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.

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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.)

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