Canadian Oil Sands Trust, and the soon to be Canadian Oil Sands stock...

Here is the latest corporate update:

Well Friday was a very rough ride for T.COS.UN.  The key IMO to the above announcement/forthcoming conversion to a stock is the reduction anticipated in the new dividend.  2010's distribution on annual basis was $2.00/share or $.50/quarter, the most recent forecast by management has the upcoming quarter paying a reduced post-trust rate of 20 cents/share dividend,short of saying the market reacted very poorly to this announcement...

Financial Outlook

Revenues, net of crude oil purchases and transportation expense, are estimated at approximately $3.2 billion, reflecting our 40.4 million barrel production estimate and a $79 per barrel sales price. The sales price assumes an average US$80 per barrel WTI crude oil price, a US to Canadian dollar exchange rate of
.98, and a discount to Canadian dollar WTI prices of $2.75 per barrel.

We are estimating operating costs of approximately $1.5 billion in 2011, comprised of approximately $1.3 billion in production costs and
.2 billion in purchased energy. The purchased energy costs reflect a $4 per gigajoule ("GJ") natural gas price assumption and consumption of about one GJ per barrel of upgraded, synthetic production. Based on our production assumption, this translates into approximately $37 per barrel of operating costs, similar to our outlook for 2010.

Non-production costs are estimated to rise by approximately $30 million over our 2010 outlook to $145 million due to a higher 2011 capital program. Also mainly as a result of the higher capital program, Crown royalties are expected to be $120 million lower than our 2010 outlook, totaling about $180 million in 2011.

Capital costs are estimated to total about $930 million in 2011, comprised of $620 million of spending on major projects and $310 million in regular maintenance of the business and other projects.

Based on these inputs, COS is estimating cash from operating activities of approximately $1.3 billion, or $2.59 per share in 2011. After deducting forecast 2011 capital expenditures, we are estimating $330 million in remaining cash from operating activities for the year, or
.68 per share.

The moving parts of this equation in the latest production forecast above:

1)WTI Oil, of late the contract price is well above the $80 USD$ forecast,this number will move in both directions...IMO I expect that $80 USD$/barrel to be exceeded.

2)The CDN$, COS uses 98 cents for the CDN$, IMO as Oil rises so does the CDN$ vs. the USD$,the rise in Oil prices should exceed the rise in the CDN$ as per the the previous Oil move in 2006/2007.

3)Nat Gas @ $4.00/GJ, I can live with number and possibly believe they may get their feed at a slightly lower price as shale gas finds destroy North American prices.

4)Capital expenditures/costs as well as maintenence costs...I expect this area experience problems once again, and the monies set aside will be exceeded IMO...whether it be lack of experience,human error, or the drive to squeeze out more production,IMO this will lead to greater costs in these areas for the year...I speak of this area based on my knowledge and work experience within the Oilsands.

5)The dividend, projected to be post-trust @ 20 cents/share in the immediate quarter following the conversion to a stock...I will point out this dividend rate can fluctuate, and IMO management is perhaps taking a prudent route of going in low and can bump this dividend rate, or pay a special dividend at anytime if higher crude oil prices are present.  Based on Friday December 3rd's close,($25.05) the present 20cents/quarter equates to just  under 3.2% return.

In summary T.COS.UN is one to watch as the conversion away from a trust, and how the newly anticipated lower dividend rate is absorbed by present shareholders.

GLTA in commodity arena,


PS ...some of the above information is based on my own opinion, please seek financial advice and do your own DD.