Canadian Natural Resources Concentrates on Heavy Oil Production

Trading at less than estimated net present value [NPV] of $87 a share, the stock of Canadian Natural Resources (CNQ) offers attractive participation in the rising oil price trend despite recent tax increases proposed in Alberta. Third quarter results reported today trace growing unlevered cash flow (Ebitda) from high levels of natural gas and oil production.

Canadian heavy oil production is the largest portion of the 46% of NPV concentrated on oil. At 24% of NPV, Horizon is the oil sands mine and upgrader set to start producing in the third quarter of 2008. Alberta’s proposed higher royalties would hit nearly all of CNQ’s operations except for about a quarter of current oil production from the North Sea and Africa.

On the optimistic side, the renewed rise may take six-year oil price to another double as was the case from thee nd of 2004 to mid 2006, subject to short declines from time to time.

Originally published on November 1, 2007.