CALGARY, July 27 /CNW/ - Canadian Oil Sands Trust announces a second quarter distribution of $0.75 per Trust Unit bringing the year-to-date distributions to $1.50 per Trust Unit. In addition, the former Athabasca Oil Sands Unitholders have now received the Special Distribution of $0.50 per Trust Unit declared immediately prior to the merger.
The Combined Trust's second quarter cash flow from operations totalled $49.2 million ($0.87 per Trust Unit) compared to $64.1 million ($1.13 per Trust Unit) in the second quarter of 2000. Distributable Income for the second quarter of 2001 was $42.6 million ($0.75 per Trust Unit) with /default.aspx?SectionId=a9a908cb-21fa-46a6-8de1-05e23027c007&ItemID=80bb9966-432d-4bdd-bdb4-07e429e403bdcapital spending of $24.7 million compared to $28.4 million ($0.50 per Trust Unit) and $41.5 million, respectively, in 2000.
Chuck Shultz, Chairman of the Combined Trust, commented that "There has been many recent accomplishments. On June 21st, the Unitholders of both Trusts approved the merger of the Trusts. On June 29th, the Syncrude owners approved proceeding with Stage 3 of the Syncrude expansion plan, a $4.1 billion expenditure. And on July 10th, the units of the Combined Trust commenced trading on the Toronto Stock Exchange using the COS.UN trading symbol with a market capitalization in excess of $2 billion and Canada's largest royalty trust."
Oil prices have remained strong during the second quarter with prices averaging approximately US$27.96 compared to US$28.73 averaged in the first quarter of 2001. During the quarter, our Trust Unit's trading value ranged from $42.00 to $34.00 with a "pre-merger" final price of $36.50.
Syncrude Operations
The Joint Venture's production for the second quarter totalled 19.1 million barrels (210,000 barrels per day) of Syncrude Sweet Blend at an average cost of $21.02 per barrel compared to second quarter production in 2000 of 20.5 million barrels (225,000 barrels per day) with a unit operating cost of $14.16. Production shortfalls were largely due to the maintenance turnaround in the upgrading plants as well as efforts to curtail emissions.
The second quarter's unit operating costs of $21.02 per barrel represents a 5% increase over the first quarter's $20.08 per barrel. Operating costs are significantly higher primarily due to higher natural gas prices, maintenance turnaround expenditures and overburden stripping costs. The average natural gas price was $6.66 per GJ for the second quarter and $8.30 per GJ for the year-to-date compared to less than $3.00 per GJ in 2000.
Approval of Third Stage of Expansion Plan
The Owners approved proceeding with the $4.1 billion Third Stage of the Syncrude Expansion Plan which is anticipated to increase Syncrude's productive capacity from 260,000 barrels per day to over 365,000 barrels per day of an even higher quality of synthetic crude oil by the end of 2004. The expenditures include a second mining train at the Aurora Mine scheduled to commence production in the last quarter of 2003 and the addition of a third coking unit for the Mildred Lake processing facilities. Similar to the first train in the Aurora Mine, the second train will use Syncrude's patented hydrotransport and low energy extraction technology reducing Syncrude's energy consumption.
<<
CANADIAN OIL SANDS TRUST
Highlights
(thousands of dollars except per Trust Unit amounts)
Three Months Ended Six Months Ended
June 30 June 30
----------------------------- -----------------------------
2001 2000 2001 2000
----------- ------------ ------------ ------------
Net Income $ 32,995 $ 49,427 $ 80,991 $ 81,185
Per Trust Unit $ 0.58 $ 0.87 $ 1.43 $ 1.43
Funds From Operations $ 49,161 $ 64,099 $112,133 $ 108,735
Per Trust Unit $ 0.87 $ 1.13 $ 1.97 $ 1.92
Distributable Income $ 42,584 $ 28,375 $ 85,146 $ 49,313
Per Trust Unit $ 0.75 $ 0.50 $ 1.50 $ 0.87
Daily Average Sales (bbls)
Syncrude Sweet Blend 45,193 48,682 48,633 48,622
Average Selling Price per barrel
West Texas Intermediate
(U.S.) $ 28.01 $ 28.61 $ 28.37 $ 28.67
-------- -------- -------- --------
-------- -------- -------- --------
Before Hedging $ 42.52 $ 42.10 $ 42.80 $ 41.96
Hedging - Oil Price (0.54) (1.84) (0.73) (1.98)
- Currency (1.61) (0.78) (1.32) (0.77)
-------- -------- -------- --------
$ 40.37 $ 39.48 $ 40.75 $ 39.21
-------- -------- -------- --------
-------- -------- -------- --------
(*) On the cash basis.
<<
Management's Discussion and Analysis of Interim Financial Results
During the second quarter of 2001, the West Texas Intermediate oil price fluctuated from a high of US$29.98 in mid-May and closed the quarter at US$26.25, virtually unchanged from the quarter's opening price of US$26.29. Markets have offset the impact of tightening oil products inventory levels resulting from production quota discipline by the Organization of Petroleum Exporting Countries and are anticipating a softening in demand due to the general economic slowdown. During the second quarter, the North American natural gas prices continued to weaken with the average price for Alberta deliveries dropping to $6.66 per GJ compared to $9.71 per GJ in the first quarter. By mid-July, natural gas prices in Alberta had dropped to $4.00. These are the major economic factors influencing Canadian Oil Sands' financial results.
The financial reporting for the merger of Athabasca Oil Sands and Canadian Oil Sands will follow the pooling of interests method whereby the accounts for prior periods are restated to reflect the combined financial position, earnings and changes in cash position of the two entities. Accordingly, the following discussion and analysis also combines the two trusts for all reporting periods.
Canadian Oil Sands' revenues of $168.2 million for the second quarter of 2001 represents a 4% drop compared to the $175.2 million recorded in 2000. The reduction represents the combined impact of a 7% drop in production and a US$0.77 drop in the average West Texas Intermediate crude oil price compared to the same quarter in 2000. The sales volume averaged 45,193 barrels per day for the second quarter of 2001 compared to 48,682 barrels per day sold in 2000. The 2001 production continues to be short of expectations as Syncrude experiences difficulties achieving designed capacity throughput at the upgrading facilities. Canadian Oil Sands' revenues include the costs of its oil price risk management agreements as discussed in Risk Management Activities.
Canadian Oil Sands' operating costs for the second quarter totalled $90.9 million, an increase of 35% over the $67.4 million incurred during the same period of 2000. Compared to 2000, the significant contributors to the increased operating costs were higher natural gas prices, which raised the unit operating costs by $3.15 per barrel, maintenance costs associated with the unanticipated work on the Vacuum Distillation Unit and LC Finer and the costs for additional overburden stripping in the North Mine. Year-to-date, the Crown Royalty charge is relatively unchanged as the impact of higher revenues in 2001 are offset by increased operating costs.
Canadian Oil Sands' share of capital expenditures during the second quarter of 2001 aggregated to $24.7 million compared to $41.5 million for the same period in 2000. During the second quarter of 2001, $20.0 million of external financing was utilized to fund capital expenditures. The second quarter's operating cash flow was directed primarily to unitholder distributions with the funding of capital expenditures funded from operating cash flow limited to $4.7 million.
Corporate Activities
Risk Management: To offset its U.S. dollar exposure attributable to the sale of crude oil, Canadian Oil Sands has entered into the following currency exchange contracts:
- On approximately 15% of Canadian Oil Sands' estimated crude oil sales to the end of June 30, 2006, contracts at an average rate of US$0.658.
- On approximately 5% of Canadian Oil Sands' estimated crude oil sales to the end of 2002 with the counter-party receiving an option to extend for a further five years, contracts at an average rate of US$0.692, and
- On a further 20% of Canadian Oil Sands' estimated crude oil sales revenue to the end of 2001, contracts at an average rate of US$0.770.
During the second quarter of 2001, currency exchange hedging settlements reduced Canadian Oil Sands' cash flow by $5.6 million as US$24 million was settled at US$0.770 per Canadian dollar, US$5 million was settled at US$0.692 per Canadian dollar and US$14 million was settled at US$0.658 per Canadian dollar while the average exchange rate for the quarter was US$0.676. The year-to-date settlements of currency exchange contracts have reduced cash flow by $8.9 million ($0.16 per Trust Unit). Accounting for settlement of currency exchange contracts defers the recognition of a $1,108,000 gain in the second quarter related to commitments originally contracted for future years. Cumulatively, Canadian Oil Sands has deferred recognition of gains totalling $8,947,000 to 2006 and beyond for accounting purposes but has included these amounts in the distributable income for the respective periods.
During the second quarter of 2001, Canadian Oil Sands' revenues were reduced by $2.2 million ($6.4 million year-to-date) as a result of oil price hedging. Canadian Oil Sands' oil price risk management contracts continue to provide the following for future periods:
- For the balance of 2001, 15% of anticipated production with an average floor price of approximately US$21.00 and an average price cap of approximately US$28.00,
- For 2002, 5% of anticipated production with an average floor price of approximately US$23.50, and
- For 2003, 4% of anticipated production with an average floor price of approximately US$24.00 and with respect of 2% of production, a price cap of US$24.00.
Credit Facilities: The merging of the Trusts required Canadian Oil Sands to renegotiate its credit facilities with its bankers. In these negotiations, Canadian Oil Sands converted the remaining term on $195 million of credit lines to a three year extendible term in exchange for a marginal increase in the cost of its standby fees and costs of borrowing. In addition, the $30 million Extendible Revolving Facility term has been extended with costs also increased marginally. In light of the Stage 3 capital spending commitment extending through 2004, Canadian Oil Sands is also re-syndicating its $100 million Revolving Term Credit Facility due to its 2003 maturity date.
Unit Distributions: The quarterly distribution of $0.75 per unit will be paid on August 15, 2001 to Unitholders of record on August 8, 2001. The income tax status of this distribution will be determined subsequent to closing the books in December 2001 and will be reported to unitholders prior to the end of February 2002. The income tax liability of each unitholder will depend on the Unitholder's specific circumstances, and accordingly, each Unitholder should obtain independent advice regarding their specific income tax consequences.
Outlook
Syncrude has reviewed its progress in resolving the operating difficulties and emissions management which have curtailed production during the first six months of the year and has revised its production expectations for the year from 87 to 90 million barrels to 82 to 85 million barrels. This revision is predicated on the upgrading facilities achieving an average daily production of 250,000 barrels for the last quarter of the year which requires Syncrude to complete the maintenance on the LC Finer during the third quarter. Due to the nature of Syncrude's cost structure, this shortfall in production will result in unit operating costs for 2001 in excess of $17.00 per barrel. Syncrude's annual capital expenditures are now anticipated to be around $650 million. Currently, high oil prices continue to offset the production shortfalls.
Unit Trading Activity
Canadian Oil Sands' Trust Units trade on the Toronto Stock Exchange under the symbol COS.UN. Subsequent to the announcement of the merger of the two trusts, the Athabasca Oil Sands Trust Units traded within a narrow band of the Canadian Oil Sands Trust Units, after adjusting for the Special Distribution of $0.50 per unit payable to the Athabasca Unitholders. The following trading information pertains to only the Canadian Oil Sands Trust Units. <<
Three Months Ended
--------------------------------------------------
June 30, March 31, December 31, September 30,
2001 2001 2000 2000
-------- --------- ------------ -------------
Unit Price ($)
- High 42.00 39.25 31.25 33.30
- Low 34.10 28.90 28.50 27.50
- Close 35.00 34.75 28.90 31.30
Volume Traded
(in 000's) 2,162 2,394 1,655 4,263
Average Number of
Units Outstanding
(in 000's) 27,000 27,000 27,000 27,000
>>
Certain information included in this Quarterly Report with respect to future periods is Canadian Oil Sands' best estimate of future events and is based upon assumptions and anticipated results that are subject to uncertainties. Actual results may vary significantly from those anticipated due to many factors including changes in business strategy, crude oil prices, the Canadian/US currency exchange rates, industry conditions, the timing of capital expenditures, the availability and prices of goods and services as well as government regulation and operating risks.
<<
CANADIAN OIL SANDS TRUST
CONSOLIDATED STATEMENT OF TRUST ROYALTY AND DISTRIBUTABLE INCOME
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
-------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------
(thousands of dollars except
per unit amounts)
Revenues (*) $168,862 $175,513 $362,917 $313,669
Operating expenses (90,860) (67,410) (185,751) (137,680)
Crown royalties (20,881) (35,723) (48,825) (52,020)
Administration expenses (2,897) (2,860) (5,517) (4,832)
Interest expense (3,441) (4,254) (7,598) (8,163)
Large Corporations Tax (410) (377) (855) (717)
-------- -------- -------- --------
50,373 64,889 114,371 110,257
Capital expenditures (24,719) (41,484) (50,334) (74,208)
Utilization of Expansion
Financing 20,000 - 20,000 4,000
Repayment of Borrowings - (1,581) - (1,581)
Site restoration costs (227) (49) (468) (652)
Mining reclamation trust (480) (475) (1,418) (830)
Interest expense payable to
Trust (621) (871) (1,384) (1,510)
Reserve - future production
costs (2,093) 6,840 3,446 11,766
-------- -------- -------- --------
Base for Trust Royalty $ 42,233 $ 27,269 $ 84,213 $ 47,242
-------- -------- -------- --------
-------- -------- -------- --------
Trust Royalty @ 99% $ 41,811 $ 26,996 $ 83,371 $ 46,770
Interest earned on Trust's
short term investments 482 809 1,043 1,547
Interest earned on AOSII's
Promissory Note 621 871 1,384 1,510
Administration expenses of
Trust (330) (301) (652) (514)
-------- -------- -------- --------
Distributable income $ 42,584 $ 28,375 $ 85,146 $ 49,313
-------- -------- -------- --------
-------- -------- -------- --------
Distributable income per
Trust Unit $ 0.75 $ 0.50 $ 1.50(xx)$ 0.87
-------- -------- -------- --------
-------- -------- -------- --------
(*) Including cash settlements of $1,187,000 for the quarter ($1,108,000
in 2000) and $2,374,000 for the year-to-date ($2,216,000 in 2000) in
respect of currency exchange contracts which have been deferred for
accounting purposes.
(xx) Excluding the Special Distribution of $0.50 per unit paid to the
Athabasca Oil Sands Trust Unitholders prior to the merger.
On June 21, 2001, the Unitholders of Athabasca Oil Sands Trust
and Canadian Oil Sands Trust approved the merger of the two trusts
and accordingly these financial statements follow the pooling of
interests basis of accounting.
CANADIAN OIL SANDS TRUST
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
-------------------- --------------------
(thousands of dollars) 2001 2000 2001 2000
-------- -------- -------- --------
Cash provided by (used in):
Operating activities
Net income $ 32,995 $ 49,427 $ 80,991 $ 81,185
Items not involving cash: 16,166 14,672 31,142 27,550
-------- -------- -------- --------
Funds from operations 49,161 64,099 112,133 108,735
Site restoration costs (227) (49) (468) (652)
Net change in deferred
items 2,642 1,014 1,668 1,549
Change in non-cash working
capital 15,378 (44,326) 29,196 (17,050)
-------- -------- -------- --------
66,954 20,738 142,529 92,582
-------- -------- -------- --------
Financing activities
Repayment of long-term debt - (1,581) - (1,581)
Merger Costs (38,700) - (38,700) -
Issuance of 29,000 Trust
Units 764 - 764 -
Special distribution (14,875) - (14,875) -
Unitholder distributions
declared (42,584) (28,375) (85,147) (49,312)
Change in non-cash working
capital 50,196 7,438 46,809 (3,775)
-------- -------- -------- --------
(45,199) (22,518) (91,149) (54,668)
-------- -------- -------- --------
Investing activities
Reclamation trust (527) (475) (1,418) (830)
Capital expenditures (24,719) (41,484) (50,334) (74,208)
Change in non-cash working
capital 881 843 (1,008) (1,770)
-------- -------- -------- --------
(24,365) (41,116) (52,760) (76,808)
-------- -------- -------- --------
Increase (decrease) in cash (2,610) (42,896) (1,380) (38,894)
Cash at beginning of period 104,021 116,339 102,791 112,337
-------- -------- -------- --------
Cash at end of period $101,411 $ 73,443 $101,411 $ 73,443
-------- -------- -------- --------
-------- -------- -------- --------
Supplemental Information
Large Corporations Tax
Paid $ 349 $ 325 $ 699 $ 787
-------- -------- -------- --------
-------- -------- -------- --------
Interest Charges Paid $ 7,279 $ 7,272 $ 7,466 $ 7,412
-------- -------- -------- --------
-------- -------- -------- --------
On June 21, 2001, the Unitholders of Athabasca Oil Sands Trust
and Canadian Oil Sands Trust approved the merger of the two trusts
and accordingly these financial statements follow the pooling of
interests basis of accounting.
CANADIAN OIL SANDS TRUST
CONSOLIDATED BALANCE SHEET
(unaudited)
June 30, December 31,
(thousands of dollars) 2001 2000
----------- ------------
ASSETS
Current assets:
Cash $ 101,411 $ 102,791
Accounts receivable 64,809 75,050
Inventories 29,035 28,744
Prepaid expenses 5,421 3,526
----------- -----------
200,676 210,111
----------- -----------
Reclamation trust 8,641 7,223
Capital assets, net 1,019,290 997,372
Deferred charges 19,094 17,555
----------- -----------
$1,247,701 $1,232,261
----------- -----------
----------- -----------
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 117,861 $ 62,435
Unit distribution payable 57,459 45,950
Current portion of other liabilities 2,710 2,703
----------- -----------
178,030 111,088
Other liabilities 20,236 20,823
Long-term debt 218,634 215,861
Future site reclamation and
restoration costs 28,774 27,749
Deferred currency hedging gains 8,947 6,693
Preferred shares of subsidiary 4,400 4,400
----------- -----------
459,021 386,614
Unitholders' equity
56,779,010 Trust Units
(56,750,010 in 2000) 788,680 845,647
----------- -----------
$1,247,701 $1,232,261
----------- -----------
----------- -----------
On June 21, 2001, the Unitholders of Athabasca Oil Sands Trust
and Canadian Oil Sands Trust approved the merger of the two trusts
and accordingly these financial statements follow the pooling of
interests basis of accounting.
CANADIAN OIL SANDS TRUST
CONSOLIDATED STATEMENT OF INCOME AND UNITHOLDERS' EQUITY
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------
(thousands of dollars except
per unit amounts)
Revenues:
Syncrude Sweet Blend $166,936 $173,666 $358,418 $309,902
Other 1,223 1,548 3,167 3,098
-------- -------- -------- --------
168,159 175,214 361,585 313,000
-------- -------- -------- --------
Expenses:
Operating 90,860 67,410 185,751 137,680
Crown Royalties 20,882 35,723 48,825 52,020
Administration 3,289 3,161 6,169 5,347
Interest 3,320 4,339 7,598 8,306
Depletion, depreciation
and amortization 16,276 14,612 31,142 27,415
Large Corporations Tax 410 377 855 717
Dividends on preferred
shares of subsidiary 127 165 254 330
-------- -------- -------- --------
135,164 125,787 280,594 231,815
-------- -------- -------- --------
Net income for the period 32,995 49,427 80,991 81,185
Unitholders' equity,
beginning of period 851,080 812,644 845,647 801,823(*)
Issue of Trust Units for Cash 764 - 764 -
Merger Costs (38,700) - (38,700) -
Special Distribution to
Unitholders (14,875) - (14,875) -
Cash distributions to
Unitholders (42,584) (28,375) (85,147) (49,312)
-------- -------- -------- --------
Unitholders' equity,
end of period $788,680 $833,696 $788,680 $833,696
-------- -------- -------- --------
-------- -------- -------- --------
Net income per Trust Unit $ 0.58 $ 0.87 $ 1.43 $ 1.43
-------- -------- -------- --------
-------- -------- -------- --------
Distributable income per
Trust Unit $ 0.75 $ 0.50 $ 1.50 $ 0.87
-------- -------- -------- --------
-------- -------- -------- --------
>>
(*) After a retroactive adjustment of $7,323,000 for prior period Post Employment Benefits
On June 21, 2001, the Unitholders of Athabasca Oil Sands Trust and Canadian Oil Sands Trust approved the merger of the two trusts and accordingly these financial statements follow the pooling of interests basis of accounting.
Canadian Oil Sands Investments Inc.
P.O. Box 2850
150 - 9 Avenue S.W.
Calgary, AB T2P 2S5
Canada
Units Listed - Symbol: COS.UN
The Toronto Stock Exchange
-30-
For further information: Robert W. Fotheringham, Chief Financial
Officer, (403) 290-3332;
To request a free copy of this organization's annual report, please go to www.newswire.ca and click on reports@cnw.
|