CVE:CC - Canadian Natural: Resilience And Returns Through The Cycle

2024-04-23 08:27:25 ET

Summary

• Canadian Natural is a leading Canadian E&P focused on open surface oil sands mining, a production method characterized by lower maintenance capital requirements and zero decline rate.
• Capitalizing on this, CNQ has led its US peers in cash returns on assets and achieved a 2x higher Capex-FCF conversion, generating superior and less volatile investment returns.
• Having grown dividends at ~16% p.a. since 2014, for 24E I expect a ~7.4% distribution yield with 100% of FCF paid out to shareholders vs ~50-70% across US E&Ps.
• At current commodity price forecasts and on the basis of a NAV model, I calculate a price target of $116 per US share and initiate at Overweight for more than 50% potential upside.

I have recently published my first note on the Canadian Oil & Gas sector, outlining the favorable set-up I see for local producers to benefit from falling WCS differentials and the overall strong crude price outlook. Among the Canadian integrated majors, I named Cenovus Energy my top pick given its leading upstream exposure and visible runway to achieve 100% FCF shareholder returns by Q3. Another Canadian company I view very positively is Canadian Natural Resources ( CNQ ), the largest domestic Oil & Gas producer and a leading operator in both the oil sands and conventional plays....

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