Canadian Natural Resources is seeing its stock price jump on strong cash flows and another dividend hike
- Record production of 1,314 million barrels of oil equivalent per day (mboe/d) was up 9.4%.
- Adjusted funds flow increased 154% to $4.3 billion.
- Increased quarterly dividend by 28% to $0.75. CNQ’s dividend yield is currently 4%.
- Net debt was reduced by approximately $7.3 billion, bringing it to $14 billion for a healthy net debt-to-cash flow ratio of approximately one.
What happened in Q4/21 for Canadian Natural Resources?
Well, the fourth quarter of 2021 was just a reflection of the great year that Canadian Natural has had. Rapidly rising oil and gas prices have really set the stage for strong results. On top of this, CNQ delivered strong operational performance and strict financial discipline. All of this has driven cash flows massively higher. As a result, the company is significantly raising its dividend and its stock price has been soaring.
Also in Q4, the positive fundamentals of the natural gas industry have become increasingly clear. Consequently, Canadian Natural Resources management has a very positive long-term view on natural gas fundamentals. They highlighted that natural gas prices beyond 2022 are looking very strong. Given this, the company is ramping up its natural gas production. In fact, CNQ’s natural gas production increased 16% in 2021.
What did CNQ’s management say?
“For 2022 and beyond, I believe we are one of the few energy companies capable of delivering meaningful economic growth while increasing sustainable returns to shareholders and reducing absolute debt in a responsible manner.”Corey Bieber, executive advisor
CNQ has a strong history of generating robust returns for the company and its shareholders. In fact, in the last 22 years, CNQ has increased its dividend every year, with a compound annual growth rate of 22%. In all of these years, there have been many difficult periods in the oil and gas industry, so it’s very telling and very significant that CNQ was able to do this.
What’s next for Canadian Natural Resources?
Going forward, Canadian Natural expects to continue to chug along, keeping costs at bay and improving efficiencies. This will, in turn, allow the company to continue to crank out huge amounts of cash flow. The company’s breakeven WTI price is in the mid-US$30s per barrel. Today, oil is trading at approximately $110. This can inform us as to the company’s ability to continue to generate strong cash flows.
The company’s long-life, low-decline assets are the key characteristics of CNQ that enable the company to consistently generate strong cash flows at all points in the commodity cycle. For 2022, the company will allocate 50% of the cash flow to the balance sheet and 50% to share repurchases. Canadian Natural Resources has seen its stock price rise 98% over the last 12 months. This performance of CNQ stock compares very favourably to the 17% rise in the S&P/TSX Composite Index.