Canadian Natural Reaps Benefits of Rising Oil Prices

| About: Canadian Natural (CNQ)

Canadian Natural Resources (NYSE:CNQ) remains a solid bet for investors over the long term, despite concerns regarding weakening natural gas prices, according to Raymond James analyst Stephen Calderwood.

Even though Canadian Natural is the second largest producer of natural gas in Canada, it appears the company's share price is more closely correlated to crude oil prices than it is to natural gas prices, he told clients in a note Tuesday. WTI prices have increased 33% year-to-date and so has Canadian Natural's stock price," the analyst wrote, adding the stock's price appreciation has also outperformed the S&P/TSX Composite Oil & Gas E&P Total Return Index. It is up only 6% over the same period.

Mr. Calderwood said his current C$78 long-term price target based on a 14% premium to Canadian Natural's net asset value per share assumes a US$70 per barrel WTI and NYMEX gas at US$10 per million btu.

But with commodity futures pointing to higher oil prices and lower gas prices, he calculated that a long-term increase in WTI to US$80 combined with a decrease in NYMEX to C$8 would result in a 19% bump to the company's NAVPS and a revised target price of C$93, based on similar 14% premium.

That said, Mr. Calderwood told clients that weaker gas prices in the short term could have a negative impact on Canadian Natural's estimated 2008 cash flow per share.

He reiterated his "market perform" rating.

CNQ 1-yr chart:

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Tagged: , Independent Oil & Gas, Canada
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