on the other board

I had a close look at CLL several months ago when it was trading at ~$1,6. I ended up going with another company that was at ~$1.3 mainly because it had far less "baggage" than CLL, although it was a year or two behind CLL in development. Like most junior Heavy Oil companies, both dipped in the past 4 months, although CLL seems to have dipped more than others (CLL now ~$1.2 (down 25%), the other company ~$1.1 (down 15%).

Since then CLL has made fairly good progress, IMO; however, they have also burned a busload of cash in the process. At this point they continue to spend more cash then they are generating. Its not entirely clear when the two lines will cross. Even though they are a junior, their fate seems heavily dependant on oil prices for the next 6-9 months, as opposed to other juniors (with more cash, fewer shares, and less debt ) who are more dependant on long term oil prices for success.

I don't normally speculate on short term events (I'd rather own the casino than play at one). However, it seems to me that of all the speculated takeovers in the heavy oil area, CLL would top my list. The reason? The biggest issue for CLL is near term cash needs. They can't get more debt, and nobody would float paper for them. Its not a cetainty that they'll even need cash, but from my perspective the chances they will need cash are fair to midland. There are several major HO players that have boatloads of cash but want to boost production (and they are boosting production, but perhaps not fast enough). For them it would be nice to be able to add 15000 boe/d NEXT year. You can't do that organically - the schemes alone would take 2 years at this point.

If we look at a quick business case - lets say someone bought CLL for $2.1 or less per share - roughly ~$1B. then they take on $800+M of net debt, add in other costs etc - and the price tab is ~$2B. $2B might this same player s a 40,000 boe/day facility, but what about land costs (How much does someone like a Suncor have to pay TODAY for 500MMboe of 2P?). And this would likley reach 40K/day 3-4 years from now.

If someone who knew what they were doing, had lots of experienced SAGD operators, could erase the debt with their petty cash, and perhaps even had refinery experience bought CLL; do you think there would be much risk that they would hit 15000 boe/day next year? I don't. So would it make business sense? At netback of $30 per boe, and 15000/day numbers - thats cash flow of $150 Million a year ($164M actually, but lets say only $150 to be conservative). $150M per year on a $2B investment is 7.5% return. Thats just on 15K. 500 MMboe would provide 50K boe/day for 27 years - and that assumes they don't have more possible and contingent reserves? How much is that worth?

So I can see why someone might want to buy this.

On the other side of the equation, at this point, I can see why CLL would want to sell - they are at risk of needing more money, and don't have any attractive options for getting it.

I hate to be one of those guys that throws out the takeover talk - lord knows just about every board on here talks about it - but in this case, the stage of development and the risk of cash shortage combine to make this potential high for CLL in the next couple of months.