Canadian Natural Resources Limited

Good morning. We would like to welcome everyone to Canadian Naturals 2025 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 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.

Lance Kasson Thank you, Operator. Good morning. Thanks for joining Canadian Natural's 2025 Third Quarter Earnings Conference Call. As always, 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 review the advisory section in our financial statements that includes comments on non-GAAP disclosure. Speaking on today's call will be Scott Stealth, our President, and Victor Durrell, our Chief Financial Officer. Additionally in the room with us this morning are Robin Zabeck, CEO of E&P, and Jay Frock, CEO of OilSams. Scott will begin by running through our strong operational performance that includes numerous production records in the quarter and our leading operating costs. Victor will then summarize our strong financial results and our significant return to shareholders so far this year. To close, Scott will summarize prior to opening the line for questions. With that, over to you, Scott.

Thank you, Lance, and good morning, everyone. Canadian Natural retrieved record quarterly corporate production during the quarter, both in liquids and natural gas production. This is the second time this year where we have achieved quarterly production records on strong performance by our teams as we executed both organic growth and accretive acquisitions. Our production totals approximately 1.62 million BOEs per day, which, as mentioned, includes records for both liquids and natural gas at approximately 1.18 million barrels per day and approximately 2.7 BCF per day, respectively. The increase in production from Q3 2024 levels is very significant, totaling approximately 257,000 BOEs per day or up 19%. Our world-class oil sands mining and upgrading assets continue to achieve strong operational performance as Q3 2025 production averaged approximately 581,000 barrels of SCO with strong utilization of 104% and industry-leading operating costs of approximately $21 per barrel. On November 1st, we closed the AOSP swap with Shell Canada Limited. Canadian Natural now owns and operates 100% of the Albion oil sands mines and associated reserves and retains a non-operated 80% working interest in the Scotford Upgrader and Quest facilities. This transaction adds approximately 31,000 barrels per day of annual zero-decline bitumen production to our portfolio, providing additional cash flow driving long-term value creation for our shareholders. This swap also enhances our ability to integrate equipment and services across our mining operations, unlocking additional value through continuous improvement initiatives. Subsequent to the close of the swap transaction, we increased our 2025 corporate production guidance range to 1,560,000 BOEs per day, 1,580,000 million barrels per day, while our operating capital forecast remained unchanged at approximately $5.9 billion, despite executing on additional activity on our larger asset base reflecting acquisitions this year. I will now run through a third quarter area operating results, starting with oil sands mining and upgrading. During the quarter, our world-class oil sands mining and upgrading production was strong, averaging 581,136 barrels per day. of the SCO, an increase of approximately 83,500 barrels per day, or 17% from Q3 2024 levels, reflecting the additional interest in the AOSP acquired in December 2024, combined with our effective and efficient operations, which drove stronger utilization of approximately 104% in the quarter. Additionally, Canadian Naturals oil sands mining and upgrading operating costs continued to be industry-leading, averaging $21.29 per barrel of SCO in Q3 of 2025. In our thermal in situ operations, we achieved strong thermal production in the quarter, averaging 274,752 barrels per day in Q3, up slightly from Q3 2024 levels. Thermal in situ operating costs remain strong, averaging $10.35 per barrel in Q3, a decrease of 2% from the same quarter last year. We continue to progress our pad development plans across our thermal assets. At Primrose, we began drilling a CSS pad in Q3 of 25 with production targeted to come on the second half of 26. At Jackfish, we brought a SAGD pad on production in July 25 as planned. At Kirby, we brought on a five-well pair SAGD on production in late October as planned. And lastly, at Pike, the company tied in the two recently drilled SAG-D pads into the jackfish facilities. These two SAG-D pads targeted to keep the jackfish facilities at full capacity, with the first pad targeted to come on production in January of 2026, the second pad, Q2 of 26. At the commercial-scale solvent SAG-D pad in Kirby North, current SOR reductions in solvent recoveries are meeting expectations following recent workovers and optimizations. On the conventional side of the business, Canadian Natural's highly successful multilateral heavy crude oil drilling program continues to unlock opportunities on our approximately 3 million net acres of high-quality land throughout our primary heavy crude oil assets. Primary heavy crude oil production averaged 87,705 barrels during the quarter, an increase of 14% from Q3 2024 levels, reflecting strong drilling results on our multilateral wells. Operating costs in our primary heavy oil crude oil operations averaged $16.46 per barrel in Q3, a decrease of 12% from Q3 of 2024, primarily reflecting higher production volumes and the increasing proportion of lower operating costs in multilateral production. Pelican Lake production averaged approximately 42,100 barrels per day, a decrease of 7% from Q3 of 24, reflecting planned maintenance that took place in Q3 of 25, the low nature of field declines from this long life low decline asset. Low operating costs of Pelican averaged $9 per barrel in the quarter. North American Lake crude oil and natural gas production averaged 180,100 barrels per day during the quarter, an increase of 69% or approximately 74,000 barrels per day from Q3 of 24, primarily reflecting production volumes from the acquisition of the liquid-rich DuVernay assets in December of 24, and light crude oil from the Pallister Block assets in Q2 of this year, as well as liquid-rich Montney assets in the Grand Prairie area during the third quarter. Operating costs of the company's North American Lake Crude Oil and NGL's operations averaged $12.91 per barrel, a decrease of 6% from Q3 2024, primarily reflecting higher production volumes. The natural gas side, North American production averaged approximately 2.66 BCF for the quarter, an increase of 30% from Q3 2024 levels, primarily reflecting the Duvernay and Montney acquisitions and strong drilling results in our liquid-rich natural gas assets. North American natural gas operating costs average $1.14 per MCF in Q3, a decrease of 7% from Q3 at 24 levels of $1.23 per MCF, reflecting higher production volumes and cost efficiencies. Our unique and diverse asset base provides us with a competitive advantage. We allocate capital to the highest return projects without being reliant on any one commodity. Our consistent and top-tier results are driven by safe and reliable operations. Our commitment to continuous improvement is supported by a strong team culture in all areas of our company that focus on improving our costs, driving execution of growth opportunities, and increasing value to shareholders. Now, I will turn it over to Victor for our third quarter financial review.

Thanks, Scott, and good morning, everyone. In the third quarter of 2025, we achieved several production records as a result of strong operational performance and the accretive acquisition over the past year. Contributing to the strong results this quarter, our teams demonstrated excellent execution, evidenced through a strong operating cost performance. Our results, including strategic acquisitions completed in the last 12 months, supported strong quarterly adjusted fund flow. of approximately $3.9 billion and adjusted net earnings of $1.8 billion. Returns to shareholders in the quarter were $1.5 billion, including $1.2 billion of dividends and $300 million of share repurchases. Dividend payments and share repurchases in 2025 up to and including November 5th bring total year-to-date shareholder returns to approximately $6.2 billion and contributing significant production growth per share in 2025. targeted at 16% compared to 2024, demonstrating very significant value creation this year. As a reminder, Canadian Natural has increased its dividend for 25 consecutive years, with a CAGR of 21%, a truly impressive track record that is unique amongst our peer group. Subsequent to quarter end, the Board has approved a quarterly dividend of 58.75 cents per common share, payable on January 6, 2026, to shareholders of record at the close of business on December 12, 2025. Our balance sheet remains strong, with quarter-end debt of 0.9 times and debt-to-book capital coming in at 29.8%. Quarter-end liquidity was also strong at over $4.3 billion, reflecting undrawn revolving bank facilities, cash on hand at period end. Additionally, during Q3, the company repaid $600 million of U.S. dollar debt securities and received a new long-term investment grade credit rating of BBB Plus from Fitch Rating. Our third quarter results reflect the impact of creative acquisition, which have immediately contributed to incremental production and additional free cash flow generation. Our robust quarterly funds flow and strong balance sheet demonstrates our industry-leading cost structure, large reserve base of high-quality, long-life, low-decline assets, and our commitment to continuous improvement and reliable execution. These factors, along the company's track record of delivering strong shareholder returns, support significant long-term value creation for Canadian Natural and our shareholders. With that, I'll turn it back to you, Scott.

Thanks, Victor. In summary, here at Canadian Natural, our culture of continuous improvement and ownership alignment with shareholders drives our teams to create significant value across all of the areas of the company.

Once again,

We achieved record production levels, strong financial results through our effective and efficient operations, driving strong returns on capital, value creation for our shareholders. Lastly, just a reminder that we will be hosting our open house tomorrow morning, started at 8.30 Eastern Standard Time, where we will go over our strategy, unparalleled, dependent, provide details on our assets and value creation opportunities. You're also invited to listen to the management presentation and view the presentation slides via webcast. You can look for our website for further details. With that, I'll 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 star 1 in 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 two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Dennis Fong of CIBC World Markets. Your line is already open.

Hi, good morning, and thank you for taking my questions. The first one is related to your recent closing of the asset swap for the Albion mine. Now that you control two mining assets in very close proximity to each other, can you talk to some of the potential upside or opportunities that exist? I know you've already addressed consolidating inventory and lowering kind of spare parts required in various storerooms, but can you talk towards maybe operational benefits beyond that, again, given the proximity of the two assets?

Yeah, thanks, Dennis. In addition to what you had mentioned, there's also the utilization of equipment, so that would include the large haul trucks and the support equipment such as dozers, craters, and and other assets of that nature. But Dennis, I would suggest that it would be worthwhile for listening for more details tomorrow to run an open house and we can get into some more detail in terms of the cost savings that we are working on and working to achieve there. So I think that's probably the best way to explain it is be a part of our open house tomorrow.

Perfect. I'll have to wait and see, I guess, on that basis. I suspect this second question may have a similar answer, but, I mean, given the continued development and the time of the wealth at Pike, I was just kind of looking through, and it seems like Grouse, in close proximity to your Kirby assets, has a similar, I guess, opportunity there. Can you maybe outline maybe some of the efficiencies that you could see via developing kind of proximal resource to your two other central processing facilities?

Yeah, for sure, Dennis. And I think you were bang on when you suggested it's probably going to be a similar answer. For sure, we'll walk you through tomorrow the assets that are adjacent to the adjacent Jackfish and Kirby assets. So we'll be able to give you a good rundown tomorrow of how we would look at development plans given the opportunities that are presented in those areas. So looking forward to that discussion tomorrow.

Sounds good, Scott. Thanks. I'll turn it back.

Thanks, Dennis.

Your next question comes from Manav Gupta of UBS. Your line is already open. Manav Gupta of UBS. Manav Gupta of UBS. Your line is already open. Manav Gupta of UBS. Your line is already open.

Manav Gupta of UBS. Your line is already open. Good morning. Good morning. Good morning. Congrats on a strong quarter again. Congrats on a strong quarter again. Congrats on a strong quarter again. I wanted to ask you about an I wanted to ask you about an I wanted to ask you about an announcement yesterday from announcement yesterday from announcement yesterday from Energy Transfer that they are Energy Transfer that they are Energy Transfer that they are looking to FID, their south looking to FID, their south looking to FID, their south Illinois Connector Pipeline, Illinois Connector Pipeline, Illinois Connector Pipeline, looking to get more Canadian crude looking to get more Canadian crude looking to get more Canadian crude into Illinois and to Gulf Coast. into Illinois and to Gulf Coast. into Illinois and to Gulf Coast. And I Would you be open to participating in any such project or any other major projects out there which give you more incremental egress capacity towards the MidCon or the Gulf Coast refiners where your crude is highly valued?

Yeah, thanks for the question. And certainly we review those opportunities for egress when tabled. And I can just tell you that there are a number of opportunities, whether it be Enbridge, TMX, or others, Certainly going to look at those and see if we would participate in volumes commitments on those or otherwise, but the good news is for the basin and the egress opportunities that companies have been talking about bode very well for strong differentials and ultimately that's the most important part of the aspect, whether your barrels are locked up or whether they're sold in the hardest Edmonton areas, it's a positive for Canadian crude. So looking forward to those opportunities as they come about, and we'll see where that goes.

Thank you. I'll turn it over.

Your next question comes from Dog Legate of Wolf Research. Your line is already open.

Hey, good morning, team. This is Carlos actually on for Doug, who, by the way, is on his way to your analyst day. So he sends his apologies. But just to be real quick with this, I'm respectful of my peers' time. Number one, I wonder what your perception is today of the need to further consolidate West Canada Gas in the context of week eight co-pricing. And despite the ramp in LNG prices, perhaps similar to how your U.S. peers have been doing in the recent past?

Yeah, that's a good question, and you don't have to apologize for Doug. That's good to see that he'll show up tomorrow. We're looking forward to those discussions. In terms of consolidation, certainly we're seeing some of that evolve. I think the most important thing to the Basin is Maybe it's a certain degree of consolidation, but the most important thing is egress opportunities. So the more gas that we can move out of the basin, the better. The LNG projects that are online now, LNG Canada and others that are coming on in the future, are very much needed for the basin to fully unlock the potential. So in spite of whatever M&A activity that may be going on in the basin, We look forward to more egress because ultimately that's what the basin requires.

Thank you very much. Appreciate that. And just a real quick housekeeping item. It looks like your pallet or endeavor might have contributed to your sequential oil production growth. Just wondering if you could share if that is the case, and if so, how does it set you up for your growth outlook into first half of 2016?

Certainly both of those areas will be part of our budgeting activities for next year. We've got strong production growth in the Duvernay, and having taken over the assets earlier this year in the Palliser Block, we continue the capital allocation towards the only light oil wells in that area, and it will be a part of our program for next year as well.

Thank you, Tim. Appreciate it.

Thanks.

Your next question comes from Greg Party of RBC Capital Markets. Your line is already open.

Yeah, thanks. Thanks for the morning. And Scott, I'll apologize because I won't be there in person tomorrow, which is probably the first time in 20-something years. But in any event, I'll have a go at you maybe ahead of tomorrow. What's your thinking now? I mean, we've had a new federal government in place recently. For a little bit of time now, there's been a lot more dialogue with the industry. Just curious, any broad strokes on progress on things like pathways? How much easier is it maybe now to work with the federal government? Is this sort of a cautious approach? Just interested in any broad strokes there that you might have.

Well, we'll miss you tomorrow there, Greg, but we do appreciate your question there today. And certainly, we're seeing... more positive signs than we've seen in the past under previous leadership. So we like the discussions that are going on, Greg, but as always, there's lots of details to work through in terms of carbon competitiveness. That's going to be key to understand the impacts that may come out of that level of discussion, that the details at this point are not well understood and we'll certainly be very anxious to work with the government and the government of Alberta to make sure that we've got a collaborative way to move forward to address the needs for pathways and certainly for future growth opportunities to, again, unlock additional value out of the basin, whether it be oil sands or conventional. More egress is needed on both gas and oil, and so the more that we can do collectively working together with the governments to help promote that growth, increase the jobs in Canada, increase, of course, taxes and royalties, certainly everyone's aware on this call the importance of the industry for the... for the GDP to Canada. So I think it's really important to continue on these discussions. Good to see what we have seen so far, but we want to get into the detailed discussions, Greg, and make sure we truly understand what carbon competitive actually means. And until we get those details, it's a little bit early to say exactly how things will unfold. But we are encouraged by the engagement.

OK. Okay, terrific. No, I think that's probably as much as you can say right now. And as you say, there's a lot more water that needs to flow into the bridge. Maybe I'll pivot just on a specific question that came in from one investor, which was just around the potential acceleration of the T-block decommissioning. So if we look at your financing cost in 3Q, significantly lower. I know some of that had to do with PRT and so forth. The abandonment expenditures tend to be a fairly large number. I'm just trying to get, even though you may not want to talk too much about 26 capex and so forth, maybe just want to get a sense maybe from Victor as to what the implications there could be and to the extent you can quantify it or even roughly quantify it, that would be super helpful.

Just in terms of the impacts on the 26 capital budget, is that the question effectively, Greg?

Yeah. I mean, so, Victor, like if I look at, what, 25, I think it was like, what, $756 million A good chunk of that I know is North Sea, and then there's PRT in there, and you get cash recoveries. But I'm just trying to understand, should we be directly thinking about a bigger number than, say, 750 next year if you decide to accelerate, or would this all kind of come out in the wash?

Yeah, the way I look at it, Greg, is that 2025 coming into 2026, the expenditure levels do go up modestly in 2026 overall. That would be the target, but we're working through that still, and we're trying to plan for our 2026 budget. Overall, when we look at the next five-year period, you do have to remember that the tax recoveries on that expenditure, they're actually weighted first five years. So the net increase after tax recovery is fairly modest. We'll see about a 75% tax recovery on the next five years.

Okay. Very helpful. Thanks very much.

Thanks, Greg. Thank you.

Your next question comes from Mino Halshof of TD Cowen. Your line is already open.

Good morning, everyone. And thanks for taking my question. I'll just put, I'm just going to put a very short term lens on things. And for my first question, now that we're halfway through the fourth quarter, give or take, how would you describe the operational setup into the end of the year? And are there any assets that you would flag as having outperformed or underperformed quarter to date?

Yeah, it's a good question. At this point in the quarter, all assets are performing as expected. Optimization, utilization looks very strong and continuance from what we've seen over the past couple of quarters here from that perspective of utilization. So nothing really to highlight there, just the assets are performing as we would expect them to perform.

Terrific. Thanks, Scott. And then you may or may not want to answer this one because it might cannibalize tomorrow a little bit, but second question is on maintenance. Maybe you could just remind us of which assets are scheduled for turnaround in 2026. Presumably Horizon is one of them, but what are the others and how large are these turnarounds expected to be?

Yeah, Horizon would certainly be the most significant, likely in the third quarter of next year. So outside of that, it would be our normal routine ones that we'd see every one facility, like every five years, our thermal facilities go in for a turnaround. So there'll be one next year as well. So nothing too significant and nothing stands out. The only real difference from 25 to 26 would be Horizon.

Terrific. Appreciate the confirmation. I'll turn it back.

Your next question comes from Alexa Patrick of Goldman Sachs. Your line is already open.

Good morning, team, and thank you for taking our question. You know, following the close of several accretive acquisitions, we were curious, what are your updated thoughts on M&A? And then can you provide any broader commentary around your capital allocation strategy, balancing dividend growth with share repurchases and potential for further M&A? Thanks.

Yeah, not a lot to comment, Alexa, on the M&A activity. You know, certainly you made reference to Some recent acquisitions that were opportunistic for us, and you probably are aware, we do look at a lot of opportunities of M&A. We execute on very few, but we certainly look at the ones that seem to be most accretive to our operations and generally in close proximity to our core areas. I think that in terms of our allocation, no significant change is there. The allocation policy is pretty straightforward. We don't have any plans to change that relative to M&A activity or not.

Okay, that's helpful. And then maybe just as a follow-up, if we could dig a little more into kind of your macro outlook, how are you thinking about light-heavy differentials from here, particularly as we see OPEC add barrels into the market? And then any views on mid-cycle differentials and some of the assumptions embedded in that?

I think we expect to see, Alexa, the differentials to be, stay in that range of, you know, that $10 to $13 a barrel. and it'll go up and down depending on Turner activities in the refineries in the United States. I don't really see any of that changing in the near term and as long as we have strong egress out of Western Canada, those differentials will remain in that range. There's still some plot capacity on the TMX system, which is very supportive for pricing. We're seeing a strong demand out of Asia for our Canadian heavy crude. That's also very supportive, and we like what we've seen. Essentially, TMX has stabilized the entire Western market here. So that's how I would summarize it up for you.

Okay, great. Well, we'll turn it back. Thank you so much.

Thank you.

There are no further questions at this time. I would hand over the call to Lance Cassin for closing remarks. Please go ahead.

Lance Cassin Thank you, operator. Excuse me. Thanks, everyone, for joining our call this morning. We look forward to seeing you all tomorrow at our Ambassador Open House or on the webcast. If you have any questions, please give us a call.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.