What does this imply for the Canadian energy sector?
Canadian Natural Resources Ltd. (CNRL) has announced on Thursday further cuts to its natural gas drilling activity. This decision comes as the company capitalizes on its vast heavy crude oil reserves and increased access to the expanded Trans Mountain pipeline, amidst a persistent slump in Western Canadian natural gas prices.
CNRL, operator of the largest heavy crude oil land base in Canada and a major player in the oil sands, now plans to drill just 74 natural gas wells in 2024, down from its original target. According to a Bloomberg report, this move underscores the company’s strategic shift towards its core strengths in a challenging market.
“The great thing about Canadian Natural is we do have a natural hedge in terms of our overall gas production, due to fuel gas requirements at our thermal and oilsands mining developments,” said president Scott Stauth during a conference call, highlighting the advantage of their diversified operations, which include the Horizon Oil Sands mine and significant thermal in situ projects.
Despite the reported cuts to drilling, CNRL maintains its 2024 natural gas production forecast, at between 2.1 billion and 2.2 billion cubic feet per day on average.
The company reported a strong third-quarter profit of $2.27 billion, exceeding analyst expectations. This success is partly attributed to the company’s increased access to the Trans Mountain pipeline expansion, which allows CNRL to transport more heavy crude from their Alberta operations to international markets.
Starting December 1st, CNRL will boost its contracted capacity on the pipeline by 75,000 barrels per day, reaching a total of 169,000 barrels per day.
“Certainly when you take a look at the opportunities off the West Coast to further expand and diversify to additional refining destinations, that provides a significant forward-looking opportunity for us,” Stauth said.
Analysts are optimistic about CNRL’s future. RBC Capital Markets analyst Greg Pardy described the company’s third-quarter results as “flawless” and reiterated CNRL as his “favorite senior producer.”
According to Bloomberg, the company reported that profit amounted to $1.06 per diluted share for the quarter that ended Sept. 30 compared with $1.06 per diluted share a year earlier. On an adjusted basis, Canadian Natural reported to have earned 97 cents per diluted share for the quarter, down from an adjusted profit of $1.30 per diluted share in the same period last year.
LSEG Data & Analytics noted the average analyst estimated a profit of 90 cents per share.
