Nyse Order Imbalance 1041189.0 Shares On Sell Side

The Oil/Energy market has been highly volatile, recently dropping below $70 per barrel. Concerns over weaker global demand, lackluster Chinese economic stimulus, and a surging U.S. dollar have weighed on market sentiment. On Thursday, Brent crude settled at $74.23 a barrel, while WTI finished at $70.10 — both still down on a year-to-date basis. Analysts warn that the planned production increases of OPEC+ could further depress prices, despite geopolitical uncertainties.

High-Yield Stocks: A Cushion for Investors

In times of oil market instability, high-yield large-cap stocks — defined as companies with a market capitalization of $10 billion or more — provide a haven for investors seeking stable returns. These stocks often offer attractive dividends, offsetting losses from commodity fluctuations. With their proven resilience and steady cash flow, they can mitigate market risks, ensuring a more balanced portfolio during volatile periods.

Canadian Natural Resources Limited CNQ, Chevron CVX and Kinder Morgan KMI stand out as compelling choices for investors seeking large-cap energy exposure.

CNQ, CVX and KMI Dividend Yield

Why Size Matters

These companies are financially strong, well-regarded, and widely covered by analysts. Their regular dividend payments make them particularly attractive to income-focused investors. For those seeking stability and a proven track record, large-cap firms hold strong appeal.

Although large-cap stocks may not match the growth potential of smaller companies, they offer greater price stability. This makes them an ideal choice for a steady approach without the sharp fluctuations often tied to commodity prices.

Our Choices

Canadian Natural Resources: It is one of the largest independent energy companies in Canada. The company is engaged in the exploration, development and production of oil and natural gas. Canadian Natural Resources boasts a diversified portfolio of crude oil (heavy as well as light), natural gas, bitumen and synthetic crude oil.

The Calgary-based CNQ beat the Zacks Consensus Estimate for earnings in three of the last four quarters, the average being 3.9%. Canadian Natural has a market capitalization of roughly $71.3 billion.

A major incentive for holding the CNQ stock is dividend. With a quarterly payout of 56.25 Canadian cents, CNQ shares currently yield 4.5% annually, well above the Zacks Oil/Energy sector average of 3.7%. Reflecting a shareholder-friendly nature, the Zacks Rank #3 (Hold) company recently hiked its payout by 7%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chevron: Based in San Ramon, CA, Chevron is one of the largest publicly traded oil and gas companies in the world, which participates in every aspect related to energy — from oil production to refining and marketing.

Chevron beat the Zacks Consensus Estimate for earnings in three of the last four quarters. The #3 Ranked company has a market capitalization of roughly $289.9 billion.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

With a quarterly payout of $1.63 per share, the CVX stock has a 4% dividend yield, above the generous sector average and significantly over the S&P 500’s 1.2% average.

Kinder Morgan: Houston, TX-based Kinder Morgan is a leading midstream energy infrastructure provider in North America. The company operates pipelines across 83,000 miles to transport natural gas, crude oil, condensate, refined petroleum products, CO2 and other products.

Kinder Morgan, carrying a Zacks Rank of 3, is valued at some $62.2 billion. The energy infrastructure provider‘s 2024 earnings per share indicate 9.4% year-over-year growth.

KMI pays out a quarterly dividend of 28.75 cents, which gives it a 4% yield at the current stock price.

Zacks Investment Research

For Immediate Release

Chicago, IL – November 18, 2024 – Today, Zacks Equity Research discusses Canadian Natural Resources CNQ, Ovintiv Inc. OVV and Baytex Energy BTE.

Industry: Canadian Oil - E&P

Link: https://www.zacks.com/commentary/2370830/drilling-deep-into-the-canadian-upstream-industry-what-to-expect

The Zacks Oil and Gas - Exploration and Production - Canadian industry faces mixed dynamics. Weaker Chinese consumption, a critical factor in global oil pricing, has prompted OPEC+ production cuts. If China's demand remains subdued, oversupply could further pressure prices. Additionally, the rise of renewables and EVs presents long-term challenges, with technology advancements steadily reducing fossil fuel dependence.

Yet Canada’s energy infrastructure received a boost from the Trans Mountain Pipeline Expansion, which alleviates crude bottlenecks and enhances global market access. This milestone strengthens the nation’s upstream sector, offering better pricing opportunities and bolstering economic growth. Despite headwinds, stocks like Canadian Natural Resources, Ovintiv Inc. and Baytex Energy remain well-positioned to navigate shifting market dynamics.

About the Industry

The Zacks Oil and Gas - Canadian E&P industry consists of companies primarily based in Canada, focused on the exploration and production (E&P) of oil and natural gas. These firms find hydrocarbon reservoirs, drill oil and gas wells, and produce and sell these materials to be refined later into products such as gasoline, fuel oil, distillate, etc. The economics of oil and gas supply and demand is the fundamental driver of this industry.

In particular, a producer’s cash flow is primarily determined by the realized commodity prices. In fact, all E&P companies' results are vulnerable to historically volatile prices in the energy markets. A change in realizations affects their returns and causes them to alter their production growth rates. The E&P operators are also exposed to exploration risks where drilling results are comparatively uncertain.

3 Key Investing Trends to Watch in the Oil and Gas - Canadian E&P Industry

Impact of Weakening Chinese Consumption: China's demand for crude oil remains a key determinant in global oil prices. Although government stimulus measures aim to boost economic growth, recent signs of slower demand growth from China have prompted OPEC+ production cuts. If demand from China does not recover as expected, global oil prices could remain subdued due to a combination of ample supply and restrained demand.

Boost to Canada’s Energy Infrastructure: The Trans Mountain Pipeline Expansion (‘TMX’) has started shipping oil, marking a significant milestone for Canada’s energy sector. Originally built in 1953, this upgraded pipeline increases transportation capacity, reducing longstanding bottlenecks in crude oil movement. By improving access to global markets, the project enables Canadian upstream operators to reach more buyers and secure better pricing, delivering a substantial economic lift to the nation’s oil industry and overall economy.

Growing Renewables and EVs Threaten Oil Demand: The global shift to renewable energy and electric vehicles (EVs) presents a long-term challenge for oil demand. While renewable infrastructure growth is gradual, advancing technology and rising EV use are expected to reduce reliance on fossil fuels, potentially lowering oil prices. In China, rapid electrification is driving oil demand to peak earlier, with imports at 11.4 million barrels per day in 2023 projected to plateau by 2026 and then decline, furthering the global supply surplus and pushing prices downward.

Zacks Industry Rank Indicates Bearish Outlook

The Zacks Oil and Gas - Canadian E&P is an 11-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #158, which places it in the bottom 37% of 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates challenging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming pessimistic about this group’s earnings growth potential. While the industry’s earnings estimates for 2024 have gone down 35.3% in the past year, the same for 2025 have fallen 41.4% over the same timeframe.

Despite the dim near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.

Industry Underperforms S&P 500 & Sector

The Zacks Oil and Gas - Canadian E&P industry has fared worse than the Zacks S&P 500 composite as well as the broader Zacks Oil – Energy sector over the past year.

The industry has moved up 3.3% over this period compared with the broader sector’s increase of 10.3% and the S&P 500’s rise of 33%.

Industry's Current Valuation

Since oil and gas companies are debt-laden, it makes sense to value them based on the Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of non-cash expenses.

On the basis of the trailing 12-month EV/EBITDA ratio, the industry is currently trading at 4.8962, significantly lower than the S&P 500’s 18.54. It is, however, above the sector’s trailing 12-month EV/EBITDA of 3.52X.

Over the past five years, the industry has traded as high as 14.49X, as low as 2.91X, with a median of 5.20X.

3 Stocks in Focus

Baytex Energy: An energy producer based in Western Canada, Baytex focuses on a high-quality and diversified oil portfolio across multiple plays, spanning Peace River, Duvernay, Lloydminster and Viking. The company is also active in the Eagle Ford shale. Banking on its strong execution and disciplined capital allocation, BTE prioritizes free cash flow generation. Baytex is also relentlessly working to improve its leverage ratios and enhance shareholder returns.

Calgary, Alberta-based BTE has a market capitalization of $2.3 billion. The Zacks Consensus Estimate for the company’s 2024 sales indicates 17.6% year-over-year growth. BTE, carrying a Zacks Rank #2 (Buy), has seen its stock go down 21% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Canadian Natural Resources: This Calgary-based energy major boasts a diversified portfolio of crude oil (heavy as well as light), natural gas, bitumen and synthetic crude oil. CNQ’s balanced and diverse production mix facilitates long-term value and reduces risk profile, thereby lending its results a high level of stability. Lower capital expenditure needs, accretive acquisitions and improving operational efficiencies have been the other positives in Canadian Natural’s story, which allowed it to generate a significant free cash flow of C$2.8 billion (post capital spending and dividends) in the first nine months of 2024.

CNQ beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. It has a trailing four-quarter earnings surprise of roughly 3.9%, on average. Canadian Natural shares have gained 6.5% in a year. The stock carries a Zacks Rank #3 (Hold).

Ovintiv: Ovintiv is an independent E&P operator with an attractive oil and gas production portfolio in three major North American unconventional basins: Montney, Anadarko and the Permian. Following the Newfield acquisition in 2019, the company has achieved a higher liquids focus, greater scale and cost synergies. Ovintiv has done a commendable job of cutting its expenses in a disciplined manner, which should boost free cash flow generation. Ovintiv’s cash flows will also receive downside protection from attractive oil and gas hedges.

Ovintiv beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 25.4%, on average. The #3 Ranked company’s Value and Momentum Score of A and B, respectively, help it to round out with a VGM Score of B. With a market capitalization of around $11 billion, OVV has increased 2% in a year.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Zacks Investment Research

Canadian Natural Resources Limited CNQ reported third-quarter 2024 adjusted earnings per share of 71 cents, which beat the Zacks Consensus Estimate of 67 cents. This outperformance can be attributed to decreased year-over-year expenses in the quarter. However, the bottom line declined from 97 cents in the year-ago quarter due to lower production and weaker commodity prices.

Total revenues of $6.5 billion depreciated from $7.4 billion recorded in the prior-year period due to reduced product sales. However, the figure beat the Zacks Consensus Estimate of $6.4 billion.

Canadian Natural Resources Limited Price, Consensus and EPS Surprise

Canadian Natural Resources Limited price-consensus-eps-surprise-chart | Canadian Natural Resources Limited Quote

On Oct. 7, CNQ’s board of directors approved a 7% increase in its quarterly cash dividend, raising the figure to 56.25 Canadian cents per common share, which was 52.5 Canadian cents previously. The new dividend will be payable on Jan. 3, 2025, to its shareholders of record as of the close of business on Dec. 13, 2024.

In the third quarter of 2024, the company delivered strong returns to its shareholders, totaling approximately C$1.9 billion. This included C$1.12 billion in dividends and C$0.74 billion through the repurchase and cancellation of around 15.6 million common shares at a weighted average price of C$47.70 per share.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Year to date, as of Oct. 30, 2024, the company has returned approximately C$6.7 billion to its shareholders, consisting of C$4.4 billion in dividends and C$2.3 billion through the repurchase and cancellation of about 47.6 million common shares.

CNQ’s Production & Prices

Canadian Natural reported quarterly production of 1,363,086 barrels of oil equivalent per day (Boe/D), down 2.2% from the prior-year quarter’s level. The figure also missed our estimate of 1,402,141 Boe/D.

The oil and natural gas liquid (NGL) output (accounting for around 75% of total volumes) decreased to 1,021,572 barrels per day (Bbl/d) from 1,035,153 Bbl/d recorded a year ago. However, the figure beat our estimate of 1,016,181 Bbl/d.

Exploration and production activities in North America, not including thermal in situ methods, reported an average output of 228,221 barrels per day. This indicates a 1.8% year-over-year deterioration owing to a decline in the natural field.

Natural gas volumes totaled 2,049 million cubic feet per day (MMcf/d), down 4.7% from 2,151 MMcf/d recorded in the year-ago period. The figure also missed our estimate of 2,316 MMcf/d. Production in North America amounted to 2,039 MMcf/d compared with 2,139 MMcf/d in the year-ago quarter. The figure missed our prediction of 2,303 MMcf/d.

The realized natural gas price decreased 65.8% to 77 Canadian cents per thousand cubic feet from the year-ago level of C$2.25. The figure missed our prediction of C$1.88 per thousand cubic feet. The realized oil and NGL price reduced 9.9% to C$79.15 per barrel from C$87.83 in the third quarter of 2023.

In the third quarter, the natural gas price for North America’s gas decreased to 56 Canadian cents per thousand cubic feet, down from C$2.20 in the year-ago quarter. Similarly, the corporate natural gas price dropped to 62 Canadian cents per thousand cubic feet compared with C$2.25 in the same period.

Thermal in situ production volume decreased to 271,551 Bbl/d from 287,085 Bbl/d recorded a year ago. However, the figure beat our estimate of 236,615 Bbl/d. The company's Oil Sands Mining and Upgrading assets achieved strong production in the third quarter, averaging 497,656 Bbl/d of high-value SCO, approximately 7,000 Bbl/d higher than the prior-year quarter’s level, despite the impacts of planned turnaround activities at the non-operated Scotford Upgrade.

Oil Sands Mining and Upgrading set a new monthly production record of approximately 529,000 Bbl/d of SCO in August 2024, driven by high utilization at both Horizon and AOSP, as well as the completion of a reliability enhancement project at Horizon during the second-quarter planned turnaround.

CNQ’s Costs & Capital Expenditure

Total expenses in the quarter were C$6.08 billion, down from C$6.75 billion recorded in the year-ago period. The decrease was due to lower production costs, interest and other financing expenses.

Capital expenditure totaled C$1.3 billion compared with C$1.1 billion a year ago.

CNQ’s Balance Sheet

As of Sept. 30, CNQ had cash and cash equivalents worth C$721 million and long-term debt of C$8.4 billion, with a debt to total capital of about 20.1%.

CNQ’s Guidance

Canadian Natural expects to continue strengthening its market position in 2024, having increased the company’s contracted crude oil transportation capacity to 256,500 Bbl/d. This expansion boosts CNQ’s committed volumes to Canada’s West Coast and the US Gulf Coast, representing approximately 25% of its liquid production based on the midpoint of the company's 2024 corporate annual guidance. The additional egress capacity supports Canadian Natural’s long-term sales strategy by accessing expanded refining markets, improving netbacks and reducing exposure to egress constraints.

Starting Dec. 1, 2024, the company will further increase its capacity on the TMX pipeline by 75,000 Bbl/d, bringing the total capacity to 169,000 Bbl/d.

For 2024, CNQ anticipates total annual output to be between 1,330,000 Boe/d and 1,380,000 Boe/d. The company also expects total liquid production in the range of 977-1,008 thousand Boe/d. This estimate includes a natural gas production prediction of 2,120 -2,230 MMcf/d for 2024.

Breaking down the liquid production further, the company anticipates a range of 253-265 thousand Boe/d from conventional exploration and production operations, excluding thermal activities. The remaining liquid production, estimated between 724 thousand Boe/d and 743 thousand Boe/d, is expected to originate from thermal and oil sands mining and upgrading processes.

For 2024, the company anticipates a total of C$5,420 million in CapEx. Approximately C$2,540 million of this amount is reserved for conventional exploration and production activities (excluding thermal projects), while the remaining C$2,880 million is allocated to thermal operations and oil sands mining and upgrading.

CNQ currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Important Energy Earnings So Far

Right in the middle of earnings season, there have been a few key energy releases so far. Let us glance through a couple of them.

Liberty Energy LBRT, the Denver-CO-based oil and gas equipment company, announced an adjusted net income of 45 cents per share, which missed the Zacks Consensus Estimate of 55 cents. This was primarily due to poor equipment and services execution and lower activity in the reported quarter. Additionally, the bottom line declined from the year-ago quarter’s reported figure of 86 cents due to a year-over-year increase in costs and expenses.

Ahead of the earnings release, LBRT’s board of directors announced a dividend of 8 cents per common share payable on Dec. 20, to its stockholders of record as of Dec. 6. This dividend represents a 14% increase from the prior regular quarterly dividend of 7 cents per share. In the quarter, Liberty returned $51 million to its shareholders through a combination of share repurchases and cash dividends.

Energy infrastructure provider, Kinder Morgan, Inc. KMI reported third-quarter adjusted earnings per share of 25 cents, which missed the Zacks Consensus Estimate of 27 cents. The bottom line was flat year over year. The weakness in quarterly results was caused by lower contributions from the Products Pipelines and CO2 business segments.

KMI also announced a quarterly cash dividend of 28.75 cents per share for the third quarter of 2024 (annualized dividend of $1.15), implying a 2% increase from the third-quarter 2023 level. The dividend is payable on Nov. 15, 2024, to its shareholders of record as of Oct. 31.

Schlumberger Limited SLB, a Houston, TX-based oil and gas equipment and services provider announced third-quarter earnings of 89 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 88 cents. The bottom line also increased from the year-ago quarter’s 78 cents. The strong quarterly earnings were primarily driven by broad-based earnings growth and margin expansion, especially in the Middle East, Asia and offshore North America. Additionally, cost optimization, greater adoption of digital solutions and contributions from long-cycle deepwater and gas projects played significant roles.

SLB reported a free cash flow of $1.81 billion in the third quarter. As of Sept. 30, the company had approximately $4.46 billion in cash and short-term investments. At the end of the quarter, it registered a long-term debt of $11.86 billion.

Zacks Investment Research