I am talking about "Operating Cash Flow" which is a line item found on the Statement of Cash Flows published in the Quarterly Financial Statements. This line item divided by the outstanding shares is commonly used to provide one way of valuing a producing oil company. EG If the operating cash flow (CF) is 25 cents/share for one year - applying a 10x cash flow multiple will give you a 2.50 share price.

Capital expenditures do not form part of the operating cash flow. During the period of construction of Algar the interest paid on that portion of the loan used to build Algar is added to the capital cost. The reason for this is that during construction there is no revenue from Algar to match against the interest expense. Only when Algar is brought into production is the interest cost expensed along with the capital amortization.

There are other determinants of share price - such as reserves, etc but cash flow is a very reliable one. As CLL's operating CF increases so will it's SP. I am expecting it to be approx 50 cents in 2008 & close to 1.00 in 2009. Applying a 10x multiple will give a substantial increase in SP over that time frame. I also feel that as CLL can prove they can successfully derive CF from SAGD operations the SP will increasingly include a premium for their reserves - reflected in a higher multiple than 10x.