CIBCHave a $59.00 target. GLTA
EQUITY RESEARCH
January 9, 2025 Flash Research
CANADIAN NATURAL RESOURCES LTD.
2025 Budget: In Line With Our Expectations And Consensus
Canadian Natural announced a 2025 capital spending and production budget
that was mostly in line with our estimates and consensus. Key highlights from the budget include spending on the Naphtha Recovery Unit Tailings
Treatment Project, which is expected to expand productive capacity at
Horizon by 6,300 Bbl/d by late-2027; SAGD pad drilling at Pike, which will be
tied-in to the Jackfish facility in 2026 (helping keep the facility full); and a 156
multilateral drilling program targeting heavy oil in the Mannville. On
shareholder returns, the company continues to allocate 60% of after dividend
free cash flow towards share repurchases in 2025, consistent with our
expectations.
Key Takeaways
• Production guidance. 2025 guidance of a range of 1,510 to 1,555
MBoe/d is in line with our estimate of 1,504 MBoe/d and consensus of
1,521 MBoe/d. The midpoint of 2025 production guidance implies Y/Y
growth of ~12%, predominantly driven by the acquisition of Chevron
Canada’s assets which closed at the end of 2024. Production mix
consists of ~47% light and synthetic crude oil, ~26% heavy crude oil and
~27% natural gas, also in line with our expectations.
• Capex guidance. Capex of $6.0 billion, including capex related to a
number of acquisitions, was in line with our estimate of $5.78 billion and
consensus of $5.99 billion (range of $5.21 billion to $6.40 billion). The
company is also allocating an incremental $135 million of spending,
consisting of $90 million related to carbon capture and $45 million related
to a one-time office move. The 2025 capital budget is divided between
~$3.2 billion of E&P operations and ~$2.8 billion of thermal and oil sands
mining and upgrading. There are ~$75 million in capital savings as the
Horizon oil sands facility can undergo maintenance without any
production impact.
• Asset-level budget details. In conventional E&P, the company will
target drilling 97 net light crude oil wells, primarily in the Montney,
Dunvegan and Manville, 82 net liquids-rich natural gas wells (in the
Montney and Duvernay) and 174 heavy oil wells. Canadian Natural’s in
situ drilling program includes drilling and bringing on production 25 infill
wells during the year and drilling four SAGD well pads targeting Kirby
and Pike. At AOSP, a planned turnaround at the non-operated Scotford
Upgrader is targeted for Q2/25, impacting net annual average production
by ~31 MBbl/d.
• Conference call. The company will host a conference call today at 9 AM
ET (7 AM MT). North America 1-800-717-1738 / International 001-289-
514-5100.
• Valuation. Canadian Natural Resources trades at a P/RNAV ratio of
94%, a 2025E EV/DACF of 7.0x and a 2025E FCF yield of 10%, vs. the
large-cap group at 84%, 5.5x and 12%, respectively.