CALGARY — Canadian Natural Resources Ltd. says it choked back heavy oil production by about 17,000 barrels per day in the first quarter to avoid selling at low prices it blames on poor pipeline capacity out of Western Canada.
The company says it is now gradually ramping up output from its heavy oil wells in northern Alberta as the discount being paid for Western Canadian Select grade oil has narrowed in comparison to New York-traded West Texas Intermediate.
Fellow Calgary-based oilsands producer Cenovus Energy Inc. last week reported that it had also reduced heavy oil output in the first quarter for the same reason but was bringing production back on stream.
The differential closed at US$17.55 per barrel on Wednesday after trading at around US$30 earlier this year.
“With the current pipeline restrictions for both crude oil and natural gas, the company will be proactive in our actions to manage our assets and preserve long-term value,” said president Tim McKay on a conference call to discuss first quarter results.
“As a reminder, heavy oil only makes up 25 per cent of our volumes but for every US$1 change in the differential it is approximately $90 million in after-tax cash flow to our company.”
Uncertainty continues to plague proposed new pipelines. The Keystone XL project from Alberta to Texas has been delayed, the future of an expanded Trans Mountain line to Vancouver is in doubt and a routing dispute has emerged over Enbridge Inc.’s Line 3 export pipeline replacement project.
Canadian Natural said its North American natural gas production fell by three per cent from the fourth quarter, mainly due to 32 million cubic feet per day affected by the partial shutdown of a third-party gas processing plant but also due to the voluntary shut-in of wells producing about 14 million cf/d of natural gas because of low prices.
Analysts were impressed that the company was able to reduce its cost guidance for the year by $2 per barrel of synthetic crude oil after a full quarter of production from an expansion at its Horizon oilsands mine and strong performance at the oilsands operations it bought from Royal Dutch Shell last year.
Canadian Natural reported adjusted net earnings of $885 million or 71 cents per share in the three months ended March 31, beating analyst expectations of $855 million or 66 cents.
A year ago, it earned $277 million or 25 cents.
It reported record production of 1.12 million barrels of oil equivalent per day in the quarter, up from 877,000 boe/d in the year-earlier period.