Company Reports

Canadian Natural Resources is one of the largest oil and natural gas producers in Canada. It seeks to use its diverse collection of producing assets to increase total production, if pipeline capacity allows it. Insufficient access to markets, both US and global, along with stiff competition has historically caused wide differentials for commodities produced. For the firm to make further gains, pipelines like Enbridge’s Mainline or the government’s Trans Mountain must boost capacity. Both seem certain, as the government seeks to maximize the value of Trans Mountain before privatizing, while Enbridge has launched new expansion projects. Canadian Natural has three growth plans, depending on what ultimately is approved.

Canadian Natural raised its capital expenditure and production guidance to CAD 7.6 billion and 1,660 thousand barrels of oil equivalent/day, driven by M&A. Management also provided its view on a recent memorandum of understanding with the government that could unlock production growth for the basin.

Canadian Natural Resources is one of the largest oil and natural gas producers in Canada. It seeks to use its diverse collection of producing assets to increase total production, if pipeline capacity allows it. Insufficient access to markets, both US and global, along with stiff competition has historically caused wide differentials for commodities produced. For the firm to make further gains, pipelines like Enbridge’s Mainline or the government’s Trans Mountain must boost capacity. Both seem certain, as the government seeks to maximize the value of Trans Mountain before privatizing, while Enbridge has launched new expansion projects. Canadian Natural has three growth plans, depending on what ultimately is approved.

We have published an outlook on 2035 North American natural gas demand, which we see growing to 169 billion cubic feet per day (Bcf/d).

Canadian Natural Resources is one of the largest oil and natural gas producers in Canada. It seeks to use its diverse collection of producing assets to increase total production, if pipeline capacity allows it. Insufficient access to markets, both US and global, along with stiff competition has historically caused wide differentials for commodities produced. For the firm to make further gains, pipelines like Enbridge’s Mainline or the government’s Trans Mountain must boost capacity. Both seem certain, as the government seeks to maximize the value of Trans Mountain before privatizing, while Enbridge has launched new expansion projects. Canadian Natural has three growth plans, depending on what ultimately is approved.

Since last week, there have been two developments in provincial and federal agreements in Canada. First, British Columbia appeared to drop its objections to new pipelines. Second, Alberta and Ontario have proposed a new transcontinental oil pipeline entirely within Canada.

Canadian Natural generated enough cash to reach its first net debt target of CAD 16 billion. Share repurchases were CAD 300 million in the quarter and CAD 700 million year to date, showing commitment to the return strategy.

Canadian Natural Resources is one of the largest oil and natural gas producers in Canada. It seeks to use its diverse collection of producing assets to increase total production, if pipeline capacity allows it. Insufficient access to markets, both US and global, along with stiff competition has historically caused wide differentials for commodities produced. For the firm to make further gains, pipelines like Enbridge’s Mainline or the government’s Trans Mountain must boost capacity. Both seem certain, as the government seeks to maximize the value of Trans Mountain before privatizing, while Enbridge has launched new expansion projects. Canadian Natural has three growth plans, depending on what ultimately is approved.

Canadian Natural Resources is one of the largest oil and natural gas producers in Canada. It seeks to use its diverse collection of producing assets to increase total production, if pipeline capacity allows it. Insufficient access to markets, both US and global, along with stiff competition has historically caused wide differentials for commodities produced. For the firm to make further gains, pipelines like Enbridge’s Mainline or the government’s Trans Mountain must boost capacity. Both seem certain, as the government seeks to maximize the value of Trans Mountain before privatizing, while Enbridge has launched new expansion projects. Canadian Natural has three growth plans, depending on what ultimately is approved.

Canadian Natural Resources tweaked its capital return plan by increasing the net debt required for expanded returns by CAD 1 billion. It also increased the base dividend by 6%. Management lowered organic capital guidance, having deferred development of the Jackpine mine expansion.

Canadian Natural Resources is one of the largest oil and natural gas producers in Canada. It seeks to use its diverse collection of producing assets to increase total production, if pipeline capacity allows it. Insufficient access to markets, both US and global, along with stiff competition has historically caused wide differentials for commodities produced. For the firm to make further gains, pipelines like Enbridge’s Mainline or the government’s Trans Mountain must boost capacity. Both seem certain, as the government seeks to maximize the value of Trans Mountain before privatizing, while Enbridge has launched new expansion projects. Canadian Natural has three growth plans, depending on what ultimately is approved.

Canadian Natural Resources is a dominant oil and natural gas producer in Canada. The firm engages in oil sands mining, thermal in situ extraction, and conventional drilling.

Canadian Natural Resources is one of the largest oil and natural gas producers in Canada. It seeks to use its diverse collection of producing assets to increase total production, if pipeline capacity allows it. Insufficient access to markets, both US and global, along with stiff competition has historically caused wide differentials for commodities produced. For the firm to make further gains, pipelines like Enbridge’s Mainline or the government’s Trans Mountain must boost capacity. Both seem certain, as the government seeks to maximize the value of Trans Mountain before privatizing, while Enbridge has launched new expansion projects. Canadian Natural has three growth plans, depending on what ultimately is approved.

We are dropping coverage of ARC Resources, Canadian Natural Resources, Cenovus Energy, Crescent Point Energy, Gran Tierra Energy, Imperial Oil, MEG Energy, Ovintiv, Peyto Exploration & Development, Suncor Energy, and Tourmaline Oil. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

After taking a fresh look at Canadian Natural Resources’ fourth-quarter results, we are increasing our fair value estimate to $35 (CAD 44) from $33 (CAD 42) due to our increased near-term commodity price forecast. Despite the uptick in our fair value estimate, the stock is still trading in 3-star territory. In our view, the market is appropriately recognizing the company’s industry-leading corporate cost structure. Furthermore, we are maintaining our no-moat rating.

Canadian Natural Resources is an independent energy company engaged in upstream operations coupled with the ownership of midstream pipeline assets. The company focuses on the acquisition, development, production, marketing, and sale of crude oil, natural gas, and natural gas liquids. Canadian Natural operates in western Canada, the U.K. sector of the North Sea, and offshore Africa.

Brent crude retreated after initially jumping above $70 per barrel on March 8 following the news that Saudi Arabian oil facilities were attacked in a drone strike organized by Houthi militants. This parallels an earlier attack on Saudi oil infrastructure at Abqaiq in September 2019. The Houthi movement in Yemen claimed responsibility for that event as well, which knocked out approximately 1 million barrels per day for the month (roughly 1% of global supply).

Canadian Natural Resources' fourth-quarter results exceeded our expectations, again. The company reported fourth-quarter adjusted operating cash flow of CAD 1.71 billion, which was down slightly on a sequential basis. The lower cash flow was a result of lower netbacks on the company’s liquids production, excluding the oil sands mining and upgrading segment, despite higher production levels. Corporate operating netbacks averaged CAD 16.37 per barrel compared with CAD 16.91 in the third quarter. Operating costs increased among the bitumen, heavy oil, and North Sea production, leading to the lower netbacks. Despite the slightly lower sequential operating cash flow, Canadian Natural still generated CAD 694 in free cash flow after adjusting for the Painted Pony acquisition costs and reduced net debt by CAD 432 from the third quarter.

With oil prices on the rise, Canada's crude pipeline egress problem is resurfacing. Oil sands economics have proved to be resilient, and many existing projects can generate free cash flow at oil prices below $40 a barrel West Texas Intermediate, or WTI. Supply will soon be approaching precrisis levels, and Canada's oil industry will need new pipeline infrastructure to bring new crude to market and prevent heavy oil prices from crashing as they did in December 2018. With Joe Biden winning the U.S. presidential election, it is almost assured he will revoke the Keystone XL's presidential permit, shelving the project indefinitely. Fortunately for oil producers, we do not expect the same opposition to Enbridge's Line 3 replacement. Line 3, combined with the Canadian government's Trans Mountain expansion and modular capacity additions on existing pipelines, will create 1.1 million barrels of new pipeline capacity by the end of 2023. Additionally, oil sands producers can take advantage of favorable heavy oil pricing in the U.S. Gulf Coast. Refiners in the region are battling declining imports from Venezuela and Mexico, a trend we expect to continue. With the Keystone XL no longer the answer to the region's problems, prices are attractive enough to incentivize rail transportation as a supplement market option for oil sands producers. Accordingly, we expect Canadian supply to grow 6.3 million barrels of oil per day by 2030, increasing by 1 mmbbl/d over the next decade. We think the market is underestimating the growth prospects and the cash flow potential of the oil sands producers along with the midstream pipeline operators. Accordingly, we see pockets of undervalued stocks, which include wide-moat Enbridge, narrow-moat TC Energy, and Canadian Natural Resources.