Oil-Sands Crisis Hits Home as Canadian Natural Cuts Spending
(Bloomberg) -- The pipeline shortage that has been strangling the Canadian oil industry is weighing on spending plans for next year, with one major producer slashing its capital budget for 2019 by C$1 billion ($750 million).
Canadian Natural Resources Ltd., citing a lack of shipping options, said on Wednesday that it’s targeting a base capital plan of C$3.7 billion for next year, about C$1 billion less than its normalized plan. Of next year’s spending, only 16 percent is aimed at increasing output, and the remainder is allocated to keeping it flat.
The oil-sands producer, which is projecting 2019 output equivalent to as much as 1.12 million barrels of crude a day, is the first major Canadian energy company to announce its spending plans for next year. With Western Canada’s pipelines overflowing, its crude selling at deep discounts and the province of Alberta mandating industry-wide production cuts, the company’s reduced spending may be a harbinger of similar announcements from its peers.
Canadian Natural said it has the flexibility to invest as much as C$700 million more next year if prices and market access improve. That capital would be focused on increasing production in 2020 and beyond, rather than immediately.
The company is targeting crude and natural gas liquid production of 782,000 to 861,000 barrels per day next year, in line with this year’s levels. Natural gas output will be 1.49 billion to 1.55 billion cubic feet a day, a 2 percent drop from this year.
Shares of the Calgary-based producer rose 4 percent to C$37.23 at 12:32 p.m. in Toronto. The stock was down 20 percent this year through Tuesday, compared with a 15 percent decline for the S&P/TSX Energy Index.
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