Canadian Natural Rsrcs (CNQ.TO)

(Market Call Minute) Thinks it is a very difficult environment for them.

It has done nothing and yet it is one of the premier companies in the oil patch. The last quarter was a big miss for them due to higher royalties and the heavy oil royalties. If you look at the production profile it could be up significantly over the next few years. It is looking attractive at the current levels.

(Market Call Minute) pricing is going to be tough.

Sold in May, went away, now it has gotten under $28 and is fairly compelling. 50/50 oil and gas. Less than 5 times cash flow. Discount to net asset value. The only problem is the differentials between heavy oil and WTI. That is why the stock is low. He thinks the differentials will narrow.

Another very cheap name. Execution has been largely very good and management team is well regarded. They don’t have refineries so are more exposed to heavy oil differential. Some refineries have been knocked down by Hurricane Sandy. Is planning on buying next year.

Continuing problems. Well managed, though. It would be good to get one solid year of production out of Horizon. It is at a great entry point right now. He would look to add to this when he puts more cash back into the market.

Has been a favourite amongst the seniors but Cenovus has taken over. CNQ is having trouble getting back up to speed on production. People are uncomfortable with this. Has best leverage amongst the seniors apart from Encana. Likes leverage to Nat gas in the long term.

(Market Call Minute) at $26

One of the biggest exploration companies in Canada. Top quality management team. Very disciplined. Cut back their natural gas drilling by a long way. Thinks they will do very well once natural gas prices recover which he expects might happen next year.

Thinks it’s safe to say that this is a company that cannot get taken over so you are buying on its fundamental value, ability to grow cash flow and hopefully its ability to start paying significant dividends. Reasonably priced.

If this doesn’t hold the $30 level, it looks like it will go back to $26. If you are going long, there are probably better places in the energy space than this. (See Top Picks.)

Suncor (SU-T) versus Canadian Natural Resources (CNQ-T)? This one is half gas and half oil with an oil sands bent to it and a bit of international. Suncor has been acting better than this one lately. At the start of “risk on” Suncor will do better. Also, we’ve had the differential narrow back again from Canadian oil to WTI making Suncor a beneficiary this quarter. This company will probably not benefit until next year. Prefers Suncor.

Ag Growth (AFN-T) or Canadian Natural Resources (CNQ)? This is a fine company but he likes other things in the energy space better.

Very inexpensive at around 5X cash flow. Have a lot of reserves in the ground so should be trading at a higher multiple. Thinks there is some real upside on this one.

One of the largest oil/gas companies with operations in both the oil Sands (Horizons project) and UK North Sea and west Africa. One of the cheaper nat gas companies out there. Given that they don’t have a refinery in order to process some of that oil/gas and get better margins, it is underperforming but he sees them boosting their Horizon production and getting higher prices from both UK North Sea and West Africa. That should offset some of the pricing differentials here.