Since there is still no respite to the oil price plunge after six months, many independent exploration and production (E&P) companies feel compelled to cut their 2015 capital spending guidance. Canadian Natural Resources Ltd. (CNQ) is no exception in this regard, as it now forecasts less spending and lower output from what it projected previously.
Yesterday, West Texas Intermediate (WTI) crude closed at $46.07 per barrel, the lowest mark since April 2009. Most importantly, the oil price tumbled more than 57% since last June as there is plentiful supply of the commodity especially in lackluster global demand. Oil touched the recent low after investment bank, The Goldman Sachs Group Inc. (GS), declared that it expects WTI to trade at $40.50 a barrel in the second quarter of 2015, significantly lower than its previous projection of $70 per barrel.
Given the persisting oil price weakness, Canadian Natural has reduced its expected 2015 capital expenditure by almost 28% to C$6.2 billion from C$8.6 billion. The budget cut then prompted the company to lower its 2015 production guidance to 840−887 thousand barrels of oil equivalent per day (MBOE/D) from the prior range of 869−916 MBOE/D.
A tight budget will now force the company to trim its drilling operations in North America and abroad. Canadian Natural added that once the oil price recovers, it will invest C$470 million in its Kirby North Phase 1 thermal in situ project.
Calgary, Alberta-based Canadian Natural is engaged in the acquisition, development and exploitation of crude oil and natural gas properties. The company currently carries a Zacks Rank #5 (Strong Sell), implying that it will significantly underperform the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at better-ranked players in the energy sector like Seadrill Partners LLC (SDLP) and Enbridge Energy Management LLC (EEQ). Both stocks sport a Zacks Rank #1 (Strong Buy).
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