Quarterly / Earnings Reports | Second Quarter (2Q) Update | Oil Sands | Production Rates | Oil Sands Projects | Capital Markets | Capital Expenditure

CNRL Lowers Spending by $245 MM in the Quarter

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   |    Friday,August 07,2015

Canadian Natural Resources Limited has announced second quarter results.

• Canadian Natural's 2015 second quarter crude oil and NGL production volumes averaged 509,047 bbl/d, and natural gas volumes reached record quarterly levels of 1,779 MMcf/d.
• Operations during Q2/15 were solid as the Company's large, balanced and diverse asset base continues to support the transition to a longer life and lower decline asset base. 
• The Company's drilling activity consisted of just 13 net wells in Q2/15 compared to 191 net wells in Q2/14, a 93% reduction year over year.
• In addition to the operating cost efficiencies achieved during the quarter, Canadian Natural continues to attain capital cost savings and has lowered its capital spending program by an additional $245 million from $5,745 million to $5,500 million. 

Q2/15 operational highlights include:

• Pelican Lake production volumes increased in the second quarter to record levels of 52,015 bbl/d, 5% higher than Q2/14 levels and 2% higher than Q1/15 levels. This leading edge polymer flood continues to perform with increasing production volumes and decreasing operating costs despite no drilling activity since Q3/14. Canadian Natural leverages innovation and technology to create value through strong netbacks and robust economic returns.
• Operations at Septimus, Canadian Natural's liquids-rich Montney natural gas play in British Columbia, continue to perform above expectations, with industry leading quarterly operating costs of approximately $0.18/Mcfe in Q2/15.
• Total Offshore Africa quarterly crude oil production in Q2/15 averaged 17,070 bbl/d, an increase of 30% over Q2/14 levels and an increase of 29% over Q1/15 levels. The infill drilling programs at the Espoir and Baobab fields in Cote d'Ivoire continue to be successfully executed with results exceeding expectations.
• To date, 3 gross wells have been drilled at Espoir, adding net production of approximately 4,500 bbl/d. Espoir is targeted to add overall net production volumes of 5,900 bbl/d through a 10 gross well
• program which includes 4 water injection wells (5.9 net well program) and is currently tracking below sanctioned costs.
• To date, Canadian Natural drilled 1 gross well at Baobab, adding net production volumes of approximately 2,000 bbl/d. Production from the second gross well is targeted to come on stream in the third quarter of 2015. Baobab is targeted to add overall net production volumes of 11,000 bbl/d through a 6 gross well program (3.4 net well program), which is currently tracking below sanctioned costs.
• Thermal operations were temporarily interrupted from late May to early June as a result of Northeastern Alberta forest fires. Employees were safely evacuated and only minor facility damage occurred. Total quarterly production volumes were reduced as a result of the related shut-down at Primrose and production curtailment at Kirby South.
• The Company continues to progress the low pressure steamflood operations at Primrose East Area 1 and the low pressure cyclic steam stimulation (CSS) operations at Primrose East Area 2. Operations at Primrose East are exceeding expectations, and due to the cyclic nature of operations at Primrose East Area 2, current production volumes are ranging from 15,000 bbl/d to 20,000 bbl/d.
• At Horizon Oil Sands (Horizon), the full maintenance turnaround originally scheduled in Q3/15 was deferred to 2016 to capture opportunities for production optimization of Phase 2B. During Q2/15, the Company planned a 10 day turnaround focusing on critical activities. The turnaround was extended from 10 days to 15 days to address necessary found work and the start-up of operations was slightly slower than expected. As a result, production volumes were lower than the Q2/15 guidance range. The Company targets strong production volumes going forward with Q3/15 production volumes targeted to range from 124,000 bbl/d to 131,000 bbl/d. 2015 annual production guidance remains unchanged from 121,000 bbl/d to 131,000 bbl/d.
• Canadian Natural continues to execute capital discipline by proactively managing its drilling programs. As a result of the decrease in commodity pricing and other external events, the Company's drilling activity consisted of just 13 net wells in Q2/15 compared to 191 net wells in Q2/14, a 93% reduction year over year. 
• In addition to the operating cost efficiencies achieved during the quarter, Canadian Natural continues to attain capital cost savings and has lowered its capital spending program by an additional $245 million from $5,745 million to $5,500 million. This reduction is a result of the Company's ability to optimize its execution strategy, enhance productivity, right scope projects, leverage technology, and achieve lower energy and material costs.
• During Q2/15, Canadian Natural's $1,500 million revolving syndicated credit facility was increased to $2,425 million and the maturity date was extended to June 2019 from June 2016. The Company's $3,000 million revolving syndicated credit facility was reduced to $2,425 million and the maturity date was extended to June 2020 from June 2017. As a result, the Company's available liquidity increased by $350 million, ending the quarter at approximately $3.3 billion.

Operations Review 

• Quarterly production volumes of North America crude oil and NGLs were 270,021 bbl/d in Q2/15, a decrease of 6% from both Q2/14 and Q1/15 levels respectively.
• As expected, North America light crude oil and NGL quarterly production averaged 89,226 bbl/d in Q2/15. Production volumes decreased 4% and 9% from Q2/14 levels and Q1/15 levels respectively, largely as a result of expected production declines offset by the modest light crude oil drilling program in place. North America light crude oil drilling activity consisted of 4 wells in the first half of 2015 compared to 52 net wells in the first half of 2014, a 92% reduction.
• Despite the reduction in production volumes, North America light crude oil and NGL quarterly operating costs decreased to $15.29/bbl in Q2/15, 13% lower than Q2/14 levels of $17.56/bbl and 6% lower than Q1/15 levels of $16.23/bbl.
• Pelican Lake operations achieved record quarterly heavy crude oil production volumes of 52,015 bbl/d, a 5% increase from Q2/14 levels and a 2% increase from Q1/15 levels. Canadian Natural continues to achieve success in developing, implementing and optimizing the leading edge polymer flood technology at Pelican Lake.
• Operational efficiencies continue to be a focus at Pelican Lake. Industry leading quarterly operating costs decreased to $6.98/bbl, 22% lower than Q2/14 and 19% lower than Q1/15.
• In Q2/15, primary heavy crude oil production averaged 128,780 bbl/d, a decrease of 10% and 6% from Q2/14 and Q1/15 levels respectively. The decrease in production volumes reflects a significantly reduced drilling program of 4 net wells in Q2/15 compared to 122 net wells in Q2/14, as well as the Company's prudent decision to shut-in approximately 4,000 bbl/d of primary heavy crude oil production as a result of unfavorable economic conditions.
• The strength of Canadian Natural's primary heavy crude oil asset base is its strong operating free cash flow established by achieving low operating costs. As demonstrated, primary heavy crude oil quarterly operating costs decreased in Q2/15 to $14.92/bbl compared to $17.61/bbl in Q2/14 and $17.21/bbl in Q1/15, cost reductions of 15% and 13% respectively.