CALGARY — Canadian Natural Resources Ltd. said Thursday it has further reduced its natural gas drilling activity due to persistent low prices in Western Canada.
Canada's largest oil and gas producer indicated earlier this year that it would reallocate investment from its natural gas development program in favour of heavy crude oil wells instead.
In a conference call Thursday, president Scott Stauth said the company now plans to drill a total of 74 natural gas wells in 2024, 17 fewer than its original target for the year.
But while the weak pricing environment has caused CNRL to delay the bringing on of future production from new wells, the company's 2024 forecast for natural gas production remains unchanged, at between 2.1 billion and 2.2 billion cubic feet per day on average.
And Stauth pointed out that CNRL benefits from its diversified operations in times of commodity price volatility. For example, in 2024, the company plans to use approximately 38 per cent of the natural gas it produces in its own operations, to power the facilities at its oilsands sites.
"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," Stauth said.
Over the summer and fall, natural gas prices in Western Canada fell to their lowest levels in years. On certain days, the Alberta natural gas benchmark AECO price declined to mere pennies per gigajoule.
Prices have improved with the cooler temperatures, as Canadians begin to turn on their natural gas-fired furnaces. In the past week, AECO spot prices have been within an approximate range of 90 cents to $1.30 per gigajoule, an improvement over pricing in August and September but still well below the 2023 average price of $2.74 per gigajoule, according to Alberta Energy Regulator figures.
The prices have come due to a combination of increased production levels — up about six per cent year-over-year so far in 2024 —as well a mild winter last year that resulted in less natural gas consumption for heating.
There is now an oversupply of natural gas in Western Canada, so much so that natural gas storage capacity in Alberta is essentially full.
But CNRL's position as the operator of the largest heavy crude oil land base in Canada is an advantage as the company seeks to pivot its attention to heavy oil well drilling instead.
The company's heavy crude oil production averaged 76,808 barrels per day in the third quarter, a one per cent increase year-over-year due to strong drilling results from the company's multilateral well program.
CNRL is also benefiting from its position as a major committed shipper on the Trans Mountain pipeline expansion, which opened earlier this year. The pipeline provides Canadian oil producers with additional export capacity to the West Coast, which has helped to reduce the discount Canadian heavy oil typically trades at in comparison to the U.S. benchmark price.
Stauth said Thursday that beginning Dec. 1, CNRL will increase its contracted crude oil capacity on the Trans Mountain expansion pipeline by 75,000 barrels per day, to 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," he said.
In recent years, CNRL has been the darling of the investor community for its track record of strong financial results and the third quarter of 2024 was no exception.
RBC Capital Markets analyst Greg Pardy called the company's third-quarter results "flawless" and said in a note Thursday that CNRL remains his "favourite senior producer."
CNRL reported a third-quarter profit of $2.27 billion Thursday, down from $2.34 billion in the same quarter last year due to lower commodity prices.
The company said the 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 said it earned 97 cents per diluted share for the quarter, down from an adjusted profit of $1.30 per diluted share in the same quarter last year.
The average analyst estimate had been for a profit of 90 cents per share, according to LSEG Data & Analytics.
CNRL's daily total production for the quarter averaged 1,363,086 barrels of oil equivalent per day, down from 1,393,614 a year ago.
This report by The Canadian Press was first published Oct. 31, 2024.
Companies in this story: (TSX:CNQ)
Amanda Stephenson, The Canadian Press