Canadian Natural (CNQ) Q2 Earnings Meet, Revenues Miss Mark

Canadian Natural Resources Limited (TSX:CNQ) reported second-quarter 2019 adjusted earnings per share of 65 cents, in line with the Zacks Consensus Estimate on higher commodity price realizations. Meanwhile, the bottom line was lower than the prior-year earnings of 70 cents a share as production fell.

Moreover, total revenues of $4,158 million missed the Zacks Consensus Estimate of $4,359 million. Also, the top line declined from second-quarter 2018 revenues of $4,613 million.

Despite a year-over-year decrease in revenues and earnings, the company’s second-quarter results offered something positive to buoy long-term investors’ optimism as free cash flow totaled $1,295 million after capital expenditure and dividend payments.

Production & Prices

Canadian Natural reported quarterly production of 1,025,800 barrels of oil equivalent per day (BOE/d), down by 2.3% from the prior-year quarter. Oil and natural gas liquids (NGLs) output (accounting for more than 75% of total volumes) decreased to 770,409 barrels per day (Bbl/d) from 793,899 Bbl/d a year ago. Crude oil and NGLs production from operations in North America came in at 719,165 Bbl/d, lower than the year-ago quarter’s 751,242 Bbl/d due to the implementation of the company’s curtailment optimization strategy and the wildfire-induced shut-ins of Alberta.

Natural gas volumes recorded a marginal year-over-year decline from 1,539 million cubic feet per day (MMcf/d) to 1,532 MMcf/d in the quarter under review. Production in North America totaled 1,482 MMcf/d compared with 1,485 MMcf/d in the prior year.

Canadian Natural’s realized natural gas price was C$1.98 per thousand cubic feet compared with the year-ago level of C$1.95. Realized oil and NGLs price increased 3.8% to C$63.45 per barrel from C$61.14 in the second quarter of 2018, courtesy of the narrowing crude oil differentials.

Expenses & Capex

Total expenses incurred in the quarter were C$4,012 million, lower than C$4,550 million recorded a year ago. Lower production and transportation expenses coupled with foreign exchange gains reduced the overall costs. In the reported quarter, capital expenditure summed C$908 million excluding the C$3.8-billion buyout of Devon Energy Corporation’s (NYSE:DVN) Canadian business.

Dividend & Share Repurchase

The company, which is committed to adding shareholder value, returned C$449 million and C$391 million via dividends and stock buybacks, respectively.

Canadian Natural declared a dividend of 37.5 Canadian cents a share, payable Oct 1 to its shareholders of record as of Sep 13, 2019.

Balance Sheet

As of Jun 30, the company had C$398 million in cash and cash equivalents, and a long-term debt of C$19,543 million, representing a debt-to-capitalization ratio of approximately 36.3%.

Guidance

Canadian Natural revised its capital expenditure and output forecast for 2019. The company expects capex to be around C$3.8 billion in 2019, up $100 million from the previous forecast as it looks to maintain the acquired properties from Devon Energy. It envisions liquids output in the band of 839,000-888,000 Bbl/d while natural gas output is predicted within 1,485-1,545 MMcf/d. Guidance for crude oil and NGL production from North American operations has been raised to include the Devon acquisition and is now projected within 231,000-251,000 Bbl/d. The company’s thermal in situ oil sands production outlook is also lifted and is estimated within 157,000-172,000 Bbl/d.

Third-quarter 2019 liquids production is anticipated within 897,000-939,000 Bbl/d and natural gas output, in the band of 1,440-1,460 MMcf/d.

Zacks Rank & Key Picks

Canadian Natural carries a Zacks Rank #3 (Hold). Better-ranked players in the energy space include Transportadora De Gas Sa Ord B (NYSE:TGS) and World Fuel Services Corporation (NYSE:INT) . While Transportadora sports a Zacks Rank #1 (Strong Buy), World Fuel Services holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Transportadora earnings beat the Zacks Consensus Estimate in the trailing four quarters.

World Fuel Services earnings beat the Zacks Consensus Estimate in the last four quarters.

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