ENERGY TRUSTS / Athabasca Oil Sands Trust Reports Third Quarter Results
Distribution set at zero as Trust re-invests in Syncrude growth
CALGARY, Oct. 23 /CNW/ - The Board of Directors of Athabasca Oil Sands
Investments Inc. today announced that there would be no third quarter
distribution to unitholders of the Athabasca Oil Sands Trust. The decision
reflects the impact of large capital expenditures associated with expansion
being made in a low oil price environment.
The Board has decided that all available cash from operations should be
re-invested into the Syncrude project. Athabasca has funded approximately $13
million of its year-to-date 1998 capital and operating expenditures from
working capital. The Board believes that the decision to re-invest in
Syncrude's growth will enhance the fundamental value of the existing 27
million units.
''Athabasca reported net income of $0.20 per Trust Unit in the third
quarter, despite low oil prices and the unexpected shutdown,'' says Chairman
Walter O'Donoghue. ''Athabasca has a strong balance sheet and undrawn lines of
credit totaling $110 million, which gives us excellent liquidity to fund our
Syncrude obligations.''
Athabasca's Syncrude Sweet Blend (SSB) revenues were $41 million for the
third quarter of 1998, $26 million lower than the same period last year,
reflecting lower volumes and substantially lower crude oil prices. Third
quarter sales volumes of approximately 23,200 barrels per day were down more
than 4,000 barrels per day from both the same period a year earlier and from
second quarter 1998 volumes, reflecting the impact of the coker shutdown. SSB
prices averaged approximately $20.98 per barrel at the plant gate compared to
$27.01 per barrel in the third quarter of 1997. Athabasca's average price
received in the quarter, including the effects of currency hedging and
tariffs, was $19.24 per barrel, down from $26.85 per barrel a year earlier.
Sales volumes for the nine months ended September 30, 1998 were 23,865
barrels per day, at an average price of $20.92 at the plant gate. This
compares to 23,250 barrels per day at an average price of $28.00 per barrel
for the same period in 1997.
As the result of the unscheduled coker shutdown during the quarter, the
1998 production target for Syncrude has been revised downward by 2.5 million
barrels to 77.5 million barrels. Athabasca's share of this revised target is
9.1 million barrels or an average of 24,900 barrels per day. Reflecting this
revised target, the joint venture's capital spending plans and assuming a
continuation of low oil prices, Athabasca does not expect to make further
distributions in 1998.
Third Quarter Report Attached.
for the nine months ended September 30, 1998
- Athabasca re-invests in Syncrude project - no distribution this quarter
- Unscheduled coker shut-down reduces volumes
- Stage 1 of major expansion almost complete
- Construction underway on Aurora Train 1
- Net earnings of $0.20 per Trust Unit despite low oil prices
- Excellent liquidity to fund project expansions
RESULTS FROM OPERATIONS
Athabasca's third quarter 1998 Syncrude Sweet Blend (SSB) revenues were
$41 million, $26 million lower than the same period last year. This reflects
both lower crude oil prices and reduced volumes. Third quarter sales volumes
of 23,210 barrels per day were down more than 4,000 barrels per day from both
the same period a year earlier and from second quarter 1998 as the result of
an unscheduled 25-day coker shutdown. SSB prices averaged $20.98 per barrel
at the plant gate, down almost 25 percent from $27.01 per barrel in the third
quarter of 1997. Athabasca's average price received in the quarter, including
the effects of currency hedging and tariffs, was $19.24 per barrel, down from
$26.85 per barrel a year earlier. Operating expenses of $26 million were $4
million lower than those reported for the same quarter last year due to the
coker shutdown and cost saving initiatives. Sales volumes for the nine months
ended September 30, 1998 were 23,865 barrels per day, at an average price of
$20.92 at the plant gate. This compares to 23,250 barrels per day at an
average price of $28.00 per barrel for the same period in 1997. On a year-to-
date basis, per barrel operating costs of $13.94 were $0.93 less than the
$14.87 per barrel achieved in 1997, as a result of cost saving initiatives and
increased production. There were no Crown royalties paid in the quarter,
reflecting a reduced net profit combined with a royalty credit for 43 per cent
of capital expenditures.
CASH FLOWS
Cash flow from operations was $13 million and $28 million, respectively,
for the three and nine months ended September 30, 1998, compared to $30
million and $59 million for the same periods in 1997. Athabasca's share of
capital expenditures in the third quarter was $15 million, $4 million higher
than the third quarter of 1997, while year-to-date it was $42 million, $9
million higher than a year earlier. The two major capital initiatives to date
include:
1) the completion of the Debottleneck 1 project, which provides the
upgrading capacity to handle the increased production expected when
the second train in the North Mine becomes operational next September;
and
2) the start of construction of the first mining train and the
Debottleneck 2 project at Aurora. Both components of the Aurora
project are under construction on an accelerated schedule to start up
in mid-2000.
DISTRIBUTABLE INCOME
Distributable income is directly related to the royalty that the Trust
receives from Athabasca Oil Sands Investments Inc. The Trust Royalty is the
net result of Syncrude operations, capital and the administrative costs and
expenses associated with Athabasca. From time to time, management retains
certain funds in working capital as a reserve to meet future cash needs.
During the third quarter, Athabasca drew down its working capital to fund
Syncrude capital expenditures.
On a year-to-date basis, Athabasca has funded approximately $13 million
of its capital expenditures with working capital. Faced with lower net
revenues, large capital expenditures associated with expansion and the
prevailing uncertainty in crude oil commodity markets, the Board of Directors
elected not to make a third quarter distribution and to re-invest all of its
available cash from operations into the Syncrude project. The Board believes
the decision to make growth-oriented capital investments will enhance the
fundamental value of the existing 27 million units. Consequently, year-to-date
distributions remain at $0.05 per unit, compared to $0.50 per unit in the
third quarter of 1997 and $1.15 per unit for the nine months ended September
30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 30, 1998 was approximately $6.5 million
lower than at June 30, 1998. This change reflects a decrease in cash and an
increase in accounts payable, partially offset by a decrease in short-term
borrowings and an increase in inventories and accounts receivable. During the
quarter, Athabasca repaid $3 million of short-term borrowings, so that there
was no money drawn on either of Athabasca's $100 million syndicated loan or
$10 million demand line at the end of the quarter.
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 attempts to hedge 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 in the amount of $72 million, $84 million, $84
million and $96 million in 1998, 1999, 2000 and 2001 respectively, at exchange
rates between US$0.766 and US$0.770 to C$1.00. This hedging activity has
essentially eliminated exchange-rate effects on Athabasca revenues. However,
Athabasca's revenues have not benefited from the decline in the Canadian
dollar as the benefit has been offset by losses on the foreign exchange hedge.
Based on the September 30, 1998 exchange rate of US$0.653, had these contracts
been settled for cash, the loss would have been about $66 million.
SYNCRUDE
Shipments of Syncrude Sweet Blend totaled 18.7 million barrels for the
quarter, down from 21.3 million barrels in the same quarter last year. Despite
this single quarter impact, year-to-date shipments totaled 55.9 million
barrels, 1.8 million barrels ahead of the record pace set in 1997.
INCOME TAXES
As a result of Athabasca Oil Sands Trust's significant tax pools,
unitholder distributions are expected to continue to be treated as return of
capital for approximately the next three years, reducing an investor's cost
base by the amount of distributions received.
OUTLOOK
As the result of the unscheduled coker shutdown, the 1998 production
target for Syncrude has been revised downward by 2.5 million barrels to 77.5
million barrels. Athabasca's share of this target would be 9.1 million
barrels or an average of 24,900 barrels per day. Reflecting this revised
target and continued low oil prices, Athabasca does not expect to make further
distributions in 1998.
On behalf of the Board of Directors of Athabasca Oil Sands Investments
Inc.,
Walter B. O'Donoghue Henry W. Sykes
Chairman President and Chief Executive Officer
October 23, 1998
Consolidated Balance Sheets
September 30, December 31,
1998 1997
(unaudited)
-------------------------------------------------------------------------
(thousands of dollars)
-------------------------------------------------------------------------
ASSETS
Current assets:
Cash $1,480 $29,169
Accounts receivable 22,439 23,876
Inventories 16,950 14,510
Prepaid expenses 957 383
-------------------------------------------------------------------------
41,826 67,938
Reclamation trust 1,454 970
Capital assets, net 396,215 372,684
Deferred charges 12,023 4,675
-------------------------------------------------------------------------
$451,518 $446,267
-------------------------------------------------------------------------
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities 27,221 25,167
Unit distribution payable 0 13,500
Current portion of other liabilities 4,985 1,986
-------------------------------------------------------------------------
32,206 40,653
Other liabilities 12,824 14,518
Long-term debt 113,806 106,226
Future site restoration and reclamation costs 13,647 13,042
Preferred shares of subsidiary 2,400 2,400
-------------------------------------------------------------------------
174,883 176,839
-------------------------------------------------------------------------
Unitholders' equity
Trust Units 254,975 254,975
Retained earnings 21,660 14,453
-------------------------------------------------------------------------
276,635 269,428
-------------------------------------------------------------------------
$451,518 $446,267
-------------------------------------------------------------------------
Consolidated Statements of Income and Retained Earnings
(Unaudited)
Three months Nine months
ended September 30, ended September 30,
1998 1997 1998 1997
-------------------------------------------------------------------------
(thousands of dollars, except per unit amounts)
-------------------------------------------------------------------------
Revenues:
Syncrude Sweet Blend $41,095 $67,566 $127,893 $177,613
Other 60 148 333 547
-------------------------------------------------------------------------
41,155 67,714 128,226 178,160
-------------------------------------------------------------------------
Expenses:
Operating 26,345 30,247 90,833 94,385
Administration and other 685 1,046 2,079 3,074
Crown royalties 0 9,745 0 12,399
Finance charges 2,417 2,216 7,055 6,970
Depletion, depreciation
and amortization 6,305 7,789 19,195 20,682
Dividends on preferred
shares of subsidiary 90 66 270 198
-------------------------------------------------------------------------
35,842 51,109 119,432 137,708
-------------------------------------------------------------------------
Income before taxes 5,313 16,605 8,794 40,452
Capital and other taxes 111 5 237 180
-------------------------------------------------------------------------
Net income for the period 5,202 16,600 8,557 40,272
Retained earnings, beginning
of period 16,458 8,451 14,453 2,329
Unit distributions 0 (13,500) (1,350) (31,050)
-------------------------------------------------------------------------
Retained earnings, end of
period $21,660 $11,551 $21,660 $11,551
-------------------------------------------------------------------------
Net income per Trust Unit $0.20 $0.62 $0.32 $1.49
-------------------------------------------------------------------------
Consolidated Statements of Changes In Financial Position
(Unaudited)
Three months Nine months
ended September 30, ended September 30,
1998 1997 1998 1997
-------------------------------------------------------------------------
(thousands of dollars)
-------------------------------------------------------------------------
Cash provided by (used in):
Operations:
Net income $5,202 $16,600 $8,557 $40,272
Items not involving cash:
Depletion, depreciation
and amortization 6,422 7,807 19,425 22,220
Site restoration costs 0 0 (379) (325)
Contribution to reclamation
trust (164) (151) (484) (383)
Change in non-cash working
capital 1,429 5,834 598 (3,257)
-------------------------------------------------------------------------
12,889 30,090 27,717 58,527
-------------------------------------------------------------------------
Investments:
Capital assets (15,478) (10,857) (41,861) (32,651)
-------------------------------------------------------------------------
Sub-total (2,589) 19,233 (14,144) 25,876
-------------------------------------------------------------------------
Financing:
Increase in long-term debt 0 0 0 102,876
Repayment of long-term debt 0 0 0 (95,000)
Increase in short-term loan 0 0 3,000 0
Repayment of short-term
loan (3,000) 0 (3,000) 0
Net restricted cash 0 3,347 0 3,550
Deferred financing costs 0 (24) 0 (1,407)
Increase (decrease) in other
liabilities (532) (529) 1,305 (2,027)
-------------------------------------------------------------------------
(3,532) 2,794 1,305 7,992
-------------------------------------------------------------------------
Other:
Unit distributions paid 0 (5,400) (14,850) (39,150)
-------------------------------------------------------------------------
0 (5,400) (14,850) (39,150)
-------------------------------------------------------------------------
Increase (decrease) in cash (6,121) 16,627 (27,689) (5,282)
Cash, beginning of period 7,601 7,657 29,169 29,566
-------------------------------------------------------------------------
Cash, end of period $1,480 $24,284 $1,480 $24,284
-------------------------------------------------------------------------
Statements of Trust Royalty and Distributable Income
(Unaudited)
Three months Nine months
ended September 30, ended September 30,
1998 1997 1998 1997
-------------------------------------------------------------------------
(thousands of dollars, except per unit amounts)
-------------------------------------------------------------------------
Revenues and expenses of
Athabasca Oil Sands
Investments Inc.
Revenues $41,154 $67,714 $128,221 $178,156
Operating expenses (26,345) (30,247) (90,833) (94,385)
Administration and other (577) (917) (1,622) (2,603)
Crown royalties 0 (9,745) 0 (12,399)
Interest on long-term debt (2,396) (2,195) (6,993) (5,428)
Capital taxes (111) (5) (237) (180)
-------------------------------------------------------------------------
11,725 24,605 28,536 63,161
Capital expenditures (15,482) (10,852) (39,097) (33,238)
Additional borrowings 0 0 3,000 7,876
Repayment of borrowings (3,000) 0 (3,000) 0
Site restoration costs 0 0 (379) (325)
Mining reclamation trust (164) (151) (484) (383)
Financing costs 0 (24) 0 (1,407)
Reserve - future operations 7,028 189 13,243 (3,848)
-------------------------------------------------------------------------
Base for Trust Royalty $107 $13,767 $1,819 $31,836
-------------------------------------------------------------------------
Trust Royalty at 99% $106 $13,629 $1,801 $31,517
Interest income of Trust 2 0 6 4
Administrative expenses of
Trust (108) (129) (457) (471)
-------------------------------------------------------------------------
Distributable income from
operations $0 $13,500 $1,350 $31,050
-------------------------------------------------------------------------
Distributable income from
operations per Trust Unit $0.00 $0.50 $0.05 $1.15
------------------------------------------------------------------------- |
