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Gold/Mining/Energy : Oil Sands and Related Stocks -- Ignore unavailable to you. Want to Upgrade?

To: 22jt who wrote (25560)	3/12/2013 10:51:29 PM
From: 22jt	Read Replies (1) \| Respond to of 25575

CG on STP - ANTICIPATING SHARE PRICE WEAKNESS FROM FEBRUARY MCKAY VOLUMES ANTICIPATING SHARE PRICE WEAKNESS FROM FEBRUARY MCKAY VOLUMES We believe the supply agreement STP signed with a major USGC refiner is a positive development; however, we expect for the market to be focused on the 1,300 bbl/d McKay February average. Even though management had signalled for February production to be impacted by operational adjustments, we expect the market to react negatively given its already bearish sentiment around heavy oil differentials/oil sands, and as we reflect on the ~6% share price decline on 2/8/2013 when STP provided McKay’s 1,500 bbl/d January average. Three notable points may raise concern for investors: 1) The four circulating well pairs have still not been turned over to production. This will be a cause of concern for some investors as there was quite a bit of focus around it last month; 2) STP has changed the wording of its rampup guidance to “up to 18 months” from the prior “12-18 months.” Although somewhat of a “nitty” point, this slight change may cause some investors to temper their expectations; and 3) March may already be feared as a weak month due to needed minor repairs. We are not turning negative on the story, but we are taking a more cautious approach. We continue to believe the McKay ramp-up will be an iteration process involving fine-tuning and adjustments. Additionally, we were already incorporating an 18-month production ramp-up in our estimates. However, even though forecasting the ramp-up is a difficult task in itself, we may be compelled to revisit our expectations if there is no supportive production ramp-up data by CQ2/13. We maintain our BUY recommendation with a reduced price target of $1.75 (from $2.00) We are re-aligning our return expectations in light of the current market sentiment and the anticipated near-term headwinds the stock will face as the market waits for positive McKay production data. Our target price is based on 1x our estimated risked NAV. More.....7 pages research.canaccordgenuity.com