RE: Petro Rubiales and Pacific Stratus mergerIn my last post I wrote :
"They produce heavy oil (12.5 API) that gets a max value of about US$50/bo."
Actually the breakdown is that they get WTI pricing - US$15.25 per barrel. So right now WTI is US$94.62/bo so they get operationg netbacks of 94.62 - 15.25 - 18 (trucking) = US$61.37/bo.
I just listened to PEG's Canaccord presentation and they say that their pipeline will drop the trucking costs from $18/bo to $7/bo in Q3-2009. So another $11 goes to the netback in late 2009, as compared to today.
They also say that their pipeline costs will be US$370 million (gross) or US$185 million net (50% WI), which banks have already expressed interest to finance 70% of it.
Even if PEG doesn't get the extension to the Rubiales field past 2016 you have 9 years to sell the stock until then so I don't see it as an issue today. In that time they will make a ton of money if the commodity prices co-operate.
My biggest fear is that PR keeps issuing more shares down the road to aquire other things as they seem to do it at will.
I'll be tuning into the webcast tommorow to see how they spin it. I really do like the upside a year out and beyond, but any new news from PSE drilling just got washed out now so the short term upside is over IMO if the deal gets done. PEG will have about 1.2 billion outstanding and 1.45 billion FD shares to spread that value over.