Canadian Oil Sands Trusts and Alberta oil prices

Dividends cut at Canadian Oil Sands Trusts in Alberta

Canadian Oil Sands Trusts invests in Northern Alberta and provides a regular dividend to its investors. Recently, Canadian Oil Sands Trust announced a cut in their regular distribution to its investors. In fact this cut in distribution to its investors was more than expected by the market. Canadian Oil Sands trusts slashed its regular distribution in response to Syncrude Oil’s cut in its quarterly distribution by 80% to 0.15 per unit. Canadian Oil Sands Trust is the largest investor in Syncrude Oil, a major oil sands player. This cut in distribution by the company may lead to increased selling pressure of the company’s shares as investors who are looking for higher yielding shares sell their stock. Canadian Oil Sands trusts has been a high yielding income play of the Alberta Oil Sands and has been able to deliver a high return to its investors. But with the recent financial crisis and the fall in Alberta oil prices to sub $50 levels, this has caused increased pressure for all Alberta oil sands company to slash their quarterly distributions.

Alberta Oil prices and Canadian Oil Sands Trusts

How linked are Alberta oil prices and the prices of shares of Canadian oil sands trusts? There is obviously a very close relationship between the level of Alberta oil prices and Canadian oil sands trusts. As the price of oil falls, the income levels of the companies that the Canadian oil sands trust invests in is significantly reduced. Companies such as Syncrude Oil is one of the companies that has had to aggressively slash its quarterly dividend in order to maintain its financial position. Other Alberta oil companies will surely follow suit and this will lead Canadian Oil Sands Trust to have less income to distribute to its shareholders. However, the price of oil is expected to stabilize around the $50 level with increases expected in 2010. Most analysts currently have a long term buy on Canadian Oil Sands Trust investment as this represents a cheap buy in the current market. However a short term sell is also recommended for this stock.

Canadian Oil Sands Trusts as Investments

Canadian Oil Sands Trust gives investors in Alberta Oil with a solid Oils Sands investment through its 36.74% interest in Syncrude Project. Syncrude Oil is a leader in the Alberta Oil Sands industry and has been in operation since 1978. Currently Syncrude Oil can produce Alberta light high quality crude oil at 350,000 barrels per day. Syncrude Oil operates oil sands operations in the northern Alberta region of Athabasca. By investing in Canadian Oil Sands Trusts as an investment vehicle, investors get a high quality Alberta oil sands investment and can take part in the growth of the oil prices. Canadian Oil Sands trusts provide a regular dividend that gets paid back to investors as a distribution and a return of their initial capital. By returning a larger percentage of an investor’s investment over time, the return on Canadian Oil Sands Investment is seen as a conservative investment.