Imperial reworking Kearl oilsands project

Canadian energy giant Imperial Oil Ltd. said Monday it is retooling its Kearl oilsands mining project in order to avoid duplicating work in future phases.

CALGARY — Canadian energy giant Imperial Oil Ltd. said Monday it is retooling its Kearl oilsands mining project in order to avoid duplicating work in future phases.

The Calgary-based integrated energy firm (TSX:IMO) made the announcement as it reported its third-quarter earnings dropped 24 per cent because of pipeline problems, maintenance work and currency swings.

Construction on Kearl’s first 110,000-barrel-per-day phase is underway and expected to come on stream around the end of 2012.

Instead of using an identical mould to build the second and third phases, Imperial will look at ways to boost output from the first one, said company spokesman Pius Rolheiser.

“It’s a reconfigured approach that will help us get to the same end point in a better way,” he said.

The changes mean spending on the $8-billion project will take place earlier than would have otherwise been the case, but that doesn’t necessarily mean a higher overall price tag.

The production profile and the total resource developed is relatively unchanged.

Meanwhile, Imperial said its quarterly profit dropped to $418 million or 49 cents per share from the $547 million or 64 cents per share recorded during the same 2009 period.

Imperial’s revenues rose to $5.85 billion from $5.56 billion.

Analysts polled by Thomson Reuters were on average expecting earnings of 51 cents per share.

“Although third-quarter earnings were lower, underlying business operations remained strong across all segments of the company,” the company said in a release.

Over the summer, there were two leaks on pipelines operated by a U.S. affiliate of Enbridge Inc. (TSX:ENB), the biggest shipper of Canadian oil. As a result, the flow of oilsands crude into the U.S. Midwest market was reduced during the quarter.

Imperial estimated the pipeline problems squeezed third-quarter earnings by about $60 million.

Other major oilsands players were also expected to feel the impact. Last week oilsands producer Cenovus Energy Inc. (TSX:CVE) said the Enbridge pipeline outages led to a $50-million cash-flow hit.

Planned maintenance work at Syncrude — the world’s largest oilsands mine, in which Imperial has a 25 per cent stake — reduced earnings by about $90 million.

And a stronger Canadian dollar dealt a $70-million blow to Imperial’s bottom line.

Imperial, majority owned by Texas-based ExxonMobil Corp. (NYSE:XOM), has vast operations in Alberta’s oilsands, refineries in Alberta and Ontario and a chain of about 2,500 Esso-branded fuel retail outlets across Canada.

In addition to Syncrude and Kearl, Imperial’s oilsands presence also includes vast steam-driven operations at Cold Lake. The company is planning to build a 30,000-per-day expansion there called Nabiye.

The company is the lead partner on the Mackenzie Gas Project, a long-stalled proposal to connect natural gas fields in the Northwest Territories to southern markets.

The National Energy Board’s final decision on the project, originally expected in September, has been delayed by a few months. Even so, Imperial has said gas will not flow for several years.

Imperial shares closed down a nickel to $39.17 on the Toronto Stock Exchange Monday.

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