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Canadian Natural 'may halve Alberta bits'



By Upstream staff 

Canadian Natural Resources may halve its natural gas drilling plans next year due to the province of Alberta's royalty hike, it said today.

The company saw third-quarter profit fell 36% without last year's big one-time gain.

Canada's second-biggest oil and gas explorer said Alberta's plan to increase royalties by C$1.4 billion (US$1.5 billion) a year will hamper its development plans in 2008 and beyond.

Canadian Natural estimated it will drill 30% to 50% fewer gas wells than it would have without Alberta Premier Ed Stelmach's new fiscal regime, announced last week.

The royalty boost does not take effect until January 2009.

The company has a potential gas drilling inventory of 900 wells for next year, and as much as 40% of those are low-productivity shallow wells, President Steve Laut said.

Canadian Natural is one of the country's biggest gas producers. Its production declines at an average rate of 23%, so the reduction in drilling will mean lower overall output, Laut told analysts.

It is working through the numbers stemming from Stelmach's move to wring more from oil and gas producers for a province struggling with strained infrastructure such as roads, schools and hospitals, and will not have its plans completed until the end of this month.

"Right now we're in the process of fine-tuning the budget and high-grading all our gas prospects and oil prospects and deciding where we're going to allocate the capital," he said.

"Obviously with the royalty program, it has made a lot of our gas programme uneconomic, particularly at these price levels."

Canadian Natural's gas output has already been on the wane, after the company reduced spending this year amid low gas prices and high oilfield service costs.

Laut said the company, which also operates in the North Sea and offshore West Africa, may cut drilling its Alberta light oil prospects by 50% as well.

In the third quarter, Canadian Natural earned C$700 million, or C$1.30 per share, down from year-earlier C$1.1 billion, or C$2.08 a share. Last year's figure included a C$754 million one-time boost from unrealised oil and gas hedging gains.

Excluding one-time items, income rose 37% to C$644 million from C$470 million. Canadian Natural attributed the improvement to higher production and lower risk-management losses, partly offset by the strong Canadian dollar.

Cash flow, a key indicator of its ability to pay for projects like its Horizon oil sands development in northern Alberta, rose 23% to C$1.6 billion, or C$2.92 a share, from C$1.3 billion, or C$2.44 a share.

Canadian Natural shares were C$1.61, or 2%, lower at C$76.95 on the Toronto Stock Exchange today. That represents an increase of 25% this year.

The company is in the final stages of building Horizon. It said Wednesday the budget for the 110,000 barrel-a-day project had climbed nearly C$1 billion to as much as C$7.75 billion.

In the quarter, oil and gas production rose 8% to 607,484 barrels of oil equivalent a day. However, gas output declined 4% from the second quarter to 1.65 billion cubic feet a day amid the drop in drilling.

The company overall forecast 2007 output of 326,000 to 334,000 barrels per day, compared with its previous outlook of 322,000-348,000 bpd, Reuters reported.


Thursday, 01 November, 2007, 17:46 GMT  | last updated: Thursday, 01 November, 2007, 17:46 GMT

Digging it: Canadian Natural Resources' Horizon oil sands project in Alberta
 

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