Martin Hubbes, CFAUTS EnergyUTS.TOTRADEAug 02, 2005
Right now they have a partnership with Petro Canada (PCA-T) and they need to bring a mining company on board with mining expertise. Once that happens, the stock will move higher. Today it's moving on news of mergers/acquisitions in the oil sands area. Speculative.
Being acquired by Total (TOT-N) at $3.08 and current stock price is $3.49. There is about $.40 value in a spin-off stock called Silver Birch. You will have 20% stake in the Fort Hills project and you hold onto this for that reason. Silver Birch could work out to be interesting.
Total (TOT-N) is making a bid to acquire at $3.08. Trading at $3.49 and the difference is the value of their Silverbirch assets, undeveloped oil sands that will take 5-7 years to come on stream.
Risk profile is higher. Their big project is the Fort Hills project, which SU operates but since the merger with Petro Canada, it is not their biggest priority. UTS have lots of cash on the balance sheet.
Bottomed out at the end of 08 at around $.80 and took a big jump one day at the beginning of 09. Followed by a very long base and moved up in the latter part of 09. Formed another base early this year. Potential on a short-term basis is $3.50 but will probably be slow. Use a stoploss at around $2.30.
Great basket of assets but unfortunately they don't control their own fate. Just announced they had sold their leases, which was a great transaction. Probably fully valued. Would consider at $1.75-$1.80.
The question is what they are going to do with Fort Hills. Waiting for Suncor (SU-T) to give their plans for this and they have until 2019 to put it on production. Very levered to oil sands.
On a 5-year view of the oil sands, in the unlikely event the US decides it doesn't like the oil, China will be quite happy to take it. Fort Hills project will be developed in due course but right now Suncor (SU-T) has a few other priorities. First class management and well positioned. Having some luck with exploration.
Likes the project long-term. Short-term there are a lot of obstacles. They have to be comfortable on a long-term oil price, which they will be, but not quite yet.
Bulk of their assets is tied to the Fort Hills project. Will find out when Suncor (SU-T) and PetroCanada (PCA-T) come together what the plans are for Fort Hills. She expects that #1 on their list will be the completion of Voyager and will be quite some time before they get to developing Fort Hills. Will be dead money for a while.