Canada's Oilsands Return to Prominence

PAVEL MOLCHANOV, Raymond James (04/19/2010)
"The Canadian oilsands are back in fashion. After a temporary hiatus away from the market's spotlight in the midst of the oil price meltdown of late 2008 / early 2009, the oilsands are firmly back on the radar screen of the investment community. Considerable improvements on the economic front over the past 12+ months have led to a resumption of the impressive development growth curve within the space. Greatly improved oil prices, low natural gas prices and record low light-heavy differentials are all factors that have contributed to a more constructive environment for oilsands development. As a result, we have seen a number of companies resume or push forward development plans, and we expect this trend to continue as 2010 progresses. In parallel, oilsands M&A, exemplified by Sinopec's pending $4.65 billion purchase from Conoco, shows that outside interest in the oilsands remains robust.

. . .As oil prices have moved steadily higher, Canadian oilsands development has picked up the pace. Given our above-consensus oil price forecast ($82/Bbl in 2010, $95/Bbl in 2011, and $100/Bbl in 2012+), we believe that oilsands production should accelerate as the decade progresses, trending towards at least 4.0 MMBbls/d by 2020. While oilsands projects face cost inflation and regulatory risks, we remain positive on the oilsands as one of the world's premier growth areas for oil production over the long run."

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