RE:In this oil market, No Refinery = No survivalJR12 wrote: COS shareholders that think it's better to reject the takeover should re-evaluate their thoughts. There is a major oil glut out there. Could take 6 months, could take 6 years to get over. There are only two types of companies in this sector that can survive this. 1) Ultra low cost producers 2) Refiners. Suncor and Husky are doing just fine because their exploration and production losses are offset but their refining capacity. Did you know that a barrel of oil creates 19 gallons of gasoline and 12 gallons of diesel? So the lower the oil price goes, the better it is for refiners. COS doesn't have a refinery, it only produces crude. Therefore, without that ability, it's game over without the merger.
1 barrel of WCS goes for under $40 now. If you refine that and get the 19 gallons of gasoline and 12 gallons of diesel, refiners can sell that for at least $100 in value. 19Gallons X 4 Litres X current price.
I agree that It's nice to have the refineries in this market. COS is cash positive at $45 WTI. SU CEO has said it will be hard to make a profit at $40 WTI. So there's not as much difference as one would think there. There are a hell of a lot of producers that need $60+. I've looked at COS's books, and they are better then MEG's or ATH's at this point in time (from a profitability stand point). If oil remains at $40 for the next 6 months, COS, MEG and ATH will all still be here. The better question is what would supply look like at that point?