More News:
Athabasca Oil Sands Trust -
Athabasca Oil Sands Trust second quarter results
Athabasca Oil Sands Trust AOS.UN
Shares issued 29,750,000 1999-07-26 close $22.5
Monday Jul 26 1999
Mr. Walter O'Donoghue and Mr. Henry Sykes report
Expansion proceeding ahead of schedule, under budget
The board of directors of Athabasca Oil Sands Investments announced today that there will be no second quarter distribution, reflecting their decision to re-invest in the Syncrude project in a year in which record capital expenditures of $660-million (approximately $77-million net to Athabasca) are anticipated.
The board noted that excellent progress continues on the Syncrude joint venture's expansion plans. The second mining train at the North mine was completed in June, two months ahead of schedule. The power generation plant for the Aurora project was completed and began providing power on July 7, also two months ahead of schedule. Other major components of the Aurora expansion are proceeding ahead of schedule and under budget. Capital expenditures of $26-million for the quarter bring the year-to-date total to a record $48-million.
"We are very pleased with the progress being made on the major capital programs at Syncrude. They have had a smooth start-up of the North mine train, and are well ahead of schedule and under budget at Aurora," says chairman Walter O'Donoghue. "These projects pave the way for the strong production growth expected in the years to come."
The capital expenditures required for the Syncrude expansion program exceeded the $28-million in net cash from operations. Athabasca Oil Sands Trust used the $49-million in proceeds from its successful equity offering of 2.75 million units to help financing 1999 capital expenditures and to repay all of Athabasca's bank debt. Reflecting these considerations, and consistent with past practices, it has been determined that there would be no second quarter distribution to unitholders of the Athabasca Oil Sands Trust.
Athabasca's Syncrude Sweet Blend (SSB) revenues of $54-million for the second quarter of 1999, were $5-million higher than the same period last year, as substantially higher crude oil prices more than offset a decline in sales volumes. Second quarter sales volumes of 25,300 barrels per day are 2,300 below last year's record pace as a result of an 800 barrel per day inventory build and plant maintenance performed during the quarter. Year-to-date sales volumes of 25,600 barrels per day are 1,400 barrels ahead of last year's first half results. SSB prices averaged $25.06 per barrel at the plant gate in the quarter, up 23 per cent from the $20.27 per barrel realized in the second quarter of 1998, and up over 30 per cent from the $19.02 received in the first quarter of 1999. Including the effects of currency hedging, Athabasca's average price received in the quarter was $23.31 per barrel.
The Syncrude joint venture continues to achieve excellent operating results during 1999. Highlights include a new first half shipment record of 40.1 million barrels and a daily shipment record of 263,400 barrels set on June 6. In addition, operating costs of $12.60 per barrel are almost $1.00 per barrel below last year's full year cost of $13.58. Building on these strong operating results, 1999 volumes are now budgeted at 83 million barrels at a cost of $12.35 per barrel. Projected volume increases will come from the recently completed second mining train in the North mine, full utilization of the completed Debottleneck 1 project, and start-up of the vacuum distillation unit in September. Reflecting these targets, and provided that oil prices are sustained near current levels, Athabasca expects to be able to resume distributions during the last half of the year.
Athabasca Oil Sands Trust
- Athabasca reinvests in Syncrude project - no distribution this quarter - Expansion projects ahead of schedule and under budget - Increased volumes and cash flow - New Syncrude first half shipment record of 40.1 million barrels - On track for record year
Results from operations
Athabasca's second quarter 1999, Syncrude Sweet Blend revenues were $54-million, $5-million higher than the same period last year due to higher 1999 crude oil prices which more than offset a small decrease in production volumes. A new record was set for Syncrude's year-to-date production as volumes of 25,600 barrels per day were 1,400 barrels ahead of last year's first half results. Second quarter sales volumes of approximately 25,300 barrels per day are down 2,300 barrels per day from 1998, largely as a result of an inventory build of 800 barrels per day and plant maintenance during the month of April.
The trust benefited from higher oil prices in 1999. SSB prices averaged $25.06 per barrel at the plant gate, up 23 per cent from the $20.27 per barrel received in the second quarter of 1998. Athabasca's average price received in the quarter, including the effects of currency hedging and marketing fees, was $23.31 per barrel, up from $19.30 per barrel a year earlier. Plant gate prices have averaged $22.02 year-to-date, $20.18 after currency hedging and fees, as compared to $20.89 and $19.82 respectively last year. Operating expenses of $28-million are down slightly from $29-million in the first quarter, while year-to-date costs of $58-million are $6-million lower than those reported for the first half of 1998. This is largely due to the absence of a coker shutdown and cost saving initiatives.
Cash flows
Cash flow from operations before the change in non-cash working capital was $22-million for the three months ended June 30, 1999, compared to $13-million for the same period in 1998. Cash flow from operations was $28-million in the first half of 1999, almost double last year's results. Athabasca's share of net capital expenditures in the second quarter increased $7-million to $24-million as compared with expenditures in the second quarter of 1998. On a year-to-date basis, capital expenditures total $46-million, which is $20-million higher than the first half of last year. Major capital projects of significance to Athabasca in the second quarter are:
- completion of the second mining train of the North mine; - continuing work on the second phase of the Upgrader Debottleneck; - continued steady progress on the construction of the first mining train of the Aurora project; and - engineering for the planned Upgrader Expansion.
Good progress was made on all strategic projects during the quarter, with most projects ahead of schedule. Both the second train of the North mine, which started up in June, and the first operating unit at Aurora, the 80 megawatt gas turbine generator, which began providing power on July 7, were two months ahead of schedule. The mining and extraction facilities being constructed at Aurora are under budget with start-up anticipated for May, 2000.
Distributable income
Distributable income is directly related to the royalty that the trust receives from Athabasca Oil Sands Investments. The trust royalty is the net result of Syncrude operations, capital expenditures, administrative and financing costs associated with Athabasca, as well as changes in debt. Capital expenditures of $26-million exceeded the net operating revenue of $22-million in the second quarter. For the first six months of 1999, net operating revenue was $30-million, up from $17-million in 1998, but still less than the $48-million in capital expenditures. Proceeds from Athabasca's equity offering in April, 1999, were used for capital expenditures.
As revenue from operations was not sufficient to cover capital expenditures, the board of directors elected not to make a second quarter distribution and instead to reinvest all available cash from operations plus some of the additional equity raised into the Syncrude project. The board believes the decision to make growth-oriented capital investments is in the best interests of unitholders over the long term.
Liquidity and capital resources
On April 6, 1999, Athabasca completed an equity offering of 2.75 million trust units. The resulting $49-million net proceeds were used to finance Athabasca's capital expenditures during the quarter and repay all of Athabasca's outstanding bank debt.
Working capital at June 30, 1999, was approximately $24-million higher than at Dec. 31, 1998. This change reflects an increase in cash, short-term investments and inventory, and a decrease in other current liabilities. During the quarter, Athabasca repaid all of the $26-million outstanding on the $100-million available on its syndicated loan, bringing total long-term debt down to $109-million.
Risk management
Athabasca's results from operations are affected by the exchange rate between the Canadian and U.S. dollars. To reduce the impact of exchange rate fluctuations on revenues, Athabasca has hedged its exposure by issuing U.S. dollar denominated debt and by entering into foreign exchange contracts. In the fourth quarter of 1996, Athabasca entered into foreign exchange contracts to sell U.S. dollars at exchange rates between 76.2 U.S. cents and 77.8 U.S cents to $1.00 (Canadian) in the amounts of $84-million, $84-million and $96-million in 1999, 2000 and 2001 respectively. Of the $84-million from 1999, approximately $42-million remains outstanding at June 30, 1999. Consequently, Athabasca's revenues have not benefited from the decline in the Canadian dollar, the impact of which has been offset by losses on the foreign exchange hedge. Based on the foreign exchange forward curve at June 30, 1999, had these contracts been settled for cash, the pre-tax loss would have been about $32-million.
Year 2000
Athabasca has considered its exposure on the Year 2000 issue and believes its greatest vulnerability arises from the systems in place at Syncrude, Gulf Canada Resources (the administrator of the trust) and Montreal Trust as trustee. During the first half of 1999, all three companies have made substantial progress in their preparations. Syncrude Canada Ltd., has now completed all of the work items identified to ensure the systems are compliant, and has developed contingency plans. It is believed that the systems Athabasca is reliant upon at Montreal Trust and at Gulf Canada are compliant.
Outlook
Syncrude project targets call for a record 83 million barrels of production at an operating cost of approximately $12.40 per barrel in 1999. Record capital expenditures of approximately $660-million are also anticipated. Athabasca's share of the projected volume target is 9.7 million barrels or an average of 26,700 barrels per day. Reflecting these targets, and provided that oil prices are sustained near current levels, Athabasca expects to be able to resume distributions during the last half of the year.
Consolidated Statement of income
Three months ended June 30
(in thousands of dollars)
1999 1998
Revenues:
Syncrude Sweet Blend $53,657 $48,421
Other 184 55
------- -------
53,841 48,476
------- -------
Expenses:
Operating 28,153 31,793
Administration
and other 919 865
Crown royalties 58 0
Finance charges 2,345 2,364
Dividends on
preferred
shares of
subsidiary 90 90
Depletion,
depreciation and
amortization 6,254 4,750
------- -------
37,819 39,862
------- -------
Income before
taxes 16,022 8,614
Capital and
other taxes 139 57
------- -------
Net income $15,883 $ 8,557
======= =======
Net income
per trust unit 54 cents 31 cents
Consolidated Statement of income
Six months ended June 30
(in thousands of dollars)
1999 1998
Revenues:
Syncrude Sweet Blend $93,491 $86,798
Other 352 273
------- -------
93,843 87,071
------- -------
Expenses:
Operating 57,565 64,488
Administration
and other 1,628 1,394
Crown royalties 82 0
Finance charges 5,077 4,638
Dividends on
preferred
shares of
subsidiary 180 180
Depletion,
depreciation and
amortization 12,688 12,890
------- -------
77,220 83,590
------- -------
Income before
taxes 16,623 3,481
Capital and
other taxes 233 126
------- -------
Net income $16,390 $ 3,355
======= =======
Net income
per trust unit 58 cents 12 cents
(c) Copyright 1999 Canjex Publishing Ltd. canada-stockwatch.com
old url (better for printing)
ChuckaAreaNewsRe INVESTING is our dividend, for the future. |
