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Canadian Natural Resources Ltd. chairman Murray Edwards, left, and president Tim McKay prepare to address the company's annual meeting in Calgary, Thursday, May 9, 2019.

Jeff McIntosh/The Canadian Press

One of Canada’s biggest oil producers is non-committal about signing onto the crude-by-rail contracts that the Alberta government is trying to offload to the private sector.

Canadian Natural Resources Ltd. (CNRL) president Tim McKay said in an interview Thursday that only the first part of shipping oil by rail is covered in the contracts. Missing is the crucial final step of where – and to whom – the crude will go.

“You can get it onto the rail but there’s no destination, so you have to figure out where you’d take it in the Gulf Coast, what that cost would be to unload it, and who you’re going to sell it to,” Mr. McKay said.

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“There are additional costs to be borne, so we have to incorporate it into our cost model … were we to ever do crude by rail.”

The Canadian oil giant was pegged as one of the front-runners in the rail-contract negotiations in a provincial postbudget analysis by TD Securities.

Alberta Energy Minister Sonya Savage said late last month that her government was closing in on securing contracts to replace a deal inked in February by the previous NDP administration.

That four-year, $3.7-billion agreement with Canadian National Railway Co. and Canadian Pacific Railway Ltd. would have seen Alberta purchase and ship 120,000 barrels of crude a day to help deal with a lack of pipeline capacity and reduce the price discount on Canadian heavy oil.

The NDP projected revenue of almost $6-billion under the program, but Premier Jason Kenney cancelled it soon after winning the April election, arguing that the financial risks were too high.

Mr. McKay said the missing piece of the puzzle leaves him “less-enthused” about crude by rail.

“It’s a more expensive option and, if you believe that pipeline optimizations will come into play, you really don’t want to be hamstrung with three-year contracts,” he said.

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Mr. McKay also urged the province to address oil curtailment.

The former NDP government first imposed curtailment in January to drain the glut of oil in storage and help ease a crippling price differential on Canadian oil.

In the past quarter, as the province extended curtailment through 2020, CNRL drilled eight wells in Saskatchewan, surpassing the past few year’s worth of wells it has drilled in that province.

Mr. McKay doesn’t see CNRL forgoing its employment and production footprint in Alberta to up and move east, but said provincially mandated production limits have impacted his company’s conventional business.

“We have opportunities in Saskatchewan that we can drill and, like most companies, if you can drill and have uncurtailed production and it makes economic sense, you would move your capital there,” he said.

It’s not an Alberta versus Saskatchewan situation, Mr. McKay stressed, so much as an opportunity to increase production to help boost the company’s bottom line.

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The company’s swath of production facilities in Alberta and Saskatchewan means it has been able to manage curtailment and remain relatively unscathed, announcing on Thursday third-quarter net earnings of more than $1-billion and adjusted net earnings of approximately $1.2-billion.

That was in large part due to lower-than-expected operating costs.

It also saw a 12-month production per share growth of 14 per cent from its 2018 third-quarter results, and its oil-sands mining and upgrading achieved a record production month in August, hitting 462,000 barrels a day of crude.

The company also reduced its gross debt by more than $1-billion from the past quarter.

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