Imperial put its 88,000-b/d Dartmouth refinery up for sale last May due to poor refining economics, but failed to find a buyer. It announced its plan to convert the refinery to an oil products terminal in June.
The Dartmouth refinery, which began production in 1918, produced a wide range of petroleum products, including gasoline, aviation fuel, diesel, home heating fuel, marine fuel, heavy fuel oil and asphalt. Most of these products were sold to customers in the Atlantic provinces and Eastern Quebec through a network of agents and distributors.
The Dartmouth refinery had about 200 employees.
This decision to convert the refinery, which triggered a $264 million non-cash after-tax charge, will improve the competitiveness of the company's downstream business, Imperial said.
Imperial reported a second-quarter net income of $327 million including a non-cash charge of $264 million to convert the Dartmouth refinery to a fuels terminal.
This compares with earnings of $635 million for the second quarter of 2012. Net income per common share on a diluted basis was $0.38, down $0.37 from the second quarter of 2012.
Downstream net income was negative $97 million in the second quarter versus $232 million in the second quarter of 2012.
Besides the one-time charge of converting the refinery, downstream earnings were also negatively impacted by lower industry refining margins of about $285 million resulting from the narrowing price differential between Brent and WTI crude oils.
These factors were partially offset by favorable impacts of about $220 million associated with improved refinery operations and lower refinery maintenance activities.
Refinery throughput in the second quarter was up significantly at 435,000 b/d, and margins were down about 25%.
Lower maintenance impacts increased refinery throughput by 51,000 b/d compared to the same quarter in 2012, but industry refining margins were down, reflecting the narrowing Brent/WTI crude price spread.
On its Kearl Oil Sands project update, Imperial said that production ramp-up continues, line-fill operations are advanced, and diluted bitumen sales are expected to begin in the third quarter.
Crude traders are watching the first delivery to the U.S. markets closely amid a volatile cash price differential for West Canadian Select crude. The first sale could help widen the WCS cash price differential against WTI.
The WCS cash differential has widened to about $20 under WTI at Hardisty from a $14-$15/bbl discount in April. That cash discount was at $26/bbl in March.
Although production volumes to date have been relatively low, Imperial continues to expect to reach 110,000 b/d (78,000 b/d Imperial's share) later in 2013.
The Kearl expansion project progressed to 43% complete, remains on track for a 2015 startup and is expected to ultimately produce 110,000 b/d (78,000 b/d Imperial's share).
The Kearl Oil Sands Project is a 50-50 joint venture between Imperial Oil and ExxonMobil Canada.
Production from the first of three proprietary paraffinic froth treatment trains at Kearl began on April 26, 2013.
The process is producing pipeline quality bitumen. Synchronizing facilities and working toward stable operations have been the focus during the quarter resulting in optimization of froth metering and filtration, solvent to bitumen ratios and froth and ore inventory management. These optimizations are being implemented across operations as well as on the expansion project.
The Kearl Oil Sands Project is located 70 km (43.4 miles) north of Fort McMurray in Alberta, and is one of the largest open-pit mining operations in Canada. It has regulatory approval for production up to 345,000 b/d.