Tuesday, March 30, 2010

Canadian Oil Sands

I am reviewing this stock (TSX-COS.UN) today as the annual reported for December 2009 has been published and when anyone talks about investing in Canadian Oil Sands, this is the stock that seems to be mentioned first. As with any other investment in oil companies, if the dividend is good, then it will vary according to the price of oil. This makes the total returns growth figures on such investments very good.

For this company, 2009 was not a good year. Even with that, there are some very good growth figures for this company. For example, the Revenue growth per share figures for the last 5 and 10 years are 14% and 13% per year. The Total Returns growth figures for the last 5 and 10 years are 25% and 27% per year. Even the book value growth figures are not bad, being 7.3% per year and 12% per year for the last 5 and 10 years respectively. The 5 year figure is not great, but it is not bad either.

The growth in Cash Flow for the last 5 year is -3% per year. However, if you look at the 5 year running average for Cash Flow, you get a very different picture with the Cash Flow growth being 180% per year over the past 5 years. Growth in Distributable Income and Earnings were not great either, but this is because this company did not make much money in 2009.

Another good thing about this company is the strong balance sheet. The Liquidity Ratio and the Asset/Liability ratios are 2.05 and 2.33 respectively. What you look for are ratios of 1.50 or higher and the ratios for this company are very good. Also, the Leverage (Assets/Book Value) ratio is good being at 1.75 for the end of financial year of 2009. The last thing to mention is the Return on Equity. The 5 year average ROE is high at 22.5% and the 2009 one is not bad at 10.9%.

Some time in the future, I might invest in some oil companies. You can make some very good dividend income over time when investing in such oil companies. However, if you are a dividend investor; you have to be prepared to deal with fluctuating dividend income if you invest in this company. If you cannot handle this, this would not be a good company for an investment. Tomorrow, I will talk about what the analysts say about this company.

Canadian Oil Sands Trust provides a pure investment opportunity in the oil sands through its 36.74% interest in the Syncrude Project. Syncrude is an experienced oil sands operator, producing a high-quality crude oil for the past 30 years. With large, bitumen-rich leases located in the sweet spot of the Athabasca oil sands deposit and a fully integrated upgrading facility that produces 100% light, sweet crude oil, the quality of their Syncrude asset is very good. Its web site is www.cos-trust.com/. See my spreadsheet at www.spbrunner.com/stocks/cos.htm .

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

1 comment:

  1. We've held COS.UN since 2007. It has defied unit-holder urgings to clean up its environmental impact.
    In a CBC aerial documentary the sum of its local eco-destruction is devastating to see. Promises to develop clean energy seem to be either faint or unsuccessful. Sorry...we are tired of waiting.
    Sold the stock and good riddance.

    Uguru Green, Ontario.