CALGARY, AB–(Marketwired – October 19, 2015) – Canadian Oil Sands Limited (TSX: COS) (OTCQX: COSWF) (COS) announced today that its Board of Directors is recommending that shareholders reject the offer by Suncor Energy Inc. (Suncor) to acquire all of COS’ common shares.
The Board provides the full background to the Suncor offer and the reasons to reject it in a Directors’ Circular being disseminated today. The reasons to reject are summarized in a letter to shareholders, the full text of which is reproduced below:
Dear Fellow Shareholder,
On October 5, 2015, Suncor Energy Inc. (Suncor ) announced it was making an offer to acquire all the common shares of Canadian Oil Sands Limited (COS ) on the basis of 0.25 of a Suncor share for each share of COS.
Your Board of Directors has now completed a full review of the offer with its external financial and legal advisors and has determined that:
The Suncor bid substantially undervalues COS and is not in the best interests of COS and its shareholders
Your Board of Directors Unanimously Recommends you REJECT the Suncor Bid. |
We have fifteen compelling reasons for recommending REJECTION that are described in the Directors’ Circular which we encourage you to review. To summarize some of them:
The Suncor bid substantially undervalues COS’ unique strategic assets.
The Suncor bid does not account for COS’ superior leverage to oil prices.
The Suncor bid represents less value than Suncor’s recent “discounted” Fort Hills acquisition.
The Suncor bid is highly opportunistic.
Through its interest in the Syncrude joint venture, Suncor has an informational advantage over the market and COS shareholders.
COS is strongly positioned to withstand low oil prices and emerge with even greater value when oil prices recover.
The Suncor bid is a very weak and undervalued alternative for COS shareholders.
The Board of COS and its advisors continue to examine strategic alternatives.
Finally, our financial advisor, RBC Capital Markets, has provided the Board with a written opinion that the consideration offered by the Suncor bid is inadequate to shareholders from a financial point of view.
The Board and management of COS will not tender to the Suncor bid. Major shareholders have stated they will not tender. We strongly recommend you join us in rejecting this undervalued, opportunistic and exploitive bid.
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Sincerely,
Donald J. Lowry
Chairman of the Board
Canadian Oil Sands Limited
Arthur N. Korpach
Director & Chair, Audit Committee
Canadian Oil Sands Limited
To REJECT the Suncor bid, simply TAKE NO ACTION. |
Do not tender your shares of Canadian Oil Sands Limited. |
For further information, please visit our website at www.rejectsuncor.ca or contact our information agent, Kingsdale Shareholder Services at 1-866-851-3215 or contactus@kingsdaleshareholder.com |
Canadian Oil Sands Provides Revised Guidance
In order to provide shareholders with up-to-date information, COS has released today an update of its 2015 guidance, including revised estimates of operating costs and annual production. We now estimate a production range for Syncrude of 92 to 97 million barrels with a mid-point of 95 million barrels in 2015. The estimate for cost savings at Syncrude in 2015 has increased to $1.3 billion ($480 million net to COS) from $900 million ($330 million net to COS). Syncrude exceeded the previously estimated $900 million in savings during the first nine months of 2015, and has identified further opportunities to reduce costs. The decline in capital costs also reflects the completion of the Centrifuge Tailings Management project, bringing to a close Syncrude’s $8 billion major capital projects program, which was completed on time and under budget following a four-year execution period. Syncrude is now entering a period of lower capital spending, expected to average about $300 million, net to COS, annually to 2019.
Full details are provided in the 2015 Guidance Document available on COS’ website.
Conference Call Today
Canadian Oil Sands will hold a conference call and webcast today at 8:00 a.m. ET. To participate, visit cdnoilsands.com or call 1-888-231-8191 (within North America) or 647-427-7450 (outside North America).
Shareholders with questions are encouraged to visit rejectsuncor.ca, or to call Canadian Oil Sands’ information agent, Kingsdale Shareholder Services at 1-866-851-3215 or contactus@kingsdaleshareholder.com.
Ticker Symbols
Toronto Stock Exchange: COS
OTCQX: COSWF
Canadian Oil Sands Limited
COS holds a 36.74 percent interest in the Syncrude project, the largest producer of light, sweet synthetic oil from Canada’s oil sands. As a pure play in Syncrude, COS provides investors with long-life, light crude oil exposure and since 2001 has paid dividends totaling $7.9 billion.
Forward-Looking Information
This news release, including the summary of the reasons for the board of directors’ unanimous recommendation that shareholders of COS reject the Suncor offer and not tender their common shares, contains forward-looking information (as defined in the Securities Act (Alberta)) and statements (collectively, “forward-looking statements”) that are based on expectations, estimates and projections as of the date of this news release. These forward-looking statements can often, but not always, be identified by the use of forward-looking terminology such as “plans”, “predicts”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases, or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved.
Examples of such forward-looking statements in this news release include, but are not limited to, COS’ and Syncrude’s expectations for future profitability; expectations with respect to production, operating changes, capital expenditures, operating expense reductions and other initiatives at Syncrude; expectations with respect to dividend payments by COS; expectations regarding future free cash flow generated by COS; the amount of reserves recoverable and the time frame to recover such reserves; future trading prices of COS’ common shares; future commodity prices; and whether or not an alternative transaction superior to the Suncor offer may emerge.
Although COS believes that the assumptions and expectations represented by such forward-looking statements are reasonable and reflect the current views of COS with respect to future events, there can be no assurance that such assumptions and expectations will prove to be correct. The factors or assumptions on which the forward-looking statements are based include, but are not limited to: the assumptions as to production, operating expenses, capital expenditures and oil prices; the successful and timely implementation of capital and maintenance projects; Syncrude’s business, maintenance and spending plans; the ability to obtain regulatory and joint venture owner approval; the continuation of assumed tax, royalty and other legislative and regulatory regimes; and the accuracy of the estimates of the reserves.
In addition to being subject to a number of assumptions, forward-looking statements in this news release involve known and unknown risks, uncertainties and other factors that may cause actual results and developments to be materially different from those expressed or implied by such forward-looking statements. Some of the risks and other factors which could cause actual results or events to differ materially from current expectations expressed in the forward-looking statements contained in this news release include, but are not limited to: volatility of crude oil prices; volatility of the synthetic crude oil (“SCO”) to West Texas Intermediate differential; the impact of the anticipated Syncrude cost reductions not materializing; the impact that pipeline capacity and apportionment and refinery demand have on prices for SCO and COS’ ability to deliver SCO; the impacts of legislative and regulatory changes especially those which relate to royalties, taxation, tailings, water and the environment; the impact of new technologies on the cost of oil sands mining; the impacts of rising costs associated with tailings and water management; the inability of Syncrude to obtain required consents, permits or approvals, including without limitation, the inability of Syncrude to obtain approval to return water from its operations; various events which could disrupt operations including fires, equipment failures and severe weather; unsuccessful or untimely implementation of capital or maintenance projects; the impact of technology on operations and processes and how new technology may not perform as expected; the obtaining of required joint venture owner approvals from the Syncrude owners for expansions, operational issues and contractual issues; labour turnover and shortages and the productivity achieved from labour in the Fort McMurray area; uncertainty of estimates with respect to reserves and resources; the supply and demand metrics for oil and natural gas; the variances of stock market activities generally; currency and interest rate fluctuations; volatility of natural gas prices; COS’ inability to either generate sufficient cash flow from operations to meet its current and future obligations or obtain external sources of debt and equity capital; general economic, business and market conditions; and such other risks and uncertainties described in the COS’ Annual Information Form dated February 24, 2015 and in the reports and filings made with securities regulatory authorities from time to time by the COS which are available on COS’ profile on SEDAR at www.sedar.com and on COS’ website at www.cdnoilsands.com. Further, dividend payments are determined on a quarterly basis by the board of directors of COS in the context of current and expected crude oil prices, economic conditions, Syncrude’s operating performance, and COS’ capacity to finance operating and investing obligations.
Readers are cautioned that the foregoing list of important factors is not exhaustive. Furthermore, the forward-looking statements contained in this news release are made as of the date of this news release and unless required by law, COS does not undertake any obligation to update publicly or revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
Additional GAAP and Non-GAAP Financial Measures
In this news release, reference is made to “non-GAAP” and “additional GAAP” financial measures that do not have any standardized meaning as prescribed by Canadian generally accepted accounting principles (“GAAP”). Additional GAAP financial measures are line items, headings or subtotals in addition to those required under GAAP, and financial measures disclosed in the notes to the financial statements which are relevant to an understanding of the financial statements and are not presented elsewhere in the financial statements. Non-GAAP and additional GAAP measures have been described and presented in order to provide shareholders with additional measures for analyzing COS’ operational performance, its ability to generate funds to finance its operations and information regarding its liquidity. Users are cautioned that non-GAAP and additional GAAP financial measures presented by COS may not be comparable with measures provided by other entities.
Additional GAAP financial measures include: long-term debt-to-total capitalization (which is calculated as long-term debt divided by long-term debt plus shareholders’ equity). For more information on additional GAAP financial measures please refer to our 2015 Second Quarter MD&A which is available on COS’ profile on SEDAR at www.sedar.com and on COS’ website at www.cdnoilsands.com.
Non-GAAP financial measures include: free cash flow (which is calculated as cash from operating activities before changes in non-cash working capital less capital expenditures) and free cash flow per share (which is calculated as cash flow from operations before changes in non-cash working capital less capital expenditures, divided by the weighted-average number of shares outstanding in the period).
Oil and Gas Information
In this news release, reference is made to the metric production life (reserve life index). Reserve life index is the ratio of reserves divided by the current annual production rate. Reserve life index is included for Shareholders as a measure of COS’ sustainability. Reserve life index does not have any standardized meaning and should not be used to make comparisons. As a result, readers are cautioned as to the reliability of disclosure of reserve life index.
Unless otherwise stated, reserves figures in this news release refer to COS’ reserves as at December 31, 2014 as prepared by COS’ independent reserves evaluator. For more information on COS’ reserves please refer to COS’ Annual Information Form dated February 24, 2015 which is available on COS’ profile on SEDAR at www.sedar.com and on COS’ website at www.cdnoilsands.com.
Siren Fisekci,
VP, Investor & Corporate Relations
(403) 218-6220
invest@cdnoilsands.com
Ian Robertson
Kingsdale Shareholder Services
Vice President, Communications
Direct: 416.867.2333;
Cell: 647.621.2646
irobertson@kingsdaleshareholder.com
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