Cdn Oil Sands earns $171-million in Q3 2010
Canadian Oil Sands Trust (2) (C:COS)
Shares Issued 484,447,536
Last Close COS.UN 10/27/2010 $26.48
Thursday October 28 2010 - News Release
Mr. Marcel Coutu reports
CANADIAN OIL SANDS TRUST ANNOUNCES 2010 THIRD QUARTER RESULTS
Canadian Oil Sands Trust had cash from operating activities of $330-million (68 cents per trust unit) for the third quarter of 2010 compared with cash from operating activities of $213-million (44 cents per unit) for the same period last year. Lower revenues and higher operating costs were more than offset by a reduction in non-cash working capital in the 2010 versus 2009 period. Year-to-date cash from operating activities increased to $997 million ($2.06 per Unit) for 2010 from about $219 million ($0.45 per Unit) recorded for the same period of 2009. Higher revenues combined with a decrease in non-cash working capital were partially offset by higher operating expenses and Crown royalties.
Net income for the third quarter of 2010 was $171 million, or $0.35 per Unit, compared with net income of $247 million, or $0.51 per Unit, for the 2009 third quarter. The decrease reflects lower revenues combined with higher operating expenses and smaller foreign exchange gains on the U.S. dollar denominated long-term debt, partially offset by lower Crown royalties, lower depreciation, depletion and accretion expense, and a future income tax recovery.
Year-to-date, net income in 2010 totaled $575 million, or $1.19 per Unit, up from net income of $336 million, or $0.69 per Unit, in 2009. The increase reflects higher revenues partially offset by higher operating expenses, higher Crown royalties, smaller foreign exchange gains on the U.S. dollar denominated long-term debt, and a reduced future income tax recovery.
The Trust has declared a quarterly distribution amount of $0.50 per Unit for Unitholders of record on November 19, 2010, payable on November 30, 2010.
In 2010, the Trust declared its distributions with the intention of achieving certain tax pool targets. Based on our October 28, 2010 Outlook, we expect to achieve our target with approximately $2 billion of tax pools at year end. This may result in slightly higher debt levels, although our balance sheet should remain strong. Optimizing tax pools in such a manner will no longer be applicable when we convert to a corporation.
Following our conversion to a corporation, and consistent with other corporations, beginning January 1, 2011, Canadian Oil Sands will be subject to corporate taxation. While tax pools will be available to shelter income from cash taxes, future cash from operating activities ultimately will be reduced by corporate taxation. We anticipate future dividend amounts also will be impacted by a projected rise in capital expenditures to fund Syncrude's sustaining capital program and future expansion plans. Consistent with past practice, the Trust intends to use its cash from operating activities to help finance such expenditures. As a result of discontinuing our tax optimization strategy, the projected rise in capital expenditures and the eventual impact of taxation, we anticipate a reduction in distributions/dividends from the current 2010 level.
"Higher production and crude oil prices during the first nine months of 2010 resulted in improved financial results compared with the 2009 period. As we look forward to becoming a corporation later this year, we are in a solid position with a strong balance sheet and about $2 billion in tax pools to shelter future income," said Marcel Coutu, President and Chief Executive Officer. "I continue to believe that, along with our expansion plans into our Aurora South leases later this decade, our greatest near-term value opportunity resides in improving the operational reliability at Syncrude. While this has been challenging, we continue to work with Syncrude, Imperial Oil and Exxon Mobil in establishing a solid foundation for gradual and sustained increases in production levels."
Sales volumes averaged 96,000 barrels per day during the third quarter of 2010 compared with 115,000 barrels per day during the same period of 2009. Unplanned maintenance in upgrading units reduced production in both quarters while the 2010 third quarter was further impacted by the planned turnaround of Coker 8-1.
Sales volumes during the first nine months of 2010 averaged 105,000 barrels per day compared with 98,000 barrels per day in 2009. The increase reflects less unplanned maintenance and the production impact of the Coker 8-1 turnaround affecting only part of the period in 2010, versus the full impact of the extensive Coker 8-3 turnaround in 2009.
Operating costs during the third quarter of 2010 were $39.99 per barrel compared with $27.80 per barrel in 2009; the increase is primarily attributable to the turnaround of Coker 8-1 combined with increased maintenance costs on other upgrading units. Year-to-date, operating costs were $36.54 per barrel in 2010 compared with $37.39 per barrel in 2009. While total operating costs actually increased year-to-date in 2010 compared with the same period in 2009, primarily as a result of higher maintenance and project-related costs, the higher production in 2010 resulted in lower per barrel operating costs.
Capital expenditures year-to-date in 2010 were $343 million compared with $308 million in the same period of 2009. The Syncrude Emissions Reduction ("SER") project accounted for $84 million and $87 million of the capital spent in 2010 and 2009, respectively. Mine train replacements and relocations accounted for $61 million and $15 million of the capital spent in 2010 and 2009, respectively, while the remaining expenditures related to other sustaining capital activities including the construction of tailings facilities, pipe replacements and other infrastructure projects. The SER project is an environmental project designed to substantially reduce sulphur dioxide emissions, and is expected to be completed in 2011.
2010 Outlook
On September 23, 2010 Canadian Oil Sands lowered its single point 2010 production Outlook by five million barrels from the revised July 29, 2010 Outlook to reflect unplanned maintenance in certain upgrading units and an extension of the planned Coker 8-1 turnaround completed in late October. Canadian Oil Sands is estimating annual 2010 Syncrude production of 105 million barrels with a revised range of 102 million to 108 million barrels. The original 2010 budget estimate for Syncrude production was 115 million barrels.
The October 28, 2010 Outlook assumes an increased U.S. $78 per barrel WTI oil price, a smaller SCO discount to Cdn dollar WTI of $1.75 per barrel but a stronger $0.97 U.S./Cdn foreign exchange rate. These assumptions, combined with the revised production volumes, result in estimated revenues of $3,037 million, or $79 per barrel in 2010.
Our revised 2010 Outlook for cash from operating activities is $1,137 million, or $2.35 per Unit. After deducting forecast 2010 capital expenditures of $511 million, we are estimating $626 million of remaining cash from operating activities for the year, or $1.29 per Unit.
More information on the Trust's Outlook is provided in the Management's Discussion and Analysis ("MD&A") section of this report and the October 28, 2010 guidance document, which is available on the Trust's web site at www.cos-trust.com under "Investor".
Syncrude Waterfowl Incident
On October 25, 2010, Syncrude reported that, during a freezing rain storm, a waterfowl incident occurred when waterfowl landed at various locations on the Syncrude site including roads, parking lots and the Mildred Lake and Aurora settling basins with the result that waterfowl that came in contact with bitumen on the settling basins were euthanized. Several other oil sands operators in the area reported waterfowl mortalities as well. Syncrude is cooperating fully with regulators in their investigation of this incident.
This incident follows the settlement of a 2008 waterfowl incident, announced on October 22, 2010, under which Syncrude paid a total of $3 million comprised of fines and payments to fund research for improved waterfowl deterrent systems, to create a waterfowl habitat-conservation project, and to create a Wildlife Management Program at Keyano College focused on Aboriginal students.
More information on Syncrude's environmental and social responsibility performance is available in its 2008/2009 Sustainability Report, which is located on Syncrude's website at www.syncrude.ca.
This press release contains statements about the future. See the forward looking advisory in the attached MD&A.
CANADIAN OIL SANDS TRUST
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
($ millions, except per
Unit amounts) 2010 2009 2010 2009
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Revenues $ 745 $ 809 $ 2,524 $ 1,884
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Expenses:
Operating 355 293 1,045 997
Non-production 26 34 81 106
Crude oil purchases and
transportation 53 36 256 132
Crown royalties (Note 10) 68 108 231 135
Administration 1 6 17 18
Insurance 5 2 10 6
Interest, net (Note 6) 22 25 70 70
Depreciation, depletion
and accretion (Note 2) 95 123 292 310
Loss on disposal of assets 5 - 10 -
Foreign exchange gain (30) (90) (25) (138)
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600 537 1,987 1,636
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Earnings before taxes 145 272 537 248
Future income tax expense
(recovery) (26) 25 (38) (88)
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Net income 171 247 575 336
Other comprehensive loss, net
of income taxes
Reclassification of derivative
gains to net income (1) (1) (2) (2)
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Comprehensive income $ 170 246 $ 573 $ 334
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Weighted average Trust Units
(millions) 484 484 484 483
Trust Units, end of period
(millions) 484 484 484 484
Net income per Trust Unit:
Basic and diluted $ 0.35 $ 0.51 $ 1.19 $ 0.69
? 2010 Canjex Publishing Ltd. |
