Canadian Natural Resources Limited (TSE-CNQ, Mkt cap 45.18B, P/E – , Div/yield 0.23/2.23, EPS -0.45, Shares 1.10B) has become the largest natural gas producer in Canada following its acquisition of about 12,000 natural gas wells in Alberta over the last two years, Reuters reported on Monday.
According to the news agency’s analysis of regulatory data, the counter-cyclical purchases have allowed CNRL to expand its business while rival operators sold assets or maintained a steady well count.
Thanks to the recently acquired wells, the company’s North American natural gas production increased by 9% in 2015, following a 35% rise the prior year. The expanded well count also gives the company a strategic advantage that will pay off in future years if the natural gas market improves, Reuters pointed out.
“All these new wells have low production, but they were bought for pennies for the dollar,” commented Chris Cox, analyst with financial services firm Ramond James. He went on to note that the wells are located in adjacent properties, offering cost synergies, and “if you are expecting pricing to improve then you get an additional uplift.”
CNRL president Steve Laut told Reuters that the company had pursued a strategy of purchasing wells across Alberta and British Columbia as they came up for sale in areas where it already operates.
“Western Canada over time has become a very high cost basin and so it’s difficult to compete especially when commodity prices go down,” Laut explained. “All industry … have to find ways to become more effective and more efficient.”
CNRL had an ownership stake in 27,968 producing natural gas wells in Alberta at the end of 2015, up 27% from a year earlier. In 2014 its well count increased by 69%. These gains resulted from acquisitions, not exploration, Reuters found.
Data filed with the Alberta Energy Regulator shows that in the 12 months from June 2015 to May 2016, CNRL became the license holder for about 3,960 producing natural gas wells. In the previous 12 months it took over around 8,290 wells — compared to only about 620 wells between June 2013 and May 2014.
In total, CNRL had a stake in 53,868 oil or gas wells in Alberta at the end of 2015, a 60% increase from two years earlier.
Canadian Natural Resources Limited is an independent crude oil and natural gas exploration, development and production company. The Company is engaged in the acquisition, exploration, development, production, marketing and sale of crude oil, natural gas and natural gas liquids (NGLs). Its exploration and production operations are focused in North America, largely in Western Canada; the United Kingdom (UK) portion of the North Sea and Cote d’Ivoire, Gabon, and South Africa in Offshore Africa. The Horizon Oil Sands Mining and Upgrading segment (Horizon) produces synthetic crude oil through bitumen mining and upgrading operations. Within Western Canada, the Company maintains certain midstream activities that include pipeline operations, an electricity co-generation system and an investment in the North West Redwater Partnership (Redwater Partnership), a general partnership formed in the Province of Alberta. More from Reuters »
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