Canadian Natural Resources Ltd. logo is seen in this undated handout image. THE CANADIAN PRESS/HO, Canadian Natural *MANDATORY CREDIT*

Tim McKay says conditions right for consolidation as Canadian Natural reports profit

Tim McKay says conditions right for consolidation as Canadian Natural reports profit

CALGARY — Conditions are right for more merger and acquisition activity in the Canadian oil and gas sector, says the CEO of Canadian Natural Resources Ltd.

On a conference call to discuss third-quarter results on Thursday, Tim McKay said the industry has reached a point in the business cycle where haves and have-nots are more clearly visible and that allows more deals to be completed.

“Obviously, there’s some very healthy companies and there’s some companies that aren’t so healthy … through the consolidation thing, there are opportunities to improve your operations both on capital and G and A (general and administrative) and such,” he said.

“I think on a broader basis there will continue to be some consolidation here over the next year.”

The comments came the morning after Calgary rival Tourmaline Oil Corp. announced a deal to purchase two private oil and gas companies for a total of about $526 million in cash and shares, a move expected to solidify its position as Canada’s largest natural gas producer.

Tourmaline shares rose by as much as $1.70 or 9.8 per cent to $18.92 in Toronto on Thursday.

Canadian Natural, a former top gas producer, said Thursday it is already ramping up investment in drilling on gas-and-liquids producing assets it obtained through its $111-million cash takeover of Calgary-based Painted Pony Energy Ltd., which closed in early October.

“We remain on track to add 35 million cubic feet per day of natural gas volumes annually,” said McKay, noting that forward strip prices have prompted the company best known for its oilsands operations to redirect capital funding to gas drilling after years of neglect.

Canadian Natural considers gas output a hedge against costs in its oilsands operations, which consume large amounts of the fuel. It is targeting production of 1.6 billion cf/d in the current quarter.

The Alberta government announced recently it will end its oil production curtailment program in December, prompting some analysts to predict wider price discounts for Alberta crude as more barrels come back into the market.

But McKay said on the call that while he expects overall production to increase over the winter, spikes in price discounts will likely be “short-term blips,” provided that export pipelines are able to operate without interruption and given the current relatively low oil storage levels.

Canadian Natural reported a third-quarter profit of $408 million, down from nearly $1.03 billion in the same quarter last year due to lower oil prices, but up from a loss of $310 million in the second quarter when oil prices plunged due to effects of the COVID-19 pandemic.

On an adjusted basis, earnings from operations were $135 million for the quarter, down from $1.23 billion in the same quarter last year but well ahead of an adjusted loss of $772 million in the second quarter.

Overall production in the third quarter was 1.11 million barrels of oil equivalent per day as the company completed maintenance at its oilsands mining operations, down from 1.176 million boe/d in the third quarter of 2019 and 1.165 million boe/d in the second quarter of 2020.

In reports, analysts said Canadian Natural beat expectations on cash flow and met forecasts for production.

“Earlier in the year, CNQ was under pressure to cut its dividend,” said Credit Suisse analyst Manav Gupta.

“However, management remained very confident in its ability to generate sufficient cash to fully cover the dividend. We believe today’s results will prove that management was right.”

Canadian Natural shares rose by as much as 37 cents or 1.6 per cent to $22.58 in Toronto on Thursday.

This report by The Canadian Press was first published Nov. 5, 2020.

Companies in this story: (TSX:CNQ, TSX:TOU)

Dan Healing, The Canadian Press

energy sector

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Asymptomatic testing will now be available for "priority groups" who are most likely to spread the COVID-19 virus to vulnerable or at-risk populations. File photo by THE CANADIAN PRESS
Marcus Golczyk, with Taco Monster, hands food to a customer during Food Truck Drive and Dash in the Westerner Park parking lot in Red Deer Friday afternoon. The drive-thru event will run every Thursday from 4-7 p.m. and Friday from 11 a.m. to 2 p.m. through June. Photo by SEAN MCINTOSH/Advocate staff
Food Truck Fridays, Food Truck Drive and Dash return in Red Deer

Red Deerians are able to take in a drive-thru food truck experience… Continue reading

Don and Gloria Moore, of Red Deer, are set to celebrate their 70th anniversary later this month. (Contributed photo)
Red Deer couple to celebrate 70th anniversary

Red Deer couple Don and Gloria Moore are set to celebrate their… Continue reading

Chris Scott, owner of The Whistle Stop Cafe, was put in handcuffs after an anti-restriction protest Saturday in the parking lot of the business. (Screenshot via The Whistle Stop Facebook page)
UPDATE: Central Alberta cafe owner arrested after anti-restriction protest

The owner of a central Alberta cafe, which was the site of… Continue reading

Alberta has 1,910 active cases of COVID-19 as of Wednesday. Red Deer is reporting five active cases, with 108 recovered. (File photo)
Red Deer now has 911 active COVID-19 cases

Central zone has 2,917 active cases

FILE - A firefighter wears a mask as he drives his truck. THE CANADIAN PRESS/Jonathan Hayward, File
VIDEO: Flames rip through Edmonton-area seniors complex, but no fatalities

ST. ALBERT, Alta. — Fire has destroyed part of a retirement complex… Continue reading

Quebec Premier Francois Legault chairs a premiers virtual news conference as premiers John Horgan, B.C., Jason Kenney, Alberta, and Scott Moe, Saskatchewan, are seen onscreen, Thursday, March 4, 2021 in Montreal. THE CANADIAN PRESS/Ryan Remiorz
Several provinces bring in new restrictions as high COVID-19 case numbers persist

Several provinces are gearing up to tighten public health measures once again… Continue reading

Members of the RCAF take part in a Royal Canadian Air Force change of command ceremony in Ottawa on Friday, May 4, 2018. The Royal Canadian Air Force is hoping Canada will open its doors to military pilots from other countries as it seeks to address a longstanding shortage of experienced aviators. THE CANADIAN PRESS/ Patrick Doyle
RCAF turns to foreign pilots to help with shortage as commercial aviators stay away

OTTAWA — The Royal Canadian Air Force is hoping Canada will open… Continue reading

An arrivals and departures information screen is seen at the Halifax Stanfield International Airport in Halifax on Thursday, Jan. 4, 2018. The chief executive of Atlantic Canada's largest airport is hoping for COVID-19 testing for arriving passengers "sooner rather than later," as an added measure to combat the province's third wave of the virus. THE CANADIAN PRESS/Andrew Vaughan
Halifax airport CEO hopes for more on-site COVID testing ‘sooner rather than later’

HALIFAX — The chief executive of Atlantic Canada’s largest airport is hoping… Continue reading

Shoppers wear mask as they shop at a nursery & garden shop on Mother's Day weekend during COVID-19 pandemic in Wilmette, Ill., Saturday, May 8, 2021. (AP Photo/Nam Y. Huh)
Tearful reunions mark second Mother’s Day under pandemic

Last Mother’s Day, they celebrated with bacon and eggs over FaceTime. This… Continue reading

Arizona Coyotes head coach Rick Tocchet, standing, watches the game during the second period of an NHL hockey game Wednesday, April 14, 2021, in St. Paul, Minn. The Wild won 5-2. (AP Photo/Craig Lassig)
Tocchet won’t return as coach of Coyotes after 4 seasons

GLENDALE, Ariz. — The Arizona Coyotes and coach Rick Tocchet have mutually… Continue reading

Columbus Blue Jackets head coach John Tortorella shouts at an official after a fight between Columbus Blue Jackets' s Gavin Bayreuther and Florida Panthers' Sam Bennett during the second period of an NHL hockey game, Monday, April 19, 2021, in Sunrise, Fla. (AP Photo/Lynne Sladky)
Tortorella out after 6 years as Columbus Blue Jackets coach

COLUMBUS, Ohio — John Tortorella is out as coach of the Columbus… Continue reading

A caribou grazes on Baffin Island in a 2008 file photo. A last-ditch attempt to save some of Canada's vanishing caribou herds is a step closer after a scientific review panel's approval of a plan to permanently pen some animals and breed them to repopulate other herds. THE CANADIAN PRESS/AP-Kike Calvo via AP Images
Parks Canada captive caribou breeding proposal gets OK from scientific review panel

JASPER, Alta. — A last-ditch attempt to save some of Canada’s vanishing… Continue reading

The smouldering remains of houses in Slave Lake, Alta., are seen in a May 16, 2011, file photo. The wildfire that is devastating large swaths of the northern Alberta city of Fort McMurray comes just five years after another blaze destroyed 400 buildings and left 2,000 people homeless in Slave Lake, Alberta. THE CANADIAN PRESS/Ian Jackson
Ten years later: Five things to know about the Slave Lake wildfire

A wildfire burned about one-third of Slave Lake in northern Alberta in… Continue reading

Most Read