There are a number of factors which if they come to pass all are favourable to Connacher's profitibility going forward in 2010.
1) Foreign Exchange Rate: Connacher benefitted in Q-3 and made millions of dollars on the higher value of the Canadian dollar. According to a Royal Bank of Canada report in Friday's Globe & Mail, the Canadian dollar will reach parity with the US dollar in February 2010. "The housing market performance, combined with widening Canada-United States interest rate spreads and “a constructive commodities outlook,” indicate that the Canadian dollar will likely reach parity with the U.S. dollar within the first two months of 2010, he said." http://www.globeinvestor.com/servlet/story/GI.20091113.escenic_1362404/GIStory/ This bodes well for Connacher's continuing to make millions of dollars profit for Q-4 in 2009 and for Q-1 in 2010.
2) Bill Harris, as an analyst, revealed his current view on BNN on Friday concerning the forward pricing of natural gas which he stated has been in a bear market for the last 3 years which will likely continue to this time next year (November 2010). If this turns out to be true then the costs of producing steam at the Great Divide & Algar will remain lower and add to Connacher's higher return on its netbacks on each bbl of bitumen going forward.
3) The two exisiting well pairs at POD 1 (the 16th and 17th well pairs) Dick Gusella told me in his E=mail the other day (which I forgot to mention) are excellent wells so far and they were drilled next to Connacher's best producing well pair at POD 1 to date and they expect that they will be excellent performers. So they will add to POD 1's increasing production as they mature.
4) Drilling two new well pairs (18 & 19) at POD 1 in early 2010 will also slowly contribute to increased production 6 months after they are drilled.
5) The differential between bitumen and WTI is likely to remain narrow for the foreseeable future. There is less heavy oil from Mexico and Venezuela reaching the Gulf Coast refineries. In addition, the Keystone pipeline will be removing 6% of the heavy oil produced in Alberta over the next 3 or 4 months as the pipeline fills up (this 9 million barrels of oil will be "lost" to the market as it takes about 3-4 months for the oil to reach the midestern refineries) http://agoracom.com/ir/Connacher/forums/off-topic/topics/371655-a-pipeline-so-big/messages/1239270#message So Connacher will continue hopefully to gain a few more dollars for each barrel of bitumen that it ships due to this temporary squeeze in the heavy oil market.
6) OPTI's upgrader is back on line after having been out of commission for its scheduled turnaround. Presumably during the month or two that it was out of commission, Connacher had to ship its bitumen from Great Divide farther at greater cost to the pipline at Hardisty. With the upgrader back in operation, Connacher's transportation costs should now be lower as the upgrader is closer than the pipeline terminal.
7) Algar is currently under budget and on time and if this continues until completion it will be interesting to see if the $15 million dollars that Connacher's Board bugeted for cost overruns or other contingencies will in the end be saved to be applied to the company's bottom line at the end of Q2- 2010.
8) Also, the new reserve report when it comes out in the summer of 2010 should have an effect on Connacher's share price, assuming there is no catastrophic news in the newpapers when the reserve report comes out.
These are some of the positives that we can debate on this board in the coming days.
Best Wishes; Scott
