March 7, 2019 / 10:29 AM / a month ago

UPDATE 3-Canadian Natural posts Q4 loss, says oil prices improving

(Recasts throughout, adds quotes, details from investor call, share price)

By Nia Williams

CALGARY, Alberta, March 7 (Reuters) - Canadian Natural Resources Ltd said on Thursday it expects the Alberta government to ease mandatory oil production cuts this year, but the company could still delay new oil sands projects if the price of heavy crude plummets.

The Calgary-based company reported a fourth quarter loss following record discounts on benchmark Canadian heavy crude because of congestion on export pipelines that led to a glut of crude building up in storage tanks in Alberta.

That prompted the provincial government to impose temporary production cuts effective Jan. 1 to help clear the bottleneck, and announce plans to lease 4,400 rail cars to help move crude out of Alberta to higher-priced markets.

Canadian Natural, the country’s largest energy producer, backed the government’s move and said prices were improving.

Company President Timothy McKay said increasing crude-by-rail capacity, natural production declines and the Sturgeon refinery in Alberta ramping up heavy oil consumption meant government curtailments could diminish markedly.

But it was too early to say whether Canadian Natural would start up its Kirby North and Primrose oil sands projects on schedule or delay, McKay told investors on a conference call.

“We have that optionality to look to defer if we see it’s going to be a problem, if the differential is going to blow,” McKay said.

The two projects in northern Alberta are currently scheduled to start up later this year and add 66,000 barrels per day to the market by the end of 2020.

Many Canadian industry participants are concerned rising output will lead to another backlog of crude and plummeting prices, especially after Enbridge Inc said this week its Line 3 pipeline project will be delayed until late 2020.

Canadian Natural posted a net loss of C$776 million, or 64 Canadian cents per share, in the fourth quarter ended Dec. 31, compared with a profit of C$396 million, or 32 Canadian cents, a year earlier.

Average realized prices of crude oil and natural gas liquids more than halved to C$25.95 per barrel. The company said prices had strengthened since then, with discount on benchmark Canadian heavy crude narrowing to $12.38 a barrel in the first quarter of 2019 from $39.36 per barrel in the reported quarter.

“We view the quarter as a relative trough given particularly weak heavy oil pricing and anticipate higher free cash flow in coming quarters,” BMO Capital Markets analyst Randy Ollenberger said in a note to clients.

Canadian Natural said daily output rose 6 percent to 1.08 million barrels of oil equivalent per day (boepd) in the fourth quarter.

The company increased its quarterly dividend by 12 percent.

The company’s shares were up 2.3 percent at C$36.65 on the Toronto Stock Exchange. (Additional reporting by Debroop Roy in Bengaluru; Editing by Shailesh Kuber and Marguerita Choy)

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