 鲜花( 1)  鸡蛋( 0)
|
Look for buying opportunity in Suncor and Canadian Natural, Citigroup says 1 t: l e2 F" ~: i0 L
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.
" A7 u3 ^' s1 O* q' O! ]% o( s9 a: A( H& b, _$ v. ?
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.$ o! t/ b& ?( U( g& w
9 c( J% t* ~/ ~8 N8 Y% ~* [/ t" 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.7 X5 d: Q& `6 N9 \8 [9 p- O" t% d( ]
' V9 X! }0 } N4 i0 F
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.
+ t6 f# Q7 P1 h% |5 C% s( Z8 q9 S. U
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. ' A+ P, c h" ]; L, _4 ]8 s7 v
' C/ o; a p" D/ i8 z5 w# z
“...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.
2 s7 A( F, ~& z5 U" L. `
* l8 \, @# ] g, d* J- {7 A4 F1 D X# pSo while he acknowledged that the new regime gives away some upside, the analyst thinks plenty of core value remains with investors. |
|