 3,650 | 4,034 | (1,533 | ) | (1,381 | ) | 6,765 | 7,183 | |||||||||||||||||||
United States | — | — | — | — | — | — | — | — | — | — | 7,718 | 9,004 | 7,718 | 9,004 | — | — | 7,718 | 9,004 | |||||||||||||||||||||
China | 763 | 838 | — | — | 763 | 838 | — | — | — | — | — | — | — | — | — | — | 763 | 838 | |||||||||||||||||||||
Total revenue | 3,677 | 3,687 | 1,734 | 1,681 | 5,411 | 5,368 | 1,321 | 1,443 | 2,329 | 2,591 | 7,718 | 9,004 | 11,368 | 13,038 | (1,533 | ) | (1,381 | ) | 15,246 | 17,025 | |||||||||||||||||||
Major Product Lines | |||||||||||||||||||||||||||||||||||||||
Light & medium crude oil | 450 | 822 | — | — | 450 | 822 | — | — | — | — | — | — | — | — | — | — | 450 | 822 | |||||||||||||||||||||
Heavy crude oil | 454 | 468 | — | — | 454 | 468 | — | — | — | — | — | — | — | — | — | — | 454 | 468 | |||||||||||||||||||||
Bitumen | 1,780 | 1,302 | — | — | 1,780 | 1,302 | — | — | — | — | — | — | — | — | — | — | 1,780 | 1,302 | |||||||||||||||||||||
Total crude oil | 2,684 | 2,592 | — | — | 2,684 | 2,592 | — | — | — | — | — | — | — | — | — | — | 2,684 | 2,592 | |||||||||||||||||||||
NGL | 210 | 285 | — | — | 210 | 285 | — | — | — | — | — | — | — | — | — | — | 210 | 285 | |||||||||||||||||||||
Natural gas | 783 | 810 | — | — | 783 | 810 | — | — | — | — | — | — | — | — | — | — | 783 | 810 | |||||||||||||||||||||
Total exploration and production | 3,677 | 3,687 | — | — | 3,677 | 3,687 | — | — | — | — | — | — | — | — | — | — | 3,677 | 3,687 | |||||||||||||||||||||
Total infrastructure and marketing | — | — | 1,734 | 1,681 | 1,734 | 1,681 | — | — | — | — | — | — | — | — | — | — | 1,734 | 1,681 | |||||||||||||||||||||
Synthetic crude | — | — | — | — | — | — | 1,129 | 1,208 | — | — | — | — | 1,129 | 1,208 | — | — | 1,129 | 1,208 | |||||||||||||||||||||
Gasoline | — | — | — | — | — | — | — | — | 692 | 823 | 4,198 | 4,766 | 4,890 | 5,589 | — | — | 4,890 | 5,589 | |||||||||||||||||||||
Diesel & distillates | — | — | — | — | — | — | 181 | 219 | 848 | 966 | 2,887 | 3,259 | 3,916 | 4,444 | — | — | 3,916 | 4,444 | |||||||||||||||||||||
Asphalt | — | — | — | — | — | — | — | — | 362 | 345 | 115 | 145 | 477 | 490 | — | — | 477 | 490 | |||||||||||||||||||||
Other | — | — | — | — | — | — | 11 | 16 | 427 | 457 | 518 | 834 | 956 | 1,307 | — | — | 956 | 1,307 | |||||||||||||||||||||
Total refined products | — | — | — | — | — | — | 1,321 | 1,443 | 2,329 | 2,591 | 7,718 | 9,004 | 11,368 | 13,038 | — | — | 11,368 | 13,038 | |||||||||||||||||||||
Total revenue | 3,677 | 3,687 | 1,734 | 1,681 | 5,411 | 5,368 | 1,321 | 1,443 | 2,329 | 2,591 | 7,718 | 9,004 | 11,368 | 13,038 | (1,533 | ) | (1,381 | ) | 15,246 | 17,025 |
Exploration and Evaluation Assets | ||
($ millions) | ||
December 31, 2018 | 997 | |
Additions | 37 | |
Disposals | — | |
Transfers to property, plant and equipment (note 6) | (23 | ) |
Expensed exploration expenditures previously capitalized | (23 | ) |
Exchange adjustments | (1 | ) |
September 30, 2019 | 987 |
Property, Plant and Equipment | Oil and Gas Properties | Processing, Transportation and Storage | Upgrading | Refining | Retail and Other | Total | ||||||
($ millions) | ||||||||||||
Cost | ||||||||||||
December 31, 2018 | 44,196 | 101 | 2,659 | 10,691 | 3,095 | 60,742 | ||||||
Transfers to right-of-use assets(1) (note 7) | (336 | ) | — | — | (180 | ) | — | (516 | ) | |||
Additions(2) | 1,776 | — | 29 | 639 | 107 | 2,551 | ||||||
Acquisitions | 5 | — | — | — | — | 5 | ||||||
Transfers from exploration and evaluation (note 5) | 23 | — | — | — | — | 23 | ||||||
Transfers from right-of-use assets(3) (note 7) | 83 | — | — | — | — | 83 | ||||||
Intersegment transfers | 2 | — | — | — | (2 | ) | — | |||||
Changes in asset retirement obligations | 63 | 1 | — | — | (6 | ) | 58 | |||||
Disposals and derecognition | (11 | ) | (1 | ) | — | (16 | ) | — | (28 | ) | ||
Exchange adjustments | (131 | ) | (1 | ) | — | (281 | ) | (2 | ) | (415 | ) | |
September 30, 2019 | 45,670 | 100 | 2,688 | 10,853 | 3,192 | 62,503 | ||||||
Accumulated depletion, depreciation, amortization and impairment | ||||||||||||
December 31, 2018 | (27,379 | ) | (50 | ) | (1,585 | ) | (3,933 | ) | (1,995 | ) | (34,942 | ) |
Transfers to right-of-use assets(1) (note 7) | 12 | — | — | 40 | — | 52 | ||||||
Depletion, depreciation, amortization and impairment | (1,308 | ) | (2 | ) | (86 | ) | (360 | ) | (111 | ) | (1,867 | ) |
Disposals and derecognition | 7 | — | — | 8 | — | 15 | ||||||
Exchange adjustments | 52 | — | — | 102 | — | 154 | ||||||
September 30, 2019 | (28,616 | ) | (52 | ) | (1,671 | ) | (4,143 | ) | (2,106 | ) | (36,588 | ) |
Net book value | ||||||||||||
December 31, 2018 | 16,817 | 51 | 1,074 | 6,758 | 1,100 | 25,800 | ||||||
September 30, 2019 | 17,054 | 48 | 1,017 | 6,710 | 1,086 | 25,915 |
(1) | Transfer to right-of-use assets due to the adoption of IFRS 16 on January 1, 2019. |
(2) | Includes $5 million of interest expense on lease liabilities allocated to the carrying amount of assets in Oil and Gas Properties. |
(3) | Includes capitalized depreciation from right-of-use assets. |
Oil and Gas Properties | Processing, Transportation and Storage | Upgrading | Refining | Retail and Other | Total | |||||||
($ millions) | ||||||||||||
January 1, 2019 | ||||||||||||
Transfers from property, plant and equipment, net (note 6) | 324 | — | — | 140 | — | 464 | ||||||
Initial recognition | 721 | 100 | — | 70 | 412 | 1,303 | ||||||
1,045 | 100 | — | 210 | 412 | 1,767 | |||||||
Additions | 1 | — | — | 27 | 4 | 32 | ||||||
Transfers to property, plant and equipment (note 6) | (83 | ) | — | — | — | — | (83 | ) | ||||
Disposals and derecognition | (7 | ) | — | — | — | — | (7 | ) | ||||
Revaluation | (206 | ) | 1 | — | — | 3 | (202 | ) | ||||
Depreciation | (35 | ) | (8 | ) | — | (38 | ) | (28 | ) | (109 | ) | |
Other | — | — | — | (3 | ) | — | (3 | ) | ||||
September 30, 2019 | 715 | 93 | — | 196 | 391 | 1,395 |
Balance Sheets | ||
($ millions) | September 30, 2019 | |
Current lease liabilities(1) | 133 | |
Non-current lease liabilities(1) | 1,352 |
(1) | Includes $481 million previously recorded in accrued liabilities and other long-term liabilities as at December 31, 2018. |
Results of Operations | Three months ended, | Nine months ended, | |||
($ millions) | September 30, 2019 | September 30, 2019 | |||
Interest expense on lease liabilities(1) (note 13) | 26 | 81 | |||
Expenses relating to short-term leases | 4 | 16 |
(1) | Includes nil and $5 million of interest allocated to the carrying amount of assets in Oil and Gas Properties for three and nine months ended September 30, 2019, respectively. |
Cash Flow Summary | Three months ended, | Nine months ended, | |||
($ millions) | September 30, 2019 | September 30, 2019 | |||
Total cash flow used for leases | 84 | 255 |
Short-term Debt | |||||
($ millions) | September 30, 2019 | December 31, 2018 | |||
Commercial paper(1) | 200 | 200 |
(1) | The commercial paper is supported by the Company’s syndicated credit facilities and the Company is authorized to issue commercial paper up to a maximum of $1.0 billion having a term not to exceed 365 days. The weighted average interest rate as at September 30, 2019, was 1.97 percent per annum (December 31, 2018 – 2.20 percent). |
Canadian $ Amount | U.S. $ Denominated | |||||||||
Long-term Debt | Maturity | September 30, 2019 | December 31, 2018 | September 30, 2019 | December 31, 2018 | |||||
($ millions) | ||||||||||
Long-term debt | ||||||||||
5.00% notes | 2020 | — | 400 | — | — | |||||
3.95% notes(1) | 2022 | 662 | 682 | 500 | 500 | |||||
4.00% notes(1) | 2024 | 993 | 1,023 | 750 | 750 | |||||
3.55% notes | 2025 | 750 | 750 | — | — | |||||
3.60% notes | 2027 | 750 | 750 | — | — | |||||
4.40% notes | 2029 | 993 | — | 750 | — | |||||
6.80% notes(1) | 2037 | 513 | 528 | 387 | 387 | |||||
Debt issue costs(2) | (26 | ) | (19 | ) | — | — | ||||
Long-term debt | 4,635 | 4,114 | 2,387 | 1,637 | ||||||
Long-term debt due within one year | ||||||||||
6.15% notes(1) | 2019 | — | 410 | — | 300 | |||||
7.25% notes(1) | 2019 | 993 | 1,023 | 750 | 750 | |||||
5.00% notes | 2020 | 400 | — | — | — | |||||
Long-term debt due within one year | 1,393 | 1,433 | 750 | 1,050 |
(1) | The U.S. dollar denominated debt is designated as a hedge of the Company’s net investment in selected foreign operations with a U.S. dollar functional currency. Refer to Note 15 for Foreign Currency Risk Management. |
(2) | Calculated using the effective interest rate method. |
Asset Retirement Obligations | ||
($ millions) | ||
December 31, 2018 | 2,424 | |
Additions | 47 | |
Liabilities settled | (186 | ) |
Revaluation | 11 | |
Exchange adjustment | (14 | ) |
Accretion (note 13) | 79 | |
September 30, 2019 | 2,361 | |
Expected to be incurred within one year | 218 | |
Expected to be incurred beyond one year | 2,143 |
Other Long-term Liabilities | |||||
($ millions) | September 30, 2019 | December 31, 2018 | |||
Employee future benefits | 215 | 205 | |||
Finance lease obligation (note 7) | — | 467 | |||
Stock-based compensation | 23 | 42 | |||
Deferred revenue | 170 | 205 | |||
Other | 123 | 188 | |||
End of period | 531 | 1,107 |
Common Shares | Number of Shares | Amount ($ millions) | |||
December 31, 2018 | 1,005,121,738 | 7,293 | |||
September 30, 2019 | 1,005,121,738 | 7,293 |
Common Share Dividends ($ millions) | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||
Declared | Paid | Declared | Paid | Declared | Paid | Declared | Paid | ||||||||||||
125 | 126 | 126 | 75 | 377 | 377 | 277 | 151 |
Cumulative Redeemable Preferred Shares | Number of Shares | Amount ($ millions) | |||
December 31, 2018 | 36,000,000 | 874 | |||
September 30, 2019 | 36,000,000 | 874 |
Cumulative Redeemable Preferred Share Dividends ($ millions) | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||
Declared | Paid | Declared | Paid | Declared | Paid | Declared | Paid | ||||||||||||
Series 1 Preferred Shares | 2 | 3 | 2 | 2 | 5 | 5 | 5 | 5 | |||||||||||
Series 2 Preferred Shares(1) | — | — | — | — | 1 | 1 | 1 | 1 | |||||||||||
Series 3 Preferred Shares | 3 | 6 | 3 | 3 | 8 | 8 | 8 | 8 | |||||||||||
Series 5 Preferred Shares | 2 | 5 | 2 | 2 | 7 | 7 | 7 | 7 | |||||||||||
Series 7 Preferred Shares | 2 | 3 | 2 | 2 | 5 | 5 | 5 | 5 | |||||||||||
9 | 17 | 9 | 9 | 26 | 26 | 26 | 26 |
(1) | Series 2 Preferred Share dividends declared and paid in the three months ended September 30, 2019 was less than $1 million (three months ended September 30, 2018 was less than $1 million). |
Stock-based Compensation ($ millions) | Three months ended September 30, | Nine months ended September 30, | |||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Stock option plan | (6 | ) | 20 | (9 | ) | 42 | |||||
PSU | (3 | ) | 20 | 20 | 52 | ||||||
Stock-based compensation (note 12) | (9 | ) | 40 | 11 | 94 |
Earnings per Share ($ millions) | Three months ended September 30, | Nine months ended September 30, | |||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Net earnings | 273 | 545 | 971 | 1,241 | |||||||
Effect of dividends declared on preferred shares in the period | (9 | ) | (9 | ) | (26 | ) | (26 | ) | |||
Net earnings - basic | 264 | 536 | 945 | 1,215 | |||||||
Dilutive effect of accounting for stock options(1) | (9 | ) | — | (17 | ) | — | |||||
Net earnings - diluted | 255 | 536 | 928 | 1,215 | |||||||
(millions) | |||||||||||
Weighted average common shares outstanding – basic | 1,005.1 | 1,005.1 | 1,005.1 | 1,005.1 | |||||||
Effect of stock dividends declared | — | 2.3 | — | 1.1 | |||||||
Weighted average common shares outstanding – diluted | 1,005.1 | 1,007.4 | 1,005.1 | 1,006.2 | |||||||
Earnings per share – basic ($/share) | 0.26 | 0.53 | 0.94 | 1.21 | |||||||
Earnings per share – diluted ($/share) | 0.25 | 0.53 | 0.92 | 1.21 |
(1) | For the three and nine months ended September 30, 2019, equity-settlement of stock of options was used to calculate diluted earnings per share as it was considered more dilutive than cash-settlement (three and nine months ended September 30, 2018 - cash-settlement method was used). Stock-based compensation recovery was $3 million and $8 million based on equity-settlement for the three and nine months ended September 30, 2019 (three and nine months ended September 30, 2018 – expense of $3 million and $7 million), respectively. Stock-based compensation would have been a recovery of $6 million and $9 million based on cash-settlement for the three and nine months ended September 30, 2019 (three and nine months ended September 30, 2018 – expense of $20 million and $42 million), respectively. |
Production, Operating and Transportation Expenses | Three months ended September 30, | Nine months ended September 30, | |||||||||
($ millions) | 2019 | 2018 | 2019 | 2018 | |||||||
Services and support costs | 331 | 286 | 888 | 771 | |||||||
Salaries and benefits | 186 | 213 | 568 | 556 | |||||||
Materials, equipment rentals and leases | 65 | 65 | 187 | 181 | |||||||
Energy and utility | 96 | 98 | 355 | 311 | |||||||
Licensing fees | 46 | 46 | 151 | 158 | |||||||
Transportation | 5 | 6 | 15 | 17 | |||||||
Other | (4 | ) | 26 | 57 | 108 | ||||||
Total production, operating and transportation expenses | 725 | 740 | 2,221 | 2,102 |
Selling, General and Administrative Expenses | Three months ended September 30, | Nine months ended September 30, | |||||||||
($ millions) | 2019 | 2018 | 2019 | 2018 | |||||||
Employee costs(1) | 95 | 76 | 283 | 254 | |||||||
Stock-based compensation expense (recovery)(2) (note 11) | (9 | ) | 40 | 11 | 94 | ||||||
Contract services | 33 | 26 | 93 | 75 | |||||||
Equipment rentals and leases | 2 | 9 | 8 | 28 | |||||||
Maintenance and other | 28 | 36 | 82 | 91 | |||||||
Total selling, general and administrative expenses | 149 | 187 | 477 | 542 |
(1) | Employee costs are comprised of salary and benefits earned during the period, plus cash bonuses awarded during the period. Annual bonus awards to be settled in shares are included in stock-based compensation expense. |
(2) | Stock-based compensation expense represents the cost to the Company for participation in share-based payment plans. |
Financial Items ($ millions) | Three months ended September 30, | Nine months ended September 30, | |||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Foreign exchange | |||||||||||
Non-cash working capital gain (loss) | 16 | (12 | ) | (15 | ) | (12 | ) | ||||
Other foreign exchange gain (loss) | (24 | ) | 3 | 39 | 28 | ||||||
Net foreign exchange gain (loss) | (8 | ) | (9 | ) | 24 | 16 | |||||
Finance income | 24 | 15 | 60 | 48 | |||||||
Finance expenses | |||||||||||
Long-term debt | (78 | ) | (83 | ) | (238 | ) | (237 | ) | |||
Lease liabilities(1) (note 7) | (26 | ) | — | (81 | ) | — | |||||
Other | — | (3 | ) | (4 | ) | (5 | ) | ||||
(104 | ) | (86 | ) | (323 | ) | (242 | ) | ||||
Interest capitalized(2) | 46 | 29 | 130 | 76 | |||||||
(58 | ) | (57 | ) | (193 | ) | (166 | ) | ||||
Accretion of asset retirement obligations (note 9) | (26 | ) | (23 | ) | (79 | ) | (72 | ) | |||
Finance expenses | (84 | ) | (80 | ) | (272 | ) | (238 | ) | |||
Total financial items | (68 | ) | (74 | ) | (188 | ) | (174 | ) |
(1) | Includes nil and $5 million of interest allocated to the carrying amount of assets in Oil and Gas Properties for the three and nine months ended September 30, 2019, respectively . |
(2) | Interest capitalized on project costs is calculated using the Company’s annualized effective interest rate of 5 percent (2018 – 5 percent). |
Non-cash Working Capital ($ millions) | Three months ended September 30, | Nine months ended September 30, | |||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Decrease (increase) in non-cash working capital | |||||||||||
Accounts receivable | (289 | ) | (190 | ) | (290 | ) | (320 | ) | |||
Inventories | (57 | ) | 41 | (442 | ) | (128 | ) | ||||
Prepaid expenses | (91 | ) | (49 | ) | (46 | ) | 16 | ||||
Accounts payable and accrued liabilities | 330 | 375 | 198 | 150 | |||||||
Change in non-cash working capital | (107 | ) | 177 | (580 | ) | (282 | ) | ||||
Relating to: | |||||||||||
Operating activities | (221 | ) | (35 | ) | (677 | ) | (600 | ) | |||
Financing activities | 10 | 64 | 29 | 139 | |||||||
Investing activities | 104 | 148 | 68 | 179 |
Financial Instruments at Fair Value ($ millions) | As at September 30, 2019 | As at December 31, 2018 | |||
Commodity contracts – FVTPL | |||||
Natural gas(1) | 22 | (9 | ) | ||
Crude oil(2) | 1 | 89 | |||
Crude oil call options(3) | 1 | — | |||
Crude oil put options(3) | (1 | ) | — | ||
Foreign currency contracts – FVTPL | |||||
Foreign currency forwards | (9 | ) | (1 | ) | |
Other assets – FVTPL | 1 | 1 | |||
Derivatives designated as a cash flow hedge - forward starting swaps | — | (14 | ) | ||
Hedge of net investment(4)(5) | (755 | ) | (846 | ) | |
Total financial instruments at fair value | (740 | ) | (780 | ) |
(1) | Natural gas contracts includes a $6 million decrease as at September 30, 2019 (December 31, 2018 – $10 million decrease) to the fair value of held-for-trading inventory, recognized in the condensed interim consolidated balance sheets, related to third party physical purchase and sale contracts for natural gas held in storage. Total fair value of the related natural gas storage inventory was $18 million at September 30, 2019 (December 31, 2018 – $15 million). |
(2) | Crude oil contracts includes a less than $1 million increase at September 30, 2019 (December 31, 2018 – $67 million increase) to the fair value of held-for-trading inventory, recognized in the condensed interim consolidated balance sheets, related to third party crude oil physical purchase and sale contracts. Total fair value of the related crude oil inventory was $106 million at September 30, 2019 (December 31, 2018 – $185 million). |
(3) | Excludes net unsettled premiums of $5 million. |
(4) | Hedging instruments are presented net of tax. |
(5) | Represents the translation of the Company’s U.S. dollar denominated long-term debt designated as a hedge of the Company’s net investment in selected foreign operations with a U.S. dollar functional currency. |
Western Texas Intermediate Crude Oil Call and Put Option Contracts(1) | ||||||||
Type | Transaction | Term | Volume (bbls/day) | Call Price (US$bbl) | Put Price (US$bbl) | |||
Call options | Sold | October - December 2019 | 17,935 | 59.35 | — | |||
Put options | Bought | October - December 2019 | 23,641 | — | 55.16 | |||
Put options | Sold | October - December 2019 | 22,283 | — | 50.40 |
(1) | Prices reported are the weighted average prices for the period. |
1.0 | Summary of Quarterly Results | |
2.0 | Business Overview | |
3.0 | Business Environment | |
4.0 | Results of Operations | |
5.0 | Risk Management and Financial Risks | |
6.0 | Liquidity and Capital Resources | |
7.0 | Critical Accounting Estimates and Key Judgments | |
8.0 | Recent Accounting Standards and Changes in Accounting Policies | |
9.0 | Outstanding Share Data | |
10.0 | Reader Advisories |
Three months ended | ||||||||||||||||
Quarterly Summary | Sept. 30 | Jun. 30 | Mar. 31 | Dec. 31 | Sept. 30 | Jun. 30 | Mar. 31 | Dec. 31 | ||||||||
($ millions, except where indicated) | 2019 | 2019 | 2019 | 2018 | 2018 | 2018 | 2018 | 2017 | ||||||||
Production (mboe/day) | 294.8 | 268.4 | 285.2 | 304.3 | 296.7 | 295.5 | 300.4 | 320.4 | ||||||||
Gross revenues and Marketing and other | 5,394 | 5,386 | 4,645 | 5,042 | 6,300 | 5,983 | 5,262 | 5,534 | ||||||||
Net earnings | 273 | 370 | 328 | 216 | 545 | 448 | 248 | 672 | ||||||||
Per share – Basic | 0.26 | 0.36 | 0.32 | 0.21 | 0.53 | 0.44 | 0.24 | 0.66 | ||||||||
Per share – Diluted | 0.25 | 0.36 | 0.31 | 0.16 | 0.53 | 0.44 | 0.24 | 0.66 | ||||||||
Cash flow – operating activities | 800 | 760 | 545 | 1,313 | 1,283 | 1,009 | 529 | 1,351 | ||||||||
Funds from operations(1) | 1,021 | 802 | 959 | 583 | 1,318 | 1,208 | 895 | 1,014 | ||||||||
Per share – Basic | 1.02 | 0.80 | 0.95 | 0.58 | 1.31 | 1.20 | 0.89 | 1.01 | ||||||||
Per share – Diluted | 1.02 | 0.80 | 0.95 | 0.58 | 1.31 | 1.20 | 0.89 | 1.01 |
(1) | Funds from operations is a non-GAAP measure. Refer to Section 10.3 for a reconciliation to the corresponding GAAP measure. |
• | Net earnings of $273 million in the third quarter of 2019 compared to net earnings of $545 million in the third quarter of 2018, with the decrease primarily due to: |
• | Lower earnings from Upstream operations due to lower global crude oil benchmark prices and lower production; |
• | Lower earnings from crude oil marketing activities due to the tightening of location pricing differentials between Canada and the U.S.; and |
• | Lower realized Upgrading and U.S. Refining margins. |
• | Cash flow – operating activities and funds from operations, which excludes changes in working capital, were $800 million and $1,021 million, respectively, in the third quarter of 2019 compared to $1,283 million and $1,318 million, respectively, in the third quarter of 2018, with the decrease primarily attributed to the same factors noted above for net earnings. |
• | Production decreased by 1.9 mboe/day or one percent to 294.8 mboe/day in the third quarter of 2019 compared to the third quarter of 2018 primarily due to: |
• | Lower production from the Liwan Gas Project due to planned maintenance; |
• | Lower production from the BD Project due to unplanned maintenance at the BD floating production, storage and offloading ("FPSO") vessel; |
• | Lower heavy crude oil production due to government-mandated production quotas in Alberta and natural declines; and |
• | Lower production from Atlantic due to lower production from the White Rose field, which resumed full production in mid-August 2019. |
• | Higher bitumen production from the Company's thermal projects; and |
• | Higher natural gas and natural gas liquids (“NGL”) production from Western Canada. |
Project Name | Nameplate Capacity (bbls/day) | Expected Project Production Date | Project Status |
Dee Valley | 10,000 | On production | First steam was achieved on June 30, 2019, with first oil achieved on August 24, 2019, and reached nameplate capacity on September 30, 2019. |
Spruce Lake Central | 10,000 | Second half of 2020 | Module setting has been completed and the Central Processing Facility plant is expected to be completed by the end of 2019. Piling has been completed on well pads and flow lines. |
Spruce Lake North | 10,000 | Around the end of 2020 | Site piling and concrete work have been completed. Module fabrication is on schedule and module setting has begun with the Once-Through Steam Generators delivered and set on site. |
Spruce Lake East | 10,000 | Around the end of 2021 | Regulatory approval has been received, and lease construction has been completed. |
Edam Central | 10,000 | 2022 | Regulatory approval has been received. |
Dee Valley 2 | 10,000 | 2023 | Regulatory approval has been received. |
• | The Board of Directors declared a quarterly dividend of $0.125 per common share, or $125 million, for the second quarter of 2019. The dividends were paid on October 1, 2019, to shareholders of record at the close of business on September 3, 2019; and |
• | Dividends of $9 million were declared on preferred shares for the third quarter of 2019, and were paid on September 30, 2019, to shareholders of record at the close of business on September 3, 2019. |
Three months ended | Nine months ended | |||||||||||||||
Sept. 30 | Jun. 30 | Mar. 31 | Dec. 31 | Sept. 30 | Sept. 30 | Sept. 30 | ||||||||||
Average Benchmarks Summary | 2019 | 2019 | 2019 | 2018 | 2018 | 2019 | 2018 | |||||||||
West Texas Intermediate (“WTI”) crude oil(1) | (US$/bbl) | 56.45 | 59.82 | 54.90 | 58.81 | 69.50 | 57.06 | 66.75 | ||||||||
Brent crude oil(2) | (US$/bbl) | 61.94 | 68.82 | 63.20 | 67.54 | 75.23 | 64.65 | 72.11 | ||||||||
Light sweet at Edmonton | ($/bbl) | 68.41 | 73.85 | 66.53 | 42.68 | 81.92 | 69.60 | 78.19 | ||||||||
Western Canadian Select (“WCS”) at Hardisty(3) | (US$/bbl) | 44.21 | 49.14 | 42.61 | 19.38 | 47.25 | 45.32 | 44.82 | ||||||||
Lloyd heavy crude oil at Lloydminster | ($/bbl) | 54.84 | 61.71 | 52.12 | 12.83 | 54.01 | 56.22 | 48.16 | ||||||||
WTI/Lloyd crude blend differential | (US$/bbl) | 11.90 | 10.28 | 11.88 | 39.32 | 22.06 | 11.35 | 21.68 | ||||||||
Condensate at Edmonton | (US$/bbl) | 52.02 | 55.86 | 50.56 | 45.28 | 66.65 | 52.81 | 66.17 | ||||||||
NYMEX natural gas(4) | (US$/mmbtu) | 2.39 | 2.64 | 3.15 | 3.64 | 2.90 | 2.73 | 2.90 | ||||||||
NOVA Inventory Transfer (“NIT”) natural gas | ($/GJ) | 0.99 | 1.11 | 1.84 | 1.80 | 1.28 | 1.31 | 1.34 | ||||||||
Chicago Regular Unleaded Gasoline | (US$/bbl) | 71.71 | 81.40 | 63.41 | 67.34 | 86.61 | 72.27 | 81.55 | ||||||||
Chicago Ultra-low Sulphur Diesel | (US$/bbl) | 75.26 | 81.50 | 77.10 | 85.42 | 92.21 | 77.96 | 87.62 | ||||||||
Chicago 3:2:1 crack spread | (US$/bbl) | 16.44 | 21.61 | 13.08 | 13.38 | 19.04 | 17.11 | 16.78 | ||||||||
U.S./Canadian dollar exchange rate | (US$) | 0.757 | 0.748 | 0.752 | 0.757 | 0.765 | 0.752 | 0.777 | ||||||||
Canadian $ Equivalents(5) | ||||||||||||||||
WTI crude oil | ($/bbl) | 74.57 | 79.97 | 73.01 | 77.69 | 90.85 | 75.88 | 85.91 | ||||||||
Brent crude oil | ($/bbl) | 81.82 | 92.00 | 84.04 | 89.22 | 98.34 | 85.97 | 92.81 | ||||||||
WCS at Hardisty | ($/bbl) | 58.40 | 65.70 | 56.66 | 25.60 | 61.76 | 60.27 | 57.68 | ||||||||
WTI/Lloyd crude blend differential | ($/bbl) | 15.72 | 13.74 | 15.80 | 51.94 | 28.84 | 15.09 | 27.90 | ||||||||
NYMEX natural gas | ($/mmbtu) | 3.16 | 3.53 | 4.19 | 4.81 | 3.79 | 3.63 | 3.73 |
(1) | Calendar month Average of settled prices for WTI at Cushing, Oklahoma. |
(2) | Calendar Month Average of settled prices for Dated Brent. |
(3) | WCS is a heavy blended crude oil, comprised of conventional and bitumen crude oils blended with diluent which terminals at Hardisty, Alberta. Quoted prices are indicative of the Index for WCS at Hardisty, Alberta, set in the month prior to delivery. |
(4) | Prices quoted are average settlement prices during the period. |
(5) | Prices quoted are calculated using U.S. dollar benchmark commodity prices and monthly average U.S./Canadian dollar exchange rates. |
2019 | ||||||||||||||
Third Quarter | Effect on Earnings | Effect on | ||||||||||||
Sensitivity Analysis | Average | Increase | before Income Taxes(1) | Net Earnings(1) | ||||||||||
($ millions) | ($/share)(2) | ($ millions) | ($/share)(2) | |||||||||||
WTI benchmark crude oil price(3)(4) | 56.45 | US $1.00/bbl | 95 | 0.09 | 70 | 0.07 | ||||||||
NYMEX benchmark natural gas price(5) | 2.39 | US $0.20/mmbtu | — | — | — | — | ||||||||
WTI/Lloyd crude blend differential(6) | 11.90 | US $1.00/bbl | (4 | ) | — | (3 | ) | — | ||||||
Canadian asphalt margins | 28.39 | Cdn $1.00/bbl | 13 | 0.01 | 10 | 0.01 | ||||||||
Canadian light oil margins | 0.038 | Cdn $0.005/litre | 14 | 0.01 | 10 | 0.01 | ||||||||
Chicago 3:2:1 crack spread | 16.44 | US $1.00/bbl | 116 | 0.12 | 90 | 0.09 | ||||||||
Exchange rate (US $ per Cdn $)(3)(7) | 0.757 | US $0.01 | (78 | ) | (0.08 | ) | (58 | ) | (0.06 | ) |
(1) | Excludes mark to market accounting impacts. |
(2) | Based on 1,005.1 million common shares outstanding as at September 30, 2019. |
(3) | Does not include gains or losses on inventory. |
(4) | Includes impacts related to Brent-based production. |
(5) | Includes impact of natural gas consumption by the Company. |
(6) | Excludes impact on Canadian asphalt operations. |
(7) | Assumes no foreign exchange gains or losses on U.S. dollar denominated long-term debt and other monetary items, including cash balances. |
Exploration and Production Earnings Summary | Three months ended September 30, | Nine months ended September 30, | |||||||||
($ millions) | 2019 | 2018 | 2019 | 2018 | |||||||
Gross revenues | 1,241 | 1,319 | 3,677 | 3,687 | |||||||
Royalties | (81 | ) | (106 | ) | (235 | ) | (285 | ) | |||
Net revenues | 1,160 | 1,213 | 3,442 | 3,402 | |||||||
Purchases of crude oil and products | — | — | — | 1 | |||||||
Production, operating and transportation expenses | 399 | 398 | 1,199 | 1,139 | |||||||
Selling, general and administrative expenses | 78 | 71 | 226 | 224 | |||||||
Depletion, depreciation, amortization and impairment (“DD&A”) | 497 | 461 | 1,349 | 1,342 | |||||||
Exploration and evaluation expenses | 41 | 26 | 157 | 96 | |||||||
Loss (gain) on sale of assets | — | 2 | (2 | ) | (2 | ) | |||||
Other – net | (18 | ) | (42 | ) | 97 | (11 | ) | ||||
Share of equity investment gain | (15 | ) | (12 | ) | (42 | ) | (33 | ) | |||
Financial items | 39 | 27 | 121 | 68 | |||||||
Provisions for income taxes | 33 | 68 | 79 | 149 | |||||||
Net earnings | 106 | 214 | 258 | 429 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||
Average Sales Prices Realized | 2019 | 2018 | 2019 | 2018 | |||||||
Crude oil and NGL ($/bbl) | |||||||||||
Light and Medium crude oil | 71.32 | 93.84 | 73.44 | 89.04 | |||||||
NGL(1) | 38.39 | 60.08 | 44.74 | 56.61 | |||||||
Heavy crude oil | 56.70 | 50.09 | 56.54 | 45.48 | |||||||
Bitumen | 51.09 | 46.00 | 51.88 | 39.35 | |||||||
Total crude oil and NGL average | 53.46 | 56.02 | 54.15 | 49.99 | |||||||
Natural gas average ($/mcf)(1) | 5.44 | 6.15 | 6.25 | 6.55 | |||||||
Total average ($/boe) | 47.54 | 50.44 | 49.26 | 47.02 |
(1) | Reported average NGL and natural gas prices include Husky’s working interest from the BD Project (40 percent). Revenues and expenses related to the Husky-CNOOC Madura Ltd. joint venture are accounted for under the equity method for interim financial statement purposes. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||
Daily Gross Production | 2019 | 2018 | 2019 | 2018 | |||||||
Crude Oil and NGL (mbbls/day) | |||||||||||
Western Canada | |||||||||||
Light and Medium crude oil | 9.4 | 9.9 | 8.6 | 9.4 | |||||||
NGL | 13.0 | 11.9 | 12.7 | 11.8 | |||||||
Heavy crude oil | 31.6 | 34.6 | 29.4 | 37.6 | |||||||
Bitumen(1) | 126.4 | 117.3 | 125.7 | 121.2 | |||||||
180.4 | 173.7 | 176.4 | 180.0 | ||||||||
Atlantic | |||||||||||
White Rose and Satellite Fields – light crude oil | 16.4 | 21.0 | 9.3 | 20.0 | |||||||
Terra Nova – light crude oil | 4.7 | 2.8 | 4.4 | 4.3 | |||||||
21.1 | 23.8 | 13.7 | 24.3 | ||||||||
Asia Pacific | |||||||||||
Liwan – NGL(2) | 6.6 | 8.4 | 7.1 | 8.1 | |||||||
Madura –NGL(3) | 2.8 | 4.2 | 2.6 | 2.3 | |||||||
9.4 | 12.6 | 9.7 | 10.4 | ||||||||
210.9 | 210.1 | 199.8 | 214.7 | ||||||||
Natural gas (mmcf/day) | |||||||||||
Western Canada | 310.4 | 297.6 | 297.2 | 287.2 | |||||||
Asia Pacific | |||||||||||
Liwan(2) | 158.3 | 181.9 | 166.7 | 180.6 | |||||||
Madura(3) | 34.6 | 40.0 | 34.3 | 29.2 | |||||||
192.9 | 221.9 | 201.0 | 209.8 | ||||||||
503.3 | 519.5 | 498.2 | 497.0 | ||||||||
Total (mboe/day) | 294.8 | 296.7 | 282.8 | 297.5 |
(1) | Bitumen consists of production from thermal developments in Lloydminster, the Tucker Thermal Project located near Cold Lake, Alberta and the Sunrise Energy Project. |
(2) | Reported production volumes include Husky’s working interest production from the Liwan Gas Project (49 percent). |
(3) | Reported production volumes include Husky’s working interest production from the BD Project (40 percent). Revenues and expenses related to the Husky-CNOOC Madura Ltd. joint venture are accounted for under the equity method for interim financial statement purposes. |
Actual Production | |||||||
Guidance | Nine months ended | Year ended | |||||
Gross Production | 2019 | September 30, 2019 | December 31, 2018 | ||||
Canada | |||||||
Light & medium crude oil (mbbls/day) | 29 - 31 | 22 | 31 | ||||
NGL (mbbls/day) | 12 - 13 | 13 | 12 | ||||
Heavy crude oil & bitumen (mbbls/day) | 155 - 163 | 155 | 161 | ||||
Natural gas (mmcf/day) | 297 - 307 | 297 | 291 | ||||
Canada total (mboe/day) | 246 - 258 | 240 | 252 | ||||
Asia Pacific | |||||||
NGL (mbbls/day)(1) | 9 - 10 | 10 | 11 | ||||
Natural gas (mmcf/day)(1) | 210 - 220 | 201 | 216 | ||||
Asia Pacific total (mboe/day) | 44 - 47 | 43 | 47 | ||||
Total (mboe/day) | 290 - 305 | 283 | 299 |
(1) | Includes Husky’s working interest production from the BD Project (40 percent). Revenues and expenses related to the Husky-CNOOC Madura Ltd. joint venture are accounted for under the equity method for interim financial statement purposes. |
Royalties | Three months ended September 30, | Nine months ended September 30, | |||||||
(Percent) | 2019 | 2018 | 2019 | 2018 | |||||
Western Canada(1) | 7 | 9 | 7 | 9 | |||||
Atlantic | 8 | 8 | 10 | 8 | |||||
Asia Pacific(2) | 7 | 7 | 7 | 7 | |||||
Total | 7 | 8 | 7 | 8 |
(1) | Includes thermal and non-thermal developments. |
(2) | Reported royalties include Husky’s working interest from the BD Project (40 percent). Revenues and expenses related to the Husky-CNOOC Madura Ltd. joint venture are accounted for under the equity method for interim financial statement purposes. |
Operating Costs | Three months ended September 30, | Nine months ended September 30, | |||||||||
($ millions) | 2019 | 2018 | 2019 | 2018 | |||||||
Western Canada(1) | 316 | 318 | 950 | 917 | |||||||
Atlantic | 63 | 55 | 184 | 156 | |||||||
Asia Pacific (2) | 24 | 28 | 73 | 70 | |||||||
Total | 403 | 401 | 1,207 | 1,143 | |||||||
Per unit operating costs ($/boe) | 14.83 | 14.68 | 15.63 | 14.08 |
(1) | Includes thermal and non-thermal developments. |
(2) | Reported operating costs include Husky’s working interest from the BD Project (40 percent). Revenues and expenses related to the Husky-CNOOC Madura Ltd. joint venture are accounted for under the equity method for interim financial statement purposes. |
Exploration and Evaluation Expenses | Three months ended September 30, | Nine months ended September 30, | |||||||||
($ millions) | 2019 | 2018 | 2019 | 2018 | |||||||
Seismic, geological and geophysical | 34 | 22 | 86 | 70 | |||||||
Expensed drilling | 5 | 1 | 65 | 21 | |||||||
Expensed land | 2 | 3 | 6 | 5 | |||||||
Total | 41 | 26 | 157 | 96 |
Exploration and Production Capital Expenditures(1) | Three months ended September 30, | Nine months ended September 30, | |||||||||
($ millions) | 2019 | 2018 | 2019 | 2018 | |||||||
Exploration | |||||||||||
Western Canada | 7 | 32 | 7 | 65 | |||||||
Thermal developments | 2 | — | 15 | 3 | |||||||
Atlantic | 1 | 6 | 12 | 65 | |||||||
Asia Pacific(2) | 1 | 18 | 3 | 52 | |||||||
11 | 56 | 37 | 185 | ||||||||
Development | |||||||||||
Western Canada | 24 | 100 | 178 | 226 | |||||||
Thermal developments | 161 | 234 | 541 | 577 | |||||||
Non-thermal developments | 23 | 24 | 81 | 54 | |||||||
Atlantic | 274 | 255 | 696 | 592 | |||||||
Asia Pacific(2) | 104 | 45 | 249 | 80 | |||||||
586 | 658 | 1,745 | 1,529 | ||||||||
Acquisitions | |||||||||||
Western Canada | — | — | — | 4 | |||||||
Thermal developments | — | 1 | — | 40 | |||||||
— | 1 | — | 44 | ||||||||
Total | 597 | 715 | 1,782 | 1,758 |
(1) | Excludes capitalized costs related to asset retirement obligations and capitalized interest incurred during the period. |
(2) | Capital expenditures in Asia Pacific exclude amounts related to the Husky-CNOOC Madura Ltd. joint venture, which is accounted for under the equity method for interim financial statement purposes. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||
Wells Drilled (wells)(1) | Gross | Net | Gross | Net | Gross | Net | Gross | Net | |||||||||||
Thermal developments | 13 | 10 | 52 | 48 | 60 | 57 | 112 | 101 | |||||||||||
Non-thermal developments | 7 | 7 | 5 | 1 | 29 | 29 | 9 | 5 | |||||||||||
Western Canada | 1 | 1 | 15 | 14 | 17 | 15 | 26 | 24 | |||||||||||
Total | 21 | 18 | 72 | 63 | 106 | 101 | 147 | 130 |
(1) | Excludes service/stratigraphic test wells for evaluation purposes. |
Region | Well | Working Interest | Well Type |
Atlantic | E-18 13 | 72.5 percent | Development |
Atlantic | E-18 14 | 72.5 percent | Development |
Atlantic | Tiger's Eye D-17 | 40 percent | Exploration |
Asia Pacific | LH 29-1-A3 | 75 percent | Development |
Asia Pacific | LH 29-1-A1 | 75 percent | Development |
Asia Pacific | LH 29-1-A2 | 75 percent | Development |
Infrastructure and Marketing Earnings Summary | Three months ended September 30, | Nine months ended September 30, | |||||||||
($ millions) | 2019 | 2018 | 2019 | 2018 | |||||||
Gross revenues | 676 | 601 | 1,734 | 1,681 | |||||||
Marketing and other | 35 | 168 | 179 | 520 | |||||||
Expenses | |||||||||||
Purchases of crude oil and products | 658 | 567 | 1,745 | 1,590 | |||||||
Production, operating and transportation expenses | 4 | 2 | 12 | 19 | |||||||
Selling, general and administrative expenses | — | 1 | 3 | 3 | |||||||
Depletion, depreciation, amortization and impairment | 4 | — | 10 | 1 | |||||||
Other – net | — | (1 | ) | — | 1 | ||||||
Share of equity investment gain | (4 | ) | (6 | ) | (22 | ) | (20 | ) | |||
Financial items | 2 | — | 2 | — | |||||||
Provisions for income taxes | 13 | 57 | 44 | 166 | |||||||
Net earnings | 34 | 149 | 119 | 441 |
Upgrading Earnings Summary | Three months ended September 30, | Nine months ended September 30, | |||||||||
($ millions, except where indicated) | 2019 | 2018 | 2019 | 2018 | |||||||
Gross revenues | 464 | 534 | 1,321 | 1,443 | |||||||
Expenses | |||||||||||
Purchases of crude oil and products | 360 | 328 | 992 | 818 | |||||||
Production, operating and transportation expenses | 57 | 52 | 163 | 144 | |||||||
Selling, general and administrative expenses | 7 | 2 | 12 | 6 | |||||||
Depletion, depreciation, amortization and impairment | 29 | 30 | 86 | 87 | |||||||
Financial items | 1 | 1 | 1 | 1 | |||||||
Provisions for income taxes | 3 | 33 | 18 | 106 | |||||||
Net earnings | 7 | 88 | 49 | 281 | |||||||
Upgrading throughput (mbbls/day)(1) | 75.6 | 77.2 | 73.4 | 76.9 | |||||||
Total sales (mbbls/day) | 75.3 | 76.7 | 74.3 | 75.1 | |||||||
Synthetic crude oil sales (mbbls/day) | 58.5 | 54.9 | 55.4 | 52.6 | |||||||
Upgrading differential ($/bbl) | 17.22 | 29.46 | 15.65 | 29.38 | |||||||
Unit margin ($/bbl) | 15.01 | 29.19 | 16.22 | 30.48 | |||||||
Unit operating cost ($/bbl)(2) | 8.20 | 7.32 | 8.13 | 6.86 |
(1) | Throughput includes diluent returned to the field. |
(2) | Based on throughput. |
Canadian Refined Products Earnings Summary | Three months ended September 30, | Nine months ended September 30, | |||||||||
($ millions, except where indicated) | 2019 | 2018 | 2019 | 2018 | |||||||
Gross revenues | 871 | 1,001 | 2,329 | 2,591 | |||||||
Expenses | |||||||||||
Purchases of crude oil and products | 706 | 834 | 1,880 | 2,123 | |||||||
Production, operating and transportation expenses | 69 | 66 | 221 | 198 | |||||||
Selling, general and administrative expenses | 13 | 12 | 40 | 36 | |||||||
Depletion, depreciation, amortization and impairment | 32 | 29 | 99 | 86 | |||||||
Gain on sale of assets | (4 | ) | (2 | ) | (4 | ) | (2 | ) | |||
Financial items | 4 | 3 | 12 | 9 | |||||||
Provisions for income taxes | 14 | 16 | 22 | 38 | |||||||
Net earnings | 37 | 43 | 59 | 103 | |||||||
Number of fuel outlets(1) | 555 | 558 | 554 | 558 | |||||||
Fuel sales volume, including wholesale | |||||||||||
Fuel sales (millions of litres/day) | 7.5 | 7.7 | 7.4 | 7.5 | |||||||
Fuel sales per retail outlet (thousands of litres/day) | 13.5 | 12.4 | 12.4 | 12.1 | |||||||
Refinery throughput | |||||||||||
Prince George Refinery (mbbls/day)(2) | 11.4 | 11.5 | 8.4 | 10.7 | |||||||
Lloydminster Refinery (mbbls/day)(2) | 28.3 | 27.8 | 25.8 | 27.8 | |||||||
Ethanol production (thousands of litres/day) | 798.9 | 772.3 | 816.5 | 800.9 |
(1) | Average number of fuel outlets for period indicated. |
(2) | Includes all crude oil, feedstock, intermediate feedstock and blend-stocks used in producing sales volumes from the refinery. |
U.S. Refining and Marketing Earnings Summary | Three months ended September 30, | Nine months ended September 30, | |||||||||
($ millions, except where indicated) | 2019 | 2018 | 2019 | 2018 | |||||||
Gross revenues | 2,644 | 3,198 | 7,718 | 9,004 | |||||||
Expenses | |||||||||||
Purchases of crude oil and products | 2,319 | 2,741 | 6,489 | 7,811 | |||||||
Production, operating and transportation expenses | 197 | 222 | 628 | 602 | |||||||
Selling, general and administrative expenses | 7 | 5 | 23 | 17 | |||||||
Depletion, depreciation, amortization and impairment | 117 | 129 | 355 | 348 | |||||||
Loss on sale of asset | 1 | — | 1 | — | |||||||
Other – net | (163 | ) | (107 | ) | (347 | ) | (130 | ) | |||
Financial items | 5 | 4 | 14 | 11 | |||||||
Provisions for income taxes | 35 | 46 | 123 | 77 | |||||||
Net earnings | 126 | 158 | 432 | 268 | |||||||
Select operating data: | |||||||||||
Lima Refinery throughput (mbbls/day)(1) | 174.3 | 163.3 | 175.2 | 166.3 | |||||||
BP-Husky Toledo Refinery throughput (mbbls/day)(1)(2) | 66.8 | 70.8 | 60.6 | 70.4 | |||||||
Superior Refinery throughput (mbbls/day)(1) | — | — | — | 15.6 | |||||||
Refining and marketing margin (US$/bbl crude throughput) | 12.17 | 17.52 | 14.60 | 13.99 | |||||||
Refinery inventory (mmbbls)(3) | 8.7 | 9.5 | 8.7 | 9.5 |
(1) | Includes all crude oil, feedstock, intermediate feedstock and blend-stocks used in producing sales volumes from the refinery. |
(2) | Reported throughput volumes include Husky’s working interest from the BP-Husky Toledo Refinery (50 percent). |
(3) | Feedstock and refined products are included in refinery inventory. |
Corporate Summary | Three months ended September 30, | Nine months ended September 30, | |||||||||
($ millions) income (expense) | 2019 | 2018 | 2019 | 2018 | |||||||
Production, operating and transportation expenses | 1 | — | 2 | — | |||||||
Selling, general and administrative expenses | (44 | ) | (96 | ) | (173 | ) | (256 | ) | |||
Depletion, depreciation and amortization | (24 | ) | (23 | ) | (77 | ) | (65 | ) | |||
Other – net | 22 | — | 12 | 9 | |||||||
Net foreign exchange gain (loss) | (8 | ) | (9 | ) | 24 | 16 | |||||
Finance income | 24 | 13 | 60 | 36 | |||||||
Finance expense | (33 | ) | (43 | ) | (122 | ) | (137 | ) | |||
Recovery of income taxes | 25 | 51 | 328 | 116 | |||||||
Net earnings (loss) | (37 | ) | (107 | ) | 54 | (281 | ) |
Foreign Exchange Summary | Three months ended September 30, | Nine months ended September 30, | |||||||||
($ millions, except where indicated) | 2019 | 2018 | 2019 | 2018 | |||||||
Non-cash working capital gain (loss) | 16 | (12 | ) | (15 | ) | (12 | ) | ||||
Other foreign exchange gain (loss) | (24 | ) | 3 | 39 | 28 | ||||||
Net foreign exchange gain (loss) | (8 | ) | (9 | ) | 24 | 16 | |||||
U.S./Canadian dollar exchange rates: | |||||||||||
At beginning of period | US$0.764 | US$0.761 | US$0.733 | US$0.799 | |||||||
At end of period | US$0.755 | US$0.774 | US$0.755 | US$0.774 |
Consolidated Income Taxes | Three months ended September 30, | Nine months ended September 30, | |||||||||
($ millions) | 2019 | 2018 | 2019 | 2018 | |||||||
Provisions for (recovery of) income taxes | 73 | 169 | (42 | ) | 420 | ||||||
Cash income taxes paid (received) | (44 | ) | (70 | ) | 34 | (10 | ) |
WTI Crude Oil Call and Put Option Contracts(1) | ||||||||
Type | Transaction | Term | Volume (bbls/day) | Call Price (US$bbl) | Put Price (US$bbl) | |||
Call options | Sold | October - December 2019 | 17,935 | 59.35 | — | |||
Put options | Bought | October - December 2019 | 23,641 | — | 55.16 | |||
Put options | Sold | October - December 2019 | 22,283 | — | 50.40 |
(1) | Prices reported are the weighted average prices for the period. |
Credit Facilities | |||||
($ millions) | Available | Unused | |||
Operating facilities(1) | 900 | 470 | |||
Syndicated credit facilities(2) | 4,000 | 3,800 | |||
Total | 4,900 | 4,270 |
(1) | Consists of demand credit facilities. |
(2) | Commercial paper outstanding is supported by the Company’s syndicated credit facilities. |
Capital Structure | September 30, 2019 | |
($ millions) | Outstanding | |
Total debt(1) | 6,228 | |
Shareholders' equity | 19,935 |
(1) | Total debt is a non-GAAP measure. Refer to Section 10.3 for a reconciliation to the corresponding GAAP measure. |
• | unlimited number of common shares |
• | unlimited number of preferred shares |
• | common shares 1,005,121,738 |
• | cumulative redeemable preferred shares, series 1 10,435,932 |
• | cumulative redeemable preferred shares, series 2 1,564,068 |
• | cumulative redeemable preferred shares, series 3 10,000,000 |
• | cumulative redeemable preferred shares, series 5 8,000,000 |
• | cumulative redeemable preferred shares, series 7 6,000,000 |
• | stock options 19,500,839 |
• | stock options exercisable 10,658,921 |
• | with respect to the business, operations and results of the Company generally: the Company’s general strategic plans and growth strategies; the Company’s 2019 production guidance, including guidance for specified areas and product types; the intended use of proceeds of the US$750 million senior unsecured notes offering; and the Company’s objective of maintaining stated debt to trailing funds from operations and debt to capital employed ratio targets; |
• | with respect to the Company's thermal developments: the expected timing of first production at the Spruce Lake Central, Spruce Lake North, Spruce Lake East, Edam Central and Dee Valley 2 projects; and the expected timing of completion of the Central Processing Facility at Spruce Lake Central; |
• | with respect to the Company’s Western Canada resource plays, the expected timing of production at 10 Montney wells at Wembley and Karr; |
• | with respect to the Company's Offshore business in Asia Pacific: the expected timing of installation of the upper completion of the remaining four wells, and of the control system and flow lines, at Liuhua 29-1; the expected timing of first gas production at Liuhua 29-1; the expected timing of gas production and sales from the MDA and MBH fields; and development plans for the additional MDK shallow water field; |
• | with respect to the Company's Offshore business in the Atlantic, the expected timing of first production at the West White Rose Project; |
• | with respect to the Company’s Infrastructure and Marketing business: expansion plans for the Saskatchewan Gathering System; the processing capacity expected to be added by the Ansell Corser Gas Plant when it comes online, and the expected timing thereof; and the expected timing of completion of construction of additional storage at the Hardisty Terminal; and |
• | with respect to the Company's Downstream operating segment: plans to market and potentially sell the Canadian retail and commercial fuels business; the contingent payment of up to $60 million as part of the consideration for, and the expected closing date of, the sale of the Prince George Refinery; the expected timing of completion of the crude oil flexibility project at the Lima Refinery; the expected investment in the rebuild of the Superior Refinery and anticipated insurance recoveries associated therewith; and the expected timing of resumption of full operations at the Superior Refinery. |
Debt to Trailing Funds from Operations | |||||
($ millions) | September 30, 2019 | December 31, 2018 | |||
Total debt | 6,228 | 5,747 | |||
Trailing funds from operations | 3,365 | 4,004 | |||
Debt to trailing funds from operations | 1.9 | 1.4 |
Reconciliation of Cash Flow | Three months ended | |||||||||||||||
Sept. 30 | Jun. 30 | Mar. 31 | Dec. 31 | Sept. 30 | Jun. 30 | Mar. 31 | Dec. 31 | |||||||||
($ millions) | 2019 | 2019 | 2019 | 2018 | 2018 | 2018 | 2018 | 2017 | ||||||||
Net earnings | 273 | 370 | 328 | 216 | 545 | 448 | 248 | 672 | ||||||||
Items not affecting cash: | ||||||||||||||||
Accretion | 26 | 26 | 27 | 25 | 23 | 25 | 24 | 28 | ||||||||
Depletion, depreciation, amortization and impairment | 703 | 643 | 630 | 662 | 672 | 639 | 618 | 647 | ||||||||
Inventory write-down to net realizable value | — | — | — | 60 | — | — | — | — | ||||||||
Exploration and evaluation expenses | — | 23 | — | 22 | — | 7 | — | — | ||||||||
Deferred income taxes | 22 | (250 | ) | 43 | 25 | 156 | 138 | 77 | (360 | ) | ||||||
Foreign exchange loss (gain) | (1 | ) | (2 | ) | (12 | ) | 1 | (6 | ) | (2 | ) | 1 | 1 | |||
Stock-based compensation | (9 | ) | 13 | 7 | (50 | ) | 40 | 33 | 21 | 25 | ||||||
Gain on sale of assets | (3 | ) | — | (2 | ) | — | — | — | (4 | ) | (13 | ) | ||||
Unrealized mark to market loss (gain) | 4 | (4 | ) | 57 | (16 | ) | (22 | ) | (26 | ) | (86 | ) | 57 | |||
Share of equity investment gain | (19 | ) | (23 | ) | (22 | ) | (16 | ) | (18 | ) | (26 | ) | (9 | ) | (1 | ) |
Gain on insurance recoveries for damage to property | (13 | ) | — | — | (253 | ) | — | — | — | — | ||||||
Other | 5 | 5 | (9 | ) | 2 | (2 | ) | 19 | 2 | 8 | ||||||
Settlement of asset retirement obligations | (73 | ) | (41 | ) | (72 | ) | (65 | ) | (45 | ) | (22 | ) | (49 | ) | (45 | ) |
Deferred revenue | (7 | ) | (5 | ) | (16 | ) | (30 | ) | (25 | ) | (25 | ) | (20 | ) | (5 | ) |
Distribution from equity investment | 113 | 47 | — | — | — | — | 72 | — | ||||||||
Change in non-cash working capital | (221 | ) | (42 | ) | (414 | ) | 730 | (35 | ) | (199 | ) | (366 | ) | 337 | ||
Cash flow – operating activities | 800 | 760 | 545 | 1,313 | 1,283 | 1,009 | 529 | 1,351 | ||||||||
Change in non-cash working capital | 221 | 42 | 414 | (730 | ) | 35 | 199 | 366 | (337 | ) | ||||||
Funds from operations | 1,021 | 802 | 959 | 583 | 1,318 | 1,208 | 895 | 1,014 | ||||||||
Funds from operations – basic | 1.02 | 0.80 | 0.95 | 0.58 | 1.31 | 1.20 | 0.89 | 1.01 | ||||||||
Funds from operations – diluted | 1.02 | 0.80 | 0.95 | 0.58 | 1.31 | 1.20 | 0.89 | 1.01 |
Total Debt | |||||
($ millions) | September 30, 2019 | December 31, 2018 | |||
Short-term debt | 200 | 200 | |||
Long-term debt due within one year | 1,393 | 1,433 | |||
Long-term debt | 4,635 | 4,114 | |||
Total debt | 6,228 | 5,747 |
• | The condensed interim consolidated financial statements and comparative financial information included in this MD&A have been prepared in accordance with IAS 34, “Interim Financial Reporting” as issued by the IASB. |
• | All dollar amounts are in Canadian dollars, unless otherwise indicated. |
• | Prices are presented before the effect of hedging. |
• | There have been no changes to the Company’s internal controls over financial reporting (“ICFR”) for the three months ended September 30, 2019 that have materially affected, or are reasonably likely to affect, the Company’s ICFR. |
Terms | ||
Asia Pacific | Includes Upstream oil and gas exploration and production activities located offshore China and Indonesia | |
Atlantic | Includes Upstream oil and gas exploration and production activities located offshore Newfoundland and Labrador | |
Bitumen | Bitumen is a naturally occurring solid or semi-solid hydrocarbon consisting mainly of heavier hydrocarbons, with a viscosity greater than 10,000 millipascal-seconds or 10,000 centipoise measured at the hydrocarbon’s original temperature in the reservoir and at atmospheric pressure on a gas-free basis, and that is not primarily recoverable at economic rates through a well without the implementation of enhanced recovery methods | |
Capital employed | Long-term debt, long-term debt due within one year, short-term debt and shareholders’ equity | |
Capital expenditures | Includes capitalized administrative expenses but does not include asset retirement obligations or capitalized interest | |
Capital program | Capital expenditures not including capitalized administrative expenses or capitalized interest | |
Debt to capital employed | Long-term debt, long-term debt due within one year and short-term debt divided by capital employed | |
Debt to trailing funds from operations | Long-term debt, long-term debt due within one year and short-term debt divided by trailing funds from operations | |
Diluent | A lighter gravity liquid hydrocarbon, usually condensate or synthetic oil, added to heavy oil and bitumen to facilitate transmissibility of the oil through a pipeline | |
Feedstock | Raw materials which are processed into petroleum products | |
Funds from operations | Cash flow - operating activities excluding change in non-cash working capital | |
Gross/net wells | Gross refers to the total number of wells in which a working interest is owned. Net refers to the sum of the fractional working interests owned by a company | |
Gross reserves/production | A company’s working interest share of reserves/production before deduction of royalties | |
Heavy crude oil | Crude oil with a relative density greater than 10 degrees API gravity and less than or equal to 22.3 degrees API gravity | |
Light crude oil | Crude oil with a relative density greater than 31.1 degrees API gravity | |
Medium crude oil | Crude oil with a relative density that is greater than 22.3 degrees API gravity and less than or equal to 31.1 degrees API gravity | |
Net revenue | Gross revenues less royalties | |
NOVA Inventory Transfer (“NIT”) | Exchange or transfer of title of gas that has been received into the NOVA pipeline system but not yet delivered to a connecting pipeline | |
Oil sands | Sands and other rock materials that contain crude bitumen and include all other mineral substances in association therewith | |
Seismic survey | A method by which the physical attributes in the outer rock shell of the earth are determined by measuring, with a seismograph, the rate of transmission of shock waves through the various rock formations | |
Shareholders’ equity | Common shares, preferred shares, contributed surplus, retained earnings, accumulated other comprehensive income and non-controlling interest | |
Stratigraphic test well | A geologically directed test well to obtain information. These wells are usually drilled without the intention of being completed for production | |
Sustaining capital | The additional development capital that is required by the business to maintain production and operations at existing levels. Development capital includes the cost to drill, complete, equip and tie-in wells to existing infrastructure. | |
Synthetic oil | A mixture of hydrocarbons derived by upgrading heavy crude oils, including bitumen, through a process that reduces the carbon content and increases the hydrogen content | |
Thermal | Use of steam injection into the reservoir in order to enable heavy oil and bitumen to flow to the well bore. | |
Total debt | Long-term debt including long-term debt due within one year and short-term debt | |
Turnaround | Performance of scheduled plant or facility maintenance requiring the complete or partial shutdown of the plant or facility operations | |
Western Canada | Includes Upstream oil and gas exploration and development activities located in Alberta, Saskatchewan and British Columbia |
Units of Measure | ||||
bbls | barrels | mboe/day | thousand barrels of oil equivalent per day | |
bbls/day | barrels per day | mcf | thousand cubic feet | |
boe | barrels of oil equivalent | mmbbls | million barrels | |
boe/day | barrels of oil equivalent per day | mmboe | million barrels of oil equivalent | |
GJ | gigajoule | mmbtu | million British Thermal Units | |
mbbls | thousand barrels | mmcf | million cubic feet | |
mbbls/day | thousand barrels per day | mmcf/day | million cubic feet per day | |
mboe | thousand barrels of oil equivalent |
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