Ebitda trading valuations -
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- Complete the building of and activate its DRU by approximately midyear 2012. This will enable the sale of more neat bitumen, which is in greater demand and provides better economic returns than bitumen combined with diluent (dilbit). Plant site preparations to hook up the DRU were completed during a 2011 turnaround so there should be minimal delay on activation;
- Steam for the new wells at pad 104 will be sourced by redirecting volumes from the company's underperforming lower-potential northern five wells, which Connacher will continue to produce without active steam injection, much like infill wells. The dirt work for pad 104 was completed in 2011. Provision has also been made for a mature gas cap depressurization at Pod One.
At Algar Connacher plans to:
Adjusted Ebitda for 2011 will be around the $140 million level.
This compares with $92 million for 2010 Ebitda.
For 2012, Ebitda will be at least $165 million and perhaps as high as $250 million, depending on the price of bitumen remaining at or above Nov/11 level, and the gains in total production.
Like most oil stocks, CLL's share price spikes in the first half of the year and weakens in the summer months.
In 2011, CLL traded in the $1.40- $1.50 range or about 7 times its trailing 2010 Ebitda of $92 million.
If CLL continues its seasonal trading pattern ( which it is right now ) , at 7 times trailing Ebitda, the share price in the first half of 2012 should rise to the $2 level.
The seasonal highs in 2013 should move upwards to the $3 level, based on initial estimates of 2012 Ebitda.
Several factors are in play which should see substantial gains in 2012 Ebitda relative to that of 2011.
First, production will increase by 15 % compared to 2011.
Second,Install permanent SAGD+TM facilities in the first half of 2012, allowing an increasing number of wells to benefit from commercial application of this technology, which produced breakthrough results in a 2011 field trial.
Third, DRU will be implemented by mid-year which will increase profitability of Bitumen sales.
Fourth, if oil prices spike, CLL will be able to hedge bitumen at very high prices and lock in cash flow gains.
As it stands, CLL is now a very attractive takeover target with strong performance upside in 2012 and 2013 from measures already in place.
Obviously, it wont go for less than $2 per share.