I'ld like to weigh in with a positive spin on the prospects for CLL. First some observations on Share Price.

I generally look to operating cash flow per share multiplied by a cashflow multiplier as a general guide for share price. For CLL I look to other companies in the oil sands area for comparison. Suncor can be used as an example. If we choose a time frame prior to the market meltdown say Q2 of 2008 what do the numbers look like. All these numbers are available from the Investor section of the company websites.

Suncor 2008 Q2 operating cashflow / unit was 1.34. To annualize this multiply by 4 to get $5.34. What was Suncor's share price at that time? It went from a high of 73 (April) to around 60 (in July) just before the crash. This works out to a muliplier range of 11 to 14.

What about CLL? Well in 2008 Q2 its cashflow per share was approx 10 cents - or 40 cents on an annual basis. Its share price varied from a high of 5.25 (April) to approx 4 (in July) just before the crash. This works out to a multiplier range of 10 to 13.

What about PBG which is often trotted out on this web site for comparison. Its cashflow per share in 2008Q2 was 1.82 or 7.28 annualized. Its share price was a high of 63 (January) to around 40 in July. This gives a multiplier range of 5 to 9.

I think 100% oil sands companies will be afforded a higher cash flow multiple because of the minimal exploration risk and the long-term annuity characteristics of their resource base. Their resource base isn't subject to the rapid depletion of conventional oil. So in my mind a 10x multiple is appropriate for CLL.

For the CLL SP get to $10, it has to generate $420 million cashflow on annual basis - due to the 420 MM diluted shares outstanding. How is that possible? Let's take yesterday's numbers. WITC was USD 81, CAD exchange rate was .96 giving a CAD 84 / barrel. Dilbit was selling for 84% of that or CAD 71 / barrel. Deducting the cost of diluent and transportation gives approx CAD 60 / barrel of bitumen. Less royalties (negligible at this point) and op costs of $15 gives a netback of $45 / barrel. Multiply that by 9,500 bpd * 365 days gives approx 150 MM per annum. 2 pods would be 300 MM / year. WITC @ USD 95 (not an unreasonable assumption) and a CAD at parity results in 400 MM / annum. I am ignoring interest and the other operations of CLL. But the point I want to make is that the oil sands can be a money machine - if the planets are in alignment.

The only significant risk I see is operational. CLL has got to get POD1 over 9,000 bpd with an op cost at or below $15/barrel. Last quarter their op cost was below $15 but production was only 6,300 bpd. I understand it was over 8,000 bpd before the September maintenance outage and they seem to be struggling to get production back up.

I am a long way from giving up on CLL. If they can get POD1 operations back on track for a few consecutive quarters then the market will reward them with an increased SP. I Personally am looking for a SP in the $5 range next summer. A successful ramp up of Algar towards the end of 2010 and a $90 oil price should see the SP push well north of $5.

I know this is long winded but I want to make one more observation. I think being long bitumen is where to be the next few years. I don't for a minute think CLL will ever expand the Montana refinery. And it wouldn't surprise me if they don't aggressively expand NG production at these low NG prices. There is a new pipeline to bring Alberta heavy oil to US refineries to replace Venezuelan and Mexico heavy oil. This should keep the heavy-light differential narrow. (The only fly in the ointment is possible US laws to penalize the refining of heavy oil).