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How Canada's oil sands transformed into one of North America's lowest-cost energy producers

How Canada's oil sands transformed into one of North America's lowest-cost energy producers

Global News16-07-2025
Giant shovels, driverless trucks and a dog-like robot have all helped Canada's oil sands companies including Imperial Oil and Suncor become some of North America's lowest-cost oil producers, driving down overheads even as the worst inflation in a generation pushed U.S. shale costs up.
As the global oil industry enters a downturn due to economic uncertainty related to U.S. tariffs policy and OPEC+ pumping more barrels, Canada's oil sands industry finds itself in a position of strength.
In the years following the oil price crash of 2014-15, international oil majors including BP, Chevron and Total sold their interests in Canadian oil sands.
At the time, they classified the Canadian operations as among their more expensive, and therefore less profitable, projects worldwide.
They directed their capital to cheaper oil production and favored U.S. shale for its quicker drilling time and returns.
Since then, new technology and cost-cutting efforts have driven meaningful improvement in the industry's competitiveness that make oil sands among the cheapest producers, according to a dozen industry insiders and a Reuters analysis of the latest U.S. and Canadian company earnings.
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While U.S. shale companies are responding to this year's oil price downturn by dropping rigs, slashing capital spending and laying off workers, the oil sands' position of strength means Canadian companies have made virtually no changes to their previously announced production or spending plans.
Some Canadian politicians are now calling for a new crude pipeline from Alberta to the Pacific coast, as part of a broader effort to strengthen the country's economy in the face of U.S. tariff threats.
1:33
As global oil prices plunge, Alberta's energy sector prepares
The lower crude prices this year have little impact on the Canadian oil sector, Cenovus CEO Jon McKenzie said in an interview earlier this year. 'This is an industry that has become much more resilient through time,' he said.
In one example, two four-legged robots— each nicknamed Spot because of their dog-like appearance — prowl Imperial's vast 45-year-old Cold Lake operation in Alberta, conducting routine equipment inspections and maintenance such as heat exchanger optimizations, and oil/water tank interface monitoring.
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The Spots free up human workers for other work and save Imperial $30 million (Cdn) per year, the company said.
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Exxon-owned Imperial and its competitor Suncor have also switched to autonomous mining vehicles, eliminating the need to hire drivers to transport oil sands ore.
The switch has improved oil output productivity at Imperial's Kearl oil sands mine by 20 per cent since 2023, the company said.
Suncor operates a 900-tonne truck at its Fort Hills operation north of Fort McMurray, Alberta, which the company says is the world's largest hydraulic mining shovel.
Suncor CEO Rich Kruger said the shovel's larger bucket and more powerful digging force deliver faster ore loading and less spillage.
Oil sands producers have also made improvements in equipment reliability and performance.
At Kearl, for example, Imperial has reduced expenses related to turnarounds — an industry term for the costly periods of required maintenance that often involve temporarily shutting down production — by $100 million (Cdn) annually since 2021.
The company cut the time between turnarounds from 12 to 24 months in 2024 and aims to extend that interval to 48 months in future.
Suncor credits efforts including standardizing maintenance practices across mines and improving management of site water to get more production out of existing assets for contributing to the company's $7 (U.S.) per barrel reduction in its West Texas Intermediate (WTI) break-even price in 2024 to $42.90.
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This long-term focus on cost-cutting means Canada's five biggest oil sands companies can break even — and still maintain their dividends — at WTI prices between $43.10 and $40.85, according to a Bank of Montreal analysis for Reuters.
That means oil sands producers have lowered their overall costs by approximately $10 a barrel in about seven years. Oil sands had an average break-even price of $51.80 per barrel between 2017 and 2019, according to BMO.
In contrast, a recent Dallas Federal Reserve survey of over 100 oil and gas companies in Texas, New Mexico and Louisiana found that shale oil producers need a WTI oil price of $65 per barrel on average to profitably drill.
Back in 2017-2019, U.S. shale producers had a break-even price of between $50 and $52 per barrel.
1:56
Dramatic crash in global oil prices–Here's why Canada is watching closely
Part of the reason that the oil sands industry has become so cost competitive is the nature of the extraction process.
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Producing the thick, sticky oil that is found in the sands of Alberta is in some locations more akin to mining than oil drilling.
Where the oil is very close to the surface, companies operate massive mines, scraping up huge volumes of sand and clay and then filtering out the oil.
When the oil is deeper, companies inject steam underground to loosen the deposits and then use a drilling process.
An oil sands mine has big initial start-up costs but once it is operational, it can run for decades with very low production decline rates. Canadian Natural Resources CNQ.TO, for example, at the end of 2024 had proved and probable reserves amounting to 20.1 billion barrels of oil equivalent in its portfolio, giving its oil sands mining and upgrading assets a remaining reserve lifespan of 43 years.
The company's Horizon oil sands mine has been producing since 2009.
Shale oil wells, by contrast, have low start up costs. Oil output from the wells, however, begins to decline within months.
Prices have begun to climb because after years of heavy drilling in the top shale fields, the most productive areas have been exhausted. Drillers are moving onto secondary areas, so they have to drill more wells to achieve the same output and that has driven up costs.
Canadian oil sands companies have also paid down debt in the past five years, allowing them to reallocate profits away from shoring up their balance sheets and towards rewarding shareholders with dividends and buybacks.
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1:54
Can Canada really build another oil pipeline?
According to the Bank of Montreal, oil sands producers Canadian Natural Resources, Suncor, Cenovus, Imperial Oil and MEG Energy MEG.TO currently have combined net debt, excluding lease liabilities, of $33.9 billion (Cdn) after paying down a combined total of almost $22 billion in debt between 2021 and 2024.
As returns grow, Canadian oil sands producers are an increasingly attractive investment for those looking to make money from the energy industry, said Kevin Burkett, portfolio manager with Vancouver-based Burkett Asset Management.
'(Canada's oil sands) are not geopolitically risky, and they have some very appealing characteristics around productivity and costs,' said Burkett, who has shares of Canadian Natural Resources and Cenovus in his portfolio.
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WINNIPEG, MB, July 24, 2025 /CNW/ - Winpak Ltd. (WPK) today reports consolidated results in US dollars for the second quarter of 2025, which ended on June 29, 2025. Winpak Ltd. manufactures and distributes high-quality packaging materials and related packaging machines. The Company's products are used primarily for the packaging of perishable foods, beverages and in healthcare applications. 1 EBITDA is not a recognized measure under IFRS Accounting Standards (IFRS). Management believes that in addition to net income, this measure provides useful supplemental information to investors including an indication of cash available for distribution prior to debt service, capital expenditures, payment of lease liabilities and income taxes. Investors should be cautioned, however, that this measure should not be construed as an alternative to net income, determined in accordance with IFRS, as an indicator of the Company's performance. 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Unless otherwise required by applicable securities law, Winpak disclaims any intention or obligation to publicly update or revise this information, whether as a result of new information, future events or otherwise. The Company cautions investors not to place undue reliance upon forward-looking statements. Financial Performance Net income attributable to equity holders of the Company (Earnings) for the second quarter of 2025 of $30.2 million declined by 22.2 percent from the $38.8 million recorded in the corresponding quarter in 2024. The deterioration in gross profit was a key factor, lowering Earnings by $6.6 million. In addition, net finance income led to a contraction in Earnings of $2.4 million. Furthermore, operating expenses subtracted $2.1 million from Earnings. Conversely, foreign exchange elevated Earnings by $2.3 million. In combination, all other factors raised Earnings by $0.2 million. 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Market expectations are that overall resin and foil prices will be relatively stable for the balance of the year. The Company is optimistic that the majority of the foil import tariffs will be passed along to customers. Going forward, the additional manufacturing costs relating to waste and quality should be curtailed significantly. Winpak expects gross profit margins for the second half of 2025 to be within the range of 30 to 32 percent. Capital expenditures of approximately $100 to $110 million are forecast for 2025, highlighted by the completion of the extensive expansion of the Winnipeg, Manitoba modified atmosphere packaging facility. Concurrently, Winpak will assess prospective acquisition opportunities that align strategically with the Company's core strengths, especially those that are focused on medical and pharmaceutical applications. Winpak Ltd. These interim condensed consolidated financial statements have not been audited or reviewed by the Company's independent external auditors, KPMG LLP. For a complete set of notes to the condensed consolidated financial statements, refer to or the Company's website, Winpak Ltd. Condensed Consolidated Statements of Income (thousands of US dollars, except per share amounts) (unaudited) Quarter Ended Year-To-Date Ended June 29 June 30 June 29 June 30 2025 2024 2025 2024 Revenue 272,800 283,496 557,602 560,279 Cost of sales (192,594) (191,431) (388,851) (382,022) Gross profit 80,206 92,065 168,751 178,257 Sales, marketing and distribution expenses (23,992) (24,418) (48,315) (49,067) General and administrative expenses (13,646) (12,414) (26,235) (25,134) Research and technical expenses (5,764) (5,435) (11,342) (10,731) Pre-production expenses (127) - (280) - Other income (expenses) 1,056 (1,730) (312) (2,009) Income from operations 37,733 48,068 82,267 91,316 Finance income 3,754 7,094 7,889 14,628 Finance expense (1,074) (1,162) (2,449) (2,522) Income before income taxes 40,413 54,000 87,707 103,422 Income tax expense (10,474) (14,981) (23,323) (28,628) Net income for the period 29,939 39,019 64,384 74,794 Attributable to: Equity holders of the Company 30,205 38,825 64,781 74,347 Non-controlling interests (266) 194 (397) 447 29,939 39,019 64,384 74,794 Basic and diluted earnings per share - cents 49 61 105 116 Condensed Consolidated Statements of Comprehensive Income (thousands of US dollars) (unaudited) Quarter Ended Year-To-Date Ended June 29 June 30 June 29 June 30 2025 2024 2025 2024 Net income for the period 29,939 39,019 64,384 74,794 Items that will not be reclassified to the statements of income: Cash flow hedge (losses) gains recognized - (354) 57 (1,160) Cash flow hedge losses transferred to property, plant and equipment - 115 378 64 - (239) 435 (1,096) Items that are or may be reclassified subsequently to the statements of income: Cash flow hedge gains (losses) recognized 2,540 (508) 2,832 (1,563) Cash flow hedge losses transferred to the statements of income 734 344 1,580 352 Income tax effect (876) 44 (1,181) 324 2,398 (120) 3,231 (887) Other comprehensive income (loss) for the period - net of income tax 2,398 (359) 3,666 (1,983) Comprehensive income for the period 32,337 38,660 68,050 72,811 Attributable to: Equity holders of the Company 32,603 38,466 68,447 72,364 Non-controlling interests (266) 194 (397) 447 32,337 38,660 68,050 72,811 Winpak Ltd. Condensed Consolidated Statements of Changes in Equity (thousands of US dollars) (unaudited) Attributable to equity holders of the Company Non- Share Retained controlling capital Reserves earnings Total interests Total equity Balance at January 1, 2024 29,195 1,361 1,319,491 1,350,047 33,602 1,383,649 Comprehensive (loss) income for the period Cash flow hedge losses, net of tax - (2,305) - (2,305) - (2,305) Cash flow hedge losses transferred to the statements of income, net of tax - 258 - 258 - 258 Cash flow hedge losses transferred to property, plant and equipment - 64 - 64 - 64 Other comprehensive loss - (1,983) - (1,983) - (1,983) Net income for the period - - 74,347 74,347 447 74,794 Comprehensive (loss) income for the period - (1,983) 74,347 72,364 447 72,811 Dividends - - (2,818) (2,818) - (2,818) Repurchase of common shares (876) - (63,250) (64,126) - (64,126) Balance at June 30, 2024 28,319 (622) 1,327,770 1,355,467 34,049 1,389,516 Balance at December 30, 2024 27,735 (3,174) 1,224,097 1,248,658 35,216 1,283,874 Comprehensive income (loss) for the period Cash flow hedge gains, net of tax - 2,131 - 2,131 - 2,131 Cash flow hedge losses transferred to the statements of income, net of tax - 1,157 - 1,157 - 1,157 Cash flow hedge losses transferred to property, plant and equipment - 378 - 378 - 378 Other comprehensive income - 3,666 - 3,666 - 3,666 Net income (loss) for the period - - 64,781 64,781 (397) 64,384 Comprehensive income (loss) for the period - 3,666 64,781 68,447 (397) 68,050 Dividends - - (4,400) (4,400) - (4,400) Repurchase of common shares (320) - (20,106) (20,426) - (20,426) Balance at June 29, 2025 27,415 492 1,264,372 1,292,279 34,819 1,327,098 Winpak Ltd. Condensed Consolidated Statements of Cash Flows (thousands of US dollars) (unaudited) Quarter Ended Year-To-Date Ended June 29 June 30 June 29 June 30 2025 2024 2025 2024 Cash provided by (used in): Operating activities: Net income for the period 29,939 39,019 64,384 74,794 Items not involving cash: Depreciation 13,507 13,086 27,193 25,766 Amortization - deferred income (499) (426) (965) (844) Amortization - intangible assets 346 387 696 778 Employee defined benefit plan expenses 676 697 1,357 1,356 Net finance income (2,680) (5,932) (5,440) (12,106) Income tax expense 10,474 14,981 23,323 28,628 Other (949) (652) (1,311) (1,017) Cash flow from operating activities before the following 50,814 61,160 109,237 117,355 Change in working capital: Trade and other receivables 5,747 (12,509) 6,801 (7,131) Inventories (10,153) (9,951) (20,335) (7,320) Prepaid expenses (346) 1,754 (2,879) 159 Trade payables and other liabilities 2,443 (1,180) (5,140) 10,995 Contract liabilities 370 391 (181) (528) Employee defined benefit plan contributions (1,220) (19) (1,238) (1,174) Income tax paid (15,921) (23,803) (30,900) (34,598) Interest received 3,637 6,686 7,443 14,078 Interest paid (973) (1,062) (2,204) (2,328) Net cash from operating activities 34,398 21,467 60,604 89,508 Investing activities: Acquisition of property, plant and equipment - net (26,537) (27,086) (45,934) (74,429) Acquisition of intangible assets (151) (9) (419) (32) (26,688) (27,095) (46,353) (74,461) Financing activities: Payment of lease liabilities (509) (402) (911) (799) Dividends paid (2,155) (1,436) (135,399) (2,907) Repurchase of common shares (5,474) (56,567) (19,172) (62,878) (8,138) (58,405) (155,482) (66,584) Change in cash and cash equivalents (428) (64,033) (141,231) (51,537) Cash and cash equivalents, beginning of period 356,458 554,366 497,261 541,870 Cash and cash equivalents, end of period 356,030 490,333 356,030 490,333 SOURCE Winpak Ltd.

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