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Positive Momentum

Canadian Natural Resources boosts Alberta investment

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It’s encouraging and positive good news for Alberta’s recovery! A $250-million boost of the capital budget, adding some 60 drilling locations and putting three additional drilling rigs to work creating 1,000 more full-time equivalent jobs.

It’s a welcomed way to start 2020 for Canadian Natural Resources, the respected oil and gas producer operating in Western Canada as well as in the U.K. North Sea and offshore Africa.

“We continue delivering sustainable growth through our blend of large resource assets,” says Canadian Natural spokesperson Julie Woo. “The recent changes in market access will result in additional investment, jobs and long-term value for our shareholders.”

The contentious battle to get Alberta oil to market has taken its toll. Although the stats are undisputable – Canada holds the world’s third-largest crude reserves, primarily in northern Alberta’s oilsands – the controversies and delays in building new export pipelines (mostly due to environmental opposition and regulatory hurdles) have slowed development of Canada’s – and particularly Alberta’s – energy sector.

At the start of 2019, Alberta introduced mandatory production curbs to reduce a glut of oil in storage and lift prices, while it continued to hold broader curtailments in place to maintain production at levels not exceeding export pipeline capacity.

This past November, the provincial government tackled the pipeline congestion that stranded crude in Alberta storage tanks and widened the discount on Canadian oil versus U.S. crude to record levels. Alberta’s recent announcement that the drilling of new conventional oil wells would not be subject to government production limits is also paying off, helping the recovery and boosting Alberta’s economy. It has also allowed companies to produce barrels at set levels, as long as that output moves by rail.

“Canadian Natural will spend $4.05 billion this year, about $250 million more than last year,” Woo says. “Canadian Natural’s large, balanced and diverse asset base is complemented by an extensive network of owned and operated infrastructure. It is supported by a deep inventory of long-life low-decline assets and conventional and unconventional assets.”

The company also says it expects free cash flow of about $4.8 billion in 2020, and plans to spend about $2.4 billion to buy back shares. “Canadian Natural is focused on enhanced margin growth and high return on capital projects that can deliver leading free cash flow with production and value growth opportunities.”

Canadian Natural expects 2020 production of 1.14 million to 1.21 million barrels of oil equivalent per day (BOE/D), higher than the 1.09 million to 1.15 million BOE/D estimates for 2019. “The 2020 production could have been higher by 10,000 barrels per day to 25,000 bpd, if not for Alberta’s mandatory curbs.”

Like many oil and gas sector experts, she agrees about unpredictable speed bumps ahead. “Western Canadian Sedimentary Basin (WCSB) natural gas demand is growing, supply is decreasing in the near term and production is currently constrained by takeaway capacity.”

Woo is cautiously optimistic about a turnaround in the future and adds oil market access is expected to improve in early 2020. “Pipeline optimizations and expansions, rail and the North West Refinery are anticipated to provide additional market access in the short term. Enbridge Line 3, Trans Mountain expansion project TMX and Keystone XL pipelines will provide incremental export capacity and new markets in future years.”

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