By Lauren Krugel, The Canadian Press

CALGARY - Canadian Natural Resources Ltd. (TSX:CNQ) plans to spend 26 per cent more next year than it did in 2009, directing the lion's share of that capital toward oil developments and continuing to shy away from natural gas.

Of the Calgary-based energy company's planned $3.9 billion 2010 budget, 80 per cent will be targeted toward its crude oil operations, which include the $9.7-billion Horizon oilsands mine in northern Alberta and heavy oil properties in western Canada.

On the other hand, fewer natural gas wells will be drilled next year than this year, which was itself a very slow period for the natural gas industry in general.

Canadian Natural. a major natural gas producer, expects to end 2009 having drilled 114 gas wells.

By contrast, at its peak in 2005, the company drilled just under 900.

The only reasons Canadian Natural drilled for gas this year was to offset drainage and hold on to its land position.

"With the current gas price and cost environment it makes no sense to drill any gas wells for any other reason," said chief operating officer Steve Laut on a conference call with analysts Thursday.

In 2010, Canadian Natural expects to drill only 93 gas wells, as abundant supplies paint a bearish picture for that commodity throughout next year.

Next year about 55 per cent of the drilling will be geared toward deep, tight unconventional areas, compared to 35 per cent in 2009.

"The greater emphasis to deeper, longer life and more expensive wells will result in a decline of our gas production effectively bottoming out in Q4 2010 and positioning us to return to gas growth in 2011," Laut said.

Natural gas was trading at around US$4.84 in New York on Thursday, well below what most producers need to make drilling economically viable but still a significant rebound to the seven-year lows below US$3 the commodity hovered around months ago.

On Horizon, which suffered a series of mechanical setbacks between August and October, Canadian Natural plans to spend $785 million next year, up 40 per cent from 2009.

It expects to have a better idea of how much future phases of that project will cost by the end of next year, and could give it the final go-ahead in early 2011.

Earlier Thursday, Canadian Natural reported third-quarter net income of $658 million or $1.21 per share in the quarter ended Sept. 30.

This was down from a year-ago profit of $2.8 billion or $5.25 cents per share.

Quarterly revenue totalled $2.82 billion, down from $4.6 billion last year.

Canadian Natural said the drop in its net income had to be put into context.

The company said its net earnings last year had included net unrealized after-tax income of $1.9 billion related to the effects of risk management activities, foreign exchange fluctuation and fluctuations in stock-based compensation.

After adjusting its net earnings, Canadian Natural said it earned $658 million or $1.21 per share this year compared to $963 million or $1.78 per share in 2008.

Analysts had expected this year's quarterly earnings per share to come in at $1.25, according to Thomson Reuters.

The decrease in net earnings was attributed to the impact of lower realized pricing, lower natural gas sales volumes, higher production expenses and higher interest expenses.

These were however partially offset by the impact of higher crude oil sales volumes, higher realized risk management gains, lower royalty expense and the impact of a weaker Canadian dollar.

Canadian Natural said its expects quarterly volatility to continue as the company feels the impacts of unrealized risk management activities, stock-based compensation, and fluctuating foreign exchange rates.

The company's shares were off $1.45, or about two per cent to $67.15 on the Toronto Stock Exchange in Thursday afternoon trading.