The Company is now half way through the hedges and the oil sands project and future oil prices show a brighter future. The selling price has reacted - rising with oil prices rising.
The estimated impact of crude oil hedging has increased to $377
million from $99 million Based on the Cannacord forecast price, the full-year hedging impact has increased to $733 million from $499 million.
Two thirds of Production Hedged - before the recent price run in oil
During 2008, CNQ has hedged approximately two-thirds of its oil production at an average ceiling price of $80.52. The recent run in oil prices has had a positive impact on Canadian Natural’s share price, which has risen approximately 28%.
Cannacord Rating was reduced to HOLD from Buy.
Cash Flow Estimates Fall
As a result of an increase in the impact of hedging -
quarterly and full-year 2008 estimates.
Q1/08 CFPS (fd) has been lowered to $2.68 from $3.15 and
operating EPS (fd) decreased to $1.09 from $1.43.
2008 CFPS (fd) has been revised to $10.51 from $11.05 and operating EPS (fd) lowered to $4.62 from $4.99.
Target Price $ 86.00 from Cannacord - I believe is too conservative.
Currently the analysts are using $90 as a long term commodity price.
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The target price represents a multiple of 7.8 times the forecast 2008 cash flow and 9.3 times on a debt-adjusted basis.
Excluding the value for Horizon oil sands, the target price represents a 5.2 multiple of debt-adjusted cash flow
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