Canadian Oil Sands Limited is slashing its budget to avoid adding more to its debt while crude prices are low.
This morning, the company released its budget for the new year. It cuts 43 per cent of its quarterly dividend to 20 cents per share by the time it releases its fourth quarter results at the end of January.
“With this budget, we are delivering a lower capital expenditure profile following significant reinvestment at Syncrude. The completion of Syncrude’s major capital projects greatly reduces the financing and execution risk in our business, positioning COS as a lower-risk, long-life crude oil investment,” said President Ryan Kubik, in a news release.
It says at the current dividend level, net debt would grow at a pace that would quickly hit more than $2 billion. COS says it’s a step to help balance the budget in an environment with lower oil prices.
“This budget also reflects our confidence in Syncrude’s ability to gradually grow production levels through improved reliability.”
The company’s main asset is its stake in Syncrude’s mine north of Fort McMurray. The budget expects Syncrude’s to produce 103 million barrels which is 37.8 million barrels net to COS. That’s about six per cent higher than 2014’s estimated production. Capital expenditures are pegged at $564 million. It includes $104 million on major projects, $425 million on regular maintenance and $35 million of capitalized interest. Crown royalties are estimated to total $176 million or $4.65 per barrel.
