Canadian Natural Resources Ltd. CNQ reported third-quarter 2015 earnings of 14 cents per share that surpassed the Zacks Consensus Estimate of 11 cents. Substantial increase in oil production volumes and cost-improvement measures resulted in the beat. Shares of Canadian Natural gained nearly 6% following the beat and new guidance.

However, the bottom-line declined substantially from the year-ago quarter of 87 cents. A significant decline in both oil and natural gas prices hampered profits.

This independent exploration and production company reported quarterly revenues of C$3,114 million, substantially lower than the year-ago figure of C$4,712 million.

Canadian Natural’s third-quarter cash flow from operations – a key metric to gauge its capability to fund new projects and drilling – was C$1,533 million, significantly below the third-quarter 2014 level of C$2,440 million.

Production

Canadian Natural reported quarterly production of 848,701 barrels of oil equivalent per day (BOE/d), 6.5% higher than the prior-year quarter level.     

Natural gas production decreased to 1,653 million cubic feet per day (MMcf/d) from 1,674 MMcf/d in the third quarter of 2014. However, oil and natural gas liquids (NGLs) production increased to 573,135 barrels per day (Bbl/d) from 518,007 Bbl/d in the year-ago quarter.

Realized Prices

As reported, the average realized liquid price (before hedging) was C$41.55 per barrel during the third quarter, down 48% from the corresponding quarter last year. Moreover, the average realized natural gas price (excluding hedging) during the three months ended Sep 30, 2015 was C$3.22 per thousand cubic feet (Mcf), considerably below the year-ago level of C$4.54 per Mcf.  

Total Expenses

Total expenses came in at C$3,212 million, 5% lower than C$3,376 million in the year-earlier quarter.

Capital Expenditure & Balance Sheet

Canadian Natural's total capital spending during the reported quarter was C$1,240 million as against C$2,175 million in the year-ago quarter.  

As of Sep 30, 2015, Canada’s second-largest natural gas producer had C$30 million in cash and cash equivalents and long-term debt (including current portion) of C$16,510 million, representing a debt-to-capitalization ratio of approximately 37.5%.

Guidance

The company anticipates capital expenditure of C$5.44 billion in 2015, lower than the previous guidance of C$5.5 billion.

Canadian Natural expects fourth-quarter liquid production of 562,000–588,000 Bbl/d and natural gas production in the 1,735–1,775 MMcf/d range.

The upstream firm lowered its 2015 liquid production range from 562,000–602,000 Bbl/d to 555,000–591,000 Bbl/d. The company, however, reaffirmed 2015 natural gas production projection between 1,730 MMcf/d and 1,770 MMcf/d.

For 2016, the company expects production between 840,000 BOE/d and 850,000 BOE/d. Of this, 65% is expected to be crude oil and NGLs, while the remaining is likely to be natural gas.

Canadian Natural anticipates 2016 capex between $4.5 billion to $5 billion, substantially below this year’s projection.

Zacks Rank and Key Stock Picks

Canadian Natural currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader energy sector are Seadrill Partners LLC SDLP, Sprague Resources LP SRLP and Northern Tier Energy LP NTI. All these stocks sport a Zacks Rank #1 (Strong Buy).

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