RE:RE:RE:RE:RE:RE:RE:New Mine Traingillisr, I will try to give you my understanding of what the capex is for. You are partially right in asking was it required.
The Mildred Lake train replacement was undertaken to replace a couple of old and high maintenance trains. (Trains are not on-track vehicles. It is conveyor belt system for moving the oil sands, crushing it and mixing it with hot water) The new mine trains will have 20% larger capacity than the older ones and will use wet crushing technology to enhance recovery and reduce maintenance. (See latest presentation). These should come online in Q4 and are projecting an increase of 3 M bbls in Q4.
The Aurora mine train relocation was undertaken because the distance from where the oil sands are mined to the location of the train was getting too far. In the process of moving, they are trying to reduce maintenace costs. This work is now complete and came in under budget.
As a side bar I would like to note the impact of this capex program on Earnings and Cash Flow. This expensive capex program shows how differently Earnings and Cash Flow are calculated and its impact. Earnings allows COS to annually depreciate the equipment currently in operation, knowing full well that it will be replaced in the future since it will have zero value when it is worn out. This results in lower current taxes. However since depreciation is a non-cash expense, it results in a higher cash flow. However at some point in time we have to pay the piker. That is what is happening now. Older worn out equipment is being replaced and money has been borrowed to do this so that the capex and divy could be maintained. COS has been fortunate that they have been unhedged and have been able to get full value for SCO as the price of WTI has gone up. This has reduced to need to borrow more money.
The analysts don't like companies that don't hedge since it makes it more difficult for them to estimate future EPS and Cash Flow. Hence we have most analysts predicting a share price around $21 and here we are close to $24.00. Must be a bit embarassing for them. Apreciate that COS has gotten here in the face of all of this negative recommendations. Imagine where it would be if the analysts took their head out of the sand and did their homework. The exception to these comments are the recent good work by Cannacord Genuity and First Energy Capital and BMO which has a $25 target.
Namsoc