CALGARY, Alberta (Reuters) - Canadian Natural Resources Ltd (CNQ.TO) has cut its spending budget by a tenth to cope with chronically low natural gas prices, while at the same time slightly boosting its outlook for overall production, sending its shares up 6 percent.
Canadian Natural, the country’s largest independent oil explorer and producer, said on Thursday it will cut 2012 capital spending by C$680 million ($687 million) to C$6.7 billion, cutting back on already-skimpy natural gas plans and trimming spending on its oil sands mining project. It shifted some spending to higher-return heavy oil production projects.
The moves came as the company reported a 19 percent drop in second-quarter net income and 22 percent increase in overall production. Output a year earlier was reduced by a lengthy outage at its Horizon oil sands project in northern Alberta following a fire.
Canadian Natural shares were up C$1.76 at C$31.33 on the Toronto Stock Exchange. They had dropped more than 22 percent since the start of the year.
High production rates at Horizon, record heavy-oil output and higher-than-expected cash flow combined for an upbeat quarter, TD Securities analyst Menno Hulshof said.
Canadian Natural is “looking a lot like the old CNQ for the first time in a long time,” Hulshof wrote in a note to clients. “Pricing discounts and Horizon reliability are obviously still a concern for many but at a minimum, this quarter should give the market a reason to start to believe in Horizon again.”
Production at the site north of Fort McMurray, Alberta, averaged 115,823 barrels a day in the quarter, which is slightly above the plant’s design capacity.
Company-wide output averaged 679,607 barrels of oil equivalent a day, up from 556,539 in the second quarter of 2011.
Net income fell to C$753 million, or 68 Canadian cents a share, from C$929 million, or 84 Canadian cents a share, a year earlier.
Adjusted earnings from operations were 55 Canadian cents a share. That beat an average estimate among analysts of 53 Canadian cents a share, according to Thomson Reuters I/B/E/S.
Cash flow, a glimpse into the company’s ability to fund drilling, rose 13 percent to C$1.75 billion, or C$1.59 a share, from C$1.55 billion, or C$1.40 a share.
The company said it expects to produce 1.22 billion to 1.24 billion cubic feet a day of gas and 454,000 to 474,000 barrels a day of oil in 2012.
Reporting by Jeffrey Jones, Bhaswati Mukhopadhyay and Shounak Dasgupta; Editing by Roshni Menon; and Peter Galloway