Outstanding Q2 results from CNQ re: Horizon OS development. Under budget and ahead of construction schedule. If crude stays level, some of the hot money that left on the Shell announcement could flow back into OS...
stockhouse.ca
Canadian Natural Resources Limited Announces Second Quarter 2006 Update on the Progress of the Horizon Oil Sands Project
7/25/2006
CALGARY, ALBERTA, Jul 25, 2006 (CCNMatthews via COMTEX News Network) --
Canadian Natural Resources Limited (TSX:CNQ) (NYSE:CNQ) ("Canadian Natural") is pleased to provide its regular quarterly update on the Horizon Oil Sands Project ("Horizon Project").
"Our emphasis on front end engineering coupled with a well defined execution strategy continues to deliver, allowing our project team the capability to execute in a resource constrained environment," commented Real Doucet, Senior Vice-President, Oil Sands. "The Horizon Project achieved significant construction milestones during the second quarter of 2006, while achieving excellent safety performance. Our emphasis on front end planning continues to be beneficial, giving our project team the ability to quickly adapt to changing market conditions. For example, during the quarter we altered our strategy for the Tar River Diversion and Raw Water Pond construction. By advancing the purchase of our own mine equipment, we will complete this work ourselves at substantial cost savings to third party alternatives. These altered strategies have avoided millions of dollars in additional costs for the project."
Our labour strategy, predicated on a Managed Open Site, has accessed a broad workforce including on site labour affiliations such as Alberta's traditional Building Trade Unions, the Christian Labour Association of Canada, Non-unionized contractors, Overburden Operating Engineers, and the Communications, Energy and Paperworkers Union of Canada. The fly-in / fly-out program combined with our world-class camp facilities, is successfully attracting new workers to the oil sands. In June we commenced weekly flights to cities in Newfoundland, New Brunswick and Quebec in order to access skilled Canadian workers from other regions of Canada. This dynamic and flexible contracting approach coupled with a higher degree of off-site modularization than has previously been achieved by oil sands developers, has resulted in a change to our expected labour curves as non-critical path contracts are managed for cost. As such, in early July we had in excess of 2,500 workers, supervisors and employees on site and we now expect that this number will ramp to between 5,000 and 6,000 in mid-2007.
Additionally, while it is still early in the project, we have found to date that the efficiency of our workers and contractors has been, generally, as good as or better than expected. Some of this is due to favorable weather conditions as well as contractors generating more efficient construction methods under their lump-sum bids and the completion of more modular work in the Edmonton region.
During the second quarter of 2006, we awarded a further C$400 million of contracts, including several that were previously deferred in order to optimize pricing. As such, with C$4.4 billion in awarded contracts and a budgeted C$900 million for our internal costs, we already have a high degree of cost certainty on C$5.3 billion of Phase 1 construction costs. Additionally all major plants have been passed through hazard/operability review without requiring major scope change, providing even greater cost certainty on these items. Of the remaining elements, we have received initial indications on an additional C$400 million in contract work currently in the tender process and have a good sense of these costs, leaving about C$400 million of cost exposure on several hundred smaller contracts to be let.
HORIZON PROJECT STATUS SUMMARY March 31, June 30, September 30, 2006 2006 2006 ------------------------------------------ Actual Actual Plan Plan ------------------------------------------Phase 1 - Work progress (cumulative) 26% 36% 31% 44%Phase 1 - Construction capital spending(1) (cumulative) 27% 37% 39% 49%(1) Relates to overall Phase 1 project capital of $6.8 billion
Accomplished During the Second Quarter of 2006
Detailed Engineering
- Completed in excess of 80% overall detailed engineering model reviews in all areas.
- Majority of 90% model reviews completed, with detailed engineering on the critical path Coker/DRU plant completed two months ahead of schedule.
Procurement
- Awarded in excess of C$400 million of contracts and purchase orders in the quarter bringing awards-to-date to over C$4.4 billion, with a further C$400 million in various stages of the tender process.
- Awarded contract for the purchase of 23 Mining Trucks.
- Awarded key construction contracts in Extraction, Froth Treatment and Tank Farms.
- Advanced mine equipment purchase (C$24 million) by one year to ensure delivery in late 2006 to accommodate self performed Tar River Diversion and Raw Water Pond construction.
Modularization
- To date, in excess of 330 oversized loads, or 20% of Phase 1 totals, have been transported to site.
- Shifted module assembly work between contractors in order to improve efficiency and maintain schedule.
Construction
- Achieved a Safety Milestone of 5 million Loss Time Accident free site hours - safety performance remains ahead of benchmarked targets.
- Ore Preparation Plant site turned over by Mining to Bitumen Production, two months ahead of base plan.
- Set 140 piperack modules for total progress of 31% complete.
- Mine Overburden Administration and Maintenance Facility were completed and occupied.
- Commissioned the new 40 m3 hydraulic shovel in the quarter. To date, 17.0 million bank cubic meters (approximately 24% of total requirement) of overburden has been removed compared to a plan of 16.0 million bank cubic meters.
- Substantially completed site preparation and underground facilities.
- Camp 2 turned over to operator and ready for occupancy, one month ahead of schedule.
Milestones for the Third Quarter of 2006
- Overall detailed engineering to surpass 90% complete.
- Mining shovels to be ordered.
- Commence Tar River Diversion and Raw Water Pond construction project.
A picture gallery providing visual updates on construction progress is available on the Company's website (http://www.cnrl.com/horizon/about_horizon/photo_gallery.html).
The Company's results for the second quarter of 2006 will be released on August 2, 2006. A conference call will be held on that day at 9:00 a.m. Mountain Daylight Time, 11:00 a.m. Eastern Daylight Time.
|
