Canadian Natural Resources Limited shares traded at $33.15 on January 13th, with trailing and forward P/E ratios of 14.18 and 16.31 respectively, according to Yahoo Finance data.
The company operates in crude oil, natural gas, and natural gas liquids across Western Canada, the North Sea's UK sector, and Offshore Africa.
Despite recent oil prices falling toward $55 per barrel, the company's dividend remains fully covered by operating cash flow down to approximately $40 to $45 oil, providing a margin of safety.
Short-term price weakness is amplified by slowing US shale activity, where declining rig counts, falling production, and reduced capital spending are evident. This creates near-term pressure but sets the stage for tighter supply as demand grows, potentially supporting higher oil prices.
Political risk in Canadian energy has modestly declined, improving industry sentiment. CNQ's increased ownership in the Athabasca oil sands through an asset swap with Shell enhances long-duration value creation. Oil sands represent over a century of supply at current production levels, resulting in lower reinvestment and depletion risk compared to shale producers.
Management has demonstrated capital discipline through accretive acquisitions, growing production per share, returning capital to shareholders, and maintaining a strong balance sheet. Recent earnings reflected weaker oil prices but remained solid overall, with dividends raised and debt reduced.
Long-term upside is reinforced by pipeline optionality, declining political risk, and potential access to US markets as shale growth slows.
On conservative assumptions, intrinsic value is estimated near C$61 per share, almost double current levels. The company offers long-term dividend growth investors durability, scale, and attractive valuation.
A previous bullish thesis from November 2024 highlighted the company's long-life oil sands assets, capital discipline, dividend growth, and free cash flow durability. The stock price has depreciated approximately 4.85% since that coverage due to weaker oil prices, though long-term asset quality and cash flow resilience remain intact.
Golden Larch Investing shares a similar view but emphasizes macro-driven supply tightening and intrinsic value upside.
According to database information, 45 hedge fund portfolios held CNQ at the end of the third quarter, up from 44 in the previous quarter.