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Friday, March 05, 2004
Canadian Oil Sands announced last night that their current expansion project is going to run over budget by at least 2Bn (50% chance of it being higher) and take 6-9 months longer than expected. Aside from being an interesting project management study, there is not much impact on the value of the business. My model estimates around an $8CAD haircut as a result of the announcement. Intrinsic value still sits above $100CAD. At $47.5CAD today it is a great buying opportunity. Interestingly on their conference call last night they talked about capital expenditure going forward and it was lower than my estimates. This is likely to to add a few dollars back.
Finally and most importantly if oil stays above $30 long term intrinsic value is up around $135CAD after this announcement.
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Analyses are prepared from sources and data believed to be reliable, but no representation is made as to their accuracy or completeness. I am not paid by covered companies. Strategies or ideas are presented for informational purposes and should not be used as a basis for any financial decisions.
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