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Canadian Natural (CNQ) Incurs Wider-than-Expected Q1 Loss

On May 5, Canadian Natural Resources Limited CNQ reported wider-than-expected loss for first-quarter 2016 owing to lower production and oil and gas price realizations.   

The company’s first-quarter loss came in at 44 U.S. cents per share, wider than the Zacks Consensus Estimate of a loss of 27 U.S. cents and the year-ago quarter loss of 3 U.S. cents.

This independent explorer and producer reported quarterly revenues of C$2,178 million, substantially lower than the year-ago figure of C$3,034 million.

Canadian Natural’s fourth-quarter cash flow from operations – a key metric to gauge its capability to fund new projects and drilling – was C$581 million, significantly below the first-quarter 2015 level of C$1,254 million.

Production

Canadian Natural reported production of 844,531 barrels of oil equivalent per day (BOE/d) in the first quarter, lower than the prior-year quarter level of 898,053 BOE/d.      

Natural gas production increased to 1,786 million cubic feet per day (MMcf/d) from 1,771 MMcf/d in the first quarter of 2015. However, oil and natural gas liquids (NGLs) production saw a decline to 546,927 barrels per day (Bbl/d) from 602,809 Bbl/d in the year-ago quarter.
 
Realized Prices

As reported, the average realized liquid price (before hedging) was C$23.31 per barrel during the first quarter, down 37% from the corresponding quarter last year. Moreover, the average realized natural gas price (excluding hedging) for the three months ended Mar 31, 2016 was C$2.23 per thousand cubic feet (Mcf), considerably below the year-ago level of C$3.38 per Mcf.

Total Expenses

Total expenses came in at C$2,646 million, 28% less than C$3,673 million incurred in the year-earlier quarter.  

Capital Expenditure & Balance Sheet

As of Mar 31, 2016, Canada’s second-largest natural gas producer had C$15 million in cash and cash equivalents and long-term debt (including current portion) of C$16,564 million, representing a debt-to-capitalization ratio of approximately 38%.   

Guidance

The company continues to anticipate capital expenditure in the range of C$3.5 billion to C$3.9 billion for 2016. Canadian Natural expects second-quarter liquid production of 504,000–529,000 Bbl/d and natural gas production in the 1,720–1,760 MMcf/d range.

For 2016, the company lowered its production expectation to a range of 802,000 BOE/d to 861,000 BOE/d from the prior guidance of 809,000 BOE/d and 868,000 BOE/d.

Zacks Rank

Canadian Natural currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy sector are PetroChina Co. Ltd. PTR, Pembina Pipeline Corporation PBA and Braskem S.A. BAK. Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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