Canadian Natural Resources Sets 2008 Budget
Commenting on the Company's 2008 budget, Canadian Natural's Vice-Chairman, John Langille, stated, "2008 will be a year of execution. Canadian Natural has always taken the approach that focusing on economic returns is more important than growth at any cost. 2008 is likely reflective of this more than any other year in our history. On the natural gas side of the business, we are faced with eroded economics due to low commodity prices and a new royalty regime in Alberta that reduces the returns on certain types of drilling. Canadian Natural continues to high-grade our projects to ensure that the maximum value to shareholders will be achieved in 2008. As expected, this reduction in capital will result in a decrease in natural gas production throughout 2008 due to normal production declines not being offset by new resource production. The new royalty regime introduced by the Province of Alberta effective for 2009 will take the vast majority of any increases in natural gas prices for most of our natural gas wells. As such, the ability to increase natural gas drilling activity with increasing gas prices is severely impacted."
Steve Laut, President & Chief Operating Officer, further commented, "Crude oil prices remain robust although muted by the strong Canadian dollar. The disparity between low natural gas prices and high crude oil prices affords us the opportunity at Primrose to optimize the economics of production of mature wellbores by steaming and producing these reserves now. As a result, the Company is capturing reserves, which may not otherwise be economic under our long-term price assumptions. New pad drilling will be reduced in 2008, as will new production volumes. In 2009, Primrose East will provide significant in-situ production growth and new pad development will again occur in existing Primrose Fields.
In addition to these initiatives, we are currently developing four major projects with targeted productive capacity of between 176,000 and 180,000 barrels per day. As such, 2008 becomes a year of emphasis on execution and optimization. The largest of these projects is, of course, the Horizon Project Phase 1, which is targeted for first oil in Q3 2008.
We are pleased to provide further clarity on our execution strategy to expand the Horizon Project for Phase 2/3 to targeted production levels between 232,000 to 250,000 barrels per day of SCO by 2013. We believe we can have better control over execution and costs by avoiding the mega-project mindset. Hence we have reconfigured the expansion into four distinct tranches that optimize our available human and financial resources and which help to ensure a more controllable, effective execution. The first tranche of this revised Phase 2/3 plan will be largely complete in 2007 through the completion of construction of certain infrastructure on the Horizon site, the purchase of certain long lead items, and front end engineering and design. During 2008, the second tranche of Phases 2/3 of the Horizon Project is targeted to remove redundancies in the Mining and Ore Preparation Area, and debottlenecking the existing plant - resulting in increased productive capacity of the facility between 6,000 and 15,000 SCO bbl/d by 2010. Tranche 3 of Phases 2/3 of the Horizon Project is targeted for approval in late 2008 and Tranche 4 in 2010. We now have a better defined path forward and will continue execution on this very economic project.
We are convinced that Canadian Natural has the people, the assets and the resolve to continue to deliver superior returns to our shareholders on our conventional crude oil and natural gas assets, as well as on the Horizon Project over the longer term."
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