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Analyst Actions: Canadian Oil Sands Ltd Estimates, Target Lowered at Credit Suisse On 2103 Guidance

2013 Guidance Implies Poor Reliability; Lowering Estimates and Target Price to C$20 (from C$21)

2013 Capex in Line with Credit Suisse Expectation: COS has announced 2013 guidance, including C$1.3 billion of capex spending, slightly below our C$1.4 billion forecast. Approximately C$836 million will be invested in major projects to replace or relocate mining infrastructure and also tailings management, while C$393 million will be directed to regular maintenance.

Production Guidance Signals Poor Reliability: Guidance is for Syncrude production to average between 288 and 315 kb/d (301.5 kb/d mid-point), below our 310 kb/d forecast and well below the facility's 350 kb/d nameplate capacity. Guidance includes a turnaround of Coker 8-1 in H2 2013. Given 2012 production was impacted by an unplanned outage at Coker 8-1 and a longer than expected planned maintenance outage at Coker 8-3, we are disappointed in the 301.5 kb/d production guidance. We note initial 2012 guidance was for 309 kb/d.

In addition, 2013 notional quarterly guidance implies production is not expected to exceed 315 kb/d in any quarter. Notional guidance in 2012 at times indicated quarterly production >340 kb/d.

C$0.35 Quarterly Dividend Held: COS "aims to maintain a quarterly dividend of C$0.35/share in 2013 based on the assumptions outlined in the 2013 budget". COS guidance is based on US$85 WTI. Overall, the strategy is to remain unhedged to provide investors with the full potential of the commodity. COS expects net debt to rise to C$1.3 billion by end 2013.

Revised Estimates and Valuation: Adjusting for 2013 guidance and our revised production outlook, we have adjusted our EPS/CFPS forecasts as summarized in our report. Our revised C$20.00 target price (was C$21.00) continues to be based on 6.0x 2013E EBIDAX of C$1,749 million (was C$1,831 million), in line with our C$20.00/sh NAV. The shares are trading at 5.9x 2013E EBIDAX vs. 4.9x for Suncor and 7.4x for Cenovus. We are lowering our 2013/2014 EPS estimates to C$2.62/C$2.50 (from C$2.65/C$2.57) respectively.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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