Canadian Oil Sands Ltd., the largest stakeholder in Syncrude Canada Ltd., has revised its 2012 financial outlook and expects its cash to drop significantly next year as debt rises until 2014.
Syncrude has expansion projects under way at its Mildred Lake mine, and Canadian Oil Sands, which controls 36.74 per cent of the consortium, expects its balance sheet to look much different next year.
"We expect cash levels to decrease significantly from the current $1.5-billion as we fund the major capital projects and repay the 2013 debt maturity," Canadian Oil Sands said in its third-quarter earnings release Monday. "As a result, net debt levels should rise to $1-billion to $2-billion by the end of 2014, coincident with the reduced capital expenditure risk from the completion of the major capital projects."
Canadian Oil Sands said it was able to protect its cash balance this year and expects to have $1.6-billion in the bank, and $200-million in debt, at the end of the year.
"While we had expected to draw down on our cash balances this year, we were able to fund our capital expenditures and dividends essentially from internally generated cash flow," chief executive officer Marcel Coutu said in the statement. "As such, we continue to be well-positioned to finance the remainder of our major project capital program while maintaining an attractive dividend. These projects are tracking to plan, and Syncrude's owners remain confident in the schedule and budget estimates."
The company made $338-million, or 70 cents a share, in the third quarter, compared to $242-million, or 50 cents a share, a year earlier, Canadian Oil Sands said in a statement Monday. Its cash flow, which investors turn to when judging whether energy companies can fund expansion plans, dropped. The company brought in $470-million, or 97 cents per share, in the quarter, compared to $512-million, or $1.06 per share.
Canadian Oil Sands said the reduced cash flow was due to lower realized oil prices, but offset by higher volumes. The company pocketed an average of $89.89 per barrel of oil in the quarter, a decrease of $8 per barrel from $97.89 per barrel it received in the same frame last year. In the first nine months of the year, Canadian Oil Sands brought in $92.59 per barrel, a $7.61 drop from the $100.20 per barrel it received in the comparable period in 2011.
Energy companies operating in Canada are being hit with the discount because of a glut of crude collected in major refining hubs like Cushing, Okla. A lack of pipeline space is making it difficult to move oil around North America and ease the excess oil inventories. Further, vast amounts of new production are hitting the market from places like North Dakota.