Canadian Natural sets synthetic crude record while recording net loss of $310M

CALGARY — Shares in Canadian Natural Resources Ltd. rose Thursday after it reported record production of synthetic crude oil and lower operating costs at its oilsands mining operations in northern Alberta during the second quarter.

Production of synthetic crude — oilsands bitumen that fetches higher prices after being upgraded to a light oil quality — rose to a record 464,300 barrels per day, despite maintenance activities at its Horizon oilsands mine in May.

Meanwhile, Canadian Natural said it cut costs at its mining and upgrading operations to $17.74 per barrel, a 15-per-cent decrease from the first quarter.

“During the quarter, we effectively and efficiently reacted to temporarily curtail production and complete maintenance due to low prices while prioritizing high-margin production,” said president Tim McKay on a conference call.

“Then, as prices improved, we quickly reinstated production cost effectively.”

He credited the improved performance to “synergies” between Canadian Natural’s Horizon mine and the Athabasca Oil Sands Project mine it operates after buying a 70 per cent stake in 2017.

The Athabasca mine supplies the Shell Canada-operated Scotford upgrader near Edmonton — McKay said Canadian Natural is confident it will be able to fill an additional 15,000 to 20,000 bpd of capacity at Scotford when its expansion to 320,000 bpd of capacity opens later this quarter.

The Calgary-based company beat analysts’ financial expectations in the three months ended June 30 despite taking a net loss of $310 million on $2.94 billion in revenue, compared with a year-ago profit of $2.8 billion on $5.93 billion in revenue.

Its adjusted loss was $772 million or 65 cents per share, versus expectations of 85 cents per share on $2.84 billion of revenue, according to financial markets data firm Refinitiv.

In Toronto, its shares closed 2.9 per cent higher at $25.76 as analysts applauded the company’s higher than expected second-quarter production and prospects for strong output in the second half of 2020.

The company reduced output at its primary heavy oil operations by 24 per cent and at its thermal oilsands projects by seven per cent in the second quarter compared with the first because their non-upgraded products were harder hit by low crude prices.

It said it expects an acceleration of corporate tax cuts by the province of Alberta from 10 to eight per cent effective July 1 will result in tax savings for 2020 of $35 million, which it said it expects to invest in projects in Alberta.

Canadian Natural said its current break-even West Texas Intermediate price level is US$30 to US$31 per barrel. WTI crude traded at US$42.12 on Thursday morning.

The company said it will leave its capital spending budget at $2.7 billion this year and expects its net debt at year-end will be unchanged from last year’s level.

It produced 1.16 million barrels of oil equivalent per day in the second quarter, including about 922,000 bpd of crude and liquids produced with natural gas.

North American natural gas production averaged 1.4 billion cubic feet per day, a two per cent increase from the first quarter, as Canadian Natural enacted a plan to add about 60 million cf/d of low-cost gas production.

The company consumes the equivalent of about half of its natural gas production in its oilsands operations.

This report by The Canadian Press was first published Aug. 6, 2020.

Companies in this story: (TSX:CNQ)

Dan Healing, The Canadian Press

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