January 29, 2015 / 10:24 PM / 3 years ago

UPDATE 1-Canadian Oil Sands fourth-quarter profit tumbles, cuts dividend

(Adds comments from company, details on earnings)

By Nia Williams and Scott Haggett

CALGARY, Alberta, Jan 29 (Reuters) - Canadian Oil Sands Ltd , the largest-interest owner in the Syncrude oil sands project, slashed its dividend and further reduced 2015 capital spending on Thursday as fourth-quarter profit dropped 87 percent due to lower oil prices.

The company cut its dividend to 5 Canadian cents a share for the first quarter of 2015, down from 20 Canadian cents.

It was the second dividend cut in less than two months after a 43 percent reduction in December, triggered by benchmark crude oil price slumping by more than half since last June.

Canadian Oil Sands said net income in the quarter was C$25 million ($19.8 million), or 5 Canadian cents per share, down from C$192 million, or 40 Canadian cents, in the year-prior quarter.

The company plans to further reduce its capital budget to C$451 million, down from C$564 million announced in December and sharply lower than the estimated C$1.1 billion spent in 2014.

It has identified potential savings of C$260 to C$400 million, about 10 to 15 percent, in operating, development and capital costs.

“While the potential cost savings announced today are substantial, Syncrude is continuing to examine the longer-term opportunities to achieve a sustainable, lower cost structure,” said Chief Executive Ryan Kubik.

The Syncrude mining and upgrading project in northern Alberta is a joint-venture of seven partners - Canadian Oil Sands, Imperial Oil, Mocal Energy, Murphy Oil, Nexen, Sinopec and Suncor Energy.

It can produce 350,000 barrels per day, but has a history of unplanned shutdowns caused by equipment malfunctions, particularly at its complex upgraders, which convert mined bitumen into refinery-ready synthetic crude.

Total Syncrude production last year averaged 258,100 bpd, a total of 94.2 million barrels, down from 267,000 bpd in 2013.

Cash flow, a key indicator of the company’s ability to pay for new projects and drilling, fell 47 percent to C$207 million, or 43 cents per share from C$391 million, or 81 cents.

The company reduced its 2015 U.S. crude oil estimate to average $55 a barrel, but maintained an annual Syncrude production forecast of 95 to 110 million barrels.

Trading in the company’s shares on the Toronto Stock Exchange was halted by regulators late on Thursday afternoon. It last traded at C$6.51, down 7.1 percent on volume of 6.6 million shares, nearly twice average over the past three months.

The shares have dropped 68 percent over the past 12 months compared with a 24 percent drop in the exchange’s energy index over the same period. (Editing by Andrew Hay)

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