Oil sands cos losing up to $50 million a day as fires rage -analysts

Fri May 20, 2016 4:44pm EDT
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By Jessica Resnick-Ault

NEW YORK May 20 (Reuters) - Out-of-control wildfires that have consumed over a million acres of land in Canada's Alberta are costing oil companies as much as $50 million a day in lost production, according to analysts.

Alberta's oil producers curtailed production by May 5 as fires prompted the evacuation of Fort McMurray, a central production hub. By May 9, more than 1 million barrels of daily oil output had been halted.

"We estimate total daily pre-tax profit loss at $45 to $50 million," Barclays analyst Paul Cheng said in an email to Reuters.

For many companies, the shut-ins will translate directly to lower revenue in the second quarter, said Chris Feltin, an analyst at Macquarie Capital in Calgary.

"The big thing here is that business interruption insurance is unlikely to be claimed because the damage isn't direct to their facilities, so this is something that is going to roll through on a revenue and cash-flow basis on the second quarter," Feltin said.

There is no guarantee on how soon production will return to normal.

Both more expensive light synthetic crude and cheaper heavy bitumen from oil sands production have been shut in, with a total of more than 1.2 million barrels of production offline, said Feltin. "That's a fair amount of production for both crude slates that is offline."

Syncrude trades at a premium to benchmark U.S. crude futures, while Western Canadian Select crude trades at a discount, and bitumen is offered for even less.   Continued...