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by Stockwatch Business Reporter

West Texas Intermediate crude for January delivery lost $1.40 to $68.54 on the New York Merc, while Brent for February lost $1.31 to $72.31 (all figures in this para U.S.). Western Canadian Select traded at a discount of $10.90 to WTI, up from a discount of $12.30. Natural gas for January was unchanged at $3.04. The TSX energy index added a fraction of a point to close at 280.59.

Oil sands giant Canadian Natural Resources Ltd. (CNQ) lost $1.56 to $46.58 on 36.9 million shares, after piling on over $2-billion of debt. It has arranged to sell $1.5-billion (U.S.) of five- and 10-year notes and another $500-million (Canadian) of seven-year notes. The proceeds will go toward repaying other debt, including debt incurred to pay for its $6.5-billion (U.S.) asset acquisition from Chevron, as announced in October. The note financings are expected to close by the end of the week and the acquisition by the end of the year.

Investors grimaced. The acquisition has prompted grumbling from debt-averse shareholders, who were much happier this time last year, when Canadian Natural was trumpeting the achievement of getting its net debt below $10-billion. This prompted it to double the percentage of free cash flow earmarked for dividends and buybacks to 100 per cent from 50 per cent. After the acquisition, however, net debt will rise to around $17-billion, and the above percentage will fall to 60 per cent (and will not return to 100 per cent until net debt is below $12-billion). Chief financial officer Mark Stainthorpe pointed out in October that the new 60-per-cent allocation is "approximately the equivalent absolute return to shareholders" as under the current system, given the jump in cash flow from the new assets. Even so -- and even with the quarterly dividend hike announced alongside the acquisition (to 56.25 cents from 52 cents, for a yield of 4.8 per cent) -- the stock has slipped toward $46 from October's high of $52.

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