RE: RE: Corporate updates The strategic review process has been ongoing for 12 months - and although the noncore
assets have been divested, the core oil sands assets are still. As we’ve stated
before, we expect the ultimate result to be the sale of the company, the questions are
when, for what price and by whom? We believe there are a few Canadian companies
that could be interested in these types of assets, but at this point the project
performance and the amount of debt are serious overhangs. Perhaps a national oil
company with a much lower cost of capital may be better suited - specifically those
companies with much bigger SAGD aspirations.
Our NAV of $0.37 assumes a run-rate production at Great Divide of 15,000 bbl/d which
is significantly above current production levels of 11,500 bbl/d. However, we are using
$85 WTI long-term which is below the strip – and we are also using a 15% light-heavy
differential. If we keep our production assumptions constant and move our long-term
oil, gas and differential assumptions to the strip ($95 WTI, $4.00 NYMEX, and 15% LH
diff), our NAV would be $0.80. But, that is using 15,000 bbl/d run rate production vs.
current production of 11,500 bbl/d. If we take production down to 12,000 bbl/d at the
strip, our NAV goes to $0.50. As a result, in order to see meaningful upside to the
current share price in an outright sale – a potential buyer would need to believe that it
can significantly increase production, is bullish on oil prices and/or ascribes some
strategic value to the assets and the operating team.