Canadian Oil Sands Ltd. (TSX:COS), the company with a 36.74% ownership interest in the Syncrude oil sands project, announced first-quarter earnings results after the market closed on April 30, and its stock has remained relatively flat in the trading sessions since. Let’s take a closer look at the operating results to determine if we should consider establishing long-term positions, or if we should look elsewhere in the industry for an investment today.
Lower oil prices lead to year-over-year declines
Here’s a breakdown of Canadian Oil Sands’ first-quarter earnings results compared with its results in the same period a year ago.
| Metric | Q1 2015 | Q1 2014 |
| Earnings per share | ($0.38) | $0.35 |
| Revenue | $634 million | $1.06 billion |
Source: Canadian Oil Sands
In the first quarter of fiscal 2015, Canadian Oil Sands reported a net loss of $186 million, or $0.38 per share, compared with a net profit of $172 million, or $0.35 per share, in the same quarter a year ago, as its revenue decreased 40% to $634 million.
These very weak results can be attributed to two primary factors. First, Canadian Oil Sands’ average realized synthetic crude oil selling price decreased 47.1% to $55.95 per barrel, which more than offset a 1.9% increase in its average sales volume to 107,305 barrels per day. Second, the company reported a $159 million foreign exchange loss on its U.S. dollar denominated long-term debt compared with a loss of just $54 million in the year-ago period.
Here’s a breakdown of eight other notable statistics from the report compared with the year-ago period:
- Syncrude’s total production increased 0.4% to 26.4 million barrels, or 293,700 barrels per day
- Cash flow from operations decreased 78.7% to $76 million
- Cash flow from operations decreased 78.4% to $0.16 per share
- Total operating expenses decreased 22.5% to $345 million
- Total operating expenses decreased 23.9% to $35.71 per barrel
- Paid out a quarterly dividend of $0.05 per share for a total cost of approximately $24 million, compared with a dividend of $0.35 per share for a total cost of $170 million in the year-ago period
- Average foreign exchange rate ($USD/$CDN) decreased 11% to $0.81
- Ended the quarter with $120 million in cash and cash equivalents, an increase of 263.6% from the beginning of the quarter
What should you do with Canadian Oil Sands’ stock today?
Canadian Oil Sands’ first-quarter earnings results were very weak, so I think its stock has responded correctly by remaining relatively unchanged since the release. I also do not think there is any reason to own the stock today, as it trades at expensive valuations and only yields 1.5%. I think Foolish investors should avoid the stock for the time being and only revisit it if it experiences a significant pullback in the weeks ahead or if a positive press release of any kind occurs.
