D.P: Its been pointed out by some that insider selling report shows one Dick Gusella selling a few shares. Your comment?
D.G: There has been both buying and selling. If you look at the reports, I have exercised some options and I have sold some stock and I also took out some money to pay income taxes and home renovation costs, which I might add reflect the Calgary boom!
There was also some selling by our Lead Director and that was purely portfolio adjustments. He just felt that between Petrolifera (where he is a shareholder) and Connacher that his exposure was quite high and he made a decision and everybody is a free agent here. It certainly breaks my heart every time I have to part with a share of Connacher, because I think it has lots of potential. I hope that answers your question.
D.P: We hear that you are cutting back these days and only putting in a 12-hour day from 6:00am to 6:00pm. Doesnt that cut into your golfing time?
D.G: As far as cutting back my daysI got here at 6:30 a.m. this morning so, I was a little late, but we all work hard around here because we enjoy it and are trying to accomplish something. We are trying to work on a model (if you will), which is similar to BlackRock where you hopefully have 10, 20 or 30,000 barrels a day in due course here and you have 10, 12, or 15 people who are able to administrate it and run it. We step up by using the oil sands expertise that is out in the marketplace on a contract basis when you are in process (like we are) in submitting an application, or in a high activity period and then you wind it back down.
We clearly are going to have a lot of field people up there working around the clock, when we get a 10,000 barrel a day operation up in the oil sands. It is a 24/7/365 day a year project, so we probably have 20 field people involved in our operation with steam, production and moving the oil into the market place, but in our head office we try to keep it small and compact. We want to maintain people with an equity stake, or the ability to have a substantial equity stake, who enjoy their job and work hard in the office. That is what drives us and we are performance driven, Dave; that is what makes a company tick.
D.P: Okay, lastly? With so many things to affect Connachers price over the coming 18 months, from the price of oil to how Great Divide gets built to the success of Petrolifera, we notice commentators and analysts giving the target range of anywhere between $1.50 and $5.00. Thats a broad range, but we would like to hear your comments anyway.
D.G: You probably are better qualified to answer that question then I am, but looking at the valuations of these oil sands models, each one of the Pods, depending on your price deck, could be worth $250 to $500 million based on the 8% after tax value.
Again, it turns on your price deck. The higher the price deck, the higher the valuation and of course offsetting that is we currently have 90 million shares outstanding. If I even had to double our capitalization (and I am not saying we would), but if we had to we still are looking at say $2.00 to $3.00 a share in value per Pod. Adding that to our conventional assets and then to our stake in Petrolifera (we own 8 million shares and every dollar of Petrolifera would mean a dime in Connacher), suggests to me that in a 24 month period, a $3.00 to $5.00 price target is not an unreasonable target. I think that the value potential and the realization of that value potential is there without giving up all the up side by financing everything with equity today.
D.P: Okay, one last question. You are an oil man who spent his whole life in the oil business, where do you see oil prices over the next few years? And a few stock picks!
D.G: Now you are going to pull the notes from the dinner we had in Calgary a while ago Dave, but I think probably $40 to $75 range, is a reasonable range. A couple of stocks that I have liked that are interesting are the following. I do like what Bob Lamond seems to be doing with Diaz Resources and another one I have liked and I didnt mention this to you before is Diamond Tree on the TSX, which I think is making some good discoveries (as I hear it) and it is a good bunch of people running the company. It has a lot of upside potential. I also think Rally Energy, with the Egyptian exercise, could also be an interesting story as well.