Oilsands project's fire repair costs rise

Calgary-based Canadian Natural Resources Ltd. said Friday it had increased its estimate for the cost of repairs to its fire-damaged Horizon oilsands upgrader in Northern Alberta.

The firm said costs are now expected to come in at between $350 million and $450 million.

That was above the $300 million to $400 million range Canadian Natural forecast during its fourth-quarter conference call.

Repairs are about half complete, and the company said it is revamping its safety procedures for when operations resume this summer.

Five workers were injured when a blast tore through the coker at Canadian Natural's oilsands upgrader in January. The upgrader converts the tar-like bitumen it mines into a type of crude refineries can handle.

Peter Janson, the senior executive who oversees operations at Horizon, said Canadian Natural had to deal with a lot of "collateral damage" in addition to the direct damage caused by the fire.

"Because of the restricted access due to the hazards and risks associated with the damaged overhead derrick structure at the time, systems couldn't be properly purged or drained," he told a conference call with analysts and media.

"That, combined with frigid temperatures experienced in early January caused extensive freezing and damage."

Design changes are being made to the facility to add more layers of protection in the event of a fire, and employees at the Horizon site are being trained and tested on safety protocols on site.

"In order to prepare for operations, a significant amount of work has been completed to ensure that we have a safe and reliable plant as well as the right operating discipline prior to startup," Janson said.

"With the completion of these initiatives, I know we will be ready to operate."

Most of the materials needed to rebuild are on site, and work is underway to assemble the rebuilt coking units, said Real Doucet, senior-vice president of the Horizon project.

"Overall on the coker rebuild progress, 50 per cent of the job has been accomplished," he told an analyst conference call Friday.

Two of the four coker drums are expected to come back online in June, after which Horizon will be able to produce about 55,000 barrels of oil per day. Work is about 70 per cent complete on cokers 2A and 2B, which sustained lighter damage in the fire.

The remaining drums are expected to restart by the end of the third quarter, and full production of 110,000 barrels per day should kick in shortly thereafter.

Investors welcomed the news on Friday, pushing shares in Canadian Natural up by two per cent.

Shares rise

The stock was at $42.10 in afternoon trading on the Toronto Stock Exchange, a gain of 86 cents.

The gain came a day after Canadian Natural reported earnings of $46 million, or four cents per share, for the quarter ended March 31 compared with a profit of $735 million or 67 cents per share a year earlier.

Reduced output from Horizon dragged down production, but the company also reduced output from the North Sea after a sharp increase in U.K. taxes and problems with an offshore African project that affected production as well.

Revenue after royalties totaled $2.95 billion, down from $3.23 billion.

Its adjusted earnings for the quarter were $228 million or 21 cents per share compared with $639 million or 58 cents per share a year ago.

Analysts polled by Thomson Reuters were on average expecting earnings of 33 cents per share and revenues of $2.74 billion.