Canadian Natural Resources Perseveres with Horizon Expansion Despite Energy Price Slump

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Researched by Industrial Info Resources (Sugar Land, Texas)--Canadian Natural Resources (NYSE:CNQ) (Calgary, Alberta) has cut its planned capital spending for 2016 by C$1 billion ($750 million) amid a sharp drop in reported fourth-quarter 2015 earnings due to low oil and gas prices. But the oil and gas producer still plans to complete a key oil sands mine expansion this year, according to executives. Industrial Info is tracking 79 active Canadian Natural projects worth $23.56 billion.

The C$1 billion ($750 million) Horizon Phase 2B expansion project, which is located 70 kilometers northwest of Fort McMurray, Alberta, will increase production by 45,000 barrels per day. Operational start-up will begin in fourth-quarter 2016, according to the company. Even at oil prices of just $30 per barrel for West Texas Intermediate, cash flow will cover capital expenses on an annualized basis at Horizon as "expansion capital spending drops dramatically with the start of Horizon Phase 2B," according to the company's earnings statement.

Capital expenditures for 2015 totaled C$3.9 billion ($2.9 billion). Canadian Natural has targeted a capital program ranging from C$3 billion ($2.2 billion) to C$3.9 billion ($2.9 billion) for 2016. The company previously targeted capital expenditures of C$4.5 billion ($3.4 billion) to C$5 billion ($3.7 billion) for this year.

For 2017, the company expects capital expenditures in the range of C$2.5 billion ($1.9 billion) to C$2.6 billion ($1.9 billion), including C$1 billion ($750 million) for continued expansion of Horizon. With the completion of the Phase 3 expansion project in fourth-quarter 2017, Horizon will be able to produce 250,000 barrels per day.

Canadian Natural reported earnings of C$131 million ($98 million) in fourth-quarter 2015, down 89% from the same quarter in 2014. For all of 2015, it reported a loss of C$637 million ($475 million), compared with earnings of C$3.9 billion ($2.9 billion) for 2014.

Nearly three-fourths of the total investment value--$17.5 million--of the Canadian Natural projects being tracked by Industrial Info is tied to 12 projects that are still in the planning phases, where plenty of factors could increase, decrease or eliminate the expected spending. More than $5.6 billion is related to projects now under construction, and $300 million stems from projects in the engineering phases.

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