Pathways CCS Deal Might Change The Case For Investing In Canadian Natural Resources Stock

• Canadian Natural Resources and four peers have agreed with the federal and Alberta governments to advance the Pathways CCS project, targeting capture of about 6 million tonnes of CO2 a year by 2035 and 16 million tonnes by 2045 under a July 2026 trilateral MOU that still requires binding terms.
• The shared CCS infrastructure could reshape long term oil sands cost structures and compliance planning for Canadian Natural Resources. It would tie any future production expansion more tightly to carbon policy, fiscal incentives and large upfront capital decisions that remain conditional ahead of the November 2026 and late 2027 decision points.
• We will look at how Canadian Natural Resources' investment narrative interacts with large scale CCS infrastructure commitments under the Pathways Alliance framework.

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Canadian Natural Resources Investment Narrative Recap

To own Canadian Natural Resources, you need to believe its long life oil sands and liquids weighted portfolio can keep generating strong cash flows even as earnings are forecast to decline about 9% a year over the next three years. The big near term swing factor is still commodity prices, which recently pushed the 1 year total return to 67.9% but also drove a sharp pullback in September.

The Pathways CCS announcement matters most as a potential enabler for long life oil sands projects that are currently paused. It is not an immediate earnings driver. The key risk stays the same. If regulatory and fiscal terms on expansions and carbon costs disappoint, fewer projects may be sanctioned and long run production and cash generation could be constrained.

The earlier memorandum of understanding on the Pathways Alliance CCS project was already on investors’ radar. This new trilateral commitment with Ottawa and Alberta builds on that. It is still conditional and subject to fiscal terms by November 2026 and a final decision in 2027 or early 2028. Until those dates pass, the CCS framework looks more like an option than a locked in asset.

For you, that means treating Pathways as a medium term catalyst linked to two things. First, whether cost allocation, subsidies and carbon pricing treatment make higher capital oil sands projects like Jackpine or Horizon expansions viable. Second, whether shared infrastructure and potential cost efficiencies can help Canadian Natural Resources manage forecast earnings pressure, support its dividend policy and maintain its current P/E discount to both peers and estimated fair value.

What The Consensus Pathway Implies For Canadian Natural Resources

Canadian Natural Resources' narrative projects CA$41.2b revenue and CA$8.7b earnings by 2029. This assumes revenue declines by 2.7% a year and an earnings decrease of CA$3.1b from current earnings of CA$11.8b.

Uncover why Canadian Natural Resources' fair value indicates a 3% potential upside to its current price before this discount closes.

Exploring Other Perspectives

One alternate view treats tightening carbon policy as the main risk for Canadian Natural Resources. The most cautious analysts were pencilling in revenue of about CA$38.0b and earnings of roughly CA$5.5b by 2029, far below consensus. Their narrative is much more pessimistic. After this Pathways CCS news, those expectations may shift, so explore several viewpoints before deciding what makes sense to you.

Explore 3 other Canadian Natural Resources fair value estimates, including one that suggests it could be worth just CA$72.57.

Form Your Own Verdict

Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so trust your own analysis and judgment.

• A great starting point for your Canadian Natural Resources research is our analysis highlighting 4 key rewards and 3 important warning signs that could impact your investment decision.
• See our latest analysis for Canadian Natural Resources. The report includes a comprehensive fundamental analysis summarized in a single visual, the Snowflake, making it easier to evaluate Canadian Natural Resources' overall financial position at a glance.

Looking for more investment ideas beyond Canadian Natural Resources?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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