For Immediate Release
Chicago, IL – August 25, 2015 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Suncor Energy (SU), Canadian Natural Resources (CNQ), Cenovus Energy Inc. (CVE), Imperial Oil Ltd. (IMO) and Exxon Mobil Corp (XOM).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday’s Analyst Blog:
Will Canadian Oil Sands Firms Survive Pricing Woes?
One may be optimistic about oil prices improving and producers starting to make money again at some point in the future. However, the question about how many of the high-cost Canadian oil-sands producers will survive till that day arrives, still lingers.
Extraction of Canadian heavy crude is more expensive than other sources. This is because it involves separating the produce from sand deposits, which raises costs. Also, this crude is priced less than crude elsewhere because the oil, after extraction, needs to be transported long distances to refineries.
Per the Canadian Energy Research Institute, Canada’s steam assisted gravity drainage (SAGD) projects need crude prices to be around $80 per barrel to recover blending, transportation and other costs associated with oil production.
The current pricing environment is far from this optimal level. While West Texas Intermediate (WTI) has recently dipped below $40 per barrel, the Canadian crude averages further lower, in the early $20 range. With such low prices, producers, even the most efficient ones, may not find extracting crude feasible anymore. Moreover, this weak pricing environment has prompted several shutdown and/or cancellation of projects. Also, the projects that are currently in process must be content with lower rate of returns.
Canadian oil sands production has increased around 30% over the past five years. However, weak crude prices are wreaking havoc on producers’ earnings. In the world of finance, earnings are both literally and figuratively ‘the bottom line.’ No wonder then, that a company’s earnings performance is possibly the most important factor influencing its stock price.
Canadian Energy Firms in the Red
Suncor Energy (SU), Canada’s biggest energy firm and the largest oil sands outfit, has seen a substantial decline in profits over the past few quarters. Shares of the company have also fallen over 18% this year.
Other producers from the region like Canadian Natural Resources (CNQ) and Cenovus Energy Inc. (CVE) have seen similar earning trends. Also, the stocks have fallen over 34% and 38%, respectively.
CAPP Reaffirms Production Growth
Despite this pricing environment, the Canadian Association of Petroleum Producers (“CAPP”) continues to expect production growth. In 2015, Oil Sands production is expected to grow to 2.29 million barrels per day (bpd) from the 2014 level of 2.16 million bpd. Big producers like Suncor Energy and Imperial Oil Ltd. (IMO) – a subsidiary of Exxon Mobil Corp (XOM) – continue to increase production. Imperial Oil recently doubled production capacity at its Kearl oil sands project.
Moreover, Canadian oil production is expected to grow 43% by 2030. While conventional oil production is likely to see a decline, Oil Sands will be the primary contributor to this growth.
CAPP anticipates domestic market opportunity for Canadian supplies, particularly conventional light and upgraded light crude oil. Refineries in the U.S. Gulf Coast also remain a strong market for Canadian crude.
Looking Ahead
Predicting where crude prices will be a few months down the line is no different from crystal ball gazing. Some big companies have managed to play out this downturn through production strength, strong fundamentals and long-term commitments. However, some smaller players have been forced to sell assets or take harsher measures like liquidating.
Owing to this pricing environment, most of these firms – both small and large – are bleeding cash. As the production-price tug of war continues, we remain apprehensive of the future of the energy firms operating in the region.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today. Find out What is happening in the stock market today on zacks.com. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SUNCOR ENERGY (SU): Free Stock Analysis Report CDN NTRL RSRCS (CNQ): Free Stock Analysis Report CENOVUS ENERGY (CVE): Free Stock Analysis Report IMPERIAL OIL LT (IMO): Free Stock Analysis Report EXXON MOBIL CRP (XOM): Free Stock Analysis Report To read this article on Zacks.com click here.
|