Hi BBQ, good to hear from you after long time,

In regards to Petrolifera (PDP) ABCP.... This is another value destruction example under our favourite (Old-Dog) Chairman watch. $37 million simply evaporated from PDP/CLL financial structure.

Where PDP was sold , GTE received Petrofilea's Asset Backed Commercial Paper (ABCP) as a free bonus initially assigned at ZERO value.

Last year GTE management was able to sell this free paper for $22.7 million.

The irony is that CLL received less money for spinning their shares to GTE, then GTE by selling PDP's commercial paper received for free.

There is many more value destruction examples but I guess it is all history now.

Hi Sharky,

What make you think that the CLL take over is around the corner?

Who in your opinion will put an offer for the company which:

1.With the holiday brake on the Royalties can not make money by selling and refining oil for 2 years on the row. They pay now only 6%. Pod1 will enter post-payout 34% rate next year. This will dramatically expend corporate losses.

2. Production is on the decline and 35% below design capacity (as per Canadian Petroleum Engineers study, due to solvent recovery you need production at 90% capacity to make SADG+ economically viable option).

3. Their cash reserves dropped to $80 million in February after paying $39 million interest installment on $900 million debt. February Dil-Bit prices dropped below their TOTAL cost. March prices are lower then February average. Q1/2012 is shaping to have 20% lower bitumen prices then Q4/2011.

4. In 2011 CLL sold assets for total of $138.4million. They are now down to about $80 million cash reserves with the lower bitumen prices then in Q4. In June they need $102 million to redeem convertibles and in July to to pay another $39 million interest installment. Credit line maybe the only option.

The point is: who on earth would like to put a reasonable offer and get in to this mess?

Believe me, there are much, much better opportunity out there for someone to park $1 or $2 billion in energy sector in Alberta. The same applies to individual investors.

.

What is the bitumen price these days? sharky

Bitumen prices recovered to about $59-$60/bbl as of last Friday Feb 24.

Sudden sharp collapse in Mid January and February to $50/$52 bbl level was related to huge spreads ($32/bbl) of Alberta's Western Canadian Select and US North Dakota Oil in comparison to WTI.

http://www.platts.com/weblog/oilblog/2012/02/10/the_sudden_shar.html

AT 13500 bbl/d production and $52/bbl bitumen can pay their bills including interest charges , G&A and production sustainability capital expenditure set for 2012.

■ Peter Sametz, former President and COO of the company, has been
reinstated and appointed interim CEO. In addition, Gregory Boland,
CEO and co-CIO of Westface Capital, has been appointed to the Board.
We believe that these moves suggest an increased likelihood that the
company will be sold.

We believe Mr. Sametz's operational expertise
and experience with Great Divide makes the company more attractive
to potential purchasers without operating experience, while Mr. Boland
will be certainly looking to maximize shareholder value, given his
firm's position in CLL.

■ The company released its year-end reserves and resources. Bitumen
reserves were essentially unchanged, while contingent resources fell by
46 MMbbl, with new additions partially offsetting the sale of 77
MMbbl associated with the company's 50% interest in Halfway Creek.
Recommendation

■ We maintain our 2-Sector Perform rating, but have increased our one year
target to $1.25/sh, as we believe the company could get purchased
for something between our 1P and 2P NAV estimate

( as per Scotia Capital CLL 1P=$0.95)

Sorry for double post.

Small correction:

...CLL share price shows strong support at ~95 cents...

Another interesting development:

Last week West Face Capital was granted (by Alberta Security Commission) a permission to communicate and seek a support from up to 15 Connacher shareholders.

As per ASC, West Face is allowed (on the next shareholders meeting) to present the resolutions including a new composition of the CLL board of directors.

The question is: will they get a support of majority shareholders to advance their agenda. They own about 10.6% of the shares (they claim a support of 11.7% shareholders). Total institutional is only 22%.

Another question is: what's on their agenda?

WFC owns big stake in Connacher debt which pays them 8.5 % interest. IMO they will not rush CLL small Board of Directors (5 persons - only 2 independent) to sell the company while they enjoy high interest payments. As oppose to individual investor status quo is a win win situation for WFC.

Not much activity on and CLL Corporate front. CLL share price shows strong resistance at ~95 cents after steady erosion and slide below $1. It seams that CIBC is the only party supporting the share price at this level.

In February Connacher realized Bitumen prices are stabilizing around $51/bbl, down from about $60/bbl average for Nov/Dec/Jan.

$51 per bbl is just below CLL TOTAL cost including interest charges , split G&A, Maintenance and Sustainability Capex, WTI hedges, etc...

In January they reported $112 million cash balance, down from over $120 million in December despite strong bitumen prices. On Feb 1 they paid $39 million interest instalment lowering the cash balance to about $80 million.

By the end of July 2012 CLL will have to pay $144 million to buy back convertibles and pay the interest. They should be OK if bitumen prices will stay at this level or go higher and they will not have any unexpected production related expenses.

Executive shuffle may cost additional $8 to $10 million if not contested in the court.

IMO JV (from the corporation point of you ) is the only way to move forward with the expansion. CLL free cash flow can not support any new projects including conventional Oil.

From the shareholders point of you buyout maybe the only solution to get instant positive returns on their investments. For some reason nobody is stepping forward with the offers. I guess CLL at this prices in not a bargain anymore.