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Canadian Natural Resources reports Q1 profit down as oil prices slide

Canadian Natural Resources Ltd. saw its profits in the first quarter decline 41 per cent year-over-year as oil prices weakened.

Canadian Natural Resources Ltd. saw its profits in the first quarter decline 41 per cent year-over-year as oil prices weakened.

The Calgary-based company, which is Canada’s largest oil and gas producer by market capitalization and a darling of the financial analyst community for its history of strong performance, reported a first-quarter profit of $1.8 billion, down from $3.1 billion in the same quarter last year.

The profit amounted to $1.62 per diluted share for the quarter ended March 31, down from a profit of $2.63 per diluted share a year earlier.

Revenue for the quarter totaled $8.6 billion, down from nearly $10.7 billion in the first three months of 2022.

The company’s financial results reflect the price of oil, which has come down significantly from the heights it reached in 2022 in the immediate aftermath of Russia’s invasion of Ukraine.

The benchmark West Texas Intermediate price remained strong in the first quarter of 2023, averaging US$76.11 per barrel, but that still represents a 19 per cent decline from the first quarter of 2022 and an eight per cent decline from the fourth quarter of 2022.

CNRL said prices remain volatile as a result of geopolitical factors and demand concerns driven by an increased risk of global recession. But the company said it can continue to generate strong returns at current crude price levels.

In addition, the discount that Alberta crude (Western Canada Select) typically trades at in comparison to the North American benchmark has narrowed recently, strengthening margins on CNRL’s heavy crude oil production.

In a conference call with analysts, CNRL’s president and CEO Tim McKay said he’s looking forward to the completion of the Trans Mountain pipeline expansion later this year and believes it will help to shore up the price of Alberta crude.

“In the short-term, it’s very constructive for oil,” McKay said.

“I believe the tightening in the WCS differential is in part the result of not having an egress issue on the oil side, and then with (Trans Mountain) coming on, I believe it will remain tight. Because those barrels have options to go off the West Coast or down to the Gulf Coast of the U.S.”

He said CNRL has contracted to ship 94,000 barrels per day on Trans Mountain when the project is completed – approximately 16 per cent of the pipeline’s total capacity,

CNRL’s production in the quarter averaged 1,319,391 barrels of oil equivalent per day, up from 1,280,180 in the first quarter of 2022.

Benchmark North American crude oil prices shot back up to north of $80/barrel in early April following a surprise production cut announcement by the Organization of Petroleum Exporting Countries and its allies (OPEC plus).

But the spike proved short-lived, as prices have retreated to below the US$70 mark as of Thursday.

In a new report, TD Economics said oil prices are vulnerable right now. The bank lowered its WTI forecast for the second quarter from US$83 per barrel previously to $78 per barrel.

However, the bank said it remains bullish on crude’s outlook for the remainder of the year.

“Our call for $90 per barrel by year-end remains unchanged, as OPEC+ has demonstrated its willingness to intervene as the global major swing producer, ultimately keeping a floor under crude prices,” the report stated.