Yahoo Finance Oil and gas earnings: Crude price spike prompts analyst calls for ‘much stronger’ Q3
Imperial Oil (IMO.TO)(IMO) is set to kick off third-quarter earnings among major players in Canada’s oilpatch on Friday, offering a fresh read on how companies fared as benchmark crude prices climbed to a 10-month high above US$94 per barrel.
West Texas Intermediate (WTI) crude (CL=F) prices averaged US$82.10 for the three months ended Sept. 30. That reporting period preceded increased volatility that has roiled commodity markets amid fears of a widening war in the Middle East, following the October 7 attacks by Hamas on Israel.
For the third quarter, RBC Capital Markets analyst Greg Pardy is calling for big Canadian oil and gas companies to showcase “much stronger financial performance amid robust upstream-downstream commodity price tailwinds.” He points to an 11 per cent quarterly jump in WTI prices, as the loonie held steady against the U.S. dollar.
“Oil prices caught tailwinds in the third-quarter fueled by expectations of a soft-landing and Saudi Arabia’s extended unilateral one million barrel per day production cut through the remainder of the year,” Pardy wrote in a recent note to clients.
Among the oilsands-weighted majors - Canadian Natural Resources (CNQ.TO)(CNQ), Suncor Energy (SU.TO)(SU), Cenovus Energy (CVE.TO)(CVE), and Imperial - he estimates free cash flow jumped 127 per cent in the third quarter, as the group shaved $3.1 billion from its collective net debt pile.
National Bank analyst Travis Wood similarly highlights “significant strengthening in crude prices quarter-over-quarter,” as well as the absence of wildfire-related impacts on production.
“We are expecting cash flow per share to be up on average by 23 per cent on a quarter-over-quarter basis,” he wrote in a research note.
The iShares S&P/TSX Capped Energy Index ETF (XEG.TO) - a basket of Canada's largest oilsands stocks - has added more than nine per cent year-to-date.
Looking ahead, Wood says Canadian heavy oil producers are well positioned to grow their share of the global crude market once the much-delayed, government-owned Trans Mountain expansion project from Alberta to the Pacific Coast comes online. That’s expected sometime next year.
Both Wood and Pardy expect capital discipline and returns to shareholders to remain in focus in the coming quarters, a theme that's persisted since oil's recovery from plunging prices at the height of COVID-19 shutdowns. Pardy estimates the Canadian majors will return a "hefty" $30 billion to shareholders next year via dividends and stock buybacks.
Imperial is scheduled to report its third quarter financial results on Friday morning. The company says it will host a conference call for analysts and investors at 11 a.m. ET. Canadian Natural Resources and Cenovus are set to report on Nov. 2. Suncor is scheduled to report on Nov. 8.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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