Canadian Natural Resources Limited

Good morning. We would like to welcome everyone to the Canadian Natural Resources First Quarter 2021 Earnings Conference column webcast. Presentation slides are available to view with the webcast and in PDF format at www.cnrl.com. After the presentation, we will conduct a question and answer session. Instructions will be given at that time. Please note that this call is being recorded today, May 6th, 2021, at 9 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.

Thank you, Operator, and good morning, everyone, and welcome to Canadian Natural's first quarter 2021 Corporate Update Conference Call. As mentioned, to facilitate today's call, you'll find a copy of the presentation slides on our website at which I would encourage you to download now in order to follow along. Canadian Natural had a strong first quarter, financially and operationally. Our asset base is unique amongst our peer group, underpinned by long-life, low-decline assets, complemented by our conventional assets that allow significant flexibility, and all of which can generate significant free cash flow. Beyond our robust asset base, there is a corporate strategy that focuses on generating real returns for shareholders. and a driven management team and a corporate culture that focuses on being effective and efficient. Over the years, Canadian Natural has demonstrated its robustness, sustainability, and the strength of its business plan. For 2021 and beyond, I believe we are one of a few companies capable of delivering meaningful economic growth, increasing returns to shareholders, and reducing absolute debt in a responsible manner. For today's call, Tim McKay, our president, will first provide a corporate update, Mark Stainthorpe, our Chief Financial Officer, will then provide an update on our financial – 2021 financial outlook, as well as our strong financial position. Tim will then provide a summary prior to opening up for questions. Before we kick off, I'd like to remind you of our forward-looking statements shown on slide 3 and our reporting disclosures shown on slide 4. Of note in our reporting disclosures is that everything will be in Canadian dollars unless otherwise stated. and as well, we report our reserves and production before royalties. I would also suggest you review our comments on non-GAAP disclosures.

So with that, I'll turn it over to you, Tim. Thank you, Corey. Good morning, everyone. Starting with slide five, Canadian Natural is in a very strong position. We have great assets, operating excellence, and with our capital, the ability to strengthen our balance sheet and deliver returns to our shareholders. This also applies... to an environmental, social, and governance side of the business, ESG, where we are delivering industry-leading performance across the board, a significant factor in our long-term sustainability. Jada Natural takes a long-term view on ESG, aimed at creating long-term value, ensuring we identify, assess, quantify, adapt, and align ourselves, and then execute. We are developing plans to address these risks by applying technology and innovation. so we can continuously improve our performance in the near, mid, and long term, always ensuring it's adding value. Moving to slide six, if you look at the overall ESG performance in terms of investment priority, it's very clear that Canada is the world leader and scores the highest in every category and should be an investment priority. Slide seven, a few weeks ago, our federal government had two announcements. The first, on April 19th, was the federal budget, which recognizes that carbon capture, utilization, and storage, CCUS, is an important pathway for Canada to achieve its environmental goals. As well, a few days later, the federal government announced that Canada will be increasing its goal from 40% to 45% reduction in GHG emissions by 2030. As part of the federal government budget announcement, we will participate in the consultation process with respect to CCUS. As well, we'll work to align with these new goals. Next slide. Canada Natural and the Canadian Canada's oil and gas sector recognize the need to reduce GHG emissions, and we have been able to leverage technology and Canadian ingenuity to deliver impressive results. Canada Natural has invested approximately $3.9 billion in R&D since 2009. Using this investment to reduce our environmental footprint, unlock reserves, and drive ever more effective, efficient operations, investing now to do even better in the future. As we've seen on slide nine, a third party has reviewed our oil sands emissions and determined that for scope one emissions, Canadian natural was 35% lower than our peer average. While this is a good starting point, we're still progressing projects that will continue to drive our GHG intensity down. Slide 10, for CCUS, Canadian Natural is using state-of-the-art carbon capture reduction technologies and is a leader in the oil and gas industry in the world. With this infrastructure in place, we can leverage them to capture more CO2. These three facilities are currently operating and are capturing approximately 2.7 million tons of CO2 per year, equivalent to taking approximately 576,000 cars off the road annually. Next slide. Another promising technology is solvent in both side B and the potential at Primrose in the steam flood area. At Kirby South, the pilot continues to perform well with GHG intensity reduction of approximately 45% within the targeted range and will continue to monitor its performance in 2021. The pilot at Primrose is targeted for commencement in Q4 2021, and similar to Kirby South, it will take a few years to evaluate its performance. In both cases, this technology can be applied to similar properties and can reduce our GHG intensity up to 50% and have targeted operating cost savings of approximately a dollar per barrel. Moving to slide 12, getting to net zero takes the ability to leverage technology, be innovative, and using Canadian industry. As well, we have defined actions in the near, mid, and long term. Canadian Natural has a huge technology funnel with just a few of those activities listed here as we progress our journey to net zero. Slide 13, we have a track record of continuously improving our GHG intensity. Since 2012, we have pathetically improved our GHG intensity by 32%, equivalent to taking approximately 1.9 million cars off the road annually, and we are progressing projects to continue that trend of reducing our GHG intensity. Moving to the next slide, in summary, Canadian Natural is delivering leading ESG performance. Our long-life, low-decline assets are advantaged as we can leverage technology, innovation, and continuous improvement to deliver ever-improving environmental performance, delivering results over the long term with a pathway to attaining net zero in the oil sands. As we work with governments, it's clear that Canadian Naturals should be an ESG investment priority. Moving to our corporate update, slide 16. TN Natural continues to deliver strong operational results, and we are focused on delivering value for our shareholders. In the first quarter, we delivered record production of approximately 1.246 million BUEs, record liquids production of approximately 979,000 barrels a day, an increase of 6% and 4% respectively over Q1 2020, primarily as a result of our record oil sands mining FCO production of approximately 468,800 barrels a day, and strong North American EMP production, including thermal, of approximately 478,700 barrels a day. Our natural gas production was strong at approximately 1.6 BCF, an 11% increase over Q1-20. Operating performance in all areas was strong, with oil sands mining being top tier at 1982 per barrel Canadian. 5% lower than a year ago. And if you look at it from a macro perspective, it's even more impressive. Compared to a year ago, we're about 41,000 barrels a day higher, and when you exclude the cost of natural gas, the absolute dollar basis is very comparable to Q1 2020. A great job done by our oil sands mining team. Slide 17. Naya Natural has robust economic, long-life, low-decline assets. and relative to most of our peers, the ability to enhance our margins and grow production, which results in more long-term value. We have a diversified asset base with value enhancement plans for every product and basin we operate. This is driven by our effective and efficient operations, our area knowledge, ownership, and operatorship of infrastructure. KM Natural has a history of capital discipline, which includes a flexible and effective capital allocation, and our ability to be nimble to capture opportunities. We continue to simply optimize capital allocation to maximize value for our shareholders. We're ensuring we're maintaining a strong balance sheet. With our low maintenance capital and our culture of leveraging technology, innovation, and driving continuous improvement throughout the company gives us ever-improving operations. For these reasons, Canadian Natural has a leading free cash flow generation. Next slide. Canadian Natural has a balanced and diverse product mix with approximately 48% that is high value, like crude oil, SUO, and NGL on a BUE basis, limiting our exposure to one product. For liquids production, approximately 81% is from long-life, low-decline assets, which requires less maintenance capital than our peers. As well, we have approximately 1.6 BCF of natural gas production for approximately 22% of our BUEs, well-positioned to capture additional value as natural gas prices strengthen. Slide 19. As a result of our unique asset base, Canadian natural corporate decline is low at approximately 10%. With approximately 63% of our BUE production being long life, low decline, or zero decline production. Because of this, we require less maintenance staff capital to maintain production than our peers. Next slide. We are executing our 2021 budget The total budget of $3.2 billion, of which only $200 million, is for growth capital, and we're growing our production by approximately 5%. Strong performance given that KN Natural is over 1 million BUEs a day. With the first quarter behind us, we are on track and will continue to be disciplined in 2021. With improved pricing that we are seeing today, we will generate significant free cash flow and pay down our debt very quickly. Slide 21, Canadian natural one-fee reserves are world-class among our global peers, which includes the supermajors. A strong indicator of the strength and depth of our assets with approximately 30-year reserve life index, of which approximately 61% represents long-life, no-decline SCO reserves that has lower attribution risk than many of our peers. As well, I remind you that 100% of Canadian natural reserves are externally evaluated, reviewed by an independent, qualified reserve evaluators. Moving to the next slide. When you look at net debt to 1P reserves, they're the lowest among global peers. As well, as you saw earlier, with two-thirds being long-life, no-decline SEO reserves, we have a lower cost structure and reserve risk. As you can see here on slide 23, Canadian National has the highest free cash flow yield among our global peers, an indicator of the strength of our assets, our effective and efficient operations, and low-maintenance capital. Slide 24. Net debt-to-cash flow. We're well-positioned compared to our global peers with less debt-to-cash flow than our peer average. It's coming down very quickly given our free cash flow profile for 2021. Slide 25. There are many positive factors ahead for the Canadian oil and gas industry, and in our opinion, the discount to global peers should disappear. Egress is improving. Heavy oil differentials are back to historical levels in the low 20%. ESG is a priority, and Canada, being a leader, will be recognized. Canadian natural has much lower operating and maintenance capital compared to our global peers and should not be undervalued when compared to these peers. It is for these reasons it's clear Canadian Natural should be an investment opportunity. We have a sustainable business model, a growing sustainable dividend track record of 21 years, and a 20% GAGR, which is top tier compared to our global peers. Slide 26, Canadian Natural is a world-class investment opportunity. We have world-class reserves, much of it being long life, low-decline assets, gives us a low decline of approximately 10%, meaning low maintenance capital as compared to our peers. Our top-tier, effective and efficient operations and our drive for continuous improvement will ensure our balance sheet will strengthen very quickly in 2021, as Mark will show you here shortly. As you saw earlier, this gives us the largest free cash flow yield percentage, nearly double our global peer average. Finally, we are focused on value creation, as we have grown our sustainable dividend for 21 years at 20% CAGR, impressive when compared to our global peers. We will now turn it over to Mark for a financial review.