Startup for first finished product from the Horizon oil sands mine and upgrader apparently has slipped one quarter to the fourth quarter of 2008 for buy-recommended Canadian Natural Resources (CNQ). That does not surprise us considering the complexity of giant energy supply projects and the intense activity in global engineering and construction.
Meanwhile, with stock price down sharply, new investment in CNQ is timelier. Released today, second quarter results displayed strength in heavy oil price relative to light oil with overall gains dampened by hedging. Actual sales for the 110,000 barrels daily Horizon facility should start next year though we have not included any in our estimates for the next twelve months ending June 30, 2009.
Projected volumes along with futures prices from August 4 promise a high level of unlevered cash flow (Ebitda). Projected cash flow capitalized at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P) supports NPV of $124 a share. Though down a few dollars in the past few days, long-term crude oil price remains in an uptrend where yesterday’s settlement of $116 a barrel for delivery over the next six years is above the 40-week average of $104.
Originally published on August 7, 2008.