November 4, 2010 / 10:31 AM / 7 years ago

UPDATE 2-Canadian Natural Resources profit beats estimates

* Q3 EPS C$0.55 vs est C$0.48

* Cash flow C$1.42/shr

* Total production up 8 pct at 621,284 boe/d

+ Shares rise 4 pct (Add details and comment)

By Scott Haggett

CALGARY, Alberta, Nov 4 (Reuters) - Canadian Natural Resources Ltd CNQ.TO, reported a higher than expected third-quarter profit on Thursday and said it has launched the first C$1.25 billion ($1.25 billion) phase of its Kirby oil sands project.

The company, Canada’s No. 1 independent oil producer, said it has given the go-ahead for the initial, 40,000 barrel per day phase of the Kirby thermal oil sands project south of Fort McMurray, Alberta.

It also expanded the scope of the project after acquiring adjoining properties from Enerplus Resource Fund ERF_u.TO. Instead of a 45,000 bpd project, Kirby will see an additional expansion and a debottlenecking phase to tweak operations that will eventually boost output to between 70,000 and 100,000 bpd.

“That’s significant development by any measure,” Steve Laut, the company’s president, said on a conference call.

Canadian Natural, which operates the 110,000 bpd Horizon oil sand mine and upgrader, expects its thermal oil sands properties -- where steam is pumped into the ground to liquefy tarry bitumen deposits -- to eventually produce as much as 400,000 barrels per day, up from about 271,000 bpd currently.

INFLATION WORRIES

The company said output from the Horizon project averaged 83,809 bpd in the quarter, up 25 percent from the year-earlier period, but below capacity as the company continued to iron out the bugs from the complex facility, which started up in 2009.

Canadian Natural said it will make a decision early next year on whether to expand the project’s output to as much as 250,000 bpd.

However, the company is concerned that a new round of construction in the oil sands region of northern Alberta could spark another round of the hyper-inflation that prevailed there before the recession, and it is looking for a clear picture of the cost of the expansion before giving any approval.

The cost of the project’s initial phase surged 43 percent, to C$9.7 billion during construction.

“Our concern is once you start announcing projects, we (and) the industry as a whole, could get back into that inflationary period and we could have cost pressures again,” Laut said.

PROFIT DROPS

For the third quarter, Canadian Natural said net earnings fell 12 percent to C$580 million, or 53 Canadian cents a share, from C$658 million, or 61 Canadian cents.

Adjusted profit fell 7.9 percent to C$606 million, or 55 Canadian cents, from C$658 million, or 61 Canadian cents.

Analysts, on average, had expected the company to earn 48 Canadian cents a share, according to Thomson Reuters I/B/E/S

Cash flow, an indicator of a company’s ability to pay for new projects and drilling, rose 2.6 percent to C$1.54 billion, or C$1.42 per share, from C$1.51 billion, or C$1.39.

Revenues rose 18 percent to C$3.34 billion.

Production increased 8 percent to 621,284 barrels of oil equivalent per day.

Canadian Natural forecast 2010 production of 1,242-1,250 mmcf/d of natural gas and 423,000-430,000 bpd of crude oil and natural gas liquids.

It expects fourth-quarter production of 1,248-1,273 mmcf/d of natural gas and 432,000-456,000 bpd of crude oil and NGLs.

Shares of the Calgary-based company rose C$1.45 to C$39.19 midday on the Toronto Stock Exchange.

$1=$1.00 Canadian Additional reporting by Ashutosh Joshi; editing by Rob Wilson

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