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Energy Summary for Jan. 27, 2015

2015-01-27 20:00 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for March delivery added $1.08 to $46.23 on the New York Merc, while Brent for March added $1.44 to $49.60 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.90 to WTI ($32.33), down from a discount of $13.65. Natural gas for February added 10 cents to $2.98. The TSX energy index added 2.07 points to close at 219.17.

As the month draws to a close, energy investors are preparing for a grim fourth quarter reporting season. One of the first reports will come on Thursday from Canadian Oil Sands Ltd. (COS), down 28 cents to $7.82 on 9.81 million shares. Analysts are predicting net earnings of 21 cents a share, down from 40 cents a share a year earlier. They are also widely expecting another dividend cut. The company pared its quarterly dividend to 20 cents from 35 cents on Dec. 3, the same day it released its 2015 guidance, which forecast spending of $564-million, net production of 96,000 to 111,000 barrels of oil equivalent a day and an average WTI price of $75 (U.S.). The new dividend yields 10.2 per cent. It was 10.6 per cent before the December cut, so another cut seems inevitable, particularly given Canadian Oil Sands' history of dividend ups and downs. (The 35-cent dividend, which was in place from April, 2012, to December, 2014, was in fact the longest-lived payout in the company's recent history. From 2008 to mid-2012, the dividend was raised and lowered 11 times.) Analysts are merely debating the size of the cut. CIBC's Arthur Grayfer predicted in his fourth quarter preview report that the company will eliminate the payout entirely. RBC's Greg Pardy, who wrote last Friday about a meeting with Canadian Oil Sands' CFO, predicted a drop all the way to five cents. As for the company's guidance, frequent changes are almost par for the course. Its only asset is a non-operated 36.7-per-cent interest in Syncrude Canada. The Syncrude project, one of the oldest operations in the oil sands, is aging awkwardly; its production guidance was cut three times in 2013 and four times in 2014. As well, WTI is down sharply from Canadian Oil Sands' early December forecast of $75 (U.S.). The companies that have most recently released or revised their guidance are forecasting $55 (U.S.) to $65 (U.S.).

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