Tim McKay, President of CNRL says his company may also reduce its heavy oil drilling program in the second half of this year, and instead, drill more light oil. CNRL photo.
CNRL is delaying completion and production ramp-up of some heavy oil wells
One of Canada’s largest oil and gas producers, Canadian Natural Resources Ltd. (CNRL), said it plans to slow its heavy crude output due to the steep price discount against West Texas Intermediate, which on Thursday amounted to $24.70/barrel.
The price discount facing Canadian producers, including CNRL, is a result of strained pipeline and rail capacity to ship crude to US refineries.
“Although oil is moving, the (price) differentials are behaving as if the oil can’t move,” CNRL President Tim McKay said.
The Alberta government said on Wednesday that it estimates the higher-than-usual differential cost heavy oil producers $30 million to $40 million in revenue each day.
Reuters reports McKay said his company is considering delaying the completion and production ramp-up of some of its heavy oil wells. McKay added CNRL may cut back its heavy oil drilling program in the second half of this year and shift to more light oil drilling.
Speaking with Reuters, McKay said he believes the cumulative effect of reducing heavy output from new wells and moving forward planned outages at some of the company’s production sites will be “quite minor” for overall production.
“We look at the differentials all the time and our ability to start and stop our drilling program, based on what’s going on with the commodities,” he told Reuters.
CNRL beat its fourth-quarter profit estimates, mostly due to higher crude production and higher commodity prices. In the fourth quarter, CNRL boosted its heavy oil output by 1 per cent over the preceding quarter.
On Thursday, shares in the company were up 65 cents to $40.40.