Canadian Natural outlines C$20 bln oil sands plan
Stock Market News and Investment Information | Reuters.com
By Jeffrey Jones
CALGARY, Alberta, Nov 2 (Reuters) - Canadian Natural Resources Ltd. (CNQ.TO: Quote, Profile, Research) sketched out huge plans worth at least C$20 billion ($17 billion) on Wednesday to develop its oil sands and heavy crude reserves as high commodity prices fuel its ability to spend.
The series of new mining, drilling and processing projects by Canada's No. 2 independent oil producer come on top of the already-started first three phases of its C$10.8 billion Horizon oil sands venture in Alberta.
Canadian Natural, known for operations in Canada, the North Sea and offshore West Africa, also reported net income dropped 51 percent due to to a noncash charge in the third quarter, but cash flow rose by a third on higher output and prices.
The flurry of announcements and strong operating results prompted investors to push the stock up C$5, or more than 10 percent, to C$54.35 on the Toronto Stock Exchange.
Vast reserves and comfort that oil prices will stay strong are big drivers behind the plan to boost oil sands and heavy oil output by as much as 800,000 barrels a day over the next 15 years, in likely one of the world's largest private development schemes, analyst Wilf Gobert of Peters & Co. Ltd. said.
"They wouldn't be able to do this off the balance sheet if oil prices weren't so high without looking at major equity dilution," Gobert said. "And it really is reflecting back to the enormity of Canada's oil sands."
Under the long-term plans, Canadian Natural will consider expanding its Horizon project capacity by 265,000 barrels of synthetic crude, in two more phases, bringing total output from the development to 497,000 barrels a day by 2017.
That could cost about the same as the first three phases, President Steve Laut told analysts.
Also being studied is a gasification unit at Horizon worth up to C$1.4 billion. It would allow byproducts from processing to be used as a fuel, cutting costly natural gas use.
The company said it will develop more of its "in situ" oil sands holdings, in projects that involve pumping steam into the earth to allow the gooey crude to be pumped to the surface in wells. Over the next 13 to 15 years, production from those resources rise by 240,000 barrels a day, it said
In addition, it is considering building a 125,000 barrel a day heavy oil upgrader by 2012, worth about C$6 billion, that would be expandable to 175,000 barrels a day. Such plants turn heavy, high-sulfur oil into higher-value light crude.
The estimated costs for the projects are highly dependent on oil prices, Canadian Natural executives cautioned.
"We have a strong asset base and a strong core of technical, operational and financial expertise to unlock the value of those assets, as well as the financial strength and stability to finance development," Chairman Allan Markin said.
Gobert said the big risks to the plans are rising materials costs and Alberta's tight labor market, which have prompted big overruns at other oil sands developments in the province.
In the third quarter, Canadian Natural earned C$151 million, or 28 Canadian cents a share, down from C$311 million, or 58 Canadian cents a share, a year earlier.
Results included a C$430 million charge for unrealized losses on forward sales of oil and gas. Excluding charges, profit was C$1.10 a share, up from 71 Canadian cents a share.
Cash flow, an indicator of an oil company's ability to fund projects, rose to C$1.4 billion, or C$2.58 a share, from C$1 million, or C$1.94 a share.
Third-quarter output was 571,900 barrels of oil equivalent a day, up 8 percent from the same period of 2004.
The company said it budgeted C$6.8 billion in spending for 2006, up 39 percent from 2005. The money is aimed at lifting gas output 7 percent to up to 1.55 billion cubic feet a day, and oil production 18 percent to up to 373,000 barrels a day.
($1=$1.18 Canadian)
By Jeffrey Jones
CALGARY, Alberta, Nov 2 (Reuters) - Canadian Natural Resources Ltd. (CNQ.TO: Quote, Profile, Research) sketched out huge plans worth at least C$20 billion ($17 billion) on Wednesday to develop its oil sands and heavy crude reserves as high commodity prices fuel its ability to spend.
The series of new mining, drilling and processing projects by Canada's No. 2 independent oil producer come on top of the already-started first three phases of its C$10.8 billion Horizon oil sands venture in Alberta.
Canadian Natural, known for operations in Canada, the North Sea and offshore West Africa, also reported net income dropped 51 percent due to to a noncash charge in the third quarter, but cash flow rose by a third on higher output and prices.
The flurry of announcements and strong operating results prompted investors to push the stock up C$5, or more than 10 percent, to C$54.35 on the Toronto Stock Exchange.
Vast reserves and comfort that oil prices will stay strong are big drivers behind the plan to boost oil sands and heavy oil output by as much as 800,000 barrels a day over the next 15 years, in likely one of the world's largest private development schemes, analyst Wilf Gobert of Peters & Co. Ltd. said.
"They wouldn't be able to do this off the balance sheet if oil prices weren't so high without looking at major equity dilution," Gobert said. "And it really is reflecting back to the enormity of Canada's oil sands."
Under the long-term plans, Canadian Natural will consider expanding its Horizon project capacity by 265,000 barrels of synthetic crude, in two more phases, bringing total output from the development to 497,000 barrels a day by 2017.
That could cost about the same as the first three phases, President Steve Laut told analysts.
Also being studied is a gasification unit at Horizon worth up to C$1.4 billion. It would allow byproducts from processing to be used as a fuel, cutting costly natural gas use.
The company said it will develop more of its "in situ" oil sands holdings, in projects that involve pumping steam into the earth to allow the gooey crude to be pumped to the surface in wells. Over the next 13 to 15 years, production from those resources rise by 240,000 barrels a day, it said
In addition, it is considering building a 125,000 barrel a day heavy oil upgrader by 2012, worth about C$6 billion, that would be expandable to 175,000 barrels a day. Such plants turn heavy, high-sulfur oil into higher-value light crude.
The estimated costs for the projects are highly dependent on oil prices, Canadian Natural executives cautioned.
"We have a strong asset base and a strong core of technical, operational and financial expertise to unlock the value of those assets, as well as the financial strength and stability to finance development," Chairman Allan Markin said.
Gobert said the big risks to the plans are rising materials costs and Alberta's tight labor market, which have prompted big overruns at other oil sands developments in the province.
In the third quarter, Canadian Natural earned C$151 million, or 28 Canadian cents a share, down from C$311 million, or 58 Canadian cents a share, a year earlier.
Results included a C$430 million charge for unrealized losses on forward sales of oil and gas. Excluding charges, profit was C$1.10 a share, up from 71 Canadian cents a share.
Cash flow, an indicator of an oil company's ability to fund projects, rose to C$1.4 billion, or C$2.58 a share, from C$1 million, or C$1.94 a share.
Third-quarter output was 571,900 barrels of oil equivalent a day, up 8 percent from the same period of 2004.
The company said it budgeted C$6.8 billion in spending for 2006, up 39 percent from 2005. The money is aimed at lifting gas output 7 percent to up to 1.55 billion cubic feet a day, and oil production 18 percent to up to 373,000 barrels a day.
($1=$1.18 Canadian)
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