CALGARY – Canadian Natural Resources Ltd. (TSX:CNQ) is directing another $400 million this year toward expansion of its Horizon oilsands mine, a sum it only planned to spend if market conditions were right.
The Calgary-based company’s 2014 plans call for $2.5 billion in spending at the project, north of Fort McMurray, Alta., with the option to raise that to $2.9 billion if costs of labour and materials look good, president Steve Laut told analysts on a conference call Friday.
“At this point, conditions are still favourable and we expect to execute the additional $400 million of project construction.”
Canadian Natural aims to take advantage of a relative lull in the northern Alberta construction market before shovels hit the ground on new projects like Suncor Energy Inc.’s (TSX:SU) Fort Hills mine and competition for workers and material heats up.
“We’re out ahead of the pack here,” said Laut.
“We think we have a window for at least a year before things heat up.”
In the first quarter, Horizon churned out about 113,000 barrels a day of synthetic crude oil, up four per cent from the same period a year earlier. April production averaged about 119,000 barrels a day.
Canadian Natural aims to expand Horizon’s output to 250,000 barrels per day through a series of mini-projects as opposed to one big megaproject, which have had a tendency to run over budget in the Fort McMurray area. That way, it can speed up or slow down activity, depending on where costs are going.
So far, the expansion is about 37 per cent constructed, with individual components in various stages of completion.
On Thursday, Canadian Natural announced it would be adding $425 million to its capital budget as a result of recent acquisitions and new development opportunities. In February, Canadian Natural acquired Devon Canada land in Western Canada for $3.1-billion, adding more natural gas to its portfolio.
Its total anticipated capital budget for 2014 stands at between $11.7 billion and $12.1 billion.
Canadian Natural also announced a near-tripling in its first-quarter profits.
Net income in the quarter totalled $622 million or 57 cents per share compared with $213 million or 19 cents in the prior-year period.
Revenue for the three months ended March 31 rose to almost $4.4 billion from $3.76 billion in the prior-year period.
Meanwhile, the company is close to completing its review into a prolonged bitumen leak at its Primrose oilsands project near Cold Lake, Alta.
It stands by its belief that the culprit is mechanical failures on old wells and that the problems are “solvable.” The Alberta Energy Regulator has not yet come to the same conclusion, and pointed to geological weaknesses as a potential cause for a past incident in the same area.
Even though Canadian Natural has a good idea of what went wrong, Laut said: “We’re going to be open.”
Any solution to the leak will have to address all possible ways the bitumen-water mixture could have travelled to surface, he told reporters following the company’s annual meeting Thursday.
“It doesn’t make sense for us to say that’s the one,” he said. “We’ll have a solution for all potential pathways to the surface.”
All of the bitumen has been cleaned up and contained, he added, and most of the old wells across the site have been checked for mechanical problems.
Last month, the regulator approved a request by Canadian Natural to resume steaming wells near where the leaks occurred, causing alarm from environmental groups.
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