Connacher gets it right
Connacher Gas and Oil has had steady increases in production since early 2012.It is a heavy oil producer that has divested it's refining operations in Montana.Connacher was producing about 11,000 barrels per day in 2012.In it's latest quarter it produced 13,433 barrels per day.It has two SAGD operations and now has approval for a commercial SAGD operation along with approval for 24,000 barrels per day from it's Great Divide operation.It still has a way to go to reach it's maximum allowable output.
2014 Production
Connacher says in it's quarterly report that production increased primarily due to new wells at Pad 104 and Pod One.Connacher has steadily worked on improvements to it's steaming process and the amount of water used and the diluent blend process.It has 9 new infill wells at Pod One and 4 have already spudded.It is expected that production will increase in 2014 at Pod One and Pad 104.Their Algar operation has also experienced technical difficulties.If their decline rate on other wells doesn't change Connacher might get up to 2000 to 2500 new barrels per day of production.This puts a top line estimate of 16,000 barrels per day.However Connacher knows that new problems almost always arise; still they should exceed 15,000 barrels.
Montana refinery
They had a refinery in Montana and tried to sell it.Connacher is very vague about their old refinery.But we do know that they did not use funds to pay off debt because long term debt increased,not decreased.In addition,Connacher has positive EBITDA but takes heavy write offs and shows negative net income every quarter.However there is no mention of refinery operations any more.It is no longer a part of income production.
Canadian Engineering
Connacher is a bit of an engineering success story.It has modified it's operations continuously so that it has increased production and gotten a bigger market.Their steaming process has been changed and improved;they have also experimented with unit trains.Thier netbacks have increased and so now they have improved financing.They reduced an existing revolver(short term loan) from $95 to $30 million and got a first lien of $140 million.This reduces their effective interest rate .While financing has gone up Connacher reduced their capital expenditure in this quarter.They have refined their process so that they can focus on horizontal and infill drilling. This is cheaper than a new exploratory well.Connacher has improved their operation but it still needs more work because it will be some time yet before production gets up to the approved rate of 24,000 barrels per day.Probably late 2015. Nevertheless EBITDA might go from the present $10.9 million for Q1up to $12 million by Q4 2014.At least they can hope,can't they.
2014 Production
Connacher says in it's quarterly report that production increased primarily due to new wells at Pad 104 and Pod One.Connacher has steadily worked on improvements to it's steaming process and the amount of water used and the diluent blend process.It has 9 new infill wells at Pod One and 4 have already spudded.It is expected that production will increase in 2014 at Pod One and Pad 104.Their Algar operation has also experienced technical difficulties.If their decline rate on other wells doesn't change Connacher might get up to 2000 to 2500 new barrels per day of production.This puts a top line estimate of 16,000 barrels per day.However Connacher knows that new problems almost always arise; still they should exceed 15,000 barrels.
Montana refinery
They had a refinery in Montana and tried to sell it.Connacher is very vague about their old refinery.But we do know that they did not use funds to pay off debt because long term debt increased,not decreased.In addition,Connacher has positive EBITDA but takes heavy write offs and shows negative net income every quarter.However there is no mention of refinery operations any more.It is no longer a part of income production.
Canadian Engineering
Connacher is a bit of an engineering success story.It has modified it's operations continuously so that it has increased production and gotten a bigger market.Their steaming process has been changed and improved;they have also experimented with unit trains.Thier netbacks have increased and so now they have improved financing.They reduced an existing revolver(short term loan) from $95 to $30 million and got a first lien of $140 million.This reduces their effective interest rate .While financing has gone up Connacher reduced their capital expenditure in this quarter.They have refined their process so that they can focus on horizontal and infill drilling. This is cheaper than a new exploratory well.Connacher has improved their operation but it still needs more work because it will be some time yet before production gets up to the approved rate of 24,000 barrels per day.Probably late 2015. Nevertheless EBITDA might go from the present $10.9 million for Q1up to $12 million by Q4 2014.At least they can hope,can't they.
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