Canadian Natural Q4 Earnings Improve Y/Y, Ups Dividend - Analyst Blog

Canadian Natural Resources Ltd. CNQ reported fourth-quarter 2014 earnings (excluding one-time and non-cash items) of 69 Canadian cents (approximately 61 U.S. cents) per share. This marks a substantial increase from the year-ago quarter’s adjusted profit of 52 Canadian cents courtesy of higher production and improved natural gas realization. Reduced expenses also contributed to the year-over-year improvement. Shares gained over 4% on the NYSE following the results.

However, the bottom line failed to meet the Zacks Consensus Estimate of 78 U.S. cents amid falling crude realizations.

The independent exploration and production company reported quarterly revenues of C$4,384 million (US$3,860 million), higher than the year-ago figure of C$3,947 million. The reported figure, however, lagged the Zacks Consensus Estimate of US$5,057 million.  

For the year ended Dec 31, 2014, Canadian Natural reported earnings of C$3.47 (US$3.14) per share, which surpassed the Zacks Consensus Estimate of US$2.97 and was also substantially higher than the year-ago level of C$2.23. Revenues totaled C$18,863 million, up from C$16,145 million in 2013.

Canadian Natural’s fourth-quarter cash flow from operations – a key metric to gauge its capability to fund new projects and drilling – amounted to C$2,368 million, higher than the fourth-quarter 2013 level of C$1,782 million.    

Dividend

The company declared a quarterly cash dividend of 23 Canadian cents per share, up 2.2%. The dividend will be paid on Apr 1, 2015 to shareholders on record as of Mar 16, 2015.

Production

Canadian Natural reported quarterly production of 860,920 barrels of oil equivalent per day (BOE/d), 27% higher than 677,242 BOE/d in the prior-year quarter.  

Natural gas production increased to 1,733 million cubic feet per day (MMcf/d) from 1,195 MMcf/d in the fourth quarter of 2013. Oil and natural gas liquids (NGLs) production increased to 572,040 barrels per day (Bbl/d) from 478,038 Bbl/d in the year-ago quarter.  

Realized Prices

On a reported basis, the average realized liquid price (before hedging) during the fourth quarter was C$62.80 per barrel, down nearly 10% from the corresponding quarter last year. However, the average realized natural gas price (excluding hedging) during the three months ended Dec 31, 2014 was C$4.32 per thousand cubic feet (Mcf), up from the year-ago level of C$3.62 per Mcf.

Total Expenses

Total expenses came in at C$2,906 million, reflecting a decline of over 15% from C$3,428 million in the year-earlier quarter.

Capital Expenditure & Balance Sheet

Canadian Natural's total capital spending during the reported quarter was C$2,220 million against C$2,091 million in the year-ago quarter.

As of Dec 31, 2014, Canada’s second-largest natural gas producer had C$25 million cash and cash equivalents and long-term debt (including current portion) of C$14,002 million, representing a debt-to-capitalization ratio of approximately 33%.

Guidance

The company anticipates capital expenditures in 2015 to be C$6.04 billion, down C$150 million from the previous guidance.

Canadian Natural expects first-quarter liquid production of 591,000–617,000 Bbl/d and natural gas production in the 1,785–1,805 MMcf/d range. Canadian Natural anticipates 2015 liquid production in the 562,000–602,000 Bbl/d band. The company estimates natural gas production to average between 1,730 MMcf/d and 1,770 MMcf/d.

Other Updates

Canadian Natural announced that it plans a 10% salary cut as a cost control measure in the current weak commodity pricing market. The pay cut will be effective from Mar 1. Additionally, the board will reduce its annual cash retainer by 10%.

The company also added that it intends to monetize its royalty business in 2015, the timing of which will depend upon the commodity pricing environment.

Zacks Rank

Canadian Natural currently carries a Zacks Rank #5 (Strong Sell).

Better-ranked players from the energy sector include Western Refining, Inc. WNR, Western Gas Equity Partners, LP WGP and Global Partners LP GLP. All these stocks sport a Zacks Rank #1 (Strong Buy).
 

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