Canadian Natural Reports Quarterly Loss on Contracts

By [bn:PRSN=1] Ian McKinnon [] and Nicholas Larkin

Aug. 7 (Bloomberg) -- Canadian Natural Resources Ltd., whose C$9.27 billion ($8.85 billion) oil-sands project is behind schedule and over budget, posted a second-quarter loss on lower values for contracts used to lock in commodity prices. The company cut its oil-output forecast.

The net loss was C$347 million, or 65 cents a share, compared with a profit of C$841 million, or C$1.56, a year earlier, the Calgary-based company said today in a statement. Excluding one-time items, the company exceeded the average estimate of 14 analysts compiled by Bloomberg by 34 cents.

The company beat expectations on high oil prices and lower- than-expected taxes, said Ben Dell, an analyst with Sanford C. Bernstein & Co. in New York. Canadian Natural boosted capital spending by as much as 20 percent while output fell, he said in a telephone interview.

``It was a pretty unimpressive quarter because of weaker production, higher costs and increasing capital expenditures,'' said Dell, who rates the company's shares as ``market perform'' and owns none. His estimate for per-share earnings was C$1.49.

Canadian Natural rose C$1.74, or 2.2 percent, to C$81.02 as of 9:51 a.m. on the Toronto Stock Exchange. The stock, which has 19 `buy' recommendations from analysts, 6 `holds' and 1 `sell,' gained 9.2 percent this year before today.

Costs for the company's Horizon oil-sands development have risen an additional 8 percent and the northern Alberta development is 36 percent higher than originally budgeted, the company said late yesterday in a statement. The 110,000-barrel-a day project will start producing refinery-ready crude in the fourth quarter instead of the third.

Horizon Project

President Steve Laut, 50, is boosting oil production to capitalize on New York prices that rose 90 percent in the quarter from a year earlier. Horizon includes a mine and an upgrader, a plant that processes extra-heavy crude extracted from tar-like deposits into synthetic oil. The oil will be sold to refiners and made into fuels such as gasoline and diesel.

Revenue at Canadian Natural, which produces oil and gas in North America, the U.K. and Africa, increased 62 percent to C$5.11 billion.

Excluding one-time costs such as hedging and stock-based compensation, Canadian Natural said it earned C$1.78 per share. On that basis, it exceeded analyst expectations of C$1.44.

The company said it has a 20-year agreement to sell 100,000 barrels a day of heavy sour crude to an unidentified U.S. refiner.

It has also committed to ship 120,000 barrels a day for 20 years to the proposed Keystone Pipeline project. Canadian Natural has an option to purchase a 10 percent stake in Keystone, Laut said today in a conference call with analysts.

Keystone Stages

Calgary-based TransCanada Corp. and partner ConocoPhillips, based in Houston, are spending $5.2 billion to build the initial stage of Keystone, which will transport 590,000 barrels a day of Canadian oil to Midwest refiners by 2010. A second stage, estimated at $7 billion, will boost capacity to as much as 1.1 million barrels a day and enable Canadian oil to reach Gulf Coast refiners.

Canadian Natural's gas, excluding hedging, sold for an average of C$9.89 per 1,000 cubic feet, up 33 percent as futures in New York rose. Gas production fell 11 percent to 1.53 billion cubic feet a day. The company ranks behind only Calgary-based EnCana Corp. for Canadian gas output.

Production of oil fell 2.6 percent to 319,077 barrels a day, the company said. Before hedging, Canadian Natural's oil sold for an average of C$103.73 a barrel, almost double the year-earlier price.

The company expects 2008 daily production will average 308,000 to 350,000 barrels of oil, down from a May forecast of 316,000 to 366,000 barrels a day.

The company's capital spending forecast was boosted C$6.97 billion, up from the May prediction of C$5.79 billion to C$5.99 billion.

(Canadian Natural started a conference call at 9 a.m. New York time, accessible on the company's Web site at http://www.cnrl.com)

To contact the reporters on this story: Ian McKinnon in Calgary at imckinnon1@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net