Canadian Natural Beats on Q1 Earnings, Misses Revs - Analyst Blog

Independent exploration and production (E&P) company, Canadian Natural Resources Ltd. CNQ reported better-than-expected first-quarter 2014 earnings after the closing bell on May 8, 2014. The stock rose to an intraday high of $40.18 the following day, before settling at $39.35, down about 1% from the previous close.

The company reported earnings (excluding one-time and non-cash items) of 85 Canadian cents (77 U.S. cents), substantially higher than the year-ago quarter's adjusted profit of 37 Canadian cents and ahead of the Zacks Consensus Estimate of 73 cents on the back of higher natural gas and liquid realizations.

Quarterly revenues of C$4,396.0 million (US$3,988.5 million) were also up 17.1% from the year-ago period.

The top line, however, fell short of the Zacks Consensus Estimate of US$4,286.0 million. A decrease in liquid production from the North Sea and offshore Africa regions led to the miss.

Canadian Natural's first-quarter cash flow from operations – a key metric to gauge its capability to fund new projects and drilling – amounted to C$2,146.0 million, which was 36.6% higher than first-quarter 2013.

Production

Canadian Natural reported quarterly production of 684,647 barrels of oil equivalent per day (BOE/d), marginally higher than 680,844 BOE/d in the prior-year quarter.

Natural gas production increased to 1,175 million cubic feet per day (MMcf/d) from 1,150 MMcf/d in the first quarter of 2013. However, oil and natural gas liquids (NGLs) production decreased to 488,788 barrels per day (Bbl/d) from 489,157 Bbl/d in the year-ago quarter.

Realized Prices

On a reported basis, the average realized crude oil price (before hedging) during the first quarter was C$79.68 per barrel, representing an increase of 30.9% from the corresponding quarter last year. The average realized natural gas price (excluding hedging) during the three months ended Mar 31, 2014 was C$5.69 per thousand cubic feet (Mcf), up from the year-ago level of C$3.51 per Mcf.

Total Expenses

Total expenses came in at C$3,491.0 million, reflecting a rise of roughly 1.8% from C$3,428.0 million in the year-earlier quarter.

Capital Expenditure & Balance Sheet

Canadian Natural's total capital spending during the reported quarter was C$1,893.0 million, as against C$1,736.0 million in the year-ago quarter.

As of Mar 31, 2014, Canada's second-largest natural gas producer had C$19.0 million cash and cash equivalents and long-term debt (including current portion) of approximately C$10,354.0 million, representing a debt-to-capitalization ratio of 28.2%.

Guidance

For second-quarter 2014, Canadian Natural anticipates liquid production in the 519,000– 546,000 Bbl/d range while natural gas output is expected between 1,620 Mmcf/d to 1,660 Mmcf/d.

Canadian Natural anticipates 2014 liquid production in the 537,000–574,000 Bbl/d band. Moreover, the company increased its expected 2014 natural gas output to the 1,530–1,570 Mmcf/d range.

The company anticipates 2014 capital expenditure in the range of C$11,730.0–C$12,130.0 million.

Zacks Rank & Other Stocks to Consider

Canadian Natural currently carries a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.

One can also consider other upstream players like Bellatrix Exploration Ltd BXE, Talisman Energy Inc. TLM and Enerplus Corporation ERF. All these stocks have a Zacks Rank #2.