I believe CLL's "realistic" goal was to produce at around 3.0, and hopefully eventually get down to the low 2's. I think if you look back at press releases from the fall, you should be able to find actual operating SOR's in there somewhere. Not quite as optimistic as they had hoped.

Regarding "payoff," I'm not sure what you mean? I guess you could look at it like this:

If they're working with an SOR of 3.0, then it takes (roughly speaking) three input units of energy creating steam to provide one output unit of product, bitumen.

Use BOE's, I guess, which "barrel of oil equivalents." I think very roughly speaking, a unit of natural gas (MMBtu) is sort of equivalent to a barrel of bitumen when using these calculations, just by chance.

In the old days, several years ago, an MMBtu of gas was around $5. If bitumen was selling for around $20 per unit, then basically they would have to spend $15 in energy inputs (3 units at $5) to produce one unit of bitumen worth $20. That would give them a $5 profit on the energy side, but of course wouldn't be nearly enough to cover all expenses.

By chance, oil and bitumen have skyrocketed over the past five years, and NG has dropped precipitously. In the mid-2000's, I believed (as did many others) that Canada and the world was facing huge problems because of impending natural gas shortages. The use of shale gas and advanced fracking methods (horizontal and directional drilling) was a hope for the future, but wasn't expected to be a game changer. But especially in the past couple of years, the successes of extracting shale gas has completely upset the apple cart (in a good way). If CLL can sell a barrel of bitumen for $40 to $50, and the energy input cost is half what it was five or six years ago (just over $2 per MMBtu right now), then there is far, far more money available to cover other operational expenses.

Ironically, this has marginalized the necessity to reduce SOR's. Obviously, the SOR is still a very important operating cost to control. But it is now a much smaller part of the pie when it comes to expenses, so much less focus is put on it now than it was several years ago. At the time, a further surge in NG prices could have made bitumen extraction unfeasible (and remember, NG was very briefly trading north of $15 immediately after Katrina).

The price of NG is a part of the CLL story that many people do not understand, or neglect to consider as important. But there has been an enormous positive impact because of historical events, and an enormous negative impact.

The positive side, of course, is that NG input costs are down. If they had moved in price parallel to the price of oil, which in a normal economic world would have been the case, then CLL would have been bankrupt by now. So the massive successful of shale gas and related extraction technologies has saved CLL.

On the negative side, Connacher made a big purchase of a major natural gas producers in the mid 2000's, I believe in late 2005, if I remember correctly. The company was called Luke Energy, and Connacher bought them at the worst time possible. NG prices were high, and Luke cost several million dollars. The intent was to create a natural hedge against NG inputs (Luke's producing wells would produce profit which would offset rising NG prices on bitumen production). Unfortunately, as we know from hindsight, this turned out to be terribly unsuccessful. A smart decision seen in the environment at the time, but an unlucky one. Had they refrained from this purchase, they would have had far more capital to advance construction of GD, and in my mind, wouldn't have had to go to market in 2008 under TERRIBLE economic conditions to save the company.

But that's the way it goes. Many people over the years have criticized the purchases of MRC and Luke (which only happened a few months apart). I have always believed that MRC was not a bad purchase. But I think that Luke was a far worse purchase than many people realized.