With its Ladyfern field showing a sharp decline last year, Canadian Natural Resources Inc. plans to step up its exploration and production program in a recently acquired region of Alberta, sticking with a strategy to keep its natural gas production in North America on an equal pace with oil.

This year, Canadian Natural is forecasting oil and gas production to jump more than 10% on a boe basis over 2002 volumes. Most of the growth is expected from conventional heavy oil drilling in North America and increased light oil production from the North Sea and offshore West Africa. And it wants to build prospect inventories for gas as Ladyfern declines. Last year, gas production was about 48% of Canadian Natural’s overall production total.

“The Ladyfern pool in Northeast British Columbia has been a tremendous success for Canadian Natural,” the company said in a statement. “Production ramped up very quickly and the pool is being depleted in a quick, orderly fashion. Ladyfern is a rare pool and difficult to replicate.”

The Calgary-based company said gas production in 4Q02 was at the “higher end”:of the company’s guidance of 1,350-to-1,365 MMcf/d from 3Q02. However, it noted that production decreased in the fourth quarter because of the declining Ladyfern field in northeast British Columbia — production there declined from an average of 178 MMcf/d in 3Q02 to 127 MMcf/d by the fourth quarter.

Overall, however, gas production was up in the fourth quarter from a year earlier because of Ladyfern development earlier in 2002, as well as the mid-year acquisition of Rio Alto. Gas production from its new core region averaged 376 MMcf/d in the final half of 2002; Ladyfern averaged 168 MMcf/d, up from 40 MMcf/d a year earlier. Gas production increased in the North Sea also was up with the acquisition of additional interests in the Banff and Kyle fields there.

Rio Alto gives Canadian Natural a high quality gas producing base and a new core area in northwestern Alberta, offering extensive undeveloped acreage. The company said the undeveloped land contains multiple zones for natural gas production supported by a large amount of seismic data and pipeline and natural gas plant infrastructure. Canadian Natural began developing its acquisition in the first quarter, and said it plans up to 65 wells there alone in 2003.

Most of the new wells will be drilled in the northern section of the core area, where the Cretaceous geological features are similar to the company’s North Alberta core area. Approximately 17 wells will target the southern portion and the Cardium zone, which is a complex geological zone requiring both horizontal and vertical wells to test the production capabilities of the formation.

This year, said the company, will be one in which it will “test and develop new geological theories on best practices for exploitation of the Cardium zone,” which would include reprocessing and interpreting new and existing seismic data and other types of drilling techniques to determine the best drilling approach. The company added that its method “will lead to an expanded and more cost effective drilling campaign in 2004 and beyond.”

Last year, Canadian Natural drastically reduced the number of natural gas wells drilled from the 476 net natural gas wells drilled in 2001. However, this year, drilling will be expanded to 580 wells. Nearly 240 wells will be drilled in the first quarter alone on “lands with natural gas potential,” it said. The rest of the drilling program, including approximately 250 southern Alberta shallow wells, are scheduled for lands with year-round access that can be drilled throughout the year. “The 2003 drilling program is on track and progressing according to expectations,” the company noted.

Production levels this year are expected to average 1,280-to-1,330 MMcf/d and 240-to-260 thousand bbl/d of oil and liquids, unchanged from previous expectations. First quarter 2003 production guidance is 1,300-to-1,320 MMcf/d and 235-to-240 thousand bbl/d of oil and liquids. Current production levels are 1,315 MMcf/d and 238 thousand bbl/d.

Canadian Natural also released its fourth quarter and year-end results on Wednesday. For a full review, visit the company’s web site at www.cnrl.com.

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