Canadian Natural Resources Ltd (NYSE: CNQ)

Sector: Energy Industry: Oil & Gas E&P CIK: 0001017413
Market Cap 85.21 Bn
P/B 2.91
P/E 17.67
P/S 3.04
ROIC (Qtr) 25.89
Div Yield % 3.45
Rev 1y % (Qtr) 5.45
Total Debt (Qtr) 12.51 Bn
Debt/Equity (Qtr) 0.43
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About

Investment thesis

Bull case

  • Strong operating cash flow of 10.70B provides robust 0.86x coverage of total debt 12.51B, indicating excellent debt servicing capability and financial flexibility.
  • Operating cash flow of 10.70B provides strong 104.75x coverage of stock compensation 102.17M, indicating sustainable incentive practices.
  • Operating cash flow of 10.70B provides exceptional 20.21x coverage of interest expenses 529.71M, showing strong debt service capability.
  • Strong tangible asset base of 62.02B provides 4.96x coverage of total debt 12.51B, indicating robust asset backing and low credit risk.
  • Strong operating cash flow of 10.70B provides 25.38x coverage of SG&A expenses 421.74M, showing efficient operational cost management.

Bear case

  • Operating cash flow of 10.70B barely covers its investment activities of (11.52B), with a coverage ratio of -0.93, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • With cash reserves of 81.88M against inventory of 2.01B, the 0.04 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Operating cash flow of 10.70B provides thin coverage of dividend payments of (3.45B) with a -3.11 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • High depreciation of 6.34B relative to operating cash flow of 10.70B, which is 0.59x suggests significant maintenance capital requirements affecting free cash flow.
  • Operating earnings of 6.31B show weak coverage of depreciation charges of 6.34B, with a 1 ratio indicating high capital intensity and potential reinvestment needs.

Segment consolidation items [axis] Breakdown of Revenue (2023)

Products and services [axis] Breakdown of Revenue (2023)

Peer comparison

Companies in the Oil & Gas E&P
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 COP Conocophillips 136.62 Bn 17.10 2.22 23.44 Bn
2 CNQ Canadian Natural Resources Ltd 85.21 Bn 17.67 3.04 12.51 Bn
3 EOG Eog Resources Inc 66.33 Bn -60.48 8.67 8.13 Bn
4 FANG Diamondback Energy, Inc. 49.64 Bn -2,818.83 314.47 16.24 Bn
5 OXY Occidental Petroleum Corp /De/ 37.18 Bn 15.36 2.56 22.88 Bn
6 WDS Woodside Energy Group Ltd 34.64 Bn 11.73 2.51 -
7 TPL Texas Pacific Land Corp 29.74 Bn 126.16 78.66 0.02 Bn
8 DVN Devon Energy Corp/De 18.80 Bn 3.24 1.91 8.55 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.22 1.02
EV to Cash from Ops. EV/CFO 7.08 18.21
EV to Debt EV to Debt 6.06 54.57
EV to EBIT EV/EBIT 12.01 29.98
EV to EBITDA EV/EBITDA 5.94 19.64
EV to Free Cash Flow [EV/FCF] EV/FCF 12.87 39.33
EV to Market Cap EV to Market Cap 0.89 1.57
EV to Revenue EV/Rev 2.71 11.47
Price to Book Value [P/B] P/B 2.91 2.97
Price to Earnings [P/E] P/E 17.67 -25.98
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 1.01 26.80
Dividend Payout Ratio % Div Payout % (Qtr) 61.10 31.86
Dividend per Basic Share Div per Share (Qtr) 1.41 0.78
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 36.14 1.05
Interest Coverage Int. cover (Qtr) 11.92 -4.97
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -29.41 -533.65
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -84.55 52.06
Dividend Growth (1y) % Div 1y % (Qtr) -27.69 -5.45
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -11.08 6.14
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 3.45 105.89
EBIT Growth (1y) % EBIT 1y % (Qtr) -14.15 75.94
EBT Growth (1y) % EBT 1y % (Qtr) -16.62 17.44
EPS Growth (1y) % EPS 1y % (Qtr) -11.75 3.07
FCF Growth (1y) % FCF 1y % (Qtr) -17.51 -43.36
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 3.48 149.32
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.33 0.33
Cash Payout Ratio Cash Payout (Qtr) 0.22 0.07
Cash Ratio Cash Ratio (Qtr) 0.01 1.32
Current Ratio Curr Ratio (Qtr) 0.86 2.37
Debt to Equity Ratio Debt/Equity (Qtr) 0.43 0.34
Interest Cover Ratio Int Coverage (Qtr) 11.92 -4.97
Times Interest Earned Times Interest Earned (Qtr) 11.92 -4.97
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 45.20 16.19
EBIT Margin % EBIT Margin % (Qtr) 31.12 -16.83
EBT Margin % EBT Margin % (Qtr) 20.66 -24.06
Gross Margin % Gross Margin % (Qtr) 48.80 58.92
Net Profit Margin % Net Margin % (Qtr) 17.20 -28.75