RE:RE:RE:RE:RE:disproportional reaction I am not sure I buy CIBC’s thesis on pipelines undermining unit trains for bitumen transport. According to TORQ Transloading unit trains advantage over pipelines for undiluted bitumen is more than $3 a barrel:
https://ww.crude-rail-markets-canada-2013.com/media/downloads/103-day1-1155-jarrett-zielinski-torq-transloading-new-pdf.pdf
The above thesis is underpinned by the fact that MEG energy is building a diluents recovery unit at our NATO location, and Cenovus indicated in February it is also considering the construction of such unit, from FP:
The Calgary-based company said Thursday it’s investigating use of a so-called diluent recovery unit, enabling it to ship cargoes of raw or under-blended bitumen by rail from northern Alberta’s oil sands and boost per-barrel returns.
“We are looking at that and how that enhances economics, including the economics of unit train capacity,” chief executive Brian Ferguson told analysts and media on an earnings call.
“I anticipate that rail will become a permanent component of our transportation network, and we are forecasting that we will have capacity of up to 30,000 barrels a day by the end of 2014 and beyond that we will be looking at the merits of additional expansion.”
https://business.financialpost.com/2014/02/13/cenovus-looks-to-boost-oil-by-rail-economics/?__lsa=f10f-3fa2
I am very comfortable with the fact that Canexus’ NATO asset will prove to be very valuable once fully operational and cash flows should more than suffice to cover the dividend. I am also very interested in the oil storage potential on the site and the prospect for handling condensate. Going forward however, it may make sense for CUS to partner with an experienced industry player should it choose to expand this site further, a potential 50/50 deal could offer the company a chance to recover some of its capital, pay back debt and help it fund the next phase of expansion.
Regards,
Nawar