CALGARY -- Operating costs and production levels are set to fall at Canadian Natural Resources Ltd. but, unlike many of its peers, the company left its long-standing dividend intact and took no asset impairment charges in its first-quarter report on Thursday.

The move to leave its quarterly dividend at 42.5 cents per share surprised analysts, who questioned its sustainability given low oil prices and refinery cutbacks as the COVID-19 pandemic reduces fuel demand throughout North America.

In its 20th consecutive annual increase, the company raised the investor payouts by 13 per cent just two months ago.

On Wednesday, fellow oilsands giant Suncor Energy Inc. cut its quarterly dividend by 55 per cent to 21 cents per share after 18 years of consecutive annual increases.

“The board of directors has shown confidence in the company's assets and ability to deliver strong and sustainable cash flow by maintaining the current quarterly dividend,” said Canadian Natural chief financial officer Mark Stainthorpe on a conference call.

"With low break-even pricing, the dividend remains sustainable."

Suncor CEO Mark Little said Wednesday the dividend cut was part of a strategy, along with cost cutting, to bring the company's targeted break-even point to US$35 per barrel from US$45 on a cash flow basis.

Canadian Natural president Tim McKay said Thursday his company's break-even point is already between US$30 and US$31 per barrel.

Maintaining the dividend will cost the company about $2 billion this year and it likely should have been reduced, noted National Bank analyst Travis Wood in a report.

Analyst Phil Skolnick of Eight Capital, however, pointed out that Suncor outspent first-quarter cash flow after paying its dividend and Canadian Natural didn't, making the latter's dividend more affordable.

Canadian Natural shares rose by about four per cent to $22.60 in early trading on the Toronto Stock Exchange but drifted lower, up 0.6 per cent at $21.86, at noon EDT.

Production in the first quarter reached a record 1.18 million barrels of oil equivalent per day, the maximum allowed under ongoing Alberta government oil curtailments, Canadian Natural said, adding it maximized its output of upgraded crude from its oilsands mining operations.

Oil production will fall this month by about 120,000 barrels per day through a combination of shutting down thermal oilsands and conventional oil wells to avoid low oil prices, and maintenance shutdowns at certain facilities, it added.

The company officially withdrew its 2020 production guidance but said it still could meet its previous target range of 1.137 to 1.207 million boe/d under current commodity futures pricing.

On the call, McKay estimated total volume reductions by the oil industry in Western Canada due to low prices likely add up to about one million barrels per day.

After avoiding natural gas investments for several years, Canadian Natural said it will drill wells to add about 60 million cubic feet per day this year in response to strengthening prices as production falls in the United States.

The company said it will cut its operating costs this year by $745 million compared with last year and will eliminate another $280 million from capital costs on top of its cut of more than $1 billion announced in March.

It now expects capital spending to total $2.68 billion this year, down from its original budget of $4.05 billion.

The company announced a first-quarter loss of $1.28 billion on lower commodity prices, compared with a profit of $961 million in the same period of 2019.

On an adjusted basis, it lost $295 million, compared with an adjusted profit of $838 million a year ago.

This report by The Canadian Press was first published May 7, 2020.