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Oil sands at high oil prices

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17 March 2022

Oil sands at high oil prices

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

    • 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 10 images and tables including:

  • 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:

  • Document

    Oil sands at high oil prices.xlsx

    XLSX 580.86 KB

  • Document

    Oil sands at high oil prices

    PDF 1.31 MB