TSX Commentary » Canadian Oil Sands Trust

Canadian Oil Sands Trust COS.UN We View COS as Fully Valued

admin — Fri, 29 Jan 2010 19:14:48 +0000

Veritas Research: Canadian Oil Sands Trust (COS.UN) – $27.99 – We View COS as Fully Valued
Sell, Intrinsic Value Estimate: $30.50 (w/ Oil at $80USD/bbl)
Syncrude finally proved it can run flat out in Q4, having emerged from its debottlenecking efforts to produce 327,000 barrels per day (bpd) – 120 thousand bpd net to Canadian Oil Sands (COS). Better still Syncrude operated at 361,100 bpd in December, slightly above its rated capacity. With a planned turnaround being moved up into Q1, and unplanned outages this January, Syncrude production is forecast to fall below 280,000 bpd in the first quarter. While the forecast is for Syncrude to run at better than 325,000 bpd for the rest of the year, until it can put at least a quarter of decent performance behind it, Veritas sees a
distribution increase for COS as unlikely. From $1.04B in net debt at Q4, the trust is considering adding $560 MM or $1.16 per unit by the end of 2010, when it plans to reconvert to a corporation. Thus, there is an outside chance that distributions could double in the latter half of the year if management arrives at a comfort level for production and commodity pricing. The trust currently pays royalties based on how it believes its bitumen should be valued and continues to ‘discuss’ the matter with
Alberta, which calculates royalties should have been $40 MM higher in 2009. Unlike many E&P companies, payouts from COS’ long life reserves are less like equity and more like a floating rate bond tied to oil prices, with operational risks on the side. A modest yield should put in perspective why Veritas views the trust as overvalued at US$70 oil and worth just $30.50 at US$80 oil.

Canadian Oil Sands Trust COS.UN Q42009 Staying on the Sidelines

admin — Fri, 29 Jan 2010 19:13:49 +0000

Canadian Oil Sands Trust (COS.UN) – $27.99 – Q4: We’re Staying on the Sidelines
Sector Perform, Average Risk, Price Target: $35.00
Canadian Oil Sands’ fourth-quarter results hit the mark with generally in-line operating CFPU of $0.75 and cash costs of $30.18/bbl. However, a combination of unplanned maintenance and a turnaround at its LC finer, which has been moved up to the first quarter, is sure to weigh on COS’s near-term operating and market performance. COS declared a first-quarter 2010 DPU of $0.35 – shy of the $0.45 RBC CM had estimated, but understandable given its revised outlook. RBC CM has trimmed its 2010 DPU outlook by $0.15 to $1.85, with 2011 unchanged at $2.25. RBC CM’s 2010 production outlook of 115,000 bbl/d of synthetic oil would fall toward the midpoint of COS’s guidance range of 110,000 – 120,000 but is admittedly back-end loaded. RBC CM states that it is remaining on the sidelines for the time being pending improved operating performance visibility. RBC CM maintains its Sector Perform, Average Risk rating on COS with a one-year target price of $35 per unit.

Canadian Oil Sands Trust COS.UN Warming Up to COS

admin — Wed, 27 Jan 2010 17:51:19 +0000

Canadian Oil Sands Trust (COS.UN) – $28.59 – We’re Warming Up to COS
Sector Perform, Average Risk, Price Target: $35.00
RBC CM is “warming up” to Canadian Oil Sands Trust (COS), in part because it believes the market overhang associated with ConocoPhillips’ decision to sell its 9% stake in Syncrude is on the road to resolution. Year-end results are expected after market close on Jan. 28. Overall, RBC CM forecasts 4Q CFPU of $0.76, in line with COS’s sell-side survey of $0.76 ($0.64 – $0.84 range). COS has already declared a fourth-quarter 2009 distribution of $0.35 per Unit; RBC CM pegs its first-quarter cash flow distribution at $0.45 per Unit (vs. consensus of $0.44 per Unit). At current levels, COS is trading at a 2010 debt-adjusted cash flow multiple of 9.5x (vs. 7.8x for RBC CM’s integrated and oil sands peer group) and a cash flow multiple of 9.2x (vs. 7.4x for RBC CM’s peer group). In the context of RBC CM’s unchanged base NAV of $34.48 per unit, which incorporates an 8.5% after-tax discount rate and escalated US$85/bbl WTI oil price in 2012 and beyond, COS is trading at a P/NAV ratio of 0.83x, which is in line with RBC CM’s integrated oil and oil sands peer group. RBC CM is maintaining its Sector Perform, Average Risk rating and one-year target price of $35 per Unit pending fourth quarter results. The target price reflects a 90% weighting toward a multiple of 1.0x RBC CM’s base NAV of $34.48 per Unit and a 10% weighting toward a 2011 debt-adjusted cash flow multiple of 9.6x at mid-cycle prices.

cos-un synthetic oil volumes

admin — Wed, 02 Dec 2009 18:13:45 +0000

In connection with the release of its November synthetic oil volumes, RBC CM has trimmed its 2009 production outlook for Canadian Oil Sands Trust, but remain constructive on its 2010 outlook. Syncrude’s vacuum distillation unit experienced unexpected maintenance in November. This problem has since been resolved and production rates are expected to recover in December, but RBC CM now pegs COS’s fourth-quarter production at 117,600 bbl/d, 9% lower than its previous outlook. Reflective of 3% lower production levels of 102,700 bbl/d and modestly higher expected operating costs of $36/bbl, the CPFU outlook for COS is now $1.45 (vs. prior $1.60) in 2009. RBC CM’s revised 2009 production outlook remains within the goal posts of COS’s guidance range of 101,000 – 105,000 bbl/d. RBC CM continues to believe that the sale of ConocoPhillips’ 9% interest in Syncrude is COS’s to lose. RBC CM pegs this transaction at roughly $4.0 billion. As much as bigger is not always better, the transaction could make logical sense on two fronts. First, it would enable COS to buy oil sands assets headed into what is expected to be a continuation of a bull market for crude oil as demand recovers. Second, COS could be picking up additional interest in Syncrude before the operational improvements have fully surfaced.

COS.UN Q3 2009 Things Are Looking Up

admin — Fri, 30 Oct 2009 01:59:04 +0000

COS’s Q3 results were solid; CFPU of $0.61 compared to consensus of $0.66 and a dime light vis-à-vis RBC CM’ outlook. Although RBC CM is maintaining its Sector Perform rating on COS and its one-year target price of $35 per unit, it notes that the trust afford sunbridled cash flow leverage toward WTI prices given its corporate structure and 100% crude oil production weighting. COS announced a fourth-quarter distribution of $0.35 per unit – roughly in line with consensus and ahead of RBC CM’ $0.25 per unit base expectation. RBC CM has raised its DPU outlook for COS by $0.25 to $2.00 in 2010 and $2.25 in 2011, reflective of an improved operational outlook. Operationally, the Syncrude ship appears headed in the right direction, with COS’s 2010 budget calling for 315,000 bbl/d (116,000 bbl/d net to COS) of SCO production, reflective of a turnaround at Coker 8-1, but still 9%ahead of RBC CM’ previous outlook. In RBC CM mind, the planned sale of ConocoPhillips’ 9% interest in Syncrude is COS’s to lose, with the transaction supporting 3% – 4% CFPU accretion.

COS.UN Q309 Strong Operational Performance

admin — Fri, 30 Oct 2009 01:37:33 +0000

Likely Front Runner For Stake In Syncrude

Despite in-line production of 115 MBbls/d, CFPU of $0.61 was below consensus of $0.66.
COS had a strong quarter on solid volumes and lower costs of $28/Bbl (versus our consensus of $33/Bbl).
The variance was due to higher royalties on stronger bitumen prices.

With tweaks to royalties, Quarterly DPU was increased to $0.35 (from $0.25).

We see COS as the front runner for Conoco’s 9% stake in Syncrude. Utilizing LT oil of
US$85/Bbl & $0.95 FX, we estimate the potential acquisition at $3.5B-$4B.

2010 guidance calls for volumes to average 110-120 MBbls/d on costs of
$35/Bbl and capital of $541MM.

We continue to believe COS offers low-risk year-over-year production growth at
an attractive valuation and should perform well at
current commodity prices.

Canadian Oil Sands Trust Distribution Increased By 67% With Q2/09 Results

admin — Wed, 29 Jul 2009 23:30:17 +0000

Maintaining Positive Outlook

With CFPU of $0.05, COS.UN increased its Q3/09 distribution (to $0.25 from
$0.15) reflecting stronger oil prices and expected improved production
reliability in H2/09. The increase was earlier than expected.

With the 8-3 Coker turnaround taking longer than expected and issues with
Coker 8-1 in Q2, COS.UN has reduced 2009 guidance to 105 MBbls/d (from
110 MBbls/d). The 8-1 Coker is scheduled for a turnaround in 2010 but may
occur in H2/09, which would lower production to 102 MBbls/d.

2009 volumes are unchanged at 99 MBbls/d assuming H2/09 volumes of 110 MBbls/d, which compares to implied volumes of 120 MBbls/d from guidance. In addition, we forecast cost to drastically improve
in H2/09 to ~$32/Bbl (from ~$50/Bbl in Q2) vs. guidance of ~$29/Bbl.

Production should ramp up in H2/09 and into 2010 with improved reliability
resulting in lower per barrel costs, which will be viewed positively by the
market.

we believe Canadian Oil sands representing a solid investment with torque to oil.