RE: STP 2.0 Easier o read?“What we’re trying to do is a string-of-pearls approach where we build smaller projects without having to reach out for more equity,” said Byron Lutes in an interview after the company reported quarterly results.
“We think if we break up these two (expansion) pieces, we’ll be able to fund the projects just using cash flow and debt and not have to risk further dilution by raising more equity.”
https://www.calgaryherald.com/business/Oilsands+junior+goes+alone+billion+plan/4752493/story.html
That’s sure how you build value indeed! Truly amazing how this new management with endurance have been able to execute this approach as it was introduced with the entry of CEO Mr Byron Lutes and the subsequent acquisition of Senlac.
"The Company placed Phase H on production on April 7. Production has since been ramped up to bring the total average production estimate for April to 5,078 bbl/d. "
In August 2011 STP relesed its latest reserves update. Bottom line Total proven reserves (P1) increased 1.670% compared to the reserves resport dated June 2010.
Then this is what´s in the pipe coming months:
- Red Earth, Q2-2011, restart pilot project. Objective is to produce minimum 10.000 bpd. Results from the pilot will be reported during the fall.
"In June of 2011, Southern Pacific commenced startup of its STP-Red Earth pilot project. This 1,000 bbl/d facility is being readied for operation and upon startup will be utilized to test a number of different cyclic steam stimulation ("CSS") production strategies involving the existing horizontal and vertical wellbores already drilled at the plant site. "
- McKay Phase 1 12.000 bpd construction updates (Road 80% completed, Plant and Pad site construction 75% completed, 200 person camp installed growing to 300 by mid March, all long lead equipment orders are placed and shop fabrication has begun.)
- McKay Phase 2 24.000 bpd application to be submitted during fall 2011.
- Senlac Phase J during third quarter 2011
- Wabiskaw Pilot project - to start Q4 2011 (Significant potential project)
- McKay phase 1 Production of 12.000 bpd to start Feb/March 2012
So then adding current and future production together we get this summary:
Senlac 4.000 - 5.000 bpd
McKay 1 12.000 bpd
McKay 2 24.000 bpd
Read Earth Pilot Project - to start during Q2 2011 (objective minimum 10.000 bpd)
Wabiskaw Pilot project - to start Q4 2011 (Significant potential project)
We-re now fast approaching a future production opportunity of beyond 50.000 bpd. More than a 10 fold increase vs. current production levels in sight. That´s then the production opportunity level we´re you start getting some real and serious attention from larger players in the market e.ge like neighboring Petro China and the alike
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 company’s other development opportunities or resource upside."
https://research-ca.bmocapitalmarkets.com/documents/40E0D89E-3EE1-4D8F-9747-1D65A6341567.PDF
That is we´re currently 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), Wabiskaw (significant potential project), the fact STP just (August 2011) released it latest reserves upgrade of P1 reserves by some 1.670% since June 2010 nor is at these valuations any value assigned for any of STPs other land.
We must not forget that the company expects to continue with a significant exploration program next coming winter at e.g. Anzac (75 sections), Hangingstone (66 sections), Leismer & Kirby (51 sections), Ells (51 sections) and thus may identify even further opportunity to develop it´s land by identifying even more production expansion.
Add all of this together and its clear the below SP targets for STP will be upgraded going forward:
https://research-ca.bmocapitalmarkets.com/documents/55D2C79D-9123-4C3E-8959-DAB92963BA60.PDF
Clearly as STP develops its land the more interest from other neighbouring players will be visible:
"The deal gives PetroChina 60 percent control of Athabasca Oil Sands Corp.´s Mac Kay and Dover oil sands deposits in Alberta. The yield from the two deposits is likely to be modest when compared with total estimates of about 175 billion barrels of oil held in the sands, the largest after Saudi Arabia. Industry analysts said China would likely seek to expand its Canadian tar sands portfolio."
https://www.upi.com/Business_News/Security-Industry/2010/01/05/China-buys-into-Canadian-tar-sands-exploitation-project/UPI-22041262732184/#ixzz1DYFkW8BQ
Here 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.”
"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.
IAE now has confirmed worldwide crude oil production has peaked already in 2006 and that production from existing oil fields is depleting by 6% annually.
In November 2008 IEA published this review. What was unique was the fact that they for the very first time had evaluated the oil supply situation. All earlier "analysis" always had focused on the demand side and then supply simply in the analysis had been adjusted to accommodate for these numbers. Not this time. What then became evident was the fact that it is not oil demand destruction that can become an issue for the markets, rather it is from now on all about oil supply destruction.
The prospect of accelerating declines in production at individual oilfields is adding to these uncertainties. The findings of an unprecedented field-by-field analysis of the historical production trends of 800 oilfields indicate that decline rates are likely to rise significantly in the long term, from an average of 6.7% today to 8.6% in 2030. “Despite all the attention that is given to demand growth, decline rates are actually a far more important determinant of investment needs. Even if oil demand was to remain flat to 2030, 45 mb/d of gross capacity – roughly four times the current capacity of Saudi Arabia – would need to be built by 2030 just to offset the effect of oilfield decline”, Mr. Tanaka added.
https://www.iea.org/Textbase/press/pressdetail.asp?PRESS_REL_ID=275
Then important to note is the fact that you need to differentiate between declining future oil production and declining oil exports. Bottom line – as the oil producing countries themselves to an increasing extent use more and more of the oil they produce for their domestic needs less oil then is exported. Combine the oil producing countries in Russia, OPEC and Mexico and you have an oil market twice as large as the Chinese oil consumption. Thus the phase at witch oil exports declines is very much more aggressive than the pace at which oil production declines.
If the team's middle case for production and consumption holds, then net exports from the current top five exporters will dwindle to zero by 2031.
https://scitizen.com/future-energies/jeffrey-brown-and-the-net-oil-exports-crisis_a-14-2559.html
Add then to that picture the geopolitical turmoil in the Middle East, the Arab revolutions and war is Libya and its clear not oil produced or possible to produce will may be exported or even pumped out of the ground.
Therefore most analysts now expect a real severe oil supply crunch by 2014 possibly even earlier as events unfold. Bottom line there is no spare capacity left in the oil market and thus even very minor distortions may have very grave implications on both production and even more so related to exports.
ABC Catalyst Peak Oil Report 28-04-2011
https://www.youtube.com/watch?v=RaNz3qS5WAo&feature=related
More stuff:
Chris Martenson
https://www.youtube.com/user/ChrisMartensondotcom?blend=22&ob=5#p/a/f/0/cwNgNyiXPLk
House Session
Part 1
https://www.youtube.com/watch?v=DGjYQyMfqIY
Part 2
https://www.youtube.com/watch?v=4OfS8IKegX4&feature=related
Part 3
https://www.youtube.com/watch?v=AQtzt-emRJI&feature=related
Part 4
https://www.youtube.com/watch?v=eeDF8b1PMWQ&feature=related
Valuation vice then compare STP with another oil play, PXX.TO that has roughly the same reserves, same number of shares and within a year roughly the same production (note this was BEFORE the positive news regarding McKay 2 as well as Wabiskaw as well as the newest reserves update where STPs P1 has been upgraded some 1670% since June 2010).
One difference is that PXX today is debt free but if all goes as planned with McKay phase 1 and Senlac STP also will be debt free by 2016. Possible upside here could be the fact some of STPs debt I nominated in $US and given a possible further decline of the $us currency the $us nominated debt may be paid of even earlier. Add to this an average Brent oil price (as per GS latest predictions august 2011) of $130 dollars in 2012 and there is even more room for STP to be able to fulfill on its promise.
Realize STP PXX today has more than four times the valuation. Kinda gives you an idea doesn’t it about where STPs SP is heading.
Can´t blame Soros for entering in to this play at this particular moment. Maybe somebody right now is trying to accumulate before the real heavy blast takes us to much higher SP levels. Time sure is starting to run out if you want to accumulate at these levels.
"Soros reports that Quantum held at January 31, 2011, 20,400,000 shares and $25,000,000 aggregate principal amount of 6.00% convertible unsecured subordinated debentures due June 30, 2016 ("Debentures") of the company. The Debentures are convertible in to common shares 465.1163 common shares of the ("Company") shares per $1,000 principal amount of Debentures until June 30th, 2016. The shares and debentures, if converted, held by Quantum represents in aggregate approximately 9.18% of all outstanding shares."
https://www.sedar.com/CheckCode.do;jsessionid=00008HupafOULoEP60UF88AJxka:-1
And Soros is not the only one:
STP 5th largest holding in Sprotts Energy Portfolio
https://quicken.intuit.com/investing/mutual-funds/MUTUAL%3ASPR006/Sprott-Energy-Fund
So bottom line with a severely undervalued play (by any standard), a ten times production increase in sight, a P1 reserves update of 1670% during last year, with smart money like e.g. Soros, Sprott 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 production within months as well as great opportunities to further develop its land in many more leases, you got quite a lot going for you. Don´t you agree?
As investors seek a safe haven when currencies devalues in a very coordinated fashion and thus makes hording cash at almost zero interest an uninteresting option, as bonds more and more only can be described as the mother of all bubbles private investor flee from, as its evident for many to see precious metals are being manipulated and tampered with as well shows very clear signs of entering in to a bubble phase and as inflation related to all necessities for everyday life is keep on increasing evident for all to see, as further stimuli and zero rates interest will make available speculative money seeking a safe haven it clear more and more people will start to look at industrial commodities that is commodities actually needed and used in the economy. In fact as oil is the real and ultimate currency as all economic activity totally depends on it. Without it our food production, logistics and transportation system as we know it simply cannot exist and as availability of it will decrease relentlessly from now on oil in the ground is where its at.
Plays active in secure regions in the world (not very many left) able to increase reserves and production next coming 10-20 years will increase in value exponentially as more and more people start to understand the real implication of what is now going on related to e.g. geopolitics, currencies, our financial system, food production, transportation and the export land model.
Soros Dumps Gold
https://intheendwerealldebt.blogspot.com/2011/08/debt-here-debt-there-debt-everywhere.html
Suthern Pacific Resources homepage
(check out the new corporate presentation)
https://www.shpacific.com/