Oil Sands and Related Stocks Message Board

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Gold/Mining/Energy : Oil Sands and Related Stocks

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To: Captain James T. Kirk who wrote (6183)	1/28/2006 9:46:24 PM
From: Taikun	Read Replies (1) of 25575

SU and COS reported their numbers recently with operating costs of C$20-25/bbl, so we can take a much deeper retracement than $60 and remain profitable. I can even envision a scenario where a deep selloff doesn't affect share price as much as the correct metric used to value these oil sands plays changes from primarily P:CF and PE to a hybrid of metrics that include RLI. Currently SU trades at about a 20-25% premium to other independent E&Ps on a P:CF basis. What if it were valued purely on RLI though? Other major independents have RLIs for 8-12yrs, so SU's 30+ implies a 300% premium. Weighting RLI at 33%% (PE 33%, P:CF 33%) a 88% (.33300%-.33.25-.33*.25) share price premium could be targeted, which means we aren't there yet. A 25% premium implies only 3yrs, or 10% of the RLI of 30yrs, is added to a longest E&P of 12yrs to get 15yrs. So, if lower commodity prices impact the first 2 metrics negatively, it is possible RLI could compensate. At the current share price SU well protects the investor against commodity downside as long as RLI is going to be more highly weighted in the future.

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