OPTI VIEW

May 22nd, 2009 – Comment

Hi Lou  I check on to tour the site daily.  As usual it is very interesting and informative. Keep up the great work.  I wanted to get your opinion on OPC.  Would this be a good time to buy Opti for the long run.  They are partners with Nexen and rumoured to possibly be bought out.  […]


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Hi Lou 

I check on to tour the site daily.  As usual it is very interesting and informative. optiKeep up the great work.  I wanted to get your opinion on OPC.  Would this be a good time to buy Opti for the long run.  They are partners with Nexen and rumoured to possibly be bought out. 

Thank-you

Steve

 

Hi Steve,

 

Opti Canada ( OPC TSX) has been on fire since March 09,2009 when it traded around $0.61. Opti is a story of a marathon runner hitting the wall at the 24th mile and having to dig deep to finish the race.

 

Opti has a 35% non operating interest in the Long Lake Oil Sands project which is experiencing a drag in production start up. Nexen is the major partner and operator with a 65% interest. Opti sold a 15% stake in the project to Nexen in December of 2008 for $735M to raise cash.

Opti has $1.75B in long term debt due in 2014 and needs to meet another cash call by September 30, 2009 to satisfy covenents of its $350M line of credit.

Thats the financial risk. The reward is a 35% interest in a 2.2 billion barrel reserve which when the project is fully operational will yield 20,000 barrels a day of black gold.

There is also operational risk. The problem in the start up has been attributed in water handling but some of the rumours suggest that there are problems with the reservoir. The Long Lake project has taken longer than forecast and also had to carry higher cost.opc

The chart indicates a stock that got a good lift from the market rally and a further push on takeover speculation. The RSI indicates that the stock got overbought and has pulled back. MACD is also signalling a reversal.

If you are going to enter a position you want to confirm support at $3.00 if it doesnt hold there $2.50 offers support. The current chart seems to be forming a double top which is a reversal pattern which after a run from $0.61 it wouldnt come as a big surprise if some investors are going to take some cash off the table.

Happy Capitalism!

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