UPDATE 2-Canadian Natural goes slow on next oil sands phase

* Next Horizon phase “re-profiled” into staged project

* Sees 2011 budget at C$5.57-C$5.97 bln

* 2011 production estimated 645,000-694,000 boed
(Recasts with Horizon expansion, adds budget details)

CALGARY, Alberta, Dec 2 (BestGrowthStock) – Canadian Natural
Resources Ltd (CNQ.TO: ) said on Thursday it would carve the next
expansion of its Horizon oil sands project into stages to keep
costs in check after the first phase suffered major cost

Canadian Natural, the country’s biggest independent oil
explorer, said it will “re-profile” the next part of Horizon in
a 2011 budget that includes up to C$6 billion ($5.9 billion) of
spending, up as much as 7 percent from 2010.

In a statement, the company did not explicitly say it was
giving the Horizon expansion the green light.

It said 45 percent of the money would be used for long-term
projects that will not yield production until after 2011.

Overall output is expected to average 645,000-694,000
barrels of oil equivalent a day before royalties, a mid-point
increase of 6 percent from 2010 estimated production.

The company set a 2011 capital budget range of
C$5.57-C$5.97 billion, compared with an estimated 2010 capital
expenditure of $5.6 billion.

For the 110,000 barrel a day Horizon project, spending on
the expansion will range between C$800 million and C$1.2
billion in 2011 “dependent upon favorability of market
conditions and whether the business case meets the company’s
investment criteria,” Canadian Natural said.

Money will be used for several modules of the northern
Alberta project, rather than one large tranche.

The first phase cost C$9.7 billion after overruns and
delays. It was built during the last oil sands rush, which
stretched the labor supply and generated soaring inflation.

In November, it said it was concerned that the resurgence
that has been taking place in oil sands development could lead
to another overheated construction environment.

After a slow start, Horizon output has been improving and
is expected to average 105,000-112,000 bpd in 2011, up 19
percent from 2010, it said.

The oil sands mining and synthetic crude processing
operation pumped out 107,900 bpd in November, up more than
20,000 bpd from the month before.

The company forecast crude oil and natural gas liquids
production of 449,000-486,000 barrels a day before royalties,
which is 10 percent above the mid-point of 2010 production.

Natural gas production is pegged at 1.18 billion to 1.25
billion cubic feet a day, about 3 percent lower than 2010
volumes, it said.

In recent years, Canadian Natural Has cut back on gas
spending as prices have weakened and reallocated cash into
heavy oil projects.

The budget is expected result in free cash flow of C$1
billion to C$1.8 billion.

Canadian Natural shares were up 49 Canadian cents, or 1
percent, at C$41.75 on the Toronto Stock Exchange. They had
gained more than 8 percent in value year-to-date.

($1=$1.01 Canadian)
(Reporting by Jeffrey Jones and Aftab Ahmed; editing by Rob

UPDATE 2-Canadian Natural goes slow on next oil sands phase