Q3 bitumen price and Cannccord commentary IMO from the luck of interesting parties in CLL Take-Over or JV partner the company is stuck with the only option which is to buy the time and try to improve the production volume to lower their loses from the unprofitable sale of their bitumen.
Average bitumen price in Q3 was ~ $44/bbl. About $10 below CLL's total cost.
Here is Canaccord Genuity commentary on CLL last news:
Connacher continues to keep investors on the edge of their seats;
announcing that it has closed it refinery and conventional asset sales and providing its 2013 budget, but giving no update on its ongoing strategic review process.
However, the stock held steady, despite Canaccord Genuity Oil & Gas Analyst Benny Wong’s concern that the market may interpret the release as a sign that a further outcome from the strategic process (post the refinery sale) is not going to happen soon. Within the update, the company said it is budgeting $70 million in 2013 on projects designed to increase production and improve wellhead netbacks.
The company anticipates these projects will increase bitumen production at Great Divide by as much as 5 mbbl/d over the next 15-24 months. Wong notes that he expects this spending to be incremental
to the sustaining and maintenance capex needed for the company.
He also addressed the question of whether CLL is a “going concern”. Before taking into account the proposed aforementioned 2013 budget, he estimates CLL will post a cash usage of ~$40 million (cash flow less interest & capex) in 2013.
The recent proceeds should provide a cushion to keep CLL afloat beyond his forecast horizon. While Wong believes the successful implementation of the growth projects may provide stronger production and cash flow, it will be difficult for CLL to overcome its heavy debt burden and be able to fund the 24 mbbl/d Great Divide Expansion on its own. Therefore, he believes the likely (and needed) outcome is for CLL to sell itself or find a partner to provide financing.
Wong maintains that he still believe a there is a limited type of suitor that would be willing to look at CLL:
one that is willing to deal with a heavy balance sheet and challenging SAGD assets (that are relatively small in size) in exchange for operational/technical experience. Wong believes that investors looking for a high-risk/high-reward binary bet, CLL would be the ideal vehicle. Otherwise, he sees a better risk-to-reward profile opportunities elsewhere, like Southern Pacific Resource(STP).