May 19, 2011 / 9:41 PM / in 7 years

UPDATE 1-North American Energy sees work suspension at Horizon helping margins

* Says Canadian Natural asks to suspend overburden ops

* Work suspension at Horizon plant to run till Jan 2

* Plans to redeploy idle equipment to other projects

* Redeploying equipment could raise cash flow, margins

May 19 (Reuters) - Canada’s North American Energy Partners Inc said on Thursday that it would suspend overburden removal work at Canadian Natural Resources Ltd’s damaged Horizon oil sands project, a day after it warned of a writedown related to continuing work.

If it can redeploy idle equipment at the project during the suspension period from May 18 to Jan. 2, 2012, it could increase its margins and cash flow, the company said in a statement.

Under the contract, Canadian Natural is required to cover fixed costs on idle equipment related to work suspension.

On Wednesday, the company, which provides mining and pipeline installation services to oil sands operators, said continuing work at the site would result in a writedown that would hurt its annual profit and make it non-compliant with certain covenants. [ID:nL4E7GI1V6]

On Thursday, North American Energy said Canadian Natural notified it to suspend overburden removal work at the project.

“The work suspension at Canadian Natural effectively removes the only low-margin recurring services activity in our project mix for the next nine months,” Chief Executive Rod Ruston said.

The company recently signed contracts with Shell Canada Energy, a unit of Royal Dutch Shell RDSa.L, and Syncrude Canada and anticipates signing a new five-year contract with Suncor Energy for overburden removal.

North American Energy’s shares closed down 1.1 percent at C$7.37 on Thursday on the Toronto Stock exchange. (Reporting by Aftab Ahmed and Savio D‘Souza in Bangalore; Editing by Roshni Menon)

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