The company is convinced that the only way the emulsion of bitumen and water could have seeped to the surface is through faulty wellbores at the property near Cold Lake, Alta., Steve Laut said Thursday.
"This is a technical, operational challenge that is totally solvable," he said on a conference call with analysts.
Laut provided the update on the same day Canadian Natural hiked its dividend by 60 per cent, posted stronger third-quarter earnings and announced it plans to increase capital spending next year.
So far, the Alberta Energy Regulator has not come to the same conclusion as Canadian Natural about what's behind the Primrose problems, which were made public in late June. A probe is underway into the root cause.
Following a similar event in 2009 at Primrose, the provincial energy watchdog raised the question of whether geologic weakness could be to blame, rather than faulty wellbores.
But Laut said there are three major geologic formations that should prevent fluids from escaping to the surface when Canadian Natural injects steam deep into the underground reservoirs.
"To date, we have not seen any evidence that would indicate any other possible route to surface" than through an old wellbore, he said.
Laut added the company's conclusion "is sound and it is governed by rock mechanics and the basic laws of physics."
Canadian Natural says it has identified four legacy wells that are the likely culprits behind the leaks. It has found mechanical failures in two, is in the process of reviewing one and waiting to get approval to access the site of another.
Canadian Natural has determined there are 31 old wells throughout the site that could pose a risk, although they meet regulatory requirements for abandoned wells.
Of those, 16 are within one kilometre of areas where Canadian Natural intends to inject steam underground next year. The steam is used to soften the bitumen so it can flow to the surface in a method called high pressure cyclic steam stimulation.
So far, Canadian Natural has fixed one of those wells, confirmed that another is OK and will check the remaining 14 once it is able to access those locations.
Laut says the company also intends to enhance monitoring, so it has an early warning if something is amiss underground.
Also Thursday, Canadian Natural announced it's hiking its quarterly dividend to 20 cents per share on Jan. 1 from its current payout of 12.5 cents. It said the increase reflects confidence in its ability to generate higher cash flow.
The Calgary-based company said it expects to increase annual cash flow by 14 per cent in 2014 to $8.7 billion as production output grows by seven per cent over this year's level.
Part of Canadian Natural's cash flow will be used to fund a 2014 capital budget of at least $7.7 billion, with an additional $400 million potentially available during the year for the Horizon oilsands project.
That marks an increase over Canadian Natural's expected 2013 capital spending of nearly $7.2 billion.
Third-quarter adjusted earnings rose to $1.01 billion or 93 cents per share — beating the average analyst estimate of 90 cents per share. At the same time last year, Canadian Natural posted adjusted earnings of $353 million, or 32 cents per share.
Production was 702,938 barrels of oil equivalent per day, up from 667,616 a year earlier.
Its Horizon oilsands mine north of Fort McMurray, Alta., churned out nearly 112,000 barrels of oil per day, an improvement from 99,205 a year earlier.
Overall construction on an expansion to Horizon is about 30 per cent complete.
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