March 8, 2012 / 12:42 PM / 6 years ago

UPDATE 3-CNRL profit jumps; sees oil discounts easing

* Q4 EPS C$0.76 vs loss/shr C$0.28 last year

* Raises quarterly div by 17 pct

* Says Horizon project on track to return to production

By Jeffrey Jones

CALGARY, Alberta, March 8 (Reuters) - Canadian Natural Resources Ltd expects the bargain-basement prices it now garners for its oil to improve over the next few months as spring maintenance at refineries ends and a new pipeline link to the U.S. Gulf Coast opens up.

Canadian Natural, which reported its fourth-quarter results climbed back into the black following a big writedown last year, has struggled along with the rest of Canada’s oil industry with deep discounts due to surging production, tight pipeline capacity and some unplanned refinery outages.

Canada’s largest independent oil producer was also hit last month by an unexpected shutdown of its 110,000 barrel a day Horizon oil sands project. It is expected to restart by mid- to late March.

Maintenance outages at refineries with a total capacity of 350,000 barrels a day are planned for April and May in the U.S. Midwest, Canadian and West Coast markets, Canadian Natural President Steve Laut said. That has contributed to heavy crude slumping recently to as much as $35 a barrel under benchmark West Texas Intermediate oil, double the discount of December.

“But it is also clear that (price spreads) will return to previous levels once the refineries come back on,” Laut told analysts.

Canadian oil producers have also been hit by the wide spread between the U.S. benchmark oil and the international grades, such as Brent. That should begin to ease when Enbridge Inc and Enterprise Product Partners complete a project to reverse the flow of their Seaway pipeline between the Cushing, Oklahoma, storage hub and Texas refineries, he said.

“We expect when the Seaway reversal becomes effective June of this year, this differential to narrow substantially and then return to more typical differentials in early 2013 as Seaway is expanded to 400,000 barrels a day,” Laut said.

Canadian Natural said on Thursday it took more money out of its natural gas operations with prices for the fuel hovering at 10-year lows.

It chopped 2012 gas spending by C$170 million ($172 million), which is expected to reduce gas output by about 20 million cubic feet a day and gas liquids output by 460 barrels of gas liquids a day.

The cuts affect all gas operations except Canadian Natural’s emerging liquids-rich Septimus prospect in British Columbia.

Overall, the company expects to produce an average of 1.25 billion to 1.3 billion cubic feet a day of gas and 440,000 to 480,000 barrels of oil and gas liquids a day.


Canadian Natural, which operates in Canada, the North Sea and offshore West Africa, earned C$832 million, or 76 Canadian cents a share, compared with a year-earlier net loss of C$309 million, or 28 Canadian cents a share, caused mostly by the writedown of its Gabon operations.

Excluding unusual items, the company earned 88 cents a share, ahead of analyst expectations of 86 Canadian cents a share, according to Thomson Reuters I/B/E/S.

It raised its quarterly dividend by 17 percent to 10.5 Canadian cents a share.

Canadian Natural shares were up 19 Canadian cents at C$35.33 on the Toronto Stock Exchange. They had fallen 8 percent since the start of the year, partly due to the Horizon shutdown, the second unplanned outage in a year.

A combination of strong pricing and solid operations led to the good showing in the quarter, CIBC World Markets analyst Andrew Potter said in a research note.

However, he cautioned that deep oil price discounts will cap cash flow for some time.

In the quarter, cash flow, a glimpse into the firm’s ability to fund future operations, rose 31 percent to a company record C$2.16 billion, or C$1.96 a share.

Overall production rose 2 percent to 657,599 barrels of oil equivalent a day.

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