Canadian Natural Resources Limited (TSX: CNQ) beat analysts' estimates for third-quarter profit on Thursday and said it will now direct all of its free cash flow to share buybacks after its net debt fell below its C$13 billion target.
The Calgary-based company, Canada's largest oil and gas producer, earned an adjusted C$1.65 per diluted share in the three months to September 30, compared with analysts' average estimate of C$1.45, according to data compiled by LSEG. Adjusted net earnings from operations rose to C$3.4 billion from C$1.8 billion a year earlier.
Higher oil prices supported Canadian oil sands producers this year, with West Texas Intermediate averaging US$85.68 a barrel in the third quarter, up from US$64.95 a year earlier. West Texas Intermediate averaged US$85.68 a barrel in the quarter, up from US$64.95 a year earlier but below US$92.85 in the second quarter. Despite the beat, Canadian Natural shares closed down 1% at C$68.48 in Toronto on Thursday.
"We achieved our net debt target of $13 billion in Q3/26, resulting in the Company now targeting to allocate 100% of free cash flow to shareholder returns through share repurchases," Chief Financial Officer Victor Darel said in the earnings release.
#Canadian Natural Targets C$800 Million a Month in Share Buybacks
Net debt fell to C$12.1 billion at September 30 from C$14.5 billion at the end of June. The company said it is targeting buybacks of C$800 million a month in November and December, after repurchasing C$728 million of stock in October. It said it expects to keep allocating all free cash flow to buybacks in 2027, subject to market conditions.
Free cash flow, which the company calculates as adjusted funds flow minus dividends, capital spending and abandonment costs, was C$2.1 billion in the quarter, up from C$379 million a year earlier. Adjusted funds flow rose to C$5.5 billion from C$3.9 billion. Sulphur sales added about C$0.5 billion in pre-tax net revenue, the company said.
Canadian Natural produces crude oil and natural gas in Western Canada, the U.K. North Sea and Offshore Africa. Its board approved a quarterly dividend of C$0.625 per share, and the company said its dividend has grown for 26 consecutive years.
#Record Thermal and Conventional Output Offsets Horizon Maintenance
Total production rose 2% from a year earlier to about 1,652,000 barrels of oil equivalent per day. That was despite a planned turnaround, a scheduled maintenance shutdown, at the Horizon oil sands site that cut volumes by about 75,000 barrels per day (bpd) in the quarter.
Thermal in situ output, where steam is used to recover bitumen from deep underground, reached a record of about 300,000 bpd, up 9%. Conventional liquids production outside the oil sands also hit a record of about 358,000 bpd, up 16%, helped by acquisitions and drilling. Mining and upgrading output fell 7% to 543,089 bpd of synthetic crude, oil sands bitumen processed into a lighter oil.
The company finished the Horizon turnaround on October 6, seven days earlier than budgeted, and said mining and upgrading output has since averaged about 640,000 bpd. It now plans to extend the gap between major Horizon turnarounds to three years from two, which it said raises average production capacity there by 5,000 bpd.
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#Canadian Natural Says Growth Plans Depend on Final MOU Agreements
Canadian Natural welcomed federal efforts to advance a proposed oil pipeline to Canada's West Coast. The company said finalizing definitive agreements under the memorandum of understanding (MOU) between the Oil Sands Alliance, Alberta and the federal government is the next step, providing clarity on its potential growth projects.
"If industry and governments are able to successfully complete and finalize the definitive agreements of the MOU, the result will be greater investments in the Canadian economy by the oil and gas industry," President Scott Stauth said in the earnings release.
On the conference call, Stauth said the parties should focus on reaching the outcomes each is seeking rather than on the November 15 target date. "It's more about focusing on ensuring that we get it right than focusing on a particular day to get it completed and signed," he told analysts.
The company said lower commodity prices than in the second quarter and the Horizon turnaround weighed on results compared with that period. It also said buyback amounts can vary from period to period with working capital, exchange rates and other factors, and that their timing may be shifted at management's discretion.
Canadian Natural expects to keep directing all free cash flow to buybacks into 2027, though oil price volatility, the timing and terms of the MOU agreements, U.S. tariffs and operational disruptions remain key risks to that outlook.