Here's Why Investors Should Hold Canadian Natural Stock for Now

Canadian Natural Resources Limited CNQ is a leading independent energy producer with a diversified portfolio spanning North America, the U.K. North Sea and Offshore Africa. With a balanced production mix, including natural gas, light and heavy crude oil, bitumen and synthetic crude oil, CNQ boasts one of the industry's most diverse energy portfolios. The company has successfully transitioned to a long-life, low-decline asset base, underpinned by investments in oil sands mining, in situ thermal projects, and an expanded polymer flood project at Pelican Lake.

In today’s dynamic market environment, making the right call on a stock can significantly impact an investor’s portfolio. With shifting economic indicators, evolving industry trends and company-specific developments, investors must continually reassess their positions. Let us take a closer look at Canadian Natural's current standing and outcomes to determine whether it is time to buy, sell or hold the stock.

CNQ’s Growth Drivers

Canadian Natural Resources presents a compelling investment case driven by record-setting operational performance and strong financial discipline. In the first quarter of 2025, the company reported record production levels of approximately 1.58 million barrels of oil equivalent per day (BOE/d). Notably, 79% of this output is from long-life, low-decline assets, ensuring predictable cash flow across fluctuating commodity markets.

Financially, CNQ remains a powerhouse. It posted C$2.4 billion in adjusted net earnings and C$4.5 billion in adjusted funds flow during the quarter. With a quarterly dividend payout of 58.75 Canadian cents, CNQ’s shares currently yield 5.3% annually, well above the Zacks Oil/Energy sector’s average of 3.9%, underscoring its strong shareholder commitment and long-term stability. CNQ also maintains a robust balance sheet, wherein it reduced net debt by C$1.4 billion and generated free cash flow of C$1.85 billion in the first quarter of 2025.

Operational efficiency is another core strength. CNQ’s Oil Sands Mining and Upgrading operations reported average operating costs of just C$21.88/barrel, which was lower by a margin of $7-$10/barrel than its peers.

The company's strategic acquisition of Duvernay assets has exceeded expectations, with production targets ramping toward 60,000 BOE/d by 2025 and well costs reduced about C$1.8 million each due to efficiency gains. Moreover, its recent acquisition of SLB’s stake in the Palliser Block joint venture and natural gas supply agreement with Cheniere Energy have further bolstered the outlook, creating a positive trajectory for the company and stakeholders.

Finally, CNQ’s low breakeven WTI price in the low to mid-$40s positions it among the most resilient producers, enhancing long-term shareholder value.

CNQ: Risks to Watch

While Canadian Natural Resources remains a major player in the energy sector, there are several red flags that could prompt investors to consider selling the stock. A key concern is the company’s high leverage. Despite reducing the debt in the first quarter, the company still reports a high long-term debt of C$17.3 billion, restricting its financial flexibility in a high-interest-rate environment. CNQ’s heavy exposure to volatile oil and gas prices further compounds its risk profile.

Operational risks also loom large. The ongoing AOSP turnaround, which began in April 2025, is projected to cut annual output by 31,000 barrel per day, potentially dragging down earnings in the second quarter. Meanwhile, CNQ’s shrinking global footprint, with international production declining 30% year over year and the Baobab field shut until mid-2026, places more pressure on North America’s operations.

The company’s elevated capital spending, budgeted at around C$6.05 billion for 2025, also raises eyebrows.

Finally, a strict competition act in Canada has exposed the company to increased litigation and financial penalties, as a result, it may face growing compliance costs and reputational risks that could weigh on valuation. Recently, CNQ had to divest a majority interest in the Seiu Lake natural gas processing plant in Alberta to invest in SLB’s stake in the Palliser Block joint venture. This was because Canada’s Competition Bureau raised significant concerns around gas processing market concentration in southeastern Alberta and wanted to safeguard the competitive landscape for local producers.

Where Do Price Performance and Estimates Stand for CNQ?

In the past year, Canadian Natural’s shares have lost 12.1%, underperforming the sector’s average of 0.8% decline. Additionally, the stock also underperformed competitors like ARC Resources Ltd. AETUF in the Canadian Exploration and Production sub-industry, where it gained 10.9% in the past year. On a positive note, CNQ has outperformed the price performance of some peers like Paramount Resources Ltd. PRMRF and Gran Tierra Energy Inc. GTE, where their stock lost 33.1% and 51.2% respectively, in the past year. As seen in the chart below.

CNQ, AETUF, PRMRF & GTE’s One-Year Stock Performance

This performance-based peer comparison indicates that the investors may have a mixed outlook regarding Canadian Natural, where some companies like ARC Resources performed better than the stock and Paramount Resources and Gran Tierra performed worse than it.

The Zacks Consensus Estimate for Canadian Natural’s 2025 earnings is pegged at $2.33 per share, indicating a 7.91% year-over-year decline. In the past 60 days, the Zacks Consensus Estimate for CNQ’s 2025 earnings per share has decreased from $2.53 to $2.33. However, the consensus mark for revenues is pegged at $26.96 billion for 2025, implying a 3.6% year-over-year rise.

CNQ’s Estimates Overview

In comparison to Canadian Naturals, the Zacks Consensus Estimate of the above-mentioned peer companies, namely ARC Resources and Paramount Resources, indicates positive year-over-year growth for 2025, except, Gran Tierra.

Buy, Sell or Hold?

Despite recent underperformance in share price and a mixed earnings outlook, investors should consider holding Canadian Natural Resources, a Zacks Rank #3 (Hold) stock, due to its strong operational fundamentals, resilient low-cost asset base and disciplined financial strategy. While near-term risks such as debt levels, volatile commodity prices and regulatory hurdles exist, CNQ’s strategic positioning and strong liquidity provide stability and upside potential for patient investors.

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

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This article originally published on Zacks Investment Research (zacks.com).

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