Although Canadian Natural Resources (NYSE:CNQ) will focus most of its capital and management efforts on oil projects in 2011, it also has extensive natural gas assets across its portfolio and plans development of some of these assets during the year.
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Canadian Natural Resources reported average production of 1.23 billion cubic feet of natural gas per day in the first quarter of 2011, and estimates that the company's proved and probable reserves total 6 trillion cubic feet equivalent. These properties also produce about 19,000 barrels per day of natural gas liquids.
Canadian Natural Resources has 15.5 million acres of land in Canada to explore and develop, with existing production and reserves from four separate areas in the western part of that country.
Canadian Natural Resources plans to spend $750 million in capital on its natural gas assets, up 8% from the $697 million spent in 2010. This level of capital will allow the company to drill 88 wells on its properties during the year. The company expects to produce anywhere from 1.18 billion to 1.24 billion cubic feet of natural gas per day in 2011.
Canadian Natural Resources plans to become more efficient in its operations in 2011 in an effort to drive operating expenses lower. The company believes that its extensive infrastructure base of pipelines, compression and other equipment gives it an advantage over competitors.
Canadian Natural Resources will also develop selective parts of its unconventional natural gas resource base in 2011, as it allocates capital to those projects with returns that can compete with oil. The company also plans to drill strategic wells to hold acreage and make selective acquisitions to complement its portfolio.
One area that the company will develop in 2011 is the Montney formation, which produces natural gas along with natural gas liquids. The company drilled 15 wells here in 2010 and constructed infrastructure to enable future production. In 2011, Canadian Natural Resources plans to drill eight horizontal wells and expand infrastructure further.
Canadian Natural Resources is also developing the Deep Basin project where the company is pursuing the Cardium and other formations. In 2011, the company plans to drill multiple wells at Wild River, Wildhay and Galloway.
Other companies involved with the Cardium play include Talisman Energy (NYSE:TLM), which has 194,000 net acres prospective for this play and 950 potential drilling locations. EnCana (NYSE:ECA) is also developing the Cardium and is involved in a joint venture with PetroChina Company (NYSE:PTR) on its acreage in the Cutbank Ridge area.
The Bottom Line
Canadian Natural Resources has allocated a significant amount of capital to explore and develop natural gas assets in Canada, despite the overall push in the industry towards oil development. (Before jumping into this hot sector, learn how these companies make their money. Check out Oil And Gas Industry Primer.)
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