Opti Canada Inc. (OPC.TO) Buy, Sell or Hold

Opti Canada Inc. (OPC.TO)

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18 watching

HOLD

Junior partner with Nexen (NXY-T) in the Long Lake oil sands project and is in production. Production is behind schedule because of mechanical issues so were in trouble with debt covenants. Managed to mitigate it so they should be okay over the next year or so but really need to get the operating issue fixed.

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DON'T BUY

35% non-operating interest in the Long Lake project. Struggling. Now have ability to generate 230,000 barrels of steam and put it into the ground but only getting back 60%-65% of the water sold their reservoir is challenged. Debt is an issue.

BUY

It’s a long-term project and there is a lot to be learned. He went for Nexen, the other side of the partnership, because there’s more cash flow support. OPC is an excellent long-term opportunity. Technology they bring to the table is great and maybe they would be a take-out target.

WAIT

Had production problems. Appear to have made some progress, but along the way had to an equity issue at a very distressed pricing level. It’ll be a crucial 6 months. Speculative buy, or wait.

COMMENT

Very challenging for them. They only have one project, Long Lake. Currently are down and she expects this to be for a month. Steam generating is the lifeblood of this project and it will be in the dead of winter in Fort McMurray. High debt and they are not making money.

DON'T BUY

Has been trial by fire. Did a fairly poor job of getting the SAGD project up and running. Time will tell if upgrader will function at full rates. Layered in a lot of debt. Surface issues in terms of water treatment and ability to generate steam. Just received a covenant waiver, which will probably buy time into the 1st quarter of 2010. Very little wiggle room.

HOLD

Frustrating stock. Balance sheet problem and getting enough steam into the ground to get enough oil out. Project is solid, technology works. Wait and see if we can get the steam issue resolved. Their upgrader is built and has value.

BUY

Oil sands with a 40-year project life. Built and in its ramp phase. There are complications as you get to the ramp phase. Just did an overhaul of their water and injection facility and over the next few weeks he expects they will be back on track. Had some balance sheet issues that they resolved with an equity issue. Very volatile.

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WATCH

Had a lot of debt. Raised some money but the debt levels are still higher than what she would like. You have to keep watching to see that operationally they keep moving in the right direction.

PAST TOP PICK

(A Top Pick Aug 22/08. Down 91.23%.) Sold most of this but still has a little for himself.

COMMENT

Doesn't like the company's prospects. The only reason to hold is if a bid emerges and it gets sold. Nexen (NXY-T) would be the logical buyer.

DON'T BUY

Not a fan. Think they will eventually resolve start-up issues but if you want to play on the resolution of the start-up issues, why not play through Nexen (NXY-T), which owns half of the oil sands project along with their other assets.

BUY

(Market Call Minute.) Looking for a recovery in oil prices and with their addition of new water handling he expects some wrap up in production finally.

COMMENT

Has great assets and are partnered with Nexen (NXY-T) on their Long Lake project. This continues to lag expectations in production and costs. Being a small company they are running out of money. Could work out their issues in 12 to 18 months.

DON'T BUY

Has become significantly leveraged with $2 billion in net debt with its market cap being about $400 million. They are in desperate need to raise capital. This is the kind of situation he likes to avoid. Operation at Long Lake is taking longer than originally anticipated. High risk.

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Opti Canada Inc. (OPC.TO)