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

Chief Medical Officer Dr. Deena Hinshaw, accompanied by Premier Jason Kenney, in March when the pandemic had just started in Alberta. On Wednesday, Kenney said COVID-19 vaccine will be distributed in three phases in the province. Photo by Government of Alberta
COVID-19 vaccine available to Albertans in January – distributed in 3 phases

Vaccine won’t be widely available until the fall of 2021

The G.H. Dawe Community Centre in Red Deer is getting a twinned ice rink, spray park and other upgrades as part of the 2021 capital budget. (Advocate file photo).
Red Deer city council approves $43.3 million upgrade to G.H. Dawe Centre

In a 7-2 vote, the majority on council felt it’s about time

Olds College received 10 Angus heifer calves, donated by The Canadian Red Angus Promotion Society. (File photo)
Olds College and TELUS to develop new agriculture technologies

TELUS Agriculture is investing $1 million in the Olds College Smart Farm.… Continue reading

Const. Jason Tress leaves Red Deer provincial court. An RCMP officer, whose name is under a publication ban, testified Tress sexually assaulted her at a party in 2012. Photo by PAUL COWLEY/Advocate staff
Former Red Deer RCMP officer denies sexually assaulting colleague

Former Const. Jason Tress took the stand in his own defence on Wednesday

A new public washroom, proposed for downtown Red Deer, was tabled in the city’s 2021 budget discussions so more questions can be answered about the proposal. (Advocate file photo).
Proposed downtown public washroom is stalled in 2021 budget discussions

More questions need to be answered about the $511,500 project

Dan Cochrane, senior pastor at CrossRoads Church. Contributed photo
CrossRoads Church closes its doors for two weeks after staff member tests positive for COVID-19

CrossRoads Church made the decision to cancel in-house services for two weeks… Continue reading

Goals galore for Ronaldo, Giroud, Neymar in Champions League

Goals galore for Ronaldo, Giroud, Neymar in Champions League

Toronto Blue Jays general manager Ross Atkins is seen at a media availablity to introduce new pitcher Shun Yamaguchi in Toronto on January 15, 2020. THE CANADIAN PRESS/Chris Young
Jays ‘prepared’ if things pick up on free agency and trade fronts this off-season

Jays ‘prepared’ if things pick up on free agency and trade fronts this off-season

Shaquille Murray-Lawrence, left, and teammate Taylor Austin are shown during training in Whistler, B.C., in this undated handout photo. Montreal Allouettes running back Shaquille Murray-Lawrence is used to pysching himself up to sprint down a field, evading a crush of muscled men the entire way. But mentally preparing for his latest venture required bracing for a whole new set of anxieties. As he got ready to hop in a bobsleigh for the first time, Murray-Lawrence knew he'd be zipping down an icy track faster than cars are allowed to travel down most highways. Murrary-Lawrence, 27, is one of three CFL players who joined the national bobsleigh team after the league canceled its season due to the COVID-19 pandemic. THE CANADIAN PRESS/HO - Shaquille Murray-Lawrence
Sliding into a new sport: CFLers turn to bobsled after football season wiped out

Sliding into a new sport: CFLers turn to bobsled after football season wiped out

North Carolina State defensive lineman Daniel Joseph (99) celebrates with linebacker Isaiah Moore after Moore forced a Liberty safety during the second half of an NCAA college football game Saturday, Nov. 21, 2020, in Raleigh, N.C. THE CANADIAN PRESS/Ethan Hyman, The News & Observer via AP, Pool
Canadian defensive lineman Daniel Joseph enjoying a banner first campaign at NC State

Canadian defensive lineman Daniel Joseph enjoying a banner first campaign at NC State

A Canadian Pacific Railway employee walks along the side of a locomotive in a marshalling yard in Calgary on May 16, 2012. CP says an investigation is underway following the release of a video showing one of the company's trains running over dozens of pronghorn antelope in southwestern Saskatchewan.THE CANADIAN PRESS/Jeff McIntosh
CP investigating after video shows train running over pronghorn antelope herd

CP investigating after video shows train running over pronghorn antelope herd

Bullet holes from 2014 attack on Parliament Hill to be left untouched in renovations

Bullet holes from 2014 attack on Parliament Hill to be left untouched in renovations

Marc Miller, Minister of Indigenous Services, holds a news conference in Ottawa on Wednesday, Dec. 2, 2020., to announce additional funds to improve access to safe drinking water on reserves. THE CANADIAN PRESS/Sean Kilpatrick
Boil-water advisories at First Nations communities to remain past March 2021: feds

Boil-water advisories at First Nations communities to remain past March 2021: feds

Wilner Cayo, centre, and Frantz Andre attend a demonstration outside Prime Minister Justin Trudeau's constituency office in Montreal on May 23, 2020, where they called on the government to give residency status to migrant workers as the COVID-19 pandemic continues in Canada and around the world. THE CANADIAN PRESS/Graham Hughes
Refugee advocates criticize Canada’s decision to resume deportations during COVID-19

Refugee advocates criticize Canada’s decision to resume deportations during COVID-19

Most Read