(Adds detail of production guidance, CEO and analyst comment)
By Nia Williams
CALGARY, Alberta Aug 7 Canadian Natural
Resources Ltd, the country's No.2 oil and gas company,
lowered its 2014 oil production guidance on Thursday as a result
of issues at its Kirby South and Primrose oil sands projects in
The company said it now expected oil production before
royalties of between 531,000 barrels per day and 557,000 bpd
this year, compared to a previous forecast of between 537,000
bpd and 574,000 bpd.
The lowered guidance came despite a rise in CNRL's overall
oil and gas production in the second quarter.
The company said there had been design operating issues with
steam generation facilities at its 19,000 bpd Kirby South
project. Steam is used to heat bitumen deposits underground,
enabling it to flow out through a wellbore.
Bitumen emulsion also has been seeping slowly to the surface
at CNRL's Primrose project since June 2013, and restrictions on
underground steaming remain in place.
CNRL is submitting a report to the Alberta Energy Regulator
later this year and hopes to get approval for using steam flood
extraction techniques, but the company said collecting data had
taken longer than expected.
"The negatives from the update were some facilities issues
at their new steam-assisted gravity drainage project in Kirby
South and delayed steaming at Primrose," FirstEnergy Capital
analyst Mike Dunn said.
"That's the main reason production guidance went down about
2 percent for their oil."
CNRL shares fell C$1.19, or 2.6 percent, to C$44.65 on the
Toronto Stock Exchange.
Chief Executive Officer Steve Laut said he did not expect
the issues to have a lasting impact on production.
"Overall both these issues are essentially timing issues and
we expect strong performance from our operations going forward
as we saw in Q2 with production exceeding guidance," Laut said.
HORIZON DRIVES HIGHER EARNINGS
The company is also completely shutting down production at
its Horizon oil sands project for 25 days starting on Aug. 16 to
undertake expansion work. Analysts, however, said that outage
was factored into CNRL's previous annual production guidance.
Horizon's production averaged a record 119,200 bpd in the
second quarter and it is expected to ramp up to 127,000 bpd once
the expansion work is complete.
CNRL's overall oil and gas production averaged 817,471
barrels of oil equivalent per day (boepd) for the second
quarter, up from 623,315 boepd a year earlier.
That rise was fueled by record production at Horizon and
property acquisitions. CNRL bought much of Devon Energy Corp's
natural gas properties in Canada in February.
CNRL's total product sales for the second quarter soared
44.5 percent to C$6.11 billion ($5.59 billion), while revenue
jumped 42 percent to C$5.37 billion.
Net income rose to C$1.07 billion, or 97 Canadian cents per
share, from C$476 million, or 44 Canadian cents, a year earlier.
The company earned C$1.04 per share on an adjusted basis.
Cash flow, a key indicator of the company's ability to pay
for new projects and drilling, rose 58 percent to C$2.6 billion.
($1 = 1.0923 Canadian dollar)
(Additional reporting by Sneha Banerjee in Bangalore; Editing
by Gopakumar Warrier, Joyjeet Das and Paul Simao)