Connacher stock drops after announcement of refinery sale, Q2 results

CALGARY – Shares in Connacher Oil and Gas Ltd. plummeted Wednesday after the oil company announced asset sales and a wider second-quarter loss.

The Calgary-based concern, which hired Goldman Sachs for a strategic review earlier this year, saw its shares closed down 10 per cent or 4.5 cents at 39 cents on the Toronto Stock Exchange after trading as low as 33 cents.

After the close of markets Tuesday, Connacher announced it had reached a deal to sell its refinery in Great Falls, Mont., to Calumet Specialty Products Partners, L.P. for US$120 million, plus $35 million to $50 million in working capital. The sale is expected to close in October.

Connacher also announced that it is selling $18.3 million in conventional oil and gas properties to an unidentified buyer.

The company said the deals will enhance its liquidity and allow it to increase production at its Great Divide oilsands property.

“CLL continues to pursue strategic alternatives, but it is clear by today’s announced asset sales that this has been a challenging process,” wrote CIBC World Markets analyst Andrew Potter in a note to clients.

“If the company can improve operations, it could emerge as a more likely sale candidate, but we will not likely see evidence of improved ops until 2013.”

The asset sale might allow Connacher to “survive long enough to hopefully see the end of the sale process,” Potter added.

“However, ops remain very poor and the company still struggles under a huge debt load.”

CIBC lowered its price target to 80 cents from 90 cents.

On Tuesday, Connacher also reported a second-quarter net loss of $45 million, widening from a loss of $44.2 million a year earlier. In both quarters, the loss amounted to 10 cents per share.

Revenues dropped to $203.8 million from $230.2 million.

Production was 12,312 barrels of oil equivalent per day, down from 14,744 barrels.