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During the last eight quarters, the following items have had a significant impact on the Corporation's financial results:
-- fluctuations in realized selling prices have affected the Corporation's sales and Crown royalties. Monthly average WTI prices have ranged from U.S. $82 per barrel to U.S. $110 per barrel, and the monthly average differentials between our realized selling price and Canadian dollar WTI prices have ranged from a $14 per barrel premium to a $17 per barrel discount;-- U.S. to Canadian dollar exchange rate fluctuations have resulted in foreign exchange gains and losses on the revaluation of U.S. dollar- denominated debt and have impacted realized selling prices;-- planned and unplanned maintenance activities have reduced quarterly production volumes and revenues and increased operating expenses;-- fluctuations in natural gas prices have affected the Corporation's operating expenses and Crown royalties;-- increased spending on capital projects to replace or relocate Syncrude mining trains and to support tailings management plans has reduced Crown royalties; and-- increases in current taxes in 2013 have reduced cash flow from operations. Prior to 2013, tax pools sheltered the Corporation's income from significant current taxes. In addition, taxes on income generated in the Corporation's partnership in 2012 were deferred to 2013.
Quarterly variances in net income and cash flow from operations are caused mainly by fluctuations in realized selling prices, production and sales volumes, operating expenses, natural gas prices, and current tax expense. Net income is also impacted by foreign exchange gains and losses, depreciation and depletion, and deferred tax expense. The dividends paid to Shareholders are likewise dependent on the factors impacting cash flow from operations as well as the amount and timing of capital expenditures.
While the supply/demand balance for crude oil affects selling prices, the impact of this relationship has not displayed significant seasonality. Natural gas prices are typically higher in winter months as heating demand rises, but this seasonality is influenced by weather conditions and North American natural gas inventory levels. Technological developments in North American natural gas production have significantly increased production levels and impacted natural gas prices. These conditions may persist for the next several years.
Syncrude production levels may not display seasonal patterns or trends. While maintenance and turnaround activities are typically scheduled to avoid the winter months, the exact timing of unit outages cannot always be precisely scheduled and unplanned outages may occur. The costs of major turnarounds are capitalized as property, plant and equipment and depreciated over the period until the next scheduled turnaround. The costs of all other turnarounds and maintenance activities are expensed in the period incurred, which can result in volatility in quarterly operating expenses. All turnarounds and maintenance activities impact per barrel operating expenses because sales volumes are lower in the periods when this work is occurring.
Capital Expenditures
Three Months Ended March 31($ millions) 2013 2012----------------------------------------------------------------------------Major Projects Mildred Lake Mine Train Replacement $ 113 $ 43 Reconstruct crushers, surge facilities, and slurry prep facilities to support tailings storage requirements Aurora North Mine Train Relocation 31 8 Relocate crushers, surge facilities, and slurry prep facilities to support tailings storage requirements Aurora North Tailings Management 13 19 Construct a composite tails (CT) plant at the Aurora North mine to process tailings Centrifuge Tailings Management 37 7 Construct a centrifuge plant at the Mildred Lake mine to process tailings Syncrude Emissions Reduction (SER) 2 7 Retrofit technology into Syncrude's original two cokers to reduce total sulphur dioxide and other emissions----------------------------------------------------------------------------Capital expenditures on major projects $ 196 $ 84----------------------------------------------------------------------------Regular maintenance Capitalized turnaround costs $ 2 $ 7 Other(1) 47 30----------------------------------------------------------------------------Capital expenditures on regular maintenance $ 49 $ 37----------------------------------------------------------------------------Capitalized interest $ 23 $ 20----------------------------------------------------------------------------Total capital expenditures $ 268 $ 141--------------------------------------------------------------------------------------------------------------------------------------------------------(1) Other regular maintenance capital includes expenditures on relocation of tailings facilities and other infrastructure projects.
