reaction to Alberta’s proposed royalty over done

QWE321

Look for buying opportunity in Suncor and Canadian Natural, Citigroup says
3 Z" Y$ z4 J( M5 `9 u  L( P+ VThe negative after-market reaction to Alberta’s proposed royalty changes for the energy sector appears overdone and may present an opportunity to buy some names in the sector, says Citigroup analyst Doug Leggate.

# m& s" J2 c% N7 WHe recommends keeping an eye on preferred names in the sector like Suncor Energy Inc. (SU/TSX) and Canadian Natural Resources Ltd. (CNQ/TSX), but admits there will likely be a strong response to any change from the industry.
' a; c; L  G2 e" y, s
) y# j+ h' X3 j' z! z/ @/ fThis view is partly a result of oil prices. Citigroup has a long-term oil price assumption of US$60 per barrel, which means the changes are not considered material enough to warrant any alterations to its earnings or target prices.
+ {! l, [5 f1 D, K( j- Y0 D
At first glance, the proposed regime looks significantly less onerous than feared, Mr. Leggate said in a research note, adding that with US$55 oil, there would be no changes to his assumptions.
& [, Z" f6 `' Q7 M" O9 p
There would be an impact with prices at US$100 and the royalty rate increases on a sliding scale with a cap at US$120 for WTI crude, he said, adding that the sector is discounting prices below US$60.

! n7 G3 U; ?! y0 l4 W“...Versus the level of oil prices we estimate are currently being discounted in the major Canadian oil sands players, the impact on valuations looks benign,” Mr. Leggate wrote.

- @- n- R& j6 k- i$ U5 v- a- r# D# l7 OSo while he acknowledged that the new regime gives away some upside, the analyst thinks plenty of core value remains with investors.