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