This acquisition fits Canadian Natural's strategy of dominating its core areas and related infrastructure as all of the properties acquired by the Company are located in its heavy oil core area. Canadian Natural expects to effect operating cost reductions through synergies with its own existing facilities including additional throughput in its 100% owned ECHO pipeline. In addition, approximately 300 new well locations and over 400 well recompletion opportunities have been identified on these lands and will be added into project inventory.
The acquisition also enhances Canadian Natural's heavy oil strategy by increasing its market share without increasing overall supply of heavy oil from Alberta. With increased market share, the Company is in a better position to accelerate its three-pronged heavy oil marketing strategy. This strategy seeks to broaden markets and increase demand for Alberta heavy crudes by working with refiners to create new conversion capacity, working with pipeline companies to access new markets and creating streams of complementary products like bitumen diluted with synthetic crude oil (Synbit) which can be used by existing refineries without the addition of heavy oil conversion capacity.
Canadian Natural is currently marketing over 34,000 barrels per day of Synbit to refiners located in the U.S. Midwest and plans to expand this effort throughout 2004 to build a solid new market for this Synbit crude. This demand expansion will support Canadian Natural's plans to expand its heavy oil production.
Concurrent with the acquisition Canadian Natural reviewed its planned capital expenditures for 2004 and, in the context of capital discipline being a prime consideration in managing its affairs, and as a result of this acquisition, $300 million of previously planned expenditures will be deferred to future years. The Company has also reviewed its 2004 capital requirements for the Horizon Oil Sands Project and has established a budget of $200 to $400 million reflecting an updated estimate of spending ranges for the year. These changes result in total 2004 forecast capital expenditures now in a range of $2.75 to $2.95 billion as compared with the previous range of $2.5 to $2.9 billion. Incorporating the acquisition and capital expenditure deferrals results in new 2004 production guidance of 263 to 283 thousand barrels per day of crude oil and liquids and 1,320 to 1,395 million cubic feet per day of natural gas.
Based upon current oil and natural gas forward strip pricing and a $0.75 Canada / US exchange rate, the Company estimates 2004 cash flow will amount to $3.0 to $3.2 billion. Once again, Canadian Natural plans to dedicate a minimum 50% of any free cash flow surplus to debt repayment, with the remainder becoming available for share repurchases pursuant to the Company's normal course issuer bid or late year increases in capital spending.
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