Cll Q1 results are worst then I expected. I took a big heat especially on the SH board in April estimating bad Q1 for CLL. These numbers are just terrible and this does not look good for so call "integrated approach model" promoted by management and misleading investors with the numbers on the slide.
Q1 2007 to Q1 2008 Revenues increase 53% but the cash flow decrease by 40% and CLL reported the loses. NG prices are higher and OIL is 80% UP. How is this possible?
Main contributor to this slump in cash flow was the refinery. Refining margin dropped form 19% to 0.7%.
Montana’s Refining revenue were $71.9M and refining cost (mainly purchase of oil) was $71.4M. If you add over $3M of capital expenditure the Montana refinery was in the read . 72% of total CLL revenue does not make money and getting exited about revenue is totally useless.
If you believe in high oil prices or peak oil you and you do not refine you own oil you must be crazy if you think about expending your refinery business.(The biggest US refinery Valero is planning to reduce long term capacity by 30%.
Almost the same applies to LUKE. Luke netbacks in Q1 are only $4M. and since acquisition is $30M. Luke capital expenditure to replaced dropping production was $70M which added to additional dilution of CLL assets.
With out the LUKE CLL Share would be 30% to 50% higher.( 240M dilution of the oilsand assets) .
In conclusion "integrated approach" model so far turn out to be total disaster for CLL share holders.
In part two I will look at the bitumen netbacks and cash flow.
