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Gold/Mining/Energy : Canadian Oil & Gas Companies -- Ignore unavailable to you. Want to Upgrade?

To: I_C_Deadpeople who wrote (10117)	1/30/2004 10:49:15 PM
From: Kerm Yerman	Read Replies (2) \| Respond to of 24927

Eric / Petro-Canada Am I concerned about the reduction in production forecast for 2004 - absolutely. It no longer is a case of riding the coat tails of a proven company with unlimited drilling opportunities ahead of them. They have a lot of proving to do in the next 12-24 months. The only real large project coming on stream occurs in 2005 - Whiterose, where they anticipate adding 25,000 boed. However, with that all said and done, the discounted valuations for Petro-Canada still prove out to be attractive - in my view. Take earnings as an example. Based upon current share prices and the earnings forecasts for 2004, Petro-Canada results in a P/E of 11.6X. In comparison to their piers, Imperial is 16.9X, Shell Canada is 17.0X and Suncor is 19.2X. Cash flow wise, Petro-Canada's ratio is 5.3X while Inperial Oil is 9.6X, Shell Canada 9.0X and Suncor is 8.7X. There are a few other valuations you might want to review, but these stats will reflect the same as the numbers above. Our newsletter this week features my Tier I Portfolio and I had established a higher price target of $76.00 for Petro-Canada - it is currently $72.00. I have now decided to maintain the $72.00 target. The bottom line objective for Petro-Canada is to establish major international projects in 2004 as a result of fresh exploration. If they meet this goal, I see absolutely no reason for their valuation stats to remain steeply discounted in comparison to their peers. If they should not meet this goal, I would phase out my holdings in the company. That decision lies 12 months down the road. In the meantime, I see no serious threats to investment in the company. Permit me to mention another observation and it's related to another pier company which I did not mention above. I believe the markets are short-sighted and have not really recognized the growth that lies ahead for Husky Oil. Like Petro-Canada, shares are also discounted to the other pier companies. (Petro-Canada is lower) The impact from Whiterose in 2005 will have a big impact upon their operations. Husky is the operator and holds a 72.5% interest in the play. If they realize total production of 100,000 boed, it would allow Husky to increase their production over 20%. That's impacting. Well, that's it for this time around. Keep in mind, just one person's opinion - this time it was mine.