With expectations to grow oil and natural gas production volumes by about 10% next year, Canadian Natural Resources Ltd. announced it would increase its fourth quarter spending and up its capital budget for 2005.
“Next year looks like another strong one for Canadian Natural,” predicted Chairman Allan Markin. Along with stronger production, Markin said the company expects to set a new cash flow record in excess of C$4.3 billion. “Additionally, you will see us continue to exploit assets we acquired during 2004.” This year, the Calgary-based independent has acquired several heavy oil drilling assets, including Petrovera and also has expanded its deep natural gas assets in the Alberta Foothills and overseas.
Canadian Natural’s crude oil and natural gas liquids target is 307,000-335,000 bbl/d before royalties, representing a midpoint increase of 13% from the midpoint 2004 annual guidance. The gas production target is 1,448-1,510 MMcf/d before royalties, representing a 7% midpoint increase over 2004. Equivalent production is targeted at 548,000-586,000 boe/d before royalties, which is a 10% midpoint increase over this year.
In North America, Canadian Natural expects its 2005 program to be highlighted by expanded drilling programs in Northwest AB and Northeast BC core regions. Overall, it expects to drill 1,033 gas wells in its core regions next year, up from 803 this year.
“Drilling in 2005 reflects higher activity levels targeting the shallow Notikewin zone in Northeast British Columbia as well as increased Cardium drilling in Northwest Alberta,” the company said in a statement. “Both shallow and coalbed methane drilling will increase in the South Alberta core region. Conventional drilling is also targeted to increase in North Alberta. During 2005 approximately 90 wells targeting deep gas are budgeted, including nine in the Foothills region. The Foothills region drilling increases reflect both increased focus on the area as well as new drilling targets identified on assets acquired during the first half of 2004.”
For 4Q2004, Canadian Natural has increased capital spending levels directed toward natural gas drilling in an effort to reduce pressures of a tight 2005 winter drilling season by starting earlier. The effort includes a detailed and sequential drilling program “that will enhance the procurement of better drilling rigs and crews for the winter season, both of which are an integral part of cost control in an inflationary environment.” The company expects to actually use about 10 less drill rigs this year while drilling a similar number of wells during the winter season.
North American midpoint average natural gas production is expected to increase by approximately 9% from midpoint 2004 guidance levels. Organic growth will account for approximately half of this growth with the remainder reflecting the full year impact of 2004 acquisitions. The 2005 capital budget for North American natural gas is $1,350 million.
Cash flow is estimated at C$4.3-4.5 billion (C$16-16.80/common share), based on a forecast average of a West Texas Intermediate oil price of US$42.50/bbl, a New York Mercantile Exchange gas price of US$6.60/MMBtu and an exchange rate of C$1.00 = US$0.79.
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