Canadian Oil Sands stock remains in free-fall
Canadian Oil Sands [TSX:COS] is Syncrude's largest shareholder, owning 36.74% of the oil sands mining operation. Syncrude's upgrader at Mildred Lake (40 km north of Fort McMurray) has the capacity to produce 315,000 barrels per day of light, sweet crude, sold to market as Syncrude Crude Oil or Syncrude Sweet Blend.
COS stock has been hit hard by the recent downturn in crude oil prices. At $8 per share, the company has a total market cap of $4 billion, making it an attractive take-out target, given its share of production at 115,000 barrels/day of upgraded, high quality crude oil. By comparison, Imperial Oil's Kearl Project cost an estimated $10 billion for 110,000 bpd production; the upcoming Fort Hills Mine is expected to cost $13.5 for 180,000 bpd capacity. However, both Kearl and Fort Hills produce diluted bitumen, not upgraded crude oil, which sells at a considerable discount to Syncrude's sweet crude. In short, purchasing COS would be much cheaper than building a new oil sands facility, making it an attractive take-over for any large energy company looking to quickly add long term, reliable production to their portfolio. The most likely acquirer would be one of the other Syncrude partners, such as ExxonMobil, which is currently Syncrude's operator and has plenty of spare cash on the balance sheet despite falling oil prices.
COS stock trades on the TSX and currently pays out a 17% dividend, which is likely to be cut if oil prices keep falling. The stock is down over 60% in the past 6 months.