Independent oil explorer Canadian Natural Resources Ltd. (CNQ) reported better-than-expected first-quarter results, buoyed by higher liquids prices and volumes. Earnings per share, excluding one-time and non-cash items, came in at C$1.21 ($1.18), above the Zacks Consensus Estimate of $1.15.
However, compared with the corresponding quarter of last year, Canadian Natural’s adjusted earnings per share were down 9.7% (from C$1.34 to C$1.21). The negative comparison reflects the company’s decision to curtail natural gas drilling activity to concentrate on higher return crude oil projects. Revenue of C$3.6 billion was up 63.8% from the first quarter 2009 level.
Production
Total production during the quarter was up 9.4% year-over-year to 610,556 oil-equivalent barrels per day (BOE/d). Oil and natural gas liquids (NGLs) production was up approximately 23.1% to 406,266 barrels per day (Bbl/d), reflecting the commencement of operations from its “Horizon” Oil Sands Project in the Athabasca oil sands play of northern Alberta. However, natural gas production fell 10.5% year-over-year to 1,226 million cubic feet per day (MMcf/d), as the company cut gas drilling to focus on more lucrative oil projects.
Realized Prices
The average realized crude oil price (before hedging) during the first quarter was C$68.76 per barrel, representing an increase of 66.7% from the corresponding period of the previous year. The average realized natural gas price (excluding hedging) during the three months ended Mar 31, 2010 was C$5.19 per thousand cubic feet (Mcf), down 5.0% from the year-ago period.
Capital Expenditure & Balance Sheet
Canadian Natural’s total capital spending during the first quarter of 2010 was C$1.1 billion, as against C$1.3 billion in the year-ago period. The reduction in spending reflects the completion of Horizon Phase 1 construction in 2009. As of Mar 31, 2010, the company had cash on hand of C$21 million and long-term debt of approximately C$8.9 billion, representing a debt-to-capitalization ratio of 30.6%.
Stock Split
Recently, Canadian Natural shareholders approved the Board’s resolution to split its shares on a 2:1 basis.
Guidance
Management is guiding towards a production of 394,000 – 426,000 Bbl/d of liquids and 1,207 – 1,232 MMcf/d of natural gas during the second quarter of 2010. The company is planning to drill 11 natural gas wells and 113 crude oil wells in North America during the period.
For 2010, Canadian Natural expects oil and NGLs production to be 405,000 – 450,000 Bbl/d, while natural gas volumes for the year are likely to be 1,202 – 1,269 MMcf/d. It plans to spend approximately C$4.0 billion on capital expenditures in 2010 (excluding property acquisitions).
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