Canadian Natural (CNQ) Q3 Earnings Beat on Strong Production

Canadian Natural Resources Limited CNQ reported third-quarter 2019 adjusted earnings per share of 79 cents, above the Zacks Consensus Estimate of 60 cents. The beat was driven by robust production. Precisely, Canada’s largest oil producer’s average daily output of 1,176,361 barrels of oil equivalent increased nearly 11% from the year-ago period and surpassed the Zacks Consensus Estimate of 1,163,913 barrels of oil equivalent.

However, the bottom line was lower than the prior-year adjusted earnings of 85 cents as average realized commodity prices fell.

Total revenues of $4,666 million beat the Zacks Consensus Estimate of $4,460 million. Also, the top line improved from third-quarter 2018 revenues of $4,514 million.

Apart from trumping revenue and earnings estimates, the company’s third-quarter results offered something more to buoy long-term investors’ optimism as free cash flow totaled $1,471 million after capital expenditure and dividend payments.

Canadian Natural Resources Limited Price, Consensus and EPS Surprise

 

Canadian Natural Resources Limited Price, Consensus and EPS Surprise

Canadian Natural Resources Limited price-consensus-eps-surprise-chart | Canadian Natural Resources Limited Quote

Production & Prices

Canadian Natural reported quarterly production of 1,176,361 barrels of oil equivalent per day (BOE/d), up by 10.9% from the prior-year quarter. Oil and natural gas liquids (NGLs) output (accounting for more than 79% of total volumes) increased to 931,546 barrels per day (Bbl/d) from 801,742 Bbl/d a year ago. Crude oil and NGLs production from operations in North America – including synthetic crude oil production of 432,203 Bbl/d and bitumen output of 206,395 Bbl/d – came in at 882,865 Bbl/d, higher than the year-ago quarter’s 754,238 Bbl/d due to the contribution from buyout of Devon Energy Corporation’s DVN Canadian business.

Natural gas volumes recorded a 5.4% year-over-year decline - from 1,553 million cubic feet per day (MMcf/d) to 1,469 MMcf/d in the quarter under review. Production in North America totaled 1,425 MMcf/d compared with 1,489 MMcf/d in the prior year.

Canadian Natural’s realized natural gas price was C$1.64 per thousand cubic feet compared with the year-ago level of C$2.32. Realized oil and NGLs price decreased 4.7% to C$55.19 per barrel from C$57.89 in the third quarter of 2018.

Costs, Capital Expenditure

Total expenses incurred in the quarter were C$4,796 million, higher than C$3,754 million recorded a year ago. Ramp up in transportation costs, foreign exchange loss and the absence of revaluation gains bloated the overall costs. In the reported quarter, capital expenditure summed C$963 million excluding costs associated with the Devon Energy assets.

Dividend & Share Repurchase

The company, which is committed to adding shareholder value, returned C$447 million and C$169 million via dividends and stock buybacks, respectively.

Canadian Natural declared a dividend of 37.5 Canadian cents a share, payable Jan 1, 2020 to its shareholders of record as of Dec 11, 2019.

Balance Sheet

As of Sep 30, the company had C$176 million in cash and cash equivalents, and a long-term debt of C$18,453 million, representing a debt-to-capitalization ratio of approximately 34.7%.

Guidance Maintained

Canadian Natural reiterated its capital expenditure and output forecast for 2019. The company expects capex to be around C$3.8 billion in 2019 and envisions total volumes in the band of 1,087,000-1,146, 000 BOE/d. While liquids output is expected between 839,000 Bbl/d and 888,000 Bbl/d, natural gas production is predicted within 1,485-1,545 MMcf/d. Guidance for crude oil and NGL production from North American operations remains within 231,000-251,000 Bbl/d. The company’s thermal in situ oil sands production outlook is estimated within 157,000-172,000 Bbl/d.

Zacks Rank & Key Picks

Canadian Natural Resources holds a Zacks Rank #3 (Hold).

Meanwhile, investors interested in the energy space could look at some better options like Phillips 66 PSX and SilverBow Resources, Inc. SBOW that also sport a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Phillips 66 has seen the Zacks Consensus Estimate for 2019 rise 13.8% over 30 days.

SilverBow Resources has seen the Zacks Consensus Estimate for 2019 rise 2.8% over 30 days.

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