CNQ Earnings Grow YoY, Hikes Dividend
Independent exploration and production (E&P) company, Canadian Natural Resources Ltd. (CNQ) reported third quarter 2013 earnings per share (excluding one-time and non-cash items) of 93 Canadian cents (89.5 US cents) versus the year-ago quarter level of 32 Canadian cents. The impressive growth could be attributed to record production levels, primarily aided by strong liquid volume across all projects.
However, CNQ’s per share profit missed the Zacks Consensus Estimate of 94 US cents. A rise in expenses and lower natural gas output could be the reasons for the underperformance.
Quarterly revenues of C$4,659.0 million (US$4,482.4 million) improved from the prior-year quarter level of C$3,536.0 million thanks to the substantial rise in realized prices. However, it failed to cross the Zacks Consensus Estimate of US$4,532.0 million.
CNQ’s third-quarter cash flow from operations – a key metric to gauge capability to fund new projects and drilling – amounted to C$2,454.0 million, up 71.5% year over year. The steep rise in cash flow was primarily due to the advantageous position the company had in terms of price realization.
Dividend Increase
In a separate release, the company declared a quarterly cash dividend of 20 Canadian cents per share, to be paid on Jan 1, 2014 to shareholders of record on Dec 13, 2013. This marks a 60% rise over the previous quarterly dividend of 12.5 Canadian cents.
Production
Total production of CNQ during the quarter increased 5.3% year over year to 702,938 barrels of oil equivalent per day (BOE/d).
Oil and natural gas liquids (NGLs) production increased approximately 8.5% year over year to 509,182 barrels per day (Bbl/d). However, natural gas production declined 2.4% from the prior-year quarter to 1,163 million cubic feet per day (Mmcfe/d).
Realized Prices
The average realized crude oil price (before hedging) during the third quarter was C$89.24 per barrel, representing a rise of about 28.0% from the corresponding quarter last year. The average realized natural gas price (excluding hedging) during the three months ended Sep 30, 2013 was C$3.15 per thousand cubic feet (Mcf), up 24% year over year.
Capital Expenditure & Balance Sheet
CNQ’s total capital spending during the reported quarter was C$1,655.0 million against C$1,621.0 million in the year-ago quarter.
As of Sep 30, 2013, Canada’s second-largest oil producer had C$18.0 million cash in hand and long-term debt (including current potion) of approximately C$9,393.0 million, representing a debt-to-capitalization ratio of 26.9%.
Guidance
2013
Management has guided production of 474,000–513,000 Bbl/d of liquids and 1,195–1,205 MMcf/d of natural gas during the fourth quarter of 2013. The company plans to drill 35 net thermal in-situ wells and 293 net crude oil wells in North America during the Oct–Dec period of 2013.
For 2013, CNQ estimates production of 482,000–513,000 Bbl/d of liquids and 1,085–1,145 MMcf/d of natural gas.
2014
In a separate press release, CNQ announced 2014 budget details, with focus on the profit making liquids projects. The company has a capex budget of $7,740–8,140 million.
CNQ gave 2014 production guidance of 711,000–757,000 Boe/d with a targeted growth of 7%. The company projects liquid production to grow 9% from the 2013 level to 521,000–560,000 bbl/d. Natural gas production is expected to be up 4% from the 2013 level at 1,140–1,180 MMcf/d (before royalties).
The company plans to drill 61 natural gas wells, 1,014 crude oil wells and 15 in-situ wells. CNQ projects cash flow at $8.7 billion.
Stocks to Consider
CNQ currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can consider other companies in the E&P industry such as TransGlobe Energy Corp. (TGA) which sports a Zacks Rank #1 (Strong Buy) or Baytex Energy Corp. (BTE) and Gran Tierra Energy, Inc. (GTE) which hold a Zacks Rank #2 (Buy) as good investment opportunities.
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Read the Full Research Report on TGA
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