Macro Tsimmis

intelligently hedged investment

Oilsands Quest (BQI) update #10

Posted by intelledgement on Thu, 26 Jun 08

“Thar’s gold in them thar hills.” (Black gold, that is.)

Our speculative Canadian tar sands E&P company, Oilsands Quest (BQI) today announced an 85% increase in the BBLS-equivalent estimate of how much bitumen is present in their Saskatchewan and Alberta properties, from 1.117 billion BBLS last year to 2.071 billion BBLS. The resource estimates were prepared by McDaniel & Associates Consultants Ltd., an independent energy consulting firm. The estimates cited are the “low” estimates included in the report (the “high” estimates amount to over six billion BBLS), and the area surveyed amounts to 8% of the total acreage of the company’s permit and license lands.

Of course, the real issue isn’t whether or not there are tar sands present, but rather how much it will cost to extract them and convert the bitumen to usable petroleum products. According to today’s press release:

Oilsands Quest and its engineering consultants have embarked upon preliminary engineering of

the first 30,000 barrels per day commercial project planned for the development of Axe Lake in

the specific area where the first series of reservoir tests are being conducted. Management also

continues to conduct advanced economic feasibility and risk assessment studies for full

commercial project development, including assessment of a “fast-track” approach to a first

prospective project, which could result in completion during 2012 or 2013. Oilsands Quest has

also commissioned a study of infrastructure and markets by Purvin & Gertz Inc. to assist in its

planning process. Development of a commercial project remains subject to regulatory and other

contingencies such as successful reservoir tests, board sanctioning and financing. 

This work will help define the projected costs, but in general, it is safe to say that so long as the price of oil remains around today’s close of $139.65—or even drops by 50% or so—we are extremely likely to be good to go here. If you don’t think oil will remain north of $60/BBLS going forward, then you probably shouldn’t be investing in a tar sands play.

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