Great Opportunity, think long term
Exxon just built the bitumen project Kearl, and with all their smart people, economists, and with their view on world oil, which is a lot more insightful then yours or mine they concluded that paying 120,000 dollars a boe was a good long term investment for a plant that will only produced bitumen. Now look at COS will all the debottleing work that has been done will soon have a capacity for (Syncrude 400,000 boe day) 400,000 * .3674 = 147,000 boe of SCO crude a day. With more then fifty years of reserves. COS is trading at 6 billion dollars / 147,000 = about 41000 a boe including debt, A third of the cost of the kearl project and it produces SCO that sell at WTI prices where bitumen sell at 60% of WTI prices. So COS get 66% more revenue then the Kearl project for boe of oil. So what is cos worth on revenue comparison, 147,000 boe a day * 120,000 cost per boe *1,67 (sco Premium) = 29 billion dollars. COS has an enterprise value of 6 billion dollars, and over 50 years of reserves. The very best leases in all the oil sands country. COS is not a traditional oil company, you buy into COS you buy into a 50+ operation that has no uncertainity in reserves, the only uncertainity if how much they are understated. Who would not invest 40,000 for a boe into the future forever, because mining operations only put value on reserves 7 years into the future. There is no way that the middle east and russia are going to adjust they ecomony to work on 50 dollar oil. 50 dollar oil likely only earns them 20 dollars a boe even with the best economics, so they need 100 boe so that they can use the other 70 dollars a boe to fund the economies, social programs, etc. Cos at these levels is a screaming buy and may be the only company that survivies this oid downturn, and what country would not pay 40,000 a boe for an oil supply forever. IMHO I am going to buy more COS at these depressed levels, and try to get rid of the current brain dead management and replace then with management that represents more strategic thinkers, that understand how to protect the balance sheet.The cost of running an unhedge operation has proved to be to expensive for the share holders to stomach, hedge companies can use these downturns to make strategic and oportunistic expansions in their business. COS is a sad sideline company with a lot of punished shareholders for their misplaced trust in management.