Canadian Natural Hits New High on Devon Deal - Analyst Blog

Independent energy explorer Canadian Natural Resources Ltd. CNQ closed the acquisition of Oklahoma City-based Devon Energy Corp's DVN conventional properties in Canada for C$3.125 billion. However, Devon Energy retained its Horn River and heavy oil properties.

The market reacted positively to the news, with Canadian Natural shares hitting an intraday high of $39.17 (also a new 52-week high for the company) on Apr 2. The stock settled at $39.05 – up 1.5% from the previous close.

The acquired properties would be immediately incorporated into Calgary, Alberta-based Canadian Natural's operations. The addition of the acreage and infrastructure will boost growth prospects of the company in its core areas, and leave room for further value enhancement in the future.

Canadian Natural is engaged in the acquisition, development and exploitation of crude oil and natural gas properties. It is one of the largest independent exploration and production (E&P) companies in Canada, with extensive heavy crude oil and natural gas developments. The company has a broad portfolio of low-risk exploration and development projects that yield long-term volume growth at above-average rates.
 
However, the company's exposure to the inherently cyclical and volatile E&P sector offsets these strengths and remains a key area of concern. The stock has also been held back by operational challenges, continued volatility in natural gas prices and a fresh round of cost inflation in the oil sands regions.

Canadian Natural currently carries a Zacks Rank #3 (Hold). This implies 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 consider better-ranked Canadian E&P firms like Baytex Energy Corp. BTE and Crescent Point Energy Corp. (CPG). Both these stocks currently carry a Zacks Rank #2 (Buy).