Canadian Sunrise By Andrew Bary
Highlighted companies: Canadian National Resources (CNQ), Suncor (SU)
Summary: Murray Edwards has overseen tremendous growth at Canadian National Resources, which holds both conventional oil and gas production assets and a big stake in an emerging Alberta oil sands project. Royal Dutch Shell's recent offer to buy out minority shareholders of Shell Canada for $7 billion (20x earnings) put a hefty valuation on Alberta oil sands and was therefore met with enthusiasm by CNR investors. CNR could be a takeover target from a larger player like BP or ENI that lack oil sands exposure. At a P/E of 18x 2006 earnings, CNR doesn't appear cheap, but as its below-market hedges on oil and gas prices roll off, 2007 should bring strong EPS growth. Labor-intensive oil sands development has become far more expensive, but CNR has made smart moves to keep overhead down. Barron's bottom line: 'The shares could hit the 60s in a year and go much higher in the long run.'
Related: Fairholme Capital's Bruce Berkowitz laid out his bull case on CNQ in May • Insight on the Canadian Oil Sands Trust from Kurt Wulff of McDep Associates