Annual General Meeting April 30, 2014 Ryan Kubik President & Chief Executive Officer Canadian Oil Sands Limited
Dec 05, 2014
Annual General Meeting
April 30, 2014
Ryan Kubik
President & Chief Executive Officer Canadian Oil Sands Limited
Forward-looking Information In the interest of providing you with information regarding Canadian Oil Sands Limited (the “Corporation”), including management’s assessment of the Corporation’s future plans and operations, certain
statements and graphs throughout this presentation contain forward-looking information and forward-looking statements (collectively referred to as “forward-looking statements”) under applicable securities
laws. Forward-looking statements are typically identified by words such as “anticipate”, “expect”, “believe”, “plan”, “intend” or similar words suggesting future outcomes. Forward-looking statements in this
presentation include, but are not limited to, statements and graphs with respect to: the estimated value and amount of reserves recoverable and the time frame to recover such reserves; the estimated
resources; plans regarding crude oil hedges in the future; the expected impact on cash flow from operations and cash flow from operations per share from increasing/decreasing crude oil prices; future
dividends and any increase or decrease from current payment amounts; the expected sales volume in 2014; the expected operating expenses in 2014; the expected cash flow from operations and cash flow
from operations per share in 2014; the expected realized selling price for the Corporation’s product in 2014; the belief that Syncrude production can grow from demonstrated levels through improved reliability
initiatives, while at the same time reducing maintenance and repair costs; the expected impact on cash flow from operations from increasing Syncrude production; the anticipated benefits of wet crushing
technology; the belief that retrofitting Syncrude’s centrifuges should improve bitumen quality and extraction capacity; the plans to improve the run length of the hydrotreaters; the views on future additional
utilities at Syncrude; the expected amount of total major project costs, anticipated target in-service dates and estimated completion percentages for the Mildred Lake mine train replacements and the
centrifuge plant at the Mildred Lake mine; the expectation that capital expenditures will significantly decline post 2014; the anticipated reliability improvements resulting from the Mildred Lake mine train
replacements; the expectations regarding the timing of planned/announced market access pipelines; the Corporation’s views on future oil prices; the views on future demand for oil and global energy use; all
expectations regarding the synthetic crude oil (“SCO”) and West Texas Intermediate (“WTI”) and Brent differentials; the expectations regarding the 2014 annual Syncrude forecasted production range of 95
million barrels to 105 million barrels and the single-point Syncrude production estimate of 100 million barrels (36.7 million barrels net to the Corporation); the timing of the Coker 8-2 turnaround; and the
expectations regarding the maintenance on Coker 8-1.
You are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature,
forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections
and other forward-looking statements will not occur. Although the Corporation believes that the assumptions and expectations represented by such forward-looking statements are reasonable and reflect the
current views of the Corporation with respect to future events, there can be no assurance that such assumptions and expectations will prove to be correct.
The factors or assumptions on which the forward-looking statements are based include, but are not limited to: the assumptions outlined in the Corporation’s guidance document as posted on the Corporation’s
website at www.cdnoilsands.com as of the date hereof and as subsequently amended or replaced from time to time, including without limitation, the assumptions as to production, operating expenses and oil
prices; the successful and timely implementation of capital projects; Syncrude’s major project spending plans; the ability to obtain regulatory and joint venture owner approval; our ability to either generate
sufficient cash flow from operations to meet our current and future obligations or obtain external sources of debt and equity capital; the continuation of assumed tax, royalty and regulatory regimes and the
accuracy of the estimates of our reserves and resources volumes.
Some of the risks and other factors which could cause actual results or events to differ materially from current expectations expressed in the forward-looking statements contained in this presentation include,
but are not limited to: volatility of crude oil prices; volatility of the SCO to WTI differential; the impact that pipeline capacity and apportionment and refinery demand have on prices for SCO; the impacts of
regulatory changes especially those which relate to royalties, taxation, tailings, water and the environment; the impact of new technologies on the cost of oil sands mining; the impacts of rising costs
associated with tailings and water management; the inability of Syncrude to obtain required consents, permits or approvals, including without limitation, the inability of Syncrude to obtain approval to release
water from its operations; the impact of Syncrude being unable to meet the conditions of its approval for its tailings management plan under Directive 074; various events which could disrupt operations
including fires, equipment failures and severe weather; unsuccessful or untimely implementation of capital or maintenance projects; the impact of technology on operations and processes and how new
complex technology may not perform as expected; the obtaining of required joint venture owner approvals from the Syncrude owners for expansions, operational issues and contractual issues; labour turnover
and shortages and the productivity achieved from labour in the Fort McMurray area; uncertainty of estimates with respect to reserves and resources; the supply and demand metrics for oil and natural gas; the
variances of stock market activities generally; currency and interest rate fluctuations; volatility of natural gas prices; the Corporation’s inability to either generate sufficient cash flow from operations to meet our
current and future obligations or obtain external sources of debt and equity capital; general economic, business and market conditions and such other risks and uncertainties described in the Corporation’s
Annual Information Form dated February 20, 2014 and in the reports and filings made with securities regulatory authorities from time to time by the Corporation which are available on the Corporation’s profile
on SEDAR at www.sedar.com and on the Corporation’s website at www.cdnoilsands.com.
You are cautioned that the foregoing list of important factors is not exhaustive. Furthermore, the forward-looking statements contained in this presentation are made as of the date of this presentation and
unless required by law, the Corporation does not undertake any obligation to update publicly or revise any of the included forward-looking statements, whether as a result of new information, future events or
otherwise. The forward-looking statements contained in this presentation are expressly qualified by this cautionary statement.
In this presentation we refer to additional GAAP and non-GAAP financial measures that do not have any standardized meaning as prescribed by Canadian Generally Accepted Accounting Principles
(“GAAP”). We refer to additional GAAP financial measures such as cash flow from operations, cash flow from operations on a per share basis and net debt. For more information on additional GAAP financial
measures please refer to our 2013 Annual Management’s Discussion and Analysis which is available on the Corporation’s profile on SEDAR at www.sedar.com and on the Corporation’s website at
www.cdnoilsands.com. In this presentation we also refer to non-GAAP financial measures such as free cash flow and return on equity. For more information on free cash flow and return on equity (referred to
as return on average shareholders’ equity in our 2013 Annual Report) please refer to our 2013 Annual Report, which is available on the Corporation’s profile on SEDAR at www.sedar.com and on the
Corporation’s website at www.cdnoilsands.com.
Third party information: To the extent that information contained in this presentation, forward-looking or otherwise, has been derived from third party sources such as Bloomberg, the International Energy
Agency and the US Energy Information Administration, the Corporation makes no representations or warranties, express or implied, as to the quality, accuracy and completeness of such information.
1. Our Strategic Focus
2. Results and 2014 Outlook
3. COS Investment Catalysts
Presentation Overview
STRATEGIC FOCUS
Syncrude: A High Quality Resource
• Established production base
• Long-life reserves
• Fully upgraded light, sweet
crude oil
• Proven operator and proven
technology
• Predictable reservoir recovery
– over 90%
Highly Leveraged to Increasing Crude Oil Prices1
0.00
1.00
2.00
3.00
4.00
$70 $80 $90 $100 $110
Illustrative cash flow from operations ($/share)2
WTI (US$/bbl)
2014 estimate
All figures in Canadian dollars unless otherwise noted.
1. Every US $1.00/bbl WTI increase/decrease in crude oil price increases/reduces cash flow from operations/share by $0.05 after tax; see April 30/14 Guidance
for other sensitivities; this assumes no other changes to operating expenses or other assumptions from the April 30/14 Guidance; see the risk factors outlined in
our Annual Information Form dated Feb. 20/14 as to other risks; for illustrative purposes only – COS is not expressing a particular view on crude oil prices.
2. Additional GAAP measure; assumes April 30/14 Guidance of: $0.92 US$/Cdn$ FX, $4/bbl SCO discount to Cdn$WTI, $46.08/bbl operating expenses and
sales of approximately 100,700 bbl/d net to COS.
Dividends Reflect Free Cash Flow Over Time (1,2)
(1) Includes distributions on trust units prior to Dec. 31/10 (2) Free cash flow (FCF) is cash flow from operations less capital expenditures and is a non-GAAP measure
Cumulative Dividends/FCF Annual Total Dividends
$ millions
$(1,000)
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$(300)
$-
$300
$600
$900
$1,200
$1,500
$1,800
$2,100
$2,400
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Dividends
Cumulative Dividends
Cumulative FCF
RESULTS & OUTLOOK
2013 Results
• Cash flow from operations of $1.3
billion
• Completed two major capital
projects, ahead of schedule and
$250 million under budget
• Paid quarterly dividends of
$0.35/share, or $678 million
• Sales volumes of 98,000 bbl/d at an
average operating cost of $42/bbl
• Achieved 18% return on equity1
All amounts as reported in COS’ 2013 Annual Report.
1) Non-GAAP measure. Defined as net income divided by
average shareholders’ equity.
Sales volume (bbl/d) 105,300 95,700
Realized SCO selling price ($/bbl) 105.73 96.11
Operating expenses ($/bbl) 46.91 41.20
Net income ($/share) 0.35 0.37
Cash flow from operations ($/share)3 0.74 0.57
Capital expenditures ($ millions) 217 268
1. Unaudited results as at March 31/14.
2. Unaudited results as at March 31/13.
3. Additional GAAP measure.
Q1 2014
Actual 1
Q1 2013
Actual 2
First Quarter Results
Announced quarterly dividend of $0.35 per share
Sales volume (bbl/d)2 100,700
Realized selling price ($/bbl) 96.00
Operating expenses ($/bbl) 46.08
Cash flow from operations ($millions)3 1,194
Cash flow from operations ($/share)3 2.46
2014 Outlook
20141
1. 2014 Outlook as at April 30/14.
2. Sales after crude oil purchases and transportation expense.
3. Additional GAAP measure.
COS INVESTMENT CATALYSTS
Syncrude’s path to
PRODUCTION GROWTH
Operating Leverage
0
50
100
150
200
250
300
350
400
2007 2008 2009 2010 2011 2012 2013 2014F
Syncrude production
Thousand barrels per day
2014F based on April 30/14 Outlook.
Average production of 287,000 bbl/d since 2007
Every 2 million bbl change in 2014 Syncrude production
impacts cash flow from operations by $44 million
Reliability Initiatives Across The Operation
Froth Production
Issues with crushers and conveyors contributed to approximately
3 MBbl production restriction in 2013
Actions taken include:
• Aurora Mine Relocation in 2013
– Comprehensive rebuild of trains 2 and 3
• Mildred Lake Mine Train Replacement
– New design includes wet crushers for increased recovery
– Increases unit capacity by 20%
Froth Treatment and Distillation
High solids in the bitumen feed causing furnace tube leaks downstream in distillation
units contributed to approximately 2 - 4 MBbl production restriction.
Actions taken include:
• Improved product quality of feed to upgrader
• Reconfigured centrifuge process design to
increase feed capacity
• Retrofitting bitumen centrifuges
Hydro Processing
Fouled hydrogen plant exchanger Reliability issues in hydro processing have led to as much as
5 MBbls/yr of lost production
Actions taken include:
• Program to replace the waste heat recovery exchangers in all
four hydrogen plants planned to be completed in the Q2 2014
turnaround
• Plan to improve run length of hydrotreaters
Utilities
Additional steam and power utilities planned in 2017
Gas Turbine Generator
Completing Syncrude’s
MAJOR PROJECTS
0
100
200
300
400
500
600
700
800
900
1000
2011 2012 2013 2014 2015
Centrifuge Tailings Management
Mildred Lake Mine Train Replacement
Aurora North Tailings Management
Aurora North Mine Relocation
Major Projects Capital Expenditure Profile
$ millions, net to Canadian Oil Sands
Capital costs only; excludes capitalized interest and certain development costs.
Mildred Lake Mine Train Replacements (MLMR)
Currently 85% complete
Expected in-service date of
Q4 2014
Cost estimates revised
downward from $4.2 billion to
$3.9 billion (gross to Syncrude)
Tightened range around cost
estimate to +5% / -10%
(1) Total project costs are net COS’ 36.74% working interest and include both capital and certain development expenses; costs
exclude capitalized interest.
(2) The estimated percentage complete is based on hours spent as a percentage of total forecasted hours to project completion.
Centrifuge Tailings Management Project
Currently 75% complete
Expected in-service date of first
half of 2015
Cost estimate remains at $1.9
billion (gross to Syncrude)
Range around the cost estimate
remains at +15% / -15%
(1) Total project costs are net COS’ 36.74% working interest and include both capital and certain development expenses; costs
exclude capitalized interest.
(2) The estimated percentage complete is based on hours spent as a percentage of total forecasted hours to project completion.
MARKETS Accessing new
Quality and Location Differentials
Cdn $/bbl
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
Trailing 3-Month Average
Brent
WTI
WCS
Bitumen
Quality and Location Differentials
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
Trailing 3-Month Average
Brent
SCO
WTI
WCS
Bitumen
Cdn $/bbl
Kitimat
Hardisty
Edmonton
Burnaby
Cushing
Montreal
Houston
Sarnia
Patoka
Quebec City
Markets for COS’ Syncrude Production
Chicago
Syncrude
Current synthetic crude oil markets
Potential new markets
LONG-TERM OIL PRICES The market’s view of
$75
$80
$85
$90
$95
$100
$105
Ju
n-1
4
Au
g-1
4
Oct-
14
Dec-1
4
Fe
b-1
5
Ap
r-1
5
Ju
n-1
5
Au
g-1
5
Oct-
15
Dec-1
5
Fe
b-1
6
Ap
r-1
6
Ju
n-1
6
Au
g-1
6
Oct-
16
Dec-1
6
Fe
b-1
7
Ap
r-1
7
Ju
n-1
7
Au
g-1
7
Oct-
17
Dec-1
7
Fe
b-1
8
Ap
r-1
8
Ju
n-1
8
Au
g-1
8
Oct-
18
Dec-1
8
Fe
b-1
9
Ap
r-1
9
Ju
n-1
9
Au
g-1
9
Oct-
19
Dec-1
9
WTI Forward Prices
Source: Bloomberg, April 23, 2014
World Energy Demand by Fuel Type
Source: International Energy Agency, World Energy Outlook 2013
Global energy needs expected to increase by 30%
Oil use is expected to increase 13% to 101 million barrels per day
Oil as a Transportation Fuel
Source: International Energy Outlook 2013; US Energy Information Administration
Globally, liquids (mostly crude oil) meet 95% of transportation needs
Production Declines Dramatically
Without Further Investment
Source: International Energy Agency, World Energy Outlook 2013;
Production declines from all currently producing fields in the absence of further investment.
COS Investment Catalysts
1. Production growth through improved reliability
2. Completion of remaining major projects
• Mildred Lake Mine Replacement (MLMR)
• Tailings Centrifuge Project
3. Market access
• Narrowing of SCO-WTI-Brent differentials
4. Market view of long-term oil prices
These four catalysts
represent potential to
improve total shareholder
return
Plus, COS offers:
Solid finance plan and
a strong balance
sheet
Currently,
approximately 6%
yield
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