reaction to Alberta’s proposed royalty over done

QWE321

Look for buying opportunity in Suncor and Canadian Natural, Citigroup says
0 Z5 d( ]! p" f8 K8 v% y8 F0 a( {1 OThe 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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* s! o" |6 N3 }. S: I! r! L# ?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.

This 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.

- s# V* [. @2 c6 E# z# oAt 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.

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.
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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.