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Syncrude's oil sands up-grader facility located north of Fort McMurray, Alberta. Syncrude is partly owned by Canadian Oil Sands.Kevin Van Paassen/The Globe and Mail

Shares of Canadian Oil Sands Ltd. have had a stunning change of fortune, one day after announcing a massive dividend cut. The stock surged nearly 21 per cent on the TSX today, far outpacing a more than 5 per cent jump in the S&P Energy index and even the 8 per cent surge in the price of crude oil.

The reason for the stock's sudden popularity isn't completely clear. What is clear is that trading in Canadian Oil Sands this week hasn't been for the faint of heart.

On Thursday, shares of Canadian Oil Sands started falling ahead of the company's earnings release, losing just over 7 per cent before being halted at 309 p.m. (ET) for pending news. The news turned out to be bad, but expected: a poor set of quarterly results and confirmation that its dividend was getting slashed in an attempt to keep net debt under control.

Material information pertaining to the company's dividend leaked early in the afternoon, according to regulators, which may have played into the price action before the stock was halted. The Investment Industry Regulatory Organization of Canada posted a notice on Thursday indicating that it had cancelled 14,793 trades in the stock that occurred after 1:04:56 p.m. (ET), in order to "protect market integrity."

Prior to today, shares of Canadian Oil Sands shed about 40 per cent of their value in the past month and more than 60 per cent in the last 90 days, massively underperforming its peers. By contrast, though the price of West Texas Intermediate crude oil in Canadian dollars has fallen nearly 18 per cent since December 10, the S&P/TSX Energy index has managed to move 8 per cent higher.

Canadian Oil Sands lacks the balance sheet flexibility of its peers, as it has only one asset – Syncrude – which is a joint venture, and as such, gives the company less control over costs. Some analysts have indicated that with crude oil at these levels, the company isn't able to make a positive return from the project.

Today's rally in the company's shares appears to be the mirror image of the classic "buy the rumour, sell the news" – the market had been conditioned to be severely disappointed by Canadian Oil Sands' results, and now this weight has finally been lifted from its shoulders. Or, perhaps the realization that Thursday's trade was unduly skewed to the downside because some parties had prior insight into the company's announcement had investors convinced that a short-term rebound was in the cards.

But there was only one analyst who advised that today was the perfect time to start picking up the stock. Sam La Bell of Veritas Research upgraded Canadian Oil Sands to "buy" from "sell" prior to the market open, emphasizing the longevity of its core asset, the company's progress in reducing operating costs, and potential upside in the event of a rebound in the price of crude to above $70 per barrel (U.S.).

"Investors who can look past COS' lousy yield have the luxury of considering Syncrude's longer-term value," said Mr. La Bell, who believed the company was worth a second look after the severe sell-off.

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