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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: Thinking about Q3 results
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It should be a good quarter. Heck, it's gotta be. Yes, nat gas price was low but I think it will be for a long time. But oil was at $60 ++ all quarter, dilbit not so far behind. I'd go so far as to say that this quarter may be the new normal for a long time so CLL must show us that they can make good money in this price environment. I don't want oil prices to go higher 'cause I drive a little SUV.
Here's what I'm hoping for in Q3:
- At GD they must prove that they can optimize production. They've had GD running for quite awhile now. I want to know that they have increased production over 9k per day and are seriously trending closer to 10. If you refer to their Sep 28 press release it strongly suggested that much of the optimization work (re installing new pumps and tweaking the SOR) and the plant turnaround had concluded, so I guess I'm really pointing to October production.
- At Montana, I dunno what the perfect price storm has to be for Montana to throw up real good cash for CLL coffers but this has got to be it. How could it get any better? We know that DG loves his refinery and is fond of saying how it paid for istelf soon after purchase but what remains to be seen is how it seriously benefits CLL. I sometimes think of it as a 'robbing Peter to pay Paul' situation. Maybe it will sell cheaper diluent back to CLL. Anyway, it would be nice to see some big numbers re the sale of asphalt. In the q2 press release it was mentioned that they had 430k barrels of asphalt for sale in excess $100 per barrel. Dunno what their netback per barrel is but it has to be good. If it's not, then what is the freakin point of owning the refinery?
- More info about doing the flow through share exercise now instead of say, 2011 after Algar was churning. Why now? The land ain't goin nowhere. Are they planning to do an asset sale, a la UTS? Why was it so important to do it now?
- Hedging. I'd like to see them lock in at least 50% of their production at today's prices. I'd like them to lock in the cash flow certainty, enough cash so they can pay the interest on their debts from here on in.
- Algar. Looks pretty good so far judging by the photos. Kudos to DG, he does seem to know how to get things built on time and near budget.
- Q3 Cash flow: How about 12k boe's a day, netback $25. 80 days of production equals $24 million cash flowing this quarter.
Assuming all of the above comes true, then CLL may be a good buy at $1 ps. With Algar churning next year, CLL may well get to $2 ps by the end 2010, so a 100% ROI ain't bad at all. Too bad I still got lots of $3 shares but thinking there might be a December sell-off and I can pick some cheapies up for my TFSA.
I welcome all comments, even the churlish ones. I've suffered so much as a loyal shareholder nothing bothers me now.....
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