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Canadian Natural Resources (CNQ) Down 13% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Canadian Natural Resources (CNQ - Free Report) . Shares have lost about 13% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Canadian Natural Resources due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Canadian Resources Tops Q3 Earnings, Sales Up Y/Y

Canadian Natural Resources delivered third-quarter adjusted earnings per share of 85 cents, comfortably surpassing the Zacks Consensus Estimate of 72 cents. The better-than-expected results were driven by higher crude oil and NGLs output, and price realizations. The bottom line was also way ahead of the prior-year earnings of 15 cents a share.

Revenues came in at $4,514 million, missing the Zacks Consensus Estimate of $4,710 million due to planned maintenance activities in the North Sea and lower natural gas output. However, the top line witnessed a jump from third-quarter 2017 revenues of $3,420 million.

Liquid Production Rises

Canadian Natural reported quarterly production of 1,060,629 barrels of oil equivalent per day (BOE/d), up from 1,036,499 BOE/d in the prior-year quarter. Oil and natural gas liquids (NGLs) output (accounting for more than 75.6% of total volumes) increased to 801,742 barrels per day (Bbl/d) from 759,189 Bbl/d recorded a year ago. Crude oil and NGLs production from operations in North America came in at 754,238 Bbl/d, higher than the year-ago quarter’s 715,581 Bbl/d.

Meanwhile, overall natural gas volumes recorded a year-over-year decline from 1,664 million cubic feet per day (MMcf/d) to 1,553 MMcf/d in the quarter under review. Production in North America came in at 1,489 MMcf/d, lower than the year-ago period’s 1,593 MMcf/d.

Prices

Canadian Natural’s realized natural gas price was C$2.32 per thousand cubic feet compared with the year-ago level of C$2.29. Realized oil and NGLs price increased 25% to C$57.89 per barrel from C$46.33 in the third quarter of 2017.

Total Expenses

Total expenses incurred in the quarter totaled C$3,754, reflecting an increase from the year-ago level of C$3,684. The increased expenses are primarily attributed to higher transportation, blending and feedstock costs.

Capital Expenditure

In the reported quarter, capital expenditure totaled C$1,473 million. Net capital expenditure totaled C$3,550 million in the first nine months of 2018.

Balance Sheet

As of Sep 30, 2018, the company had C$296 million in cash and cash equivalents, and a long-term debt of C$19,233 million, representing a debt-to-capitalization ratio of approximately 36.5%.

Guidance

Canadian Natural expects its capital expenditure to be around C$4.6 billion in 2018.

For full-year 2018, the company expects its crude oil and NGL production from North American operations in the range of 240,000-246,000 Bbl/d. It reiterated its thermal in situ oil sands production guidance at 107,000-127,000 bbl/d. It forecasts its full-year 2018 liquids output in the band of 802,000-868,000 Bbl/d (lower than the previous guided range of 815,000-885,000 bbl/d), while natural gas output is still likely to be in the range of 1,550-1,600 MMcf/d.

Fourth-quarter liquids production is anticipated within 801,000-849,000 Bbl/d and natural gas output is projected at 1,480-1,510 MMcf/d.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Canadian Natural Resources has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Canadian Natural Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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