Estimated Net Present Value (NPV) of US$85 a share is about 170% higher than stock price for moderate-debt, hold-rated Canadian Natural Resources (CNQ). Released today, fourth quarter results displayed lower unlevered cash flow (Ebitda) driven by crude oil and natural gas prices.
A major project milestone was achieved last month with the production of the first synthetic oil from the C$10 billion oil sands mine and upgrader. Designed for 110,000 barrels daily (bd) capacity, the facility is currently producing 55,000 bd into storage tanks prior to commencement of sales.
We estimate a present value of US$15 billion for CNQ’s 100% ownership, about 82% of the present value we estimate for a pro-rata share of the 350,000 bd Syncrude venture.
Pointing in the direction of oil price that would justify our present value, futures prices for the next six years averaged US$58 a barrel recently. At today’s spot oil price in the low US$40s, Horizon would not have been built, thereby attesting to the need for higher oil price to fund the next projects to develop oil supply for global economic growth.
Originally published on March 5, 2009.
