Canadian Natural Resources Limited

Ladies and gentlemen, thank you for standing by, and welcome to the Canadian Natural Resources Fourth Quarter and 2020 Earnings Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to turn the conference call over to Mr. Corey Beegers, Executive Advisor, please go ahead.

Thank you, Operator. Good morning, everyone, and thank you for joining our fourth quarter and year-end 2020 conference call. With me this morning are Tim McKay, our President, Darren Fichter, Chief Operating Officer, Exploration and Production, and Mark Steenthorpe, our Chief Financial Officer. 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 statements contained in our press release and would also note that all amounts are in Canadian dollars and production and reserves are expressed as before royalties unless otherwise stated. With that, I'll now pass the call over to Tim McKay.

Thank you, Corey. Good morning, everyone. The COVID-19 pandemic has impacted our lives and the way we operated our businesses in 2020, including the many precautions that we had to put in place to protect our stakeholders. Canada Natural would like to thank our employees, contractors, suppliers and shareholders for their support through this challenging year. Despite the challenges in 2020, Canada Natural delivered top-tier operational and financial results, which is a result of the strength of our low-life, low-declined assets and operational excellence of our people, which maximized free cash flow in a challenging year. In 2020, we were nimble Quickly lowering our capital with our long life, low decline, and high quality asset base, we still achieved record annual corporate BUE production of 1.16 million BUEs per day, or approximately 65,000 BUE increase over 2019 levels. With our culture of continuous improvement, we continue to drive effective and efficient operations. And as a result, we had record low annual operating costs of 2046,000 per barrel of SCO in our oil sands mining upgrading group, a decrease of 210 per barrel. As well, in our North American E&P liquids, we achieved significant operating cost reduction of $1.20 per barrel, or 10% lower than 2019 levels. We continue to apply the same drive to ESG, environmental, social, and governance, to deliver industry-leading performance across the board, a significant factor in our long-term sustainability. Canadian Natural and the entire Canadian oil and gas sector leads the world and has delivered game-changing environmental performance. In 2020, we reduced our corporate GHG intensity by 18%, methane emissions by 28% for 2016 levels. Our safety record is top tier as our corporate total recordable injury frequency improved 0.21 in 2020. a reduction of 58% from 2016 levels. We reached significant environmental milestones, including the 5 million ton of CO2 captured at Quest, and now have planted 2.5 million trees at our oil sands mining operations. In our oil sands operations, we can develop technologies using Canadian ingenuity to continue to move us closer to Canadian Natural's aspirational goal of reaching net zero emissions. Canadian Natural has multiple pathways, to achieve net zero, with actions identified in the near, mid, and long term. And the strength of the Canadian oil sands mining asset is that with its long life, no decline, and with its manufacturing-like operation, it can have one of the clearest routes, if not the clearest route, to net zero of any global assets. I will now do a brief overview of our assets, starting with natural gas. Overall, 2020 annual North American Natural Gas natural gas production was 1.48 BCF per day, which is comparable to our 2019 production of 1.49. With North American annual natural gas production of 1.45 versus 1.44 for 2019, which is up slightly as a result of the company's strategic decision to invest in low-cost natural gas opportunities and the acquisition of Painted Pony in Q4. Our annual North American natural gas operating costs was $1.14, which is down 2% when compared to 2019 of $1.16. For the fourth quarter, North American natural gas production was approximately 1.6 BCF per day versus 1.45 for Q4 2019, with strong operating costs of $1.07 per MCF versus Q4 2019 of $1.11. Impressive year-over-year operating cost performance as we continue to focus on operational excellence. At Septimus, The company's high-value, liquids-rich mountain area and the second half of 2020, eight wells were drilled. All came on production in Q4 of 2020. This project was completed with strong capital efficiencies of approximately $4,800 per B.U.E.D., with total current production rates from the new wells at approximately 46 million cubic feet per day and 2,200 barrels a day of NGLs, delivering as expected. Looking forward on annual strip races, acre prices for 21 look very strong at $2.78 per GJ, an increase of approximately 31% over 2020 levels, improving the economics of natural gas projects. In 2021, within our high-quality mountainy lands at Townsend, six of seven wells were brought on production at strong rates, totaling approximately 74 million cubic feet per day, compared to our target of 50. resulting in a strong capital efficiency of approximately $2,200 per flowing VUE. For North American light oil and NGLs, annual production was 84,658 barrels per day, down 13% from 2019, primarily a result of natural field declines. Annual operating costs were strong at $14.61 per barrel, which is 4% lower than the 2019 annual operating costs of $15.21 per barrel. Q4 production was 88,161 barrels per day, down 6% when comparing to Q4 2019, with fourth quarter operating costs that were down 10% to $13.88 per barrel, as compared to Q4 2019 operating costs of $15.41 per barrel. In 2021, the company continues to advance high-value Montanite light crude oil development plan at Wembley, targeting 18 net wells, and a construction of a new crude oil battery with a targeted on-stream date of October 2021. With the crude oil battery in place, new wells are targeted to be brought on stream at strong capital efficiencies of approximately $9,400 per flowing barrel. This project is targeting to exit 2021 at total production rates of approximately 8,500 barrels a day of liquids and 28 million cubic feet of natural gas. For international assets in 2020, had annual oil production of approximately 40,200 barrels per day, a decrease of 19% versus 2019 levels, primarily due to natural declines. Our international assets continue to generate strong free cash flow and value for the company. Offshore Africa annual production was approximately 17,000 versus 2019 of 21,400 barrels a day, which is down due to natural fuel clients. CDI operating costs were different in 2020, were 13.29 per barrel versus 2019 of 11.21 per barrel. In the North Sea, annual production averaged 23,142 barrels a day in 2020 versus 2019 of approximately 28,000 barrels a day, primarily down, primarily due to natural field declines in the succession of production in the bound field in 2020. Annual operating costs were strong at 36.51 per barrel and were comparable to 2019 levels, The team did a great job managing costs. Moving to heavy oil, annual production was 70,279 barrels today in 2020 versus 82,189 barrels in 2019, reflecting natural decline, limited investment due to commodity prices, and the Alberta mandatory curtailment program. Annual operating costs were $17.59 per barrel versus 2019 operating costs of $16.66 per barrel. Fourth quarter 2020 production, with 65,513 barrels versus Q4 2019 production of 94,262 barrels per day. While operating costs were $17.61 per barrel versus Q4 2019 of $15.03. We continue to focus on effective and efficient operations. A key component of our long-life, low-decline assets is our world-class Pelican Lake pool, where our leading-edge polymer flood continues to deliver significant values. 2020 annual production was 56,535 barrels per day versus 2019 average of 58,855 barrels a day, only a 4% decline, reflecting the very low decline of the property. The team continues to do a great job, and we had very strong annual operating costs of $6.03 per barrel, a 3% reduction versus 2019 operating costs of $6.22 per barrel. Fourth quarter up. 2020 production was approximately $56,000, down from the fourth quarter of 2019 of $59,000. Operating costs in Q4 2020 were very strong at $5.85 per barrel. At Pelican, our team continues to drive for operational excellence and has been able to mitigate the impact of decline in production over the last five years, reducing the annual operating costs on a BUE basis, an excellent accomplishment by them. With our low decline and very low operating costs, Pelican Lake continues to have excellent netbacks. We had a strong year in thermal operations in 2020 as we continued to leverage our continuous improvement culture and our expertise to deliver effective and efficient operations. In 2020, our thermal production reached a record of approximately 249,000 barrels a day as we optimized production throughout the year under our curtailment optimization strategy. The strong annual performance in thermal reflects increase in volumes from pad adds at Primrose, production ramp-up of Kirby North, and additional pad tie-in at Jackfish. Thermal annual operating costs were very strong at $9.44 per barrel, a decrease of 13% for 2019 levels of $10.83. as a result of cost synergies achieved as we integrated in jackfish and curvy field operations, as well as continued to focus on effective and efficient operations. Q4 production was approximately 266-200 barrels a day, down from Q3 as part of our curtailment optimization strategy with operating costs of $9.17 per barrel. In October, our thermal team optimized the ramp-up of additional pad-added jackfish as we recorded a record monthly production of approximately 128,600 barrels a day, a great result by our team. In the company's world-class oil sands mining and upgrading assets, annual production averaged 417,351 barrels a day of FCO, an increase of 6% from 2019 levels, primarily with as a result of high utilization rates and operational enhancements. Record low annual operating costs were achieved in 2020 and remain industry-leading, averaging $20.46 per barrel of SEO, a decrease of $2.10 from 2019 levels, driven by the company's continued focus on high reliability, cost control, as well as operational enhancements. In summary, the company increased annual SEO production by approximately 22,000 barrels a day over 2019 levels. As well, we reduced the total annual operating costs by $183 million, excluding energy costs. Our teams continue to do an excellent job here, and they are focused on continuous improvement and effective and efficient operations. At oil sands mining operation, production in Q4 was approximately 417,100 barrels a day, As planned maintenance was concluded at Horizon and ASOP ran well at expanded capacity. In the quarter, operating costs were strong at $20.20 per barrel of SEO as our teams drive for operational excellence. As well in December, in our oil sands mining assets, we recorded a record monthly of approximately 490,800 barrels a day as we had high utilization rates combined with enhanced capacity and operational excellence. As part of our 2021 budget, a planned 30-day turnaround is scheduled for the month of April. During the shutdown, new incremental operational packages at the Upgrader is coordinated to be tied in. I will now turn it over to Darren for a 2020 reserves review. Thank you, Tim, and good morning. To start, as in previous years, 100% of Canadian natural reserves are externally evaluated and reviewed by independent qualified reserve evaluators. Our 2020 reserves disclosure is presented in accordance with Canadian reporting requirements using forecast prices and escalated costs. The Canadian standards also require the disclosure of reserves on a company gross working interest share before royalties. In 2020, Canadian Natural had an excellent year, replacing 361% of the company's 2020 production on a total approved basis, 282% for crude oil, NGLs, bitumen, and synthetic crude oil, and 656% for natural gas. On a total approved plus probable basis, the company replaced 493% of the 2020 production, Total approved reserves increased 10 percent to 12.1 billion BUE, and total approved plus probable reserves increased 12 percent to 15.9 billion BUE. Of the 12.9 billion BUE of total approved reserves, approximately 7 billion barrels are high value, no decline, SCO reserves. It's also important to note that 71% of Canadian Natural's total approved reserves are approved developed producing reserves at $8.6 billion BOE. Finding and development costs are key indicators of the strength of our assets and the company's ability to execute. Canadian Natural delivered top-tier results in 2020, and our strong performance is reflected in our finding and development costs. The corporate finding, development and acquisition costs excluding changes to future development costs are $1.91 per BUE for total approved and $1.40 per BUE for total approved plus probable reserves. Canadian Naturals finding, development and acquisition costs including changes to future development costs are $4.46 per BUE for total approved and $3.46 per BUE for total approved plus probable reserves. The strength and depth of the company's asset base is evident as approximately 80% of the total approved reserves are long life, low decline, resulting in our top tier approved reserve life index of 29.8 years and total approved plus probable reserve life index of 39.2 years. The net present value of future net revenue before income taxes using a 10% discount rate and including the full company ARO, is $80.7 billion for total approved reserves and $98 billion for total approved plus probable reserves. In summary, these excellent results reflect the strength and depth of Canadian Naturals' asset base, the value of the company's long-life low-decline reserves, and our ability to execute. Now I will hand over to Mark for the financial highlights.