RE: RE: RE: Entry PointSorry - all the plants you listed are commercial Phase 1 commercial plants or commercial demonstration plants - check the company presentations. A little knowledge can be dangerous - learn what a pilot plant is. As someone who is still involved in Stat Leismer plant and has been involved in Firebag for years, I can tell you that 15000 bbl/day facilities generates significant cashflow. Anyway - investors should do there own due diligence and find out who they think is FOS on what a pilot plant is - put that person on ignore. Also - if someone considers Laricina a non player, they would fall into the category of someone that said Microsoft was a non-player in 1990 (all kinds of people told me MSFT was way overvalued in 1990).
Here is the math for a 12000 bbl/day facility.
Cost of 12000 bbl/day facility including pads, pipelines, CPF, and all infrastructure (roads etc) - $400M. Cost of capital is 15%. That means the facility needs to generate $60M positive cash flow to cover financing. Add in $10M in Gen and Admin and ROI of 10% and you need an generate $110M/year to be viable.
At $75 oil, netback ranges from 20-30$ per bbl 8 12000
bbls/day * 365 days *25 =$110M (CLL has averaged 23 this year, but Q3 was $20 and an anomaly). So that gives you 10% ROI. The point is that you have to walk before you can run w.r.t. thermal projects, but if you can establish good cashflow, you can afford to fund your next projects without dilution. CLL and the majority of juniors in Northern Alberta have larger plans, but they need to generate cashflow first.
For CLL for the next year - not including anything other than upstream dilbit sales:
Assume all finance expenses and capital are related to this activity - total is $26*4 = 104M. About $20M G&A (say the other $5M G&A is related ot other businesses). $10 M other =~135M to Break Even.
Netbacks per bbl of DILBIT- $25 (low-end and that includes dilluent purchases) and Bitumen production of 15000 bbls/day that provides Dilbit sales of of ~1.3* bitumen production = 1.3*15000*365*25 = $178M. That assumes Oil averages $75, production does not improve during 2011 from the current levels, and all other opertaions only break even without any finance costs (because these are all covered by the upstream).
If someone is looking at Connacher and trying to compare them to StatOil, Conoco, Nexen and...Christina Lake? (thats not even a company - it is an area, and there are several companies in the area) and can't understand why Nexen or StatOil (a company with Quarterly net income of $4.7 BILIION
last quarter) would have much more significant development plans than CLL. Its not that they couldn't make money on 15000 bbl/day plants its just that they can make more money (roughly the same % ROI though) on a much larger investment. If I have $1000 to invest and can make 10% return, and someone else has $100000 to invest and can make 10% return, does that mean that it makes no sense for me to invest $1000 because that guy is investing a $100000. If you say no, look to your left quickly, then to your right, then back to your left - keep going until it makes sense.
There is risk here, but far less risk than 3 months ago, and relative to the value being placed on other companies in the same sector, this is undervalued IMO.