Canadian Oil Sands: Good Stock, Even When Oil Bubble Bursts

Commodities, especially oil, have had a remarkable run. When, not if, the bubble bursts in oil, it will still be essential to have some of the gooey substance in your portfolio. After researching oil companies, I believe I have found a long term gusher on shore, in a stable country and with a great long term future. This company is the Canadian Oil Sands Trust (COSWF.PK), located in the Alberta, Canada Oil Sands region.

Trading at US$51.83 and yielding over 8%, Canadian Oil Sands presents the investor with an excellent game plan for stability, value and total return even when oil price slips and Canadian taxes are raised.

COSWF offers the only pure play within Syncrude and its associated long-term growth. With an estimated 4.7b barrels of syncrude oil, trust holders assume none of the usual risk associated with conventional 20th century oil and gas exploration. As its product receives WTI equivalent prices, cash flow is not overly sensitive to swings in crude oil prices.

We all know of the Canadian government's plan to raise taxes on the oil trusts after 2011. COSWF, with its under-leveraged balance sheet has indicated that long term debt will be increased in order to maximize distributions of income ahead of the taxation timeframe. Assuming oil prices will remain in a range of US$90-140/barrel through 2011, Canadian Oil Sands can provide unitholders with a total return of over 40% over the next three years and solid returns thereafter.

Canadian Oil Sands owns 36.74% of the oil sands region (Syncrude) that is currently or shortly to be developed in Alberta. These oil sands represent long-life, no decline underpins to COSWF as much of the oil product is still in the ground. Management has been outstanding in the operation of the company, and decisions are transparent, conservative and appear to be consistently in the interest of unitholders. Current production is unhedged, unlike most other Canadian oil and gas trusts. Relatively low risk growth should ocur should production ramp up due to the massive untapped reserve potential. Whereas many mature oil fields are experiencing a slow decline, Canadian Oil Sands is not.