July 18, 2016 (Source: Globe & Mail) Canadian Natural Resources Ltd has quietly bought up about 12,000 natural gas wells across Alberta over the last two years, a Reuters analysis of regulatory data shows, becoming the country’s largest natural gas producer as rivals sold assets or held steady in a tough market.
The counter-cyclical shopping spree helped CNRL push its Alberta well count up 60 per cent between the end of 2013 and the end of 2015, building a dominant position in the province and overtaking Encana Corp to become Canada’s top producer.
The purchases – some for less than $1.00 per well – came as the company grappled with the biggest oil price slump in a generation, selling land to pay down debt. While CNRL has bought assets during previous downturns, it has never before acquired so many wells, so quickly. The expanded footprint not only increases production, but also gives the company a strategic advantage that will pay off for years to come if the natural gas market improves.
With an extensive network of wells and the gathering pipelines that connect them, it can turn a profit from wells that might lose money in the hands of a smaller producer.
“All these new wells have low production, but they were bought for pennies for the dollar,” said Ramond James analyst Chris Cox, noting the wells are in adjacent properties which offers cost synergies, and “if you are expecting pricing to improve then you get an additional uplift.”