Investors Shift Focus to Canada's Energy Sector

Dramatic declines in the commodity markets the past few weeks have some comparing it to the epic asset revaluations of the late 1990s tech bubble, and plunging real estate prices more recently. Oil is down roughly 30% and natural gas is off about 45%. This has many investors turning their focus to Canada’s energy trust sector, wondering whether their distributions are safe and for how long.

RBC Capital Markets said in a Sept. 11 report:

For producers in the oilsands, share prices are discounting long-term oil prices in the mid to high $70 per barrel range.

The firm’s analysts noted that oilsands producers are a worthy core, holding in energy portfolios where long-term prices are expected to remain above $80 per barrel.

RBC recommends Husky Energy Inc. (HUSKF.PK), Canadian Natural Resources Ltd. (CNQ), Canadian Oil Sands Trust (COSWF.PK), EnCana Corp. (ECA), and UTS Energy Corp. (UEYCF.PK).  However, RBC also noted that investors are not incorporating enough value to future oilsands products. As a result, it said a “free” call option is available on oilsands expansion projects within Petro-Canada (PCZ) and Nexen Inc. (NXY).

RBC added:

However, if costs keep increasing the ‘option value’ of future projects would diminish.

Comments

[je:]

They are talking their book andtrying tohelp drive the price of the trusts down. You can rest assured that they will be in them as well by the first quarter and they are hoping that their entry price will be lower.

These trusts will be some of the few dividend options alive and well in another year. All that crap about the tax in 2011 is a non-issue because they can opt to become a regular corporation and then will become a growth stock. Holders of the trusts will win either way.

2008 Sep 16 01:55 PM