Oil prices threaten Canadian Natural's shareholder return plan, CEO warns

Calgary-based company ended the first three months of 2023 with $6.1 billion in liquidity

·2-min read
CNQ's CEO says lower oil prices may see the company miss its latest debt target.
CNQ's CEO says lower oil prices may see the company miss its latest debt target.

Canadian Natural Resources (CNQ.TO)(CNQ) CEO Tim McKay says if oil prices “continue to decrease or stay low” the oilsands firm may miss its net debt target for 2023, delaying a plan to return more cash to shareholders.

Speaking on a post-earnings conference call with analysts on Thursday, McKay responded to a question about the company’s ability to hit its goal of slashing net debt to $10 billion by the end of the year. Doing so would see Calgary-based Canadian Natural boost returns to shareholders to 100 per cent of free cash flow, up from 50 per cent today.

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“It’s going to depend on where commodity prices settle out,” McKay said on Thursday morning. “I don’t think it’s unrealistic to get there by the end of this year still, but if prices continue to decrease or stay low, then it may push out early... into 2024.”

Canadian Natural reported first quarter financial results on Thursday, ending the first three months of 2023 with $11.9 billion in net debt on its books, as well as $6.1 billion in liquidity. The company reported $10.5 billion in net debt at the end of December.

Last year, with the war in Ukraine pushing oil prices to heights not seen in years, Canadian Natural said it expected its net debt level to fall below $8 billion in late 2022 or early 2023.

“I think the message is to just remember that we're generating a lot of free cash flow now,” McKay added on Thursday’s call.

Canadian Natural’s first quarter profit fell to $1.8 billion, down from $3.1 billion in the same period last year, while revenue also dipped year-over-year. However, adjusted funds flow per share fell in line with analyst estimates.

RBC Capital Markets analyst Greg Pardy called the results “solid” in a note to clients, adding they “reinforce our bullish stance towards the company.”

Toronto-listed Canadian Natural shares fell 1.95 per cent to $74.95 at 11:52 a.m. ET.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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