reaction to Alberta’s proposed royalty over done

QWE321

Look for buying opportunity in Suncor and Canadian Natural, Citigroup says
2 Q5 }) m- R, S2 t! @5 ?$ EThe 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.

5 u+ |) {! C) C2 K$ gHe 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.

" t) e9 @$ r, a2 P& A7 c( Y2 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.
  `4 z" x4 P4 M) a2 N5 m' ^
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.

“...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.
7 D& K( u7 l0 K2 D  {1 S6 _
( n! G+ R7 R: u: d/ M$ ^/ ?So while he acknowledged that the new regime gives away some upside, the analyst thinks plenty of core value remains with investors.