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Canadian Natural Resources to offer update on leak

A well flare is pictured in the Groundbirch area of B.C.’s Montney formation. CNRL is buying Devon Energy’s Montney natural gas assets for $3.1-billion.

Canadian Natural Resources Ltd. has been leaking bitumen to the surface at one of its oil sands sites since last May. In November, the company's president called the problem "totally solvable."

CNRL this week has another chance to explain to investors and analysts how much progress it has made with the troublesome leaks.

The company reports its fourth-quarter earnings Thursday, and the spills at part of its Primrose oil sands project, as well as a recent $3.1-billion acquisition of natural gas assets, will likely be discussed in its conference call.

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In addition to the surface leaks, CNRL in January had an underground spill, releasing 27,000 litres of crude.

"[CNRL] continues to work with the Alberta Energy Regulator to resolve the root cause of bitumen emulsion releases, and remains confident that they revolve around mechanical failures in the vertical sections of certain wellbores, as opposed to cap rock issues," Greg Pardy, an analyst at RBC Capital Markets, said in a note previewing the company's results.

The Calgary-based energy company, which is noted for its strong balance sheet, will also have the chance to further elaborate on its plans for the natural gas assets it agreed to buy from Devon Energy Corp. in the middle of February.

CNRL hosted a conference call following the announcement, but now that analysts and investors have had time to digest the news, the quarterly conference call gives them a chance to dig deeper.

Some of the new assets include a royalty revenue stream expected to bring in $75-million in cash flow this year.

CNRL "is reviewing options to combine this with its existing royalty revenue portfolio and potentially sell/spin-out this cash flow stream into a public entity," Mr. Pardy noted. (Encana Corp., the natural gas giant, is also planning to spin assets into a new company this year.)

Mr. Pardy predicts CNRL will post cash flow per share of $1.65. His peers are more bullish, with the Street's consensus ringing in at $1.73, according to Mr. Pardy.

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The market uses cash flow as a measure to gauge how well companies can finance their growth.

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