Canadian Natural Resources Ltd T.CNQ

Alternate Symbol(s): CNQ

Energy Oil & Gas E&P

Canadian Natural Resources Limited is a senior crude oil and natural gas production company. Its exploration and production segment are focused on North America, in Western Canada, the United Kingdom portion of the North Sea, and Cote d'Ivoire in Offshore Africa. Its Oil Sands Mining and Upgrading segment produces synthetic crude oil through bitumen mining and upgrading operations at Horizon Oil Sands and through its direct and indirect interest in the Athabasca Oil Sands Project (AOSP). Within Western Canada in the Midstream and Refining segment, it maintains certain activities: pipeline operations, an electricity co-generation system, and an investment in the Northwest Redwater Partnership, a general partnership formed to upgrade and refine bitumen in the Province of Alberta. It owns a 70% interest in light crude oil and liquids rich Duvernay assets. It owns 90% of AOSP: the Muskeg River and Jackpine mines, the Scotford Upgrader and the Quest Carbon Capture and Storage facility.

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Canadian Natural Resources Ltd

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Post by retiredcfon Jan 09, 2025 9:22am

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Post# 36395869

RBC

January 9, 2025

Canadian Natural Resources Limited
2025 Budget—No Surprises

TSX: CNQ | CAD 46.99 | Outperform | Price Target CAD 63.00

Sentiment: Neutral

CNQ’s 2025 mid-point production guidance of 1.53 million boe/d (1.51-1.56 million boe/d) was 1% above Street expectations amid a 2% higher capital program of $6.02 billion (excluding $90 million related to carbon capture and $45 million for a one-time office move).

Conference Call

• Time: 9:00am ET, Thursday, January 9 • Dial-in: 1-800-717-1738

Noteworthy Factors

• CNQ’s 2025 production guidance of 1.53 million boe/d (1.12 million bbl/d of oil & NGLs and 2.45 bcf/d of natural gas) is broadly in-line with RBC at 1.54 million boe/d.

The company’s 2025 operating capital budget consists of approximately $3.2 billion aimed at its Conventional E&P segment (excluding Thermal) and circa $2.8 billion earmarked for its Thermal and Oil Sands Mining & Upgrading assets, for a total of $6.02 billion—in-line with our $6.0 billion estimate.
CNQ’s mid-point 2025 production guidance of 1.53 million boe/d rises about 12% year/year vis-a-vis the mid-point of its 2024 production guidance of 1.355 million boe/d, largely driven by the company’s US$6.5 billion acquisition of Chevron’s western Canada assets which closed on December 6, 2024. CNQ did not break out its Mining & Upgrading production outlook for 2025, but we will ask this question on its 9am ET conference call.
The company’s 2025 capital budget includes a level-loaded drilling program, however CNQ highlighted it will maintain flexibility based upon changing market conditions. The company is targeting 361 (net) wells in 2025, including 97 (net) light crude oil wells primarily in the Montney, Dunvegan, and Mannville, as well as 82 (net) liquids-rich gas wells primarily in its recently acquired Duvernay and its Montney assets. CNQ will also look to drill 174 (net) heavy crude oil wells, of which 156 are multilateral wells primarily in the Mannville.
In CNQ’s thermal in-situ drilling program, the company expects to drill 2 SAGD well pads at Kirby (Q1/Q4), which are targeted to come on production in the fourth-quarter of 2025 and fourth-quarter of 2026, respectively. At Pike, the company is targeting to drill 2 SAGD well pads in the first-half of 2025, which are targeted to come on production in 2026 to keep the Jackfish plants at full capacity.
- CNQ will continue to pursue opportunities to debottleneck and increase production at Horizon & AOSP, following the closing of its acquisition of a 20% wi in AOSP from Chevron. The company completed its reliability enhancement project (REP) at Horizon, with 2025 marking the first year without a planned turnaround (capital savings of circa $75 million). Additionally, the company is progressing its Naphtha Recovery Unit Tailings Treatment (NRUTT) project at Horizon which targets an incremental 6,300 bbl/ d of SCO following mechanical completion in the third-quarter of 2027. CNQ also successfully completed a debottlenecking project in the fourth-quarter of 2024—increasing gross capacity by 8,000 bbl/d (7,200 bbl/d, net). The company has a planned turnaround at the Scotford Upgrader in the second-quarter of 2025 which will result in reduced rates for 73 days (31,000 bbl/ d annual impact, net).
- In the company’s offshore Africa segment, CNQ targets to send its FPSO vessel to dry-dock for refurbishment, with production suspended in late January 2025 and expected to resume in the second-quarter of 2026, impacting net annual production by circa 7,800 bbl/d.
- CNQ is committed to incremental shareholder returns beyond its current 60% allocation of free cash flow (after dividends and base capital) towards share repurchases as its balance sheet approaches its intermediate net debt target of $15 billion, at which time returns will inflect to 75% of free cash flow. Following that and upon achieving at or below $12 billion of net debt, CNQ will look to direct 100% of free cash flow to shareholder returns, with free cash flow defined as adjusted FFO less dividends and total capital expenditures (excluding A&D).