Earnings Rise Y/Y at Canadian Natural, Div Up

Zacks

Independent exploration and production (E&P) company, Canadian Natural Resources Ltd. (CNQ) reported fourth-quarter 2013 earnings (excluding one-time and non-cash items) of 52 Canadian cents (49.5 US cents) ahead of the year-ago quarter’s adjusted profit of 33 Canadian cents, owing to increased liquid and natural gas production.

However, the bottom line missed the Zacks Consensus Estimate of 56 US cents. Increased expenses hampered the result.

Quarterly revenues of C$3,947.0 million (US$3,759.5 million) improved from the prior-year quarter level of C$3,700.0 million, primarily due to higher oil and gas price realizations. However, it failed to beat the Zacks Consensus Estimate of US$4,093.0 million.


For the year ended Dec 31, 2013, Canadian Natural reported earnings of C$2.20 (US$2.14) per share, which failed to beat the Zacks Consensus Estimate of US$2.17. However, the top line came ahead the year-ago period’s adjusted profit of C$1.46. Revenues stood at C$16,145.0 million higher from C$14,589.0 million in 2012.

Canadian Natural’s fourth-quarter cash flow from operations – a key metric to gauge capability to fund new projects and drilling – amounted to C$1,782.0 million, up 15.1% year over year. The rise in cash flow was primarily on increased sales of liquid in offshore Africa.

Dividend Increase

In a separate release, the company reported a quarterly cash dividend of 22.5 Canadian cents per share, to be paid on Apr 1, 2014 to shareholders of record as on Mar 17, 2014. This marks a 12.5% hike over the previous quarterly dividend of 20 Canadian cents.  

Production

Total production of Canadian Natural during the quarter increased 2.8% year over year to 677,242 barrels of oil equivalent per day (BOE/d).

Oil and natural gas liquids (NGLs) production increased approximately 1.7% year over year to 478,038 barrels per day (Bbl/d). Moreover, natural gas production improved 5.4% from the prior-year quarter to 1,195 million cubic feet per day (Mmcf/d).

Realized Prices

The average realized liquid price (before hedging) during the fourth quarter was C$69.38 per barrel, representing a rise of about 4.3% from the corresponding quarter last year. The average realized natural gas price (excluding hedging) during the three months ended Dec 31, 2013 was C$3.62 per thousand cubic feet (Mcf), up 5.8% year over year.

Total Expenses

Total expenses came in at C$3,428.0 million, reflecting a rise of roughly 6.2% from C$3,228.0 million in the year-earlier quarter.

Capital Expenditure & Balance Sheet

Canadian Natural’s total capital spending during the reported quarter was C$2,091.0 million against C$1,767.0 million in the year-ago quarter.

As of Dec 31, 2013, Canada’s second-largest oil producer had C$16.0 million cash in hand and long-term debt (including current potion) of approximately C$9,661.0 million, representing a debt-to-capitalization ratio of 27.3%.

Guidance

Canadian Natural maintains its 2014 liquid production projection in the 521,000- 560,000 Bbl/d band (excluding output from Devon properties). Moreover, the company increased its expected 2014 natural gas output to the 1,170–1,210 Mmcf/d range.

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 better-ranked upstream players like Bellatrix Exploration Ltd (BXE), Crescent Point Energy Corp. (CPG) and TransGlobe Energy Corporation (TGA). All the players have a Zacks Rank #2 (Buy).

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