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

Opti Canada Inc. (OPC.TO)

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COMMENT

Opti Canada (OPC-T) and Nexen (NXY-T) are in partnership on an oil sands project in Alberta. Project has been bereft with problems in terms of getting production up to speed and getting costs in line. Has been a lot of speculative money coming in, particularly with Opti, in the last couple of weeks. Some debt commitments coming up.

COMMENT

(Market Call Minute.) High-risk oil sand stock. If you have the patience, this will be worth more later.

DON'T BUY

This company got stuck with cost escalations without having any real base so the stock collapsed last year. Thinks they will find it hard to get out of the box they are in. Would rather buy an in-production oil sands business.

HOLD

Kind of an option on oil sands with something good happening between Suncor (SU-T) and PetroCanada (PCA-T) and people chasing after Nexen (NXY-T).

COMMENT

CEO was the driving force and he is leaving so speculation is that the company is for sale. Disposed of 15% of their Long Lake oil sands project. Nexen (NXY-T) would be the logical buyer. May have to re-drill some of their well pairings, which is a big capital cost. Can you handle this?

DON'T BUY

Prefers PetroBank. Got out of it. Can extract oil without putting an open pit mine in.

COMMENT

Nexen (NXY-T) owns a controlling stake in this. A proven asset that is now coming into production. He would rather own something that is producing.

DON'T BUY

Trading on a big discount to its NAV. Would rather play this through Nexen (NXY-T), which has a bunch of their position on the Long Lake project and will continue to grow. Doesn't want to own stocks where company needs a lot of financing just to complete existing plans. (See Top Picks.)

COMMENT

Disappointing on the production side. The story has been awful. A lottery ticket that could go either way. Has enough cash to get through the year.

DON'T BUY

Has run into a lot of problems, both with the price of oil and operationally. Have been delayed in production out of a joint venture production with Nexen (NXY-T). Costs have also been higher than expected. Hoping for a pop so he can get out.

DON'T BUY

1) Technically it seems to be straight lining, which is not a good sign. If it did start to perk up and move above the trading range, this would imply there might be life after all. 2) Seasonally, you're getting to a period where it should do very well. 3) Fundamentally it has financial difficulties.

COMMENT

All companies out West with exposure to oil sands projects have very high exposure to oil prices. At $40 oil this is not worth the current stock price. At $50 he sees about $1.50 and so on. Can see a tiny bit of upside, but not a lot. Also have obligations going forward and with a $60 oil price they do not have enough to meet those obligations.

DON'T BUY

Currently up against the ropes. Recently sold 15% of its interests in Nexen (NXY-T) in the Long Lake project. If it can continue to skate on side and not have the banks foreclose, it is potentially a 4 to 5 bagger from here. Also could be zero. Lottery ticket.

HOLD

(Market Call Minute.) In the throes of distress in the oil sands.

DON'T BUY

Got caught in the dramatic in oil prices. Too high a risk.

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Opti Canada Inc. (OPC.TO)