(Adds executive comment from interview, updates share price,paragraphs 5-8)
By Rod Nickel
March 1 (Reuters) - Oil and gas producer Canadian NaturalResources Ltd CNQ.TO said on Thursday it will slow its outputof heavy crude due to a steep price discount tied to tighttransportation capacity from the landlocked Alberta province.
CNRL, one of Canada's largest heavy oil and gas producers,is delaying the completion and production ramp-up of some wellsthat produce heavy oil, President Tim McKay said on a conferencecall with analysts.
"Although oil is moving, the (price) differentials arebehaving as if the oil can't move," McKay said.
The company is also considering reducing its heavy oildrilling program in the second half, and switching to more lightoil drilling, McKay said.
In an interview, McKay said he expects the cumulative effectof slowing heavy output from new wells and advancing the timingof planned outages at some production sites will be "quiteminor" for overall production.
"We look at the differentials all the time and our abilityto start and stop our drilling program, based on what's going onwith the commodities," he said.
Earlier on Thursday, CNRL's fourth-quarter profit beatestimates, boosted by higher oil production and higher prices.
The company's Toronto-listed shares were up 65 Canadiancents, or 1.6 percent, to C$40.40.
Alberta oil producers have struggled to move crude to U.S.refineries due to strained pipeline and rail capacity, leadingto a bigger-than-usual discount on Canadian heavy crude, calledWestern Canada Select (WCS), compared to U.S. benchmark WestTexas Intermediate (WTI) light oil.
Heavy crude must be diluted to move through pipelines,adding cost.
CNRL's heavy oil output was 1 percent higher during thefourth quarter than the preceding quarter. The company expandedits Horizon oil sands site last year.
WCS heavy crude was trading on Thursday at $24.70 per barrelbelow WTI, according to Shorcan Energy Brokers data.
The Alberta government on Wednesday estimated that thehigher-than-usual differential was costing heavy oil producersC$30 million to C$40 million in revenue per day.
Overall daily production during the quarter rose 19 percentto 1 million barrels of oil equivalent per day (boe/d).
The company's net income fell to C$396 million ($308.17million), or 32 Canadian cents per share, in the fourth quarter,from C$566 million, or 51 Canadian cents per share, a yearearlier.
Excluding items, the company earned 46 Canadian cents pershare, beating analysts' average estimate of 36 Canadian cents,according to Thomson Reuters I/B/E/S. ($1 = C$1.29)
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