December 14, 2018

Canadian Oil Sands Ltd (COS)

 

 

The giant energy company known as Canadian Oil Sands Ltd. (COS) is that largest shareholder (36.74% owner) in the massive oil sands project known as Syncrude.  By investing in COS, you are essentially getting a non-hedged bet on the project since the company does not own many other assets.  The two-pronged approach to ideal profitability levels for the Canadian Oil Sands is to maintain a strong balance sheet, including low debt levels.  Keeping a strong financial position allows the company to pursue great growth opportunities when profitable investments present themselves, and pay shareholders generous dividend rates during times when investment opportunities are not as plentiful.  These two items have been the main focus on the company since it began in 1995.

 

The Syncrude Project is a huge drilling project owned by several of Canada’s large energy companies.  It is located in northern Alberta around the city of Fort McMurray.  Snycrude has been in operation in 1978 and has a productive capacity of over 350,000 barrels per day of high quality crude oil.  COS is the largest owner of Syncrude, and other major shareholders are as follows:

 

Imperial Oil Resources (25%)

Suncor Energy Oil and Gas Partnership (12%)

Sinopec Oil Sands Partnership (9.03%)

Nexen Oil Sands Partnership (7.23%)

Mocal Energy Limited (5%)

Murphy Oil Company Ltd. (5%)

 

Syncrude is mainly managed by Imperial Oil Resources since it is a subsidiary of the massive ExxonMobil oil company, and consequently has access to all the expertise and resources of that mega-conglomerate.  The high quality of bitumen produced from the Syncrude project means that it has lower production costs and better profit margins.  Syncrude has produced over 2 billion barrels of oil since its inception.

 

COS recently released their budget for 2012.  The plans include a $1,460 million investment in the Syncrude project that will be used to boost efficiency and overall production.  Reports are that $974 million of the money will be directly allocated to large-scale infrastructure projects that will keep Syncrude in production for 20 years, while improving on the development’s environmental record.  Marcel Coutu, President and CEO of the company stated that, “We are well positioned to fund our business plan with a strong balance sheet and excellent liquidity […] During 2012, we plan to maintain our dividend, at least at the current level, based on the assumptions in our outlook for the year and support from our cash balances as necessary. We will remain unhedged to capture the full value of oil prices for potentially higher dividends in the near term. Further out, we look forward to the completion of our mine train projects in 2014 and correspondingly higher free cash flow, assuming continued strength in oil prices, to support dividend growth.”  COS hopes to boost production from 106 million barrels in 2011 to 117 million barrels in 2012.

 

 

Canadian Oil Sands recently opened at $24.08.  This is close to the middle of the company’s 52-week trading range that has saw a low of $18.17 and a high of $33.94.  COS has a large market capitalization of over $11.5 billion.  This gives you an idea of just how large the Syncrude project is.  Right now, the company has a very attractive Price-to-Earnings ratio of 9.42.  The annual dividend of $1.20 gives the stock a yield of 5%.  Some investors are scared off by the environmental lobby that has targeted the oil sands to some degree, but I think this an outstanding investment opportunity as energy costs around the globe continue to soar.

 

Canadian Oil Sands Ltd. (COS) Technical Analysis:

COS trend analysis

COS is trading on a down trend, click here to get your free trend analysis report on COS

 

Canadian Oil Sands Ltd. (COS) Stock Graph:

TSE COS

Canadian Oil Sands Ltd. (COS) Dividend Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
COSCanadian Oil Sands Ltd30.983.87101.130.0977206316.271178.94738