Blackmont: Rise in Energy Prices Should Benefit Most Canadian Producers

Nexen Inc. (NXY) and Talisman Energy Inc. (TLM) stand to benefit most from a sizeable uptick in oil and natural gas prices last quarter, according to Blackmont Capital. A handful of Canada’s senior producers, including EnCana Corp. (ECA) and Nexen, are set to roll out fourth quarter earnings today. Talisman and Canadian Natural Resources Ltd. (CNQ) report in two weeks.

Trends that shaped results include oil prices rallying 20% from the third quarter, and a 12% lift in natural gas prices. Benchmark West Texas Intermediate oil averaged $90.48 last quarter, which is a full 51% higher than the same quarter in 2006, Blackmont’s energy team said in a research note.

Countering gains from those higher prices was the loonie’s appreciation next to the U.S. dollar, which cuts into price realizations for Canadian producers. Other negatives include the usual decline in demand and pricing for heavier oil blends over the winter months, and a similar seasonal decrease in refining margins.

Blackmont is forecasting earnings per share (fully diluted) for Nexen will jump 43% from C$0.62 in the third quarter to C$0.89, while earnings per share (fully diluted) for Talisman should rise 36% between quarters, from C$0.24 to C$0.32.

As for EnCana, Blackmont expects earnings per share (fully diluted) of C$1.23 in the quarter, down 3% from C$1.27 in the previous quarter.

On Tuesday, Canadian Natural said that costs to build the first phase of its Horizon oilsands project have risen for a third time in 12 months, and will come in almost C$2-billion higher than original projections of C$6.8-billion.

The company, which like all the others except EnCana has sizeable oil and gas assets outside of North America, should generate earnings per share (fully diluted) of C$1.11, down almost 5% from C$1.17 in the third quarter, Blackmont said.

NXY vs. TLM vs. ECA vs. CNQ 1-yr chart: