Here's Why a Hold Strategy Is Apt for Canadian Natural Stock Now

Shares of Canadian Natural Resources Limited CNQ gained momentum over the past three months, climbing 9% and outperforming the sub-industry and the broader oil and energy sector’s rise of 7.3% and 2.2%, respectively.

Peer comparison further highlights the strength, as Canadian Natural conveniently outpaced its peers Paramount Resources Ltd. PRMRF, which gained 2.1%, and Baytex Energy Corp. BTE, which lost 1.4% during the same period.

CNQ Outperforms Industry, Sector & Peer Companies (PRMRF, BTE)

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Canadian Natural is a diversified energy producer engaged in the exploration, development, production, mining, upgrading, marketing and transportation of crude oil, synthetic crude oil, natural gas and natural gas liquids. Its operations are centered mainly in North America, with additional exploration and production activities in the North Sea and offshore Africa. The company’s asset base includes conventional oil and gas properties, thermal in-situ oil sands projects, oil sands mining and upgrading operations, and liquids-rich natural gas assets. It also owns midstream infrastructure, including crude oil pipeline systems and a cogeneration facility, and participates in refining through the North West Redwater Partnership.

Canadian Natural has built scale over decades, balancing growth with disciplined financial management and a strong commitment to safe and efficient operations. However, as with any investment, it is essential to take a closer look at the company’s current standing in terms of its resilience, growth trajectory and operational strength. Therefore, let us dig deeper into the prospects to determine Canadian Natural’s credibility.

Factors Favoring Canadian Natural Stock

2026 Earnings Estimates: For 2026, the Zacks Consensus Estimate projects Canadian Natural’s earnings at $4.05 per share, reflecting a 59.5% year-over-year improvement. Moreover, the consensus mark for revenues is pegged at $33.3 billion for 2026, implying a 20.1% year-over-year rise. The Zacks Consensus Estimate for Baytex Energy’s 2026 earnings indicates 210.8% year-over-year growth. However, the Zacks Consensus Estimate for Paramount Resources’ 2026 earnings indicates an 82.9% year-over-year decline.

CNQ’s EPS Estimates

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Record Production Provides Stronger Earnings and Cash-Flow Potential: Canadian Natural delivered record production in the second quarter of 2026, with total output reaching approximately 1.68 million BOE/d, up 18% year over year. Liquids production also climbed 23% to approximately 1.25 million barrels per day, while North American conventional E&P liquids increased 25% to 338,000 barrels per day. Importantly, the company raised its 2026 production guidance for the second time, with the midpoint increasing by 20,000 BOE/d to 1.66 million BOE/d. The combination of higher production, strong drilling results and acquisitions gives CNQ greater exposure to commodity prices and creates a stronger foundation for cash-flow generation.

Low-Cost Oil Sands Assets Support Attractive Margins: Canadian Natural’s Oil Sands Mining and Upgrading operations remain a major investment attraction because of their scale and cost competitiveness. Second-quarter production reached approximately a record 625,000 bbl/d, while upgrader utilization was 106%. Operating costs averaged just C$22.19 per barrel, down 16% year over year, and the company achieved its highest-ever quarterly Oil Sands Mining and Upgrading netback of approximately C$78 per barrel. The assets also benefited from an average SCO premium of $8.37 per barrel to WTI. This combination of high production, low costs and premium pricing provides CNQ with substantial operating leverage when oil prices remain supportive.

Acquisitions and Drilling Are Expanding CNQ's Growth Base: Canadian Natural is combining organic drilling with targeted acquisitions to expand production and improve its asset position. The company spent approximately C$761 million on additional Peace River assets during the second quarter, increasing its exposure to an area where it already has infrastructure and operating expertise. Management expects the consolidation to generate synergies, including targeted operating-cost reductions of 10% or more. At the same time, conventional drilling performance remains strong, with a 100% success rate for crude oil wells in the second quarter. CNQ also reported 12% faster drilling times in its primary heavy crude operations while maintaining similar well costs, demonstrating the potential for continued productivity improvements.

Challenges That Pressure CNQ Stock

CNQ Remains Highly Exposed to Commodity-Price Volatility: Despite its strong second-quarter performance, Canadian Natural’s earnings and cash generation remain heavily influenced by oil and natural gas prices. The quarter benefited from a particularly strong commodity environment, with WTI averaging $92.85 per barrel and SCO receiving an $8.37-per-barrel premium to WTI. However, the company's realized natural gas price fell to C$2.05/Mcf in the second quarter from C$2.58/Mcf a year earlier. The unusually strong SCO premium was also partly driven by temporary factors, including Middle East supply disruptions, reduced Western Canadian supply and seasonal maintenance. A normalization in oil prices or SCO differentials could therefore reduce realized prices, fund flow and the amount available for buybacks and debt reduction.

The Upcoming Horizon Turnaround Will Pressure Production: Canadian Natural faces a significant planned maintenance event at Horizon that could weigh on production in the near term. A 35-day turnaround is scheduled to begin Sept. 8, 2026, and the company expects the event to reduce annual average production by approximately 29,000 bbl/d. Although the impact has already been incorporated into full-year production guidance, the shutdown creates a temporary headwind for volumes and cash generation. Investors should also recognize that large-scale oil sands operations require periodic maintenance, meaning production can be affected by scheduled downtime as well as unexpected operational disruptions. The timing could make the second half of 2026 less operationally strong than the record-setting second quarter.

Growth Projects Are Currently on Hold Because of Regulatory Uncertainty: Canadian Natural has substantial long-term production opportunities, but investors cannot assume that these projects will proceed on schedule. The company explicitly stated that its medium- and long-term growth projects remain on hold until definitive agreements related to the trilateral MOU are finalized. These projects include Jackfish, Pike 2, the potential Jackpine Mine and the Horizon in-pit extraction project. Consequently, CNQ's near-term growth is being driven largely by existing assets, drilling and acquisitions rather than major new oil sands developments. Any delay in reaching the required regulatory and fiscal agreements could postpone incremental production and capital deployment, limiting the company's longer-term growth trajectory.

Capital Requirements and Abandonment Costs Remain Significant: Canadian Natural’s strong cash generation needs to be viewed alongside substantial capital requirements. The company's updated 2026 forecast calls for approximately C$7.64 billion of total capital expenditures, including C$1.53 billion of net acquisitions, while operating capital remains approximately C$5.99 billion. In addition, CNQ expects approximately C$993 million of abandonment expenditures, before recoveries, related to its North American and North Sea abandonment and reclamation programs. These requirements compete with dividends, share repurchases and debt reduction for available cash. If commodity prices weaken, the company could face less financial flexibility to simultaneously fund its capital program, maintain shareholder returns and reduce debt at the desired pace.

Final Words on CNQ Stock

Canadian Natural stock stands out, backed by its recent outperformance versus peers — Baytex Energy and Paramount Resources — as well as strong production growth, low-cost oil sands assets and improving earnings expectations supporting its fundamentals. Record second-quarter production of 1.68 million BOE/d, higher 2026 guidance and successful drilling strengthen its cash-flow potential, while the Peace River acquisition could deliver additional synergies.

However, CNQ remains highly sensitive to oil and natural gas prices, and the upcoming 35-day Horizon turnaround is expected to reduce annual average production by about 29,000 bbl/d. Regulatory uncertainty is also delaying major growth projects, while substantial capital and abandonment expenditures could limit financial flexibility. In this context, investors should consider staying invested in the Zacks Rank #3 (Hold) company for now.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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