CIBC Upgrade Equity analysts at CIBC World Markets expect an undersupply of oil and gas to persist worldwide through the fourth quarter and into 2022.
Accordingly, they raise their commodity price expectations on Friday, leading to higher financial estimates across the sector and price target increases.
The firm’s key benchmark price assumption increases for 2021 included WTI to US$67.91 per barrel from US$64.76 and NYMEX to US$4.05 per thousand cubic feet from US$3.58.
“The third quarter showed significant strength in both oil and natural gas pricing as a combination of faster-than-expected demand recovery and capital discipline from producers has created a situation where the globe could be undersupplied for energy through the winter months,” he said. “With the stronger oil price, our focus turns towards capital allocation plans, 2022 guidance and the acceleration of cash returns for shareholders.”
“As companies achieve debt targets through 2021, we expect further defined capital allocation plans which focus on a combination of dividend increases, special dividends and share repurchase programs.”
Notable target price adjustments include:
- Canadian Natural Resources Ltd. (“outperformer) to $62 from $58. Average: $57.20.
- Cenvous Energy Inc. (“outperformer”) to $22 from $20. Average: $17.13.
- Crescent Point Energy Corp. ( “outperformer”) to $9.75 from $9. Average: $8.05.
- Enerflex Ltd. ( “neutral”) to $12 from $10. Average: $11.58.
- Freehold Royalties Ltd. ( “outperformer”) to $16 from $14. Average: $13.92.
- Imperial Oil Ltd. ( “neutral”) to $50 from $48. Average: $43.06.
- Paramount Resources Ltd. ( “neutral”) to $27 from $20. Average: $23.23.
- Precision Drilling Corp. (“neutral”) to $65 from $60. Average: $60.35.
- Tourmaline Oil Corp. ( “outperformer”) to $60 from $55. Average: $58.42.
- Vermilion Energy Inc. ( “neutral”) to $15 from $12.50. Average: $13.91.