Independent oil and gas explorer Canadian Natural Resources Ltd. (CNQ) reported better-than-expected second-quarter results, buoyed by higher liquids prices. Earnings per share, excluding one-time and non-cash items, came in at 56 Canadian cents (57 cents), above the Zacks Consensus Estimate of 49 cents.
However, the Calgary, Alberta-based operator’s per share profits came slightly lower than the second-quarter 2010 level of 59 Canadian cents amid plant shutdowns that led to lower production.
Revenue of C$3.3 billion ($3.4 billion) was up 1.3% from the year-ago period and comfortably beat our guidance of $2.6 billion.
Production
Total production during the quarter was down 14.3% year-over-year to 556,539 oil-equivalent barrels per day (BOE/d). Oil and natural gas liquids (NGLs) production dipped approximately 21.0% to 349,915 barrels per day (Bbl/d), primarily due to the suspension of production from its “Horizon” Oil Sands Project in the Athabasca oil sands play of northern Alberta.
However, natural gas production remained flat year-over-year at 1,240 million cubic feet per day (MMcf/d), as volumes from the Septimus Montney development in Northeast British Columbia and other recently acquired producing properties were offset by the company’s strategic decision to cut gas drilling and focus on more lucrative oil projects.
Realized Prices
The average realized crude oil price (before hedging) during the second quarter was C$82.58 per barrel, representing an increase of 29.8% from the corresponding period of the previous year. The average realized natural gas price (excluding hedging) during the three months ended June 30, 2011 was C$3.83 per thousand cubic feet (Mcf), down marginally from the year-ago level of C$3.86 per Mcf.
Capital Expenditure & Balance Sheet
Canadian Natural’s total capital spending during the second quarter of 2011 was C$1.4 billion, as against C$1.6 billion in the year-ago period. The decrease in spending reflects lower seasonal outgo on drilling activities and associated facilities, somewhat negated by higher costs related to the coker fire incident at Horizon.
As of June 30, 2011, the company had cash on hand of C$6 million and long-term debt of approximately C$8.2 billion, representing a debt-to-capitalization ratio of 27.8%.
Guidance
Management is guiding towards a production of 373,000 – 414,000 Bbl/d of liquids and 1,230 – 1,255 MMcf/d of natural gas during the third quarter of 2011. The company is planning to drill 24 natural gas wells and 367 crude oil wells in North America during the period.
For 2011, Canadian Natural expects oil and NGLs production to be 371,000 – 406,000 Bbl/d, while natural gas volumes for the year are likely to be 1,250 – 1,275 MMcf/d.
Canadian Natural, which competes with other Canadian behemoths like EnCana Corp. (ECA) and Suncor Energy Inc. (SU) – currently retains a Zacks #4 Rank, which translates into a short-term Sell rating.
