Canadian Natural Resources Limited

Good morning, ladies and gentlemen, and welcome to the Canadian Natural Resources Earnings Results Conference Call slash Webcast. After the presentation, we'll conduct a question and answer session. Instructions will be given at that time. Please note that this call is being recorded today, May 7, 2020, at 8 a.m. Mountain Time. I would now like to turn the meeting over to your host for today's call, Corey Beaver, Executive Advisor. Please go ahead, Mr. Beaver. Thanks, and enjoy the day.

Thank you, Operator. Good morning, everyone, and thank you for joining our first quarter 2020 conference call. With me this morning are Tim McKay, our President, Scott Stouth, Chief Operating Officer for WellSams, Taryn Fichter, Chief Operating Officer for Exploration and Production, and Mark Steenthorpe, Chief Financial Officer. In order to facilitate today's call, we will be referring to a number of slides which are currently available on our website. I would encourage you to download this package to facilitate following along with the presentation. Further, I would ask that any detailed modeling questions be directed to investor relations rather than be handled on this call. Before we begin, I would refer you to the special note regarding non-GAAP measures contained in our press release. These measures used to evaluate the company's performance should not be considered to be more meaningful than those determined in accordance with IFRS. I would also like to refer you to the comments regarding forward-looking information contained in our press release and also note that all amounts are in Canadian dollars and production and reserves are expressed as before royalties unless otherwise noted. With that, I'll now pass the call over to Tim.

Thank you, Corey. Good morning, everyone. In Q1 2020, Canadian Natural delivered top-tier operational results. We are a unique energy company as we have robust economic long life, low to coin assets, a history of capital discipline and operational excellence, and relative to most of our peers, the ability to enhance margins. Few, if any of our peers, can deliver sustainable cash flow. Canadian Natural has a proven effective strategy, and as a result, Canadian Natural is in a strong position, and we are delivering in today's environment, ensuring a sustainable dividend to our shareholders. which is robust in a volatile commodity price environment. Moving to slide six, Canadian Natural continues to be proactive and effective, take proactive and effective steps to ensure the health and safety of our people working for us. We continue to enhance our COVID-19 program across the company and now have added the requirement of field personnel in our camps to wear a face mask in shared spaces. Our teams continue to do a great job in minimizing the impacts of COVID-19 to our operations. Moving to slide seven, Neonatural had a very strong operational result as we achieved record quarterly production of 1.179 million BUEs per day and record liquids production of approximately 939,000 barrels per day. We effectively executed our curtailment optimization strategy, achieving the maximum allowable production under the Government of Alberta curtailment guidelines. while prioritizing high-value SEO production. Oil sands mining and upgrading also had a strong quarter, with March being a record production of approximately 478,000 barrels a day of SEO. Operating costs in the quarter were also very strong and will continue to improve. Our E&P liquids Q1 operating costs were $13.71 a barrel, or $10.19 per barrel. And our industry leading oil sands mining and upgrading costs were impressive 2076 per barrel or 1543 US per barrel. More importantly, we're targeting an impressive $745 million of operating cost improvements in 2020. Finally, as a result of our operational excellence, we had no asset impairments, despite the low prices at the end of the quarter. Slide 8, as a reminder, Canadian Natural has a balanced and diverse product mix with approximately 48% that is light crude oil, SEO, NGL on a BUE basis, limiting our exposure to one product. For our liquid production, 77% is long-life low-decline assets, which is sustainable through volatile prices as they require less maintenance capital. We have 1.4 BCF of natural gas production with 20% of our BUEs. which is well positioned to capture additional value with strengthening natural gas prices. Slide 9, Canadian Natural's ability to deliver cash flow in today's environment starts with our large, long-life, low-decline asset base of approximately 750,000 barrels a day, which has low maintenance capital requirements and is sustainable, allowing us to withstand commodity price changes. Our diversified products and assets are driven by our effective and efficient operations, our area knowledge, ownership, and operatorship of infrastructure. We have 1.4 BCF of natural gas and with our assets, ability to add low-cost production. Our culture of continuous improvement is unique among our peers as our teams are focused on delivering margin growth across the asset base over and above what we see today. Canadian natural strategy includes a flexible and effective capital allocation. and our ability to be nimble to capture those opportunities. Our strategy is simply to optimize capital allocation to maximize value for our shareholders. Our teams are focused and are continuing to drive efficiencies across the company. With improved pricing, our operating cash flow from our natural gas assets can contribute approximately $700 million over the next 12 months. As a result of our effective and efficient operations, quality of our assets, we have a low free cash flow break even, including capital expenditures, plus current dividend of approximately $30 to $31 U.S. per barrel. I will now talk to the robustness of our assets. Slide 12, Canadian natural 1P reserves are the highest among peers, showing the strength and depth of our assets with approximately 27-year reserve life index, of which 84% represents long-life, low-decline reserves. Our oil sands mining reserve index is an oppressive 40 plus years. Not only, slide 13, not only do we have the largest proven developed producing reserve base when compared to theirs, our low cost structure, effective and efficient operations make our PDP reserves robust, giving us the highest value among peers. Slide 14, similarly, compared to our peers with our PDP and proven undeveloped reserves, we're massive when compared when comparing to our peers. Once again, reflecting the strength of our low cost structure and effective and efficient operations. Slide 15. As a result of our unique asset base, Canadian natural corporate decline is low at approximately 10%, with approximately 62% of our production being long life, low decline, or zero decline production, requiring much less maintenance capital to maintain production, making our cash flow more predictable and sustainable. Canadian Natural's corporate maintenance capital is top tier in 2019 at approximately $6 US per BUE, which was approximately 75% lower than the peer average. We have, for 2020, reduced it to approximately $4.50 US per barrel, which gives Canadian Natural a huge advantage over our peers and supports our industry-leading free cash flow and reflects the robustness of our asset base. Slide 17. Further, when comparing our breakeven price with dividends, we are top tier when compared to our global peers. An impressive result. Again, an indicator of the robustness of our assets and our top tier operations. In the oil sands, our oil sands mining and upgrade operations continue to be top tier and is approximately 40% lower than other operations, which reinforces why Canadian Natural is unique and is in a strong position in a low price environment. I will now talk to our capital and operational discipline. Slide 20, Canadian Natural has a relatively balanced capital spending throughout 2020, and at the end of Q1, we had only spent 31% of our capital. Since the beginning of the year, we have been able to continue to modify our capital program and reduce our spending forecast, which is now targeting $2.68 billion, down almost approximately $1.4 billion. As well, Canada Natural is focused on continuous improvement, effective and efficient operations. We continue to find opportunities to drive our costs down and are continually working with our service providers to find other savings. We are targeting significant savings of approximately $745 million for 2020. Slide 22. As you can see, our teams have been focused on all of our costs. We have many opportunities and the drive to reduce the total cost in our company, which is now targeted at $1.4 billion of capital reductions and $0.8 billion of margin enhancements. We are focused on delivering excellence, a total free cash flow enhancement of $2.2 billion. Neonatural is in a strong position in these challenging times. Our assets are robust. Our culture of working together ensures we are effective, efficient, innovative, and nimble with our capital to add value for our shareholders. With that, I will turn it over to Mark for a financial review. Thanks, Tim.