Opinions
Alexander MacDonald
Canadian Natural Rsrcs
CNQ-T
DON'T BUY
Nov 14, 2024
Stock price when the opinion was issued
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Likes it very much, first-class operator. Unique ability to be counter-cyclical. Gushes lots of cash. Uncertainty of how tariffs will impact Canadian producers; this name likely caught up in it, as it's such a large index component. Watch and wait.
Benefit to CAD weakening, as it sells in USD and converts it back. Refining assets give a small hedge, but not as much as SU or IMO which are both more vertically integrated.
We would be fine buying, though we do not think it would need to be all at once. We would focus on CNQ, SU, TOU for producers.
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The only oil stock he owns. Earnings this morning were pretty good. Cyclical business, but has never cut dividend. Well run, low-cost producer. Good upside and good downside protection.
One of the great energy companies in NA, great runway. Long-life reserves. Will be in decent shape even if oil prices soften; break-even is ~$40 WTI. Yield is 5+%.
He owns a lot of shares. It's sold off because Canada is for sale since January due to Trump tariffs; energy is for sale again because of oil tariffs; CNQ is exposed to these factors. US shale production is peaking in the next 2 years, as will non-OPEC supply growth. So, there will be massive demand for companies with deep reserves as the demand for oil grows. It trades at 6.4x cash flow at $70 oil, an 11% free cash flow yield; and a 9% cash return (dividend + share buybacks). This is massively oversold.
Concerns about economy, sentiment around energy stocks is lower, oil prices are weak as well. He sold. Long-term, makes sense to own oil and energy. 200-day MA is flat, trending slightly down. Price now below 200-day. Down 26-27% from recent highs. Technicals don't look great. Yield is ~5.65%.
SU is the only true energy name in his portfolio.
Loves it as one of the biggest oil & gas producers. Strong mix of crude, nat gas, and synthetic oil. Production set to grow 12% in 2025. Counting on new Trans Mountain to boost profit. 9/10 on value, 8/10 on fundamentals. US tariffs are a risk, along with unpredictable oil prices.
Paying down debt, strong balance sheet. Chevron assets expected to add nicely to FCF profile. Solid pick for steady cashflow. Yield is 5.5%, reliable.
If she could make this a Top Pick again, she would. Very high conviction on its future. Premier oil company at a discounted price. One of the best management teams in the world. Premier assets and cost structure. Consistently good acquisitions at a good price that are accretive. Strong record of share buybacks and dividend increases.
Revenues are slightly down YOY, but that's a function of oil prices being down. Likes the 60/40 mix of gas to oil.
He doesn't generally participate in the E&P space, as it's hard to make decisions based on the underlying commodity price. Bigger picture, still huge demand for Canadian oil and gas on world markets. EVs won't take over anytime soon.
Very strong operations. Very focused on shareholders by returning $$ to them and paying down debt. Would have been his top choice, until SU ended up turning things around.