Canadian Natural Resources swings to $1.3B loss, abandons guidance

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Canadian Natural Resources (CNQ.TO)(CNQ) has swung to a billion-dollar loss and now looks to save $745 million in costs this year as COVID-19 snuffs out oil demand and Saudi-Russian price aggression clobbers prices.

Canada’s largest oil and gas producer also said it will slash an additional $280 million in capital expenditures on top of the more than $1 billion in planned spending it eliminated in March.

Canadian Natural Resources reported a net loss of $1.28 billion or $1.08 per share in its first quarter, after booking profit of $961 million or 80 cents per share in the same three months last year.

The Calgary-based company said on Thursday that average realized prices for crude and natural gas liquids plunged more than 52 per cent year-over-year to $25.90 per barrel in the quarter ended March 31. The company said it has a free-cash-flow break-even price of US$30 to US$31 per barrel.

The dual shocks of the price war and COVID-19 have decimated commodity prices. West Texas Intermediate crude prices briefly slipped into negative territory last month. Western Canadian Select prices have also fallen to historic lows.

“Our teams have been focused on all of our costs,” chief executive officer Tim McKay told analysts on the quarterly call. “Canadian Natural is in a strong position in these challenging times. Our assets are robust.”

The company said it had about $5 billion in liquidity at its disposal at quarter’s end, including $1.1 billion in cash reserves.

Due to the ongoing pandemic, Canadian Natural Resources has withdrawn its 2020 production outlook and plans to curtail output by 14 per cent.

The company said it produced a record-setting quarterly output of roughly 1.18 million barrels of oil equivalent per day. Production rose nearly 14 per cent in the first quarter as the company took advantage of the Alberta government’s special production allowance, permitting additional output if moved by rail.

Canadian Natural Resources said its May reductions will amount to about 36,000 barrels per day of conventional production, and about 38,000 barrels per day of steam-driven oil sands output. Routine maintenance at its Horizon facility will result in an additional 50,000 barrel per day decline in May.

Unlike many of its peers, Canadian Natural Resources has maintained its dividend amid unprecedented pressure on the sector.

“I think it speaks to the resilience and sustainability of the assets. The board understands the underlying assets, their ability to generate free-cash-flow sustainably, even in low commodity price environments,” chief financial officer Mark Stainthorpe said on the call.

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

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