Article content continued

The 2015 budget has been allocated $104 million to major projects, $425 million on regular maintenance and $35 million to capitalized interest.

Canadian Oil Sands said it expects Syncrude to produce 95 million to 110 million barrels (35 million to 40 million barrels net) in 2015. That’s 260,000 to 301,000 barrels of light synthetic crude per day.

Chief financial officer Rob Dawson said on the call the company could not continue to pay its dividend of 35 cents per share per quarter next year without going over its self-imposed cap of $2 billion in net debt, so the decision was made to reduce it to 20 cents per share.

“We appreciate a dividend reduction is not welcome news. But I suspect this isn’t a complete surprise to the market,” he said.

He said Canadian Oil Sands estimates it will realize $730 million in cash flow in 2015 based on an average $75 US per barrel for benchmark West Texas Intermediate crude, a dollar worth 88 cents US, and a realized price of $80 Cdn per barrel of synthetic crude.

The capital plan for next year was lower than financial analysts had estimated and production numbers also fell below expectations.

Arthur Grayfer, an analyst for CIBC World Markets, cautioned the company may have to cut its dividend again if synthetic crude prices are lower than $84 per barrel and Syncrude utilization is 83 per cent.

“Notwithstanding the six per cent expected year-over-year production growth and the reduced dividend, we remain cautious on the name as capital spending and dividends are still expected to outstrip cash flow in 2015 assuming (either) company guidance or strip pricing,” he wrote in a note.

Greg Pardy, an analyst for RBC Dominion Securities, said he pegs Canadian Oil Sands’ break-even point at $68 US per barrel WTI before dividends and $80 after dividends in 2015. RBC cut its one-year target price to $16 from $19.

“While we believe that the decision to reduce the dividend will be taken negatively by the market, in our view it was a sound decision by management to protect the balance sheet during the current market uncertainty,” wrote analyst Nick Lupick of AltaCorp Capital.

dhealing@calgaryherald.com

Twitter.com/HealingSlowly