UPDATE 1-Canadian Natural ponders spin off or sale of royalty income

Fri May 9, 2014 1:49pm EDT

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(Adds details and comment on potential sale, updates share price)

CALGARY, Alberta May 9 (Reuters) - Canadian Natural Resources Ltd, the country's largest independent oil and gas producer, said on Friday it will consider spinning off or selling its stream of royalty income from its wholly owned lands in Western Canada, making it the latest Canadian energy company to ponder the move.

Steve Laut, the company's president, said the company was in the early stages of considering the spin-off of its royalty income, which are payments from third-party oil and gas production on its lands.

Spinning off such a royalty stream would offer Canadian Natural cash up front, with the potential of retaining majority control of that royalty stream.

However Canadian Natural is waiting to familiarize itself with the additional royalty properties that came with its C$3.13 billion ($2.87 billion) April acquisition of Devon Energy Corp's Western Canadian properties before making a final decision on what to do with the money, which he estimates will run between C$140 million and C$150 million in 2014.

"Once complete, we'll look at the options to monetize the combined (Canadian Natural) and Devon royalty streams, which could either be a direct sale or via a separate vehicle," Laut said on a conference call. "We're targeting a decision for the potential options for later this year."

The move follows on Encana Corp's decision earlier this year to spin out its extensive royalty lands into a new company, PrairieSky Royalty Ltd. Encana expects to raise as much as $861.3 million from the sale.

Canadian Natural shares were down 14 Canadian cents to C$42.86 on the Toronto Stock Exchange. ($1 = 1.0905 Canadian Dollars) (Reporting by Scott Haggett; Editing by Jeffrey Benkoe and Chris Reese)

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