Canadian Oil Sands Trust Posts Lower Profits for First Quarter '09

Canadian Oil Sands Trust announced first quarter 2009 cash from operating activities of $50 million ($0.10 per Unit) compared with $441 million ($0.92 per Unit) in the same quarter in 2008. Net income for the quarter was $43 million ($0.09 per Unit) compared with $298 million ($0.62 per Unit) for the first quarter of 2008. The decrease in cash from operating activities and net
income in 2009 reflects the significant decline in crude oil prices with average West Texas Intermediate ("WTI") prices down 56 per cent from the first quarter of 2008. The financial results also reflect higher operating costs net of lower Crown royalties. Higher future income tax recoveries were recorded in the 2009 first quarter, increasing net income, while changes in non-cash working capital reduced cash from operating activities compared with the 2008 first quarter.

"We experienced a difficult first quarter with very weak crude oil prices and more than the usual winter challenges," said Marcel Coutu, President and Chief Executive Officer. "We expect production to improve as constraints in bitumen supply are gradually addressed and we complete the turnaround work that began in the first quarter, positioning us for a much stronger second half of the year. Our financial plan during this economic downturn remains on track with a focus on maintaining a healthy balance sheet, and more importantly, a solid liquidity position."

Mr. Coutu added, "I am cautiously optimistic that crude oil prices are now on a recovering trend. Despite a global recession that may extend for a few more quarters, an eventual oil price recovery may be accelerated by natural production declines due to lower industry reinvestment in producing fields and outright production cuts by OPEC nations."

The Trust has declared a distribution of $0.15 per Unit for the second quarter of 2009, unchanged from the previous quarter. The distribution is payable on May 29, 2009 to Unitholders of record on May 11, 2009. Eligible Unitholders can elect to participate in the Trust's Premium Distribution, Distribution Re-Investment and Optional Unit Purchase Plan ("DRIP") by contacting their financial advisor or Computershare Trust Company. During the first quarter of 2009, sales volumes averaged about 103,000 barrels per day as compared to 99,000 barrels per day for the first quarter of 2008. Constraints in bitumen supply and unplanned maintenance reduced production in the first quarter of both years. In mid-March 2009, Syncrude began turnaround work on Coker 8-3. The turnaround was scheduled to commence early in the second quarter, and its advancement also impacted first quarter volumes.

Operating costs in the first quarter of 2009 were $38.78 per barrel compared with $35.93 per barrel in the 2008 period, reflecting a $35 million increase in total operating costs in the first quarter of 2009 over the first quarter of 2008. The increase was primarily due to higher maintenance costs, higher labour costs and additional mining activity in 2009 relative to 2008.

The Trust's 2009 Outlook estimates production of 40 million barrels (109,500 barrels per day), operating costs of approximately $33.50 per barrel, and capital expenditures totaling $453 million. The estimate for production was reduced in March 2009 to reflect the lower than estimated first quarter production and the early turnaround of Coker 8-3, which delayed a sulphur plant turnaround and resulted in an extension of the overall turnaround schedule. Based on the Trust's assumption of WTI crude oil averaging U.S. $50 per barrel in 2009, together with our other assumptions outlined in our Outlook, we are estimating cash from operating activities of $1.21 per Unit in 2009.


Canadian Oil Sands' expansion related capital expenditures have declined in recent years and capital costs for 2009 and 2008 were mainly related to sustaining capital. We define expansion capital expenditures as costs incurred to grow the productive capacity of the operation while sustaining capital is effectively all other capital. Capital expenditures may fluctuate considerably
year-to-year due to the timing of expansions, equipment replacement and other factors. The productive capacity of Syncrude's operations was previously described in the "Review of Syncrude Operations" section of this MD&A. In the first quarter of 2009, capital expenditures totaled $84 million compared with expenditures of $47 million in the same quarter of 2008. The Syncrude Emissions Reduction ("SER") project accounted for $25 million and $17 million of the capital spent in the first quarters of 2009 and 2008, respectively. The remaining amounts in each quarter pertain to other sustaining capital activities including replacement of trucks and shovels as well as infrastructure projects. Sustaining capital expenditures on a per barrel basis were approximately $9.10 and $5.25 in each of the first quarters of 2009 and 2008, respectively.

Syncrude is undertaking the SER project to retrofit technology into the operation of Syncrude's original two cokers by the end of 2011 in order to reduce total sulphur dioxide and other emissions. The estimate of the total cost of the SER project is $1.6 billion ($590 million net to the Trust) and the Trust's share of SER expenditures to date is approximately $206 million.