OPTI Canada Inc. (OPTI) has announced the Company's financial and operating results for the second quarter ended June 30, 2008.
The Long Lake Project (the Project) will be the first to use OPTI's integrated OrCrude(TM) process. This proprietary process is designed to position OPTI as a low-cost producer in the oil sands by substantially reducing our reliance on natural gas, while at the same time producing a high quality, sweet synthetic crude (PSC(TM)). Upon achieving full design capacity, the Project is expected to produce approximately 60,000 barrels per day (bbl/d) of PSC(TM) (30,000 net to OPTI) for over 40 years. OPTI is also advancing its future growth via a multi-stage expansion strategy to reach 180,000 bbl/d of PSC(TM) production capacity net to OPTI.
Key recent developments include:
- Continued SAGD production ramp-up with declining steam oil ratio (SOR) for producing wells;
- Completion of approximately 80 percent of Upgrader commissioning in preparation for start-up late in the third quarter of 2008 and production of first PSC(TM);
- Establishment of a new first lien revolving debt facility totaling $150 million;
- Advancing future phases of growth including the advancement of detailed upfront engineering for Phase 2; and
- Two new members appointed to the Board of Directors and changes to senior management.
"With encouraging reservoir results from our SAGD operations and our Upgrader nearing operational readiness, we are on-track for start-up of the Long Lake Project, Canada's fourth integrated oil sands project," said Sid Dykstra, President and Chief Executive Officer of OPTI. "We are looking forward to first oil from our OPTI-operated Upgrader and are well positioned for substantial future growth."
Advancing Future Phases
OPTI is well positioned for growth with sufficient current resources to support production volumes of 180,000 bbl/d net to OPTI. We continue to advance up-front engineering and planning for the Phase 2 SAGD and upgrader, with the potential to sanction the integrated project in late 2008. Phase 2 upgrader regulatory approval has already been received. Sanctioning will be dependent on multiple factors including Phase 1 ramp-up performance, regulatory approval for the SAGD portion of the Project, the capital cost estimate, and clarity on regulations pertaining to carbon dioxide (CO(2)) and
royalties.
The Phase 2 upgrader will be located immediately adjacent to the Phase 1 Upgrader which will provide certain efficiencies and optimization opportunities. The configuration will contain the same main processing units, enabling us to benefit from lessons learned during the construction and operation of Phase 1, but with some adjustments to more readily provide the potential for future CO(2) capture.
Greenhouse gas (GHG) emissions, particularly CO(2), continue to be a key issue facing oil sands developers. The March 2008 policy papers from the federal government provided some clarification on the initial 2007 policy framework regarding the requirements to reduce GHG emissions. The policy papers suggest that Phase 1 of Long Lake operations will be required to reduce its emissions by two percent annually from a baseline to be established after three years of operations, and by 2018 will need to meet a cleaner-fuel standard based on an assumed use of natural gas.
Future phases of development of the Company's resources are expected to be required to meet targets set at levels of emissions at facilities that employ Carbon Capture and Storage (CCS) technology. The federal government is proposing a number of alternative means of meeting reduction targets, including the implementation of CCS technology, the option to make payments into a technology fund, and an emissions and offset trading system. OPTI is well positioned to meet these requirements as our proprietary OrCrude(TM) technology with gasification facilitates the capture of CO(2) with the addition of a shift reactor.
We remain committed to applying innovative and realistic approaches to meet the goals set by government. We see CCS as being an opportunity to reduce emissions from the oil sands, and are currently working with three complementary organizations to help address this issue. We are collaborating with the Alberta Energy Research Institute (AERI) to pursue opportunities for long-term CO(2) capture. We are also members of two Canadian consortiums investigating CCS; the Integrated CO(2) Network (ICO2N), studying transportation and sequestration of CO(2) and the Alberta Saline Aquifer Project (ASAP), organized to identify deep saline water reservoirs for safe and reliable long-term storage. Recently, the Government of Alberta announced a commitment to invest in CCS development, in conjunction with industry, as part of its climate change action plan. We believe this announcement demonstrates that the provincial government is committed to carbon sequestration as one of the key ways to manage long term CO(2) reduction commitments.
Corporate Update
OPTI also announces the appointment of two additional directors and changes in senior management.
Mr. Bruce Waterman has been appointed as director. Mr. Waterman is the Senior Vice President, Finance and Chief Financial Officer of Agrium Inc. He joined Agrium in 2000 and has more than 30 years experience as a financial executive. Prior to joining Agrium, Mr. Waterman was the Vice President and Chief Financial Officer of Talisman Energy Inc. Mr. Waterman holds a Bachelor of Commerce from Queen's University and is a Chartered Accountant.
Ms. Edythe (Dee) Marcoux has been appointed as director. Ms. Marcoux is a retired executive from the oil industry with extensive experience with several major oil and gas companies including Suncor Inc. She was a consultant to Ensyn Group Inc. a heavy oil upgrading technology company and is currently a director of Sherritt International Corporation and SNC-Lavalin. Ms. Marcoux holds an engineering degree, a Masters of Business Administration and an honourary Ph.D., all from Queen's University.
James Stanford, Chairman of OPTI, noted: "We are very pleased to welcome Mr. Waterman and Ms. Marcoux to OPTI's Board. They bring extensive oil sands and large project experience as well as broad business and financial expertise."
Mr. Bill King has been appointed as Vice President of Major Projects. In this capacity Mr. King will have overall responsibility for development and execution of major projects through design, procurement and construction currently focused on Phase 2. He joined OPTI in mid 2004 and most recently held the role of Phase 2 Project Director. Previously he worked with ConocoPhillips and Gulf Canada and has extensive experience on international onshore and offshore construction projects. Mr. King holds a B.Sc. in Chemical Engineering from the University of Alberta.
Mr. David Schleen has been appointed Director, Project Development, responsible for managing the development of future phases through conceptual development and initial planning. He joined OPTI in mid 2002 and most recently was Vice President of Major Projects and prior to that Project Director for Phase 1.
Mr. Jamey Fitzgibbon, OPTI's Vice President, Resource Development has resigned to pursue a new opportunity.
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