CALGARY, A.B. – Canadian Natural Resources Ltd has bought up about 12,000 natural gas wells across Alberta over the last two years, becoming the country’s largest natural gas producer as rivals have been selling assets or holding steady in a tough market brought on by the crash in oil & gas commodities in recent years.
According to a Reuters analysis of regulatory data, CNRL’s shopping spree has helped the company up its Alberta well count by 60 percent in the 24 months spanning the end of 2013 and the end of 2015, causing it to overtake Encana Corp. to become Canada’s top natural gas producer.
While CNRL has bought assets during previous downturns, never before has the company acquired so many wells so quickly. The expanded footprint not only increases production, but also gives the company a strategic advantage that will pay off for years to come if the natural gas market improves.
With an extensive network of wells and the gathering pipelines that connect them, it can turn a profit from wells that might lose money in the hands of a smaller producer.
Raymond James analyst Chris Cox says that “… these new wells have low production, but they were bought for pennies for the dollar.” Cox also noted that the wells are in adjacent properties which offers cost synergies, and “if you are expecting pricing to improve then you get an additional uplift.”
CNRL’s natural gas production on the continent rose nine percent last year, and a whopping 35 percent the year before that.
While CNRL bought wells, most rivals sold assets or maintained a steady well count. Cenovus Energy Inc’s well count dropped two per cent in Alberta between the end of 2013 and the end of 2015, and Penn West Petroleum Ltd shed nearly 30 per cent of its wells.
CNRL President and CEO Steve Laut, who is the head of the biggest private landowner in western Canada – second only to the government, said the company had opportunistically bought 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 told Reuters. “All industry … have to find ways to become more effective and more efficient.”
The rise of fracking operations in North America has boosted gas production, causing natural gas prices to drop in recent years, but analysts expect prices to rise starting next year, buoyed by rising industrial demand, as well as export terminals beginning operations.
With files from Reuters/The Financial Post. Read the full story here: http://business.financialpost.com/news/energy/canadian-natural-resources-overtakes-encana-to-become-canadas-top-natural-gas-producer?__lsa=79db-ba28