ENERGY TRUSTS / Canadian Oil Sands Trust Announces a Distribution of
$0.10 per Trust Unit for the Fourth Quarter of 1998
CALGARY, Jan. 26 /CNW/ - Canadian Oil Sands Trust announced a fourth
quarter distribution of $0.10 per Trust Unit, resulting in cumulative
distributions for 1998 totalling $0.65 per unit. Chuck Shultz, Chairman of
Canadian Oil Sands, summarized the 1998 results with the following comments:
''Even though crude oil prices were the lowest since 1986, Canadian Oil Sands
has made distributions of $0.65 per unit and strengthened its balance sheet
for future growth with the issue of equity and its long term debt
arrangements. The Syncrude joint venture set a new annual production record of
76.7 million barrels in 1998, continuing their record of year-over-year growth
while substantially containing capital spending to reflect the current
economic environment.''
West Texas Intermediate crude oil prices averaged US$12.92 for the fourth
quarter compared to US$19.94 in 1997. Overall, the average WTI price for the
year was down 30 percent compared to 1997. The trading price of Trust Units
ranged from $21.45 to $17.00 in response to the decline in oil prices and
closed the year at $17.75.
Canadian Oil Sands' balance sheet at the end of 1998 remains strong with
$83 million of cash on hand and $250 million in unused lines of credit.
Distributable Income during the fourth quarter totals $2.7 million ($0.10 per
unit) compared to $13.8 million ($0.60 per unit) while the total for 1998 was
$17.6 million ($0.65 per unit) compared to $41.4 million ($1.80 per unit) for
1997. For the fourth quarter, cash flow from operations was $11.0 million in
1998 compared to $24.9 million in 1997 while capital expenditures were $11.7
million in 1998 compared with $7.5 million in 1997.
Syncrude Operations
Syncrude's production for the fourth quarter of 1998 totalled 20.8
million barrels of Syncrude Sweet Blend, a drop of 4% compared to the 21.6
million barrels produced in 1997. During the fourth quarter of 1998, a diluent
recovery unit shutdown resulted in a seven day disruption in operations and a
loss of 900,000 barrels of production. Syncrude's unit operating costs for
the fourth quarter of $11.82 per barrel are higher than the $11.14 achieved in
1997 due to the reduced production volume only partially offsetting cost
savings within a relatively fixed cost structure. The deferral of overburden
stripping continues to offset the impact of higher natural gas costs in 1998
with total operating costs substantially unchanged from 1997.
Syncrude's capital expenditures totalled $139 million during the fourth
quarter. Strategic expenditures focused on the North Mine's second train and
the development of the Aurora Mine while the sustaining expenditures on the
Mildred Lake plant aggregated $33 million.
In October, the Syncrude Owners approved the 1999 operating and capital
budgets including the Aurora Mine development and the installation of a vacuum
distillation unit at the Mildred Lake upgrader.
CANADIAN OIL SANDS TRUST
Highlights
Three Months Year Ended
Ended December 31 December 31
----------------- ------------
1998 1997 1998 1997
------ ------ ------ ------
(thousands of dollars except per unit amounts)
Net Income $2,568 $16,922 $18,010 $51,247
Per Trust Unit $0.10 $0.74 $0.68 $2.23
Funds From Operations $10,970 $24,860 $48,022 $78,049
Per Trust Unit $0.41 $1.08 $1.81 $3.39
Cash Distribution $2,700 $13,800 $17,550 $41,400
Per Trust Unit $0.10 $0.60 $0.65 $1.80
Daily Average Sales (bbls.)
Syncrude Sweet Blend 23,166 23,002 20,997 20,703
Average Selling Price per barrel
West Texas Intermediate
(U.S.) $12.92 $19.94 $14.43 $20.61
------ ------ ------ ------
------ ------ ------ ------
Before Hedging $18.59 $27.48 $20.40 $27.82
Hedging - Oil Price - 0.63 0.59 (0.33)
- Currency (0.80) 0.19 (0.39) 0.36
------ ------ ------ ------
$17.79 $28.30 $20.60 $27.85
------ ------ ------ ------
------ ------ ------ ------
Financial Performance
Canadian Oil Sands' revenues were $38.6 million for the fourth quarter of
1998 compared to $60.0 million in 1997, a 35% drop. The revenues in the
fourth quarter of 1998 reflect the selling 2.1 million barrels of oil at an
average price of Cdn$18.59 per barrel compared to selling 2.1 million barrels
at an average price of Cdn$27.48 per barrel in 1997. The fourth quarter
volumes in 1998 are essentially unchanged while the price of West Texas
Intermediate crude oil averaged US$12.92 during the quarter compared to
US$19.94 in 1997, resulting in a $21 million drop in crude oil revenue before
hedging activity. Canadian Oil Sands' share of Syncrude production averaged
23,166 barrels per day during the fourth quarter of 1998 compared to 23,002
barrels in 1997.
Canadian Oil Sands' fourth quarter operating costs totalled $25.1 million
($11.77 per barrel) compared to $23.5 million ($11.12 per barrel) for 1997.
The operating costs incurred are higher due to a furnace tube rupture in a
diluent recovery unit and higher natural gas prices. Compared to the $9.4
million incurred in the fourth quarter of 1997, Crown Royalties for the fourth
quarter of 1998 were substantially eliminated by the weak operating profits
and higher Crown Royalty investment credits. The Crown Royalty investment
credits were introduced, effective January 1, 1997, to encourage further
investment in the development of Alberta's oil sands.
Canadian Oil Sands' capital expenditures for the fourth quarter of 1998
total $11.7 million compared to $7.5 million in 1997. Distributable Income
for the fourth quarter of 1998 includes a $3.8 million provision for the
expansion financing which results in the aggregate funding of capital
expenditures from operating cash flow in 1998 being $31.9 million compared to
$35.4 million in 1997. There is $1.9 million of deferred payments related to
1998 lease acquisitions included in the $17.6 million of expansion financing
utilized in 1998.
Corporate Activities
Risk Management: Canadian Oil Sands is subject to considerable U.S.
dollar exposure attributable to the sale of crude oil. To reduce this
exposure to exchange rate fluctuations, Canadian Oil Sands has entered into
currency exchange contracts at an average rate of US$0.693 covering 50% of its
crude oil sales for the next five years and 35% of its sales for an additional
thirteen years. In addition, it has granted a call option to a counter-party
for a further 15% of its sales revenue at an exchange rate of US$0.693 for
five years commencing in 2003. Although Canadian Oil Sands oil sales revenue
benefited by $2.8 million from the weak Canadian dollar during the fourth
quarter, the benefit has been offset by the $1.7 million payment required to
settle currency exchange contracts. Canadian Oil Sands' currency exchange
commitments required that US$17 million currency be settled at US$0.693 per
Canadian dollar during the fourth quarter while the average exchange rate was
US$0.648. Canadian Oil Sands has received $4.8 million from the settlement of
its currency exchange contracts since its inception through to the first
quarter of 1998 and has made payments totalling $3.1 million in the last three
quarters of 1998. As at January 22, 1999, the mark-to-market deficiency of
its currency contracts was US$62 million with the spot exchange rate at
approximately US$0.659. While the decline in the mark-to-market value of the
currency exchange contracts reflects the current weakness in the Canadian
currency relative to the US dollar, Canadian Oil Sands' revenues, net of
currency exchange contract settlements, benefit from the weakness as only 50%
of its estimated revenues are hedged.
Excluding the $117,000 in credit standby charges, interest costs on the
US$70 million of 7.625% Senior Notes during the quarter were $1.7 million,
reflecting a US fixed rate of 5.95% for the quarter. Canadian Oil Sands has
swapped its 7.625% interest obligation to a 5.95% fixed rate contract for the
remaining eight years of the Senior Notes.
In the 1997 Annual Report to Unitholders, Canadian Oil Sands has
described the process and timeline being followed in addressing the potential
impact of the Year 2000 Issue. The related projects are proceeding as planned
and will be completed within the appropriate time frames. Additional details
of Canadian Oil Sands' Year 2000 readiness will be available in the 1998
Annual Report to Unitholders.
Unitholder Rights Plan: On November 30, 1998, Canadian Oil Sands Trust
adopted a unitholders rights plan which requires the unitholders' approval at
the Trust's next annual meeting. The Plan provides the Trust, its manager and
unitholders with more time to consider any unsolicited take-over bid in order
to maximize unitholder value. When a person acquires 20% or more of the
Trust's outstanding units without complying with the ''Permitted Bid''
provisions of the Plan, the rights allow unitholders, other than the person
holding 20% or more, to acquire additional units at a 50% discount to the
market price.
Income taxes: Since its inception, the Trust has designated all of its
distributions, $3.38 per Trust Unit, as a ''return of capital''. 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 five
years. ''Return of capital'' distributions result in the Unitholder's adjusted
cost base of the trust unit being reduced by the amount of such distributions.
Such distributions also enable Unitholders who are non-residents of Canada to
receive such amounts exempt from 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.
Outlook for 1999
Syncrude anticipates its annual production in 1999 will total 82 million
barrels of Syncrude Sweet Blend at an expected unit operating cost of $13.27
per barrel. Capital expenditures are expected to total approximately $700
million in 1999. With the price of crude oil at or near historic lows,
capital spending coupled with Syncrude's pursuit of lower operating costs as
well as improved bitumen recovery and yield factors become increasingly
significant to enhancing the value of our Trust Units.
Based on Syncrude's current expectations for 1999 and an average oil
price of US$15.00 for the year, Canadian Oil Sands anticipates that its 1999
distributions will approximate $0.70 per Trust Unit. For every US$1.00
change in the West Texas Intermediate oil price, $0.50 per barrel change in
Syncrude's unit operating cost, 2 million barrel change in Syncrude's
production or US$0.01 change in the Canadian/US dollar exchange rate, Canadian
Oil Sands' 1999 distributions will be affected by $0.40, $0.14, $0.12 and
$0.06 per unit, respectively. In light of the current WTI price being less
than US$15.00, Syncrude is re-evaluating its capital expenditures and
operating costs for potential reductions or deferrals. To the extent
reductions or deferrals are realized, these distribution sensitivities may
change.
Unit Trading Activity
Canadian Oil Sands' units trade on the Toronto Stock Exchange under the
symbol CO.UN
Three Months Ended
------------------------------------------------------
December 31, September 30, June 30, March 31,
1998 1998 1998 1998
------------ ------------- -------- ---------
Unit Price ($)
- High 21.45 20.75 23.45 27.25
- Low 17.00 15.00 18.50 19.60
- Close 17.75 20.25 20.85 22.40
Volume Traded
(in 000's) 1,393 2,987 2,793 3,403
Average Number Of
Units Outstanding
(in 000's) 27,000 27,000 27,000 24,822
Certain information included in this Quarterly Report regarding, but not
limited to, cash distributions, production targets, crude oil prices, currency
exchange rates, unit operating costs and capital expenditures, is forward
looking and based upon assumptions and anticipated results that are subject to
uncertainties. Should one or more of these uncertainties materialize or
should the underlying assumptions prove incorrect, actual results may vary
significantly from those expected.
CANADIAN OIL SANDS TRUST
CONSOLIDATED STATEMENT OF TRUST ROYALTY AND DISTRIBUTABLE INCOME
(unaudited)
Three Months Year Ended
Ended December 31 December 31
----------------- ------------
1998 1997 1998 1997
------ ------ ------ ------
(thousands of dollars except per unit amounts)
Operating Cash Flow
Revenues $37,521 $59,983 $157,512 $210,496
Operating expenses (25,083) (23,528) (103,432) (103,768)
Administration expenses (692) (1,022) (2,893) (3,343)
Crown royalties (55) (9,420) (55) (20,184)
Interest expense (1,835) (1,011) (6,672) (4,270)
Large Corporations Tax (112) (82) (395) (318)
-------- -------- -------- --------
9,744 24,920 44,065 78,613
Capital expenditures (11,702) (7,538) (49,550) (35,358)
Utilization of Expansion
Financing (1) 3,800 - 17,600 -
Mining reclamation trust (230) (215) (816) (763)
Site restoration costs - (49) (323) (325)
Reserve - future production
costs 144 (3,092) 3,317 (3,282)
-------- -------- -------- --------
Base for Trust Royalty $1,756 $14,026 $14,293 $38,885
-------- -------- -------- --------
-------- -------- -------- --------
Trust Royalty at 99% $1,738 $13,886 $14,150 $38,496
Distribution of Surplus Cash - - - 3,353
Interest earned on Trust's
short term investments 1,073 - 3,781 -
Administration expenses of
Trust (69) (88) (381) (451)
-------- -------- -------- --------
Distributable income $2,742 $13,798 $17,550 $41,398
-------- -------- -------- --------
-------- -------- -------- --------
Distributable income per
Trust Unit $0.10 $0.60 $0.65 $1.80
-------- -------- -------- --------
-------- -------- -------- --------
(1) Includes $1.9 million of deferred payments related to lease
acquisitions.
CANADIAN OIL SANDS TRUST
CONSOLIDATED STATEMENT OF CHANGES IN CASH POSITION
(unaudited)
Three Months Year Ended
Ended December 31 December 31
----------------- ------------
1998 1997 1998 1997
------ ------ ------ ------
(thousands of dollars)
Cash provided by (used in):
Operating activities:
Net income $ 2,568 $ 16,922 $ 18,010 $ 51,247
Items not involving cash: 8,402 7,938 30,012 26,802
------- -------- -------- --------
Funds from operations 10,970 24,860 48,022 78,049
Net change in deferred items (278) 299 (629) (1,067)
Site restoration costs - (49) (323) (325)
Change in non-cash working
capital (5,043) 1,831 (7,458) 396
------- -------- -------- --------
5,649 26,941 39,612 77,053
------- -------- -------- --------
Financing:
Repayment of long-term debt - - - (95,000)
Issuance of Senior Notes
(US$70MM-7.625%) - - - 96,278
Cash distribution to
Unitholders (2,700) (13,800) (17,550) (41,400)
Issuance of Trust Units - - 91,950 -
------- -------- -------- --------
(2,700) (13,800) 74,400 (40,122)
------- -------- -------- --------
Investments:
Reclamation trust (230) (215) (816) (763)
Capital expenditures (11,702) (7,538) (49,550) (35,358)
------- -------- -------- --------
(11,932) (7,753) (50,366) (36,121)
------- -------- -------- --------
Increase (decrease) in cash (8,983) 5,388 63,646 810
Cash at beginning of period 92,563 14,546 19,934 19,124
------- -------- -------- --------
Cash at end of period $ 83,580 $ 19,934 $ 83,580 $ 19,934
------- -------- -------- --------
------- -------- -------- --------
CANADIAN OIL SANDS TRUST
CONSOLIDATED BALANCE SHEET
December 31, 1998 December 31, 1997
----------------- -----------------
(thousands of dollars)
ASSETS
Current assets:
Cash $ 83,580 $ 19,934
Restricted cash - 1,334
Accounts receivable 13,831 22,254
Inventories 11,486 10,424
Prepaid expenses 446 266
----------------- -----------------
109,343 54,212
Reclamation trust 1,994 1,178
Capital assets, net 445,636 423,559
Deferred Charges 12,584 6,029
----------------- -----------------
$ 569,557 $ $484,978
----------------- -----------------
----------------- -----------------
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities $ 13,690 $ 18,561
Unit distribution payable 2,700 13,800
Current portion of other
liabilities 2,825 675
----------------- -----------------
19,215 33,036
Other liabilities 11,853 13,690
Long-term debt 107,100 100,100
Future site reclamation and
restoration costs 9,019 8,192
Preferred shares of subsidiary 2,000 2,000
----------------- -----------------
149,187 157,018
Unitholders' equity 420,370 327,960
----------------- -----------------
$569,557 $484,978
----------------- -----------------
----------------- -----------------
CANADIAN OIL SANDS TRUST
CONSOLIDATED STATEMENT OF INCOME AND UNITHOLDERS' EQUITY
(unaudited)
Three Months Year Ended
Ended December 31 Ended December 31
------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(thousands of dollars except per unit amounts)
Revenues:
Syncrude Sweet Blend $37,819 $59,772 $157,100 $209,525
Other 775 213 4,193 979
--------- --------- --------- ---------
38,594 59,985 161,293 210,504
--------- --------- --------- ---------
Expenses:
Operating 25,083 23,528 103,432 103,768
Administration 760 1,110 3,273 3,794
Crown royalties 55 9,420 55 20,184
Interest 1,835 1,011 6,672 4,270
Depletion, depreciation
and amortization 8,105 7,857 29,156 26,703
Large Corporations Tax 112 82 395 318
Dividends on preferred shares
of subsidiary 76 55 300 220
--------- --------- --------- ---------
36,026 43,063 143,283 159,257
--------- --------- --------- ---------
Net income for the period 2,568 16,922 18,010 51,247
Unitholders' equity,
beginning of period 420,502 324,838 327,960 318,113
Proceeds on issue of 4,000,000
Trust Units - - 91,950 -
Cash distributions to
Unitholders (2,700) (13,800) (17,550) (41,400)
--------- --------- --------- ---------
Unitholders' equity,
end of period $420,370 $327,960 $420,370 $327,960
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income per Trust Unit $0.10 $0.74 $0.68 $2.23
--------- --------- --------- ---------
--------- --------- --------- ---------
Distributable income per
Trust Unit $0.10 $0.60 $0.65 $1.80
--------- --------- --------- ---------
--------- --------- --------- ---------
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
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