CIBCThey might raise their $59.00 target. GLTA
EQUITY RESEARCH
October 31, 2024 Flash Research
CANADIAN NATURAL RESOURCES LTD.
First Look: Q3/24 Results Ahead Of Our Expectations And
Consensus
Canadian Natural reported Q3/24 results that were above our expectations
and consensus on adjusted FFO per share (but in line on production).
Variances to our estimates stemmed primarily from higher-than-expected
production from the oil sands mining business unit, better-than-expected
realizations and moderately lower-than-expected operating costs. Key
takeaways from the quarter include stronger-than-budgeted production
volumes at the Scotford Upgrader given better-than-expected turnaround
timing, strong production levels at Jackfish of 128 MBbl/d and as previously
reported through the new and expanded committed capacity of ~257 MBbl/d
to tidewater including the West Coast and USGC.
Financial And Operating Takeaways:
• Q3/24 results. Production of 1,363 MBoe/d (75% liquids) was in line with
our estimate of 1,371 MBoe/d (74% liquids) and consensus of 1,355
MBoe/d (range of 1,332 MBoe/d to 1,371 MBoe/d). Adjusted FFO per
share of $1.84 was ahead of our estimate of $1.60 and consensus of
$1.68 (range of $1.54 to $1.77). Capex of $1,349 million was in line with
our estimate of $1,390 million and in line with consensus of $1,395
million (range of $1,235 million to $1,543 million).
• North America E&P update. North America E&P liquids production,
excluding thermal in situ, was 228 MBbl/d in Q3/24. The company
previously announced shifting natural gas development activity in 2024 to
multilateral heavy oil wells. The company further reduced dry natural gas
drilling capital and now targets a total of 74 net wells (17 fewer than
targeted in the original 2024 budget). FY24 natural gas production
guidance of 2,120 MMcf/d-2,230 MMcf/d remains unchanged.
• Oil sands mining and upgrading update. The company’s Q3/24 SCO
production was 498 MBbl/d, including impacts from planned turnaround
activities at the Scotford Upgrader. The company achieved record
monthly SCO production of ~529 MBbl/d in August primarily due to
higher utilization at both Horizon and AOSP as well as the completion of
the reliability enhancement project at Horizon in Q2/24. Stronger-than-
budgeted production volumes from Scotford concurrent with reduced
turnaround resulted in a reduced annual impact to ~5.4 MBbl/d from ~11
MBbl/d. The Scotford upgrader bottlenecking project was completed
during the turnaround and added ~8 MBbl/d incremental capacity at
AOSP (~7.2 MBbl/d net to Canadian Natural).
• Valuation. Canadian Natural Resources trades at a P/RNAV ratio of
97%, a 2025E EV/DACF of 7.1x and a 2025E FCF yield of 10% vs. the
large-cap group at 90%, 5.7x and 11%, respectively.