CALGARY, Jan. 29 /PRNewswire-FirstCall/ -- Canadian Oil Sands Trust ("Canadian Oil Sands" or the "Trust") (TSX - COS.UN) today announced that 2006 funds from operations increased to $1.1 billion, or $2.40 per Trust unit ("Unit"), from $1.0 billion, or $2.19 per Unit, recorded in 2005. A distribution of $0.30 per Unit also was declared, payable on February 28, 2007 to Unitholders of record on February 8, 2007.
"During the fourth quarter of 2006, our Stage 3 project contributed to higher sales volumes and revenues, although the impact was mitigated by unplanned coker maintenance and a marked decline in our Syncrude(TM) Sweet Blend selling price," said Marcel Coutu, President and Chief Executive Officer. "We expect 2007 production to rise as a result of our newly expanded facilities, which should help offset the weaker crude oil prices we are currently seeing. Together with a long-term constructive view of crude oil prices, my optimism for the Syncrude project is heightened by last year's signing of the management services agreement with Imperial Oil Resources. We now are already seeing the beginnings of this change with global secondees joining forces with Syncrude Canada in Fort McMurray to set out a new path to enhanced performance."
Overview of fourth quarter and annual 2006 results
As of this fourth quarter 2006 report, Canadian Oil Sands will be reporting "cash from operating activities", as it relates to the Trust's Consolidated Statements of Cash Flows, as our measure of the Trust's ability to generate cash from operations. Previously, Canadian Oil Sands reported "funds from operations" as such a measure, which did not include changes in non-cash working capital from operating activities and was not considered a Canadian generally accepted accounting principles ("GAAP") measure. Cash from operating activities provides similar information to funds from operations, better comparability to other reporting entities, and is in accordance with GAAP. After this report, we anticipate reporting only on cash from operating activities. All information has been adjusted to reflect the 5:1 Unit split, which occurred May 3, 2006.
- Funds from operations per Unit during the fourth quarter of 2006 were
up 11 per cent to $0.63, or a total of $296 million, compared to the
same period of 2005. Including non-cash working capital changes from
operating activities, cash from operating activities was
$412 million, or $0.88 per Unit, an increase of $131 million, or
$0.27 per Unit, from the same quarter of 2005.
- For the 2006 year, funds from operations increased to $1.1 billion,
or $2.40 per Unit, up from $1.0 billion, or $2.19 per Unit, recorded
in 2005. Cash from operating activities amounted to $1.1 billion, or
$2.45 per Unit, in 2006 compared to $0.9 billion, or $2.07 per Unit,
in 2005.
- The increase in quarter-over-quarter and annual funds from operations
and cash from operating activities primarily reflects higher revenues
from the increase in sales volumes with the start-up of the Stage 3
facilities. Our realized Syncrude(TM) Sweet Blend ("SSB") price after
currency hedging gains averaged $63.71 per barrel in the fourth
quarter of 2006, down 12 per cent from the same 2005 period. On an
annual basis, our realized SSB price after hedging averaged
$72.56 per barrel compared to $70.91 per barrel in 2005.
- Net income was $128 million, or $0.27 per Unit, in the fourth quarter
of 2006, down from $174 million, or $0.38 per Unit, in the fourth
quarter of 2005. Fourth quarter 2006 net income was reduced by much
higher Crown royalties, higher operating expenses, and higher foreign
exchange losses and future income tax expenses than were recorded in
the same 2005 period. Net income before unrealized foreign exchange
losses and future income tax expenses, which management believes is a
better measure of operating performance, was $214 million, or
$0.46 per Unit, in the fourth quarter of 2006 compared to
$192 million, or $0.42 per Unit, in the same quarter of 2005.
- Annual net income in 2006 was $834 million, or $1.79 per Unit,
similar to the prior year's net income of $831 million, or
$1.81 per Unit. Net income in 2006 reflects higher revenues due to
higher sales volumes and realized selling price, offset primarily by
an increase in operating costs, Crown royalties, and depreciation,
depletion and accretion expense. Net income before unrealized foreign
exchange gains and future income tax expenses increased to
$851 million, or $1.83 per Unit, from $796 million, or
$1.73 per Unit.
- Crown royalties increased to $83 million, or $8.23 per barrel, in the
fourth quarter of 2006 from $5 million, or $0.72 per barrel, in the
comparable 2005 quarter. Annual 2006 Crown royalties were
$232 million, or $6.93 per barrel, and $19 million, or $0.71 per
barrel, in 2006 and 2005, respectively. The Syncrude operation
shifted to the higher royalty rate of 25 per cent of net revenues
from the minimum one per cent of gross revenue in the second quarter
of 2006.
- Sales volumes averaged 110,200 barrels per day during the fourth
quarter of 2006 and 91,800 barrels per day during the year compared
to 78,300 barrels per day and 76,000 barrels per day in the 2005
respective periods. The 2006 fourth quarter reflects incremental
production from Stage 3, offset by unplanned maintenance on
Coker 8-2. Production in the same 2005 period was affected by
turnarounds of the vacuum distillation unit and a light gas oil
hydrotreater as well as replacement of catalyst in a heavy gas oil
hydrotreater. Both 2006 and 2005 annual production reflect extended
coker turnarounds and extensive maintenance in the first quarters.
Sales volumes differ slightly from our share of Syncrude's production
volumes due to changes in inventory, which are primarily in-transit
pipeline volumes.
- Per barrel operating costs in the fourth quarter of 2006 declined to
$23.60 compared to $25.54 in the same period last year. The decline
on a quarterly basis primarily reflects decreased purchased energy
costs with the substantial decline in natural gas prices during the
quarter offset by an increase in the value of Syncrude's incentive
and retention compensation. Annual operating costs increased in 2006,
averaging $27.07 per barrel, compared to $26.34 per barrel in 2005.
Higher fixed production costs to support the new Stage 3 facilities
without the benefit of incremental production for much of the year
combined with inflationary pressures in the Fort McMurray area
contributed to higher year-over-year operating costs.
- Capital spending in the fourth quarter of 2006 decreased to
$57 million from $177 million in the same period of 2005. Annually,
capital spending decreased to $300 million in 2006 from $800 million
in 2005. The significant decline is largely a result of the
completion of Stage 3 in 2006.
- Net debt was $1.3 billion and net debt-to-book capitalization was
25 per cent at December 31, 2006 (prior to financing our acquisition
of Talisman Energy Inc's 1.25 per cent indirect Syncrude interest,
which closed on January 2, 2007). At year end 2005, net debt-to-book
capitalization was 33 per cent.
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CANADIAN OIL SANDS TRUST
Highlights
(millions of Canadian dollars, except Trust unit and volume amounts)
Three Months Ended Twelve Months Ended
December 31 December 31
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net Income $ 128 $ 174 $ 834 $ 831
Per Trust unit - Basic $ 0.27 $ 0.38 $ 1.79 $ 1.81
Per Trust unit - Diluted $ 0.27 $ 0.37 $ 1.78 $ 1.80
Cash from operating
activities $ 412 $ 281 $ 1,142 $ 949
Per Trust unit $ 0.88 $ 0.61 $ 2.45 $ 2.07
Unitholder Distributions $ 140 $ - $ 512 $ 184
Per Trust unit $ 0.30 $ - $ 1.10 $ 0.40
Syncrude Sweet Blend Sales
Volumes(x)
Total (MMbbls) 10.1 7.2 33.5 27.7
Daily average (bbls) 110,185 78,318 91,844 75,994
Per Trust unit
(bbls/Trust unit) - - 0.1 -
Operating Costs per barrel $ 23.60 $ 25.54 $ 27.07 $ 26.34
Net Realized Selling Price
per barrel
Realized selling price
before hedging $ 63.47 $ 71.14 $ 71.96 $ 70.08
Currency hedging gains
(losses) 0.24 0.93 0.60 0.83
---------- ---------- ---------- ----------
Net realized selling
price $ 63.71 $ 72.07 $ 72.56 $ 70.91
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
West Texas Intermediate
($US per barrel) $ 60.16 $ 60.05 $ 66.25 $ 56.70
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
(x) The Trust's sales volumes may differ from its production volumes due
to changes in inventory, which are primarily in-transit pipeline
volumes.
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Syncrude operational performance
Figures provided below are the gross Syncrude numbers and are not net to
the Trust.
Production may differ from that posted on Canadian Oil Sands Trust's web
site due to rounding.
SSB production during the fourth quarter of 2006 totalled 27.8 million barrels, or approximately 302,700 barrels per day, compared to 20.8 million barrels, or approximately 226,000 barrels per day, in the fourth quarter of 2005. This increase reflects incremental production from the Stage 3 expansion, offset primarily by the outage of Coker 8-2 in the fourth quarter of 2006. Largely as a result of this outage, Syncrude recorded a production rate of 255,000 barrels per day in December versus an anticipated exit rate of 315,000 barrels per day.
Bitumen feed to Coker 8-2 was pulled on November 18 to repair a hole in an overhead line. While this work was completed in late November, efforts to restart the coker were unsuccessful, necessitating a complete outage of the unit to remove the internal coke deposit. This unscheduled maintenance occurred after a run length of 20 months against a planned run length of 30 months. Coker 8-2 returned to operation in mid-January 2007. During the same quarter of 2005, production was primarily affected by planned turnarounds of the vacuum distillation unit and a light gas oil hydrotreater as well as replacement of catalyst in a heavy gas oil hydrotreater.
SSB production in 2006 totalled 94.3 million barrels, or approximately 258,000 barrels per day, compared to 2005 production of 78.1 million barrels, or approximately 214,000 barrels per day. The 21 per cent increase in year-over-year production largely reflects incremental volumes from Stage 3 operations beginning late in the third quarter of 2006. Both years were impacted by extended coker turnarounds and maintenance on other operating units. Production in 2006 was further reduced by unplanned maintenance on Coker 8-2.
Syncrude continues to focus on ramping up to full annual productive capacity of 128 million barrels on a sustained and reliable basis. As we have indicated in the past, we anticipate this process will take time as Syncrude optimizes the new Stage 3 operating units and that, during this period, production rates may fluctuate. In this context, Syncrude is currently investigating the potential factors for constrained production rates from the new Coker 8-3, which has been producing at only 70 per cent of its capacity for the past several weeks. Syncrude does not believe the constraint is design related as production averaged 348,000 barrels per day during the month of October and design rates have been exceeded for short periods of time since the coker began operating; rather, Syncrude expects to resolve the performance issues through the usual process of optimizing the operation of a new unit.
Syncrude employees and contractors recorded a lost-time injury rate of 0.15 per 200,000 workforce hours in 2006 compared to an annual rate for 2005 of 0.05 per 200,000 workforce hours. The 2006 rate still reflects strong safety performance since Syncrude's 2005 LTI rate was its best on record.
Syncrude continued to make progress in its land reclamation efforts in 2006. For the third year in a row, Syncrude reclaimed more than 300 hectares of land. To date, Syncrude has reclaimed about 22 per cent of the disturbed land in the original Base Mine. As well, Syncrude planted over 500,000 tree seedlings in 2006, resulting in more than 4.5 million seedlings planted since 1978.
Syncrude reached the $1-billion milestone of business activity with Aboriginal companies since it began tracking the annual figure in 1992. In 2006 alone, spending was an estimated $130 million based on 27 active contracts with local Aboriginal businesses. As a strong proponent of Aboriginal business development, Syncrude is the only business in Canada to have achieved Gold Level accreditation for the third time with the Canadian Council for Aboriginal Business. This national program recognizes companies committed to increasing Aboriginal employment, assisting in business development, building individual capacity, and enhancing community relations.
Syncrude signs management services agreement
Effective November 1, 2006 Syncrude Canada Ltd. entered into a comprehensive management services agreement with Imperial Oil Resources ("Imperial"). Under the agreement, Imperial, with the support of ExxonMobil, will provide proprietary global best practices in several areas including: maintenance and reliability, energy management, procurement, safety, health, and environmental performance. Importantly, the agreement also supports Syncrude's growth plans by engaging the Joint Venture owners to pursue the scope design of the currently proposed Stage 3 debottleneck and Stage 4 expansions. Syncrude owners believe this agreement can deliver further sustainable improvement in Syncrude's operating performance and leverage Syncrude's growth opportunities.
The agreement has an initial term of 10 years with five-year renewal provisions, and either Syncrude Canada Ltd. or Imperial has the option to cancel the agreement on 24 months notice for any reason. In order to compensate Imperial for their expanded commitment, Syncrude Canada will pay annual fixed service fees of $47 million (about $17 million net to Canadian Oil Sands based on its 36.74 per cent share) during the first 10 years and reimburse Imperial for any direct costs they incur in providing the services. For the following 10 years, the annual fixed service fees drop to $33 million(approximately $12 million net to the Trust). As well, performance fee incentives also will apply after the first three years of the agreement if certain targets are achieved.
An opportunity assessment team ("OAT") comprised of experts from Syncrude, Imperial, ExxonMobil, and some of the other owner companies has been formed and is currently conducting a comprehensive onsite assessment of the Syncrude operations. The mandate of this team is to better understand the opportunities and define best approaches for implementation, including prioritization of the opportunities to pursue. In about three months, the OAT will make specific recommendations to the Syncrude owners. If the recommendations that are approved by the Syncrude owners are not to the reasonable satisfaction of Imperial, then Imperial can terminate the management services agreement.
The implementation phase is expected to involve the secondment of Imperial, ExxonMobil and potentially other owner companies' personnel to Syncrude. These secondees will work closely with Syncrude management and staff to assist in the implementation of the OAT's recommendations and Imperial/ExxonMobil's proven global best practices and systems.
Canadian Oil Sands acquires an additional 1.25 per cent working interest
in Syncrude
On January 2, 2007 the Trust's wholly owned subsidiary, Canadian Oil Sands Limited, closed its previously announced acquisition from Talisman Energy Inc. of an additional 1.25 per cent indirect working interest in the Syncrude Joint Venture. The transaction price agreed to on November 29, 2006 was for approximately Cdn $475 million, comprised of $237.5 million in cash and 8,189,655 Canadian Oil Sands Trust Units. The transaction increased Canadian Oil Sands' ownership in Syncrude to 36.74 per cent, was modestly accretive to reserves and production per Unit and enabled the Trust to simplify its administrative structure.
Executive management change
As previously announced, the following executive management change is effective April 25, 2007. Mr. Allen Hagerman, FCA, has decided to transition from his full-time position as Chief Financial Officer of the Trust's wholly-owned subsidiary, Canadian Oil Sands Limited, to a part-time role as Executive Vice President. In this new role, Mr. Hagerman will be responsible for various projects and specific Syncrude related matters, such as oversight of the Syncrude business controls project. Concurrent with this move, Mr. Ryan Kubik will be promoted to Chief Financial Officer of Canadian Oil Sands. Mr. Kubik joined Canadian Oil Sands as Treasurer in September 2002. He has more than 15 years of corporate finance experience, holding progressively senior finance positions with EnCana Corporation, PanCanadian Energy and PricewaterhouseCoopers prior to joining Canadian Oil Sands. Mr. Kubik holds Chartered Accountant and Chartered Financial Analyst designations and a Bachelor of Commerce Degree from the University of Calgary.
Foreign ownership at 36 per cent
Based on information from the statutory declarations by Unitholders, we estimate that, as of November 3, 2006, approximately 36 per cent of our Unitholders are non-Canadian residents. Canadian Oil Sands' Trust Indenture provides that not more than 49 per cent of its Units can be held by non-Canadian residents.
The Trust continues to monitor its foreign ownership levels on a regular basis through declarations from Unitholders. The next declarations will be as of February 8, 2007, and the results will be posted on our web site at http://www.cos-trust.com/ under investor information, frequently asked questions. This section of the web site and page 45 of the Management's Discussion and Analysis section of the Trust's 2005 annual report describe the Trust's steps for managing its non-Canadian resident ownership levels.
Financial plan revised in response to proposed income trust tax changes
On October 31, 2006 the Minister of Finance announced the federal government's intention to impose a new tax on certain distributions from existing income and royalty trusts effective in 2011. A stated goal was to equalize the tax burden between income trusts and corporations after a transition period. On December 21, 2006 draft legislation was released for comment. Assuming the proposed changes are enacted, it is expected that, after the transition period in 2011, the new tax will apply to Canadian Oil Sands' distributions and will ultimately have a material adverse impact on the cash available for distributions to Unitholders. Under the proposed rules, distributions of non-portfolio earnings (as defined in the draft legislation) of the Trust would not be deductible to the Trust and would be taxable at the rate of 31.5 per cent, thus reducing the distributions paid. Currently almost all of Canadian Oil Sands' Unitholder distributions are comprised of non-portfolio earnings. Distributions of non-portfolio earnings would be considered dividends under the new rules and eligible for the dividend tax credit, similar to the tax treatment on corporate dividends. As such, the after-tax impact would be relatively neutral to Canadian investors who hold our Units in taxable accounts. Investors who hold our Units in tax deferred accounts and non-resident Unitholders would see their after-tax realizations decline significantly. The impact of the federal government's announcement resulted in a substantial decline in the market value of trust units generally.
While the proposed changes, if enacted, will negatively impact the after-tax realizations of some Unitholders, the fundamental business of Canadian Oil Sands remains unchanged. The Trust does not rely on the trust structure and issuance of equity to sustain its business. We have long-life reserves of approximately 40 years at Stage 3 productive capacity rates with virtually no decline in production. As well, we have approximately $2 billion of tax pools available to defer taxable income in future years. We have revised our net debt target to $1.6 billion, up from $1.2 billion, to accelerate fuller payout of free cash flow and allow the Trust to maximize distributions and conserve tax deductions until the proposed tax changes take effect in 2011.
The new rules are not expected to significantly limit our near-term growth opportunities. The proposed changes permit "normal growth" throughout the transition period by allowing cumulative increases of equity capital of 40 per cent in 2007 and 20 percent in each of the subsequent three years for a doubling of equity capital between now and 2010. Equity capital growth in excess of these limits may be deemed "undue expansion" and may subject the Trust's distributions to the proposed tax changes prior to the end of the transition period.
In the absence of final legislation implementing the 2006 proposed changes, the implications are difficult to fully evaluate and no assurance can be provided as to the extent and timing of their application to Canadian Oil Sands and our Unitholders. Management will evaluate Canadian Oil Sands' alternatives to most effectively optimize value for our Unitholders.
Canadian Oil Sands encourages Unitholders to join CAITI
Canadian Oil Sands is continuing to express its concerns and objections to the federal government regarding the proposed income trust tax changes in order to realize a better solution than what is currently being proposed. An organization called the Canadian Association of Income Trust Investors ("CAITI") has been formed with a mission to preserve the ongoing viability and sustainability of the Canadian income trust market. Their immediate goal is to ensure that the proposed Draft Legislative Proposals of December 21, 2006, known as the Tax Fairness Plan, are not voted into law. CAITI is an effective vehicle through which retail investors can voice their opinions regarding trust taxation. We are encouraging Canadians to support the efforts of this organization by becoming members of CAITI. Signing up for membership is a simple process accomplished through CAITI's website at http://www.caiti.info/, which also contains comprehensive information on income trusts and the proposed tax changes.
Distribution reinvestment plan ("DRIP")
As previously disclosed, Canadian Oil Sands Trust suspended its DRIP. The Trust no longer requires the equity financing from the DRIP following the completion of the Stage 3 project. The Trust may reinstate the DRIP in the future if required to fund new investing activities. The distribution announced today and payable on February 28, 2007 will not allow DRIP participation.
Review of Alberta oil sands royalty
The Alberta government has announced that it is reviewing Alberta's Oil Sands Royalty regime to determine if the current regime applies the most appropriate royalty rate to oil sands' revenues. Canadian Oil Sands cannot determine or speculate as to the potential impact of any changes to the royalty rate on its operations until the government provides information on the findings of its review. The Syncrude operation shifted to the higher royalty rate of 25 per cent of net revenues from the minimum one per cent of gross revenue in the second quarter of 2006.
Alberta's current Oil Sands Royalty regime was instituted in 1997 and calculates royalties as one per cent of gross revenue until a project reaches payout, after which point the rate rises to 25 per cent of revenue less operating and capital costs. The rates are tied to crude oil prices, such that higher prices accelerate recovery of costs and payout, after which, the higher rate is a cash sharing formula of a project's profitability.
The Trust believes the current regime strikes the right balance between the owners of the resource - the people of Alberta - and those risking capital to develop it. We hope that any review of oil sands royalty rates would seek to maintain a fair and stable fiscal regime that also recognizes the value of processing oil sands in the province. The success of Alberta's oil sands is largely due to this historically stable and predictable fiscal regime that has been in place since 1997, which has encouraged investment by recognizing the unique challenges of the oil sands business. Oil sands projects are capital intensive and risky, requiring billions of dollars of upfront investment and very long lead times before they are capable of generating revenue and eventually a profit. Once these projects have recovered their costs, however, the regime provides Albertans with the opportunity to participate with a 25 per cent share in the industry's profits.
The Syncrude Project is already providing this higher return to Albertans. Robust crude oil prices increased revenues from the base plant and accelerated the payout period of the new Stage 3 expansion; as a result the Syncrude project began paying the higher royalty rate at roughly the same time as the expansion was completed. Based on Canadian Oil Sands' assumptions in its January 29, 2007 Guidance Document, Syncrude is expected to pay Crown royalties of $675 million in 2007.
2007 Outlook
The following provides Canadian Oil Sands' Outlook for 2007 as of January 29, 2007 and is subject to change without notice. It reflects the Trust's 36.74 per cent interest in Syncrude. Certain information regarding the Trust and Syncrude set forth below, including management's assessment of the expected production and operating costs for the first quarter and year 2007; the expected cause of the Coker 8-3 production limitations; the benefits to be realized from Syncrude Canada Ltd's agreement with Imperial Oil Resources; the expected impact of announced changes by the federal government taxation of income trusts; the Trust's future production, revenues and costs for 2007; the maintenance schedule for 2007; and the level of taxability of Units in 2007, may constitute forward-looking statements under applicable securities law. Forward-looking statements often contain terms such as "may", "will", "should", "anticipate", "expects" and similar expressions. These statements represent management's current expectations and beliefs based on information known today. However, by their nature, forward-looking statements necessarily involve risks and uncertainties, known and unknown, which may cause actual performance and financial results in future periods to materially differ from the estimations or results expressed or implied by such forward-looking statements. The discussion on proposed tax changes in trust tax legislation is based solely on the general information found in the background paper issued by Finance at the time of the October 31, 2006 announcement (which is not legislation), the guidelines issued by Finance on December 15, 2006, and the draft amendments to the Tax Act released on December 21, 2006. No assurance can be given that the final legislation implementing the 2006 proposed tax changes will be consistent with the foregoing or that Canadian federal income tax law respecting income trusts and other flow-through entities will not be further changed in a manner which adversely affects the Trust and its Unitholders. To the extent that changes, including the 2006 proposed tax changes, are implemented, such changes could result in the income tax considerations described in this press release being materially different in certain respects. For more detail on the factors and risks that could potentially impact the outlook, please refer to the Management's Discussion and Analysis section of the fourth quarter 2006 report and the January 29, 2007 guidance document, as well as the risk factors contained in the Trust's annual information form, all of which are available on the Trust's web site at http://www.cos-trust.com/ under investor information. The information in these sections is all forward-looking, and as such, is qualified by this advisory. Unless required by law, the Trust assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change.
The Outlook reflects a 36.74 per cent interest in Syncrude following the close of the acquisition of Talisman Energy Inc.'s indirect 1.25 per cent Syncrude interest on January 2, 2007.
- Syncrude production is estimated to range between 105 to 120 million
barrels, or 39 to 44 million barrels net to the Trust. The single
point estimate is 110 million barrels, or 40.4 million barrels net to
the Trust, which includes one planned coker turnaround scheduled for
the third quarter of 2007. The low end of the range reflects the
possibility of an additional unscheduled coker turnaround while the
upper end reflects higher than budgeted operational reliability and
stability.
- Operating costs are estimated to be $25.83 per barrel with purchased
energy costs accounting for $7.08 per barrel of this amount. We are
assuming an average AECO natural gas price of $7.50 per gigajoule for
2007.
- Cash from operating activities is expected to total $857 million, or
$1.79 per Unit, based on an average WTI crude oil price of
US $55 per barrel and a foreign exchange rate of $0.88 US/Cdn during
2007. Cash from operating activities includes a projected $25 million
increase in operating working capital requirements.
- Free cash flow is expected to be $1.25 per Unit. Free cash flow is
defined as cash from operating activities less capital expenditures
and reclamation trust contributions.
- Annual Crown royalties are expected to be $6.14 per barrel, or
$248 million, reflecting the 25 per cent royalty rate.
- Capital expenditures are expected to total $255 million with
approximately 57 per cent directed to maintenance of operations,
33 per cent directed to the Syncrude Emissions Reduction project and
10 per cent to Stage 3 completion and modification costs. The
Syncrude Emissions Reduction project is a multi-year special project
expected to total approximately $772 million, gross to Syncrude.
Combined with the sulphur reduction technology in the completed
Stage 3 expansion, the project is designed to reduce aggregate
sulphur dioxide emissions by 60 per cent from today's approved levels
by 2011.
- We estimate that over 95 per cent of the distributions pertaining to
2007 will be taxable as other income. The actual taxability of the
distributions will be determined and reported to Unitholders prior to
the end of the first quarter of 2008.
- The Trust's crude oil production remains unhedged, and under the
current financing plan, we do not intend to undertake any crude oil
hedging transactions. The Trust may hedge its crude oil production in
the future depending on the business environment and our growth
opportunities.
Changes in certain factors and market conditions could potentially impact this Outlook. In particular, cash from operating activities and free cash flow are highly sensitive to crude oil prices; every US$1.00 per barrel change in the WTI crude oil price impacts cash from operating activities and free cash flow by $0.07 per Unit. A sensitivity analysis of the key factors affecting the Trust's Outlook is provided in its December 7, 2006 Guidance Document, which is available on the Trust's Web site at: http://www.cos-trust.com/investor/guidance.aspx. Canadian Oil Sands intends to continue providing quarterly updates to its guidance.
The full text of this fourth quarter release, including the Management's Discussion and Analysis, can be accessed on Canadian Oil Sands Trust's Web site at http://www.cos-trust.com/ under investor information, financial reports, or through SEDAR at http://www.sedar.com/.
Canadian Oil Sands Trust provides a pure investment opportunity in the oil sands through its 36.74 per cent working interest in the Syncrude Project. Located near Fort McMurray, Alberta, Syncrude operates large oil-sands mines and an upgrading facility that produces a light, sweet crude oil. The Trust is an open-ended investment trust managed by Canadian Oil Sands Limited and has approximately 479 million units outstanding, trading on the Toronto Stock Exchange under the symbol COS.UN.
Canadian Oil Sands Limited
Marcel Coutu
President & Chief Executive Officer
Units Listed - Symbol: COS.UN
Toronto Stock Exchange
