Oilpatch senior a dividend stocks lover's dream

Canadian Natural Resources hikes payout twice in five months

Tyler Reardon and Jeff Martin help cover Canada's oil and gas industry for Calgary-based Peters & Co.

And they're nothing if not enthusiastic about Canadian Natural Resources Ltd. (CNQ-TSX, $41).

And well they should be. For one thing, the senior oilpatch play is shareholder-friendly.

Not only did it boost its dividend to $0.80 from $0.50 a share last November, it's now raising its payout by a dime to $0.90.

But of greater importance, the company, given the hikes, is obviously confident in its financial future, say Messrs. Martin and Reardon, who see it averaging $10 billion in operating cash flow between 2014 and 2017, or growth of 10 per cent a year.

Indeed, in this regard, they see Canadian Natural ranking among the best in big-cap oil and gas plays.

In the meantime, the company continues to turn over on all four pistons, having posted daily production for the fourth quarter of 677,000 barrels of oil equivalent - 1,000 BOE above the analysts' forecast.

Canadian Natural scored elsewhere, logging cash flow of $1.64 a share. Although this was $0.06 shy of the consensus call, it was a penny above the analysts' own forecast.

In the interim, the company continues to record strong run rates, as well as lower operating costs, at its Horizon project in the Alberta tar sands.

Average volumes, for example, were the second-highest they've been since Horizon's inception, while costs were 20 per cent lower year over year. In fact, for 2013, costs were 10 per cent below those of 2012.

For 2014, Messrs. Martin and Reardon see costs falling even further - in this case, by seven per cent to $38 a barrel, putting the their figure between the company's own forecast of $36-$38 a barrel.

The analysts, in their recent report on Canadian Natural, admit the company provided no new information on recent bitument leaks at its Primrose tar sands project. But the company recently characterized the problem as "totally solvable."

In addition to these surface leaks, Canadian Natural had an underground spill in January, resulting in the release of 27,000 litres of crude oil.

Not surprisingly, for both Messrs. Martin and Reardon, Canadian Natural continues to merit a recommendation of "sector outperform" with a 12-month price target of $48.

Our market watchers this month were onside with Peters & Co. in their admiration for Canadian Natural.

Of the 13 other parties we surveyed, 11 rated the company a "buy," but only two, a "hold," lofting it into first place in our list of top-10 buys.

Headquartered in Calgary, Canadian Natural Resources is one of the world's biggest indpendent producers of crude oil and natural gas.

Not only is it the second-biggest producer of gas in Canada, it's also Canada's biggest producer of heavy oil. Indeed, its Horizon project boasts reserves of six billion barrels.

In addition to North America, the company has operations in the North Sea, as well as off the coast of Africa.

For the three months ended Dec. 31, Canadian Natural's net income climbed to $413 million, or $0.38 a share, from $352 million, or $0.32 a share, for the similar period in 2012.

Revenue, not surprisingly, was also higher, rising to $3.9 billion from $3.7 billion, while pre-tax earnings rose to $519 million from $472 million.

Product sales were up as well, increasing 4.9 per cent to $4.3 billion.

For the 12 months ended Dec. 31, Canadian Natural's net income jumped to $2.3 billion, or $2.08 a share, from $1.9 billion, or $1.72 a share, for the similar period in 2012.

Revenue also presented a brighter picture, rising 10.3 per cent to $16.1 billion, while pre-tax earnings climbed 15.4 per cent to $3 billion. Product sales took a step up too, increasing 10.5 per cent, or $1.7 billion, to $17.9 billion.