CALGARY-- Canadian Natural Resources Ltd., one of Canada's
largest oil and gas producers, cut its full-year capital spending
plans and production forecast on Monday, citing the rapid drop in
crude oil prices since setting its initial 2015 budget in early
November.
The Calgary-based company said it would spend 6.2 billion
Canadian dollars ($5.25 billion) on growth projects, down from an
earlier target of C$8.6 billion, and increase production of crude
oil and natural gas liquids about 7% over 2014 levels, down from an
earlier projection of around 11% growth.
The moves come after the Canadian unit of Royal Dutch Shell PLC
on Friday said it would cut up to 10% of its oil sands mining
workforce due to lower crude prices. The slump in global oil prices
is expected to trim profit and slow growth at many energy
producers, especially those with higher cost operations.
Canadian Natural said the slimmer budget will impact its
drilling activity in North America and overseas, as well as a defer
about C$470 million that had been earmarked for a new oil sands
project "until such time as commodity prices stabilize at levels
that justify such capital expenditures."
The company also left the door open for more spending cuts as
the year progresses, saying that it would "further curtail capital
spending if required."
The size of the reduction is larger than the C$2 billion
Canadian Natural had said it would consider trimming when it
announced a 2015 budget on Nov. 6. Oil prices have continued to
fall since then, with global benchmark Brent crude hitting $50.11 a
barrel on Friday for the first time in more than five years.
As a result, it now estimates production this year will be no
more than 592,000 barrels a day of oil and natural gas liquids,
down from an earlier forecast of up to 611,000 barrels a day. But
the revised target would still be higher than its latest 2014
forecast for output of between 531,000 and 557,000 barrels a
day.
The reduced budget will delay construction of an oil sands
project in the Western Canadian province of Alberta using
horizontally drilled wells to extract heavy oil known as Kirby
North Phase 1 that had been expected to start up as soon as
2016.
But Canadian Natural said its plans to expand production at its
core Horizon oil sands mine in Alberta by 125,000 barrels a day
over the next two years "remain on track." Once complete, mine
operating costs will be between C$25 to C$27 a barrel, it said,
which is below current spot market prices for Canadian crude.
Write to Chester Dawson at chester.dawson@wsj.com
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