We initiate on CNQ at Strong Buy with a $43 PT. Canadian Natural Resources Limited is a diversified upstream and midstream operator producing crude oil, natural gas, and NGLs, with exposure across Western Canada, the North Sea, and Offshore Africa.
We are driven by three distinct levers:
- Our FY25E revenues of C$45.8bn (18% above FY24) includes compounding volume growth from the Albian mine acquisition and persistent realisation expansion on both crude and natural gas, underestimated by the market.
- Consensus misses the step-change in cash flows from the ramp of LNG Canada and the narrowing of WCS/SCO differentials post-TMX, underpinning our forward 2.4x FY26E EV/Sales target – a deliberate balance: premium to peers but prudent discount to recent highs to reflect macro headwinds.
- Limited downside from capital discipline and peer-leading FCF generation, and potential upside as the valuation premium compresses less than feared.
Elevated real interest rates and oil supply shocks are embedded into our multiple and scenario range. Bottom-line: Forecast revenue growth, execution resilience, and a recalibrated valuation framework create a favourable asymmetric R/R profile that stands out in the global energy landscape.
Peer-Leading FCF Engine: The Numbers Behind CNQ’s Capital Dominance
For investors looking for structural upside, “transformational production growth catalysts” are the sweet spot for Canadian Natural Resources Limited. The opportunity is significant: As CNQ completes the swap for 100% ownership of the Albian mines, the company will add ~31,000 bbl/d of premium, zero-decline oil sands production (accretive and not included in FY25E production guidance) – transaction targeted to close by the end of Q1/25.