Insight
Oil sands at high oil prices
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*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
Report summary
With the Russia/Ukraine conflict putting extreme pressure on global commodities, Canada’s oil sands sector is reaching peak production levels at a unique time. Production is now past the three million barrel per day mark. Using Lens Valuations, we can quickly run price scenarios across an entire sector or region. A 2022 price of WTI US$110/bbl means annual oil sands cash flows to companies after maintenance costs, operating costs, royalties and taxes would total US$56 billion. That is a 2.4x higher than if prices averaged the US$70/bbl WTI we expected at the start of the year. Government share in royalties and taxes also benefit, making a 3x jump to US$41 billion. It is unlikely the higher cash generation is re-invested into growth. Instead, funds will be earmarked for future carbon reduction projects, further consolidating deals and continued shareholder payments.
Table of contents
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Executive summary
- Cash flow outcomes from higher prices in 2022
- Corporate share
- Government share
- What does development look like in an upside scenario?
- Where will the cash flow go to?
- 1. Investors hold the reins and are rewarding cash return strategies
- 2. Cdn$70 billion needed for emissions reductions
- 3. A final use for cash will be consolidation
Tables and charts
This report includes the following images and tables:
- 2022 cash generated at various WTI prices
- Drilldown: 2022 cash generated in US$ millions with a US$90/bbl WTI price
- Price triggers for pre- and post-payout royalty rates
- Example project royalty rates over time
- Royalty rates in 2020 versus 2022
- Capital investment over time
- Annual growth capex vs. prevailing WTI price
- Share price performance for oil sands, Majors and US peers
- CNRL free cash flow allocation policy
- Majors and ConocoPhillips' oil sands valuations at different long term prices
What's included
This report contains:
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