Canadian Natural cuts $680M from budget
Company reports record production
Stock in Canadian Natural Resources Ltd. rose six per cent Thursday after it chopped $680 million from its capital budget for 2012 while reporting record production and lower earn- ings. Canada’s second-largest natural gas producer noted it has shut in an average of 20 million cubic feet per day of the heating fuel so far this year and currently has 40 mmcf/d it is not producing because of low prices.
It said it will cut $110 million from its 2012 gas development budget (part of $275 million in cuts to non-oilsands assets), drilling 36 fewer net wells than the 71 it had planned and deferring the completion of 10 wells and a facility expansion at its northeastern British Co- lumbia Septimus liquids-rich gas field. In spite of those cuts and $ 3 3 0 mil - lion lower spending at its Horizon oilsands mine expansion project due to cost savings and deferrals, output this year is expected to increase to between 1,220 and 1,235 mmcf/d of gas and between 454,000 and 474,000 barrels per day of crude oil and liquids.
The total capital budget is now $6.68 billion.
“We’ve reduced our capital spending in 2012 by roughly $700 million, a 10 per cent reduction, and at the same time slightly increased our overall production guidance for 2012,” boasted president Steve Laut on a conference call with analysts.
The company reported net earnings of $753 million in the three months ended June 30, down from $929 million in the same period a year earlier mainly due to lower realized prices for its products: gas, heavy oil, synthetic crude and natural gas liquids.
It had record production of 680,000 barrels of oil equivalent per day for the quarter.
Oil and liquids output climbed 34 per cent to 471,000 bpd as Horizon, shut down by a fire in the second quarter of 2011, churned out a slightly better than capacity 115,000 bpd.
That was due in part to the addition of a third ore preparation plant, and the company drilled more primary heavy oil wells.
North American light crude oil and liquids production increased 17 per cent from a year ago to 62,500 bpd in the quarter and gas output rose one per cent to 1,255 mmcf/d.
Canadian Natural’s international operations fell 46 per cent year-over-year to 17,600 bpd, mainly due to a longer than expected thirdparty pipeline outage in the North Sea.
Analyst Andrew Potter of CIBC World Markets said in a morning note that Canadian Natural beat expectations on financial results and was in line with production estimates.
“Overall the company’s Q2 results were positive,” he wrote, pointing out operating earnings per share of 55 cents was higher than consensus predictions.
Phil Skolnick, an analyst for Canaccord Genuity, said Canadian Natural’s production at Horizon was higher than he had expected and answered lingering questions about reliability at the mine and upgrader.
At the close, CNQ stock was up six per cent or $1.48 at $31.39. Its 52-week high is $41.12 reached in February.
Canadian Natural generated cash flow from operations for the quarter of $1.75 billion, up 13 per cent from a year earlier. It reported it has bought back for cancellation six million of its shares at an average price of $28.91 each.
The company reported adjusted net earnings from operations for the quarter were $606 million, compared with $621 million in the same period of 2011.