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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 9 Z( }1 t# I3 X+ n( ~
The 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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- W1 W1 `% M6 ~3 a- P+ v) cHe 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.
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+ V0 l" N: W7 w( i2 X/ b4 qThis 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./ c. A! X7 o3 h0 l" N) E8 p5 \" p8 ~

* ?$ v: V  |# HAt 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.% Y  d5 w7 v% F* V# [

" `* v; C3 w+ J" UThere 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. ; W  \( S& g3 T
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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.+ n3 [7 N& P4 k& a: h
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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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