​Canadian Natural boosting spending by $250MM to drill more conventional oil wells

CALGARY — Shares in Canadian Natural Resources Limited rose by almost four per cent on Wednesday after it announced it will spend $250 million more in 2020 than it did last year to drill conventional oil wells in Alberta.

On the Toronto Stock Exchange, the Calgary-based oil and gas producer's stock jumped as high as $37.65 by mid-afternoon, up $1.44, but short of its 52-week high of $42.56.

Canadian Natural said the increased spending will allow it to add three rigs to drill at about 60 locations, a move it said would create about 1,000 jobs in Alberta.

It linked the decision to the recent Alberta government move to exempt certain new conventional wells from the oil curtailment program it enacted last January, as well as the province's corporate tax cuts announced last spring.

“As we move forward to 2020 and beyond, we see opportunities to further enhance our effective and efficient operations,” said president Tim McKay on a webcast from the company's investor day.

“As WTI (West Texas Intermediate) prices improve, there is even more upside for our shareholders.”

The 2020 capital spending budget of $4.05 billion, compared with $3.8 billion in 2019, is expected to result in average production of about 1.17 million barrels of oil equivalent per day, about five per cent higher than 2019.

The production forecast assumes that Alberta oil curtailments continue through 2020, thus removing 10,000 to 25,000 barrels per day of average production.

Six more drilling rigs could be put to work if the government expanded the elimination of curtailment to include newly drilled conventional heavy oil wells, Canadian Natural said.

The budget is in line with other major Canadian companies with both oilsands and refining assets who are forecasting small or no increases in spending to grow oil output in 2020.

Earlier this week, Suncor Energy Inc. announced a 10 per cent increase in its 2020 budget to $5.7 billion, but said none of the new money would go to oil production-related spending.

Meanwhile, Husky Energy Inc. cut $100 million from its 2020 capital guidance in a five-year forecast released last spring to $3.3 billion while confirming it had reduced staffing by 370 people this year. A further cut of $400 million is expected in 2021.

Canadian Natural said Wednesday that production at the Kirby North project, where steam is used to extract bitumen from wells, will ramp up through 2020 and reach capacity of 40,000 bpd in early 2021.

The company, the largest producer of natural gas in Canada, says production of the price-challenged fossil fuel will continue to decline next year as it makes minimal investments.

© 2019 The Canadian Press

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