A Way Into Canada’s Crude And Oil Sands
When you think of oil, you think of the Middle East. But our neighbor to the north has the second-largest oil reserves in the world behind Saudi Arabia. Canada boasts being the world’s third-largest producer of natural gas and ranks ninth in crude oil production.
Canadian oil production is projected to grow from 2.6 million barrels a day in 2006 to 4.6 million barrels per day by 2015 and to more than 5.3 million by 2020. That’s according to the June 2007 crude oil forecast report from the Canadian Association of Petroleum Producers.
CAPP attributes most of the growth to increasing production from the oil sands, which have only begun to be tapped.
Claymore Securities aims to tap into Canada’s rich reserves with the Claymore/SWM Canadian Energy Income Index () ETF, launched July 3.
It combines 29 Canadian royalty trusts and oil sands producers that have been screened for profitability, liquidity and production growth.
Royalty Trust
A royalty trust is a corporation that’s structured like a real estate investment trust or REIT. A high percentage of the profits are passed on to shareholders as dividends.
Oil sands are a mix of bitumen, a heavy tar-like oil, sand, water and clay. Unlike regular crude oil, it has to be mined, processed and blended into synthetic crude oil and diesel fuel.
Suncor Energy () accounts for 7.3% of assets.
It reported that oil sands production averaged 225,000 barrels of crude per day as of the end of June. It plans to increase production to 265,000 barrels per day this year and more than half a million barrels a day by 2010 or 2012.
Other Pursuits
Suncor is also engaged in energy exploration and refining. And it’s trying to be a major player in renewable energy. It runs Canada’s largest ethanol plant, which can produce as much as 200 million liters of ethanol annually. It’s building four wind-power projects that are set to be up and running by the end of this year.
But analysts polled by Thomson Financial expect sales to decline the next four quarters. Earnings are also expected to slow down.
Another major holding that trades in the U.S., Imperial Oil, () makes up 5.8% of assets. It bought back 47.1 million shares for about $2.0 billion as of mid-June. In addition, it plans to buy back up to 5% of its outstanding common shares over the next 12 months. That’s relatively significant considering Exxon Mobil () owns 69.6% of total shares.
Imperial claims to have more than 1.6 billion barrels in proven reserves and 12 billion unproven barrels. It sells gas at about 2,000 Esso stations located throughout Canada.
Sales growth declined the past five quarters. Earnings growth tapered off from 96% year over year to 5% in Q1.
