Analysts Unenthusiastic About Canadian Natural Resources' Current Share Price

Costs are on the rise at Canadian Natural Resources Ltd.'s (CNQ) Horizon oil sands project but its still cheaper than similar integrated mining projects being constructed, according to Raymond James analyst Stephen Calderwood.

Phase 1 of the project is now estimated to be 5 to 12% over the original cost estimate of C$6.8 billion, Mr. Calderwood said in a note to clients and he expects cost overruns for the entire project, which includes Phases 1, 2 and 3, will reach 19% by the time it is complete.

As a result, his cost estimate on the whole project is roughly C$2 billion above Canadian Natural's original estimate of C$10.8 billion.

Even so, Phase 1 of the Horizon project is efficient, the analyst wrote, noting that the production addition cost of C$74,000 per barrel per day is 13% lower than similar construction projects that average C$85,000 per barrel per day.

He reiterated his “market perform” rating on the stock and his C$63 price target remains unchanged.

Meanwhile, Canadian Natural released better-than-expected first quarter earnings of C$1.15 per share on higher production in North America than anticipated.

Despite the results, Adam Zive of Desjardins reiterated his “sell” rating and C$50 price target, saying Canadian Natural remains stretched, trading at 35% above his net asset value of C$50.