UPDATE: Morgan Stanley Initiates Coverage on Canadian Natural Resources

In a note releases Tuesday, Morgan Stanley analyst Evan Calio initiated coverage of Canadian Natural Resources Limited (NYSE: CNQ) with an Overweight rating and announced a price Target of C$51 (Current exchange rate US$1 = C$1.12).In describing his position on Canadian Natural Resources, Calio listed four key factors that contributed to his rating and valutaion:

1. Canadian Natural Resources is best positioned to benefit from 2014 macro tailwinds (higher WCS).
2. Market confidence is returning to Horizon operations and execution.
3. The stock is pricing in only ~US$60/bbl WCS, while heavy oil prices are currently at ~US$77/bbl.
4. The stock is just starting to catch up to historical valuation multiples, trading at 5.0x EV/DACF vs. its peak of 7.9x.

In a more detailed look at the Horizon phase 2/3 expansion, Calio estimates that when this expansion is completed, which is expected to be in 2017, the company will see an increase in its free cash flows putting it over $3 billion annually. Furthermore, the expansion is running approximately 10 percent under its budgeted cost. Calio believes this increase in free cash flows will open up the possibility of both higher dividends and more stock repurchases.At last check Canadian Natural Resources shares were trading up ~1/2 percent at $37/56