CNQ Canadian Natural Resources Ltd

Independent oil and gas explorer, Canadian Natural Resources Ltd. (CNQ), reported mixed first-quarter 2013 results.

Earnings per share, excluding one-time and non-cash items, were 37 Canadian cents (37 US cents) in the quarter, way behind the Zacks Consensus Estimate of 43 US cents. The miss is primarily due to significant fall in price realization for crude oil.

The Calgary, Alberta-based operator’s per share profits were however up from the first quarter of 2012 level of 27 Canadian cents (27 US cents), favored by higher price realizations for natural gas.

Quarterly revenues of C$3,755.0 million (US$3,726.1 million) were up 6.5% from the year-ago period, owing to higher crude oil and liquid production. The top line also surpassed our projection of US$3,427.0 million.

Canadian Natural’s first-quarter cash flow – a key metric to gauge its capability to fund new projects and drilling – amounted to C$1,571.0 million, which was 22.7% higher than that achieved in the first quarter of 2012.  

Production

The total production of Canadian Natural during the quarter was up 11.2% year over year to a record 680,844 oil-equivalent barrels per day (BOE/d). Oil and natural gas liquids (NGLs) production increased approximately 23.7% to 489,157 barrels per day (Bbl/d), primarily due to successful drilling of crude oil.

Natural gas production, however, declined 11.7% from the prior-year period to 1,150 million cubic feet per day (MMcf/d) due to the decision of Canadian Natural to reduce drilling operations of natural gas and allocate capital for oil projects that will provide higher return.

Realized Prices

On a reported basis, the average realized crude oil price (before hedging) during the first quarter was C$60.87 per barrel, representing a drop of 26.1% from the corresponding quarter last year. The average realized natural gas price (excluding hedging) during the three months ended Mar 31, 2013 was C$3.51 per thousand cubic feet (Mcf), up from the year-ago level of C$2.73 per Mcf.

Capital Expenditure & Balance Sheet

Canadian Natural's total capital spending during the quarter was C$1,736.0 million, as against C$1,596.0 million in the year-ago quarter.

As of Mar 31, 2013, Canada’s second-largest oil producer 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%.

Guidance

Management is guiding towards production of 435,000–461,000 Bbl/d of liquids and 1,090–1,110 MMcf/d of natural gas during the second quarter of 2013. Canadian Natural is planning to drill 27 net thermal in-situ wells and 127 net crude oil wells in North America during the Apr-Jun period of 2013.

For 2013, Canadian Natural estimates production of 482,000–513,000 Bbl/d of liquids and 1,085–1,145 MMcf/d of natural gas.

Dividend

Canadian Natural announced quarterly cash dividend payment of 12.5 Canadian cents per share, which has increased by 19.0% from the year-ago level. The increased dividend will be paid on Jul 1, 2013, to shareholders of record as on Jun 14, 2013.

Stocks to Consider

Canadian Natural 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 look at energy firms like EPL Oil & Gas Inc. (EPL), SemGroup Corporation (SEMG) and InterOil Corporation (IOC) as attractive investments. All these firms sport a Zacks Rank #1 (Strong Buy) and are expected to significantly outperform the broader U.S. equity market over the next one to three months.

 
CDN NTRL RSRCS (CNQ): Free Stock Analysis Report
 
EPL OIL&GAS INC (EPL): Free Stock Analysis Report
 
INTEROIL CORP (IOC): Free Stock Analysis Report
 
SEMGROUP CORP-A (SEMG): Free Stock Analysis Report
 
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