Being in a cyclical industry, P/E valuations have been all over the map. P/E averaged 9.0X in 2009 post-financial crisis. The highest average in the past 20 years was 25.4X, in 2017. Debt was likely a bit factor in price variability. Debt was $8B in 2009, and rose to $23B in 2020 (it is $21B now). In a cyclical sector, investors like debt when oil prices are rising, and hate debt when commodity prices are dropping. This again contributes to extreme price volatility. Cash flow has ranged from $4.1B (2006) to $3.4B (2016) to $14B (last year). It is interesting that even with a period of negative oil prices in 2020, that was not the low year in cash flow ($4.7B). Of course, the company has shown good organic growth through much of the period noted. Note CNQ has also made multiple acquisitions in the period noted. Painted Pony (2020), Storm Energy (2021). We think the main confusion stems from the spin off of PSK in 2016. This of course changed some of the metrics for the company, though at the time it was not a giant deal. In the 20 years, CNQ has lost money in three years, 2015, 2016 and 2020. But it was never cash flow negative. It has not cut its dividend, and in fact raised its dividend in 2020 a few days before the world shut down. Current payout is 33% and the dividend is likely secure in all but the most extreme type of environment (worse than Covid, even).
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