Connacher Oil & Gas Ltd CLLZF

Partner asset /Wellsitter

[strzelin]

Wellsitter,
Good effort in trying to rationalized the management decision of seeking the partnership.
Unfortunately you are using some numbers and based on them drawing some conclusions which make no sense.

The netback numbers you are referring to are just imaginary numbers which are presented for the show. Netback are not the cash you can take to the bank or reinvest like you suggest in your post.
Read the management disclaimer and you will see that they are not taking any responsibility for it.

Among other things their netbacks are based on the Prepayout royalties rates of 1%, they do not include the interest payments on the debt, no maintenance CAPEX and no investment capex related to depletion to maintain the production at the average of 8000bbl/d or above. Sometimes in 2011 POD1 production will move the Postpayout Royalty rate of over 30% based on the bitumen revenue which will cut the cash flow in half.

Simply put,  there is no free cash on the horizon to go  with the expansion. How about 100 million for the pipeline? Imagine the logistics of  250 barrel tracks loading the bitumin and unloading the dilbit every 10 to 15 minutes.

Equity Partner  or New Equity issue is the only option. This mean dilution of the NAVPS which now is estimated by market annalist at  $2.5 to $2.7 per share. With the new Equity Partner this may drop to $1.5 to $2.

You also suggest that the CLL is profitable as we speak. I guess you do not read the CLL financial reports. Just look at Q3 report  were they added $67 million of  noncash items for the reporting purpose only. There was no actual profit to report.

Make no mistake it will take  production at ALGAR above 8000bbl/d and about $60 per barrel of bitumen (do not confuse this with WTI) for the CLL to start to show some profit.
This may happen past 2012 when we wll have to start to think about debt repayments or refinancing.