Canadian Natural Resources Limited

Good morning, everyone.

and thank you for joining Canadian Natural's second quarter 2023 earnings conference call. As always, 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 are Tim McKay, our President, and Mark Stainthorpe, our Chief Financial Officer. Tim will first speak to how Canadian Naturals targeting strong production in the second half of 2023 following the completion of planned turnarounds and through our strategic growth plan. Additionally, he'll touch on some highlights of our ESG achievements from our 2022 stewardship report to stakeholders that was released today, followed by specifics on our safe, reliable and world class operations. Mark will then summarize our financial results, our strong financial position, free cash flow generation and significant returns to shareholders so far this year. To close, Tim will summarize our call prior to opening up the line for questions. With that, I'll turn it over to you, Tim.

Good morning, everyone. In the second quarter, we achieved quarterly production of approximately 1.19 million BUEs per day, which included natural gas production at approximately 2.1 BCF per day, with liquids production at approximately 847,000 barrels a day, both reflecting the operational impacts of the wildfires in Western Canada third-party pipeline outage as well as planned turnaround activities in the quarter. The wildfires in Western Canada resulted in some assets being shut in at various times through the months of May and into July. There is no significant damage to our assets and essentially all the production impacted by the wildfires has now been restored and we continue to actively monitor the situation. We'd like to thank our field personnel, their families, as well as first responders, emergency response agencies, for their efforts over the past few months. As a result of strong execution on our thermal growth plan, Q3 2023 average thermal production is now targeted to be approximately 280,000 barrels a day, as well as Q4, which represents growth of approximately 30,000 barrels a day from Q4 2022 levels. As well, it's well-timed with Western Canadian select pricing improving both year to date and forecasted to remain strong for the remainder of 2023. Following the completion of the planned turnarounds at both our world-class oil sands mining and upgrading assets, production in July has been strong with a monthly average of approximately 513,000 barrels a day, capturing SCO pricing that continues to be priced at a premium to WTI. Our 2023 capital budget has increased by about $200 million compared to the original budget. In particular, the oil sands mining and upgrading has increased by approximately $130 million, largely reflecting increased scope and third-party costs relating to slaining activities to ensure safe and effective operations. The remaining, approximately $70 million, relates to the North American E&P and thermal operations as a result of increased non-op operations activities and increased work over activities on properties as well as some inflationary pressures. The 2020-23 targeted capital program is approximately $5.4 billion or approximately a 4% increase. Canadian Natural continues to be a leader on environmental, social and governance and has made it a priority to work collaboratively with industry and peers and governments to achieve meaningful GHG reductions in support of both Alberta and Canada's climate goals. Today, our 2022 Stewardship Report to Stakeholders was released, which highlights several of our ESG accomplishments, including top-tier safety performance, working together with 167 Indigenous businesses in which approximately $684 million in contracts were awarded in 2022. Additionally, we are an investment leader in R&D as we increased investment by 30% over 2021 levels, with over $587 million invested in technology development, deployment, focusing our reductions in reducing our environmental footprint, including greenhouse gas emissions and productivity improvements. I'll now do a brief overview of our assets, starting with natural gas. Overall, Q2 2023 natural gas production was approximately 2.1 BCF, which was comparable to Q2 2022 production. For North American operations, Q2 2023 production was slightly down at approximately 2.07 BCF versus the Q2 2022 production of 2.09 BCF, primarily a result of the wildfires, the third-party outage impact in the quarter by approximately 100 million cubic feet per day offset by our company's drill-to-fill strategy, adding low-cost, high-value, liquid-rich natural gas production volumes. During the quarter, the company drilled 21 net wells, of which 6.5 were brought on during the quarter, meeting targeted rates. Our North American Q2-23 gas operating cost was $1.35 an MCF, which is up 17% compared to Q2-2022 of $1.15, primarily due to higher service and power costs as well as the impact of lower production volumes resulting from the wildfires and the third-party outage. Our teams continue to focus on cost control and operational excellence. For North American light oil and NGLs, Q2 production was 102,553 barrels a day, down from Q2 2022 of 109,907 barrels a day, primarily as a result of the wildfires and third-party outages impacting liquids production by approximately 7,600 barrels a day for the quarter. Q2 2023 operating costs were 18.03, up from Q2 operating costs of 15.19, reflecting the impact of higher service and power costs and lower volumes due to the wildfires and third-party outage. Our international assets in Q2 had oil production of 26,520 barrels a day, which is comparable to Q2 2022 levels of 25,000 907 barrels a day. Our international assets continue to generate good cash flow and value to the company. Moving to heavy oil, production was 76,498 barrels a day in Q2 2023, up 15% from Q2 2022 of 66,521 barrels a day, primarily due to strong drilling results offsetting natural fuel declines. Operating costs in Q2 were at $20.07, down 12%, as compared to Q2 2022 operating costs of $22.86, primarily due to lower natural gas fuel costs. During the quarter, the company drilled 24 net heavy oil wells, of which 18 wells were multilaterals across our land base from Bonneville to Lloyd Minister and to the Clearwater area. as well as six-slot wells, which all results are untargeted to budgeted rates. A key component of our long-life low-decline assets is our world-class Pelican Lake pool, where the leading-edge polymer flood continues to deliver significant value. Q2 2023 production was 47,151 barrels a day, down 8% versus Q2 2022 average of 51,112 barrels a day, reflecting the natural decline nature of the property as well as the polymer injection rates that were reinstated in February 2023. The field is targeted to return to its historical decline rate of approximately 5% in the latter half of 2023. The team continues to focus on mitigating cost pressures with Q2 2023 operating costs of $8.55 per barrel, an increase from our Q2 2022 operating costs of $7.99 per barrel, reflecting higher service and power costs, as well as lower production volumes. With our low decline and very low operating costs, Pelican Lake continues to have excellent netbacks. In our thermal in situ areas in Q2 2023, we continue to leverage our continuous improvement culture, our expertise to deliver effective and efficient operations. Q2 2022 production was 238,941 barrels a day, down from Q2 2022 production of 249,938 barrels a day, as forecasted as a result of the planned turnaround at Primrose. Q2 operating costs were $14.59 per barrel, down approximately $4 when compared to Q2 2022 operating costs of $18.93, largely a result of lower natural gas costs. I'll now update our thermal growth class. At Primrose, the company is targeting to grow production by approximately 25,000 barrels a day, primarily from its two new CCS pads, CSS pads drilled in 2022. The production from these new pads, which targets strong quarterly production of approximately 100,000 barrels a day for this area in the third and fourth quarter. At Kirby, the company is targeting to grow production by approximately 15,000 barrels a day from Q4 2022 levels to approximately 65,000 barrels a day in Q4 2023, as the company progressed the development of the four SAGD pads in 2023. The three remaining pads are targeted to ramp up to full production capacity over the first nine months of 2024 at a pace of one pad per quarter. At Jackfish, production has been very strong, averaging approximately 113,000 barrels a day with minimum growth capitals since acquiring the asset, representing its long-life, low-decline nature. Production from these new pads are targeted to ramp up to their full production capacities in Q3 2024 and Q4 of 2024, respectively, supporting continued high utilization rates at Jackfish. Thermal in situ production is targeted to increase in the second half of 2023, averaging approximately 280,000 barrels a day. And with the stripped WCS differentials, it'll add incremental cash flow. In the company's world-class oil sands mining and upgrading assets, We had Q2 production averaging 355,246 barrels a day of SCO. As previously announced, the planned turnaround activities at the non-operated Scotford Upgrader and Horizon, as well as Horizon, were completed with Q2 operating costs that were $31.28 per barrel. Following the completion of the planned turnarounds at our world-class mining and asset upgrading, production in July has been very strong. with a monthly average of approximately 513,000 barrels a day, capturing strong SCO pricing. At Horizon, during the planned turnaround and as part of the reliability enhancement project, the company completed two tie-in of two furnaces. In August, both furnaces are targeted to be operational, increasing SCO production capacity by approximately 5,000 barrels a day, which is included in our company's 2023 production guidance. The reliability enhancement project is targeted to add approximately 14,000 barrels a day of additional SCO capacity in 2025 as a result of shifting the maintenance schedule from once per year to once every two years, reducing downtime for maintenance activities and increasing overall reliability at Horizon. I'll now turn it over to Mark for a financial review.