TSX:CNQ - Post Discussion
Post by
retiredcf on Oct 31, 2024 9:14am
RBC
October 31, 2024
Canadian Natural Resources Limited
3Q First Glance—Looks Like Another Flawless Quarter
TSX: CNQ | CAD 47.50 | Outperform | Price Target CAD 62.00
Sentiment: Positive
CNQ reported strong third-quarter results that came in 11% above on AFFO/shr. and in line on production, amid 4% lower capital spending vis-a-vis Street consensus. Shareholder returns totalled circa $1.9 billion in the third-quarter.
CNQ is our favorite senior producer and on our Global Top 30 and Global Energy Best Ideas lists.
Conference Call
• Time: 11:00am ET, Thursday, October 31 • Dial-in: (800) 717-1738
Key Points
• The company achieved quarterly Synthetic Crude Oil (SCO) production of 497,700 bbl/d (2% above our estimate of 488,300 bbl/ d) amid operating costs of circa $21/bbl (7% below RBC at about $22/bbl).
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CNQ achieved monthly SCO production of about 529,000 bbl/d in August supported by high utilization at both Horizon and AOSP in addition to the completion of the reliability enhancement project (REP) at Horizon.
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At the Scotford Upgrader, a planned turnaround commenced on September 9, 2024, and was successfully completed on October 18, 2024 with an annual impact of 5,400 bbl/d, reduced from 11,000 bbl/d due to shorter maintenance time and stronger than budgeted production volumes. A planned debottleneck project was completed in the turnaround which increases AOSP’s capacity by 8,000 bbl/d (gross), 7,200 bbl/d (net, 90% wi after Chevron acquisition closing).
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CNQ’s North America E&P third-quarter liquids production averaged 499,800 bbl/d (1% below RBC at 505,000 bbl/d). The company noted a quarterly production record at Jackfish of 128,000 bbl/d.
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The company reported third-quarter North American natural gas production of 2.04 bcf/d (3% below RBC at 2.10 bcf/d).
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Cash taxes of $389 million were 25% below our estimate of $519 million in the third-quarter ($0.06 per share impact).
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Due to low natural gas prices in 2024, CNQ has decided to further reduce dry natural gas drilling activity, now targeting to drill a total of 74 net natural gas wells this year, 17 fewer wells than targeted in the company’s original 2024 budget.
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CNQ reported net capital expenditures of $1.35 billion (excluding abandonment expenditures of about $204 million), 11% below RBC at $1.51 billion.
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CNQ is currently paying 100% of free cash flow to shareholder returns until the closing of its US$6.5 billion ($8.8 billion) cash acquisition of Chevron’s assets. Upon closing, CNQ will shift to paying out 60% of free cash flow (adjusted funds flow less all capital and dividends) to shareholder returns and 40% to the balance sheet until its net debt reaches $15 billion. Once it reaches $15 billion of net debt, CNQ will pay 75% of free cash flow to shareholder returns with the balance earmarked for debt reduction until reaching $12 billion of net debt, upon which time the company will pay 100% of free cash flow to shareholder returns.
• Commencing on December 1, 2024, the company will increase its capacity on the Trans Mountain Pipeline Expansion (TMX) by 75,000 bbl/d to a total of 169,000 bbl d.
2024 Guidance
• There are no changes that we see to CNQ’s 2024 guidance, which points toward total equivalent production volumes of 1,330-1,380 mboe/d amid a $5.42 billion capital program (excluding abandonment expenditures). This does not include the company’s recently announced acquisition of Chevron’s assets.
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