CORRECT:Canadian Natural 2Q Profit Quadruples On Higher Oil Production, Lower Costs
August 05 2010 - 1:37PM
Dow Jones News
Canadian Natural Resources Ltd.'s (CNQ, CNQ.T) net income more
than quadrupled during the second quarter as oil production and
prices rose while the company's production costs decreased.
The only major negative factor the Calgary oil and gas producer
reported was lower expected annual production from its Horizon oil
sands project due to it being taken offline for unscheduled
maintenance last month after a pipeline break.
Second-quarter net earnings came in at C$667 million, or 61
Canadian cents a share, while revenue increased by nearly a third
to $3.6 billion.
Adjusted net earnings, which exclude the effects of hedging and
currency fluctuations, were 63 Canadian cents a share, beating
analysts' mean estimates of 56 Canadian cents a share.
Canadian Natural's shares rose 1.1% to $36.14 in recent trading
on the New York Stock Exchange.
Total production increased 10% to 649,195 barrel of oil
equivalents per day during the quarter compared with a year
earlier.
Canadian Natural's higher profits were largely driven by higher
oil prices, as well as increased oil production. The company's
average realized oil price rose 7% to C$63.62 a barrel. Much of
Canadian Natural's production is heavy oil, which trades at a
discount U.S. light oil benchmark prices, which averaged $77.99
during the quarter. Crude oil makes up 68% of Canadian Natural's
production volume and 86% of its revenue.
"Canadian Natural continues to benefit from the decision to
allocate capital to the oil portion of our portfolio rather than
the natural gas portion," President Steve Laut said during a
conference call Thursday, adding that the company expects natural
gas prices to remain "challenged" near $4 a million British thermal
units for the rest of this year.
The company's best production results came from its thermal
heavy oil assets, where it reached record production of 96,000
barrels a day, a 53% increase from a year earlier.
Operating costs for the company's crude oil and natural gas
liquids production also dropped 23% from a year ago due to
operational efficiencies, and the company slightly lowered its
annual operating cost guidance for all its operations, except oil
sands.
The company lowered the top end of its production guidance for
its Horizon oil sands project in northeast Alberta to 90,000 to
100,000 barrels a day--the previous top end had been 105,000
barrels a day--as a result of a pipeline break at the end of last
month. Company executives said during the conference call that the
break was likely caused by corrosion from high concentrations of an
ammonia compound. Horizon would likely be up and running again by
the end of next week and steps would be taken to prevent the same
incident from happening again, the executives said.
Laut said during the conference call that the company was
committed to moving forward with the second phase of Horizon's
development, which would take production to 232,000 barrels a day,
"but only when we can be certain that reasonable cost certainty can
be achieved." The company estimated the project won't enter
production until 2012 or 2013.
The company is also moving forward with its 45,000 barrel-a-day
Kirby oil sands project in Alberta, which it expects to receive
regulatory approval for this summer and to sanction in the fourth
quarter.
-By Edward Welsch, Dow Jones Newswires; 403-229-9095;
edward.welsch@dowjones.com
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