January 12, 2015 / 5:28 PM / 3 years ago

UPDATE 1-Canadian Natural Resources defers oil sands thermal project

3 Min Read

(Adds executive comment, Kirby North details)

By Nia Williams

Jan 12 (Reuters) - Canadian Natural Resources Ltd, the country's largest independent oil producer, said on Monday it would defer the first phase of its 40,000-barrel-per-day Kirby North thermal project in northern Alberta until crude prices stabilize.

The company, whose shares fell more than 4 percent, also cut its 2015 capital expenditure and production forecast as global oil prices continued to nosedive.

Phase one of the Kirby North thermal project, pumping steam underground to liquefy bitumen so it can flow to the surface, was originally targeted for the fourth quarter of 2016.

Chief Financial Officer Corey Bieber said he did not know the project's new start date, but it would depend on such factors as oil prices, currency rates and capital costs.

"We target our 15 percent returns," Bieber said, "and until we can justify that we are going to get that through its life on a full cycle basis, it will be deferred."

CNRL, which has operations in Western Canada, Britain's North Sea and offshore West Africa, now plans to spend C$6.2 billion ($5.22 billion) in 2015, 28 percent lower than its earlier forecast of C$8.6 billion.

The decrease stems primarily from reduced drilling activity, the company said, echoing other North American energy producers that have scaled back spending plans due to weak oil prices.

Benchmark crude prices have more than halved since June because of oversupply, producer group OPEC's refusal to cut its output ceiling and weak demand. International Brent crude slumped to below $48 a barrel on Monday, its lowest since April 2009.

Bieber said CNRL had the flexibility to reduce spending into its 2015 corporate budget released in November and would cut even further if market conditions warranted.

"This is to telegraph to the marketplace that we have enacted some of the initiatives we said we could," he said.

CNRL said it now expected to produce 840,000 to 887,000 barrels of oil equivalent per day cut in 2015, down from a prior forecast of 869,000 to 916,000 boepd.

The company is proceeding with its Horizon oil sands mining project and upgrader, which will add an extra 125,000 bpd of synthetic crude oil production capacity by late 2017.

CNRL shares were down 4.3 percent at C$31.75 on the Toronto Stock Exchange.

$1 = C$1.1873 Additional reporting by Rama Venkat Raman and Ashutosh Pandey in Bengaluru; Editing by Savio D'Souza and Lisa Von Ahn

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