Canadian Natural Resources Limited

Good morning. We would like to welcome everyone to the Canadian Natural Resources 2021 Second Quarter Earnings Conference Call and Webcast. 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, August 5, 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, sir.

Thank you, operator, and good morning, everyone, and welcome to Canadian Natural's second quarter 2021 corporate update conference call. Canadian Natural had another strong quarter, financially and operationally. As I've commented before, I believe our asset base is unique amongst our peer group, underpinned by long-life, low-decline assets and complemented by our conventional assets that allow significant flexibility, 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 clearly demonstrated its robustness, sustainability, and the strength of its business plan. For 2021 and beyond, I believe we're one of only a few companies capable of delivering meaningful economic growth increasing returns to shareholders, and reducing absolute debt in a responsible manner. And as both Tim and Mark will discuss, we're pleased to provide additional clarity on how our substantial future free cash flows will be dispersed amongst our four pillars. For today's call, Tim McKay, our president, will first provide a corporate update. Then Mark Stainthorpe, our chief financial officer, will then provide an update on our 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. 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. Canadian Natural delivered strong operational results in the second quarter. as we achieved quarterly production of approximately 1.142 million BEOEs per day as a result of our long life, robust, low decline assets, operational excellence, and with our capital discipline generated significant free cash flow. We balanced free cash flow to our four pillars of capital allocation, maximizing value for our shareholders. In the first two quarters of 2021, we have reduced net debt by $3.1 billion, returned approximately $1.3 billion to our shareholders through dividends and share repurchases, maintained capital adjustment, executed on opportunistic transactions, which will add long-term value. The strengths of Kenya Natural's business model are also applied to environmental, social, and governance to deliver industry-leading performance across the board, a significant factor in our long-term sustainability. For the period from 2016 to 2020, in our oil sands operation, our GHG intensity is down 38%. North American E&P methane emissions are down 28%. And corporately in this time, we have taken equivalent to over 1 million cars off the road annually. And over and above, we are the leading capture and sequester of CO2 in the oil and gas sector worldwide. Our safety record is top tier as a corporate total recordable industry frequency improved to 0.21 in 2020, a reduction of 58% from 2016 levels. In June, we announced the Oil Sands Pathway to Net Zero initiative, an alliance of oil sands industry participants who have a goal of achieving net zero emissions in the oil sands operations by 2050. This is an important initiative, and the oil sands industry participants at Canadian Natural will further strengthen our leading ESG performance while delivering meaningful emission reductions and balancing sustainable economic development. And we'll require collaboration with the federal and Alberta governments so that together we can help achieve Canada's climate goals. With the positive outlook for commodity prices for 2021, we have increased our annual capital budget by $275 million. The breakdown is as follows. Our conventional and unconventional budget has increased by $120 million dollars, primarily for additional drilling of 78 wells and development activities, with a targeted capital efficiency of approximately $8,400 per flowing BUE, and giving us the 2021 exit rate of approximately 14,000 BUEs per day. $110 million is related to long life, low decline assets, of which $75 million primarily relates to the additional scope completed and the extended turnaround time to complete the horizon turnaround in the second quarter. $35 million of the $110 is for construction of three pads at Primrose, two at Kirby North and two at Kirby South, which will support production additions in 2022 and beyond. Our area-based abandonment program has been highly cost-effective, and as a result, we have added an additional $45 million to our 2021 capital budget and target to do an additional 800 well abandonments as we continue to prudently manage our liabilities and environmental footprint. All of these additional expenders will result in an estimated increase of about 1,500 jobs across Alberta, British Columbia, and Saskatchewan. Moving to the assets and starting with natural gas, overall Q2 production was 1.614 BCF per day, an increase from our Q1 production of 1.598 BCF per day, with North American Q2 natural gas production of 1.591 BCF up from Q1 of 1.581 BCF. 5, even though Pine River, approximately 100 million a day, was down for the full quarter. As of July 24th, the plant resumed operation and is currently producing approximately 100 million a day. We continue to focus on operational excellence, and in our Q2, North American natural gas operating costs were strong at $1.15 versus Q1 of $1.24 per MCF. At Septimus, a 5-net well pad came on stream in June, as budgeted with total current rates limited to approximately $30 million a day of natural gas. It had a strong capital efficiency of approximately $5,000 per flowing BUE. Septimus is now at full capacity at approximately $150 million a day of natural gas and 9,000 barrels a day of liquids, and targets to remain at full capacity for the remainder of 2021. A Townsend six-wall pad came on stream in June on time and cost. with toll rates of approximately 55 million cubic feet of natural gas, with strong capital efficiencies of approximately $4,000 per flowing BUE. Production at Townsend is approximately 265 million cubic feet of natural gas, was achieved in the second quarter, and remains on target to exit 2021 at a production rate of approximately 340 million cubic feet per day. Looking to the second half of 2021, ACO strip prices continues to look strong at over $3.50 per GJ, improving the economics of our natural gas projects, adding more value to our natural gas production as we revised our target natural gas guidance up to 1.68 BCF per day to 1.72 BCF and target exit 2021 in excess of 1.8 BCF per day. Our Q2 North American light oil and NGL production with 98,559 barrels per day, up 6% from Q1 2021. Primarily as a result of the company's drilling and development activities, Q2 operating costs decreased to $14.39 per barrel versus Q1 operating costs of $16.07 per barrel. The company continues to advance its high-value Montney light crude oil development at Wembley, where 13 net wells have been drilled to date, ahead of schedule, under cost. of the budgeted 18 net wells targeted to be on stream in 2021. Cost efficiencies have been realized on the Wimbley drilling and targeting costs are 12% lower than budgeted levels, resulting in strong capital efficiencies of approximately $8,300 per flowing BOE once on stream. Construction of the new crude oil battery and gathering system has been top tier and is approximately 45 days ahead of schedule and is now targeted to be on stream in mid-August with costs targeted to be under budget by 11%. This project is targeted to exit 2021 with total production rates of approximately 8,500 barrels a day of liquids and 30 million cubic feet of natural gas. The international E&P crude oil production averaged 32,697 barrels per day in Q2 2021, a decrease of 26% from Q2 20 levels and a 3% increase from Q1 2021 levels. The changes in production from prior periods are primarily a result of planned maintenance activities, natural field declines, and the permanent shut-in of the battlefields in 2020. Crude oil operating costs increased from prior periods primarily due to lower volumes and as a result of planned maintenance activities in the North Sea and offshore Africa, as well as increased GHG and energy costs in the North Sea. Q2 heavy oil production was up to approximately 66,000 barrels a day. versus the 62,700 barrels a day in Q1, primarily as a result of the company's drilling and, to a lesser extent, increased development activities related to higher prices in the quarter. Future operating costs increased to $19.32 per barrel from Q1 operating costs of $18.89 per barrel. At the company's Clearwater play at Smith, six net horizontal multilaterals are now on Production from these wells continues to be strong, currently totaling approximately 2,200 barrels per day, exceeding budget rates by 600 barrels per day. As part of an additional capital, the company is targeting to drill 70 additional heavy oil wells, which includes another pad of six net horizontal multi-well laterals at Smith and will be drilled and come on stream in Q4. This pad is also targeting strong productive rates of approximately 2,000 barrels per day. A key component of our long-life low-decline assets is our world-class pelican pool. Our leading-edge polymer flood continues to deliver significant value. Second quarter production was 55,212 barrels per day, comparable to the first quarter of approximately 55,500, primarily as a result of the well-drilling program activities in the quarter, offset by natural field declines. Operating costs continue to be very strong at $690 per barrel versus Q1 operating costs at $738 per barrel. During the quarter, the company brought on stream 10 net wells, which has a current production capacity of approximately 1,300 barrels a day, and low capital efficiencies of $9,900 per flowing BUE. Our team at Pelican continues to drive operational excellence, and with our low decline and very low operating costs, Pelican Lake continues to have excellent netbacks. Our second quarter of thermal production was 258,551 barrels a day, down 3% from Q1. Operating costs in Q2 were 3% higher at $11.78 per barrel versus Q1 operating costs of $11.40 per barrel, primarily due to lower volumes in the quarter. At Primrose, the steam flood area, a solvent injection pilot is on track to commence in Q4-21, and similar to the first pilot at Kirby South, This is target to operate for a two-year period. At our oil sands mining operations, we had a strong second quarter with production of 361,707 barrels per day, inclusive of the planned maintenance at Horizon and Scotford in the quarter, with strong operating costs of 25.46 per barrel of SCL. Our teams continue to leverage technical expertise between the two sites, services, operating efficiencies, driving our costs down with consistency. The company's focus on continuous improvement initiatives delivered high utilization and reliability at the company's oil sands mining and upgrading assets. As a result, a record monthly SEO production of approximately 495,100 barrels a day was achieved in June 21, an increase from the previous record of approximately 490,800 barrels a day of SEO in December 2020. I will now turn it over to Mark for a financial review.