Citigroup Thinks Canadian Natural Resources May Escape Royalty Hikes

Investors in Canadian Natural Resources Inc. (CNQ) have reacted strongly to proposed royalty rate increases in Alberta, driving the stock down more than 6% over the past two days.

According to Citigroup analyst Gil Yang, the sell-off is excessive, and he told clients in a note that Canadian Natural's depressed share price represents "an excellent entry point for an attractively valued oil sands play."

Investor concerns are not entirely unfounded, the analyst conceded, noting a post-payout royalty increase from 25% to 33%, as tabled by the Alberta Royalty Review Panel on Tuesday, would reduce the value of Canadian Natural Resources by about C$4 per share.

Mr. Yang, however, argued in his research note that the proposal at this stage is just that, a proposal, and may never be adopted. He added that even if the royalty rate increase does go through, Canadian Natural is likely protected due to a contract it has with the Alberta government that stipulates the lower royalty rate.

As such, he considers the shares undervalued and maintained his "buy" rating and C$90 price target on the stock.

CNQ 1-yr chart:

Comments

[HOOCH:]

I agree.........CANADA is a "gold mine" of Natural Resources......ANOTHER GREAT PLAY of avoiding the "canadian taxes" is (CNE)...Canetic Resources.........curr... YIELDS 14.25%.....(monthly dividends).........I'm Loading up on BOTH.......and with the "Loonie" at parity its a 3-4% upside starting next month with the dividend at $C0.19 cents/share----(CNE)..... BUYING

2007 Sep 22 01:29 AM