OPTI Canada Shares Drop As Slower Long Lake Growth Seen In 2011
By Edward Welsch
Published November 16, 2010
CALGARY -(Dow Jones)- Shares of oil sands company OPTI Canada Inc. (OPC.T) declined sharply Tuesday after its partner in its Long Lake oil sands project said production next year would be even lower than expected.
Nexen Inc. (NXY: 21.60 ,+0.30 ,+1.41%) said during its investor day conference that Long Lake's production would average between 38,000 and 45,000 barrels a day of raw oil sands crude next year. Nexen, a Calgary-based major international oil and gas producer, holds a 65% stake in the Long Lake project located in north central Alberta.
GMP Securities analyst Sean Barr told clients in a reseach note that Nexen's estimate implies that OPTI Canada's share of upgraded oil sands crude would be less than the 15,000 barrels a day he expected, and cut his target price on the company's shares by almost a third to 55 Canadian cents a share.
OPTI Canada shares fell 15% to 73 Canadian cents in recent trading on the Toronto Stock Exchange. Nexen shares fell 5.2% to C$21.05, amid a broader decline in commodity equities sparked by fears that China, one of the world's largest buyers of raw materials, may raise interest rates to slow its rapid growth.
OPTI Canada owns a proprietary oil sands technology that upgrades the heavy, sour crude abundant in northern Alberta into a light, sweet synthetic oil. But the Long Lake project demonstrating the technology has fallen far short of its target of 72,000 barrels a day. Equipment failures and other problems have made the project slow to ramp up and inefficient compared with other oil sands projects that use underground steam injections to extract the resource.
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