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Canadian Oil Sands profit slashed in half

Canadian Oil Sands Ltd. holds the largest stake in the Syncrude Canada oil sands venture.

Todd Korol/Reuters/Todd Korol/Reuters

Profit at Canadian Oil Sands Ltd. , which has the largest stake in the Syncrude Canada Ltd. oil sands venture, was halved in the fourth quarter as outages of a major processing unit cut into production, the company said on Wednesday.

Canadian Oil Sands earned $232-million, or 48 cents a share, down from year-earlier $575-million, or $1.19 a share. The year-ago figure includes a large tax recovery. It recorded a tax expense in the most recent quarter related to its conversion to a corporation from an income trust.

The result slightly beat the average analyst estimate of 45 cents a share, according to Thomson Reuters I/B/E/S.

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Cash flow, a glimpse into the company's ability to fund expenditures and pay dividends, fell 9 per cent to $363-million, or 75 cents a share, from $398-million, or 82 cents.

Canadian Oil Sands has a 37 per cent stake in Syncrude, one of the top two oil sands mining and synthetic crude processing operations. The venture struggled with mechanical problems in the quarter.

A hydrogen processing unit at Syncrude's upgrading plant had an extended outage in November and December, forcing the company to cut its production target for the year.

Also in November, a 100,000 barrel a day coker unit, which turns heavy bitumen from the oil sands into refinery-ready light crude, was unexpectedly idled. The unit, which is back in operation, is slated for a 30-day turnaround starting early this month.

"[The downtime]exemplifies the value of the effort currently under way to target unplanned capacity losses," chief executive officer Marcel Coutu said in a statement. "We do expect this to gradually result in increased capacity rates at Syncrude, and in 2012 we are looking forward to a 7 per cent increase in volumes over 2011."

During the quarter, sales volumes net to Canadian Oil Sands averaged 91,259 barrels a day, down 20 per cent from the fourth quarter of 2010.

Fewer barrels led to operating costs of $46.88 a barrel, up a hefty 31 per cent. Syncrude's synthetic oil fetched $104.78 barrel in the quarter, up 25 per cent from the same period a year earlier.

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The Syncrude partners have pushed back expansion plans to fix reliability problems with current equipment.

In December, Canadian Oil Sands forecast the overall Syncrude operation would produce 106 million to 117 million barrels in 2012, still well below the 350,000 bpd capacity.

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