Canadian Natural Resources Limited CNQ is a leading company in the oil and gas industry, involved in everything from discovering new energy sources to producing and marketing crude oil and natural gas. Operating across major regions like Western Canada, the North Sea and offshore Africa, CNQ has access to a wide range of valuable resources, including Synthetic Crude Oil. The company prioritizes low-cost, sustainable projects, helping it stay profitable even when energy prices are unpredictable.
As with any investment, it is important to carefully consider both the benefits and potential downsides. Is now the right time to keep CNQ stock in your portfolio, or is it time to reassess your position? Let us examine the main factors affecting its performance to help you decide whether to buy, hold or wait.
What Is Working in Favor of CNQ Stock?
Strong Financial Performance and Shareholder Returns: CNQ reported robust first-quarter 2025 results, with adjusted funds flow of $4.5 billion and adjusted net earnings of $2.4 billion. The company returned $1.7 billion to its shareholders, including $1.2 billion in dividends and $500 million in share buybacks. Additionally, CNQ increased its quarterly dividend by 4%, marking the 25th consecutive year of dividend growth with a 21% compound annual growth rate. This demonstrates the company’s commitment to rewarding shareholders and its ability to generate sustainable cash flows. CNQ’s strong balance sheet, with $5.1 billion in liquidity and a $1.4 billion reduction in net debt, further underlines its financial resilience.
Although CNQ has demonstrated consistency in dividend growth, Arc Resources AETUF has also increased its returns to shareholders through both dividends and variable buybacks, offering investors another income-oriented option in the energy space of Canada.
Industry-Leading Cost Structure and Operational Efficiency: CNQ achieved record quarterly production of 1.58 million BOE/day, driven by its low-cost operations. Oil Sands Mining and Upgrading operating costs were $21.88 per barrel, which was $7 to $10 lower than peers, translating to an incremental annual margin of $1.2 billion to $1.7 billion. The company also reduced its 2025 capital budget by $100 million due to operational efficiencies, without impacting production targets. This cost leadership positions CNQ well to withstand commodity price volatility and maintain profitability.
High-Quality, Long-Life Asset Base: Approximately 79% of CNQ’s liquids production comes from long-life, low-decline assets, including oil sands and thermal in-situ operations. These assets require minimal maintenance capital, ensuring stable cash flows. The company’s SCO production reached a record 595,000 barrels per day, with upgrader utilization at 106%. The reliability of these assets reduces operational risk and supports consistent production growth.
Strategic Acquisitions and Synergies: The recently acquired Duvernay assets are performing ahead of expectations, with operating costs at $9.52 per BOE and a 14% reduction in drilling costs. CNQ’s expertise in similar plays, such as the Montney, allows for further optimization. The company is also on track to close the Shell asset swap deal by second-quarter 2025, which will enhance production guidance. These strategic moves strengthen CNQ’s portfolio and provide additional growth avenues.
Resilient Breakeven Pricing: CNQ’s WTI breakeven remains in the range of low-to-mid $40s per barrel, well below current prices. This low breakeven is supported by the company’s cost-efficient operations and diversified asset base. Even in a lower-price environment, CNQ can sustain dividends and fund growth projects, making it a lower-risk investment compared with higher-cost peers.
Trouble Spots for Canadian Natural
Recent Stock Performance Concerns: CNQ stock has lost 19% over the past year. This is worse than the overall oil and gas sector’s decline of 8.4% and many of its competitors in the Canadian Exploration and Production sub-industry. For example, Enerflex Ltd. EFXT and Arc Resources saw their stock prices go up 38.2% and 17.8%, respectively. Even Coterra Energy CTRA only lost 9.7%.
One-Year Price Performance Overview
Zacks Investment Research
Image Source: Zacks Investment Research
This poor performance may show that investors are worried about CNQ, which could hurt its stock price in the near future. This divergence in stock trends suggests that investors are increasingly favoring companies like Arc Resources and Enerflex, which have been more responsive to market expectations.
Exposure to Commodity Price Volatility: Despite CNQ’s low breakeven, its financial performance remains closely tied to crude oil and natural gas prices. WTI averaged $71.42 per barrel in first-quarter 2025, down from $76.97 in first-quarter 2024. A prolonged downturn in oil prices could pressure margins and free cash flow, potentially impacting dividend growth and share buybacks. The company’s heavy reliance on hydrocarbon revenues makes it vulnerable to macroeconomic and geopolitical risks.
Limited International Expansion: CNQ focuses mainly on North America and has not expanded much into international markets. This makes the company more exposed to local economic issues and policy changes. Unlike some competitors, CNQ does not have a strong presence in fast-growing regions where oil demand is rising. Because of this, it may miss growth opportunities and could be less competitive over the long term as global energy needs change.
High Capital Intensity: While CNQ has reduced its 2025 capital budget by $100 million, it still plans to spend $6.05 billion (excluding abandonment costs). Large-scale projects like oil sands mining and thermal in-situ operations require sustained capital investment. Any cost overruns or delays could strain cash flows, particularly in a weaker commodity price environment.
Dependence on Pipeline Access: CNQ relies on pipelines such as TMX and Flanagan South to transport its products. Any disruptions or delays in pipeline expansions could lead to wider heavy oil differentials, reducing realized prices. Although the company has contracted capacity to mitigate some of this risk, egress constraints remain a long-term concern.
Verdict for CNQ Stock
CNQ boasts several strengths, including strong financial results, consistent dividend growth, industry-leading cost efficiency and a high-quality, long-life asset base. The company’s strategic acquisitions and low breakeven pricing further enhance its resilience and growth potential.
However, recent underperformance in stock price, exposure to volatile commodity prices and limited international diversification raise concerns. High capital intensity and dependence on pipeline infrastructure add to operational risks, especially during unfavorable market conditions.
Given this mix of strengths and potential challenges, investors should wait for a more opportune entry point instead of adding this Zacks Rank #3 (Hold) stock to their portfolios.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
