Canadian Oil Sands: 14th Distribution Increase in 5 Years

The newly declared quarterly distribution for buy-recommended Canadian Oil Sands Trust (COSWF.PK) of C$1 a unit to be paid next month is up ten times in five years, a compound annual growth rate of 58% a year.
The increase for U.S. investors is an even greater 14 times in five years, or 70% a year, because the U.S. dollar lost forty percent of its value during that period.

The distribution increase was announced with first quarter results reported after the market close on April 28. At latest oil futures prices, projected free cash flow for the next four quarters exceeds the distribution of C$1 a unit in each quarter. Meanwhile, NPV is supported by projected cash flow capitalized at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P). Not fully recognized in NPV, remaining recoverable resources, according to fresh estimates by an independent engineer, would allow production for 70 years at a likely further expansion of capacity by 40%.

Finally, our long-term oil price assumption of US$80 a barrel for estimating NPV is looking increasingly outdated as oil price continues to trend upward.

Originally published on April 29, 2008.