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Canadian Natural (CNQ) Stock Down Despite Q3 Earnings Beat

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Shares of Canadian Natural Resources Limited (CNQ - Free Report) have dipped 3.6% since the third-quarter 2021 earnings announcement on Nov 4. 

This downward stock movement can be attributed to a huge debt burden in the third quarter, increased operating expenses and higher capital expenditure, including net acquisition costs. 

Behind the Earnings Headlines

Canadian Natural reported third-quarter 2021 adjusted earnings per share of $1.41, beating the Zacks Consensus Estimate of $1.20 and the year-ago quarter’s earnings of 47 cents. This outperformance is attributable to expanded oil and natural gas output and higher commodity price realizations.

However, total revenues of $6.12 billion missed the Zacks Consensus Estimate of $6.3 billion due to a sequential weakness in sales volumes. But the top line improved from $3.4 billion sales a year ago.

During the quarter under review, Canadian Natural, which is committed to adding shareholder value, returned C$558 million via dividends.

CNQ’s board of directors declared a 25% hike in its quarterly dividend, increasing the amount to 58.75 Canadian cents a share, payable Jan 5, 2021, to its shareholders of record as of Dec 10, 2021.

Production & Prices

Canadian Natural reported quarterly production of 1,237,503 barrels of oil equivalent per day (BOE/d), up 11.4% from the prior-year quarter’s level. Oil and NGLs output (accounting for more than 77% of total volumes) rose to 952,839 barrels per day (Bbl/d) from 884,342 Bbl/d a year ago.

Crude oil and NGLs production from operations in North America, including synthetic crude oil production of 468,126Bbl/d and bitumen output of 248,113Bbl/d, totaled 716,239Bbl/d, comparing favorably with the year-ago quarter’s 638,611Bbl/d.

Natural gas volumes recorded a 25.4% year-over-year rise from 1,362 million cubic feet per day (MMcf/d) to 1,708MMcf/d in the quarter. Production in North America summed 1,698MMcf/d compared with 1,340MMcf/d in the prior year.

Canadian Natural’s realized natural gas price surged 78.8% to C$4.13 per thousand cubic feet from the year-ago level of C$2.31. Moreover, realized oil and NGLs price jumped 70% to C$68.06 per barrel from C$40.14 in the third quarter of 2020.

Costs & Capital Expenditure

Total expenses incurred in the quarter were C$4,902 million, higher than C$4,087 million recorded a year ago. An increase in production expenses along with transportation, blending and feedstock costs escalated the overall costs. Canadian Natural’s Oil Sands Mining and Upgrading operating expenses decreased 16.6% year over year to C$19.86 per barrel. 

In the reported quarter, capital expenditure (including net acquisition costs) totaled C$1,011 million.

Balance Sheet

As of Sep 30, Canadian Natural had C$894 million of cash and cash equivalents, and long-term debt of C$15,774 million, representing total debt to total capital of 30.7%.

Zacks Rank & Other Key Picks

Canadian Natural sports a Zacks Rank #1 (Strong Buy), currently.  Other top-ranked players in the energy  space include EOG Resources (EOG - Free Report) , Diamondback Energy (FANG - Free Report) and ConocoPhillips (COP - Free Report) , each presently flaunting a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

EOG Resources reported third-quarter 2021 adjusted earnings per share of $2.16, beating the Zacks Consensus Estimate of $2.01. Strong earnings were driven by increased production volumes and a higher realization of commodity prices.

EOG announced a quarterly dividend of 75 cents per share, indicating an 82% increase from the previous level. The dividend will be paid out on Jan 28, 2022, to its shareholders of record as of Jan 14, 2022. EOG Resources also declared a special dividend of $2 per share. Moreover, the board of directors updated its share repurchase authorization to $5 billion.

Diamondback Energy reported third-quarter 2021 adjusted earnings of $2.94 per share, which surpassed the Zacks Consensus Estimate of $2.81 and the year-ago quarter’s earnings of 62 cents. FANG’s bottom line was aided by better-than-expected production.

The board of directors declared a dividend of 50 cents per share for the third quarter, accounting for an 11.1% hike in Diamondback Energy’s quarterly payout from the previous level of 45 cents. The amount will be paid out on Nov 18, 2021, to its shareholders of record as of Nov 11. FANG also generated a free cash flow of $740 million in the third quarter.

ConocoPhillips reported third-quarter 2021 adjusted earnings per share of $1.77, comfortably beating the Zacks Consensus Estimate of $1.53. This outperformance is led by increased production volumes owing to the Concho acquisition and the rising realized commodity prices.

Based in Houston, TX, this one of the world’s largest independent oil and gas producers’ capital expenditures and investments totaled $1.3 billion, and dividend payments grossed $579 million. ConocoPhillips’ net cash provided by operating activities was recorded at $4.8 billion, up from the year-ago figure of $868 million. COP generated a free cash flow of $2.8 billion in the third quarter.