Canadian Natural Resources Limited (NYSE:CNQ) Q4 2024 Earnings Conference Call March 6, 2025 11:00 AM ET Corporate Participants Lance Casson - Manager of Investor Relations Scott Stauth - President Robin Zabek - Chief Operating Officer of E&P Mark Stainthorpe - Chief Financial Officer Conference Call Participants Greg Pardy - RBC Capital Markets Dennis Fong - CIBC Manav Gupta - UBS Financial Patrick O'Rourke - ATB Capital Markets Menno Hulshof - TD Securities Roger Read - Wells Fargo John Moyle - JPMorgan N ...

Core Viewpoint - The Cash Flow Kingdom Income Portfolio aims to achieve an overall yield in the range of 7% to 10% by combining various income streams to create a steady portfolio payout [1] Company Performance - Canadian Natural Resources Limited (NYSE: CNQ) reported strong Q4 results, highlighting excellent production growth [1] - The company is expected to have another record operational year in 2025 due to an asset swap that will drive production [1] Investment Focus - The Cash Flow Club, where the author contributes, focuses on company cash flows and access to capital, targeting a yield of over 6% [1] - The club offers features such as community chat, a "Best Opportunities" List, and coverage of sectors including energy midstream, commercial mREITs, BDCs, and shipping [1]

Group 1 - Canadian Natural Resources (CNQ) reported quarterly earnings of $0.66 per share, missing the Zacks Consensus Estimate of $0.69 per share, and down from $0.86 per share a year ago, representing an earnings surprise of -4.35% [1] - The company posted revenues of $6.77 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 5.88%, but down from $7.02 billion year-over-year [2] - Over the last four quarters, Canadian Natural Resources has surpassed consensus revenue estimates four times [2] Group 2 - The stock has lost about 11.1% since the beginning of the year, while the S&P 500 has declined by -0.7% [3] - The current consensus EPS estimate for the coming quarter is $0.69 on revenues of $6.66 billion, and for the current fiscal year, it is $2.48 on revenues of $26.26 billion [7] - The Zacks Industry Rank for Oil and Gas - Exploration and Production - Canadian is currently in the bottom 43% of over 250 Zacks industries, indicating potential underperformance compared to higher-ranked industries [8]

Core Insights - Canadian Natural achieved record annual average production of over 1,363,000 BOE/d in 2024, with significant contributions from both oil sands and thermal in situ operations [1][6][17] - The company reported strong financial results, including adjusted net earnings of approximately $7.4 billion and adjusted funds flow of $14.9 billion for the year [4][17] - Canadian Natural's total proved reserves increased by 9% to 15.2 billion BOE, with a reserve life index of 33 years, indicating robust long-term growth potential [3][30] Operational Highlights - Record quarterly and annual Synthetic Crude Oil (SCO) production reached approximately 535,000 bbl/d and 472,000 bbl/d respectively, with an annual utilization rate of 99% [1][9][45] - Thermal in situ production also set records at approximately 271,000 bbl/d, with strong operating costs of $11.04/bbl (US$8.06/bbl) [1][41] - The company achieved industry-leading operating costs of $20.97/bbl (US$15.00/bbl) for SCO in Q4/24, reflecting a decrease of 6% from 2023 levels [4][21][46] Financial Performance - Canadian Natural returned approximately $7.1 billion to shareholders in 2024, including dividends and share repurchases, with a 4% increase in the quarterly dividend approved for 2025 [4][25] - The company maintained a strong balance sheet with a Debt to Book Capitalization of 32% and a Debt to Adjusted EBITDA of 1.1x [5][20] - Cash flows from operating activities totaled approximately $13.4 billion, supporting ongoing capital investments and shareholder returns [17][21] Growth and Acquisitions - Following the acquisition of Chevron's Alberta assets, Canadian Natural's working interest in the Athabasca Oil Sands Project (AOSP) will reach 100%, enhancing production capacity [2][20] - The company is targeting to increase total oil sands mining production capacity to approximately 592,000 bbl/d, up from 570,000 bbl/d, after completing various enhancement projects [2][10] - Canadian Natural's disciplined capital allocation strategy aims to maximize shareholder value while maintaining flexibility in its operations [28][32]

Group 1 - The Board of Directors of Canadian Natural Resources Limited approved a 4% increase in its quarterly cash dividend to C$0.5875 per common share, effective April 4, 2025 [1] - This marks the 25th consecutive year of dividend increases for the company, with a compound annual growth rate (CAGR) of 21% over this period, reflecting the Board's confidence in the sustainability of the business model and strong balance sheet [2] - Canadian Natural is a senior crude oil and natural gas production company with operations in Western Canada, the U.K. portion of the North Sea, and Offshore Africa [3]

Core Viewpoint - Canadian Natural Resources (CNQ) is expected to report quarterly earnings of $0.69 per share, reflecting a 19.8% decline year-over-year, with revenues forecasted at $6.39 billion, down 8.9% from the previous year [1]. Earnings Estimates - The consensus EPS estimate has been revised 1.5% higher in the last 30 days, indicating a collective reevaluation by analysts [2]. - Revisions to earnings projections are crucial for predicting investor behavior and are linked to short-term stock price performance [3]. Production Metrics - Total average daily production is estimated to reach 1,436,480 BOE/D, up from 1,419,313 BOE/D year-over-year [5]. - Primary Heavy Oil production is projected at 81.86 thousand barrels per day, compared to 80.1 thousand barrels per day last year [5]. - Thermal In Situ Oil production is expected to be 281.07 thousand barrels per day, an increase from 278.42 thousand barrels per day year-over-year [6]. - Oil Sands Mining and Upgrading production is forecasted at 507.12 thousand barrels per day, up from 500.13 thousand barrels per day [6]. - Pelican Lake Oil production is estimated at 45.71 thousand barrels per day, slightly down from 46.05 thousand barrels per day last year [7]. - North Sea Oil production is expected to be 11.98 thousand barrels per day, down from 12.62 thousand barrels per day [7]. - Offshore Africa Oil production is projected at 13.55 thousand barrels per day, up from 13.21 thousand barrels per day [8]. - Average daily production of Oil & liquids is estimated at 1,064,114 BBL/D, compared to 1,047,541 BBL/D last year [8]. - Natural gas average daily production is expected to reach 2,225.38 million cubic feet, slightly down from 2,231 million cubic feet year-over-year [9]. - North America Natural Gas production is forecasted at 2,214.17 Mcf/D, down from 2,218 Mcf/D last year [9]. - Offshore Africa Natural Gas production is estimated at 9.75 Mcf/D, down from 11 Mcf/D year-over-year [10]. - Light Crude Oil production is projected at 52.08 thousand barrels per day, up from 48.12 thousand barrels per day last year [10]. Stock Performance - Shares of Canadian Natural Resources have decreased by 11% over the past month, compared to a -2.3% change in the Zacks S&P 500 composite [11]. - The company holds a Zacks Rank of 3 (Hold), indicating it is expected to perform in line with the overall market in the near future [11].

Core Viewpoint - Canadian Natural Resources Limited (CNQ) is expected to report fourth-quarter results on March 6, with earnings estimated at 69 cents per share and revenues of $6.39 billion [1]. Group 1: Previous Quarter Performance - In the last reported quarter, CNQ achieved adjusted earnings per share of 71 cents, exceeding the Zacks Consensus Estimate of 69 cents, with total revenues of $6.5 billion, surpassing estimates by 1.9% [3]. - CNQ has beaten the Zacks Consensus Estimate three times in the last four quarters, with an average surprise of 3.87% [3]. Group 2: Fourth Quarter Estimates - The Zacks Consensus Estimate for fourth-quarter earnings indicates a 19.77% year-over-year decrease, while revenues are expected to decline by 8.92% compared to the previous year [4]. - Revenues are projected to decrease to $6,247.5 million from $7,018 million in the same quarter last year, primarily due to poor performance in the Exploration and Production segments [6]. Group 3: Revenue Breakdown - North America's revenues are anticipated to decline by 15.7% year-over-year, totaling C$3,735.5 million, while North Sea revenues are expected to decrease by 16.2% to C$138.2 million [7]. - Oil Sands Mining and Upgrading's revenues are projected to decrease by 7.3% year-over-year, amounting to C$4,190.9 million [7]. Group 4: Cost Management - CNQ's cost-reduction initiatives are expected to positively impact its bottom line, with total expenses projected to reach C$6,386.5 million, a 3.2% decrease from C$6,595 million in the previous year [8]. - Total depletion, depreciation, and amortization expenses are forecasted to decrease significantly to C$1,382.6 million, representing a 32.3% drop [9].

Group 1 - The article promotes iREIT on Alpha as a source for in-depth research on various income alternatives including REITs, mREITs, Preferreds, BDCs, MLPs, and ETFs [1] - It highlights the importance of considering "big picture" developments such as economic trends and geopolitical factors that may impact investment portfolios [1] Group 2 - There is a mention of analyst disclosures regarding beneficial long positions in specific companies, indicating a vested interest in the stocks of CNQ, TPL, and LB [2] - The article clarifies that it expresses the author's own opinions and does not involve compensation from the companies mentioned [2] Group 3 - Seeking Alpha emphasizes that past performance does not guarantee future results and that no specific investment recommendations are provided [3] - It notes that the views expressed may not reflect those of Seeking Alpha as a whole, highlighting the diversity of opinions among its analysts [3]

Core Viewpoint - The market anticipates a year-over-year decline in earnings for Canadian Natural Resources (CNQ) due to lower revenues, with a focus on how actual results compare to estimates impacting stock price [1][2]. Earnings Expectations - Canadian Natural Resources is expected to report quarterly earnings of $0.69 per share, reflecting a year-over-year decrease of 19.8% [3]. - Revenues are projected to be $6.39 billion, down 8.9% from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has been revised 1.47% higher in the last 30 days, indicating a reassessment by analysts [4]. - The Most Accurate Estimate for Canadian Natural Resources is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -7.25% [10][11]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive or negative reading indicates the likely deviation of actual earnings from the consensus estimate, with a strong predictive power for positive readings [6][7]. - A positive Earnings ESP combined with a Zacks Rank of 1, 2, or 3 significantly increases the likelihood of an earnings beat [8]. Historical Performance - In the last reported quarter, Canadian Natural Resources exceeded the expected earnings of $0.67 per share, achieving $0.71, resulting in a surprise of +5.97% [12]. - Over the past four quarters, the company has beaten consensus EPS estimates three times [13]. Industry Comparison - Tourmaline Oil Corp. is expected to report earnings of $0.83 per share for the same quarter, indicating a year-over-year decline of 43.5% [17]. - Tourmaline Oil Corp. has an Earnings ESP of 6.45%, suggesting a likelihood of beating the consensus EPS estimate, despite not beating estimates in the last four quarters [18].

Company Overview - Canadian Natural Resources Limited (CNQ) is experiencing significant attention from investors due to high implied volatility in its options market, particularly the Mar 21, 2025 $22.50 Call option [1] - The company currently holds a Zacks Rank 3 (Hold) in the Oil and Gas - Exploration and Production - Canadian industry, which is positioned in the top 35% of the Zacks Industry Rank [3] Analyst Insights - Over the past 60 days, three analysts have raised their earnings estimates for Canadian Natural Resources for the current quarter, increasing the Zacks Consensus Estimate from earnings of 63 cents per share to 68 cents [3] Market Sentiment - The high implied volatility suggests that options traders are anticipating a significant price movement for Canadian Natural Resources shares, indicating potential upcoming events that could lead to a major rally or sell-off [2][4] - Options traders often seek to capitalize on high implied volatility by selling premium, aiming for the underlying stock to not move as much as initially expected at expiration [4]