Oil prices have fallen more than 20% in the last year. This fall has been driven by oversupply fears and concerns regarding oil demand out of the US. Accordingly, Canadian energy companies like Canadian Natural Resources Ltd. (TSX: CNQ) have seen their share prices fall as well. In fact, Canadian Natural’s stock is down more than 10% in the last year.
But what if oil prices rebound? What would that mean for Canadian Natural Resources’ stock?
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Oil prices in 2025 and beyond
The main reason for the oversupply fears comes from fears that OPEC+ may authorize an output hike of up to 137,000 barrels per day (bpd) or more. This is not an insignificant amount; therefore, oil prices have been under pressure.
It is true that global inventories are rising and the oversupply in the oil market has been building. But the fact is that supply from OPEC+ has been steadily increasing as demand has been stronger than anticipated in 2025.
But looking ahead to the year 2026 and beyond, there are some catalysts that would send oil prices higher, such as rising geopolitical risks or reduced Russian exports. In fact, the US is pressuring the world to stop importing crude oil from Russia. This would send oil prices skyrocketing, as Russia is still a critical supplier of crude oil to places like India.
In this scenario, Canadian oil companies like Canadian Natural Resources would likely see a sharp rise in their share prices.
Canadian Natural: A highly profitable energy company
Canadian Natural Resources has seen its stock steadily rise over the last five years. During this time, the company’s revenue more than doubled, and its operating cash flow increased 184% to $13.4 billion in 2024.
Today, Canadian Natural continues to generate strong returns from its very lucrative asset base. This asset base has a low decline rate, which means its oil and gas reserves have a long life (33 years) and require minimal capital investment. This translates into a business with strong and predictable returns.
In the first half of 2025, the company’s operating cash flow increased 6.4% to $7.4 billion. Also, margins and returns continue to be strong and better than those of its peer group. Canadian Natural’s return on equity currently stands at 20% and its profit margin is a very healthy 22%.
Dividend history
Canadian Natural is special in its industry for its level of profitability and shareholder returns generated. For example, the company has paid dividends for 25 consecutive years. Also, during this time period, the dividend has increased at a compound annual growth rate (CAGR) of 21%.
If oil prices rise, Canadian Natural stock will most definitely see upside. And if they don’t rise, well, Canadian Natural is extremely well-positioned with its world class asset base.
Bottom line
Canadian Natural Resources stock is currently trading at a mere six times cash flow and 2.1 times book value. Also, its dividend yield is 5.3%. In my view, this stock is the stock to own. If oil prices rise, it will also rise, but if oil prices fall, it will not fall as much as some of the other Canadian energy companies.
