Welcome to the Connacher Oil and Gas Hub on AGORACOM
Connacher is a growing exploration, development and production company with a focus on producing bitumen and expanding its in-situ oil sands projects located near Fort McMurray, Alberta
Message: AN INTERVIEW WITH ANDY GUSTAJTIS Jan. 22, 2008 Excerpt from Canaccord Capital
D.P: Connacher Oil and Gas is one of the plays in the
heavy oil business that you’ve been following and I suspect
we are all a little bit disappointed. Does it surprise
you that it’s taking so long to get production going?
A.G: No, I think everything is pretty much on schedule.Their Pod-1 was constructed in 300 days, they started
steaming for 90 days and are getting bitumen production
as we speak. Production will be ramping up through
2008 and I can see them reaching design capacity by the
end of 2008 with possible cash flow north of $140 million
for 2008 with a fourth quarter of over $50 million or over
a $1 per share annualized..
D.P: And then of course, hopes for Algar or Pod-2?
A.G: That’s another 10,000 barrels a day so within18-24months from now this company conceivably could be
producing 20,000 barrels a day of bitumen and probably
another 3,000 barrels equivalent of gas and conventional
oil with possible cash flow of about $300 million a year.
D.P: You had some pretty lofty targets a while ago?
A.G: I think in terms of the resource market, all we’vehad is a correction in an upward trending bull market. I
have very little reason to want to move off my very bullish
longer-term outlook for resource stories. I think Connacher
certainly could be a double-digit stock within the
next 12-24 months.
D.P: Good. We are always glad to hear that! Now, anassociated company is Petrolifera Petroleum, and it seems
every analyst from Warren Verbonac to Malcolm Shaw at
Wellington West – are all aware of Petrolifera and theirtargets in Peru and the enormity of that. Now with Petrolifera
trading at almost a third of where it was, your
thoughts on Petrolifera?
A.G: It’s a cheap stock. I liked it at $15.00. Oil prices in Argentina are capped at $42 a barrel, but even at that oil pricegiven the fact that the company should be able to get up to 14,000 or 15,000 barrels a day in Argentina, they should
have a cash flow of $2.00 a share. The stock is trading essentially at three times cash flow.
D.P: Now how big are these targets in your estimation?
A.G: Camisea, which Hunt is developing, are multi-TCF world-class type targets. The oil prospects that they’ve goton the northern block are upwards of a couple hundred million barrel-type targets. So it’s somewhere between 200
million barrels for the oil and multi-TCF for the gas.
D.P: They got a shot at it sometime in the second half of this year, correct?
A.G: I don’t think they’ve announced the spud date but I do believe they’ve been able to get a suitable rig and I thinktheir plan is to either try and see if they can drill a well before the end of this year or early part of next. But I haven’t
seen or I don’t recall having seen an actual commitment on their part when they are going to spud.
D.P: I guess it comes time to the favorite question…if you could only buy one stock today in the oil and gas sector,what would it be for timeliness now?
A.G: I can’t help but think the way that Connacher has gotten beaten up here with all the stars lining up. They aretotally funded right through to development of Pod-2. They don’t have to raise any equity. I am of the view that oil
prices will stay upwards of $100 for a considerable length of time. In Pod-1 it looks like it’s a great project, all the
early indications are that he’s got an extremely attractive SAGD project there. I just think that the Connacher looks to
me like a pretty good bet.
D.P: Thank you so much for your time Andy!
4 Recommendations
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