Canadian Natural Resources (TSX:CNQ) is an oil and natural gas producer with a diversified asset base spanning Western Canada, the North Sea, and Offshore Africa. Supported by strengthening oil prices, the company has generated an impressive 18.7% total shareholder return year to date, outperforming the broader equity markets. Following this recent rally, the stock is now trading near its all-time high.
Let’s take a closer look at its historical performance, growth outlook, and valuation to assess whether it remains an attractive buy at current levels.
CNQ’s historical performance
CNQ operates large, low-risk, high-value reserves that require relatively modest capital reinvestment. Coupled with its efficient operations, which have helped lower costs and reduce its breakeven level, the company generates strong profitability and robust cash flows – key drivers of its long-term share price performance. Over the past 20 years, CNQ has delivered an average annual total shareholder return of 9.8%.
Backed by healthy cash flows, the company has increased its dividend at an impressive 21% compound annual growth rate over the past 25 years and currently offers a forward yield of 4.3%. In addition to dividend growth, CNQ has returned significant capital to shareholders through share repurchases, repurchasing $14.3 billion in shares since the beginning of 2021.
In its most recently reported third quarter, CNQ achieved record average production of 1,620,261 barrels of oil equivalent per day (BOE/d), marking a 19% year-over-year increase. Accretive acquisitions and organic expansion over the past 12 months drove this growth. Higher production supported strong adjusted funds flow of $3.9 billion during the quarter. The company also maintains a solid financial position, with $4.3 billion in liquidity at quarter-end, leaving it well-positioned to fund future growth initiatives.
With this solid operational and financial foundation in place, let’s now examine its growth prospects.
CNQ’s growth prospects
Amid heightened geopolitical tensions and supply-side concerns, oil prices have rebounded 15% from last month’s lows, a trend that could benefit producers such as CNQ. In its latest outlook report, ExxonMobil also noted that oil and natural gas could account for roughly 55% of the global energy mix by 2050, despite the ongoing transition toward cleaner energy sources. This outlook underscores the sector’s long-term relevance and supports CNQ’s growth prospects.
Moreover, CNQ holds the second-largest reserve base among its global peers, with more than 5 billion barrels of oil equivalent (BOE) in proved reserves and a proved reserve life index of 32 years. Importantly, these reserves include a significant proportion of high-value petroleum products, enhancing the company’s revenue and margin potential.
To further strengthen its production capabilities, CNQ has planned to invest $6.7 billion in 2025 and $6.4 billion in 2026. Following these initiatives, management expects average production in 2026 to range between 1,590 and 1,650 thousand BOE per day, with the midpoint reflecting a 3.2% increase from last year. Higher production volumes, combined with firmer oil prices, could support continued financial growth in the coming quarters.
Investors’ takeaway
Despite its strong performance this year, CNQ continues to trade at a reasonable valuation, with next-12-month (NTM) price-to-sales and price-to-earnings multiples of 3.1 and 20.9, respectively.
Considering its solid operating track record, consistent dividend growth, attractive valuation, and healthy long-term growth prospects, CNQ appears well-positioned to extend its upward momentum and potentially deliver stronger returns over the remainder of the year.
