CALGARY (Bloomberg) — The pipeline shortage that has been strangling the Canadian oil industry is weighing on spending plans for next year, with one major producer slashing its capital budget for 2019 by $750 million (C$1 billion).
Canadian Natural Resources Ltd., citing a lack of shipping options, said on Wednesday that it’s targeting a base capital plan of $4.9 billion (C$3.7 billion) for next year, about $750 million ( C$1 billion) less than its normalized plan. Of next year’s spending, only 16% is aimed at increasing output, and the remainder is allocated to keeping it flat.
The oil-sands producer, which is projecting 2019 output equivalent to as much as 1.12 MMbopd, is the first major Canadian energy company to announce its spending plans for next year. With Western Canada’s pipelines overflowing, its crude selling at deep discounts and the province of Alberta mandating industry-wide production cuts, the company’s reduced spending may be a harbinger of similar announcements from its peers.
Canadian Natural said it has the flexibility to invest as much as $935,000 (C$700 million) more next year if prices and market access improve. That capital would be focused on increasing production in 2020 and beyond, rather than immediately.
The company is targeting crude and natural gas liquid production of 782,000 bpd to 861,000 bpd next year, in line with this year’s levels. Natural gas output will be 1.49 Bcfd to 1.55 Bcfd, a 2% drop from this year.
Shares of the Calgary-based producer rose 4% to $49.75 (C$37.23) at 12:32 p.m. in Toronto. The stock was down 20% this year through Tuesday, compared with a 15% decline for the S&P/TSX Energy Index.