Canadian Natural Resources increased natural gas production for the seventh consecutive quarter with 1.08 Bcf/d in 2Q02, or 22% more than the company’s production in the second quarter of 2001.

Allan Markin, Canadian Natural’s chairman, attributed the increase in part to the commissioning in early March of a Canadian Natural operated pipeline that connected the Ladyfern producing area in northeastern British Columbia to sales facilities in Alberta, and increased field take-away capacity. Natural gas production accounted for 49% of the company’s production this quarter.

Markin looks for results to continue to improve with the recent $2.3 billion acquisition of Rio Alto Exploration Ltd. “We now have a new core area for natural gas growth, prospects and multi-zone potential in this new core area in Northwest Alberta.”

The company also has assets in heavy oil, Pelican Lake oil, International light oil and its Horizon Oil Sands Project.

Nevertheless, Canadian Natural net showed lower earnings for the second quarter of $145 million ($1.18 per common share) compared with $286 million ($2.37 per common share) for the second quarter of 2001. The figure was up, however, from the first quarter’s $99 million ($0.81 per common share). The company had cash flow of $475 million ($3.86 per common share) compared with $528 million ($4.36 per common share) in the second quarter of 2001.

Canadian Natural noted wellhead prices have dropped from C$3.72 during the second quarter to C$2.60 on Aug. 5. Last year’s second quarter price averaged $5.99

The number of wells drilled during the first half of the year (excluding injection/stratigraphic test wells) decreased 32% from the prior year, comprised of a 57% reduction in natural gas well drilling and a 6% increase in oil well drilling.

Canadian Natural said the decrease in natural gas drilling reflected a strategy of building an inventory of natural gas locations to offset future Ladyfern production declines and also its capital allocation policy which opportunistically has shifted additional capital into heavy oil drilling to take advantage of favorable market pricing. As a result of lower price differentials for heavy oil production, the company realized a 12% increase in the wellhead price for its oil and liquids sales over the corresponding quarter of 2001.

Canadian Natural believes that current natural gas prices are below levels necessary to sustain the industry over the long-term. It expects prices to increase with normal weather, a working off of storage and production decreases.

“Furthermore, the company believes that current price differentials between Alberta AECO pricing and U.S. Nymex pricing are short-term anomalies resulting from maintenance downtime on common carrier pipeline systems. The company’s natural gas price continues to be affected by the amount of natural gas sold through its British Columbia facilities, which have received a lower price this year, and by the higher cost of owning our own sale pipeline space.”

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