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Canadian Natural Sells Royalty Interests to Finance Oil Sands Project

Calgary-based Canadian Natural Resources Ltd. said Wednesday it will sell a "large" portion of its overriding royalty interests in several producing properties throughout Western Canada and Ontario for C$345 million to reduce long-term debt and to help finance its fledgling Horizon Oil Sands Project.

Canadian Natural acquired the royalty interests over the past 10 years through several acquisitions, but it offered no further details on where they are located. In 2004, the royalty interests produced approximately 3,700 boe/d, consisting of 9.3 MMcf/d of natural gas and 2,100 bbl/d of crude oil and natural gas liquids. Cash flow from these interests in 2003 and 2004 averaged approximately C$50 million per year. The disposition is not expected to impact 2005 production guidance.

"This disposition reflects our ongoing commitment to maintaining financial discipline," said Chairman Allan Markin. "The monetization of these noncore interests allows us to capture good value...and builds further balance sheet capacity to finance the Horizon Oil Sands Project and the continued growth of our conventional crude oil and natural gas business."

The Horizon Oil Sands Project is an offshoot of a bitumen mega-mine located in northern Alberta, which will be built in Fort McMurray (see NGI, Nov. 8, 2004; Feb. 14). Sponsored by Canadian Natural, the project will cost C$6.8 billion.

As part of the royalty sale, Canadian Natural agreed to purchase 3.86 million trust units of Freehold Royalty Trust for C$60 million. The entire transaction is expected to close by May 10. Scotia Capital Inc. acted as financial adviser.

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