Of all the publicly listed companies operating in Canada’s oil patch, Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) is one of the largest and oft-looked to outfits for a generally barometer of how the sector is doing.
With oil prices collapsing, and in particular the price of Western Canadian Select (WCS), Canadian Natural’s oil sands operations have taken a big hit, dropping the company’s share price like a stone in recent weeks.
Currently, Canadian Natural’s revenue comprises of approximately 40% oil sands production, due mainly to the company’s acquisition of Canadian Oil Sands in years past.
This acquisition, among others, has led to a relatively high debt load, a key factor in why Canadian Natural’s stock price has been hit particularly hard. The price volatility we’ve seen is likely to exacerbate concerns about this company’s balance sheet, so I’d wait for a while before jumping in at these levels.
Canadian Natural is a great example of a company with a balance sheet that the market has deemed is too risky. Every investor needs to assess the balance sheet strength of any company in their portfolio or on their watch list before jumping in, as the stock market undoubtedly will be a ruthless place in the coming quarters to investors that have chosen to invest in companies with low-quality balance sheets.
Invest wisely, my friends.