On Aug 6, Canadian Natural Resources Ltd. CNQ reported second-quarter 2015 earnings of 19 cents per share that compared favorably with the Zacks Consensus Estimate of a loss of 12 cents. Record natural gas production and cost-improvement measures resulted in the beat. Notably, with this earnings beat the company has turned around from the loss reported in the previous quarter.
However, this independent exploration and production company reported quarterly revenues of C$3,422 million (US$2,782.4 million), lower than the year-ago figure of C$5,371 million. The reported figure also lagged the Zacks Consensus Estimate of US$3,554 million.
Canadian Natural’s second-quarter cash flow from operations – a key metric to gauge its capability to fund new projects and drilling – amounted to C$1,503 million, below the second-quarter 2014 level of C$2,633 million.
Production
Canadian Natural reported quarterly production of 805,547 barrels of oil equivalent per day (BOE/d), 1.5% lower than the prior-year quarter level.
Natural gas production increased to 1,779 million cubic feet per day (MMcf/d) from 1,634 MMcf/d in the second quarter of 2014. Oil and natural gas liquids (NGLs) production, however, decreased to 509,047 barrels per day (Bbl/d) from 545,169 Bbl/d in the year-ago quarter.
Realized Prices
As reported, the average realized liquid price (before hedging) during the second quarter was C$53.09 per barrel, down 39% from the corresponding quarter last year. Moreover, the average realized natural gas price (excluding hedging) during the three months ended Jun 30, 2015 was C$3.06 per thousand cubic feet (Mcf), down considerably from the year-ago level of C$5.06 per Mcf.
Total Expenses
Total expenses came in at C$3,302 million, 16% lower than C$3,927 million in the year-earlier quarter.
Capital Expenditure & Balance Sheet
Canadian Natural's total capital spending during the reported quarter was C$1,297 million against C$5,456 million in the year-ago quarter.
As of Jun 30, 2015, Canada’s second-largest natural gas producer had C$32 million cash and cash equivalents and long-term debt (including current portion) of C$15,983 million, representing a debt-to-capitalization ratio of approximately 36.5%.
Guidance
The company anticipates capital expenditure of C$5.50 billion in 2015, lower than the previous guidance of C$5.75 billion.
Canadian Natural expects third-quarter liquid production of 559,000–590,000 Bbl/d and natural gas production in the 1,670–1,690 MMcf/d range. Canadian Natural reaffirmed its 2015 liquid production range of 562,000–602,000 Bbl/d. The company still expects natural gas production to average between 1,730 MMcf/d and 1,770 MMcf/d.
Zacks Rank
Canadian Natural currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the oil and gas exploration and production space are Bellatrix Exploration Ltd. BXE, TransGlobe Energy Corporation TGA and Africa Oil Corp AOIFF. All these stocks hold a Zacks Rank #2 (Buy).
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