PR: Canadian Oil Sands Q4 profits slip as lower prices offset higher volumes
Canadian Oil Sands (COS) (TSE:COS) saw its profits fall in its fourth quarter, missing expectations on lower oil prices, despite an increase in production rates.
The company, the largest stakeholder of Syncrude Canada Ltd., late Thursday released its fourth quarter results which fell 2.73 per cent to $20.99 in after-hours trading.
For the quarter ended December 31, COS reported net of $221 million or 46 cents per share, down from $232 million or 48 cents per share a year earlier.
Analysts polled by Thomson Reuters had expected a profit of 50 cents per share.
Sales totalled $1 billion, up 2.7 per cent from $973 million in the year-ago quarter.
The company said that cash flow from operations rose 15 per cent to $418 million or 86 cents per share, reflecting higher sales volumes, which were partially offset by a lower realized selling price.
During the quarter, sales increased 22 per cent to an average of 111,669 barrels per day, with operating costs of about C$38.85 a barrel, compared with $46.88 last year. The average price for its synthetic crude fell to $89.99 per barrel, down 14 per cent from the year-ago period.
The company’s Syncrude operations produced an average of 298,900 barrels per day for a total of 27.5 million barrels during the fourth quarter, up from 252,300 barrels per day or a total of 23.2 million barrels a year ago.
"Our average realized selling price of $92 per barrel in 2012 was relatively strong, given the dynamics of North American crude oil markets,” said president and CEO Marcel Coutu.
“As a result of limited transportation capacity, the WTI benchmark price for crude oil traded at a discount of about $18 per barrel relative to global crude oil prices, which averaged $112 per barrel in 2012.”
Coutu said that producers in western Canada generally experienced a further discount to WTI oil prices.
“However, pricing for our high-quality [synthetic crude oil] SCO blend averaged a discount of only $2.50 per barrel relative to WTI, demonstrating the value of our upgrader.”
COS expects the differential between WTI and global crude oil prices to narrow as additional pipeline capacity comes on through 2013 and 2014.
“Our unhedged approach allows us to capture any upside in WTI oil prices,” Coutu added.
The company’s net debt decreased to $241 million as at December 31, from $414 million in the year-ago period.
COS said net debt levels are expected to rise over the next two years, as it draws down its $1.55 billion cash balance to fund the major capital projects program.
During 2012, the company paid a total of $654 million, or $1.35 per share, in dividends to shareholders. The company maintained its quarterly dividend at 35 cents per share, payable on February 28, to shareholders of record on February 22.
In 2013, estimate an annual production range for Syncrude is between 105 million and 115 million barrels.
Sales, net of crude oil purchases and transportation expense, are expected to come in at $3.2 billion on a production estimate of 40.4 million barrels and an $80 per barrel plant-gate realized selling price, the company noted.
Capital expenditures are estimated to total $1.3 billion.
"Our outlook for 2013 is based on an $80 per barrel plant-gate realized selling price and a five per cent increase in production rates over 2012,” Coutu said.
“We will continue to conservatively manage our business as we progress through our capital program, and we are well positioned at this time both financially and operationally."
