Why COS is heading back to $30+
Let's have a look at netbacks for 2014:
So far this year, SCO prices have averaged $106.80cdn through Jan and Feb.
$106.80 Sale price
($41.50) operating cost
($1.10) transportation cost
($3.21) royalty
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$60.99 field netback
($4.18) G&A
($0.54) Interest
($5.40) Cash taxes
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$50.87 cash netback
105,700 bbl/d x 365 = 38,580,000 bbl per year
38,580,000 bbl x $50.87 cash netback =
$1,962,600,000 cash flow from operations for 2014 or $4.05 cash flow per share
***Nesbitt Burns is projecting $1,280,000,000 cash flow for 2014 or $2.64 cash flow per share
These are exciting figures. Will oil prices remain this high? Difficult to say. What is the cost to produce an incremental barrel these days? $90? More?
Just read that of the 50 billion barrels consumed globally in 2013, new discoveries totaled 20 billion barrels.
https://www.forbes.com/sites/christopher … s-of-2013/
So let's fast forward to 2016 and all things remain equal. Still 105,700 bbl/d.
Capex is now down to $400mm
Dividend cost is $680mm
$1,080,000,000 committed cash flow
$1,900,000,000 cash flow from operations
-----------------------------
$820,000,000 extra FcF
Room to double the dividend if management commits to distributing all FcF to shareholders.
Realistic? Maybe. I do feel the dividend will be increased
Debt to equity will be around 15-20%
No share buybacks
I could see management paying out 90% of distributable cash flow
$1,500,000,000 x 0.9 = $1,350,000,000 or $2.79 per share