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Should You Invest in Canadian Oil Sands Ltd. Today?

Canadian Oil Sands Ltd. (TSX:COS), the company with a 36.74% ownership interest in the Syncrude oil sands project, announced third-quarter earnings results after the market closed on October 29, and its stock has responded by rising over 3% in the trading session since. The company’s stock still sits more than 43% below its 52-week high of $18.10 reached back on November 10, 2014, so let’s take a closer look at the results to determine if we should buy or avoid the stock today.

Lower oil prices lead to a lacklustre performance

Here’s a summary of Canadian Oil Sands’s third-quarter earnings results compared with its results in the same period a year ago. 

Metric Q3 2015 Q3 2014
Earnings per share ($0.36) $0.18
Revenue, Net of Royalties $542 million $901 million

Source: Canadian Oil Sands

In the third quarter of fiscal 2015, Canadian Oil Sands reported a net loss of $174 million, or $0.36 per share, compared to a net profit of $87 million, or $0.18 per share, in the same quarter a year ago, as its revenue, net of crown royalties, decreased 39.8% year over year to $542 million.

The very weak results above can be attributed three primary factors. First, oil prices have fallen dramatically over the last year, which led to Canadian Oil Sands’s average realized selling price of synthetic crude oil decreasing 41.3% to $60.20 per barrel. Second, its total sales volume decreased 1.2% to eight million barrels. Third, the company reported a $132 million loss on foreign exchange as a result of the stronger U.S. dollar compared with a loss of just $73 million in the year-ago period.

Here’s a quick breakdown of six other notable statistics from the report compared with the year-ago period:

  1. Sales volume decreased 1.3% to 86,687 barrels per day
  2. Cash flow from operations decreased 72.8% to $82 million
  3. Total operating expenses decreased 15.2% to $40.49 per barrel
  4. Capital expenditures decreased 62.2% to $84 million
  5. Average foreign exchange rate ($USD/$CDN) decreased 17.4% to $0.76
  6. Paid out a dividend of $0.05 per share for a total cost of approximately $25 million compared with a dividend of $0.35 per share for a total cost of approximately $170 million in the year-ago period

Canadian Oil Sands also announced that it will maintaining its quarterly dividend of $0.05 per share, and the next payment will come on November 30 to shareholders of record at the close of business on November 23.

What should you do with Canadian Oil Sands’s stock today?

It was a very weak quarter for Canadian Oil Sands, so I do not think the market has reacted correctly by sending its shares higher. With this being said, I do not see further upside from here and think the negatives far outweigh the positives for the stock from an investment standpoint, especially because the price of oil is still trading at a fraction of what it was a year ago, and this will likely lead to another disappointing performance in the fourth quarter.

With all of the information provided above in mind, I think Foolish investors should avoid Canadian Oil Sands today.

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Fool contributor Joseph Solitro has no position in any stocks mentioned.

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