Posted by Attorney30 : 4/3/2010 9:39:57 AMGood analysis. If long lake phase I produces about $500 million in oil revenue per annum to OPC (i.e. based on OPC's 35% interest at full design rates of 50,000 bpd+) with $75 oil pricing, and long term debt of $2.3 billion, then doesn't OPC stand to earn about 17 billion gross dollars from phase I (i.e. without expenses, taxes etc.).
Given OPC has about 280 million shares outstanding, that present value of OPC shares (excluding other leases) is worth a lot, lot, lot more than $2.16 per share. I'd say OPC shares have an intrinsic worth easily over $10 per share ... maybe $20 or $30 per share. So execution risks aside, I'd say that OPC shares are the steal of the century.
If I can figure this out with limited intelligence, my guess is that the oil majors (include NXY in this group) and sovereign wealth funds have already figured out that by buying OPC now for say $3.5 billion, they can get a very nice return on their investment (ROI). That values OPC shares in a "takeover" scenario at about $4. Remember, the takeover value is not the same as the instrinsic value. The real OPC share value is multiples of the April 1, 2010 close of $2.16, as I reason above.
Now, shake, stir and repeat this formula for phase II of long lake etc. and you now see the repeatable expansions on the other lease interests ... and the value. That is why current bitumen production is the catalyst for valuation gains, all it takes is for phase I to hit design loads to internally "fund" this monstrous money making machine called OPC. OPC would need only modest external capital to fund future phases of long lake.
NXY also seeks reserves and ROI. NXY will likely take the first shot at OPC, but there will be multiple bidders, and as Dr. Stocktopuss posits, probably for both companies to take out the entire long lake project. This is the past, present and future. Now, prove me wrong...