Two Things to Watch in Canadian Oil Sands’ Second-Quarter Earnings

There’s lots to get ready for when this pure-play on the Canadian oil sands reports.

| More on:
The Motley Fool

By:  Dave Van Geem

Canadian Oil Sands (TSX:COS), the largest owner of the Syncrude Project in the Athabasca oil sands deposit in Alberta, reports second-quarter earnings Tuesday. Here’s a quick profile of two things to watch for:

Earnings

COS is currently yielding 6.7% on a dividend of $1.40. Last time around, it reported the following results, and said unexpected outages at its upgrader and in the mining area hurt production volumes:

Highlights First quarter   2013 First quarter   2012
Cash   flow from operations ($ millions) $275 $454
Cash   flow from ops per share $0.57 $0.94
Net   income ($ millions) $177 $318
Net   income per share $0.37 $0.66
Sales   volumes: Total (mmbbls) 8.6 9.8
Sales   volumes: Daily average (bbls) 95,683 108,108
Realized   SCO selling price ($/bbl) $96.11 $97.07
Operating   expenses ($/bbl) $41.20 $32.58
Capital   expenditures ($ millions) $268 $141
Dividends   ($ millions) $170 $145
Dividends   per share $0.35 $0.30

Source: Canadian Oil Sands first-quarter report.

Investors should start by looking closely at the sales volumes. With repairs completed last quarter, the daily average volumes should be approaching 110,000 bbls/day. Canadian Oil Sands should see improvements in operating expenses as well.

Capital expenditures

The company has undertaken a number of multi-year capital projects. At the end of the first quarter, management reported the following:

Project

Total Cost Estimate ($Billion)

Estimate Complete Q1 2013

In Service Target Date

Mildred Lake Mine Train Replacement

$1.6

45%

Q4 2014

Aurora North Mine Train Relocation

$0.4

60%

Q1 2014

Aurora North Tailings Management

$0.3

75%

Q4 2013

Centrifuge Tailings Management

$0.7

15%

H1 2015

Source: Canadian Oil Sands company statements.

On Tuesday I’d like to see continued progress on all four — without any surprises in cost projections. Notably, Aurora North should come in at 85% complete or higher to ensure commissioning on time. This project can be seen as a bellwether representing how well the company is managing projects.

The final word

Canadian Oil Sands is in the midst of four expensive capital refurbishment projects. In my view, executing on these expensive projects — on time, on budget — while maintaining current production will be key to ensuring the health of the company moving forward.

Do you like the fact that Canadian Oil Sands pays an attractive dividend?   Want more dividend paying stocks like COS in your portfolio?  To help take the guesswork out of dividend investing, The Motley Fool assembled a Special FREE Report, “13 High-Yielding Stocks to Buy Today“. Simply click here now to receive a copy at no charge!

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Dave Van Geem owns shares of Canadian Oil Sands.  The Motley Fool doesn’t own shares in any of the companies mentioned.   

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

Stock analysts were once excited about construction company Aecon as an investment.
Coronavirus

Bull or Bear: Why Analysts Changed Their Tune on Aecon Stock

Analysts had been champing at the bit for the construction company, but the tides have turned.

Read more »

Specialty Brands faces higher raw materials costs.
Dividend Stocks

What’s Next for Premium Brands Stock?

Shares of the specialty food production and distribution company have fallen about 25% since last October.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

2 Interesting Buys in Any Market

Here are two intriguing buys in any market climate that offer defensive appeal as well as growth and income earning…

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Should You Buy Bank Stocks Now?

Canadian bank stocks are getting cheap. Is this the right time to buy?

Read more »

stock data
Stocks for Beginners

2 Reliable Stocks Beginners Can Buy Amid the Market Selloff

As the broader market turmoil continues, new investors can buy these two reliable dividend stocks to get good returns on…

Read more »

Biotech stocks can be good yet risky investments.
Coronavirus

Is Bellus Health Stock Still a Buy After 30% Earnings Jump?

The biotech continues to make progress on obtaining FDA approval for its chronic-cough therapy.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

TFSA Investors: 3 TSX Stocks for Tax-Free Passive Income

These Canadian corporations have strong visibility over future earnings and dividend payouts.

Read more »

Piggy bank next to a financial report
Investing

Do You Have Cash Sitting in Your TFSA? Now Is a Great Time to Buy Stocks

If you have cash in your TFSA that you're looking to invest, now is a great time to buy high-quality…

Read more »