CALGARY – Canadian Natural Resources Ltd. (TSX:CNQ) says an expansion to its Horizon oilsands mine is currently tracking 10 per cent under budget as contractors and service providers compete for work in the Fort McMurray, Alta. region.
“The availability of construction contractors and related services has been better than expected,” president Steve Laut told analysts on a conference call Friday to discuss the company’s first-quarter earnings.
“As a result, we continue to see bidders sharpen their pencils.”
Work is about 20 per cent complete on the plan to bring Horizon’s production from its current 110,000 barrel-per-day capacity to 250,000 barrels per day. Eventually, Canadian Natural aims to churn 500,000 barrels per day out of the mine.
Instead of handling the expansion as one big megaproject — an approach that has caused delays and cost overruns for many in the oilpatch — Canadian Natural is tackling it as a series of smaller projects that have the flexibility to be started and stopped easily, depending on market conditions.
Imperial Oil Ltd.’s Kearl oilsands mine, which recently started producing bitumen, came in at $12.9 billion, up from a previous estimate of $10.9 billion. The project was initially expected to cost $7.9 billion.
In the first three months of 2013, production of synthetic crude oil from Horizon— a premium product that has been upgraded from tar-like oilsands bitumen — averaged 109,000 barrels per day, a 31 per cent increase from a year earlier.
For all of 2013, Horizon production is expected to range from 100,000 barrels to 108,000 barrels per day, including a 24-day planned maintenance outage currently underway.
Another one of Canadian Natural’s oilsands projects, the steam-driven Kirby South development, is expected to start up sooner than expected.
It had originally planned for first steam at the 40,000-barrel-per-day project in November, but now it’s looking like that will take place in the third quarter.
The company also said the Kirby project remains on budget.
On Thursday, Canadian Natural reported net earnings from operations were $401 million, or 37 cents per share, missing the average analyst estimate of 42 cents per share, according to Thomson Reuters. Last year, it brought in $300 million, or 27 cents per share.
Revenues were $3.8 billion, up from $3.5 billion in the same 2012 quarter.
Net earnings, which include one-time accounting items, were cut in half to $213 million, or 19 cents per share, from $427 million, or 39 cents per share, a year earlier.
Average company-wide production in the first three months of the year was 680,884 barrels per day, up three per cent from the previous year.
Canadian Natural also said it has found a partner to help it drill exploratory wells in the rough waters off the South African coast. The company won’t provide further details about who the partner is until it receives regulatory approval.
Earlier this year, it said it was on the lookout for a deal to unlock value from its vast shale holdings in northeastern B.C.
It’s a departure for the company, which has resisted the sorts of joint-venture deals that have been all the rage among its oilpatch peers in recent years.
Canadian Natural is the largest player in the Montney formation, which stretches through parts of northeastern B.C. and northwestern Alberta.
It said it was looking to “monetize” about a quarter of the more than 400,000 hectares it controls in the Montney. The land being offered is in the Graham Kobes area of B.C., an area rich in valuable natural gas liquids and outside of what Canadian Natural considers to be its core position.
Canadian Natural shares rose 2.6 per cent to $30.23 in afternoon trading Friday on the Toronto Stock Exchange.