Canadian Natural Resources Limited

Good morning. We would like to welcome everyone to the Canadian Natural Resources 2021 Fourth 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, March 3, 2022, at 9 o'clock a.m. Mountain Time. I would now like to turn the meeting over to your host for today's call, Corey Bieber, Executive Advisor. Please go ahead, Mr. Bieber.

Thank you, Operator, and good morning, everyone, and welcome to Canadian Natural's fourth quarter 2021 Corporate Update Conference call. Canadian Natural had an exceptionally 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, and again, all of which was strongly demonstrated in Q4. Beyond our robust asset base, there's a corporate strategy that focuses on generating real returns for shareholders, and a driven management team and corporate culture that focuses on being effective and efficient. Over the years, Canadian Natural has differentiated itself through its robustness, sustainability, and strength of its business plan For 2022 and beyond, I believe we are one of the few energy companies capable of delivering meaningful economic growth while increasing sustainable 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. Darren Fichter, COO of E&P, will update our 2021 reserves. And Mark Stainthorpe, our chief financial officer, will then provide an update on our 2022 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 in 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 fourth quarter of 2021, as we achieved record quarterly production of approximately 1.314 million BOEs per day, of which over 1 million barrels a day was liquid production, a result of our robust, long-life, low-decline assets and operational excellence, primarily in the oil sands mining and thermal in situ. This, combined with our capital discipline generated significant free cash flow as we continued to balance free cash flow to our four pillars of capital allocation, maximizing value for our shareholders. In 2021, we exited with net debt of approximately $14 billion, returned approximately $3.8 billion to shareholders through dividends and share repurchases, maintained capital discipline, and executed on optimistic acquisitions, which added long-term value. We continue to apply that same drive to ESG, environmental, social, and governance, to deliver industry-leading performance across the board, a significant factor in our long-term sustainability. Data Natural targets to publish its 2021 Stewardship Report to stakeholders in Q3 2022, including a third-party independent reasonable assurance on Scope 1 and Scope 2 emissions, and limited assurance on Scope 3 emissions. Additionally, we will continue to outline our path to lower carbon emissions across the asset base and our journey to achieve our goal of net zero GHG emissions in the oil sands. We'll also display how Canadian Natural leverages technology innovation to reduce its environmental footprint, ensuring safe, reliable, effective and efficient operations. Canadian Natural has multiple pathways to achieve net zero. with actions identified in the near, mid, and long term. The strength of Canadian natural oil sands mining asset is that with its long life, no decline, and with its manufacturing-like operations, it can have one of the clearest routes, if not the clearest route, to net zero of any global oil asset. I'll now do a brief overview of our assets, starting with natural gas. Overall, 2021 annual natural gas production was approximately 1.695 BCF per day, which was a 15% increase over 2020 production. For North American operations, 2021 annual natural gas production was approximately 1.68 BCF versus 1.4 for 2020, which was primarily a result of the company's strategic decision to invest in the company's liquid-rich monitoring areas through the drill-to-fill strategy, adding low-cost, high-value, liquid-rich natural gas production volumes. as well as opportunistic acquisitions completed in 2020 and 2021, the last being storm resources in mid-December 21, in which we will target to drill 14 net wells on the assets as part of our 2022 capital budget. Our 2021 annual North American natural gas operating cost was $1.15 per MCF, which was comparable to 2020 of $1.14. For the fourth quarter of 2021, North American natural gas production was approximately 1.841 BCF per day versus 1.623 BCF per day for Q4 2020, with strong operating costs of $1.08 per MCF versus Q4 2020 of $1.07. Good year-over-year operating cost performance as our teams continue to focus on operational excellence. Looking forward on the annual strip basis, ACO prices for 2022 look very strong, approximately 425 per GJ, an increase of approximately 26% over 2021 levels of 338 per GJ, improving the economics of our montane liquids-rich natural gas projects. For North American light oil and NGL, 2021 annual production was 94,581 barrels a day, up 12% for 2020, primarily a result of strong drilling results. Annual operating costs were strong at $15.28 per barrel versus the 2020 operating costs of $14.61 per barrel. Q4 production was 97,799 barrels per day, up 11% when comparing to Q4 2020 with operating costs of $14.61 per barrel as compared to the Q4 2020 operating costs of $13.88 per barrel. The company delivered top-tier execution. and results at the company's high-value Montney light crude development in 2021 was very good. As budgeted, a total of 18 net wells were brought on stream in 2021, with an exit rate exceeding the targeted budget rates by over 25%, totaling approximately 11,000 barrels a day of light crude oil and $35 million a day of natural gas, and 12-month capital efficiencies of approximately $6,000 per BW. Based on the success, Canadian Natural targets to complete 15 net wells as part of our 2022 capital budget and targeted to maintain the processing facilities at full capacity for this year. Our international assets in 2021 had an annual production of 31,650 barrels, a decrease from 2020 levels, primarily due to maintenance activities and natural declines. Offshore Africa production was approximately 14,000 barrels a day versus 2020 of 17,000 barrels per day. With annual operating costs in 2021 were 1473 per barrel versus 2020 of 1329. In the North Sea, annual production averaged 17,633 barrels a day in 2021 versus 23,142 in 2020. Our international assets continue to generate free cash flow and value for the company. Moving to heavy oil, annual production was 64,366 barrels per day in 2021, an 8% decrease versus the 70,279 in 2020, reflecting natural decline partially offset by strong drilling results and increased development activity in 2021. Annual operating costs were 19.37 per barrel versus the 2020 operating costs of 17.59. Fourth quarter of 2021 production, with 64,866 barrels per day, primarily a result of strong drilling results and increased development activity, versus the Q4 production of 65,513 barrels a day, while operating costs were 1,972 per barrel, versus the Q4 2020 of 1,761, primarily a result of higher energy costs. At the company's Clearwater Play at Smith, 12 net horizontal multilaterals were brought on stream in 2021 and continued to perform well, with the current production rates totaling over 3,200 barrels a day. As part of our 2022 budget, the company has commenced a two-rig drilling program targeting 41 net horizontal wells to be drilled and placed on production during the year. A key component of our long-life, low-decline assets is our world-class Pelican Lake pool. where leading-edge polymer flood continues to deliver significant value. The 2021 annual production was 54,390 barrels a day versus 2020 average of 56,535 barrels per day, only a 4% decline, reflecting the very low decline of the property. The team continues to do a great job. We've had strong operating costs of $6.75 per barrel, an increase from 2020 operating costs of $6.03, primarily a result of increased energy costs. Q4 2021 production was approximately 52,963 barrels per day, down from the fourth quarter of 2020 of 56,000 barrels a day. Operating costs in Q4 2021 were 678 a barrel, reflecting higher energy costs, versus the 585 for Q4 2020. With our very low decline and very low operating costs, Pelican Lake continues to have excellent next steps. We had a very strong year in our thermal in-situ operations in 2021 as we continued to leverage our continuous improvement culture and our expertise to deliver effective and efficient operations. In 2021, we achieved record annual production of 259,284 barrels a day as the teams optimized production throughout the year. The thermal annual operating costs were $12.14 a barrel, up from 2020 levels of $9.44, primarily a result of increased energy costs. Q4 2021 production was very strong at 263,110 barrels per day, up from the Q3 production of roughly 248,000 barrels a day, with operating costs of 1,308 per barrel. When comparing last year's Q4 2020 production, it's very similar, which was at 266,000 barrels per day, with operating costs of 1,224 per barrel. As part of our 2022 strategic growth capital, the company has commenced a three-rig drill program in thermal that will conclude in Q2 2023. This program targets to drill three pads at Kirby, two pads at Jackfish, targeting on-stream production volumes in mid-2023, with an average capital efficiency of approximately $8,000 per BWD. At Primrose, the program consists of one SAGD pad as well as two CCF pads targeted to be on-stream in mid-2023, with average capital efficiencies of approximately $10,000 per BUD. Finally, Canadian Natural is progressing its engineering and design of a commercial-scale solvent SAGD pad development at Kirby North and targets to commence solvent injection early 2024. In the company's world-class oil sands mining and upgrade assets, we had a record annual production averaging 448,133 barrels a day of SEO, an increase of 7% from 2020 levels, primarily a result of high utilization rate and operational enhancement. The team had strong annual operating costs in 2021 and remained industry-leading, averaging 2091 per barrel of SEO versus the 2020 operating costs of 2046 per barrel, driven by the company's continuous focus on high reliability cost control, as well as operational enhancement. At our oil sands mining operations, we had a record production in Q4 2021, which was 493,406 barrels per day, as planned maintenance was concluded at Horizon and ASOP earlier in the year, and the facilities ran well at expanded capacities. In the quarter, operating costs were strong at $19.55 per barrel of SEO as our teams drive for operational excellence. In the lead-up to the planned turnaround at the non-operated Scotford Upgrader, it has had operational issues in the first quarter, impacting Canadian Natural's Q1-22 production volumes by approximately 31,000 barrels a day. The turnaround is still targeting to begin March 15th for approximately 65 days, as previously announced. At horizon, plant turnaround is targeted for May for a full plant outage for approximately 32. Overall, the 2022 annual production target range remains unchanged. I will now turn it over to Darren for our 2021 reserve review.