Canadian Natural Resources Limited

Good morning. We would like to welcome everyone to the Canadian Natural Resources 2022 Third 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, November 3rd, 2022 at 9 a.m. Mountain Time. I would now like to turn the meeting over to your host for today's call, Lance Casson, Manager of Investor Relations.

Thank you, Operator. Good morning, everyone. and welcome to Canadian Actual's third quarter 2022 earnings conference call. Before we begin, I'd like to remind you of our forward-looking statements, and it should be noted that in our reporting disclosures, everything is in Canadian dollars unless otherwise stated, and we report our reserves and production before royalties. Additionally, I would suggest you review our comments on non-GAAP disclosures in our financial statements. With me this morning is Tim McKay, our president, and Mark Stainforth, our chief financial officer. Tim will first speak to highlights on our safe, reliable operations that continue to drive long-term shareholder value. This will include an overview of activities in the quarter, including specifics on our world-class assets and operations. Mark will then provide an update on our strong financial results, including our robust financial position, free tax regeneration, and increasing shareholder returns. To close, Tim will summarize our call prior to open up the line for questions. With that, I'll turn it over to you, Tim.

Thank you, Lance. Good morning, everyone. Our focus on cost control, our culture of continuous improvement, combined with our disciplined and balanced approach to capital allocation continues to drive strong operational and financial results as our 2022 capital program remains unchained at $4.9 billion, excluding acquisitions. In the third quarter, we achieved record total quarterly production of approximately 1.34 million BOEs per day, which included record natural gas production at approximately 2.13 BCF a day, all which received strong realized pricing in the quarter, averaging 657 per MCF as a result of our diversified sales strategy. We also had liquids production at approximately 983,700 barrels per day, reflecting strong operational performance across all our assets. including our long-life zero-decline oil sands mining and upgrading assets, which was 487,553 barrels per day of SCO, comprising approximately 50% of the company's total liquid production in the quarter. Our hard-valued SCO captured $8.87 US dollar price premium to WTI in the quarter, driving strong SEO pricing and generate significant free cash flow for the company. Subsequent to the quarter end on October 4th, the Pathways Alliance reached an important milestone, securing the right to continue exploration work for our CO2 injection hub, allowing us to advance to the next stage of evaluation. As a result, we are continuing to progress our stakeholder engagement detailed engineering work on our approximately 400-kilometer-long trunk line that will carry captured CO2 from the oil sands to the storage hub. We'd like to thank the Alberta government for their continued support as we work together on this ambitious GHG emissions reduction project. Additionally, we appreciate the federal government's recent public statements in support of Canadian oil and gas sector's role in global energy security along with the commitment to be competitive on a fiscal framework for carbon capture. Both these developments are important steps to help Canada's oil and sand industry meet its commitment of net zero GHG emissions by 2050, which will have the industry and governments investing approximately $24 billion between now and 2030 on the Pathways Foundational Carbon Capture Storage Project and other emission reduction projects. As well as a result of Canadian Naturals' effective and efficient operations and a progressive royalty and tax system in the provinces and Canada, payments to government have been significant for 2022. Total forecast payments from Canadian Naturals to Canadian governments from income taxes, property taxes and royalty is estimated to be approximately $11 billion in 2022, an increase of approximately $6 billion or 120% from 2021 levels. Additionally, our 2022 capital spend forecast of approximately $4.9 billion, excluding acquisitions, is an increase of approximately $1.4 billion, or 41% from 2021 levels, as we deliver responsibly produced energy to help meet global energy demand. As well, in 2022, we have returned approximately $4.9 billion to our shareholders through base dividend and special dividends. an increase of $2.8 billion, or 127% from 2021 levels. I will now do a brief overview of the assets starting with natural gas. Overall, Q3 2022 natural gas was approximately 2.13 BCF, which was a record for the company. Slight increase over Q2 2022. For North American operations, Q3 2022 natural gas production was approximately 2.12 BCF, versus the 2.09 BCF for Q2 2022, up primarily as a result of the company's strategic decision to invest in our drill-to-fill strategy, adding low-cost, high-value, liquid-rich natural gas production volumes, as well as authentic acquisition. Our Q3 2022 North American natural gas operating cost was $1.13 per MCF, which was down 2% when compared to Q2 2022 of $1.15. reflecting good operating performance as their teams continue to focus on operational excellence. Some area highlights are, at NIG, a six-well pad came on production in Q3 with very strong capital efficiency of approximately $2,700 per BOD. October 2022 monthly production from this pad averaged approximately 55 million cubic feet per day of natural gas and 3,200 barrels of liquids, exceeding budgeted rates and maximizing existing facility capacity. In Townsend, the 2-well pad came on production in July 2022 at a capital efficiency of approximately $4,800 per B.U.E.D. Production from this pad continues to be strong with an average October 2022 monthly production of approximately 20 million cubic feet of natural gas. For North American light oil and NGL, Q3 production was 109,255 barrels a day, comparable to Q2 2022, primarily as a result of strong drilling results and previous acquisitions. Q3 2022 operating costs were $16.68 a barrel, up 10% from Q2 operating costs at $15.19, primarily due to increased power costs in the quarter. Our drilling program continues to show strong results. At Wembley, a three-well pad came on production in July at a capital efficiency of approximately $6,000 per VUED, October 2022 monthly production from this pad averaged over approximately 2,000 barrels a day of liquids and 7 million cubic feet of natural gas. At Gold Creek, a two-well pad came on production in September at a strong capital efficiency of approximately $4,300 per BUD with strong October 2022 monthly average production of approximately 2,100 barrels a day of liquid and 16 million cubic feet of natural gas. Our international assets in Q3 had oil production of 24,493 barrels a day, which is down from Q2 2022 levels of 25,907 barrels, primarily due to planned and unplanned maintenance in the North Sea and offshore Africa. Our international assets continue to generate good free hash flow and value for the company. Moving to heavy oil, production was 68,933 barrels a day in Q3, up 4% from Q2. primarily due to strong drilling results in 2022. Operating costs in Q3 were lower at 21.30 per barrel versus our Q2 operating costs at 22.86 per barrel, primarily lower due to lower natural gas fuel costs and offset by higher trucking costs. Canadian Natural has one of the largest land bases of Clearwater rights at approximately 940,000 net acres, of which the company has drilled 14 net or multilateral clear water wells in the Smith area in Q3, bringing the total clear water wells drilled and on production year to date to 33 net wells. And the company's total clear water production in September averaged approximately 12,300 barrels a day, an increase of 8,400 barrels a day from the beginning of 2022. 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. Q3 2022 production was 50,051 barrels versus Q2 average of 51,112 barrels, reflecting the low-decline nature of this property. The team continues to focus on mitigating cost pressures, and we had good Q3 2022 operating costs of $8.89 per barrel, An increase from our Q2 operating costs of $7.99, primarily due to the higher power costs in the quarter. With our low decline, very low operating costs, Pelican Lake continues to have excellent netbacks. In our thermal in situ areas in 2022, we continue to leverage our continuous improvement culture and our expertise to deliver effective and efficient operations. In Q3 2022, production was 243,393 barrels a day, down from Q2 production of 249,930 barrels per day, primarily as a result of planned maintenance at Jackfish in the quarter. Q3 operating costs were $15.63 per barrel, down compared to Q2 operating costs of $18.93 per barrel, primarily a result of lower natural gas costs, offset by higher power costs in the quarter. At Kirby, the company is progressing as budgeted, with the three SAGD well development and is targeting to begin steaming on the first pad in Q1 2023 with full ramp up to production capacity in Q3 2023. At Primrose, the company completed drilling the two CCS pads on time and on cost. These two pads are targeted to begin steaming and come on production in Q3 of 2022, 23, sorry. The company's world-class oil sands mining and upgrading assets, we had a strong Q3 2022 production, averaging 487,553 barrels of SEO, with Q3 operating costs that were strong at $22.35 a barrel. Both the change in production and operating costs compared to Q2 was primarily a result of the Scotford and Horizon plan maintenance turnarounds in the second quarter. During this quarter, SEO prices were very strong, resulting in a premium pricing for SEO at $8.87 US per barrel above WGI, which added additional free cash flow. Subsequent to Q3 2022, the company's oil sands mining and upgrading assets experienced unplanned outages at both Horizon and at the Scotford Upgrader in the month of October, resulting in the Q4 targeted production range of 450,000 to 460,000 barrels of SEO. Both oil sands mining and upgrading assets are now up and running at full capacity, and at Horizon, we will be enhancing our piping integrity and maintenance programs to support safe and reliable operations. At Horizon, the 14-4 reliability enhancement project is progressing as planned and targets to extend major maintenance cycles from one per year to every second year, increasing the SEO production capacity by approximately 5,000 barrels a day in 2023, increasing to approximately 14,000 barrels a day in 2025. Now I will turn it over to Mark for a financial review.