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reaction to Alberta’s proposed royalty over done

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发表于 2007-10-26 07:47 | 显示全部楼层 |阅读模式
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Look for buying opportunity in Suncor and Canadian Natural, Citigroup says
/ w3 q/ ~) |: z- Y' i' ~3 D) qThe 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.
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2 E. J' V* u' Y# o1 Q+ h- \( h: ]He 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.* j' P2 l) \& V: ^4 c; I

3 s4 k. ~( u' OThis 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.( Y, W3 n: @! X! H  Y6 W6 I( Y
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At first glance, the proposed regime looks significantly less onerous than feared, Mr. Leggate said in a research note, adding that with US$55 oil, there would be no changes to his assumptions.
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$ }6 B( J5 R: e$ R# ?5 ZThere 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.
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“...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.
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So while he acknowledged that the new regime gives away some upside, the analyst thinks plenty of core value remains with investors.
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