Independent exploration and production (E&P) company,
Canadian Natural Resources Ltd.
) 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
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
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.
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.
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
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
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%.
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.
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
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.
) which sports a Zacks Rank #1 (Strong Buy) or
Baytex Energy Corp.
Gran Tierra Energy, Inc.
) which hold a Zacks Rank #2 (Buy) as good investment
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