Canadian Natural to Boost 2015 Output as Prices Decline

Canadian Natural Resources Ltd. plans to boost oil and natural gas production next year by 11 percent, surpassing analysts’ estimates, as it increases spending in the face of declining prices.

Canada’s largest producer of heavy oil has budgeted C$8.6 billion ($7.5 billion) for capital expenditures in 2015, a 4.6 percent increase from current spending, excluding acquisitions. Canadian Natural can “weather volatility in commodity prices,” the Calgary-based company said in a statement today.

Output is forecast to rise to the equivalent of about 892,500 barrels of oil a day, above the 859,135-barrel average of 10 analysts’ estimates compiled by Bloomberg. Canadian Natural estimates U.S. crude prices, which have fallen 27 percent since a June high on fears of slowing global demand and rising supplies, will average $81 a barrel. Canadian heavy oil will average 18 percent less than the U.S. benchmark, the company forecast.

“Even in a weak oil pricing environment, CNQ expects to generate material free cash flow in 2015 -- a number we expect to grow substantially over the next five years,” Justin Bouchard, an analyst at Desjardins Securities Inc. in Calgary, wrote in a note today, referring to the company’s ticker symbol.

The company today reported adjusted third-quarter earnings that exceeded estimates by 14 Canadian cents a share. Canadian Natural climbed 3.8 percent to C$39.70 at the close in Toronto.

‘Flexible’ Capital

“Our capital programs are flexible, allowing us to pro-actively respond to market conditions and enabling us to allocate capital to those projects which generate the highest returns,” Chief Financial Officer Corey Bieber said in a statement today.

Production has expanded since Canadian Natural bought assets from Devon Energy Corp. this year. It’s also rising from the Kirby oil-sands project and from the Primrose East project after Alberta regulators gave permission to resume steam injections following a bitumen leak last year in the area. Regulators also approved development at Primrose South and the company applied for permission to carry out additional work at Primrose East.

Quarterly production rose to the equivalent of 797,000 barrels a day from 702,938 for the same period a year earlier. The increase came even as it had a 25-day halt in output from the Horizon project to accommodate work to expand production.

Royalty Spin

Net income dropped to C$1.04 billion, or 94 cents a share, from C$1.17 billion, or C$1.07, a year earlier, as added oil-sands output couldn’t make up for a decline in prices. Canadian Natural has 24 buy and two sell recommendations from analysts.

Canadian Natural said it may delay a decision on what it intends to do with so-called royalty lands, which generate funds from payments by other companies drilling on the properties, until early next year.

Encana Corp., another Calgary-based energy producer, spun off its royalty lands for C$1.46 billion in May to form PrairieSky Royalty Ltd., in Canada’s largest IPO in 14 years. Encana later sold its entire stake in the company for C$2.6 billion.

(An earlier version of the story was corrected to change million to billion in ninth paragraph.)

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