Upgrade In conjunction with Scotia Capital’s quarterly commodity price update, equity analysts Jason Bouvier and Cameron Bean raised their cash flow per share projections for oil-weighted companies in their coverage universe by an average of 5 per cent for 2022 and 3 per cent for 2023 on Thursday.
Conversely, gas-weighted names saw a decline of 10 per cent in 2022 following by a 2-per-cent increase next year.
“Our Brent and WTI price assumptions are relatively unchanged through 2026 as we maintain our positive bias on the medium-term outlook,” they said. “In the near term, we see global oil supply exceeding demand in H1/22. It is our view that the OPEC plus alliance will need to revisit their current production agreement of increasing supply by 400 mbbl/d a month through 2022. Looking at the Canadian oil market, differentials narrowed in the last half of Q4/21 as new pipeline egress came online. Additional pipeline egress is expected to enter service in H1/23, which will provide several years of runway depending on the pace of production growth.”
“We are revising down our 2022 Henry Hub estimate to US$3.75 per mmBtu [one million British Thermal Units], while maintaining our medium and long-term forecasts. We expect the dynamics of an under-supplied international market to keep US feedgas flows running at or near all-time highs but are concerned about growing production. We made modest changes to our near-term AECO differential forecasts (Q1/22: US$0.60/mmBtu; Q2/22: US$0.85/mmBtu) while keeping our 2H/22 through 2025 estimates unchanged. We remain cautiously optimistic that the tumultuous times on the NGTL system are in the past and expect the AECO differential to approximate the marginal cost of out-of-basin transportation for the next few years – though we continue to caution that NGTL system dynamics are always an adventure.”
Among large-cap stocks, their target changes were:
- Canadian Natural Resources Ltd. (CNQ-T, “sector outperform”) to $64 from $60. Average: $65.70.
- Cenovus Energy Inc. (CVE-T, “sector outperform”) to $20 from $19. Average: $20.52.
- Imperial Oil Ltd. ( “sector outperform”) to $56 from $52. Average: $50.05.
- Suncor Energy Inc. ( “sector outperform”) to $38 from $37. Average: $41.13.
- Tourmaline Oil Corp. ( “sector outperform”) to $77 from $76. Average: $62.16.