CANEXUS CORP 6.5 PCT DEBS T.CUS.DB.D

MIXED UPDATE

[Nawaralsaadi]

Negatives:

NATO is a total and complete execution disaster, they did not just raise the estimate to $350m to $360m but the new scope does not even take us to 10.5 trains per week, there is yet more construction (minor debottlenecking as they call it) to get us to 10.5 trains per week capacity. This is a fiasco beyond compare when you consider their original plan called for a budget of $190m to $225m and no we could be approaching $400m if minor debottlenecking is around $40m.
 
Positives:
 
New CEO:
 
Finally we have a new CEO, this is a much needed step, his chemical background indicates a re-focus on the their core business, I view this as a strong positive and it does signal that they will focus back on their bread and butter ,once NATO is completed and probably divested.
 
M&A in the works: 
 
"Our impressive portfolio of assets has not gone unnoticed either and we will continue to advance discussions with those parties that have expressed a potential interest in certain assets." There is no assurance that a transaction, if pursued, will be concluded."
 
The above clearly state that they will precede with some asset sales, and I strongly believe that they are referring to NATO; my guess selling this asset is a priority at this stage. The press release referred several times to enhancing and unlocking shareholder value. It still makes tremendous sense for a midstream company, pipeline company or even one of our customers to buy NATO, all the major pipeline projects are dead in the water; terminal construction times lines and escalating construction costs in Alberta makes a greenfield project a risky proposal. A buyer here can hit the ground running and relatively quickly ramp up capacity (once the minor remaining debottlenecking is done). NATO is much larger than a bitumen transport site, it is a large condensate handling site and a large storage site as well, a key asset for the likes of Keyera, Enbridge, Gibsons, TransCanada, Cenovus .. etc, they are all loaded with cash and can afford to pay top dollars for a long term strategic asset.
 
Canexus value will be eventually unlocked, but we are probably talking $6 to $6.5 after all the dilution and miss-steps at NATO, only a high multiple M&A for NATO can compensate for those issues, I guess, we will know soon enough.
 
Regards,
Nawar

[jd43xl]

Yes, but with all of the cost over-runs, could they break even on a sale? Or would this just be burning the furniture to keep the house warm? Talking $6 to $6.50 for CUS at this stage is dreaming in Technicolor. Admit it Nawar, selling SGY and buying this turd was a big mistake.

[Nawaralsaadi]

I would like to correct the word “precede”, I meant to say “proceed”.   Regards, Nawar

[JustforFun7]

I can't see anyone buying NATO until it has stabilized. That includes the "minor debottlenecking". Why would anyone pay for an unknown cost and unknown capacity.  JFF7

[JustforFun7]

I can't see anyone buying NATO until it has stabilized. That includes the "minor debottlenecking". Why would anyone pay for an unknown cost and unknown capacity? JFF7

[roscoe74]

Nawar, when one looks at cost overruns in the oil sector in general, NATO is no big deal. Blaming management for execution should be tempered with the realisation that approval delays can mean losing skills and that capacity challenges can mean critical path timelines are disturbed.

[greenhawk]

Market is pretty much taking the news in stride. Ran up yesterday on anticipation of the new president and down today 25c. Net net only 11c down.. Chances are that Wonnacott would have wanted to dispose of any bad news as he takes over and overestimated any overruns. At least that's my hope. Cheers

[ocean112]

what makes me very uncomfortable is that the $45M is the known amount - FOR NOW - what is the unknown amount to get to full capacity?  They have left this wide open without any clarity or ballpark figure.  There are a number of uncertainties that will weigh on the stock in the coming days/weeks..... Will they cut the dividend further? Will there be additional cost overruns on top of

[Jackroy]

Agree with all your points.... if I was a new CEO I would have left nothing on the table in terms of potential costs and overruns and I am hoping that this is the case here. I would bury the old president and come in like a hero. Cross your fingers

[Kherson]

Looks like we now know... Kherson