As with most of its energy competitors, Canadian Natural Resources Limited (TSX:CNQ)(NYSE:CNQ) has been hit by the current oil crisis. This year cash flows, earnings, and production are expected to drop. Still, shares are nearing highs set in 2014 when oil prices were above $100 a barrel.

If oil prices are unable to sustain their latest rebound, are Canadian Natural Resources shareholders set to suffer?

Is bigger better?

With a market capitalization of $44 billion, Canadian Natural Resources is one of Canada’s biggest oil producers. Its production is split fairly equally between heavy oil (35%), natural gas (35%), and light oil (30%). With growing reserves across three continents, many investors have fled to the company’s stable outlook and production profile. This year it continued its streak of 15 consecutive years of dividend increases, and shares now yield a respectable 2.3%.

Will its leading size and portfolio diversification continue to prop up earnings and cash flows?

This year capital expenditures are set to fall to about $3.7 billion, a relatively small decrease from last year’s level of $3.8 billion. Limited spending is expected to push production lower from 564 thousand barrels a day to between 514,000 and 563,000 barrels a day. While this appears to be concerning, the company’s management team has prepared well for the future.

Currently, company reserves are estimated to contain over nine billion barrels of oil, resulting in a reserve life of about 34 years.

Two major projects, expected to be finished over the following 12-24 months, will boost current output considerably. Its Horizon bitumen extraction project, with stage two finishing next year, is expected to produce 126,000 barrels of oil per day. The Kirby, Primrose and Pelican Lake oil sands projects, which will all finish by 2018, are expected to produce 180,000 barrels of oil per day. That’s would provide a huge jump from current levels.

Cash flow is ready to roar

Canadian Natural Resources should have no problem finishing up its current backlog of projects. The company maintains a BBB+ credit rating from Moody’s and still has $2.3 billion in committed credit facilities. At current oil prices, the company should generate roughly $1 billion in free cash flow after dividends next year with over $2 billion generated in 2018.

Those figures aren’t including any additional improvements in cost structure either. In 2015 the company was able to push operating costs 15% lower from 2014 levels. At its Pelican Lake project for example, it cut operating expenses from nearly $10 a barrel to under $8.

Once its Horizon and oil sands projects are completed, cash flow will soar from rising production, falling capital expenditures, and, hopefully, higher oil prices. Because its management team is incentivized to create shareholder value—they currently own over $1.4 billion, or 2.6% of outstanding shares—expect Canadian Natural Resources to continue outpacing the industry through 2018 and beyond.

Stock buy alert hits astounding 96% success rate!

The hand-picked investing team inside Stock Advisor Canada, recently issued a buy alert for one special type of "bread-and-butter" stock where The Motley Fool U.S. has banked profits on 23 out of 24 recommendations. Frankly, with an astounding 96% success rate that has delivered average returns of 260%, chances are this new pick could deliver life-changing returns as well. Because the team at Stock Advisor Canada fully embraces the same time-tested investing philosophies that have led to countless Motley Fool winners globally. So simply click here to unlock the full details behind this new recommendation and join Stock Advisor Canada.

*96% accuracy includes restaurant stock recommendations from Motley Fool U.S. services Stock AdvisorRule BreakersHidden GemsIncome Investor and Inside Value since each services inception. Returns as of 5/27/16.


Let’s not beat around the bush – energy companies performed miserably in 2015. Yet, even though the carnage was widespread, not all energy-related businesses were equally affected.

We've identified an energy company we think offers one of the best growth opportunities around. While this company is largely tied to the production of natural gas, it doesn't actually produce the gas. Instead, it provides the equipment required to get natural gas from the ground to the end user. With diversified operations around the globe, we think it's a rare find in the industry.

We like it so much, we’ve named it as 1 Top Stock for 2016 and Beyond. To find out why, simply enter your email address below to claim your FREE copy of this brand new report, "1 Top Stock for 2016 and Beyond"!

Fool contributor Ryan Vanzo has no position in any stocks mentioned.