By: Dave Van Geem
Canadian Oil Sands (TSX:COS), the largest owner of the Syncrude Project in the Athabasca oil sands deposit in Alberta, reports second-quarter earnings Tuesday. Here’s a quick profile of two things to watch for:
Earnings
COS is currently yielding 6.7% on a dividend of $1.40. Last time around, it reported the following results, and said unexpected outages at its upgrader and in the mining area hurt production volumes:
| Highlights | First quarter 2013 | First quarter 2012 |
| Cash flow from operations ($ millions) | $275 | $454 |
| Cash flow from ops per share | $0.57 | $0.94 |
| Net income ($ millions) | $177 | $318 |
| Net income per share | $0.37 | $0.66 |
| Sales volumes: Total (mmbbls) | 8.6 | 9.8 |
| Sales volumes: Daily average (bbls) | 95,683 | 108,108 |
| Realized SCO selling price ($/bbl) | $96.11 | $97.07 |
| Operating expenses ($/bbl) | $41.20 | $32.58 |
| Capital expenditures ($ millions) | $268 | $141 |
| Dividends ($ millions) | $170 | $145 |
| Dividends per share | $0.35 | $0.30 |
Source: Canadian Oil Sands first-quarter report.
Investors should start by looking closely at the sales volumes. With repairs completed last quarter, the daily average volumes should be approaching 110,000 bbls/day. Canadian Oil Sands should see improvements in operating expenses as well.
Capital expenditures
The company has undertaken a number of multi-year capital projects. At the end of the first quarter, management reported the following:
|
Project |
Total Cost Estimate ($Billion) |
Estimate Complete Q1 2013 |
In Service Target Date |
|
Mildred Lake Mine Train Replacement |
$1.6 |
45% |
Q4 2014 |
|
Aurora North Mine Train Relocation |
$0.4 |
60% |
Q1 2014 |
|
Aurora North Tailings Management |
$0.3 |
75% |
Q4 2013 |
|
Centrifuge Tailings Management |
$0.7 |
15% |
H1 2015 |
Source: Canadian Oil Sands company statements.
On Tuesday I’d like to see continued progress on all four — without any surprises in cost projections. Notably, Aurora North should come in at 85% complete or higher to ensure commissioning on time. This project can be seen as a bellwether representing how well the company is managing projects.
The final word
Canadian Oil Sands is in the midst of four expensive capital refurbishment projects. In my view, executing on these expensive projects — on time, on budget — while maintaining current production will be key to ensuring the health of the company moving forward.
Do you like the fact that Canadian Oil Sands pays an attractive dividend? Want more dividend paying stocks like COS in your portfolio? To help take the guesswork out of dividend investing, The Motley Fool assembled a Special FREE Report, “13 High-Yielding Stocks to Buy Today“. Simply click here now to receive a copy at no charge!
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.
Follow us on Twitter and Facebook for the latest in Foolish investing.
Fool contributor Dave Van Geem owns shares of Canadian Oil Sands. The Motley Fool doesn’t own shares in any of the companies mentioned.
