Reality Check
With COS with a market Cap of approximately 4 billion dollars and a enterprise value of somewhere around 6 million dollars, ask yourself what did it cost to build kearl? To replace the syncrude plant with a plant of design capacity of 128,000 boe a day would cost based on kearl economics (120 K/boe flowing) that about 15 billion dollars. Then add an upgrader into the mix of about 8 billion?, then you have 23 billion in assets take off the debt (2 billion) with 500 million shares about 42 dollars a share. If syncrude design capacity is 350,000 boe a day, replace cost based on kearl just for bitumen production would be, amost 45 billion dollars. Not to mention the values of the upgraders, sysncrude will not cease to exist. It got about a 70 billion dollars of investment in it. All the oil sands companies who would build a green field project at 15 billion dollars for an bitumen mining operation like Exxon did when you could by COS for 6 billion currently enterprise value, or lets hope, 20 dollars a share just for the bitumen production capacity of COS.(14 billion)
Right now a serious blow is being make to oil companies that have been recycling those shale wells and they will now be lucky to get their money back. Look at penn west and how they have been drilling horz wells for years and have not increased their production or grown it for that matter. Six months of no drilling will result in a significant drop in US adn Canadian production, in many cases i simply think they are cycling money.
The only reason COS is in this bad positon is stupid management, who tell investors it is too expensie to have a hedging program. I really don't know where they get these guys, but they should be fired. What is the management of COS doing to cut costs now that they have make a multi billion dollar blunder with the balance sheet and the viability of the company at stake. Management is not only stupid but all Arrogant.
With companies like Suncor considering to go ahead with Fort Hills in the current enviroment because of the future reserves is represents, i am sure that COS would get sold for the same reason, maybe to suncor in place of Fort Hills, it might be cheaper? I think suncor should take the entire project over and the we could have a going away party for the Exxon management team and the COS management team what a great event that would be.
Saudi has to defend its oil share or else what will they do, sell camels. However if they are loosing out on 60 dollars a barrel, 10 million boe a day, that about 600 million dollars a day or about 20 billion a month. They cannot go on loosing that kind of money forever, and even they a feeling the pinch. Every county that produces a million boe a day, is now loosing 2 billion a month in earnings. The damage done to the oil industry will take a long time to recoup. Syncrude needs to take this opportunity to reduce its cost base.
Finally, i need to be clear about this, i think management is stupid.