Unproven technology?Tell me how many companies invest 6 billion in unproven technology. IT works; just not as well as they thought. But it's improving. Nothing ever works right out of the gate. You learn, you improve and it keeps getting better. Frick... 35% of 6 billion is approx 2 billion. Given the current market cap of OPC and just on the plant alone; OPC should be about 5-6 bucks. Throw in the oil assets and OPC should be around 7-8 bucks. You have to remember that NEXEN payed 750 million for 15%. It set a standard. Someone should pay about 1.7 billion for the remaining 35% of this project. Based on this valuation, OPC should be well over $4.
Everyone read the reports; they won't be at the 70,000 barrels a day until end of 2010 or early 2011 but it is ramping up. They may be at 35,000 in the spring. If Oil stays at $80, given OPC makes $30 net over $50. They should be generating a net profit of approx $11 million a month. This profit doubles at 70,000 barrels a day to 22 million.
So what OPC really needs is to sell some oil sand leases like UTS to have some reserve capital in case of any unexpected problems with the plant over the next year till it hits the 70,000 bopd. Any shutdown or slowdown or a considerable drop in Oil prices will just pile more debt on this company and Nexen will scoop it up for alot less.
The problem with $50 barrel operating cost is if for 1 year they get the perfect 70,000 bopd and oil stays at $80 for the whole year in 2011. OPC makes about $264 million net. It's a fairly decent net income. But any thoughts of doing any further upgrading to the plant might be impossible for 3+ years as either OPC will have to raise alot more cash to fund their portion of any large upgrader or look to the banks for a huge loan to pay for an upgrader. What would it cost to add another 50,000 bopd to Long Lake, another $2 billion? It would cost OPC approx $700 million to fund their 35% share.
If Oil prices are forecast to go over $100 and the long term forecast is over a $100 for a number of years; I believe NEXEN will make an quick offer for OPC. Those kind of numbers make it easy for NEXEN to do the upgrading.
If Oil prices are forecast to stay around $80 and if it falls to $60 in the summer of 2010, Nexen will let OPC slide into the tar pit and scoop it up for a lot less.
NEXEN is playing the waiting game like everyone else. Texas hold-em at it's best. Everyone is waiting for the river card. I think NEXEN really is a bunch of card sharks, real SOB's.