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Here's Why Hold Strategy Is Apt for Canadian Natural Stock
CNQCanadian Natural Resources(CNQ) ZACKS·2025-05-27 13:05

Core Viewpoint - Canadian Natural Resources Limited (CNQ) is a prominent player in the oil and gas sector, demonstrating strong financial performance and operational efficiency while facing challenges related to stock performance and market volatility [1][3][9]. Financial Performance - CNQ reported adjusted funds flow of 4.5billionandadjustednetearningsof4.5 billion and adjusted net earnings of 2.4 billion for the first quarter of 2025, returning 1.7billiontoshareholdersthroughdividendsandsharebuybacks[3].−Thecompanyincreaseditsquarterlydividendby41.7 billion to shareholders through dividends and share buybacks [3]. - The company increased its quarterly dividend by 4%, marking 25 consecutive years of dividend growth with a 21% compound annual growth rate [3]. - CNQ maintains a strong balance sheet with 5.1 billion in liquidity and a 1.4billionreductioninnetdebt[3].OperationalEfficiency−CNQachievedrecordquarterlyproductionof1.58millionBOE/day,withoperatingcostsforOilSandsMiningandUpgradingat1.4 billion reduction in net debt [3]. Operational Efficiency - CNQ achieved record quarterly production of 1.58 million BOE/day, with operating costs for Oil Sands Mining and Upgrading at 21.88 per barrel, significantly lower than peers [5]. - The company reduced its 2025 capital budget by 100millionduetooperationalefficiencieswithoutimpactingproductiontargets[5].−Approximately79100 million due to operational efficiencies without impacting production targets [5]. - Approximately 79% of CNQ's liquids production comes from long-life, low-decline assets, ensuring stable cash flows [6]. Strategic Moves - Recent acquisitions, including Duvernay assets, are performing ahead of expectations, with operating costs at 9.52 per BOE and a 14% reduction in drilling costs [7]. - The company is on track to close the Shell asset swap deal by the second quarter of 2025, enhancing production guidance [7]. Market Position and Risks - CNQ's WTI breakeven price remains in the low-to-mid 40sperbarrel,allowingittosustaindividendsandfundgrowthprojectseveninlower−priceenvironments[8].−However,CNQ′sstockhasdeclinedby1940s per barrel, allowing it to sustain dividends and fund growth projects even in lower-price environments [8]. - However, CNQ's stock has declined by 19% over the past year, underperforming compared to the overall oil and gas sector [9][11]. - The company's financial performance is closely tied to crude oil and natural gas prices, with WTI averaging 71.42 per barrel in the first quarter of 2025, down from 76.97inthepreviousyear[12].Challenges−CNQ′slimitedinternationalexpansionmakesitmorevulnerabletolocaleconomicissuesandpolicychanges[13].−Thecompanyplanstospend76.97 in the previous year [12]. Challenges - CNQ's limited international expansion makes it more vulnerable to local economic issues and policy changes [13]. - The company plans to spend 6.05 billion on capital projects in 2025, which could strain cash flows if there are cost overruns or delays [14]. - Dependence on pipeline access poses risks, as disruptions could lead to wider heavy oil differentials and reduced realized prices [15].