As the price of oil hikes onward, the United States is forecasted in a September report by Goldman Sachs to hit an all-time high crude oil production of 10.9 million barrels of oil per day (B/D) by 2016, up from its current production of 8.3 million. In comparison to the United States, for 2010, Canada reported oil production of 2.8 million B/D, with forecasts increasing this to 3.5 million B/D by 2015, to 4.2 million B/D by 2020 and to 4.7 million B/D by 2025 with the majority of this coming from the Alberta oil sands. It is remarkable to note that a country with about the tenth the population size is producing about 25% of North America's oil production.
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With forecasts that oil prices will hit $185 per barrel by 2020, the requirement to increase domestic production is playing an ever increasing role in American energy policy. It is fortunate then that Canada is the largest supplier of oil to the U.S., exporting 2.16 million B/D year to date. Saudi Arabia and Mexico, on the other hand supply 1.18 and 1.11 million daily barrels, respectively so far for 2011. With the growing production out of the oil sands, Canada will be playing a larger role in supplying America's energy needs. Taking a look at the largest oil sands providers, investors can see where the opportunity lies to profit from the increase in oil prices. (For related reading, see What Determines Oil Prices?)
Canada's largest energy company by market cap, Suncor (NYSE:SU), holds approximately 5.9 million net barrels of oil equivalent (BOE) in 2P (proven + probable) resources as of 2010. Oil sands production is expected to increase at a compounded annual growth rate (CAGR) of 10% over the next nine years. Its production for the first nine months of 2011 has been 297,400 B/D, along with about 364 million cubic feet (Mcf) of natural gas per day. For the third quarter, Suncor reported $1.29 billion in net earnings, up 5% from $1.22 billion in the third quarter of 2010. Revenue came in at $10.68 billion, up 39% from the year ago quarter.
Not quite as big as Suncor, Cenovus Energy (NYSE:CVE) in comparison has about 2.4 billion BOE in 2P reserves, or about half of Suncor's. Producing about 131,000 B/D of crude oil and natural gas liquids for the first nine months of 2011, as well as 655 Mcf of natural gas per day. It might not be as big but Cenovus is growing fast, translating $3.86 billion in revenues for the third quarter of 2011 to net profits of $510 million, up 30 and 73% respectively from the same period a year ago.
Canadian Natural Resources Limited
Canadian Natural Resources Limited (NYSE:CNQ) had 2P reserves of 6.9 billion BOE as of 2010. In 2011, CNQ produced 370,000 B/D and 1,249 Mcf of natural gas production per day, with goals to increase its BOE production by 17% by the end of 2012. The top line came in at $3.29 billion, with the bottom line bringing in $836 million, up 40% from $596 million the same quarter a year ago. (For related reading, see A Snapshot Of Canadian Natural Resources Limited.)
Another major Canadian oil producer is Imperial Oil (AMEX:IMO) with over 5.8 billion BOE of 2P reserves. With current production of 251,000 B/D for 2011, and 259 Mcf of natural gas, Imperial Oil proves to be a major player in the oil sands sector. The top line growth came in at 36%, bringing in $7.9 billion in revenue over the year ago quarter. Net income was $859 million, or 105% higher than it was a year ago.
The Bottom Line
Canada has the second highest oil reserves only to Saudi Arabia. With the growing demand for oil and the ever increasing oil prices, investors should take a look at these companies with operations in the Canadian oil sands.
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