Canadian Natural Resources Limited

Good morning. We would like to welcome everyone to Canadian Naturals 2024 fourth quarter and year-end 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 6, 2025, 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, and good morning, everyone. Thank you this morning for joining Canadian Natural's 2024 fourth quarter and year-end 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. Also, I would suggest that you review our advisory section in our financial statements that includes comments on non-GAAP disclosures. Speaking on today's call will be Scott Stealth, our president, Robin Zabeck, our Chief Operating Officer of E&P, and Mark Stainthorpe, our Chief Financial Officer. Additionally in the room with us this morning is Jay Frock, CEO of OilSense, and Victor Durrell, Senior Vice President of Finance and Principal Accounting Officer. Scott will first provide some examples of our top-tier performance and strong execution over recent years before getting into the numerous operational records achieved in 2024. Next, Robin will provide highlights of our growing high-value reserves that compete on a global scale. Mark will then summarize our financial results that includes robust adjusted funds flow, earnings, and returns to shareholders. To close, Scott will summarize prior to opening up the call for questions. With that, over to you, Scott.

Thank you, Lance, and good morning, everyone. Before I get into our 2024 results, I'd like to run through some key factors that highlight our top tier performance over the past three years in execution, effective and efficient operations, returns to shareholders, resource value growth and opportunistic acquisitions. Our unique and diverse asset base provides us with a competitive advantage as we have ample organic growth opportunities and can allocate capital to the highest return projects without being reliant on any one commodity. Our strong culture of continuous improvement is about doing it right and it is driven by teams in the organization that believe ownership and accountability deliver consistently strong results. All employees are shareholders, and we firmly see the value in having our employees as owners. And importantly, we've been able to keep the team together, which is important for our long-term sustainability and business continuity. Over the past three years, we have achieved the following successes. Absolute production growth of approximately 82,100 BOEs per day the vast majority of which was liquids growth. We have delivered annual production per share CAGR of 7%. We improved liquids margin significantly by reducing operating costs by more than $3 per barrel, or 15%, equating to an incremental margin of approximately $1.2 billion based on 2024 production. We returned over $11 per share to shareholders through dividends and share repurchases. We increased our annualized quarterly dividend by 59% to $2.25 per share from $1.42 per share, and the Board has subsequently increased the dividend by another 4%. Our share count reduced by approximately 234,000 shares, or 11% in closest of shares issued upon exercise of stock options. Adding more value at AOSP through the acquisition that closed in Q4 of 24 and a swap transaction targeted to close by the end of Q2 this year, consolidating our working interest in the Albion mines to 100%. In the Albion mines, these transactions will add approximately 93,500 barrels per day of long-life, zero-decline production to our world-class oil sands mining and upgrading assets. Additionally, we acquired Chevron's 70% operator working interest of light crude oil and liquid-rich assets in the Duvernay. These assets are targeted to average approximately 60,000 VOEs per day in 2025 and provide the opportunity for meaningful near-term growth while contributing additional free cash flow. Expanding even further on AOSP and going back to 2017, we unlocked significant long-term values since we first acquired an interest in this world-class asset. We've increased production and reduced operating costs through process improvements and optimization projects that improved reliability and increased utilization. Since 2017, we've increased gross production at Albion Mines by 30% or over 70,000 barrels per day. Upgrader capacity was also increased to match the increased production from the mines. We've decreased AOSP per unit operating costs by more than 30% or approximately $10 per barrel. This equates to an incremental margin of approximately $800 million based on 2024 production. With 100% working interest in the mines, once the swap transaction closes, we are targeted to unlock further value with our effective and efficient operations and relentless continuous improvement culture. Adding even more value to our world-class oil sands mining and upgrading assets, when you combine that increased ownership interest with the recently completed debottlenecking and reliability projects, our total oil sands mining production capacity increases to approximately 592,000 barrels per day. And further to that, when you combine our top-tier conventional crude oil and liquid-rich natural gas assets, with our leading oil sands mining and upgrading assets, you get a significant and sustainable free cash flow and the ability to organically grow production, if it makes sense to you so. I will now run through our strong 2024 operational results and highlights. We hit several new records across our assets in 2024, including record annual total production of approximately 1.36 million BOEs per day, including record liquids production of over 1 million barrels per day. Record annual oil sands mining and upgrading production of 472,245 barrels per day and record quarterly production of 534,631 barrels per day. These record production rates resulted in higher upgrader utilization of 99% in 2024, including planned turnarounds and 105% utilization in the fourth quarter. Our low oil sands mining and upgraded operating costs are industry leading, averaging $22.88 per barrel in 2024 and $20.97 per barrel in the fourth quarter. Our oil sands mining and upgrading assets continue to achieve strong production and high utilization in January 2025 and February 2025 averaging on a gross basis approximately 634,000 barrels per day over the two months. February 25 was the highest monthly gross production in our history at approximately 640,000 barrels per day as we focused on continuous improvement initiatives combined with the strong performance from the Reliability Enhancement Project at Horizon and the De-Bottleneck Project at Scotford. Additionally, further value has been unlocked from piping modifications completed during the recent e-bottleneck project at Scottford Upgrader. These modifications unlock approximately 5,000 barrels per day of annual gross production from the Albion Mines, resulting in higher utilization during planned Upgrader turnarounds. This increased zero-declined production will continue to benefit Canadian Naturals for decades, including our increased ownership in the Albion Mines. In our thermal in situ operations, we've achieved record production in 2024, averaging just over 271,000 barrels per day, a 3% increase over 2023, which was driven by our capital efficient thermal pad development program. 2024 thermal in situ operating costs were strong, averaging 11.04 per barrel, which is down 16% compared to 2023, primarily reflecting lower energy costs and higher production volumes. We have significant available processing capacity of approximately 70,000 barrels per day in our thermal operations. We continue to utilize this available capacity through our strong execution on our drill-to-fill pad additions and have been able to bring these pads on production ahead of schedule. For example, at Wolf Lake, we brought a SAGD pad on production ahead of schedule in Q4 of 24, which was originally targeted for Q1 of 25. At Primrose, We brought a CSS pad on production ahead of schedule in Q4 of 24, originally targeted for Q2 of 25. A second CSS pad had been drilled and is targeted to come on production ahead of schedule in late Q1 of 25, originally budgeted for the second quarter of 2025. At Jackfish, we drilled a SEGD pad in Q4 of 24 with production targeted to come on in Q3 of 25. At Pike, we are drilling two SAGD pads in the first half of 2025, which will be tied into the existing jackfish facilities. These two pads are targeted to come on production in 2026 and keep the jackfish plants at full capacity. At Kirby, we are currently drilling a SAGD pad targeted to come on production in Q4 of 2025, with a second SAGD pad targeted to be drilled in Q4 of 2025 and come on production in Q4 of 2026. On the conventional side of the business, primary heavy oil production averaged approximately 79,100 barrels per day, a 2% increase over 2023, reflecting strong results from multilateral wells on our extensive heavy oil land base. We drilled 121 net horizontal multilateral primary heavy oil wells in 2024, compared to 104 in 2023. Multilateral wells combine increased reservoir capture and higher production with reduced servicing requirements, which lowers operating costs. As we shift more of our primary heavy oil assets to multilateral development, we are seeing overall operating costs coming down as these wells are more efficient and require less servicing activity. In 2024, primary heavy oil operating costs averaged $18.11 per barrel down 9% from 2023. We continue to optimize well design and length in our highly successful multilateral program, achieving top tier average initial peak rates of approximately 250 barrels per day per well, which is 43% higher than the budgeted initial peak rate of 175 barrels per day per well, and a further 9% higher than a previously disclosed rate of 230 barrels per day. North American light crude oil and NGL production averaged approximately 114,400 barrels per day in 2024, an increase of 5% compared to 2023. Half of this increase is driven by strong organic growth and liquid-rich natural gas, with the remainder related to recently acquired DuVernay assets. We achieved a 17% reduction in operating costs on light crude oil and NGLs, averaging $13.55 per barrel in 2024 compared to North American natural gas production averaged 2.14 BCF in 2024, which is comparable to 2023. In 2024, we remained focused on liquid rich natural gas activity in the Montney and Deep Basin, while certain dry natural gas activity in 2024 was deferred due to lower natural gas prices. Operating costs in our North American natural gas averaged $1.19 per MCF in 2024, 6% lower than 2023. Complementing the opportunistic acquisitions completed in 2024, as well as those announced but not yet closed in 2025, we have plenty of organic growth opportunities within our large, diverse asset base. We will leverage this expanded portfolio of organic growth opportunities to continue creating long-term shareholder value into the future while maintaining the flexibility to manage the pace of these development opportunities to deliver strong returns. We have a long track record of consistently delivering strong industry-leading results driven by our safe, reliable operations and relentless focus on continuous improvement, which maximizes long-term shareholder value. Now I will turn it over to Robin to speak to our 2024 year-end reserves.

Thank you, Scott, and good morning, everyone. I'll start by pointing out that as in previous years, 100% of Canadian Naturals reserves are externally evaluated and reviewed by independent qualified reserve evaluators. Our 2024 reserves disclosure is presented in accordance with Canadian reporting requirements using forecast prices and escalated costs on a company working interest before royalties basis. As you just heard from Scott, Canadian Natural had a very strong year. One of the many places in which that is evident are the company's reserves. For December 31st, 2024, total proved reserves are $15.2 billion BOE, and total proved plus probable reserves are $20.1 billion BOE. This is a 9% increase in both proved and proved plus probable reserves compared to December 2023. Canadian Natural replaced 2024 production by 365% on a total prove basis and 422% on a total prove plus probable basis. The accretive acquisition of Chevron's Alberta assets in December 2024 added material reserves and NPV growth. And as you heard from Scott, these assets will continue to drive value for decades. It is also notable that even excluding the contribution of acquisitions in 2024, the company's organic reserves replacement would still have been about 118% of production in total proved and about 128% of production in total proved plus probable. Highlighting one of the key attributes that differentiate Canadian Naturals assets, approximately 74% of total proved reserves are from long life, low decline or zero decline assets. resulting in a total proved reserve life index of 33 years and a total proved plus probable reserve life index of 44 years. Notably, at year end 2024, approximately 50% of the company's total proved reserves are high value SEO with zero decline and a total proved reserve life index of 43 years. In 2024, the strength of Canadian Naturals assets and results also continue to be reflected in our strong finding and development costs. Corporate finding, development and acquisition costs, excluding changes in future development costs, are $7.82 per BOE for total approved reserves and $6.76 per BOE for total approved plus probable reserves. Including changes in future development costs, Corporate FD&A is $13.56 per BOE for total proved and $12.60 per BOE for total proved plus probable. The net present value of future net revenue before income tax using a 10% discount rate and including the full company ARO is approximately $170 billion for total proved reserves and approximately $206 billion for total proved plus probable reserves. This equates to net asset values of $74.83 per share for total approved and $91.72 per share for total approved plus probable. In summary, our 2024 reserves reflect the strength and depth of Canadian Naturals asset base, the predictability of the company's long life, low decline reserves, the value of accretive acquisitions completed in 2024, and our proven ability to deliver organic reserves and value growth. I will hand over to Mark now for financial highlights.

Thanks, Robin, and good morning, everyone. In 2024, we delivered strong financial results on the back of the solid operational performance Scott discussed, which are highlighted by annual adjusted funds flow of $14.9 billion, including Q4-24 adjusted funds flow of $4.2 billion. Our capital program for 2024 was approximately $100 million under budget of $5.3 billion, resulting in significant free cash flow in the year, where we returned approximately $7.1 billion to shareholders in 2024, inclusive of our sustainable and growing dividend and share repurchases. We increased our quarterly dividend twice in 2024 and subsequent to year end, given our strong financial position and significant and sustainable free cash flow generation, Our Board of Directors approved a further 4% increase to our quarterly dividend to $0.5875 per common share, or $2.35 per common share annualized, with 2025 being the 25th consecutive year of dividend increases by Canadian Natural, with a compound annual growth rate of 21% over that time. After the recent acquisitions, our financial position remains strong, and with the additional free cash flow generation, our US dollar WTI break even remains top tier in the low to mid 40 WTI per barrel. With strong balance sheet metrics, including debt to EBITDA at 1.1 times and debt to book capital at 32% at the end of 2024. Liquidity remains strong and including undrawn revolving bank facilities and cash, liquidity at the end of the quarter was approximately 4.7 billion. Our industry leading cost structure, Predictable long life, low decline assets and reserve base combined with our relentless commitment to continuous improvement continues to drive significant value at Canadian Natural. This is all a result of our focused and dedicated teams across our business who are aligned with shareholders and have the drive to do things right every day. This is a unique competitive advantage and facilitates driving strong, long-term returns on capital. With that, I'll turn it back to you, Scott, for some final comments.

Thank you, Mark. In summary, our consistent and reliable results are underpinned by safe and reliable operations. Our commitment to continuous improvement is driven by a strong team culture in all areas of our company that focus on improving our cost, strong execution of organic growth opportunities, and increasing value to shareholders. We consistently deliver top-tier operational and financial results, which is unique and sustainable. clearly demonstrating our ability to both economically grow and deliver returns to our shareholders by balancing across our four pillars of capital allocation. I'd like to take this opportunity to thank Mark for all of his service as our CFO and contributions to the Management Committee. I'd also like to congratulate Victor in his new role, new position as our CFO. And with that, I will turn it over for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. And if you are using a speakerphone, please lift the handset before pressing any keys. The first question comes from Greg Pardee at RBC Capital Markets. Please go ahead.

Yeah, thanks. Good morning. Thanks for the rundown. And indeed, Mark, congrats on your new role. It's been great to work with you. You'll probably get more sleep now on weekends. And welcome, Victor. A couple of questions on my end. I guess, Scott, you talked about the Shell swap and then the Chevron deal and so forth. What do those two transactions mean on a combined basis for your shareholder returns, but also conceivably organic growth at AOSP down the road?

Thanks, Greg. So yeah, those two acquisitions, you know, I talked about adding 93,000 barrels a day of production through those acquisitions. And obviously that will be a significant contribution to our overall free cash flow, which will formulate itself into our shareholder payment programs proportionally. So there's significant value. Those are high dollar value barrels as well. If you look at organic growth opportunities, Greg, I would point out that there is already existing approvals in place for Jack Pine mine expansion in the order of 100,000 barrels a day. And I'd also point out that we have license capacity availability in the existing JPM and MRM licenses as well. So we have the opportunity for good, strong growth opportunities in the Albion mine. I think it'll take lots of work on egress opportunities in order to ensure that those barrels can move to market. There's certainly the opportunities there and very well laid out in terms of the reserve life that we can get out of that project with no decline. There's a lot of overall value wrapped up in that.

Okay, thanks for that. Maybe I'll just switch gears. In your opening remarks, you talked about a number of the thermal developments where you're ahead of schedule. Is this intentional? Is there something bigger going on with the series of projects you're laying out?

Yeah, I think, Greg, what's happened over time, and folks shouldn't be overly surprised at times when we're able to exceed our expectations when we sanction a project to get it on production, such as these SAGD and CSS paths. And that's because we employ our continuous improvement. So every time we build a path, we take the learnings from that, things that we could do better, and we apply it to the next path. So, you know, arguably we're getting caught up on some of that here, but certainly it's nothing ordinary from what we normally do. It's just part of continuous improvement.

Okay, got it. Thanks very much.

Thanks, Greg.

Thank you. The next question comes from Dennis Fong at CIBC. Please go ahead.

Hi, good morning, everyone. And, again, I would like to echo the congratulations to Mark on your new role. My first question maybe falls along the line of Greg's question there, just around your oil-fed mining operations. So, I mean, you guys have shown, obviously, a track record of really optimizing production and kind of throwing in a little kind of small, we'll call it de-bottlenecking or just even driving better kind of throughput, frankly, since you started owning this asset and operating it as well. Eventually, in a situation where, say, you are able to optimize the assets in such a way that exceeds Scotford upgrade or capacity, what are maybe some of your options that you can look at doing, and what are the synergies in that nearby asset structure that you can maybe lean on to kind of gain incremental margin?

Yeah, good question, Dennis. In terms of the AOSP mines, and relative to the Scotford production, the next step to get higher volumes would most likely involve something similar to what we've talked about before over at Horizon, which is a paraffinic frost treatment opportunity. So that's where you would get bitumen barrels. You would move to market, call it around the Scotford Upgrader. But obviously, number one, Ensure the upgrader is full, kept full at all times. And secondly, it would be providing an expansion opportunity to bring on additional bitumen barrels and move those to market.

Great. Appreciate that incremental color. And then maybe shifting gears towards the thermal side, in your press release you've talked about 70,000 barrels of potential oil processing unused capacity, which really helps that drill-to-fill program. Can you talk towards what you would need to do to further unlock that 70,000 potential barrels a day of the oil processing side? Presumably, it's about liberating steam capacity and then using that a little bit more efficiency, theoretically, I presume, through Wolf Lake and Primrose.

Yeah, I think you got it bang on, Dennis. It's primarily in the Primrose-Wolf Lake area. The SAGD assets are primarily full certainly jackfishes. And so yeah, I think if you just over time, with steam capacity availability, we'll continue to do our pad ads. And, you know, we're also working and continue to work on, you know, the implementation of solvents in those areas. And so I think I talked about this on the last call, Dennis, with you that Primarily, we'll be looking to do pad-add opportunities in primrose, probably before we would do the solvent injection. But they certainly go hand-in-hand, and the teams are working on both those opportunities. But to get to your point, the steam availability is the key factor there, but we would plan on having pad-adds to ensure we're maximizing our capacity available from our steam plants.

Great. Really appreciate that color, Scott. I'll turn it back. Thanks.

Thank you. The next question comes from Manav Gupta at UPS Financial. Please go ahead.

Good morning. You guys have a very informed view of the markets out there. I'm just trying to understand how are we thinking about the echo prices next 18 to 24 months given some of the LNG projects which are expected to ramp up over in Canada?

Yeah, it's a good question. You know, I think you see an uptick on the pricing going into 2026, obviously on the back of getting LNG Canada online. And, you know, I think that those opportunities will, you know, continue to allow us to move gas out of the basin here. Our focus is going to primarily be on liquids rich, Gassy areas such as the mountain and Duvernay. But you know, certainly looks like to me that the market is somewhat. I would say conservative potentially on the pricing, but again, some of that's going to depend on how quickly that energy capacity can be backfilled, but. I think those are some of the driving factors there.

And a quick comment I also wanted. Over the last week, I think Enbridge talked about increasing mainline capacity by about like 150,000 barrels in the near term and over longer term, I think they allocated 2 billion in capital. So they're looking to increase it to like 300,000 barrels. So I'm just trying to understand in your view, is this incremental capacity needed? Do you think the basin will fill up at some point, if you could comment around that?

Well, you know, it's a good question, and I would say yes, over the long term it will. Primarily, I'd suggest that the growth opportunities, or at least the most significant growth opportunities, you would look towards the oil sands to make the biggest contributions. We're certainly well positioned from that. In our mining operations, we've talked about Verizon in the past, and We're also talking about the OSP mines as well in terms of production growth opportunities here. So we have additional capacity in our thermal operations. So other operators do have additional opportunities as well. So I think all combined, that capacity will be utilized in the long term.

Thank you so much.

Thank you. The next question comes from Patrick Orwork at ATP Capital Markets. Please go ahead.

Good morning, guys, and congratulations to Mark on the new role as well. I guess just from the perspective of the capital structure here with the net debt where it is, the $15 billion and $12 billion targets, just wondering about your thoughts in terms of flexing the balance sheet here in the M&A markets or acquisition market if we do continue to see some volatility on the commodities versus the impetus to get to those enhanced shareholder returns right now?

Good question, Patrick. I think that we're quite happy with our assets and in terms of M&A activity, we'll just see how things unfold. The fluctuations in pricing as a result of all these discussions on tariffs and so forth, it's going to take some time to sort some of that out, but we're quite happy. If you look at our reserve base, we have ample opportunity to grow organically. We've always liked acquisitions that bring that additional value and are creative to the company. As in the past, for the past 35 years, that's been one of our strengths, organic growth and taking advantage of opportunity acquisitions. And, you know, unless there's something that changes significantly in the environment going forward, I don't see our strategy changing.

Okay, great. And then maybe just on the operational side, looking through some of the numbers here, particular to the commercial solvent project at Kirby North. I noticed that the solvent recoveries came down very slightly in the quarter from 85 to 80%. Just wondering how you anticipate this to trend through time. Is there any seasonality there? And then what the view is in terms of potential proliferation of this technology now through the rest of the portfolio now that you've had it online for a while?

Yeah, Patrick, I don't think I'd read anything too much into the change in terms of the recovery. It has to do with some of the nuances just with certain wells on stream or certain wells off stream for servicing or enhancements that they're working on individual wells with. So the trajectory is what we'd anticipated in terms of the recoveries and the SOR reductions. We'd expect to see, get towards, what we would think would be a solid, stable state in and around July of August of this year. And then once we've reached that state, you know, we'll be able to certainly have access to all the information, all the data that's been gathered over the past year, and just determine exactly how we want to move forward from here. Now, I will say that in parallel, our teams are looking at, you know, expanding the opportunity further. into areas such as Pike as we move forward. Those opportunities would be a few years down the road, say into 27 and 28, where we would look at doing the next implementation of a project such as that. But we are seeing good positive results. We like the opportunity to be able to bring reserves forward. and there's lots of reserves that we have intersect the operations. So it provides that significant opportunity to bring those reserves forward based on our capital allocation program. So it's another good tool in our toolbox.

Okay. Thank you very much.

Thank you. The next question comes from Manal Halshaw at TD Securities. Please go ahead.

Thanks, and good morning, everyone. Can we begin by maybe having you elaborate on the pipeline modification that allowed you to add 5,000 barrels per day of capacity at Albion? Like, what exactly got done there? What was the capital efficiency? And then, higher level, what other near-term bottlenecking opportunities are you seeing at the AOSP or Horizon that you're prepared to flag today? Thank you.

Yeah, good question. Quite simply, the work that they've done there is just looking at de-bottlenecking some of the piping that allowed the transfer between the two different upgraders there. There was pumps that the teams had increased the sizing on, just modification to certain sizes of piping. Really, it was just about ensuring that the teams had the flows well understood, the engineering part of it understood. Not overly complex, but still stepped through it very methodically, making sure that we were making the right moves there. I don't have a capital efficiency number for you off the top of my head, but the key to this is they're low capital dollars overall. And if you look at it, that's 5,000 barrels a day for 50 years. Additional opportunities, you know, we'll continue to work on efficiencies and finding tweaks that we can do or creep capacity in both the Horizon and the Albion assets. You saw we had very strong production in the first quarter, started to ramp up strongly in the fourth quarter as well. And I think what you're seeing that is a result of all the good work that our teams have done on implementing the reliability project enhancement and the de-bottom-legged project at Scotford. The teams did very good work on that, and the results of the work that they did on those projects are turning out to be better than we actually anticipated. So we're getting strong run rates. And we're getting more production through the facility than we originally had the engineering design for. So that's a very, very good positive from a go-forward basis here.

Terrific. And then my second question is on the North Sea. We've seen a pretty big shift in focus back to energy security in the UK and Europe more generally. And I think there's certainly a growing view that European domestic supply growth becomes a much bigger priority looking forward. You have a very long history in the North Sea. I think everybody understands that. It's a basin with unconstrained market egress. And so my question is, is there any scenario where you would consider building up your position again? Or is the most likely scenario still a slow wind down of those assets?

Yeah, it's a good question. And, you know, I think in what we know today and where we're at with the development of the reserves there, we would continue to unwind and abandon the facilities. That development in the North Sea has, you know, the downward direction in the production is not something new. As you know, there's been, you know, significant, I would say, political regime to move away from oil and gas. And to your point, you know, that that's probably going to change. I think for our operations in the North Sea, it's probably those decisions were made several years ago. Potentially, had the fiscal regime been different five, ten years ago, it might be different for us today. But as we stand today, we're not likely to invest any more capital in those areas.

Thanks, Scott. I'll turn it back.

Thank you. The next question comes from Roger Reed at Wells Fargo. Please go ahead.

Roger Reed Yes, thanks. Good morning. A lot of talk on here about, you know, incremental investments growth, both things you've done and things you may do. I'm just curious how you look at, from either a return standpoint or what your break-evens are as you think about these investments. you know, where you've been able to de-bottleneck, obviously it's going to be a very low break-even. But if you were doing something more, you know, actually putting another hole in the ground and looking to produce, how does that compare as you look across the various ops?

So, Roger, are you referring to like a larger project? Is that what you mean by your commentary?

No, I would actually keep it within the things you've discussed so far. So not trying to go you know, do something significant, but for the smaller things you've been doing, you know, how should we think about that from, you know, call it a $60, $65 oil world, however, you know, you want to define that, what it's really delivering in terms of bottom line impacts.

Okay, I got you. So really, those types of projects, like the ones we've done in the past, where we get these incremental barrels on a year-over-year basis, those are the first projects that you want to look at doing because they're going to have the best capital efficiencies and you already have the infrastructure essentially in place. So you don't change anything from an operating cost perspective. In terms of adding cost, it actually helps your operating cost because most of your costs there are already on a fixed basis, Roger. So all these areas where we're in, especially in the mines where we're adding incremental barrels, or in fact, any area in the company where we're adding incremental barrels through facilities, they're great projects with the best returns because the infrastructure is mostly built.

Yeah, well, I guess I was just curious. I mean, how do you look at them from a I'm just trying to think about what makes sense here in terms of investment and, you know, call it a flattish oil outlook. It seems like you've got these opportunities. I mean, are they the equivalent to $30 break-evens or $40 or $50? I mean, just how do you kind of scale that up?

Yeah, yeah. They would make sense at low dollar break-even, like low dollar cost, Roger. I think I follow what you're getting at. But, you know, again, because they're they have some of the best capital efficiencies, you would always want to do those first, Roger.

All right, I'll leave it there.

Basically, any investment environment. Thank you.

Thank you. The next question comes from John Moyle at J.P. Morgan. Please go ahead.

Hi, good morning. Thanks for taking my question. So my first one's on the mines, and I think you addressed this a little bit, but They ran at very strong rates in January, February, in the context of your now-raised capacity. There's no turnaround at Horizon this year. You do have one at AOSP and 2Q. But outside of the scope of turnarounds and, of course, excluding the impact of the close of the swap, can these types of levels be sustained, or is there anything seasonal or more kind of non-repeatable in those early results?

Yeah, they're not seasonal, you know, and I think you just have to look at it. These two months, very strong rates. The rates increased from the fourth quarter coming into the first quarter, and that is because we've optimized the projects that I talked about at both Scottford and Horizon. And so those are definitely strong rates. There was essentially no unplanned downtime. to speak of in the past two months. We normally do budget for unplanned downtime on any given month throughout the entire year. So I would expect that while on the one hand, our teams are going to focus on ensuring they're optimizing the production opportunities as much as they possibly can. We still understand that from time to time, there could be some unplanned downtime due to an unforeseen event. That's budgeted. And so, you know, that's likely to happen. I just, you know, the good news is I think I look at it as a positive. The rates are stronger than we would have anticipated. So even with unplanned downtime going forward, we're still going to see some very strong rates coming out of both those mines.

Great. Thank you. And then my next question is on the Chevron acquisition. With that deal now closed, do you have a better sense or maybe a better sense that you're willing to share of the cash that's available from tax pools? And is there a good way for us to think about how that could impact your cash taxes in 25?

Hi, it's Mark. You know, we don't guide to sort of tax pools particularly on that. I know I've discussed it before when you look at you know, the PP&E values of the acquisition. We do generate, you know, tax pools. And you saw that in Q4 where we're able to claim a full year of tax depreciation in that one quarter. So that'll be on a go forward, but you'll see it over the full year. So that's just the difference, and that's the impact of the taxes you see in Q4.

Thank you.

Thank you. The next question comes from Neil Mehta at Goldman Sachs. Please go ahead.

Thanks, team. So my first question is just on the macro. Obviously, there's a lot of moving pieces around tariffs, around WCS. In the 25 presentation, you guys talked about using a $14 planning assumption for WTI-WCS, which I guess was the strip at the time. And Just has anything changed in that worldview? How are you thinking about the impacts of tariffs to the extent that there is some durability to them? And any perspectives on how much is absorbed by the producer versus the refiner? So just a lot of moving pieces around the differential, but your perspective on the market would be great.

Yeah, good question, Neil. I think what you're seeing in the market today is We've seen WCS to Houston change over the past month here in and around that $4 range. It's narrowed into around $2 to $3, so we'll call it $2.50. It suggests that maybe some of the cost of the tariffs would be passed on through to the consumer in the U.S. On the WCS hardesty, WTI, WCS, and Hardesty side. We've seen fluctuations. I saw this morning, April, in and around some sales at $1,250. Over the last couple of days, they're upwards of $1,450. So there's some fluctuation in Hardesty on that. So still very fluid in terms of how this is all going to work out. It is our view that certainly the U.S. consumer is going to end up having to absorb the cost of the tariffs. To what degree, we're not exactly sure how the market's going to play out. It could be on a shared basis. It could be leaning more towards the U.S. consumer paying more for it than the producer would. We'll see how that all balances out, but certainly in our view, we believe it's going to be not all placed back on the producer.

Yeah. Yeah. That's helpful. And then, you know, the offset to that could be currency, right? Cause the cat is now out to a dollar 44. So, so just love your perspective on how that can provide an offset. And as you think about as you think about in general, where, which inning you are in terms of driving your operating costs per barrel lower and, how much more is there to go as we work our way through the year?

Yep, another good question. I think we'll see where the dollar goes. It's difficult to make a comment at this time. There's a lot of political activity driving that. So, you know, I think we'll probably just not comment on that. Sorry, the second part of your question was, can you repeat that?

was just on OPEX per barrel, how much can you drive that lower with and without currency, right?

Yeah, well, you know, I think that one thing you need to remember about Canadian Natural is we already have a very low cost structure. It's one of the key differentiators relative to our peers. We've got a low break-even, low operating costs, low maintenance capital, and significant capital flexibility in our 2025 budget. And so I think that bodes very well. And then you look at it and you say, okay, well, half of our production essentially is SCO production. So, you know, it's taking pricing, you know, plus or minus WTI. So there's another strength for Canadian natural. You know, and so if you look at how our barrels are marketed and, you Most of our barrels are marketed here in Canada, with the exception of 87,500 barrels a day that we carry down Flanagan and Keystone, and then of course the 169,000 barrels per day that we move to the West Coast, which is basically isolated from the tariff. Most of our barrels are pretty much sold here in Alberta as well. Yes, our barrels are dependent on WCS pricing, certainly. But the underlying or the underpinning factor for Canadian Natural is our low-cost structure. And I just want to make sure that that message is well understood. We get superior netbacks, and that low-cost structure has helped us through the previous times, such as COVID. We were able to work with our vendors when oil pricing dipped right down into the low single digits. Certainly, the cost of services dropped at that time. And so, we were able to work with our vendors for a short period of time to work through that. We came out of that very strong. But again, it's on the back of the fact that we have a low cost and very sustainable operating cost platform across all of our assets, both on the natural gas side and especially on the oil sands mining side.

Yeah, that's very clear. Thanks, and congrats again to Mark and Victor.

Thank you. Thank you. Thank you. The next question comes from Eric Buslinger at UER. Please go ahead.

Hi, gentlemen. Great quarter and results into this first part of the year. Just following up on the Jack Pine potential expansion, 100,000 barrels a day. One is, what's the limiting factor in sanctioning that tomorrow? And two, is that included in your base reserves for 2024?

So in terms of the... you know, the decision to go ahead with something like that. The great thing about us is we have ample opportunity for organic growth. The challenging thing in Canada is getting approval for large projects. The jackfish, or sorry, the jack pine mine expansion already has that approval in place. So we could build that out over time here. Then our capital allocation, I think it's a great tool to have in our tool chest here. When we do the project, if and when we do the project, we'll talk more about that over time, but certainly we're in an advantageous position here to be able to do a project of magnitude of that size. So all depends on our outlook for pricing, for egress, for carbon capture. There's a number of factors that are going to go into making that decision because they are, as you know, you build 100 or 150,000 barrel a project in the mine, and it's going to run for 40 to 50 years. Great. Thank you.

Thank you. We have no further questions. I will turn the call back over to management for closing comments.

Thank you, operator, and thanks, everyone, for joining us this morning. If you have any questions, please give us a call. Thanks, and have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.