Canadian Natural (CNQ) increased 2022 production and plans larger increases in 2023

   Canadian Natural Resources (CNQ) reported it's Q4 and annual results on March 3.It showed record annual production of 1.28 million BOE/day which is a 4% increase from 2021.It also released it's 2023 budget and it showed an expected increase in production of slightly more than 4%.CNQ had a healthy capital investment program in 2021 and will increase it to $5 billion in 2022.This not only increases production but also reserves.Canadian Natural has long life, low decline assets and it increased total proved reserves to 13.58 billion BOE (6% increase) making a 32 year reserve.                                                   And one of it's main accomplishments  was that it generated approximately $20 billion in adjusted funds flow. After dividends and capital expenditures it had $11 billion of free cash flow.So they were able to pay down net debt by $3 billion.Consequently CNQ closed the year with only $10.5 billion in debt and reduced debt by a whopping 50% from January 2021.

Q4 Highlights

    Canadian Natural had a good Q4 to close out 2022.Production was down slightly from Q3 but greater than the 2021 average.Adjusted funds flow was healthy at a robust $1.76 billion or $3.73 per share.Further debt was reduced for a total reduction in 2022 of $3 billion.And the dividend was increased twice(once at year end) to bring it to $.90 per share

                                                             

 The Year Ahead

   Canadian Natural tells shareholders that it has 32 years of reserves.And it has low decline assets so total proved  reserves increased by 6% in 2022 to 13.58 billion BOE.And it will have a further $5 billion of capital investment in 2023.CNQ has been plowing a lot of investment and expenditures into increasing reserves.Consequently production will increase by another 50,000-60,000Boe/day in 2023. And it has decided that after its debt gets to $10 billion it will put 100% of it's free cash flow into shareholder returns.This means that all excess free cash flow will go into dividends and share buybacks both of which benefits shareholders.Because of the size of their adjusted funds flow this blog expects that CNQ will have an increase of their dividend by 8-10% and a small special dividend of $.40-$.50 per share.Rarely will a company forecast a special dividend but this blog will.

      The TSX has been flat to down this year and may recover only slightly in the second half.Even though this blog expects that CNQ will perform relatively well compared to it's peers Canadian Natural may only reach a high of $85 per share in 2023.Of course, if oil rises again to the $80-$85/bbl price range then look for CNQ to move into the $90 per share range.

Dale Mcintyre M.S.Sc(Econ) is a freelance writer.He acn be contacted at daleandmac@gmail.com.   https://www.marketbeat.com/;www.zacksinvestmentresearch.com