The president of Canadian Natural Resources says his company will increase production to more than one million barrels of oil equivalent a day in the next three years if oil prices strengthen.
Steve Laut said in an interview Thursday that the Calgary-based company would increase annual spending to about $4.5-billion a year from 2017 through 2019 if it sees signs of sustainability in benchmark oil prices above $60(U.S.) a barrel and in natural gas prices above $3 a gigajoule, or roughly the amount of heat supplied by about 1,000 cubic feet of natural gas.
"If we see it is a sustainable $60 ... we would spend about $4.5-billion a year in capital spending, which is well below our cash flow so our balance sheet strengthens very quickly," he said.
"We would probably spend it in a balanced approach between everywhere in our inventory and each product or each project would have to compete for capital."
Benchmark North American crude, which has recently traded above $50, fell Thursday to under $47, while natural gas was trading at just under $2.60.
Canadian Natural, already Canada's largest producer of natural gas and conventional heavy oil, is expected to wrap up a series of expansions at its Horizon oil sands mine and upgrader by the end of 2017. It says it will spend $3-billion to add 45,000 barrels of oil per day this year and 80,000 bpd next year at Horizon.
Laut said completion of the oil sands expansion will free up capital that the company can then invest throughout its portfolio of promising oil and gas drilling opportunities, mainly in Western Canada, but also offshore West Africa.
Analysts applauded Canadian Natural's new emphasis on growing production following its investor open house in Toronto on Wednesday.
"Post 2017 investment opportunities are likely to be a balance of shorter-cycle and medium-term investment opportunities," analyst Michael Dunn of FirstEnergy Capital said in a report.
"This low-decline, high free cash flow characteristic is fairly unique amongst oil and gas producers."
Canadian Natural expects to produce more than 800,000 barrels of oil equivalent this year while spending just under $4-billion.