UBS's Increased Commodity Forecast Boosts EnCana, Suncor and CNQ

UBS Securities has revised its assumptions for commodity prices and the positive impact will be felt most in crude oil-weighted names.

The firm boosted its oil price outlook by 14% to an average of US$74 per barrel in 2008 and by 18% to US$73.25 for 2009. For the long-term, oil is expected to average US$75, compared to US$51 previously.

Its natural gas price assumptions are essentially unchanged at US$8.25 per 1000 cubic feet (mcf) in 2008 and US$8.50 in 2009. When the Canadian dollar at US$1.03 is factored in, the realized price for AECO (Alberta spot) gas falls by roughly 7% to 10% each year, analyst Grant Hofer said in a research note.

UBS also boosted its long-term forecast for the loonie to US95¢ from US81.5¢.

So while oil stocks get the largest estimate boosts from these changes, natural gas-weighted names get a negative hit from the stronger Canadian dollar.

Among large cap exploration and production/integrated companies, the top picks at UBS are Canadian Natural Resources Ltd. (CNQ), EnCana Corp. (ECA), Nexen Inc. (NXY) and Suncor Energy Inc. (SU).

UTS Energy Corp. (UTS/TSX) is its favorite name among small cap oil sands stocks.

The firm likes Compton Petroleum Corp. (CMZ) in the domestic junior exploration and production space, while Addax Petroleum Corp. (AXC/TSX) is its international pick.

As for energy trusts, UBS likes Crescent Point Energy Trust (CPGu/TSX), Progress Energy Trust (PGXu/TSX) and Vermilion Energy Trust (VETu/TSX).

Its earnings per share estimate [EPS] for Canadian Natural falls 2¢ to C$4.50 for 2007, but rises 10¢ to C$4.88 in 2008 and 20¢ to C$6.29 in 2009. EnCana gets a 3¢ boost to C$5.96 for 2007, 21¢ to C$5.86 in 2008 and 76¢ to C$6.14 in 2009.

Suncor’s EPS is expected to come in at C$5.03 in 2007, up from C$4.73 previously. For 2008, UBS hiked its earnings forecast by 36¢ to C$5.63, while 2009 EPS got an 18¢ boost to C$5.13.