Canadian Natural Resources Ltd. (CNRL) is targeting a roughly 5% year/year increase in natural gas production next year, and plans to export more than one-third of its output to North American markets outside the AECO hub in Western Canada.
Gas production in 2023 is forecast to average 2.17-2.24 Bcf/d, up from 2.11 Bcf/d projected for this year, management said Wednesday.
Calgary-based CNRL is Canada’s largest natural gas producer and one of the country’s leading independent producers, with a sizable footprint in the Montney Shale and Alberta oilsands, as well as conventional resource plays.
CNRL is aiming to market about 36% of gas production outside of AECO next year, with another 36% allocated for consumption at its energy-intensive oilsands operations. The remaining 28% of production would be sold into the AECO/Station 2 market.
CNRL’s natural gas exports to the United States have captured “significantly greater” prices than the AECO market in recent months, CFO Mark Stainthorpe told investors on Wednesday.
Strengthening prices have, in turn, led to more investment and gas supply from the Western Canadian Sedimentary Basin. “This increased supply comes with some challenges related to available transportation, particularly in times of maintenance, and can cause some disconnects with sales point pricing,” Stainthorpe said. “However, currently there are no constraints on firm contracts for natural gas leaving the basin during periods of low maintenance.”
There are constraints, though, during maintenance periods, “and we did experience that in 2022, and these constraints are expected to continue in 2023,” Stainthorpe said. “This requires strategic planning to mitigate price exposure, and requires system improvements or expansions to mitigate going forward.”
He cited two capacity expansions planned by TC Energy Corp. that are slated to come online in 2023: a 150 MMcf/d expansion into the Empress hub, and the 265 MMcf/d West Path Delivery project.
The LNG Canada project and Coastal GasLink pipeline, meanwhile, are slated to enter service in 2025, bringing 1.8 Bcf/d of additional takeaway capacity online.
Balanced Production Mix
CNRL’s total production is expected to average 1.33-1.37 million boe/d, up 4% from almost 1.30 million boe/d this year.
“Our 2023 targeted production mix is balanced, consisting of approximately 44% of high value light and synthetic crude oil, 29% bitumen and heavy crude oil and 27% natural gas, based on the midpoint of our production guidance range,” the company said.
Thermal oilsands production is forecast to range 705,000-729,000 b/d, up 5% at the midpoint from 2022 targeted levels. Conventional liquids production is targeted at 264,000-272,000 b/d, or a roughly 4% year/year increase at the midpoint versus 2022.
CNRL, which reports in Canadian currency (C$1.00/US$0.74), is forecasting net capital expenditures (capex) for 2023 of $5.21 billion, including $2.12 billion for conventional exploration and production, and $1.78 billion for oilsands mining and upgrading.
The capex budget is divided into base capital of about $4.2 billion to provide near-term production growth in 2023, and strategic growth capital of roughly $1.0 billion for projects to add production and capacity growth beyond next year.
CNRL is aiming to allocate 50% of free cash flow to share repurchases and 50% to the balance sheet, “less strategic growth capital/acquisitions, as defined in our free cash flow allocation policy.”
Net Zero Ambitions
On the environmental front, CNRL is “committed to supporting Canada’s climate goals and continuing to reduce our environmental footprint with our aspirational goal of net zero greenhouse gas (GHG) emissions in the oilsands. We believe Canadian energy is one of the most responsibly produced sources of energy in the world and should be the preferred energy choice.”
CNRL is aiming to reduce total corporate absolute Scope 1 and Scope 2 GHG emissions by 40% by 2035 from a 2020 baseline.
“Setting a target based on absolute emissions is important to support Canada’s overall environmental goals and demonstrates we are committed to reducing our overall carbon footprint.”
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December 02, 2022 at 11:47PM
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