We are maintaining a Neutral rating on
Canadian Natural Resources Ltd.
(
CNQ
), reflecting its large, diversified oil and gas asset base,
capital investment plans and healthy financial position, partially
offset by volatile oil and gas fundamentals.
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.
As of the end of 2011, the company had approximately 4.83
billion oil-equivalent barrels (BBOE) in total proved reserves, of
which approximately 85% was crude oil/liquids and 15% natural gas.
In addition, Canadian Natural had approximately 2.12 billion
barrels in total proved reserves in its oil sands (naturally
occurring mixtures of bitumen water and sand) operations in the
Province of Alberta.
The company exhibits a broad portfolio of low-risk exploration
and development projects that yield long-term volume growth at
above-average rates. We appreciate the company's diverse asset base
both geographically and in terms of products, with the bulk of
production located in various countries.
Canadian Natural has invested a significant amount of capital in
oily projects to boost production. The company expects light oil
and natural gas and liquids in Canada to grow 17%, primary heavy
oil to increase 16% and thermal in situ heavy oil to expand 10% in
2012. We believe that extensive drilling activities, development
works at Primrose unit and advanced technological applications will
aid the company in accomplishing the set goal.
However, our optimism is somewhat clouded by the company's weak
performance in the last three months of 2011, hurt by lower volumes
in North Sea and Offshore Africa, lower realized natural gas prices
and steeper production costs.
Additionally, Canadian Natural pursues long-term oil projects,
which call for large capital outlays and several years of
development before any cash flow is realized. Therefore,cost and
time overrun in the company's ongoing projects have a negative
impact on the stock's performance.
The company's results in the coming months are directly exposed
to the oil and gas prices, which are inherently volatile and
subject to complex market forces. Realized prices could differ
significantly from our estimates, thereby affecting the company's
revenues, earnings and cash flow.
Canadian Natural, which competes with other Canadian behemoths
like
EnCana Corp.
(
ECA
) and
Suncor Energy Inc.
(
SU
), currently, retains a Zacks #3 Rank that translates into a
short-term Hold rating.
CDN NTRL RSRCS (
CNQ
): Free Stock Analysis Report
ENCANA CORP (
ECA
): Free Stock Analysis Report
SUNCOR ENERGY (
SU
): Free Stock Analysis Report
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