Re: Goldman Assistance/10% NPV

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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

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jurek

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Re: Goldman Assistance/10% NPV

in response to

Re: Goldman Assistance

old dog

posted on Jan 26, 2012 02:03AM

I knew you will brink 10% NPV (Present value of Future Revenue) number as an example of value creation.

I am a little disappointed that you did not quote your own warning that the $3 billion NPV does not represent the fair market value. NPV is called a Bluesky for a reason and does not automatically (as generally suggested) represent the NAV (Net Asset Value).

NPV assumes too many factors (like Capex per flowing barrel, L/H differential,) and does not include the cost of capital, maintenance Capex, taxes and so on...

As an example (from Society of Petroleum Engineers): good Bitumen plant with 100% productivity (like MEG) will have $2 NPV per recoverable Barrel. At 70% productivity (like CLL) NPV will drop to $0.75 per bbl.

Market never gave us or other SAGD producers a credit for the NPV anyway.

What it is in play here is the Fair Market Value and not our imaginary 10% NPV. Click on the link bellow and you will find the latest SAGD deals converted to $ per bbl of the reserves.

Multiply it by CLL reserves (1300 millions bbl) , add other CLL assets and you will get about $1.3 billion.

Adjust it for the $900 million debt and one can arrive at CLL Fair Market Value of $1.1 to $1.2 per share (15% premium to present CLL SP).