JP Morgan initiated coverage of six major Canadian oil companies
on Monday, taking a favourable view of the entire sector, as well
as stating there was a "solid" upside potential for valuations,
according to a Financial Post report.
The six companies now covered are Talisman Energy Inc. (TLM.TO),
Nexen Inc. (NXY.TO), Cenovus Energy Inc. (CVE.TO), Canadian Natural
Resources Ltd. (CNQ.TO), Suncor Energy Inc. (SU.TO) and Husky
Energy Inc (HSE.TO).
"We believe depth of resource bases, production growth
exposure to an increasingly important source of global oil
supply make for an
attractive value proposition in oil sands-rich Canadian oils,"
J.P. Morgan analyst Katherine Lucas Minyard reportedly said in a
J.P Morgan reportedly bases its positive oil sector view on a
long-term US$80/bbl oil price outlook, but reportedly added upside
potential didn't necessarily hinge on oil prices alone.
"Although the oil price has served as the major driver of sector
performance, a trend we expect to continue, we see upside potential
among both the resource-rich and conventional portfolios despite
differences in portfolio dynamics and potential catalysts," Minyard
reportedly said in her note.
According to the Financial Post report, J.P Morgan's top
overweight picks include Talisman, Cenovus and Nexen. The three
companies are reportedly rated as having an upside potential of 25%
for Talisman, 26% for Cenovus and 31% for Nexen, based on 2011
But J.P Morgan isn't bullish on all of the new stocks it now
covers, the Financial Post says.
It notes the investment bank rates Husky as underweight, saying
it sees the company as having limited upside potential, due largely
to the fact that it could reduce its dividend to fund growth.
Canadian Natural Resources and Suncor meanwhile are reportedly
rated neutral. J.P Morgan says it expects the two companies to post
performance that is line with peers. However, price targets for the
end of 2011 suggest Canadian Natural Resources could see an upside
potential of 20%, and that Suncor could see an upside of 13%.