Canadian Natural Resources (NYSE:CNQ) plans to continue the company's focus on oil development in 2011, while also working selective higher return natural gas assets in an effort to hold acreage. The company is also putting a greater share of capital into longer-term projects over the next few years.

TUTORIAL: Economic Indicators To Know

2010 Summary
Canadian Natural Resources reported production of 632,000 barrels of oil equivalent (BOE) per day in 2010, with 67% of this production composed of oil. The company spent $5.5 billion in total capital in 2010 across its portfolio, including acquisitions and in the midstream business.

2011 Review
In 2011, Canadian Natural Resources estimates that its production will be in a range between 582,000 and 633,000 BOE per day. This poor growth outlook is due to a fire in January 2011 at the company's coker unit at the Horizon oil sands project. The fire caused an interruption of production and reduced the company's revenue by $595 million relative to the first quarter of 2010.

Another company involved in developing the oil sands in Canada include Cenovus Energy (NYSE:CVE), which recently raised production targets due to better-than-expected performance at the company's Foster Creek project.

2011 Capital Expenditures
Canadian Natural Resources has the bulk of its exploration and production assets in North America, and like most operators, the company allocated its capital to those projects with the highest returns. In 2011, more than 80% of its capital will be spent on oil projects across its portfolio. This tilt towards oil is a continuation of a trend that began in 2005, when only 40% of its capital was directed towards oil.

Oil Assets
Canadian Natural Resources has allocated $3.76 billion in capital in 2011 to develop oil properties across its portfolio. The company is also spending between $1.1 billion and $1.2 billion in capital towards its Horizon oil sands project, which requires extensive repairs due to the fire in early 2011.

Many of these oil projects will be more long term than previous years. These include enhanced oil recovery projects targeting light oil resources, thermal oil and heavy oil projects. The company is also working on long-term expansion of its Horizon oil sands project.

Canadian Natural Resources expects that this level of development will lead to an 11% increase in North American crude oil production in 2011. This excludes production from the Horizon oil sands project.

In the international space, Canadian Natural Resources is using $420 million to explore and develop light oil assets in the North Sea and offshore West Africa. This will allow the company to drill or work over eight wells in 2011.

Other companies involved in the hunt for oil and gas resources in the international area include Harvest Natural Resources (NYSE:HNR), which just announced a discovery off the coast of Gabon. Noble Energy (NYSE:NBL) recently entered a joint venture to explore for oil and gas off the coasts of Senegal and Guinea-Bissau.

Natural Gas Assets
Canadian Natural Resources has more than 15 million acres of leasehold in Alberta, British Columbia, and Saskatchewan. The company has allocated $750 million in capital in 2011 to develop natural gas assets which generate returns that can compete with oil projects.

Canadian Natural Resources will also drill extensively in 2011 to hold its acreage across its western Canadian portfolio. The company's natural gas production in 2011 will be approximately flat from 2010, jumping by only 8%.

The Bottom Line
Canadian Natural Resources is increasing the company's capital bias towards longer-term oil projects in 2011, while also drilling selected natural gas assets designed to hold acreage in its portfolio. (Before jumping into this hot sector, learn how these companies make their money. Check out Oil And Gas Industry Primer.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    The Biggest Oil Producers in Asia

    Learn which Asian countries deliver the most crude oil to market, and discover what companies are the biggest producers in each country.
  2. Stock Analysis

    The 5 Biggest Russian Oil Companies

    Discover the top Russian oil companies by production volume and find out more about their domestic and international business operations.
  3. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  4. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  5. Stock Analysis

    3 Solar Stocks to Add to Your Portfolio

    Understand the growth and challenges of the renewable energy market and its success in 2015. Learn about the top three energy stocks to add to a portfolio.
  6. Investing News

    Glencore Shares Surge in Hong Kong

    Shares of Glencore International, a leading multinational commodities and mining company, jumped by around 15% on London Stock Exchange, after the shares had gained about 71% earlier on the Hong ...
  7. Stock Analysis

    The 5 Best Buy-and-Hold Energy Stocks

    Understand why energy companies' stock are volatile when oil prices are volatile. Learn about the top five energy companies to buy and hold.
  8. Investing

    Have Commodities Bottomed?

    Commodity prices have been heading lower for more than four years, being the worst performing asset class of 2015 with more losses in cyclical commodities.
  9. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  10. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  1. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  2. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  5. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  6. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!