Canadian Natural shares rise as profit surges
CALGARY, Alberta (Reuters) - Canadian Natural Resources Ltd CNQ.TO shares surged more than 5 percent on Thursday as record operating profits offset concerns over new cost overruns and delays at its massive Horizon oil sands project.
A day after announcing that costs for the Horizon project had risen to C$9.27 billion ($8.8 billion) -- 6 percent above its last estimate and more than a third higher than the 110,000 barrel-per-day project's original C$6.8 billion budget -- Canadian Natural said synthetic crude production at Horizon could begin at reduced rates in the fourth quarter.
Also, Steve Laut, the company's chief operating officer, said in an interview that major construction is nearly complete and full output could come by early 2009.
"There are just little things left," he said. "It's all small things but they take a tremendous amount of time and productivity is very low."
Budget overruns and project delays have become almost routine in Canada's oil sands, the largest oil reserves outside of the Middle East.
Every major project in the region has exceeded its budget because of labor shortages and rising prices for steel and other materials as oil firms rush to exploit the resource.
However, the cost increases and delays are unlikely to hurt Canadian Natural, an analyst said, as its earnings are rising on high oil prices and its 40,000 barrel per day Primrose East heavy oil development is ahead of schedule.
Oil from the new development is expected to flow in the fourth quarter instead of early 2009, Canadian Natural said.
"Primrose is very positive and it looks like it may help offset the slight delay from Horizon," said Chris Feltin, an analyst at Tristone Capital. Continued...