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Canadian oil and gas operators plan to grow production, spending in future

Multiple Canadian companies, including the country’s most prolific natural gas producer, plan on growing volumes and capital spending in the quarters ahead, in a stark contrast from major US oil and gas operators prioritizing fiscal discipline and relatively static production.

The second-quarter earnings report of Tourmaline Oil Corp., the largest natural gas producer in Canada, showed substantial growth plans between Q2 and the end of the current quarter. Tourmaline averaged 1.916 Bcf/d during Q2, representing a significant year-on-year gain as production averaged 1.425 Bcf/d during Q2 2020.

The company expects volumes to average 2.11 Bcf/d during the third quarter, a nearly 200 MMcf/d rise quarter on quarter.

This production growth may be behind much of NGTL’s strength this summer. NGTL production averaged 12 Bcf/d during Q2, according to S&P Global Platts Analytics. It has averaged 12.26 Bcf/d during Q3 as of Aug. 20. While Tourmaline likely comprises the bulk of this, there is possibly growth from other operators as well.

Active rigs deployed across Canadian oil and gas fields have rebounded close to pre COVID-19 levels. With 145 rigs, Canada is at 72% of the rigs deployed in early 2020, according to Platts Analytics.

Canadian Natural Resources increased its Q2 production to 1.614 Bcf/d compared with 1.462 Bcf/d the same quarter one year prior. The company plans to grow production in the months ahead.

“With the increased positive outlook for commodity prices for the remainder of 2021, we have increased our 2021 capital budget by $275 million to $3.48 billion as we undertake lead activities for future growth opportunities,” said Tim McKay, president of Canadian Natural, during the company’s Q2 earnings call. “The increase includes $120 million for conventional and unconventional assets, $110 million for long life low decline assets and $45 million in additional well abandonment activities.”

Tourmaline said it plans to expand production in 2022 as well, with gas averaging 2.31 Bcf/d during Q2 2022, which would mean another 200 MMcf/d of growth from just this one.

Tourmaline expecting production to be that strong this quarter could be a bearish sign for AECO once the Upstream James River maintenance begins, according to Platts Analytics. However, the lack of processing plant turnarounds so far this summer could mean operators are aiming to bring plants down during the September maintenance, which could bring production down.

Last month, Tourmaline inked a deal to sell 140 MMcf/d of natural gas to Cheniere beginning in 2023. The LNG associated with this gas supply, about 850,000 mt/year, will be marketed by Cheniere. Tourmaline will have 905 MMcf/d exposed to export markets on firm, long-term transport agreements at exit of 2023.

Platts Analytics forecast total Canadian production to average 16.3 Bcf/d on 2022 based on current drilling and completion data. This would be 1 Bcf/d higher than 2021. Most of the growth is projected to come from British Columbia’s Montney Shale, followed by Alberta’s Duvernay and Cardium plays.
Source: Platts

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