RE: RE: Cash FlowHere is what BMO Capital markets has to say about this play:
"We believe the market is still overestimating the levels of execution risks associated with this story and believe that the company's ability to demonstrate ongoing construction progress at McKay, along with additional exploration and a potential regulatory application at McKay, could act as further catalysts for the shares in 2011."
Page .6 : Solid underlying
“Our valuation includes MacKay leases with phase 1 un risked , but future expansion value risked at 50% chance. We value the undeveloped resources at 0.75/bbl. Adding in Senlac generates a NAV of 3.49.”
From the BMO Capital analysis p5:
"We estimate that the value of Senlac and Mckay phase 1 alone is in the range of $1.80 - 2/share, implying little value is being given to the companys other development opportunities or resource upside."
That is we´re currenly valued at even lower levels than what can be considered relevant when only including McKay 1 and Senlac and that
no value what so ever at these levels are assigned to either of Mckay 2 (24.000 bpd), Read Earth (objective minimum 10.000 bpd) as well as Wabiskaw (significant potential project). All of these are projects in the pipe but then we also in addition to these have all the other undeveloped land to be explored as well that at these valuation levels are assigned 0 value. Next winters extensive core holes drilling program sure will provide us with some more info on what potential there is on some of the undeveloped parts of the other STP conssesions.
"Our un risked net asset value estimate is nearly $6/share, which we believe represents the real upside potential of the shares as the company works to "de-risk" the value of its oil sands recourses through development"
Comment - BMO is definitely using a VERY conservative Oil price of $90 in 2015. Remember that this is only 4 years from now. Net asset value should be adjusted accordingly if you believe that oil will be higher than $90 in 4 years.
Expect these above numbers to be upgraded as the new reserves and recourses update will be published in June.
https://research-ca.bmocapitalmarkets.com/documents/40E0D89E-3EE1-4D8F-9747-1D65A6341567.PDF
So bottom line with a severely undervalued play (by any standard), a ten times production increase in sight, with smart money like e.g. Soros buying large chunks in to this case and with reserves and production sites surrounded by large oil plays aggressively expanding their production like e.g. Petro China expanding in the very area you are developing (McKay), and with fantastic opportunities to increase both reserves as well as production within months, you got quite a lot going for you. Period.
Suthern Pacific Resources homepage
(check out the new corporate presentation)
https://www.shpacific.com/