OTCPK:BLKPF - Post by User
Post by
pablo87on Oct 11, 2018 10:00am
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Post# 28780111
Onion Lake Thermal guesstimate valuation
Onion Lake Thermal guesstimate valuationI've said before, this is a great little asset. Nameplate will be 5M barrels per year in 2019. Cost structure is very low: C$8-9 opex, C$2-3 transportation, C$4-6 maintenance capital. So C$14-18 or US$11 to US$14. This is their break even (after royalties of guess ~15% - not disclosed by PXX).
They do get less than WCS since its heavy oil, historical pattern is around $8-10 less. So at C$55 WCS, they would get $47, $40 less royalties. For a netback of $22 AFTER maintenance capital. Or $112M per year. For 20 years. Plus an additional $48M per year with phase III. So $160MM per year for 20 years assuming C$55 WCS (it will average a lot higher than that over 20 years IMO).
This hasn't happened yet as they are still ramping phase 2 (to 12,000) with the tweak announced in Q2 to 14K bpd yet to come. And they can increase further to 20K bopd with a $180MM further investment.
The thing is with this thermal oil is, there is a limited supply of it that I can tell. This is why HSE is offering to buy MEG. HSE has been the biggest developer of this heavy thermal oil but they must realize the limitations in terms of production growth - there's only so many heavy oil thermal candidates IMO.
So this asset itself is worth a lot because its cost structure is low and there is only so much of it. My guess: $760MM. Easily north of $2 per share fully diluted.
14,000 x 50,000 = 700,000,000
6,000 x 10,000 = 60,000,000 (phase III costs would be 30,000 per flowing barrel)