CNQ Completes Kirby South Project - Analyst Blog

Independent exploration and production (E&P) company, Canadian Natural Resources Ltd. (CNQ), announced the achievement of first steam injection at its Kirby South steam assisted gravity drainage (SAGD) project.

The company’s 100% owned and operated project was completed much ahead of its planned steam-in date of Nov 2013 and within the targeted budget, with the expected addition of production valued at roughly $34,000 per flowing barrel.

The project is expected to reach production levels of 40,000 barrels per day (bbl/d) by the end of 2014. The company plans to gradually increase production in the greater Kirby area to approximately 140,000 bbl/d. The Kirby South project is the first step of the planned expansion.

The thermal in-situ plan of CNQ includes increasing the company’s total capacity in an incremental manner – from the current 170,000 bbl/d to approximately 510,000 bbl/d – over a span of 15 years.

Management believes that the Kirby project would strengthen the company’s asset folio and contribute to cash flow generation in the near as well as long term.

Calgary, Alberta-based CNQ is engaged in the acquisition, development and exploration of crude oil and natural gas properties. Its core operations are focused in western Canada, the United Kingdom sector of the North Sea and offshore West Africa.

We appreciate the company’s diverse asset base both geographically and in terms of products. In addition to the conventional oil and gas production assets, CNQ is also a major oil sands player with several projects in inventory. However, the company pursues long-term projects which require large capital outlay and several years of development. Also, we remain concerned about the effects of a steep drop in crude prices on the company.
 
Currently, CNQ holds a Zacks Rank #3 (Hold), implying that it is expected to perform in-line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at companies in the energy sector such as Pioneer Southwest Energy Partners L.P. (PSE), Seacor Holdings Inc. (CKH) and Range Resources Corporation (RRC) as good investment opportunities. All the three firms sport a Zacks Rank #1 (Strong Buy).
 

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CDN NTRL RSRCS (CNQ): Free Stock Analysis Report

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