Connacher Oil gets back to it's old strength
On November13, 2014 Connacher Oil had production of 14,163 barrels per day; this is up 20% from production of Q3 in 2013and up from Q2 2014 production of 13,689 barrels per day.This increase was attributable to four infill wells at Pod One (pumping since Q4 2013) and four well pairs at Pod 104(pumping since Q1 2014) and five new infill wells at Pod One (pumping since Q3 2014).Furthermore Pod One production averaged 9,240 barrels per day which exceeded the plant emulsion handling capacity of 9,000 bbl/day.Lastly the adjusted EBITDA went from $23.3 million in Q2 to $28.8 million in Q3 2014.
Operations
Connacher Oil plans to spend about $25 million in capital expenditures this quarter;this is less than their EBITDA of $29 million.Expenditures are focused primarily on the completion of 9 new infill wells and the advancement of the mini-steam expansion of the 9 wells plus completing the SAGD commercial project at Algar (their new facility).In addition, Connacher plans a turnaround of the Pod One facility because production now exceeds the inlet capacity;they say it should be completed in Q2 2015.However the expansion and tie-in of the new wells is already underway in Q4.So it is likely that a make-shift expansion to cover the increased production will be cobbled together for Q4 or at the latest by Q1 2015.This may allow production from Pod One to hit 10,000 barrels in Q4.And this will likely put some added pressure to do an early turnaround of the inlet facility by late Q4.
Connacher says that there will not be likely any production from their new Algar plant until Q2 2015.Once this happens this will create a substantial bump in production.Right now Connacher has to use trains to handle deliveries that cannot get to market by pipeline.As 56% of sales go outside Alberta.They utilized 6 unit trains in 2014 and will continue to use them in 2015.
Financing
Their stock price is quite low now and prohibits them from doing any new equity issues at this time.So likely they will need new debt financing in 2015 and the covenants on their existing debt are becoming quite restrictive.They did increase their debt in 2014 and will likely increase it again in early 2015.They have an existing $8 million credit facility and almost $25 million in letters of credit.But a new debt financing will likely be required. The increases in net income in 2014 will allow them to take on new debt ,if not at great interest rates.
Back to the 2011 levels of profit
In 2011 Connacher Oil had a refinery in Great Falls, Montana and almost 50 % of it's EBITDA came from refinery operations.Total EBITDA for the year was about $120 million.The refinery was sold and it appeared as if a small capital gain was made but total EBITDA tumbled in 2012 and 2013.Now Connacher depends solely on it's heavy oil operation at it's Great Divide operation.Connacher recorded EBITDA of $24.4 million in Q1 and $23.3 million in Q2.This blog predicted EBITDA of only $25 to $26 million for this quarter but it actually made $28.8 million.This blog also predicted production of 14,300 barrel per day and they got 14,163 barrels.So production is down somewhat but EBITDA is up.If the inlet capacity at Pod One can be modified somehow to get another 1000 barrels of production from the four new infill wells this will bring total production from Pod One to 10,000 and overall production to 15,000 barrels per day.This should bring quarterly EBITDA to about $32 million and annual EBITDA to $110 million.This is very close to 2011 levels of profitability and should send the price of the stock to 2011 levels gradually.In 2011 Connacher Oil traded between $1.00 and $1.50 per share.
Operations
Connacher Oil plans to spend about $25 million in capital expenditures this quarter;this is less than their EBITDA of $29 million.Expenditures are focused primarily on the completion of 9 new infill wells and the advancement of the mini-steam expansion of the 9 wells plus completing the SAGD commercial project at Algar (their new facility).In addition, Connacher plans a turnaround of the Pod One facility because production now exceeds the inlet capacity;they say it should be completed in Q2 2015.However the expansion and tie-in of the new wells is already underway in Q4.So it is likely that a make-shift expansion to cover the increased production will be cobbled together for Q4 or at the latest by Q1 2015.This may allow production from Pod One to hit 10,000 barrels in Q4.And this will likely put some added pressure to do an early turnaround of the inlet facility by late Q4.
Connacher says that there will not be likely any production from their new Algar plant until Q2 2015.Once this happens this will create a substantial bump in production.Right now Connacher has to use trains to handle deliveries that cannot get to market by pipeline.As 56% of sales go outside Alberta.They utilized 6 unit trains in 2014 and will continue to use them in 2015.
Financing
Their stock price is quite low now and prohibits them from doing any new equity issues at this time.So likely they will need new debt financing in 2015 and the covenants on their existing debt are becoming quite restrictive.They did increase their debt in 2014 and will likely increase it again in early 2015.They have an existing $8 million credit facility and almost $25 million in letters of credit.But a new debt financing will likely be required. The increases in net income in 2014 will allow them to take on new debt ,if not at great interest rates.
Back to the 2011 levels of profit
In 2011 Connacher Oil had a refinery in Great Falls, Montana and almost 50 % of it's EBITDA came from refinery operations.Total EBITDA for the year was about $120 million.The refinery was sold and it appeared as if a small capital gain was made but total EBITDA tumbled in 2012 and 2013.Now Connacher depends solely on it's heavy oil operation at it's Great Divide operation.Connacher recorded EBITDA of $24.4 million in Q1 and $23.3 million in Q2.This blog predicted EBITDA of only $25 to $26 million for this quarter but it actually made $28.8 million.This blog also predicted production of 14,300 barrel per day and they got 14,163 barrels.So production is down somewhat but EBITDA is up.If the inlet capacity at Pod One can be modified somehow to get another 1000 barrels of production from the four new infill wells this will bring total production from Pod One to 10,000 and overall production to 15,000 barrels per day.This should bring quarterly EBITDA to about $32 million and annual EBITDA to $110 million.This is very close to 2011 levels of profitability and should send the price of the stock to 2011 levels gradually.In 2011 Connacher Oil traded between $1.00 and $1.50 per share.
Comments
Post a Comment