Canadian Oil Sands: A Strong Long-term Investment
Canadian Oil Sands Trust (COSWF) has operates in the expansive Canadian oil sands, and a recovery in the price of oil could pay big dividends to shareholders down the road.
Canadian Oil Sands Trust [[COSWF.PK]] had a difficult first quarter with weak crude prices and unusual winter challenges, but the company expects production to improve and oil prices to recover. Meanwhile, the company will focus on maintaining a healthy balance sheet and a solid liquidity position in this difficult economic environment.
Canadian Oil Sands has a higher extraction cost than most wells, with operating costs of $38.78 per barrel, but reserves and production levels are often much higher. In fact, the Canadian oil sands represent one of the largest oil fields in the world, behind Saudi Arabia. However, constraints in bitumen supply and unplanned maintenance held back first quarter results.
Since Canadian Oil Sands is structured as a trust, unit holders are paid a distribution that amounts to a majority of its net income. Currently, the trust trades for just $25 per unit, which is approximately 20.6x conservative estimates for 2009. Of course, the future of oil prices depends largely on demand recovery in the United States and OPEC’s commitment to stability.
The trust’s 2009 outlook estimates production of 40 million barrels (109,500 barrels per day), operating costs of approximately $33.50 per barrel, and capital expenditures totaling $453 million. Assuming oil prices conservatively remain at around $50 per barrel, the trust anticipates cash from operating activities of $1.21 per unit in 2009.
In the end, Canadian Oil Sands Trust represents a great OTC oil stock that pays out healthy dividends. If oil prices continue their recovery, this stock will yield strong dividends down the road. Meanwhile, it maintains a healthy balance sheet and liquidity position that help it weather tough economic times without blinking twice.
CONTACT: Daniel Minton, Managing Director, 406-862-5400, daniel@accelerize.com