Independent oil and gas explorer
Canadian Natural Resources Ltd.
) recently announced the pricing of C$500 million 2.89% unsecured
notes due Aug 14, 2020. The notes were priced at C$100.003 a
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The company plans to utilize the proceeds for the repayment of
bank debts and for general corporate purposes.
As of Mar 31, 2013, Canadian Natural had C$18.0 million cash in
hand and long-term debt of approximately C$9,322.0 million,
representing a debt-to-capitalization ratio of 27.7%. The company
paid net interest of $77.0 during the first quarter. We expect
this interest expense to increase with the sale of the new notes.
Calgary, Alberta-based Canadian Natural is engaged in the
acquisition, development and exploitation of crude oil and
natural gas properties. It is one of the largest independent
exploration and production companies in Canada, with extensive
heavy crude oil and natural gas developments. Its core operations
are focused in western Canada, the United Kingdom sector of the
North Sea and offshore West Africa.
Canadian Natural enjoys the benefits of oil price leverage. As a
result, a steep rise in crude prices may lead to improvement in
the company's cash flows and profitability.
However, the company's exposure to the inherently cyclical and
volatile E&P sector offsets these strengths and remains a key
area of concern, in our view. The stock has also been held back
by operational challenges, continued volatility in natural gas
prices and a fresh round of cost inflation in the oil sands
As a result, Canadian Natural currently retains a Zacks Rank #3
(Hold). This implies that it is expected to perform in line with
the broader U.S. equity market over the next one to three months.
Meanwhile, there are certain other Canadian exploration and
production firms that are expected to perform better in the short
term. These include
ARC Resources Ltd.
) as well as
) with Zacks Rank #1 (Strong Buy) and
Gastar Exploration Ltd
) with Zacks Rank #2 (Buy).