CNRL set to restart oilsands project

Company aiming to boost rig count

Canadian Natural Resources Ltd. says it will restart an oilsands project shelved earlier in the commodity rout while it puts more drilling rigs to work in Western Canada in a new sign of confidence.

Canada’s largest heavy oil and natural gas producer reported Thursday it would resume construction on its $1.3-billion Kirby North project, which uses steam to extract oil in northern Alberta.

It’s the first new oilsands project to get the green light since prices began to fall two years ago.

CNRL president Steve Laut told analysts on a third-quarter earnings call that the restart was made possible by efforts to drive down project costs.

The company shaved more than $100 million from the project’s remaining budget, now estimated at $650 million. It plans to spend a modest $28 million in 2017 as it conducts procurement and engineering work with a focus on cutting expenses further.

The first oil is expected from the project in 2020.

Canadian Natural also revealed plans to deploy 16 drilling rigs across Western Canada by January, its highest count by far during the downturn.

Laut said the busier drilling season is due in part to the company’s confidence in higher commodity prices, while its financial outlook is stronger from the expansion of its Horizon oilsands project.

“We have more capacity to strengthen the balance sheet and maybe put a little more into developing resources,” Laut said in an interview.

The Petroleum Services Association of Canada, which represents oilfield service and supply companies, projected this week that oil and gas drilling activity will increase slightly next year, but most of the new work will be concentrated in Saskatchewan.

In Alberta, 1,900 wells are forecast to be drilled next year, a marginal increase of 53 wells over 2016 projections, while Saskatchewan is expected to boost its 2017 drilling program by 240 wells, bringing the total to 1,940.

Canadian Natural said it hadn’t finalized its capital budget for 2017 but estimated its 16 rigs will be spread across Alberta and British Columbia, with some in Saskatchewan.

Laut said the company had previously deployed two to four rigs during the winter drilling season since prices took a nosedive.

“We feel more confident in the prices going forward than we have probably for the last two years, but again we’re cautious,” Laut said.

Canadian Natural posted a $326-million loss in the third quarter, more than triple the $111-million loss it recorded a year earlier.

The Calgary-based company said the setback was largely due to lower commodity prices and lost revenue from planned maintenance at its Horizon and Primrose oilsands plants.

Canadian Natural said an expansion at its Horizon mining and upgrading project remains on schedule. Its latest phase is substantially complete, with production expected to ramp up to 182,000 barrels of synthetic oil per day.

The final phase of the massive project, which would boost production capacity to 250,000 barrels per day, is expected to be operational late 2017.

A contractor is suing Canadian Natural for almost $214 million over allegations of unpaid work at the Horizon expansion, but the company declined to comment on whether it was concerned the litigation may add to the project’s costs.

None of the allegations have been proven.

Canadian Natural said it will pay a cash dividend of 25 cents per common share on Jan. 1, up nine per cent.