(Adds CEO comments on Syncrude coker outages, reliability issues)
By Nia Williams
CALGARY, Alberta, April 30 (Reuters) - Solving reliability issues at the Syncrude mining project in northern Alberta will be more of a marathon than a sprint, the chief executive of Canadian Oil Sands Ltd said on Wednesday, in the wake of another unplanned coker outage.
The Syncrude project can in theory produce about 350,000 barrels per day but has a history of unplanned shutdowns due to equipment malfunctions, particularly at its complex upgraders, which convert tar-like bitumen stripped from the oil sands into refinery-ready synthetic crude.
Last week Syncrude shut one of its two upgraders for unplanned maintenance following a valve leak repair. Canadian Oil Sands, which owns the largest stake in the project, was forced to lower the annual production forecast to between 95 and 105 million barrels and shares in the company promptly dropped around 6 percent.
Speaking after the company’s annual general meeting, Canadian Oil Sands Chief Executive Officer Ryan Kubik said Syncrude had no more reliability problems than other oil sands mining companies, but it was one of the issues management was focused on.
He said the expertise of Imperial Oil, which owns a 25 percent stake in Syncrude, and Imperial’s majority owner ExxonMobil Corp would help improve reliability at the project but progress would take time.
“The methodical approach that Imperial and Exxon are bringing in will really help us attack that. It’s a bit of a marathon as opposed to a sprint but long-term we think that’s the right strategy and we are starting to see some results,” Kubik said.
Coker 8-1, which was shut down on April 24, will be out of action for approximately 30 days although the outage could last longer as it will overlap with the planned shutdown on Coker 8-2. Kubik said that had been factored into production guidance.
“When you are doing both at the same time the complexity increases, which increases the risk of an extension,” he said.
Canadian Oil Sands Ltd reported first-quarter net income falling to C$172 million, or 35 Canadian cents per share, from C$177 million, or 37 Canadian cents, in the first quarter of 2013.
Analysts, on average, expected it to report net income of 49 Canadian cents per share, according to Thomson Reuters I/B/E/S.
The company said its net income for the quarter was affected by an increase in deferred tax expense and a larger unrealized foreign exchange loss on long-term debt.
That offset higher sales volumes, which averaged 105,300 barrels per day, up 10 percent from 95,700 bpd in the year-prior quarter when unplanned extraction and upgrader outages cut production.
Operating costs averaged C$445 million, compared with C$355 million in the first quarter of 2013, as a result of higher natural gas prices, the timing of planned maintenance and increased drilling activity.
The company said its Mildred Lake mine train replacement project at Syncrude is 85 percent complete and the estimated cost had dropped to $3.9 billion from $4.2 billion.
Canadian Oil Sands’ cash flow, a measure of its ability to pay for new projects, rose 30 percent to C$357 million, or 74 Canadian cents, from C$275 million, or 57 Canadian cents in the same period a year earlier.
Canadian Oil Sands shares closed at C$23.76 on the Toronto Stock Exchange. (Additional reporting by Scott Haggett; Editing by Bernard Orr and Cynthia Osterman)