Canadian Pure Assets (TSX: CNQ) is an oil and pure fuel producer with a diversified asset base spanning Western Canada, the North Sea, and Offshore Africa. Supported by strengthening oil costs, the corporate has generated a formidable 18.7% complete shareholder return yr to this point, outperforming the broader fairness markets. Following this latest rally, the inventory is now buying and selling close to its all-time excessive.
Let’s take a more in-depth take a look at its historic efficiency, development outlook, and valuation to evaluate whether or not it stays a lovely purchase at present ranges.
CNQ’s historic efficiency
CNQ operates massive, low-risk, high-value reserves that require comparatively modest capital reinvestment. Coupled with its environment friendly operations, which have helped decrease prices and cut back its breakeven stage, the corporate generates sturdy profitability and sturdy money flows – key drivers of its long-term share worth efficiency. Over the previous 20 years, CNQ has delivered a median annual complete shareholder return of 9.8%.
Backed by wholesome money flows, the corporate has elevated its dividend at a formidable 21% compound annual development charge over the previous 25 years and at present provides a ahead yield of 4.3%. Along with dividend development, CNQ has returned vital capital to shareholders by way of share repurchases, repurchasing $14.3 billion in shares because the starting of 2021.
In its most not too long ago reported third quarter, CNQ achieved document common manufacturing of 1,620,261 barrels of oil equal per day (BOE/d), marking a 19% year-over-year enhance. Accretive acquisitions and natural growth over the previous 12 months drove this development. Greater manufacturing supported sturdy adjusted funds move of $3.9 billion throughout the quarter. The corporate additionally maintains a stable monetary place, with $4.3 billion in liquidity at quarter-end, leaving it well-positioned to fund future development initiatives.
With this stable operational and monetary basis in place, let’s now look at its development prospects.
CNQ’s development prospects
Amid heightened geopolitical tensions and supply-side issues, oil costs have rebounded 15% from final month’s lows, a pattern that might profit producers corresponding to CNQ. In its newest outlook report, ExxonMobil additionally famous that oil and pure fuel might account for roughly 55% of the worldwide vitality combine by 2050, regardless of the continued transition towards cleaner vitality sources. This outlook underscores the sector’s long-term relevance and helps CNQ’s development prospects.
Furthermore, CNQ holds the second-largest reserve base amongst its international friends, with greater than 5 billion barrels of oil equal (BOE) in proved reserves and a proved reserve life index of 32 years. Importantly, these reserves embrace a major proportion of high-value petroleum merchandise, enhancing the corporate’s income and margin potential.
To additional strengthen its manufacturing capabilities, CNQ has deliberate to speculate $6.7 billion in 2025 and $6.4 billion in 2026. Following these initiatives, administration expects common manufacturing in 2026 to vary between 1,590 and 1,650 thousand BOE per day, with the midpoint reflecting a 3.2% enhance from final yr. Greater manufacturing volumes, mixed with firmer oil costs, might help continued monetary development within the coming quarters.
Buyers’ takeaway
Regardless of its sturdy efficiency this yr, CNQ continues to commerce at an inexpensive valuation, with next-12-month (NTM) price-to-sales and price-to-earnings multiples of three.1 and 20.9, respectively.
Contemplating its stable working observe document, constant dividend development, enticing valuation, and wholesome long-term development prospects, CNQ seems well-positioned to increase its upward momentum and doubtlessly ship stronger returns over the rest of the yr.