Canadian Oil Sands profits triple
Canadian Oil Sands Inc. on Thursday kicked off the fourth quarter earnings season with profits that more than tripled over last year on the strength of higher production and oil prices.
The Calgary-based-company said it made $311 million or 64 cents per unit compared to $96 million or 20 cents per unit in the same period of 2009.
Canadian Oil Sands is the largest working interest owner in Syncrude Canada, the largest oilsands producer in the world. The results marked its final quarter as a royalty trust before converting to a corporation effective Dec. 31, 2010.
“We quickly recaptured the higher profit margins of a rising oil price due to our unhedged position, resulting in cash flow and earnings more than doubling year-over-year,” Marcel Coutu, the company’s president and CEO said.
Full-year profits of $886 million or $1.83 per share in 2010 compared with $432 million 89 cents per share in 2009. The increase mainly reflects higher revenues partially offset by higher operating expenses, higher Crown royalties and smaller foreign exchange gains on the U.S. dollar denominated long-term debt in 2010, Canadian Oil Sands said.
Quarterly distributions of 50 cents per unit were slashed to 20 cents in December, a level which Coutu said “primarily reflects the reinvestment of a greater share of our cash flow to maintain and grow our mining and bitumen production facilities over the coming years. We also take a longerterm view when establishing dividend levels to help minimize frequent adjustments, particularly in response to moves in crude oil prices.”
The company’s share of Syncrude production amounted to 108,000 barrels per day (bpd) in 2010 compared to 103,000 bpd in 2009. However, fourth quarter production dipped to 115,000 bpd from 119,000 bpd in the similar period of 2009 due to planned maintenance.
A barrels of Syncrude synthetic went for $83.97 a barrel in the quarter, up from $78.67 in 2009, offsetting a hefty jump in operating costs that rose to $37.35 a barrel from $30.18 in the comparable period.
The earnings release no mention of the Enbridge pipeline outages that reportedly forced Syncrude to put oil in storage although Canadian Oil Sands’ obligatory disclaimer identifies pipeline capacity and refinery demand as a potential risk to its operations.
Despite higher realized prices for synthetic oil, Scotiabank commodities expert Patricia Mohr said Alberta’s oilsands producers are not realizing full value for their product due to limited export capacity to foreign markets.
Pointing to European Brent oil prices that approached $98 a barrel on Thursday, Mohr said the difference between North American prices was about $11 or 12 per cent representing what she called a “commercial risk” for Alberta’s oil producers.
She said the gap could be closed with a combination of increased export capacity to the Gulf of Mexico and access to Asian markets in the form of a pipeline or rail link to the West Coast.
“I really think the producers need to diversify their export markets,” she said. “You’d be able to play those markets against each other which would tend to level prices between those markets.”