Canadian Natural joins an exclusive oil club

Emerging as a bonafide Canadian oil powerhouse, Canadian Natural Resources Ltd.’s blockbuster $12.7 billion deal on Wednesday has propelled the company into the exclusive club of listed global companies that pump out more than a million barrels of oil equivalent every day.

The Calgary-based operator’s 70 per cent stake in Royal Dutch Shell Plc. and Marathon Oil Corp.’s oilsands assets will make it one of only 17 public companies in the world that produce more than 1 million barrels of oil equivalent per day, if the deal is finalized.

“The transaction will push CNQ (the company’s stock symbol) above the million boe per day threshold, which will make it the first Canadian E&P company to reach that mark,” said energy investment broker Peters & Co. in a note.

The list excludes state-owned companies such as Saudi Arabian Oil Company (Aramco), Abu Dhabi National Oil Company, Nigeria National Oil Company and Kuwait National Oil Company, among others, that produce well over a million barrels per day.

CNQ’s acquisition of Royal Dutch Shell Plc. Athabasca Oil Sands Project and Marathon Oil Corp.’s assets will see its output surge to around 1.07 million barrels of oil equivalent per day — nearly equivalent to that of Algeria — from 870,139 bpoed recorded at the end of last year.

Peters notes that CNQ’s massive bet on Shell’s oilsands assets is “one of the better deals of the cycles,” which will set up the company for the next decade. The company will take over operations of the Jackpine and Muskeg River mines, where it will hold a 70 per cent interest, although Shell will remain operator of the Scotford upgrader.

Even before the deal, Peters had rated CNQ as a company with the highest free cash flow among its peers, that include U.S. companies, and this deal places its even higher among its rivals.

“With the strong share price performance following the deal announcement combined with the accretion numbers … we have CNQ screening as one of the best stocks,” Peters analysts wrote, raising their target price for the company to $53 per share from its earlier target of $50 per barrel.