Canadian Natural Resources Limited

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Good morning. You would like to welcome everyone to Canadian Natural's 2025 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 know that this call is being recorded today, March 5th, 2026, at 9 a.m. Mountain Time. I'd now like to turn the conference over to your host for today's call, Lance Cashin, Manager of Investor Relations.

Thank you and good morning everyone. Thank you for joining Canadian Natural's 2025 fourth quarter and year-end results 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 our royalties. Also, I would suggest you review the 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, CEO of E&P, and Victor Durrell, our Chief Financial Officer. Additionally in the room with us this morning is Jay Frock, CEO of OilSounds. Scott will first run through our strategic updates and our strong operational performance that once again included numerous production records in the quarter and annually. Next, Robin will provide highlights of our growing, high-value reserves that are significant when compared to other major oil and gas companies. And Victor will summarize our strong financial results and our significant returns to shareholders in the year, along with details on the enhancement of our free cash flow allocation policy. To close, Scott will summarize prior to open up the line for questions. With that, over to you, Scott.

Thank you, Lance, and good morning, everyone. 2025 was the best operational year in the company's long history of maximizing value for our shareholders. We set several new production records. lowered operating costs, and capital expenditures came in under our previous forecast. We grew our production organically, as well as completed several accretive acquisitions. These include the Palliser Block assets, southern Alberta, liquid-rich Montney assets in the Grand Prairie area, as well as increasing our ownership in the Albion Mines 100% through an asset swap. We achieved record annual production of 1,571,000 BOEs per day in 2025, resulting in year-over-year growth of 15% or approximately 207,000 BOEs per day from 2024 levels. We also showed continuous improvement in our safety record with our total recordable injury frequency at the lowest levels ever. Our teams continue to be focused on safety Specific to some of the annual operating highlights, 1,146,000 barrels per day, an increase in annual liquids production of 141,000 barrels per day, or 14% from 2024 levels. 65% are liquids production, SCO, light crude oil, or NGLs. Strong total corporate liquids operating costs of $18.44 per barrel. Record oil sands mining and upgrading production of approximately 565,000 barrels per day of zero decline SCO with upgrader utilization of 100%, including the planned turnaround at AOSP. Industry-leading oil sands mining and upgrading operating costs of $22.66 per barrel. record thermal in situ production of approximately 275,000 barrels per day of long life, low decline production, and primary heavy crude oil production growth of approximately 88,000 barrels per day, which is 11% growth from 2024 levels. This reflects strong drilling results from our multilateral well program. Operating costs in our primary heavy crude oil operations averaged $16.68 per barrel in 2025, A DECREASE OF 8% FROM 2024 LEVELS, PRIMARILY REFLECTING LOWER OPERATING COSTS FROM MULTILATERAL PRODUCTION. RECORD NATURAL GAS PRODUCTION OF APPROXIMATELY 2.5 BCF PER DAY, AN INCREASE OF 400 MILLION PER DAY, OR 19% FROM 2024 LEVELS. IN DECEMBER, WE RECEIVED REGULATORY APPROVAL FOR OUR PIKE II 70,000 BARREL PER DAY SAGGEDY GROWTH PROJECT OPPORTUNITY. CHIPTING TO OUR QUARTERLY RESULTS. Q4 2025 was equally impressive with numerous records including record quarterly production of approximately 1,659,000 BOEs per day, record total liquids production of approximately 1,215,000 barrels per day, an increase of 125,000 barrels per day or 12% from Q4 2024 levels. Record oil sands mining and upgrading production of approximately 620,000 barrels per day of SCO with upgraded utilization of 105%. Industry leading oil sands mining and upgrading operating costs of $21.84 per barrel. Within our thermal areas, production from the first Pike I pad came on production ahead of schedule in December. Current production from this pad exceeds our expectation at approximately 27,000 barrels per day with an SOR of approximately 1.8 times as we target to keep the production at the jackfish facilities at full capacity. Second Pike I pad will come on production in the second quarter. Canadian natural reserves are significant when compared to other major oil companies, which support long-term growth opportunities. Year-end 2025 total approved reserves and total approved plus probable reserves increased by 4% 3% respectively from year-end 2024 levels, another strong year of reserve replacement with very strong F&D costs. Robin will provide additional color on our year-end reserve shortly. Strong execution across our large, diverse asset base continues to provide significant opportunities to create shareholder value in 2026 and beyond. This is evident by our increased production cash flow and reserves achieved in 2025 through accretive acquisitions and organic growth, which gave the Board of Directors confidence in their approval of a quarterly dividend increase, 6.4%, and the enhancement of our free cash flow allocation policy by adjusting our net debt targets, accelerating direct returns to shareholders. Victor will explain in more detail in this finance section this morning. In addition, we completed a strategic acquisition in Q1 of 26, and as a result, we are increasing the midpoint of our 2026 production guidance by 20,000 BOEs per day with a range of 1,615,000 BOEs per day to 1,665,000 BOEs per day, and we are reducing our 2026 operating capital forecast by 310 million to approximately 6 million. We continue to progress our defined short- and medium-term growth strategy development in our conventional EMP assets, drill-to-fill pad additions, and feed capital on both the 70,000-barrel-per-day Pike II greenfield project and the 30,000-barrel-per-day jackfish brownfield expansion project. As part of our long-term growth strategy, we are deferring feed capital for the oil sands jack pine mine expansion opportunity at Elvian that was included in our 2026 capital budget. This approximately $8.25 billion project is being deferred due to lack of finalization of government regulatory policies around carbon pricing and methane, which creates uncertainty and economic burden for our long-term growth investment. Once there's more certainty on improved regulatory policy, improved timelines, and additional egress, we will reassess the economic viability of this project. Complementing the accretive and opportunistic acquisitions completed in 2025 and in Q1 of 2026, we have plenty of organic growth opportunities within our large, diverse asset base. We will leverage our portfolio of opportunities to continue creating long-term shareholder value while maintaining flexibility to manage the pace of these development opportunities and continue to maximize shareholder value. Now I will turn it over to Robin to provide additional details on our year-end 2025 reserves.

Thank you, Scott, and good morning, everyone. I'll start by reminding everyone that 100% of Canadian Naturals reserves are externally evaluated and reviewed by independent, qualified reserve evaluators. Our 2025 reserve disclosure is presented in accordance with Canadian reporting requirements and forecast pricing and escalated costs, on a company working interest or royalties basis. As you just heard from Scott, 2025 was another very strong year for Canadian Natural, with that strength including the company's reserves. For December 31st, 2025, total approved reserves are $15.9 billion BOE, representing a 4% increase compared to 2024, and total approved plus probable reserves increased 3% to $20.75 billion BOE. Through a combination of organic growth and accretive acquisitions, Canadian Natural replaced 2025 production by 218% on a total proved basis and 212% on a total proved plus probable basis. To put that in context, that's more than 1.2 billion BOEs of reserves added in each of the proved and proved plus probable categories. And as you heard from Scott, we've done that while achieving industry-leading finding, development, and acquisition costs. For 2025, our FD&A, including changes in future development costs, $3.64 per PoE for total approved and $2.42 per PoE for total approved plus probable, underscoring the strength of our extensive, diverse assets. Also highlighting one of the attributes that differentiates Canadian Natural, approximately 73% of total proved reserves are from long life, low decline, or zero decline assets, resulting in a total proved reserve life index of 31 years and a total proved plus probable RLI of 40 years. Notably, at year-end 2025, approximately 50% of the company's total approved reserves are high-value SCO and mining bitumen reserves with zero decline and a total approved RLI of 39%. In summary, our 2025 reserves continue to reflect the strength and depth of Canadian Natural's diverse asset base, the predictability of the company's long-life, low-decline reserves, and our proven ability to create values for organic growth and accretive acquisition. I will now hand over to Victor for the financial highlights.

Thanks, Robin, and good morning. The fourth quarter full year 2025 results were excellent, with record operational performance, which also reflected the impact of acquisitions in 2024 and 2025, and which contributed to similarly strong financial performance. The strong execution by our team in 2025 has resulted in adjusted net earnings of $7.4 billion, or $3.56 per share, and adjusted fund flow for the year of $15.5 billion, or $7.39. Quarterly performance was equally strong, with adjusted net earnings of $1.7 billion, or $0.82 per share, and adjusted fund flow of approximately $3.7 billion, or $1.08. Net earnings of $5.3 billion per quarter, or $2.55 per share, was higher than the operational earnings related to the accounting for the AOSP asset swap, which resulted in a non-cash gain of approximately $3.8 billion after tax per quarter. Following the asset swap, where we assumed the entirety of the interest for the role of the AOSP designs, we accounted for the transaction in accordance with relevant requirements and recognize an adjustment from the previous carrying value to its fair value in accordance. In doing so, we demonstrated the significant value that has been created in those operations since the acquisition of the initial interest in AOSP in 2017. As Scott mentioned, the accretive acquisitions in late 2024 and throughout 2025, including the AOSP asset swap in November of this past year, have increased reserves, production, and cash flow. while contributing to net debt reduction of approximately $2.7 billion at the year-end of 2024, with net debt at approximately $16 billion at the year-end of 2025. In 2025, the company returned approximately $9 billion to our shareholders, including direct returns of approximately $4.9 billion in dividends, $1.4 billion in share repurchases, and additionally, the $2.7 billion in net debt reduction I just mentioned. As we end 2025, our balance sheet was strong, with quarter-end debt EBITDA 0.9 times and debt-to-book capital coming in at 26%. Liquidity was also strong, at over $6.3 billion at year-end and reflecting undrawn revolving bank credit system cash on hand at end of period. Demonstrating the continued performance of and their confidence in our business, the Board approved a 6% increase to our quarterly dividends. bringing the annualized dividend to $50 per common share. This marks 2026 as the 26th consecutive year of dividend increases by Canadian Natural, with a compound annual growth rate of 20% over that time, demonstrating the sustainability of our business model, our strong balance sheet, and the strength of our diverse, long-life, low-decline reserves and asset base that Robin spoke to. Additionally, the Board of Directors have, effective January 1, 2026, adjusted the net debt target level in our free cash flow allocation policy, which results in an acceleration of the next increase in shareholder returns. Now, when net debt is below $16 billion compared to the previous target of $15 billion, we will increase shareholder returns 75% of free cash flow generated and managed on a forward-looking basis. Similarly, when net debt levels reach $13 billion compared to the previous target of $12 billion, we will target to increase shareholder returns to 100% every cash flow. Our robust fund flow generator and strong balance sheet demonstrates our industry-leading cost structure, large reserve base, high quality, long life, low decline assets, and our commitment to continuous improvement and reliable execution. These factors, along with the company's track record of delivering strong shareholder returns, support significant long-term value creation of Canadian Natural and its shareholders. Our financial flexibility and low maintenance capital requirements demonstrate a track record of execution and allow us the opportunity to provide strong returns to shareholders moving forward. With that Scott, I'll turn it back to you.

Thanks Victor. In summary, our strong 2025 results and our growing reserves are supported by safe, reliable distant operations. Our commitment to continuous improvement as part of our effective and efficient operations is driven by focusing on cost improvement, margin expansion, and strong execution. This is combined with our increased production guidance and accelerated shareholder returns. We are set up to continue to return real value to our shareholders in the near, medium, and long term. With that, I will turn it over for questions.

Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. If you would like to withdraw from the polling process, please press star then the number two. If you are using a speakerphone, please make sure to lift your handset before pressing any keys. The first question comes from the line of Dennis Fung from CIBC Well Markets. Please go ahead.

Hi, good morning. Thank you for taking my questions and congratulations on a strong quarter and year. My first one here is really, you guys have shown a track record of applying C&Q best practices on kind of new assets you've acquired or taken over-operatorship of. And as you alluded to in your prepared comments, really a focus on continuous improvement. Can you talk to some of the opportunities you're looking to chase down or that you're seeing now that you control 100% of the Albion mine, and how does that maybe interact with Horizon on a go-forward basis?

Yeah, Dennis, I think if you recall, we did have a bit of this discussion at the last quarter. We had estimated an instantaneous savings of about $30 million dollars in an annual savings in around 30 million dollars per year 30 to 40 million dollars per year so it's just really about the synergies of being able to utilize the equipment and the people resources the contractors back and forth at the mine sites in a more efficient manner than we would have otherwise been able to do so before so better utilization of your service providers allows for more efficient practices and ultimately more efficient costs. So, you know, over time, Dennis, it's fairly evident to be able to see the reduction in operating costs from 2017 going right through to the acquisition of Chevron 2024, and we continue to make improvements in the operating costs from that point going forward here just through our mid- use improvement methodology and also you know significant increase in production in the range of 50,000 barrels a day since 2017 so you know we had made some significant Bain gain certainly before the acquisition of Chevron and at this point in time where we'll be working more on the continuous movement portions of that there were small dollars add up to big dollars great

Really appreciate that color. My second question shifts here a little bit. It's obviously great to see the confidence in the board or from the board on the current strength of the balance sheet and the potential acceleration of returning free cash to shareholders. Can you talk towards a little bit around where the discussions may have gone in terms of what we'll call bookends or ensuring kind of key metrics that both management and the board focus on in terms of determining some of these factors, as well as maybe touching on some of the flexibility that you still have in the capital program, obviously either higher or lower given the volatile commodity price environment that we're in today?

Yeah, Dennis, it's really about the robustness of our balance sheet on the backs of the synergies created through the most reconnect acquisitions we've been able to achieve, increased cash flow, lowering the operating costs, increasing the production, all of those things combined don't necessarily lead towards bookends per se Dennis but what they do is show a continued improvement to the overall strength of our balance sheet primarily providing additional cash flow and that's resulted in the board taking a look at all of the acquisitions that we've done combined with the way we've been able to effectively and efficiently manage our capital development programs through organic growth have really provided that stepping stone to get to change the net debt levels for the pre-cash flow policy and obviously continue to increase our dividends. So then it's not really about bookends but just part of the ongoing continued growth of the company both organically and through acquisitions that have strengthened the balance sheet and have set us up for continued strength through strong commodity prices, lower commodity prices, or any cycle.

Thanks for the call over there. I'll turn it back.

Your next question comes from the line of Patrick O'Rourke from ATB Capital Markets. Please go ahead.

Hey, good morning, guys. And maybe just a little bit more on the capital side of the equation here. Obviously, the bulk of the capital that came out was, it seems like with respect to Jack Pine, I just wonder, you know, what opportunities there are still remaining for the rest of the year. And I think back to years past, we were looking at a, you know, sort of a weaker gas tape right now.

there any opportunities to potentially shift some capital from the liquids rich gas portfolio towards some of the short cycle oil here in remaining in 2026 we always carry that nimbleness certainly when when we're looking at our capital allocation being good return strong returns with strong liquids pricing on the liquid rich natural gas activity areas that that do compete. If you look at it, Patrick, we've got payouts in our multi-lats, you know, 12 months or less, very comparable payouts to 12, 13 months or less on the strong liquid-rich gas areas, so they're very competitive with each other. And I think the way to look at it is we have a very well-balanced rig program. across all of the areas. So we're working very hard to ensure that we don't sort of apply any self-inflicted inflation in the areas in which we're operating. And we do that by having that balanced rig program. So we continue to monitor the commodity prices. We have about 21 rigs working, very well balanced across the entire basin here. looking at strong returns, not spending money on dry gas activity. So we're really focused on the value returns. And I don't see us making significant changes to that a whole lot. We do have the capacity to be able to increase the heavy oil multilats potentially to a small percentage. But again, we're running very well balanced. We're not creating inflation. We're making sure we're keeping up with the efficiencies, our drill times. People are very focused, and we want to keep the momentum going in that direction.

Okay, great. And then just thinking about the operational performance, sort of one thing that really stuck out to me was the 105% upgrade or utilization in the quarter. Just wondering how you think about how repeatable this is, and then does that open sort of the pathway to a potential re-rate on these assets going forward?

Patrick, we'll see on a go-forward basis here. I think you've seen some strong production in the fourth quarter. That's not unique compared to previous years. Strong efficiencies running into the fourth quarters, coming out of turnarounds and so forth. So 105% is certainly very strong, and 620,000 barrels a day is extremely strong production levels. we're happy with in the range of 600,000 barrels a day is very strong efficiencies and utilization so you know we certainly strive to continue to do work towards maximizing and or over utilizing the facilities from a utilization perspective I doubt it's going to lead us to a rewrite We'll look at that at some point down the road at Horizon potentially when we bring on the 6,300 barrels a day of SCO from the NRUT project. But until that time, Patrick, I think we're pretty happy with where our capacities are rated at.

Okay. Terrific. Thank you very much.

Your last question for today comes from the line of Neil Matter from Goldman Sachs. Please go ahead.

Yeah, good morning, Tim. Congrats on a good quarter, as always. I had some more macro questions, though. I want to get your perspective on the environment that we're in right now, where there's a lot of volatility. There's talk of, obviously, the Venezuela barrels coming to the market. But at the same time, we've got some disruptions here in the Middle East in terms of supply and How you are seeing real-time that flowing through into the heavy markets and how that shapes your near-term view around TIWCS? That's a good starting point, and then I have a follow-up on gas.

Yeah, Neil, I think if you look back a month or so ago with the potential to increase the volumes into the U.S. Gulf Coast, the differentials to WTI did widen out. And we did see increased barrels, Venezuelan barrels, coming into the U.S. Gulf Coast for processing. Now, as to your point, there has been some tightening in the market with the recent developments in the Middle East. And so we're seeing differentials swing back down probably about $1.50 to $1.60 lower than they were products tighter than they were, excuse me, about a month or so ago. So for us, it's all about continued focus on our operating costs and ensuring that we can be competitive in all the markets and that we also have a diversified portfolio. So we've got 256,000 barrels a day and we've got that well diversified between between the US Gulf Coast and the west coast of Canada here so continue to focus on those types of opportunities for diversification of our portfolio and continue to focus on our operating cost to ensure that in the long run rather than just on the short term thinking that in the long run we can manage and excel and be competitive in any market condition.

And to the extent we are in a firmer market condition as the world is now pulling on heavy barrels maybe a little bit harder, does that change the way you think about near-term activity, or you kind of have to stay level-loaded just given the long-term planning assumptions?

We have to go by long-term planning assumptions, Neil, and there's ebbs and flows that are caused by various different factors, obviously a major factor going on right now in the Middle East, but Also, at times in the year, there's factors of turnarounds that happen, you know, in the U.S. refining complexes. And so, you know, again, the thinking has to be long-term and ensuring that we're achieving the best netbacks that we can with our portfolio.

And that's the follow-up. It's just natural gas. I think, you know, a number of us have been waiting for ACO to get firmer, and it just seems like production is ever flowing and so just how do you guys think about this cleaning cleaning itself up and in as you guys look at the eco balances is this a structural issue or is there line of sight to better pricing in the horizon well I think it's evident that you're seeing with LNG Canada processing in the range of about it one and a half BCF not yet approaching full capacity

But not that far away from full capacity you're seeing the market is suggesting that the system is full and So that's likely coming through the development of a lot of liquids great rich gas production and and some producers drilling with Potentially lower liquids gas production as well. So the very very strong supply market We continue to see on a go-forward basis that those conditions will remain tight over time. Canada really needs additional LNG export capacity and the projects to be approved in an expeditious manner so we can take advantage of prosperity for all Canadians by increasing our gas production, our exports, and providing a project that the world truly needs.

Yeah, we really appreciate the color. Thanks, guys. Thank you, Neil.

We have an additional question coming from the line of Greg Party from RBC Capital Markets. Please go ahead.

Yeah, thanks. Good morning, Scott. I was not going to let you off that easy. Look, just maybe I may have missed this. It's kind of a question for Victor, but effectively, are you at 75% payout now, i.e., you know, post everything in terms of the updated budget, year-end numbers, the acquisition, and so forth. Is the debt at a level where it's now triggered that higher payout, or is that still to come?

Yeah, so to your point, Greg, at December 31st, we were below $16 million under the policy. We would have achieved the target for sure. And, of course, as a result of that, Target increased returns here in 2026. As you know, we do do that on a forward-looking basis, so we model the strip and the cash flows forward as we look at the policy over the course of the year. Of course, keep in mind, you know, significant volatility in pricing, we're all aware. So under the current policy as just announced, strong pricing we're seeing, we'd be very solidly there in Q3 with, you know, slightly higher and slightly lower debt over the course of the first and second quarter. Hopefully that helps us.

Yeah, yeah, no, no, exactly from a modeling perspective. Thanks for a nice and great quarter.

Thank you, Greg. Thank you.

There are no further questions at this time, so I'd like to turn the call back to Lance Gashin for closing comments. Sir, please go ahead.

Thank you, Operator, and thanks to everyone for joining us this morning. If you have any questions, please give us a call. Thank you.

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