I really don't understand why the net present value of Connacher's oil reserves should not be taken into account in the valuation of the company. It is true that they have a large amount of debt at a relatively high interest rate but that debt bought hard assets. Production plants are expensive! If you look just at the current production level for bitumen and do a net present value calculation on the income stream from that production you can get an relatively good estimate of what it is worth. Jurek posted recently that bitumen was currently bringing about $60 per barrel. In Connacher's latest presentation they indicate that the cost to produce a barrel of bitumen was about $22.00 a barrel including operating costs, natural gas costs and royalties. So if we use $38.00 a barrel we can get an estimate of what the current Great Divide production is worth. $38 x 14000 x 365 = $194,180,000 or about $16,181,666 per month.

The estimated life of this operation is estimated at 25 years.

Current 30yr US Treasury notes pay 3.1% interest. At 3.1 % interest the NPV of this income stream is worth about 3.4 billion dollars. If we subtract the 900 million debt this equates to about $5.50 per share. Pension funds typically would like to have at least an 8% return on their investments. At 8% interest this income stream is worth about 2.1 billion dollars. Subtracting the 900 million debt we get about $2.66 per share. This is just current production! Great divide has the potential for greater than 44,000 barrrels per day! Also, only about 16% of Connacher's bitumen land holdings have been drilled!

Connacher also has a profitable refinery and profitable conventional production. So if you were a rich foreign oil company representing a government with lots of cash reserves, what would you pay? I would think that $2.50 a share would not be unreasonable!

Martin