Canadian Natural Resources eyes Rail Contracts

August 1, 2019

A crude oil train segment rumbles alongside a U.S. inland waterway. CREDIT: Dagmar Etkin
A crude oil train segment rumbles alongside a U.S. inland waterway. CREDIT: Dagmar Etkin

Canadian Natural Resources, the country's biggest oil and gas producer, is looking at taking on the Alberta provincial government's contracts to move crude by rail, a senior company executive said on Thursday.

Shipping more crude by rail is seen as critical for Canadian oil producers due to congested pipelines that forced Alberta to order mandatory oil curtailments this year.

Alberta's United Conservative Party government said in June that it would divest rail contracts amounting to 120,000 barrels of crude per day (bpd) to the private sector this fall. The contracts were signed by the previous New Democratic Party government.

"To go forward with it, obviously it has to make sense, but we're in the process and we're looking at it," Canadian Natural President Tim McKay said on a quarterly conference call.

In an interview, McKay said the government had set a deadline by the end of August to receive proposals from bidders. He declined to say how much volume Canadian Natural wants to take on.

"We have to look at it from the company's perspective in terms of the economics and how it works into our whole operational piece," he said.

Samantha Peck, spokeswoman for Alberta Energy Minister Sonya Savage, said the government still expects to complete the divestments this fall.

Canadian Natural currently ships 14,000 bpd, McKay said.

Railways moved 285,131 bpd of Canadian crude in May, the most since January when curtailments took effect, according to the National Energy Board.

Curtailments have been effective in draining Alberta's oil in storage and in averting job losses, McKay said. The company expects the mandatory cuts to last through 2019.

Canadian Natural shares fell 5% in Toronto, in line with broad weakness in the sector as global oil prices sank.

The Calgary, Alberta-based company beat estimates for quarterly profit, as higher prices helped offset lower production.

Canadian Natural said average realized prices for crude and natural gas liquids ticked up 3.8%, while natural gas prices climbed 1.5% in the second quarter.

The company, which in June bought Devon Energy Corp's Canadian assets for C$3.8 billion, said daily production fell to 1.03 million barrels of oil equivalent per day from 1.05 million.

Net earnings rose to C$2.83 billion, or C$2.36 per share from C$982 million, or 80 Canadian cents, a year earlier.

On an adjusted basis, the company earned 87 Canadian cents per share, beating analysts' estimates for 85 Canadian cents per share, according to IBES data from Refinitiv.

By Rod Nickel and Taru Jain

Logistics News

JS Alliance Successfully Completes Indian Liquid Cargo Berth

JS Alliance Successfully Completes Indian Liquid Cargo Berth

Heritage Capital Group Appoints Jamie McCurry as Industry Specialist

Heritage Capital Group Appoints Jamie McCurry as Industry Specialist

CMA CGM, Asyad Plan $400m Terminal at Sohar Port

CMA CGM, Asyad Plan $400m Terminal at Sohar Port

AD Ports Group, Emirates Global Aluminium Invest $22m in Khalifa Port Infrastructure Development

AD Ports Group, Emirates Global Aluminium Invest $22m in Khalifa Port Infrastructure Development

Subscribe for Maritime Logistics Professional E‑News

UK's long-awaited Defence Plan allocates PS5 Billion to Drones
China bans light aircraft following Beijing tower crash: FT
U.S. announces that Trump envoys Kushner, Witkoff and Witkoff are traveling to Doha for the Iran meeting