‘Ottawa’ Canadian Natural Resources Ltd Loss Narrows on Lower Costs, Says Horizon Project on Track for November
CALGARY — Canadian Natural Resources Ltd. is three months away from pumping oil at a major oilsands expansion, but company executives said Thursday that crude prices need to stabilize before it sanctions similar sized-projects in the future.
CNRL, which produces more oil and gas than any other company in Canada, announced during a Thursday earnings call that it would begin pumping oil in November from a new phase of its Horizon oilsands plant, an expansion project that has been under construction since before oil prices began their slide in 2014.
The West Texas Intermediate benchmark oil price dipped below US$40 per barrel this week, which reversed a price rally to over US$50 per barrel between April and July of this year.
Before CNRL sanctions another major, multi-year project such as Horizon, “we’d want to see more stability,” CNRL president Steve Laut said in an interview.
In the meantime, Laut said the company could grow its production with smaller steam-based oilsands projects and lower-cost, conventional oil and gas projects when prices permit.
CNRL posted a net loss of $339 million in the second quarter, which is slightly smaller than the $405 million net loss it reported during the same period last year.
Analysts shrugged off as short-term “noise” a series of recent events, including the wildfires around Fort McMurray, Alta. and a flood that shut down the Pine River gas plant in B.C., that affected the company’s operations and production.
Spectra Energy owns the gas plant, but its outage has forced CNRL to shut in 176 million cubic feet of daily natural gas production in the area.
Laut said the company is working to bring 50 million cubic feet back online by next week, with the rest of the volume resuming in September and then December.
“That stuff is temporary. That stuff goes away,” Edward Jones senior analyst Lanny Pendill said. “Where they beat (analysts’ expectations) on the earnings side was on costs.”
The company shaved another $430 million out of its operating costs in the first half of 2016, after trimming $950 million in 2015.
“It’s a never-ending process,” Laut said of cost-cutting. He also said that 50 to 60 per cent of CNRL’s savings were structural, meaning those savings won’t be lost if oil prices rise and oilfield activity levels begin to recover.
“We recommend investors look through what we view to be the negligible impact of shut-in gas production, and continue to focus on the step change in free cash flow that is expected to occur later this year as Horizon Phase 2B comes online,” Raymond James analyst Chris Cox said in a research note.