North American gas companies face a challenging year amid a weak gas price environment, according to CIBC World Markets, which downgraded Enerplus Corp, Paramount Resources Ltd and Fairborne Energy Ltd .
“The ‘golden age of downstream’ has ended rather abruptly with the quick narrowing of Brent-WTI CL-LCO1R differentials through the fourth quarter of 2011,” wrote analysts, including Andrew Potter, who cut their 2012 natural gas forecast to $3.75 US per mcf from $4.50 US per mcf.
CIBC’s Potter is a four-star rated analyst for the accuracy of his earnings estimates on the companies under his coverage, according to Thomson Reuters’ StarMine data.
Canadian oil and gas company Enerplus Corp is currently exposed to weak natural gas prices as more than 50% of its production is weighted towards natural gas, CIBC said and downgraded the stock to “sector underperformer” from “sector performer.”
On Friday, U.S. natural gas futures slid to a 28-month spot chart lows amid concerns over a mild winter, bloated inventories and record production.
CIBC also downgraded Connacher Oil and Gas Ltd to “sector performer” from “sector outperformer,” as the company has been under pressure from shareholders since December last year to open up a strategic review process.
In early December, the Calgary, Alberta-based company said that it had received an unsolicited takeover offer but later turned it down, as Connacher wanted to focus on pursuing joint venture initiatives.
The brokerage cut its rating on Paramount Resources Ltd to “sector performer” from “sector outperformer,” and cuts its price target on the stock to $41.50 from $44.
(Reporting by Meenakshi Iyer in Bangalore; Editing by Maju Samuel)