ConocoPhillips revises down over 1 billion bbls of oil sands reserves

[CALGARY] ConocoPhillips has revised down over a billion barrels of oil sands reserves because of low global crude prices, a company filing showed on Tuesday, the latest sign that some of Canada's vast hydrocarbon potential may be left untapped.

The US oil major said developed and undeveloped reserves of bitumen - the heavy viscous oil found in northern Alberta's remote oil sands - totalled 1.2 billion barrels at the end of 2016, down from 2.4 billion barrels at the end of 2015.

The oil sands have some of the highest full-cycle breakeven costs in the world, with new thermal projects needing US crude prices around US$60 a barrel. Crude futures settled at US$54.33 a barrel on Tuesday.

The US Securities Exchange Commission (SEC) document provides a detailed breakdown of the global reserves cut Conoco announced in quarterly results in early February, when it debooked 1.75 billion barrels of oil equivalent of reserves.

Al Hirshberg, Conoco's executive vice president for production, drilling and projects, told investors on the quarterly call the company expects to rebook the reserves if current prices hold.

Likewise Martin King, an analyst with GMP FirstEnergy in Calgary, said the debooking likely had more to do with SEC rules requiring companies to evaluate economic reserves at year-end.

But the fact that the oil sands make up 70 per cent of the reduction underlines how much of Canada's resources are uneconomic in a weaker oil environment. "They (the oil sands) are at the upper end of the cost curve," said Judith Dwarkin, chief economist at RS Energy Group in Calgary. "It may or may not speak to future similar events from other producers." Calgary-based Imperial Oil Ltd, which is majority-owned by Exxon Mobil Corp, debooked 2.6 billion barrels of reserves in January.

ConocoPhillips made the reserve reductions at the Surmont, Foster Creek, Christina Lake and Narrow Lakes projects.

Surmont is operated by ConocoPhillips and a joint venture with Total E&P Canada, a unit of Total SA, and the other three are joint ventures run by Cenovus Energy Inc .

Total also debooked undeveloped reserves at Surmont, according to SEC filings. But Cenovus, which reports to Canadian securities authorities, said its total proved reserves including non-oil sands operations rose 5 per cent in 2016 versus a year earlier.

Cenovus spokesman Reg Curren said the company assumed different rules relating to reserves reporting in Canada and the United States were behind the difference.


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