previously we discussed the Syncrude operation and the effect of $35/bbl USD with their estimated $45/bbl CAD all in production cost. Happily, CL has risen to $45/bbl, which is almost $56/bbl CAD giving COS positive cash flow once again. A recent report suggests Syncrude is selling at $57 confirms my estimate above. I would also assume, perhaps foolishly, that the $45/bbl cost will go down with the lower price of NG, as Syncrude burns NG to produce CL.
I'm curious if you have studied COS as an investment? The main attraction is that they have a 45 year RLI.
I watch COS and Encana principally for the oil sands cost and development data they provide. I sold my holdings just after the 5:1 split some time back.
With current oil prices, it does look like the company should be back to at least break even cash flow overall and positive operating cash flow. One aspect of its finances that I am aware of but have not investigated further is that it does have US $ denominated debt, which has become much more costly to service in Canadian dollars at current exchange rates.
I have always liked COS, but I don't know what it is saying about maintaining its current model after tax changes hit in 2011. Given the high costs associated with expansion, it is highly capital intensive on the front end of any growth -- I don't recall the extent to which Syncrude drives COS' cash flow dollars for growth, but there must be an agreement between the companies about how funding for growth occurs. Have you looked at that?
BAD, what is your take on this - looks very impressive:
INTEROIL ANTELOPE-1 WELL FLOWS AT RECORD GAS RATE OF 382 MMCFD WITH 5,000 BBLS PER DAY OF CONDENSATE
March 2, 2009 -- InterOil Corporation (IOC:NYSE Alternext US) (IOC:POMSoX) today announced that its Antelope-1 well flowed at 382 million cubic feet of natural gas per day (MMcfd) with 5,000 barrels of condensate per day (BCPD) for a total 68,700 barrels of oil equivalent per day
Right now, COS's debt is low relative to assets on the balance sheet. 1.2B in lt debt.
Actually, since CL is priced in USD, it might actually be better for debt to be denominated in USD from a "safety" point of view. Assuming a lower USD means a higher CL price (that was the argument last year), that forms a natural hedge?
As to your second point, that is a question I have not considered. The long term plan for COS talks about another expansion, but it is many years away. I don't think much expansion is on the table, or even was on the table with 140/CL. There are so many factors between now and any future expansion...
I forwarded the thread to an internet contact with a large COS position and below is his reply...