Oil & Gas Job Listings
CALGARY, July 25 /CNW/ - Canadian Oil Sands Trust ("Canadian Oil Sands" or the "Trust" or "we") (TSX - COS.UN) today announced funds from operations rose 14 per cent to $324 million, or $0.70 per Unit, in the second quarter of 2006 compared to $284 million, or $0.62 per Unit, for the same 2005 quarter. In the first six months of 2006, funds from operations rose to $465 million, or $1.00 per Unit, from $377 million, or $0.82 per Unit, in 2005. The increase in funds from operations for both the three and six month periods ended June 30, 2006 reflect higher realized Syncrude(TM) Sweet Blend ("SSB") selling prices and sales volumes, partially offset by an increase in expenses and Crown royalties. The Trust is declaring a quarterly distribution of $0.30 per Unit for Unitholders of record on August 4, 2006 payable on August 31, 2006.
"While we are pleased with the quarter's strong financial results, the suspension of our Stage 3 expansion has been disappointing," said Marcel Coutu, President and Chief Executive Officer. "We are in the process of resuming Stage 3 operations and expect incremental production to come on-stream in early August. Aside from the odour issues, Stage 3 operations were performing as expected, leaving us optimistic about the potential contribution this expansion could have on our results for the remainder of the year."
Second Quarter 2006 overview - Net income was $337 million, or $0.72 per Unit, in the second quarter of 2006, up from $219 million, or $0.48 per Unit, in the same 2005 period. Net income before unrealized foreign exchange and future income tax, which management believes is a better measure of operational performance than net income, was $259 million, or $0.56 per Unit, in the second quarter of 2006 compared to $233 million, or $0.51 per Unit, in the same period of 2005. For the first six months of 2006 and 2005, respectively, net income before unrealized foreign exchange and future income tax rose to $346 million, or $0.75 per Unit, from $293, or $0.64 per Unit. - The increase in net income before unrealized foreign exchange and future income tax for the second quarter of 2006 reflects higher realized SSB selling prices and sales volumes, partially offset by an increase in operating, depreciation and depletion expenses, and Crown royalties. The same factors also impacted net income for the first half of the year, although higher non-production costs in 2006 compared to the same 2005 period further reduced 2006 year-to-date net income. - Canadian Oil Sands' 2006 sales volumes averaged 86,000 barrels per day in the second quarter and 81,000 barrels per day for the first half of the year compared to 80,000 barrels per day and 70,000 barrels per day for the respective 2005 periods. - Operating costs in the second quarter of 2006 increased to $28.48 per barrel from $21.35 per barrel in 2005. The 33 per cent rise in per barrel operating costs primarily reflects the shift to an expanded operating facility to support the Stage 3 project without an offsetting increase in production. The new Stage 3 units coming into operation also contributed to an 18 per cent rise in per barrel purchased energy costs. In addition, the increase in operating costs reflects higher costs associated with Syncrude's long term incentive compensation and employee retention programs. On a year-to-date basis, operating costs rose to $33.92 per barrel in 2006 compared to $28.51 per barrel in 2005. - Capital expenditures declined to $59 million in the second quarter of 2006 from $205 million in 2005 with approximately 28 per cent of second quarter 2006 expenditures related to Stage 3 compared to about 75 per cent in the same 2005 period. The Stage 3 project is now essentially complete, although expenditures related to final site clean-up and improvements remain to be incurred, which are estimated at $115 million, gross to Syncrude. - Net debt to book capitalization was 30 per cent at the end of the second quarter of 2006, down from 33 per cent at December 31, 2005. ------------------------------------------------------------------------- CANADIAN OIL SANDS TRUST Highlights (millions of Canadian dollars, except Trust unit and volume amounts) Three Months Ended Six Months Ended June 30 June 30 -------------------- -------------------- 2006 2005 2006 2005 --------- --------- --------- --------- Net Income $ 337 $ 219 $ 428 $ 278 Per Trust unit - Basic $ 0.72 $ 0.48 $ 0.92 $ 0.61 Per Trust unit - Diluted $ 0.72 $ 0.48 $ 0.92 $ 0.61 Funds From Operations $ 324 $ 284 $ 465 $ 377 Per Trust unit $ 0.70 $ 0.62 $ 1.00 $ 0.82 Unitholder Distributions $ 139 $ 46 $ 232 $ 92 Per Trust unit $ 0.30 $ 0.10 $ 0.50 $ 0.20 Syncrude Sweet Blend Sales Volumes(x) Total (MMbbls) 7.9 7.2 14.6 12.6 Daily average (bbls) 86,394 79,506 80,693 69,755 Per Trust unit (bbls/Trust unit) - 0.1 - 0.1 Operating Costs per barrel $ 28.48 $ 21.35 $ 33.92 $ 28.51 Net Realized Selling Price per barrel Sales revenue $ 79.76 $ 68.99 $ 75.46 $ 66.95 Transportation and marketing expense (1.43) (1.64) (1.37) (1.60) --------- --------- --------- --------- Realized selling price before hedging $ 78.33 $ 67.35 $ 74.09 $ 65.35 Currency hedging gains (losses) 1.02 0.68 1.04 0.82 --------- --------- --------- --------- Net realized selling price $ 79.35 $ 68.03 $ 75.13 $ 66.17 --------- --------- --------- --------- --------- --------- --------- --------- West Texas Intermediate ($US per barrel) $ 70.72 $ 53.22 $ 67.13 $ 51.66 --------- --------- --------- --------- --------- --------- --------- --------- (x) The Trust's sales volumes may differ from its production volumes due to changes in inventory, which are primarily in-transit pipeline volumes. -------------------------------------------------------------------------
Second quarter production impacted by planned coker turnaround Figures provided below are the gross Syncrude numbers and are not the Trust's net share.
SSB production during the second quarter of 2006 totalled 21.9 million barrels, or approximately 241,000 barrels per day, compared to 21.3 million barrels, or approximately 234,000 barrels per day in the second quarter of last year. For the six months ended June 30, 2006 production was up 14 per cent to 40.4 million barrels, or 223,000 barrels per day, compared to 35.4 million barrels, or 196,000 barrels per day, in the same 2005 period.
The startup of Coker 8-3 temporarily contributed incremental production volumes during the second quarter of 2006 while the extension of the Coker 8-1 turnaround into April was the primary factor in reducing production. In the same quarter of 2005, production was impacted by repairs to a hydrogen plant, feed restrictions in our vacuum distillation unit, and sulphur pump difficulties. For the first half of both 2006 and 2005, production was impacted by extended coker turnarounds, although 2005 production was further reduced by the hydrogen plant repairs, feed restrictions in the vacuum distillation unit, and sulphur pump repairs.
Syncrude employees and contractors recorded a lost time injury rate of 0.15 per 200,000 workforce hours during the first half of 2006, not as strong as last year's rate but still among the best in the industry.
Syncrude announced a major donation of $2.5 million in May 2006 to help meet the growing need for greater recreational facilities in Fort McMurray. This donation constitutes the largest single community investment ever made in Syncrude's history, and commemorates the completion of the Stage 3 expansion.
Stage 3 operations resume
Syncrude has resumed start-up activities for its Flue Gas Desulphurization ("FGD") Unit and other associated operating units. Once the units reach stable operation, Syncrude plans to introduce bitumen feed into Coker 8-3 with incremental production from Stage 3 coming on-stream shortly thereafter. Syncrude currently anticipates that bitumen feed will be introduced into Coker 8-3 in early August, the exact timing of which is dependent upon successful start-up of the remaining Stage 3 units.
Syncrude obtained regulatory approval from Alberta Environment to resume operations of the facilities after investigating the source of odorous emissions, and undertaking facilities modifications and other steps to help prevent a similar occurrence. Odours were reported by the local communities following the start-up of Syncrude's Stage 3 expansion on May 8, and led to the temporary shut-down of the expansion on May 18. The new FGD Unit is an important part of Syncrude's commitment to improving environmental performance by reducing its sulphur dioxide emissions.
Syncrude has expended the total estimated Stage 3 project costs of $8.4 billion with the completion of the project in the second quarter. Ancillary costs, such as final site clean-up and recently identified improvements, totalling approximately $115 million, gross to Syncrude, remain to be incurred.
Canadian Oil Sands to acquire Canada Southern Petroleum Ltd.
The Trust's wholly-owned subsidiaries, Canadian Oil Sands Limited and 1212707 Alberta Ltd., have offered to purchase all of the outstanding common shares of Canada Southern Petroleum Ltd. ("Canada Southern") for cash consideration of US$13.10 per common share (or approximately Cdn$224 million in aggregate).
Canada Southern owns mostly carried interests in seven significant discovery licenses in the Arctic islands that, based on available information and Canada Southern's internal estimates, represent a net recoverable resource of approximately 927 billion cubic feet equivalent of natural gas. This resource provides Canadian Oil Sands with a unique opportunity to reduce the risk of significant future natural gas price increases on its Syncrude oil sands production, and to participate in the future development of a long-life energy resource. The acquisition will not change the Trust's business model or strategy as Canadian Oil Sands plans to dispose of Canada Southern's conventional natural gas assets, and with mostly carried interests in the Arctic assets, there is no requirement to fund any field development costs. The Trust plans to finance the acquisition entirely with bank debt and funds from operations. Following the sale of the conventional assets, the transaction cost should represent less than two months of funds from operations, modestly deferring our overall debt reduction target timing accordingly.
Our offer to purchase all of the issued and outstanding shares of Canada Southern expires on August 1, 2006. If 90 per cent or more of the Canada Southern shares are tendered into our offer, we intend to use the compulsory acquisition rules to acquire the remainder of the shares. If we obtain 66 2/3 per cent but less than 90 per cent, we will take up the Canada Southern shares tendered and extend the offer for another ten days to about August 11, 2006. Following the acquisition of Canada Southern, we intend to sell the conventional oil and natural gas assets through an auction process. It is anticipated that the purchase and the subsequent sale will not be finalized until year end. Canadian Oil Sands has received approval in the form of an advance ruling certificate from the Canada Competition Bureau to proceed with the acquisition.
Distribution reinvestment plan (DRIP)
Eligible Unitholders who wish to participate in the Trust's current DRIP must file their election form, in the case of registered Unitholders, with Computershare Trust Company of Canada at the number or address noted on the enrolment forms before the August 4, 2006 record date. Unitholders who hold their Units in the name of a broker should contact their broker to ensure that the proper election forms are completed and sent in before August 4, 2006. Information on the plan and enrolment forms are available on the Trust's web site or by calling Investor Relations. The Trust has previously announced it plans to modify the DRIP once it approaches its debt target to allow only reinvestment of distributions at a volume-weighted average market price with no discount, which should be implemented around the end of this year.
Foreign ownership update
Based on information from the statutory declarations by Unitholders, we estimate that, as of May 8, 2006 approximately 36 per cent of our Unitholders are non-Canadian residents with the remaining 64 per cent being Canadian residents. Canadian Oil Sands' Trust Indenture provides that not more than 49 per cent of its Units can be held by non-Canadian residents.
The Trust continues to monitor its foreign ownership levels on a regular basis through declarations from Unitholders. The next declarations to be requested will be as of August 4, 2006. The Trust plans to post the results of the declarations on its web site at www.cos-trust.com under investor information, frequently asked questions. This section of the web site and page 45 of the Management's Discussion and Analysis section of the Trust's 2005 annual report describe the Trust's steps for managing its non-Canadian resident ownership levels.
2006 Outlook
The following provides Canadian Oil Sands' outlook for 2006 as of July 25, 2006 and is subject to change without notice. Certain information regarding the Trust and Syncrude set forth below, including management's assessment of the expected timing of Stage 3 operations being fully resumed, the closing of the proposed acquisition of Canada Southern and its impact on reaching the Trust's debt target, expectation that Canada Southern's natural gas resource will provide a low cost financial hedge against the impact of significant rising natural gas prices on our business and the future production of natural gas from the Arctic licenses and that the Arctic licenses will be developed at some time in the future; resources are not the same as reserves and may not be recognized under applicable Canadian or US securities rules and regulations; the Trust's future production revenues and costs for 2006, the maintenance schedule for the remainder of 2006, crude oil prices for the year, and the start-up and production from Stage 3 in 2006, may constitute forward-looking statements under applicable securities law. Forward-looking statements often contain terms such as "may", "will", "should", "anticipate", "expects" and similar expressions. These statements represent management's current expectations and beliefs based on information known today. However, by their nature, forward-looking statements necessarily involve risks and uncertainties, known and unknown, which may cause actual performance and financial results in future periods to materially differ from the estimations or results expressed or implied by such forward-looking statements. For more detail on the factors and risks that could potentially impact the outlook, please refer to the Management's Discussion and Analysis section of the second quarter 2006 report and the July 25, 2006 guidance document, as well as the risk factors contained in the Trust's annual information form, all of which are available on the Trust's web site at www.cos-trust.com under investor information. The information in these sections is all forward-looking, and as such, is qualified by this advisory. Unless required by law, the Trust assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change.
Canadian Oil Sands has revised its outlook for 2006 as follows. More information on the Trust's outlook is available in its Guidance Document dated July 25, 2006, which is posted on the Trust's website at http://www.cos-trust.com/investor/guidance.aspx.
- Syncrude production in 2006 has been revised to range from 85 to
95 million barrels, or 30 to 34 million barrels net to the Trust
based on our 35.49 per cent interest. The single point estimate
has been reduced from 95 to 90 million barrels, or 32 million
barrels net to the Trust, primarily due to the delay in restarting
Stage 3 operations as well as additional contingency for further
unplanned outages. The high end of the revised production range
assumes a stable re-start of Stage 3 operations without any
significant future operational shutdowns while the low end assumes
current production levels for the remainder of the year. The next
coker turnaround is assumed to occur in 2007, as currently
scheduled.
- Production in the third quarter of 2006 is estimated at
24 million barrels, or 8.5 million barrels net to the Trust, which
reflects the currently scheduled early August start-up of
Coker 8-3.
- Funds from operations in 2006 are anticipated to total
$1.0 billion, or $2.22 per Unit, based on an average WTI crude
oil price of US$67.50 per barrel and a foreign exchange rate of
$0.90 US/Cdn for the year.
- Operating costs are estimated to total $902 million, or $28.25
per barrel, which includes $7.43 per barrel of purchased energy
at an estimated $7.00 per gigajoule ("GJ") natural gas price. The
higher per barrel operating cost reflects the incremental fixed
costs of supporting Syncrude's Stage 3 productive capacity without
an offsetting increase in production as the units start-up. In
addition, while the forecast for 2006 natural gas prices has been
reduced, purchased energy consumption is expected to average
approximately 1.1 GJs per barrel as a result of fluctuating
production levels while the Stage 3 expansion is brought into
operation. Beyond 2006, per barrel energy consumption is expected
to be approximately 0.85 GJs per barrel.
- Our estimate for 2006 capital expenditures decreased to $328
million, from $367 million due to a reduction in maintenance of
business projects and deferral of a portion of the Stage 3 and
Syncrude Emissions Reduction Project costs into subsequent years.
- Of the approximately $224 million total acquisition cost for
Canada Southern, Canadian Oil Sands expects to incur a net cost of
$150 million, after disposition of the producing assets and
liquidation of working capital.
- Under the Trust's 2006 outlook, we anticipate reaching our net
debt target of approximately $1.2 billion in the first quarter of
2007. Once we have achieved our net debt target, unless capital
investment growth opportunities exist that we believe would offer
Unitholders better value, we intend to approach full payout of our
free cash flow (funds from operations less capital expenditures
and reclamation trust contributions).
- We estimate that approximately 95 per cent of the distributions
pertaining to 2006 will be taxable as other income with the
remainder classified as a tax-deferred return of capital. The
actual taxability of the distributions will be determined and
reported to Unitholders prior to the end of the first quarter of
2007.
The full text of this second quarter release, including the Management's Discussion and Analysis, can be accessed on Canadian Oil Sands Trust's Web site at http://www.cos-trust.com/investor/financial/finR_2006.aspx, or through SEDAR at www.sedar.com.
Canadian Oil Sands Trust provides a pure investment opportunity in the Alberta oil sands through its 35.49 per cent working interest in the Syncrude Project. Located near Fort McMurray, Alberta, Syncrude operates a large oil sands mining and upgrading facility that produces a light, sweet crude oil. Canadian Oil Sands is an open-ended investment trust, which allows it to distribute the free cash flow it generates from the Syncrude Project to Canadian Oil Sands' investors on a tax-efficient basis. The Trust is managed by Canadian Oil Sands Limited and has approximately 466 million units outstanding, which trade on the Toronto Stock Exchange under the symbol COS.UN.
Canadian Oil Sands Limited Marcel Coutu President & Chief Executive Officer Units Listed - Symbol: COS.UN Toronto Stock Exchange
For further information
Siren Fisekci, Director, Investor Relations, (403) 218-6228, investor_relations@cos-trust.com
Web site: www.cos-trust.com
Source: Canadian Oil Sands Trust
