Dividend Leadership And Capital Return Focus Will Guide Stability Ahead

Key Takeaways

• Strategic acquisitions and operational efficiencies are boosting cash flow, expanding margins, and supporting long-term earnings growth and stability.
  
• Infrastructure expansion and a diversified asset base are enhancing market access, product pricing power, and overall revenue prospects.
  
• Reliance on oil sands, regulatory pressures, pipeline constraints, and energy transition trends all threaten future profitability, asset value, and revenue growth.

Catalysts

Engages in the acquisition, exploration, development, production, marketing, and sale of crude oil, natural gas, and natural gas liquids (NGLs) in Western Canada, the United Kingdom sector of the North Sea, and Offshore Africa.

• Recent accretive acquisitions have expanded production and reserves with minimal increase to the 2025 capital budget, positioning Canadian Natural for immediate cash flow growth and increased future revenues as these assets are developed.
  
• Operational execution and ongoing cost efficiencies-such as reduced drilling, completion, and operating costs across both oil and gas segments-are lowering the company's operating breakeven, which should sustainably expand net margins and free cash flow.
  
• Completion of turnaround projects ahead of schedule and successful reliability enhancements in oil sands assets are driving higher utilization rates and production stability, supporting stronger earnings and lower maintenance capital requirements over the long term.
  
• Expanding asset base in Canadian oil and gas, which benefits from heightened global geopolitical instability, enhances the intrinsic value and pricing power of Canadian Natural's production-bolstering long-run revenue prospects and earnings stability.
  
• The ongoing incremental infrastructure buildout in Canada (e.g., TMX pipeline completion, LNG Canada ramp-up), combined with a strategic, diversified asset base, is set to improve market access and realized prices for CNQ's products, positively impacting revenue and long-term profitability.

Canadian Natural Resources Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Canadian Natural Resources's revenue will decrease by 1.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 21.9% today to 22.0% in 3 years time.
• Analysts expect earnings to reach CA$8.1 billion (and earnings per share of CA$4.09) by about September 2028, down from CA$8.3 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.7x on those 2028 earnings, up from 10.8x today. This future PE is greater than the current PE for the US Oil and Gas industry at 12.2x.
• Analysts expect the number of shares outstanding to decline by 1.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.19%, as per the Simply Wall St company report.

Canadian Natural Resources Future Earnings Per Share Growth

Risks

• The company's long-term reliance on oil sands assets exposes it to higher operating costs and potential volatility in net margins, especially if future oil prices weaken or global competitors with lower breakevens expand market share.
  
• Heightened ESG and environmental regulatory pressures-particularly around greenhouse gas emissions, emissions intensity, and carbon pricing-could lead to mandatory capital expenditures or higher operating costs, eroding earnings and net profit margins over time.
  
• Persistent pipeline, egress, and export capacity constraints in Western Canada, combined with dependency on volatile AECO gas pricing and regional price differentials (e.g., WCS), could limit realized prices and revenue, even as production grows through organic and acquisitive means.
  
• Delays or challenges in integrating acquisitions, along with possible shifting regulatory or policy risk related to the Competition Bureau and federal climate policy, could impact future production growth, increase cost structures, and constrain long-term revenue and cash flow.
  
• Accelerating adoption of electric vehicles, renewable energy, and long-term efforts toward global decarbonization could reduce structural demand for oil and natural gas, posing a risk to Canadian Natural's long-term revenue growth and asset value.

Valuation

• The analysts have a consensus price target of CA$52.139 for Canadian Natural Resources based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$62.0, and the most bearish reporting a price target of just CA$45.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CA$36.7 billion, earnings will come to CA$8.1 billion, and it would be trading on a PE ratio of 15.7x, assuming you use a discount rate of 6.2%.
• Given the current share price of CA$43.08, the analyst price target of CA$52.14 is 17.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.