ENERGY TRUSTS / Canadian Oil Sands Trust reports Distribution
CALGARY, Jan. 26 /CNW/ - Canadian Oil Sands Trust announced a fourth
quarter distribution of $0.60 per unit bringing the cumulative distributions
for 1997 to $1.80 per unit. Chuck Shultz, Chairman of Canadian Oil Sands,
summarized the fourth quarter with the following comments, ''Canadian Oil
Sands has achieved its 1997 cash distribution target. The 90% improvement in
Distributable Income earned during the quarter compared to 1996 is attributed
to Syncrude's record setting production and the 43% capital spending credit
against Crown Royalties payable. The ''Syncrude 21'' expansion plan announced
on November 24, 1997 is an opportunity for the Trust to double its production
of an even better quality, low-sulphur crude at a significantly lower
operating cost. The Trust Units have been trading at the $25.00 level during
the quarter despite by the significant drop in West Texas Intermediate crude
oil prices, US$21.00 to US$17.50.''
Before deducting the $3.1 million Reserve for Future Production Costs,
Distributable Income earned during the fourth quarter totalled $16.9 million
($0.73 per unit) compared to $8.7 million ($0.38 per unit) for the fourth
quarter of 1996. Distributable Income for the year totals $41.4 million
($1.80 per unit) including $3.4 million ($0.15 per unit) of surplus cash
compared to $21.4 million for the June 20, 1996 to December 31, 1996 period
including $2.4 million ($0.10 per unit) of surplus cash. Cash flow from
operations for the quarter was $24.8 million compared to $16.8 million in 1996
with capital expenditures of $7.5 million in 1997 and $7.8 million in 1996.
Syncrude Operations
Syncrude's production for 1997 was a record 75.7 million barrels of
Syncrude Sweet Blend, an increase of 3% over the 73.5 million barrels in 1996.
The fourth quarter also set a quarterly production record at 21.6 million
barrels surpassing the 21.3 million barrels produced in the third quarter of
1997. These production records are the result of an improving bitumen
extraction recovery rate and an improvement in the yield of Syncrude Sweet
Blend crude from bitumen.
On January 1, 1998, Syncrude experienced an equipment failure at one of
its coking units. This will result in lower production during the first
quarter of 1998 which Syncrude anticipates will be recovered over the
following three quarters of the year.
On October 24, 1997, the Alberta Energy and Utilities Board approved
Syncrude's application for the development of the Aurora Mine. The Aurora
Mine has recoverable reserves estimated at 3.6 billion barrels of Syncrude
Sweet Blend. The plan includes a truck and shovel fleet for ''in pit''
operations, a hydrotransport system and a low temperature extraction process
to extract bitumen from the oil sand.
As part of its ''Syncrude 21'' expansion, Syncrude announced it will to
seek regulatory approval to increase the capacity of its Mildred Lake
Upgrading facilities from 110 million barrels per year to 175 million. With
its reserve base, this increase in Syncrude's production is expected to be
sustainable for at least 40 years.
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CANADIAN OIL SANDS TRUST
Highlights
(thousands of dollars except per Unit amounts)
Three Months Year Ended June 20, 1996
Ended December 31 December 31, to December 31,
1997 1996 1997 1996
------ ------ ------ ------
Net Income $ 16,922 $ 9,219 $ 51,247 $ 20,503
Per Trust Unit $ 0.74 $ 0.40 $ 2.23 $ 0.89
Funds From Operations $ 24,860 $ 16,773 $ 78,049 $ 33,736
Per Trust Unit $ 1.08 $ 0.73 $ 3.39 $ 1.47
Cash Distribution $ 13,800 $ 8,740 $ 41,400 $ 21,390
Per Trust Unit $ 0.60 $ 0.38 $ 1.80 $ 0.93
Daily Average Sales (bbls.)
Syncrude Sweet Blend 23,002 20,877 20,647 21,259
Average Selling Price
per barrel
West Texas Intermediate
(U.S.) $ 19.94 $ 23.92 $ 20.61 $ 22.37
-------- -------- -------- --------
-------- -------- -------- --------
Before Hedging $ 27.48 $ 32.41 $ 27.82 $ 30.92
Hedging - Oil Price 0.63 (3.71) (0.33) (2.79)
- Currency 0.19 0.57 0.36 0.47
-------- -------- -------- --------
$ 28.30 $ 29.27 $ 27.85 $ 28.60
-------- -------- -------- --------
-------- -------- -------- --------
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Financial Performance
Canadian Oil Sands' revenues were $60.0 million for the fourth quarter of
1997 compared to $56.4 million in 1996. The price of West Texas Intermediate
crude oil averaged US$19.94 during the quarter with Canadian Oil Sands
receiving an average of Cdn$27.48 per barrel for its sale of Syncrude Sweet
Blend compared to US$23.92 and Cdn$32.41 per barrel, respectively, in 1996.
For the year ended December 31, 1997, West Texas Intermediate averaged
US$20.61 and Canadian Oil Sands averaged Cdn$27.82. Canadian Oil Sands' share
of Syncrude production averaged 23,000 barrels per day during the fourth
quarter compared to 20,877 barrels in the fourth quarter of 1996; an increase
of 10% over 1996.
Operating costs during the fourth quarter totalled $23.5 million ($11.12
per barrel) compared to $23.7 million and $12.34 per barrel in 1996. The
fourth quarter operating costs are higher than anticipated due to the extent
of imported electricity consumed, increases in the unit price of natural gas
and electricity and maintenance work required on the extraction plant.
Operating costs for the year at $13.77 per barrel exceeded our expectations of
$13.45 per barrel due the same factors.
Crown Royalties during the fourth quarter totalled $9.4 million ($4.45
per barrel) compared to $13.8 million ($7.19 per barrel) in 1996. The
reduction of $4.4 million is primarily attributed to a royalty credit, which
effective January 1, 1997, reduced Crown Royalties otherwise payable by 43% of
capital expenditures incurred. Changes to the Crown Royalty structure were
introduced to encourage further investment in the development of Alberta's oil
sands.
Canadian Oil Sands' share of Syncrude's capital expenditures for 1997
totals $35.4 million, $6 million higher than budget. Beyond the capital
expenditures of a maintenance nature, the principal capital projects in 1997
were the development of the North Mine, debottlenecking of the existing
upgrading facilities, replacing 20 kilometers of tailings piping and the
engineering and design work for the Aurora Mine. The higher than anticipated
capital spending is the result of advancing the timing on these approved
projects primarily in the third and fourth quarter.
On January 1, 1998, one of Syncrude's cokers failed resulting in a
significant drop in the production of Syncrude Sweet Blend. For the next 14
days, Syncrude attempted to restore the coker to normal operations with
limited success due to coke circulation problems. To achieve its 1998
production target of 80 million barrels, Syncrude has decided to advance the
scheduled coker turnaround to the first quarter of 1998 rather than the second
quarter as originally planned. As a result, unitholder distributions for the
first quarter of 1998 are expected to reflect higher maintenance and capital
spending and a decrease in production volumes. The benefits realized from the
oil price hedge of 7,000 barrels per day at US$21.00 during the first quarter
will partially offset the impact of the coker turnaround on the first quarter
distribution.
The fourth quarter cash distribution has been reduced by a Reserve for
Future Production Costs totalling $3.1 million ($0.13 per unit). Management
believes the reserve is prudent due to the significant drop in the West Texas
Intermediate benchmark price in January 1998, the premature shutdown of one
coker for its maintenance turnaround and the significant capital expenditures
now anticipated for the first quarter of 1998. The cumulative distributions
for 1997 at $1.80 per unit are at the level targeted by management and the
investment community.
Corporate Activities
Risk Management: To offset its U.S. dollar exposure attributable to the
sale of crude oil, Canadian Oil Sands has a US$1.5 billion foreign currency
exchange contract over a twenty year period at an average rate of US$0.694.
As at January 23, 1998, the mark-to-market value of this currency hedge was
$35 million, representing $1.50 per trust unit. During the fourth quarter of
1997, the currency hedge added $398,000 to Canadian Oil Sands' revenue as
US$12 million of US currency was settled at US$0.694 per Canadian dollar
compared to the average exchange rate of US$0.700. This settlement added
$0.02 per unit to the fourth quarter distribution bringing the total
contribution for the year to $0.12 per unit. These US$12 million quarterly
settlements continue through 1998, increase to US$13 million per quarter for
1999 and increase regularly thereafter to 2016.
In early October, Canadian Oil Sands entered into oil price put options
which provide a floor price of US$21.00 per barrel for 10,000 barrels per day
for the fourth quarter of 1997 as well as 7,000 barrels per day for the first
quarter of 1998. The cost of the options for the fourth quarter of 1997 was
US$0.52 per barrel while the cost for the first quarter of 1998 was US$0.95
per barrel. The cost of these put options was funded from gain on the sale of
approximately 15% of the foreign currency hedge for the years 2013, 2014 and
2015 leaving the current year's cash flow unaffected. The fourth quarter
hedge on 10,000 per day was settled for $1.6 million (US$1.42 per barrel) in
early 1998.
Interest costs on the US$70 million of 7.625% Senior Notes during the
quarter were $1.0 million compared to $1.2 million for the Term Loan in 1996.
Canadian Oil Sands has swapped its 7.625% fixed rate obligation to a Canadian
floating rate which averaged 4.4% during the quarter.
Increased Credit Facilities: On November 26, 1997, Canadian Oil Sands
Investments Inc. agreed to a $200 million increase to its lines of credit
which may be used to fund its 10 percent share of the $6 billion expansion of
Syncrude. This brings the unsecured credit facilities to $250 million. These
credit arrangements may be reduced at any time by Canadian Oil Sands
Investments Inc., if desirable, and are comprised of a $220 million Revolving
Term Credit Facility and a $30 million Revolving Facility. The $220 million
Revolving Term Facility operates on a revolving basis for the first five years
and then converts to a five year term loan with equal semi-annual repayments.
The $30 million Revolving Facility is extendible annually for a five year term
with no repayments until maturity of the facility. The credit facilities may
be used for general corporate purposes including the funding of capital
expenditures.
Income taxes: Unitholder distributions from Canadian Oil Sands Trust will
continue to be categorized as a return of capital with the adjusted cost base
of the trust unit reduced by the amount of such returns of capital. Including
the 1997 fourth quarter distribution, the Trust has distributed $2.73 per unit
as a return of capital and is entitled to distribute about $11.50 per unit in
the future with the same categorization. The Trust is able to distribute cash
as a return of capital due to its significant tax pools which are expected to
shelter distributions for at least the next four years. As the distributions
are considered to be a return of capital of the Trust, Unitholders who are
non-residents of Canada are not subject to Canadian withholding tax. The
income tax liability of each Unitholder will depend on the Unitholder's
specific circumstances, and accordingly, each Unitholder should obtain
independent advice regarding their specific income tax status.
Unit Distributions: The quarterly distribution of $0.60 per unit will be
paid on February 13, 1998 to Unitholders of record on February 6, 1998.
Unit Trading Activity
Canadian Oil Sands' units trade on the Toronto Stock Exchange under the
symbol CO.UN
<<
Three Months Ended
---------------------------------------------------
December 31, September 30, June 30, March 31,
1997 1997 1997 1997
------------ ------------- -------- ---------
Unit Price ($)
- High 28.75 28.90 24.45 23.00
- Low 23.75 23.05 19.90 19.80
- Close 27.00 28.00 24.10 21.45
Volume Traded (in 000's) 2,115 3,243 4,480 8,183
Average Number Of Units
Outstanding (in 000's) 23,000 23,000 23,000 23,000
CANADIAN OIL SANDS TRUST
STATEMENT OF TRUST ROYALTY AND DISTRIBUTABLE INCOME
(thousands of dollars except
per unit amounts)
Three Months Year Ended June 20, 1996
Ended December 31 December 31, to December 31,
1997 1996 1997 1996
------ ------ ------ ------
(unaudited)
Revenues and expenses of
Canadian Oil Sands
Investments Inc.
Revenues $ 59,983 $ 56,353 $210,496 $118,648
Operating expenses (23,528) (23,697) (103,768) (50,846)
Administration expenses (1,022) (697) (3,343) (1,491)
Crown royalties (9,420) (13,810) (20,184) (29,455)
Interest expense (1,011) (1,186) (4,270) (2,721)
Capital taxes (82) (60) (318) (122)
-------- -------- -------- --------
24,920 16,903 78,613 34,013
Capital expenditures (7,538) (7,760) (35,358) (14,178)
Mining reclamation trust (215) (193) (763) (415)
Site restoration costs (49) - (325) -
Reserve - future
production costs (3,092) (44) (3,282) (44)
-------- -------- -------- --------
Base for Trust Royalty $ 14,026 $ 8,906 $ 38,885 $ 19,376
-------- -------- -------- --------
-------- -------- -------- --------
Trust Royalty at 99% $ 13,886 $ 8,817 $ 38,496 $ 19,182
Distribution of Cash - - 3,353 2,376
Administration expenses
of Trust (88) (77) (451) (168)
-------- -------- -------- --------
Distributable income $ 13,798 $ 8,740 $ 41,398 $ 21,390
-------- -------- -------- --------
-------- -------- -------- --------
Distributable income
per Trust Unit $ 0.60 $ 0.38 $ 1.80 $ 0.93
-------- -------- -------- --------
-------- -------- -------- --------
CANADIAN OIL SANDS TRUST
CONSOLIDATED STATEMENT OF CHANGES IN CASH POSITION
Three Months Year Ended June 20, 1996
Ended December 31 December 31, to December 31,
(thousands of dollars) 1997 1996 1997 1996
------ ------ ------ ------
(unaudited)
Cash provided by (used in):
Operating activities:
Net income $ 16,922 $ 9,219 $ 51,247 $ 20,503
Items not involving
cash:
Depletion, depreciation
and amortization 7,857 7,554 26,703 13,233
Other 81 - 99 -
-------- -------- -------- --------
Funds from operations 24,860 16,773 78,049 33,736
Net change in
deferred items 299 1,511 (1,067) 2,023
Site restoration costs (49) - (325) -
Change in non-cash
working capital 1,831 (2,750) 396 (1,638)
-------- -------- -------- --------
26,941 15,534 77,053 34,121
-------- -------- -------- --------
Financing:
Increase in (repayment
of) long-term debt - - (95,000) 95,000
Issuance of Senior Notes
(US$70MM-7.625%) - - 96,278 -
Cash distribution
to Unitholders (13,800) (8,740) (41,400) (21,390)
Issuance of Trust
Units - - - 319,000
Issuance of preferred
shares - - - 2,000
-------- -------- -------- --------
(13,800) (8,740) (40,122) 394,610
-------- -------- -------- --------
Investments:
Acquisition of working
interest - (19) - (395,014)
Reclamation trust (215) (193) (763) (415)
Capital assets (7,538) (7,760) (35,358) (14,178)
-------- -------- -------- --------
(7,753) (7,972) (36,121) (409,607)
-------- -------- -------- --------
Increase (decrease) in
cash 5,388 (1,178) 810 19,124
Cash at beginning of
period 14,546 20,302 19,124 -
-------- -------- -------- --------
Cash at end of period $ 19,934 $ 19,124 $ 19,934 $ 19,124
-------- -------- -------- --------
-------- -------- -------- --------
CANADIAN OIL SANDS TRUST
CONSOLIDATED BALANCE SHEET
(thousands of dollars) December 31, 1997 December 31, 1996
----------------- -----------------
ASSETS
Current assets:
Cash $ 19,934 $ 19,124
Restricted cash 1,334 1,461
Accounts receivable 22,254 22,817
Inventories 10,424 8,339
Prepaid expenses 266 4,779
---------- ----------
54,212 56,520
Reclamation trust 1,178 415
Capital assets, net 423,559 413,423
Deferred Charges 6,029 1,531
---------- ----------
$ 484,978 $ 471,889
---------- ----------
---------- ----------
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 18,561 $ 27,018
Unit distribution payable 13,800 8,740
---------- ----------
32,361 35,758
Other liabilities 14,365 13,636
Long-term debt 100,100 95,000
Future site reclamation and
restoration costs 8,192 7,382
Preferred shares of subsidiary 2,000 2,000
---------- ----------
157,018 153,776
Unitholders' equity 327,960 318,113
---------- ----------
$ 484,978 $ 471,889
---------- ----------
---------- ----------
CANADIAN OIL SANDS TRUST
CONSOLIDATED STATEMENT OF INCOME AND UNITHOLDERS' EQUITY
(thousands of dollars except
per unit amounts)
Three Months Year Ended June 20, 1996
Ended December 31 December 31, to December 31,
1997 1996 1997 1996
------ ------ ------ ------
(unaudited)
Revenues:
Syncrude Sweet
Blend $ 59,772 $ 56,231 $209,525 $118,347
Other 213 125 979 310
-------- -------- -------- --------
59,985 56,356 210,504 118,657
-------- -------- -------- --------
Expenses:
Operating 23,528 23,697 103,768 50,846
Administration 1,110 774 3,794 1,659
Crown royalties 9,420 13,810 20,184 29,455
Interest 1,011 1,186 4,270 2,721
Depletion, depreciation
and amortization 7,857 7,554 26,703 13,233
Capital and other taxes 82 60 318 122
Dividends on preferred
shares of subsidiary 55 56 220 118
-------- -------- -------- --------
43,063 47,137 159,257 98,154
-------- -------- -------- --------
Net income for the
period 16,922 9,219 51,247 20,503
Unitholders' equity,
beginning of period 324,838 317,634 318,113 -
Proceeds on issue of
23,000,010 Trust Units - - - 319,000
Unit distributions (13,800) (8,740) (41,400) (21,390)
-------- -------- -------- --------
Unitholders' equity,
end of period $327,960 $318,113 $327,960 $318,113
-------- -------- -------- --------
-------- -------- -------- --------
Net income per Trust
Unit $ 0.74 $ 0.40 $ 2.23 $ 0.89
-------- -------- -------- --------
-------- -------- -------- --------
Distributable income
per Trust Unit $ 0.60 $ 0.38 $ 1.80 $ 0.93
-------- -------- -------- --------
-------- -------- -------- --------
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Canadian Oil Sands Investments Inc.
PO Box 2850
150 - 9 Avenue SW
Calgary AB T2P 2S5
Canada
Units Listed - Symbol: CO.UN
The Toronto Stock Exchange |
