Canadian Natural cost cuts trim loss as output misses estimates

CALGARY (Bloomberg) -- Canadian Natural Resources Ltd., the nation’s largest heavy-oil producer, reported a narrower second-quarter loss as lower costs helped offset the slump in crude prices.

The loss was C$339 million ($259 million), or 31 cents a share, compared with a loss of C$405 million, or 37 cents, a year earlier, the Calgary-based company said in a statement on Thursday. Excluding one-time items, the 19-cent-per-share loss was smaller than the 27-cent average of 18 analysts’ estimates compiled by Bloomberg. Production came in 2.3% lower than the average analyst forecast because of unplanned outages.

Canadian Natural has stayed committed to expansions of its Horizon oil-sands mining project this year and next even as a crude market slump that began in 2014 has it focused on cutting costs, slowing drilling and turning off oil and natural gas wells unprofitable at low prices. A major turnaround at Horizon is now largely complete, with start of the second phase of the project planned for October and full production in November, it said in the statement.

“In the first half of 2016, we continued to realize significant operating cost savings,” of about C$430 million compared with the prior year, CFO Corey Bieber said in the statement. Capital expenditures will fall significantly when the Horizon 2B expansion is complete, he said. Costs per equivalent barrel of oil fell 14% from the prior year to C$13.73, according to the statement.

Unplanned outages

In the second quarter, gas production fell 5 percent because of unforeseen third-party pipeline and facility outages, causing the company to lower its gas output target for the year by 2%. Canadian Natural also had minor production interruptions at Horizon due to unplanned upgrader repairs and at the Primrose heavy-oil project as it mended pipeline cracks. Production fell 2.7% to 783,988 equivalent bopd. U.S. crude averaged $45.64/bbl, down 21% from the same period in 2015.

The results were “slightly negative,” as unplanned outages explained most of the lower-than-expected production, Menno Hulshof, an analyst at TD Securities Inc. in Calgary, wrote in a note. However, the company’s cost savings have been significant, he said.

The company released the results before the start of regular trading on North American markets. The stock, which has 18 buy and seven hold recommendations from analysts, rose 1.7% to C$39.43 on Wednesday in Toronto. The shares have risen 32% this year.