January 24, 2022

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Canadian Natural Resources (CNQ) Down 45.2% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Canadian Natural Resources (CNQ). Shares have lost about 45.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Canadian Natural Resources due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Canadian Natural Q4 Earnings & Sales Miss Estimates

Canadian Natural Resources Limited reported fourth-quarter 2019 adjusted earnings per share of 44 cents, below the Zacks Consensus Estimate of 54 cents due to lower natural gas price realizations plus higher costs and expenses. However, the bottom line delivered a profit against the prior-year adjusted loss of 16 cents per share, driven by robust production and higher liquids realizations.

Total revenues of $4,471 million missed the Zacks Consensus Estimate of $4,546 million. However, the top line improved from fourth-quarter 2018 revenues of $2,801 million.

Apart from bettering year-over-year revenues and earnings, the company’s fourth-quarter results offered something more to buoy long-term investors’ optimism as free cash flow totaled C$994 million after adjusting capital expenditure and dividend payments.

Production & Prices

Canadian Natural reported quarterly production of 1,156,276 barrels of oil equivalent per day (BOE/d), up by 6.9% from the prior-year quarter. Oil and natural gas liquids (NGLs) output (accounting for more than 79% of total volumes) increased to 913,782 barrels per day (Bbl/d) from 833,358 Bbl/d a year ago. Crude oil and NGLs production from operations in North America including synthetic crude oil production of 357,856 Bbl/d and bitumen output of 259,387 Bbl/d came in at 864,427 Bbl/d, higher than the year-ago quarter’s 790,102 Bbl/d on the back of contribution from the buyout of Devon Energy Corporation’s (DVN) Canadian business.

Natural gas volumes recorded a 5.4% year-over-year decline from 1,488 million cubic feet per day (MMcf/d) to 1,455 MMcf/d in the quarter under review. Production in North America totaled 1,411 MMcf/d compared with 1,441 MMcf/d in the prior year.

Canadian Natural’s realized natural gas price was C$2.64 per thousand cubic feet compared with the year-ago level of C$3.46. Realized oil and NGLs price escalated 91% to C$49.60 per barrel from C$25.95 in the fourth quarter of 2018.

Costs & Capital Expenditure

Total expenses incurred in the quarter were C$5,079 million, higher than C$4,601 million recorded a year ago. Elevated transportation costs, foreign exchange loss and the absence of revaluation gains flared up the overall costs. In the reported quarter, capital expenditure summed C$1,056 million excluding costs associated with the Devon Energy assets.

Dividend & Share Repurchase

The company, which is committed to adding shareholder value, returned C$444 million and C$140 million via dividends and stock buybacks, respectively.

Canadian Natural declared a 13% hike in its dividend to 42.5 Canadian cents a share, payable Apr 1, 2020 to its shareholders of record as of Mar 20, 2020. This marks the company’s 20th consecutive dividend raise.

Balance Sheet

As of Dec 31, the company had C$139 million in cash and cash equivalents, and a long-term debt of C$18,591 million, representing a debt-to-capitalization ratio of 34.7%.

2020 Guidance

Canadian Natural expects capex to be C$3.95 billion for the full year. While liquids output is expected between 910,000 Bbl/d and 970,000 Bbl/d, natural gas production is predicted within 1,360-1,420 MMcf/d.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -163.89% due to these changes.

VGM Scores

Currently, Canadian Natural Resources has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.

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