Buy-recommended Canadian Oil Sands Trust (COSWF.PK) stands out at a low McDep Ratio of 0.67 despite a steady uptrend in stock price from the bottom on January 23. Opportunities for optimists, or concerns for pessimists, might include operating reliability, distribution rate and environmental issues. We remain hopeful that the trust can meet management guidance with operations near capacity of 350,000 barrels daily (bd) to the end of the year despite a surprise upset in August that reduced monthly volume to 284,000 bd.
We see ample capacity to double the distribution rate on October 28 to C$0.50 a unit compared to estimated Ebitda minus Interest of C$0.79 a unit for the quarter ended December 31.
On the ecological front, we think that Greenpeace and other activists can find better targets that need more prodding than oil sands. The buffalo are grazing on restored mining lands, the air is clean and the water in the Athabasca River relatively pure by our experience. Finally, translated to U.S. dollars, we project a distribution of US$2.15 for the next twelve months indicating a distribution yield of 8.0%.
Originally published on September 17, 2009.