CALGARY - The biggest partner in Syncrude Canada says it expects output from the giant oilsands mine this year will be up to seven per cent higher than in 2011, when equipment failures significantly reduced production.

Canadian Oil Sands Ltd. (TSX:COS), which owns 37 per cent of Syncrude, said production averaged 252,000 barrels per day last year compared to 316,000 barrels per day in 2010.

An outage at Syncrude's largest hydrogen unit reduced production by millions of barrels during the fourth quarter, causing the company to miss its annual target, Canadian Oil Sands CEO Marcel Coutu said Wednesday.

"This exemplifies the value of the effort currently underway to target unplanned capacity losses," he said in a statement.

"We do expect this to gradually result in increased capacity rates at Syncrude, and in 2012 we are looking forward to a seven per cent increase in volumes over 2011."

The Calgary-based company reported a 59.7-per-cent drop in net income in the fourth quarter, largely due to changes related to its conversion to a corporation from an income trust.

Net income in the fourth quarter was $232 million, down from $575 million a year earlier. A big deferred tax expense was recorded in 2011, compared to a recovery a year earlier.

The net income amounted to 48 cents per share, compared to $1.19 per share a year earlier, beating the average analyst estimate of 45 cents per share, according to Thomson Reuters.

Three-month revenues were $900 million, compared to $867 million during the fourth quarter of 2010.

For the full year, profits fell slightly to just over $1.1 billion from nearly $1.2 billion in 2010. But cash flows rose and the company's underlying operations were strong, Coutu said.

"Our approach of providing unhedged exposure to crude oil delivered a 50 per cent increase in cash flow from operations over last year," Coutu said.

"We are in a very healthy financial position as we enter 2012, which supports our ability to fund both our capital program at Syncrude and our target of at least a 30 cents per share quarterly dividend for 2012."

He said the company has a strong balance sheet to cushion it in an uncertain economic environment, as a potential recession in Europe risks spreading into other regions.

"Despite that risk, oil prices currently remain around US$100 per barrel, providing robust support for our business."

Canadian Oil Sands is the biggest owner the Syncrude Canada oilsands mine north of Fort McMurray, Alta., the largest such project of its kind in the world.

Syncrude's other owners include Imperial Oil Ltd. (TSX:IMO), Nexen Inc. (TSX:NXY), Suncor Energy Inc. (TSX:SU), China's Sinopec, Mocal Energy Ltd. and Murphy Oil Co. Ltd.

The company said in December that its share of spending at Syncrude will more than double in 2012 to $1.46 billion compared with last year.

Output is targeted at between 106 million and 117 million barrels this year, up from 2011's total of 105.3 million barrels.

Late last year, the Syncrude partners backed away from a plan that would push raw bitumen output to 600,000 barrels per day by the end of the decade. They said they'd rather focus on improving existing operations for now than invest in new projects.

In November, a disruption at one of the Syncrude upgrader's coking units reduced output by about 100,000 barrels per day. A coker breaks down heavier crude into lighter oils, gases and petroleum coke and is an important step in the upgrading process. The synthetic crude oil that comes out of the upgrader can then be refined into products like gasoline and diesel.

Shares in Canadian Oil Sands, which reported after markets closed, fell 2.5 per cent to $24.23 on the Toronto Stock Exchange Wednesday.