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$70 billion needed for emissions reductions
- 3. A final use for cash will be consolidation
Tables and charts
This report includes the following images and tables:
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2022 cash generated at various WTI pricesDrilldown: 2022 cash generated in US$ millions with a US$90/bbl WTI pricePrice triggers for pre- and post-payout royalty rates
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Example project royalty rates over timeRoyalty rates in 2020 versus 2022Capital investment over timeAnnual growth capex vs. prevailing WTI priceShare price performance for oil sands, Majors and US peersCNRL free cash flow allocation policyMajors and ConocoPhillips' oil sands valuations at different long term prices
What's included
This report contains:
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