Canadian Natural Resources (TSX: CNQ) has recently completed the acquisition of $6.5 billion worth of assets, further solidifying its position as one of the largest energy companies in Canada and a major crude oil producer globally. With this transaction, CNQ has gained 122,500 barrels per day of active production and 1.44 billion barrels worth of reserves, enhancing its presence in the oil and gas industry in Canada.
The profitability of these newly acquired assets will depend on the volatility of oil prices, which have experienced significant fluctuations throughout the year. The additional revenue from these assets could potentially generate $551 million in extra profit for CNQ, based on the current profit margin. However, the future profitability of the company is tied to the direction of oil prices moving forward.
In considering the oil and gas industry outlook for 2024, it is important to note that CNQ is already generating significant annual earnings and free cash flow, even before accounting for the impact of the recent acquisition. With oil prices at their current levels, CNQ’s stock valuation appears favorable, trading at 12 times earnings and 7 times cash flow.
The sustainability of current oil prices is a key factor in determining CNQ’s future growth. While demand for oil has been steadily increasing, there are global incentives for renewable energy and nuclear power projects that could impact oil prices in the coming years. It is projected that oil prices may range between $60 to $75 over the next five years, with potential fluctuations based on OPEC production decisions.
Considering CNQ’s strong company fundamentals and profitability margins, coupled with the newly acquired assets, it is expected that the company will continue to grow and increase its value over the next five years. The stock is currently positioned at a favorable valuation, trading at 10 times forward earnings and 8 times forward free cash flow, indicating potential for future expansion and profitability for CNQ.
