Canadian Natural Resources Limited

Good morning. We would like to welcome everyone to the Canadian Natural Resources 2022 Fourth Quarter and Year-End Earnings Conference call-in 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 2, 2023, at 9 a.m. Mountain Time. I would now like to turn the meeting over to your host for today's call, Lance Kasson, Manager of Investor Relations. Please go ahead.

thank you operator good morning everyone and welcome to canadian naturals fourth quarter and year-end 2022 earnings conference call before we begin i'd like to remind you 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 reserves and production before royalties additionally i would suggest you review our comments on non-gap disclosures in our financial statements with me this morning is tim mckay our president Trevor Cassidy, Chief Operating Officer, Commercial EMP, and Mark Stainthorpe, our Chief Financial Officer. Tim will start off by speaking of specifics of our safe, reliable, world-class operations that continue to drive long-term shareholder value. Next, Trevor will provide highlights of our growing high-value reserves. Then Mark will provide an update of our strong financial results, including our robust financial position, substantial shareholder returns, and our free cash flow policy that we are enhancing today. 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. Tenea Natural delivered strong operational results in 2022, as we achieved record annual production of approximately 1.28 million BUEs per day, an increase of 4% over 2021 levels, which included approximately 933,000 barrels a day of liquid production, and record annual natural gas production of approximately 2.1 BCF per day. As a result of our diverse portfolio, which is supported by our robust, long-life, low-decline assets, primarily in the oil sands mining and thermal in situ, combined with our capital discipline, we generated significant free cash flow. And as we continued balancing free cash flow to our four pillars of capital allocation, maximizing value for our shareholders. In 2022, we exited with a net debt of approximately $10.5 billion. We returned approximately $10.5 billion to our shareholders, $5.6 billion in share repurchases and $4.9 billion in dividends. And today, we announced a further 6% increase in our dividend. In 2022, the company's total crude reserves increased by 6% to nearly $13.6 billion BOE. results in a 265% replacement of 2022 production at an FD&A metric, $8.39 per BOE, including changes in further development costs. Notably, greater than 50% of the company's full approved reserves are high-value, zero-declined SCOs. As we continue to progress our ESG initiative, deliver industries, leading performance across the board, a significant factor in our long-term sustainability. In November 2022, we announced our new environmental GHG target to reduce Scope 1 and Scope 2 absolute emissions by 40% by 2035, as we leverage technology innovation to reduce our environmental footprint while ensuring safe, reliable, effective, and efficient operations. We are working collaboratively through the Pathways Alliance to achieve our goal of net zero in the oil sands. Equally as important is that we work together with both federal and provincial governments to achieve climate goals in an economically sustainable manner. As well, Canadian Natural is an industry leader in abandonment and reclamation, as we have abandoned over 3,000 wells in the last two years, each in the last two years. And at this pace, we could abandon our current inventory of inactive wells in just 10 years. I will now do a brief overview of our assets, starting with natural gas. Overall, 2022 annual natural gas production was approximately 2.1 BCF per day, which is a 23% increase over 2021 production level. For North American operations, 2022 annual natural gas production was approximately 2.08 BCF per day, versus the 1.68 BCF for 2021, up almost approximately 395 million cubic feet per day, primarily as a result of the company's strategic decision to invest in liquid-rich natural gas areas through a drill-to-fill strategy, adding low-cost, high-value, liquid-rich gas production, as well as optimistic acquisitions completed late 2021 and early 2022. On an annual basis, our 2022 North American natural gas operating cost was $1.19 per MCF, an increase of 3% from 2021 of $1.15 per MCF, primarily due to increased energy costs. For the fourth quarter of 2021, North American natural gas production was approximately 2.1 BCF versus 1.84 for Q4 2021. The operating cost was $1.22 per MCF, versus $1.08 in 2021. Once again, reflecting the higher cost of energy. Our teams continue to focus on operational excellence. We had a successful natural gas drilling program, which included 15 net wells in Q4 2022, bringing the total natural gas wells drilled in the year to 72 net wells. For North American light oil and NGL, the 2022 annual production was approximately 110,000 barrels a day, up 16% from 2021, primarily as a result of strong drilling results. Annual operating costs were strong at $15.91 per barrel versus operating costs of $15.28. Q4 production was 112,989 barrels per day, again, up 16% when comparing to Q4 2021, with quarterly operating costs of $16.47 per barrel, as compared to Q4-21 costs of $14.61 per barrel, again, primarily a result of higher energy costs. The company delivered strong execution and results in the high-value Montney Light crude oil and deep basin developments in 2022, and as budgeted, a total of 32 net wells were brought on stream. For international assets in 2022, it had an annual production of 27,233 barrels a day, a 14% decrease versus 2021 levels, primarily due to maintenance activities in the North Sea and natural fuel decline. Offshore annual production was 14,343 barrels today versus 2021 of approximately 14,000 barrels, with annual operating costs in 2022 of 17.25 per barrel versus 2021 at 14.73. In the North Sea, annual production averaged 12,890 barrels in 2022, down from the 2020 level of 17,633 barrels per day, and an annual operating cost of approximately $89 per barrel. As a result of the North Sea regulatory and economic conditions, including the impact of higher natural gas and carbon prices going forward, we're accelerating our plan for the COP and abandonment of the two Minyan platforms, by four to five years earlier than originally envisioned. This follows the company's successful abandonment of the Ninnia North platform using the single lift technology in 2022. Moving to heavy oil, the 2022 annual production was approximately 67,700 barrels a day in 2020, an increase of 5% versus 2021, reflecting strong drilling results, increased development activity, offset by natural fuel declines. Annual operating costs were 2,184 per barrel versus the 2021 operating costs of 1,937 per barrel. Fourth quarter 2022 production was 72,161 barrels per day, primarily a result of strong drilling activity versus the Q4 2021 production of 64,866 barrels a day. Operating costs were 2,128 per barrel versus Q4 2021 Operating costs in 2021 of 1972 per barrel, again impacted by higher energy costs. In 2022, the company drilled the total of 127 net horizontal multi-lap heavy oil wells, including 52 net wells at Smith in the Clearwater. The company's Clearwater production average is approximately 13,000 buoys per day in Q4 2022, up approximately 9,100 buoys per day from the start of the year. A key component of our long-life, low-decline assets is our world-class Peloton Lake pool, where our leading-edge polymer flood continues to deliver significant value. The 2022 annual production was 50,333 barrels per day versus the 2021 average of 54,390 barrels per day, a 7% decline. The team continues to focus on operating costs, with the annual operating costs of $8.36 per barrel an increase from their 2021 offering costs of 6.75 per barrel, again, primarily a result of increased energy costs incurred during the year. The fourth quarter of 2022 production was approximately 48,000 barrels a day, down 9% from the fourth quarter of 2021 of approximately 53,000 barrels a day. This primarily is a reflection of the temporary injection reduction in Q4 2022 and natural fuel declines. In February, Injection rates have been fully restated, and the polymer flood is expected to return to its historical low decline rate of approximately 5% in the second half of 2023. Operating costs in Q4 2022 were $9.14 per barrel versus Q4 2021 of $6.78 per barrel. With our low decline, low operating costs, Pelican Lake continues to have excellent net maps. We had a good year in our thermal in situ operations in 2022 as we continue to leverage our continuous improvement culture and our expertise to deliver effective and efficient operations. In 2022, we had annual production of approximately 252,000 barrels a day versus 2021 levels of approximately 259,000 barrels a day. Thermal annual operating costs were $1,650 per barrel up from 2021 levels of $1,214 per barrel primarily as a result of increased energy costs. Q4 2022, production was strong at 253,188 barrels per day, down 4% from Q4 2020 levels, with operating costs of $17.20 per barrel, reflecting higher energy costs when compared to Q4 2021 of $13.08 per barrel. At Primrose, we finished drilling two CSS pads in Q4 2021, and we target to bring these pads on in early Q3 2023. At Kirby, the development to the four side D pads is on track. The first pad began steaming late December 2022 and targets to ramp up to full production capacity in Q3 2023, with the remaining three pads targeted for full ramp up in 2024. At Jackfish, the company is currently drilling a side D pad, which is targeted to beat steam in early Q4 2023, with the ramp-up of full production capacity in 2024. As well, we are continuing to progress our engineering and design of the commercial-scale solvent SAG-D development at Kirby North, and target to commence solvent injection in early 2024. At Canadian Naturals' world-class oil sands mining and upgrading assets, we had an annual production averaging 425,945 barrels a day of SUO, a decrease of 5% from 2021 levels, primarily as a result of unplanned downtime at both Scotford and Horizon during the year. We had annual 2022 operating costs averaging $26.04 per barrel versus 2021 operating costs of $20.91 per barrel. The company continues to focus on high reliability, cost control, as well as operational enhancements. At our oil sands mining operations, we had production of 428,784 in the fourth quarter of 2022, with a fourth quarter operating cost of $25.48 per barrel of SCO. Our quarterly production was impacted as a result of the October unplanned maintenance at both Scotford and Horizon, which we talked to in our November Q3 2022 results. Then, with the extreme cold weather in December, we had a had to complete multiple mining equipment repairs, resulting in the reduced rates at Horizon for both December 2022 and January 2023. This event is targeted to impact Q1 production by approximately 25,000 barrels a day. Production from the oil sands mining and upgrading assets averaged approximately 483,000 barrels a day in February 2023. The reliability enhancement project at Horizon continues to progress well and is now targeted to be 45 days ahead, increasing FCO production capacity earlier than originally budgeted. The impact of this project was approximately 5,000 barrels a day on an annual basis for 2023, increasing to approximately 14,000 barrels a day in 2025. As a result of the advancement of the reliability project and the reduced rates in Q1, And the thermal and oil sands mining and upgrading 2023 production guide remains unchanged. For the second quarter, both Scotford and Horizon will start their planned 2023 turnarounds. Scotford is targeted to start in April at reduced rates for 73 days, and Horizon is targeted for a full shutdown in May for 28 days. And we'll now turn it over to Trevor for a 2020-22 reserves review.