Oil & Gas Job Listings
CALGARY, Oct. 25 /CNW/ - OPTI Canada Inc. ("OPTI") announced today the Company's financial and operating results for the third quarter ended September 30, 2006.
OPTI's Long Lake Project ("the Project"), Canada's fourth and next integrated oil sands project, is progressing towards start-up of its SAGD operations with the OPTI-operated Upgrader start-up scheduled in 2007. The Company is also advancing future phases of growth via a multi-stage expansion strategy. Key accomplishments in the third quarter of 2006 include:
- Continued on-site construction progress at Long Lake Phase 1.
Upgrader construction is now over 60 percent complete with SAGD
(steam assisted gravity drainage) construction approximately
90 percent complete.
- Approximately 75 percent of the anticipated Long Lake operations
workforce has been hired to date. This team is now planning and
executing commissioning activities.
- Continued advancement of Long Lake Phase 2 engineering and planning
activities, as well as ongoing evaluation of expansion lands, to
support OPTI's objective to reach 120,000 bbl/day of premium
synthetic crude ("PSC") production capacity net to the Company within
the next decade.
- The addition of 32 sections of land contiguous to its Leismer lease.
OPTI and its 50/50 joint venture partner Nexen Inc. now hold over
370 sections of land on three leases in the Athabasca oil sands
region.
"The Long Lake Project continues to move forward as we prepare for start-up within the next year," said Sid Dykstra, President and Chief Executive Officer of OPTI. "While in the short term we continue to experience upward pressures on construction costs, our focus remains on the successful completion of this large, long-life resource project expected to produce 60,000 barrels per day of PSC for 40 years."
FINANCIAL SUMMARY(i) -------------------- ------------------------------------------------------------------------- Three months Nine months ended ended Year ended September 30, September 30, December 31, 2006 2006 2005 ------------------------------------------------------------------------- Net earnings (loss) $ (1) $ 1 $ (2) ------------------------------------------------------------------------- Capital expenditures incurred(ii) 287 835 754 ------------------------------------------------------------------------- Working capital 52 52 134 ------------------------------------------------------------------------- Shareholders' equity $ 1,413 $ 1,413 $ 1,382 ------------------------------------------------------------------------- Common shares outstanding (basic)(iii) 170.8 170.8 156.8 ------------------------------------------------------------------------- (i) Tabular amounts in millions of dollars and shares as applicable. (ii) Non-cash additions are excluded. (iii) All common shares outstanding after giving effect to the 2:1 share split to shareholders of record on June 1, 2006. (iv) Common shares outstanding after giving effect to common share options and common share warrants would be 184.3 million.
LONG LAKE PHASE 1: Project Progress Continues ---------------------------------------------
Significant progress was made in the third quarter on the Long Lake Project. Engineering, the commercial drilling program and the module program are essentially complete. The vast majority of equipment and supplies for the Project are on-site. Construction is progressing with over 90 percent of the SAGD construction and approximately 60 percent of the Upgrader construction having been completed. Operations planning is well under way with over 75 percent of the combined operations staff already hired and focused on delivering a safe and reliable facility for the next 40 years.
At the end of the third quarter, over $3.4 billion had been incurred on the Project. The Project is being completed during a period of very high activity levels throughout Alberta that continues to place considerable upward pressure on the cost of all supplies and services. A review of anticipated costs to complete Phase 1 has indicated increased work hour estimates combined with higher than anticipated all-in construction costs, and has led the Project Owners to revise the estimated cost to complete Phase 1 of the Long Lake Project from $4.2 billion to $4.6 billion.
On the SAGD portion of the Project, overall site construction is approximately 90 percent complete. Turnover of the 81 well pairs, including the three pilot well pairs, to commercial operations has commenced with construction continuing on the central plant and cogeneration facilities. Due to the high degree of work completed to date, the workforce on the SAGD project is beginning to decrease from the peak and will continue to be reduced over the next two quarters. Mechanical completion should be achieved near year-end 2006 with first steam injection in the first quarter of 2007. Bitumen production is expected to ramp-up to peak rates over a 12-24 month period. The project to add additional steam capacity is ongoing with the expected date of completion remaining mid-2008.
Over 60 percent of Upgrader site construction was complete at the end of September. Schedule pressure is being experienced in some areas. The forecast start-up for the Upgrader is expected to be in the third quarter of 2007 with first synthetic volumes projected to commence in the fourth quarter of 2007. As previously announced, construction of the soot processing facilities is scheduled to be completed during the second quarter of 2008.
LONG LAKE PHASE 2: Planning advances ------------------------------------
OPTI and Nexen plan to apply for an additional 140,000 bbl/day of bitumen production to be developed in two phases on the southern portion of the Long Lake lease. It is expected the application will be filed later this year with approval anticipated prior to the end of 2007. Regulatory approval is already in place for a second 70,000 bbl/day phase of upgrading capacity.
Extensive planning is underway to identify ways to mitigate pressure on future project costs due to unprecedented levels of activity in Canada's oil sands and the global energy industry. Activities in 2007 are expected to be directed toward developing a definitive cost estimate, execution strategy and project schedule and expected on-stream dates based on a high level of engineering to provide sufficient information for potential sanctioning in early 2008.
ADDITIONAL EXPANSION Phases: Land acquired, evaluation continues ----------------------------------------------------------------
In the third quarter of 2006, OPTI and Nexen acquired an additional 32 sections of land contiguous to the Leismer lease. The Leismer lease is now comprised of 146 sections of land, more than twice the amount held at year end 2005. The joint venture partners now own over 370 sections of land at Long Lake, Leismer and Cottonwood.
Evaluation of last winter's core hole and seismic programs at the Long Lake, Leismer and Cottonwood leases continued in the third quarter with information provided to the independent resource evaluators. Plans for next winter's evaluation program are currently being refined and will be announced in conjunction with the approval of the 2007 capital budget, expected in December.
RESULTS FROM OPERATIONS ----------------------- (x) Project Expenditures
OPTI's primary activity is the construction of Phase 1 of the Long Lake Project. The estimated cost to complete the Project is $4.6 billion. This estimate includes project expenditures to complete Phase 1 including the previously announced facilities for additional steam capacity and soot processing. OPTI's share of these costs is $2.3 billion.
In addition to its interest in the Project, OPTI is continuing the development of future phases. The table below identifies incurred expenditures in the referenced periods for Phase 1 of the Long Lake Project, future phase development and other capital expenditures.
------------------------------------------------------------------------- Capital expenditures Three months Nine months ($ millions) ended ended Year ended September 30, September 30, December 31, 2006 2006 2005 ------------------------------------------------------------------------- Long Lake Project - Phase 1 Upgrader $ 135 $ 362 $ 368 SAGD 118 322 310 ------------------------------------------------------------------------- Total Long Lake Project - Phase 1 253 684 678 Other oil sands activities 15 117 56 Other capital expenditures 19 34 20 ------------------------------------------------------------------------- Total cash additions 287 835 754 Non-cash additions 11 21 11 ------------------------------------------------------------------------- Total capital expenditures $ 297 $ 856 $ 765 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the three months ended September 30, 2006, OPTI invested a total of $297 million. This was primarily comprised of Project expenditures that totaled $253 million for the quarter. These expenditures during the quarter focused on the continuation of on-site construction. To September 30, 2006, OPTI has committed $1.8 billion and incurred $1.7 billion in Project costs.
In addition, during the three month period ended September 30, 2006, OPTI invested $15 million in future phase development, $19 million in other capital expenditures and had $11 million of non-cash additions. Expenditures for other oil sands activities during the quarter relate to land acquisition, SAGD pilot operations, engineering costs and resource delineation. Other capital expenditures include corporate capital costs and $16 million of capitalized interest and standby charges in connection with debt facilities. The non-cash additions relate primarily to an unrealized hedging loss of $5 million, capital leases of $4 million and capitalized stock-based compensation.
(x) Operating Results
Interest income decreased to $3 million in the three month period ended September 30, 2006, from $4 million in the same period in 2005. For the nine months ended September 30, 2006, interest income decreased to $6 million from $12 million in 2005. Interest income is comprised of interest on cash, cash equivalents and short-term investments. It is affected by average balances of interest-bearing instruments and associated interest rates. The decrease is due to a reduction in average investment balances in 2006.
General and administrative expenses are unchanged at $2 million in the three month period ended September 30, 2006 and 2005. For the nine months ended September 30, 2006, general and administrative expenses increased to $7 million from $5 million in 2005. The increase in 2006 is due to increased levels of corporate staff and related services.
Amortization and accretion expense is $1 million for both of the three month periods ended September 30, 2006 and 2005. Amortization and accretion expense increased to $6 million in the nine month period ended September 30, 2006, from $3 million for the same period in 2005. The increase is due to the termination of the Company's Subordinated Debt facility during the second quarter of 2006 and the associated amortization of the remaining deferred financing charges. Other expenses that are consistent in each period relate to the amortization of deferred financing charges in relation to the Company's long-term debt. The deferred financing charges related to the Project Debt facility and Term Loan B ("TLB") facility will be amortized over the terms that expire in 2010 and 2013, respectively.
Capital taxes are $nil for the three month period ended September 30, 2006. Capital taxes decreased to $nil for the nine month period ended September 30, 2006 from an expense of $2 million for the same period in 2005. During 2006, federal legislation was enacted that provided for the elimination of the large corporation tax effective January 1, 2006. In the third quarter of 2006 there was a future tax expense of $nil, compared to an expense of $1 million for the same period in 2005. Future tax expense for the nine month period ended September 30, 2006 is a recovery of $8 million compared to an expense of $2 million in 2005. The recovery in future tax expense in 2006 is primarily due to a reduction in the applicable tax rate from 33.6 percent to 29.0 percent.
Summary Financial Information ($ million, except per share amounts) ------------------------------------------------------------------------- 2006 2005 2004 ------------------------------------------------------------------------- Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 ------------------------------------------------------------------------- Interest income $ 3 $ 2 $ 1 $ 2 $ 4 $ 4 $ 4 $ 5 ------------------------------------------------------------------------- Net earnings (loss) (1) 4 (2) (1) (1) (-) - (-) ------------------------------------------------------------------------- Earnings (loss) per share, basic and diluted (i) $ (-) $ 0.02 $(0.01) $(0.01) $ (-) $ (-) $ - $ (-) ------------------------------------------------------------------------- (i) All per share amounts reflect shares outstanding after giving effect to the 2:1 common share split for shareholders of record on June 1, 2006.
Liquidity and Capital Resources -------------------------------
During the three months ended September 30, 2006, OPTI's working capital decreased by $57 million from the prior quarter to $52 million and long-term debt increased by $250 million to $843 million. Capital expenditures of $287 million were primarily funded by the increase in long-term debt during the period. During the quarter, borrowings under the Project Debt facility increased by $94 million and borrowings under the TLB facility increased by $156 million. At September 30, 2006, the Company had a pre-funded account of $90 million which is reserved for interest payments until December 31, 2008 on the TLB facility.
At September 30, 2006, OPTI's financial resources included total working capital of $52 million and an undrawn amount of $559 million under the Project Debt facility. Working capital is comprised of cash and cash equivalents of $208 million and a non-cash working capital deficiency of $156 million.
As previously noted, the current cost estimate to complete Phase 1 is $4.6 billion, or $2.3 billion net to OPTI. The Project Debt facility is structured to allow borrowings so long as the remaining costs on the Project are not greater than the amount remaining on the facility, plus an allowable overrun provision of up to $200 million net to the Company's interest. With the increase in costs, the remaining costs are more than the amount available under the facility, but within the overrun provision. Therefore, future borrowings are permitted; however, incremental funding will be required within either 60 or 120 days to ensure remaining Project costs do not exceed the amount available under the facility. The Company expects to utilize the full 120 day period to execute the incremental funding during which time further borrowings could occur.
OPTI has been in discussion with a number of financial institutions with the objective of securing longer term debt to fund Phase 1 completion and future phase development in 2007. OPTI expects the transaction or transactions ("Proposed Debt Financing") to be completed prior to the end of 2006, with interim funding to allow ongoing access to the Project Debt facility. The purpose of the Proposed Debt Financing is to provide increased certainty with respect to Phase 1 funding and to provide sufficient funds to complete planned future phase activities to the planned date of Phase 2 sanctioning in early 2008.
OPTI's ability to complete the Proposed Debt financing is subject to execution risks. Although these factors may influence debt ratings, interest rates and covenants, OPTI does not expect this risk to impact the ultimate execution of the Proposed Debt Financing on terms acceptable to OPTI.
(x) Hedging
The Company completed an interest rate swap in July 2006. OPTI has fixed the interest rate for USD $225 million of its TLB debt at a rate of 5.56 percent plus a spread of 175 basis points until September 30, 2010.
(x) Share Capital
At September 30, 2006 and after giving effect to the 2:1 common share split to shareholders of record on June 1, 2006, the Company had 170,841,504 common shares, 3,120,750 common share warrants and 7,240,038 common share options outstanding. The common share options have a weighted average exercise price of $10.79 per share and each common share warrant entitles the holder to purchase two common shares at a price of $14.75 per share until November 30, 2008.
At September 30, 2006, including instruments where the option to exercise resides with the holder, common shares outstanding after giving effect to common share options and common share warrants is 184,323,042.
(x) Contractual Obligations and Commitments
The Company's share of the estimated costs to complete the Project, which includes costs for increased steam capacity and soot processing from January 1, 2004 until commencement of commercial operations in 2007, is $2.3 billion. Of this amount, $0.6 billion remains to be incurred. A portion of the costs in relation to the steam facilities will be incurred after start-up and in the first half of 2008. In connection with the Project and OPTI's other oil sands activities, OPTI's share of future commitments in connection with contracts and purchase orders was $149 million at September 30, 2006.
OPTI has $502 million outstanding at September 30, 2006, under its Term Loan B facility and $341 million under its Project Loan facility.
OPTI is a participant in two transportation agreements. Under these agreements, the pipeline operator is responsible for construction costs and execution. OPTI will not make toll payments under these agreements until 2007. However, OPTI has included costs with respect to future tolls during the initial contract term in its commitments. OPTI anticipates that the future tolls under these agreements will be funded by operating cash flow. Total commitments under these agreements are $159 million.
The following table shows OPTI's debt repayments, contractual obligations and commitments during the next five years and thereafter as at September 30, 2006.
------------------------------------------------------------------------- (less than) 1-3 3-5 5+ ($ millions) Total 1 year years years years ------------------------------------------------------------------------- Contracts and purchase orders $ 149 $ 149 $ - $ - $ - ------------------------------------------------------------------------- Long term debt(i) 843 - - 351 492 ------------------------------------------------------------------------- Capital lease 159 - 28 33 98 ------------------------------------------------------------------------- Total $ 1,151 $ 149 $ 28 $ 384 $ 590 ------------------------------------------------------------------------- (i) The commitment under long-term debt represents only scheduled principal repayments. In addition, the Company is contractually obligated for interest payments on borrowings under its long-term debt and standby charges in respect of undrawn amounts under these facilities. Third Quarter Conference Call ----------------------------- (x) Conference Call OPTI will hold a conference call at 6:30 a.m. MT (8:30 a.m. ET) on Wednesday, October 25, 2006 to review the Company's third quarter 2006 results as well as progress on the Long Lake Project and future phases. Sid Dykstra, President and Chief Executive Officer and George Crookshank, Chief Financial Officer will host the call. To listen to the conference call, please dial: (403) 410-9170 (Calgary or Alternate International) (866) 540-8136 (North American Toll-Free) (800) 8989-6323 (International Toll-Free)
Please reference the OPTI Canada conference call with Sid Dykstra when speaking with the Operator.
A replay of the call will be available until November 25, 2006, inclusive. To access the replay, call (416) 695-5800 and enter passcode 3200253, followed by the pound (number) sign.
This call will also be webcast and can be accessed on OPTI Canada's website in the Presentations section under "For Investors". Investors and others are invited to listen to the quarterly broadcast live over the Internet. The webcast will be available for replay at this address through November 25, 2006.
About OPTI
OPTI Canada Inc. is a Calgary, Alberta-based company focused on developing the fourth and next major integrated oil sands project in Canada, the Long Lake Project, in a 50/50 joint venture with Nexen Inc. The first phase of the Project consists of 72,000 barrels per day of SAGD (steam assisted gravity drainage) oil production integrated with an OPTI-operated upgrading facility, using OPTI's proprietary OrCrude(TM) process and commercially available hydrocracking and gasification. Through gasification, this configuration substantially reduces the exposure to and the need to purchase natural gas. The Project is expected to produce 58,500 bbl/d of products, primarily 39 degree API premium sweet crude with low sulphur content, making it a highly desirable refinery feedstock. OPTI's common shares trade on the Toronto Stock Exchange under the symbol OPC.
Information about OPTI is available at http://www.opticanada.com and additional information, including OPTI's current Annual Information Form, is available at www.sedar.com. Additional information regarding the Long Lake Project is available at http://www.longlake.ca.
Forward-Looking Statements
Certain statements contained herein are forward-looking statements, including statements relating to: OPTI's operations; anticipated financial performance; business prospects, expansion plans and strategies; OPTI's plans and expectations concerning the use and performance of the OrCrude(TM) Process and other related technologies; the cost, development and operation of the Long Lake Project and OPTI's relationship with Nexen Inc. Forward-looking information typically contains statements with words such as "anticipate," "estimate," "expect," "potential," "could" or similar words suggesting future outcomes. Readers are cautioned not to place undue reliance on forward-looking information because it is possible that expectations, predictions, forecasts, projections and other forms of forward-looking information will not be achieved by OPTI. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties. A change in any one of these factors could cause actual events or results to differ materially from those projected in the forward-looking information. Although OPTI believes that the expectations reflected in such forward-looking statements are reasonable, OPTI can give no assurance that such expectations will prove to be correct. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by OPTI and described in the forward-looking statements or information. The forward-looking statements are based on a number of assumptions which may prove to be incorrect. In addition to other assumptions identified herein, we have made assumptions regarding, among other things: market costs and other variables affecting operating costs of the Project; the ability of the Long Lake joint venture partners to obtain equipment, services and supplies, including labour, in a timely and cost-effective manner; the availability and costs of financing; oil prices and market price for the PSC output of the OrCrude(TM) Upgrader; foreign currency exchange rates and hedging risks; government regulations and royalty regimes; the degree of risk that governmental approvals may be delayed or withheld; other risks and uncertainties described elsewhere in this document or in OPTI's other filings with Canadian securities authorities.
Readers should be aware that the list of factors, risks and uncertainties set forth above are not exhaustive. Readers should refer to OPTI's current Annual Information Form, which is available at www.sedar.com, for a detailed discussion of these factors, risks and uncertainties. The forward-looking statements or information contained in this news release are made as of the date hereof and OPTI undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable laws or regulatory policies.
For further information
Alison Trollope, Investor Relations Manager, (403) 218-4705
George Crookshank, Chief Financial Officer, (403) 218-4710
Source: OPTI Canada Inc.
