Canadian Natural Resources Ltd. (CNQ.TO) is a senior crude oil and natural gas production company with operations in Western Canada, the U.K. portion of the North Sea, and Offshore Africa. Recently, CNQ announced the acquisition of assets worth US$6.5 billion, which will add 122,500 BOE/day to its Western Canadian sedimentary assets, including oil sands and liquid-rich Duvernay resources. Additionally, management declared its 25th consecutive year of dividend increases, raising the dividend by 7% to $0.5625 per share. Despite these developments, investors are questioning the stagnation of CNQ’s stock performance. Looking at relative strength, CNQ shares rank 43rd out of 60 in the SIA S&P TSX 60 Index Report, placing them in the unfavored zone. The stock has returned only 2.77% in the past quarter, significantly underperforming the iShares S&P/TSX Index ETF (XIU.TO), which returned 10.38%. This underperformance is reflected in its SMAX score of 4 out of 10, indicating weakness compared to its peers and other asset classes. A point and figure chart shows top-line resistance at $55.67 and closest resistance at $50.42, a level the stock failed to break despite the recent announcement. Currently, CNQ shares are forming a consolidation triangle, which could lead to either bullish or bearish outcomes. Given the current trends and a potential need for equity raises to strengthen the balance sheet post-acquisition, the odds appear more likely for a downside completion of the triangle, with support levels at $43.03 and a major support zone between $37.46 and $38.21.
In the context of crude oil pricing, the market is experiencing lower multi-year highs, with a major top just above $100 in 2022. Recent peaks in 2023 and early 2024 indicate a persistent downward trend. Crude is now trading within a range of $80 to $65, with the latest price at $73.89, placing it in the middle of this range. The Energy Futures SMAX score of 4 further suggests that investors may want to explore alternatives with better growth potential, as current energy market conditions pose opportunity costs for SIA practitioners.
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