Oil and natural gas producer Canadian Natural Resources Ltd. (CNQ, CNQ.TO) Thursday morning reported that profit for the fourth quarter soared from last year, boosted by unrealized gains from risk management activities, despite lower revenues, and fall in natural gas pricing. On an adjusted basis, earnings rose from last year, and came in above analysts' expectations. The company further provided its first quarter and fiscal year 2009 production forecasts.
Canadian Natural is a senior oil and natural gas production company, with continuing operations in its core areas located in Western Canada, the U.K. portion of the North Sea and Offshore West Africa.
The steep slide in commodity prices during the fourth quarter has negatively impacted the results of oil companies. At the beginning of the fourth quarter in October, oil prices dropped about 30% from historic highs of US$147 in July 2008 on mounting evidence of slowing global economic growth and energy demand.
Fourth Quarter Results
The Calgary, Canada-based company reported net earnings of C$1.77 billion or C$3.27 per share for the fourth quarter, that soared from C$798 million or C$1.48 per share in the prior-year quarter.
The results for the latest quarter primarily include net unrealized after-tax income of C$1.03 billion related to the effects of risk management activities, foreign exchange losses and stock-based compensation recovery, while prior-year results included C$252 million of the same income.
Excluding items, adjusted net earnings from operations for the quarter rose to C$697 million or C$1.29 per share from C$546 million or C$1.02 per share in the year-ago quarter. On average, five analysts polled by Thomson Reuters were looking for fourth quarter earnings of C$0.76 per share. Analysts' estimates typically exclude one-time items.
According to Canadian Natural, the increase in adjusted net earnings from operations was primarily due to the impact of higher realized natural gas pricing, lower depletion, depreciation and amortization expense, lower royalty expense, higher realized risk management gains, and lower interest expense. These factors were partially offset by the impact of lower realized crude oil pricing, higher production expense, and lower sales volumes.
Excluding non-cash items before working capital adjustments, cash flow from operations for the quarter grew to C$1.57 billion or C$2.90 per share from C$1.49 billion or C$2.75 per share in the year-ago quarter.
Revenues for the quarter, before royalties, were C$2.51 billion, lower than C$3.20 billion in the same quarter last year. Revenue, net of royalties, declined to C$2.24 billion from C$2.86 billion in the year-ago quarter. Three Wall Street analysts had a consensus revenue estimate of C$2.11 billion for the quarter.
Among Canadian Natural's peers, Calgary-based Petro-Canada (PCZ, PCA.TO) reported a net loss for the fourth quarter, largely due to loses on foreign currency translation of long-term debt. The company reported fourth-quarter net loss of C$691 million, or C$1.43 per share, compared to net earnings of C$522 million, or C$1.08 per share in the prior-year quarter.
Another peer, EnCana Corp. (ECA, ECA.TO) last month reported a flat profit for its fourth quarter, but operating earnings declined from last year, mainly due to lower oil prices as well as Chicago crack spread. Operating earnings declined to US$449 million or US$0.60 per share from US$849 million or US$1.12 per share in the year-ago quarter. Revenues, net of royalties, grew 8.16% to US$6.36 billion from the same quarter last year.
Other Metrics
Total Production for the fourth quarter before royalties, decreased 9% to 547,399 barrels of oil equivalent per day or boe/d, from 601,908 boe/d in the fourth quarter of 2007. Total crude oil and NGLs production, before royalties, declined 8% to 309,570 bbl/d from 337,240 bbl/d for the fourth quarter of 2007. Fourth quarter natural gas production decreased 10% to average 1,427 mmcf/d from 1,589 mmcf/d for the fourth quarter of 2007.
Capital expenditures, net of dispositions, for the quarter increased to C$1.83 billion from C$1.51 billion in the same quarter last year.
In a separate news release, Canadian Natural declared a quarterly cash dividend on its common shares of C$0.105 per common share, payable on April 1, 2009 to shareholders of record at the close of business on March 13, 2009.
Full-Year Highlights
For fiscal 2008, Canadian Natural reported net earnings of C$4.99 billion or C$9.22 per share, up from 2.61 billion or C$4.84 per share posted in fiscal 2007. Excluding items, adjusted net earnings from operations soared to C$3.49 billion or C$6.46 per share from C$2.41 billion or C$4.46 per share a year earlier. Analysts estimated earnings of C$5.39 per share for the full-year 2008.
Total revenue for the period, before royalties, was C$16.17 billion, higher than C$12.54 billion in the previous year. Net of royalties, revenues for the year rose to C$14.16 billion from C$11.15 billion last year. The Street was looking for full-year 2008 revenues of 10.08 billion.
Outlook
Looking ahead to the first quarter, Canadian Natural anticipates production, before royalties, to average between 1,365 and 1,394 mmcf/d of natural gas and between 320 and 344 mbbl/d of crude oil and NGLs.
Further, for fiscal 2009, the company expects production levels, before royalties, to average between 1,272 and 1,328 mmcf/d of natural gas and between 331 and 399 mbbl/d of crude oil and NGLs.
Canadian Natural also noted that it has reduced its capital spending program to C$3.2 billion from C$4 billion in 2009. The Company has also deferred about C$800 million in expenditures planned for 2009, citing continuing weak commodity prices, particularly in natural gas.
Stock Quote
CNQ closed Wednesday's regular trading session at $30.11, down $0.08 on a volume of 8.02 million shares, sharply higher than the three-month average volume of 4.15 million shares. In the past 52-week period, the stock has been trading in a broad range of $26.43 to $109.32.
CNQ.TO closed Wednesday's regular trading session on the Toronto Stock Exchange at C$38.54, down C$0.41 on a volume of 5.37 million shares, higher than the three-month average volume of 2.66 million shares. In the past 52-week period, the stock has been trading in a broad range of C$34.19 to C$111.30.
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