Canadian Natural Resources Limited (CNQ): A Bull Case Theory

We came across a bullish thesis on Canadian Natural Resources Limited (CNQ) on Golden Larch Investing’s YouTube Channel. In this article, we will summarize the bulls’ thesis on CNQ. Canadian Natural Resources Limited (CNQ)’s share was trading at $33.15 as of January 13th. CNQ’s trailing and forward P/E were 14.18 and 16.31 respectively according to Yahoo Finance.

Canadian Natural Resources Limited engages in the acquisition, exploration, development, production, marketing, and sale of crude oil, natural gas, and natural gas liquids (NGLs) in Western Canada, the United Kingdom sector of the North Sea, and Offshore Africa.

The company stands out as one of Canada’s highest quality oil and gas companies and a deeply undervalued opportunity, despite being widely owned and often misunderstood by investors. While oil prices have recently fallen toward $55 per barrel, CNQ has demonstrated that its dividend is fully covered by operating cash flow down to roughly $40 to $45 oil, providing a meaningful margin of safety.

Short term weakness in prices is amplified by slowing US shale activity, where declining rig counts, falling production, and reduced capital spending are already evident. While this creates near term pressure, it also sets the stage for tighter supply over time as demand continues to grow, ultimately supporting higher oil prices.

CNQ’s fundamentals further strengthen the long term case. Political risk in Canadian energy has modestly declined, improving industry sentiment, while CNQ’s increased ownership in the Athabasca oil sands through its asset swap with Shell enhances long duration value creation. With oil sands representing over a century of supply at current production levels, CNQ faces far lower reinvestment and depletion risk than shale producers.

Management has consistently demonstrated capital discipline, executing accretive acquisitions, growing production per share, returning substantial capital to shareholders, and maintaining a strong balance sheet. Recent earnings reflected weaker oil prices but remained solid overall, with dividends raised and debt reduced. Long term upside is reinforced by pipeline optionality, declining political risk, and potential access to US markets as shale growth slows.

On conservative assumptions, intrinsic value is estimated near C$61 per share, almost double current levels. While not suited for short term trading, CNQ offers long term dividend growth investors a compelling combination of durability, scale, and attractive valuation.

Previously, we covered a bullish thesis on Canadian Natural Resources Limited by VIC in November 2024, which highlighted the company’s long life oil sands assets, capital discipline, dividend growth, and free cash flow durability. The company’s stock price has depreciated by approximately 4.85% since our coverage. This is because oil prices weakened, and the thesis has not yet played out. This is because the long term asset quality and cash flow resilience remain intact. Golden Larch Investing shares a similar view but emphasizes macro driven supply tightening and intrinsic value upside.

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Disclosure: None.