Q4 2024 Canadian Natural Resources Ltd Earnings Call

Speaker Change: Good morning. We would like to welcome everyone to Canadian Natural's 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.

Speaker Change: 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 Casson, Manager of Investive Relations. Please go ahead.

Speaker Change: Thank you and good morning everyone. Thank you this morning for joining Canadian Natural's 24th, 4th, quarter, and year-end earnings commerce call.

Speaker Change: As always before we begin, I'd like to remind of our forward-looking statements and should be noted that in our reporting disclosures, everything's in Canadian dollars and that's otherwise stated, and we report our reserves and production before we're all teased.

Speaker Change: Also, I would suggest to review our advisory section in our financial statements that includes comments on non-GAAP skosers.

Scott Stauth: Speaking on today's call, we'll be Scott Stelt, our President, Robin Zayback, our Chief Operating Officer of EMP, and Mark Stainthorpe, our Chief Financial Officer. Additionally, in the room, with us this morning, is Jay Frock, CEO of Royal Sands, and Victor Durrell, Senior Vice President of Finance, and Principal Accounting Officer.

Scott Stauth: Scott will first provide some examples of our top tier performance.

Scott Stauth: and strong execution over recent years before getting into the numerous operational records achieved in 2024.

Scott Stauth: Next, Robin will provide highlights of our growing, high-value reserves that compete on a global scale.

Scott Stauth: Mark will then summarize our financial results that includes robust adjusted funds flow, earnings and returns to shareholders. To close, the Scott will summarize prior to opening up the call for questions. With that, over to you Scott.

Thank you all and good morning everyone.

Scott Stauth: 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 Resource Value Growth and Opportunistic Acquisitions.

Scott Stauth: Our unique 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 anyone's commodity.

Scott Stauth: 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.

Scott Stauth: 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 a long-term sustainability and business continuity.

Scott Stauth: Over the past three years, we have achieved the following successes. Absolute production growth and approximately 82,100 B.O.E.s per day, the vast majority of which was liquid growth.

We have delivered annual production per share kegur of 7%.

Scott Stauth: We improve 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.

Scott Stauth: We returned over $11 per share of shareholders through dividends and share repurchases. We increased our annualized quarterly dividend by 59% to $2.25 per share from a $1.42 per share, and the board has subsequently increased the dividend by another 4%.

Scott Stauth: Our share count reduced by approximately 240, 34,000 shares, or 11% inclusive of shares issued upon exercise of stock conference.

Scott Stauth: Adding more value at AOSP through the acquisition that closed in Q424 and a swap chance action targeted to close by the end of Q2 this year, consolidating our working interest in the Albion Minds to 100%

Scott Stauth: In the NLB and mines, these transactions will add approximately 93,500 girls per day of long-life zero-declined production to our world-class oil-sense mining and upgrading assets

Additionally, we acquired Chevrolet and 70% [inaudible]

Scott Stauth: Operator Working Interest of the Light Crude Oil and Liquid Rich Assets in the Doverday. These assets are targeted to average approximately 60,000 B.O.E.'s per day in 2025 and provide the opportunity for meaningful near-term growth while contributing additional free cash flow.

Scott Stauth: Expanding even further on AOSP and going back to 2017, we unlock significant long-term value 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 have improved reliability and increased utilization.

Scott Stauth: Since 2017, we've increased growth production at LVN mines by 30% or over 70,000 barrels per day. Upgraded capacity was also increased to match the increased production from the mines.

Scott Stauth: We've decreased AOSP per unit operating cost by more than 30% or approximately $10 per barrel. This equates to an incremental margin of approximately $800 million based on 2024 production.

Scott Stauth: With 100% working interest in the minds, once the swap transaction closes, we are targeted to unlock further value with our effective and efficient operations and relentless continuous improvement culture.

Scott Stauth: Adding even more value to our world-class oil-sense mining and upgrading assets when you combine that, the increased ownership interest for the recently completed de-bottle lacking in reliability projects are total oil-sense mining production capacity increases to approximately 592,000 barrels per day.

Scott Stauth: and further to that. And you combine our top-tier conventional crude oil and liquid-rich natural gas assets with our leading oil sense 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 use oil.

Scott Stauth: I will now run through our strong 2024 operational results and highlights.

Scott Stauth: We hit several new records across our assets in 2024, including...

Scott Stauth: Record annual total production of approximately 1.36 million B.O.E.'s per day, including record liquids production of over 1 million B.O.E.'s per day.

Scott Stauth: Record annual oil-sense mining and upgrading production of 472,245 barrels per day and record quarterly production of 534,631,000 barrels per day.

Scott Stauth: These Reconproduction rates resulted in the higher-upgrader utilization of 99% in 2024, including planned turn-arounds and 105% utilization in the fourth quarter.

Scott Stauth: Part of the oil sense mining and upgraded operating costs are industry leading, averaging $22.88 per garble in 2024.

and $20.97 per barrel in the fourth quarter. [inaudible]

Scott Stauth: Our oil sends mining and upgrading assets continue to achieve strong production and high utilization in January of January 2025 and February 2025, averaging on a growth basis approximately 634,000 barrels per day over the two months.

February

Scott Stauth: 25 was the highest monthly growth production in our history at approximately 640,000 barrels per day as we focus on continuous improvement initiatives combined with the strong performance from the Reliability Enhancement Project at Horizon and the Debotal Neck Project at Scottford.

Scott Stauth: Additionally, further value has been unlocked from piping modifications completed during the recent debout on the project at Scott Productor.

Scott Stauth: These modifications unlock approximately 5,000 barrels per day of annual growth production from the Elbian mines, resulting in higher utilization during plant of crater turnarounds.

Scott Stauth: This increase the zero decon production will continue to benefit Canadian Natural for decades, including our increased ownership in the Albion Minds.

and our Thermal and Situ Operations.

Scott Stauth: 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 at Development Program.

Scott Stauth: 2020-24 Thermal Institute operating costs were strong, average in 1104 per barrel, which is down 16% compared to 2023, primarily reflecting lower energy cost and higher production

Scott Stauth: We have significant available processing capacity of approximately 70,000 barrels per day in our thermal operations.

Scott Stauth: We continue to utilize this available capacity through our strong execution on a drill-to-fill pad additions.

Scott Stauth: and have been able to bring these products on production ahead of schedule. For example, a wolf lake.

Scott Stauth: We brought a SAG D pad on production ahead of schedule in Q4 of 24, which was originally targeted for Q1 of 25. At Primrose, we brought a CESF pad on production ahead of schedule in Q4 of 24, originally targeted for Q2 of 25.

Scott Stauth: A second CSS pad have been drilled and is targeted to command production ahead of schedule in late Q1, 25, originally budgeted for the second quarter of 2025

Scott Stauth: Ajachvish, we drill the SEG-D pad in Q4-24 with production partied, come on in Q3-25.

Scott Stauth: At Pike, we are drilling two SAG-D pads in the first half of 2025 which will be tied in to existing jackfish facilities. These two pads are targeted to come on production in 2026 and keep the jackfish plant to fork powerfully.

Scott Stauth: The Kirby, we are currently drilling a SAG-D pad targeted to come on production in Q4 or 25, but the second SAG-D pad targeted to be drilled in Q4 or 25 in [inaudible]

on the commercial side of the business.

Scott Stauth: Primary heavy oil production average approximately 79,100 barrels per day, a 2% increase over 2023, roughly 3, reflecting strong results from multilateral wells on our extensive heavy oil land base.

Scott Stauth: We drilled a 121 net horizontal multilateral primary heavy oil wells in 2024 compared to 104 in 2023.

Scott Stauth: Multilateral Wells combined increased reservoir capture and higher production with reduced servicing requirements which lowers operating cost.

Scott Stauth: As we shift more of our primary heavywell assets to multilateral development, we are seeing overall operating costs coming down as these wells are more efficient and require less servicing activity.

Scott Stauth: In 2024, primary heavy oil operating costs averaged $18.11 per barrel, down 9% from 2023.

Scott Stauth: We continue to optimize well design length and length in our highly successful multi-lateral program, achieving top tier average initial peak rates of approximately 250 barrels per day per well.

Scott Stauth: 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.

Scott Stauth: North American Lake Crude Oil and NGL production average approximately 114,400 barrels per day in 2024, an increase of 5% compared to 2023.

Scott Stauth: Half of this increase is driven by strong organic growth and liquid rich natural gas, but the remained related to recently acquired duvet assets.

Scott Stauth: We achieved a 17% reduction in operating costs on light crude oil and NGOs averaging $13.55 per barrel of the 24th compared to 2023.

Scott Stauth: North American Natural Gas Production, Average 2.14 BCF in 2024, which is comparable to 2023.

Scott Stauth: In 2024, we remain focused on liquid-rich natural gas activity in the Monteney and Deep Basin, while a certain dry gas activity in 2024 was referred due to lower natural gas prices.

Scott Stauth: Operating costs in a North American natural gas averaged $1.19 per MCF in 2024 for 6% lower than 2023.

Thank you very much.

Scott Stauth: Complimenting the opportunistic acquisitions completed in 2024, as well as those announced but not yet closed in 25. We have plenty of organic growth opportunities within our large diverse asset base.

Scott Stauth: We will leverage this expanded portfolio of organic growth opportunities to continue.

Scott Stauth: Creating long-term shareholder value into the future while maintaining the flexibility to manage the pace of these development opportunities to deliver strong returns.

Scott Stauth: The long track record of consistently delivering strong industry leading results driven by your safe, reliable operations and relentless focus on continuous improvement which maximizes long-term shareholder value.

Scott Stauth: Now I will turn it over to Robin to speak to our 2024 Uranian Reserves.

Thank you Scott and good morning everyone.

Scott Stauth: I'll start by pointing out that as in previous years, 100% of Canadian natural reserves are externally evaluated and reviewed by independent, qualified reserve evaluators.

Scott Stauth: Our 2024 Reserve Disclosure is presented in accordance with Canadian reporting requirements using forecast prices and escalated costs on a company working interest before Royalty's basis.

Scott Stauth: As you just heard from Scott, Canadian Natural had a very strong ear. One of the many places in which that is evident are the company's reserves.

Scott Stauth: For December 31st, 2024, Total Proof Reserves are 15.2 billion DOE, and Total Proof Plus probable reserves are 20.1 billion DOE.

Scott Stauth: This is a 9% increase in both proved and proved plus probable reserves compared to December

Scott Stauth: Canadian Natural Replace 2024 Production by 365% on a total-proof basis and 422% on a total-proof

Scott Stauth: 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.

Scott Stauth: 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 proof and less probable.

Scott Stauth: Highlighting one of the key attributes that differentiate Canadian natural assets, approximately 74% of total prune reserves are from long-life, low decline or zero decline assets.

Scott Stauth: resulting in a total-proved reserve life index of 33 years and a total-proved plus probable reserve life index of 44 years.

Scott Stauth: Notably, at your 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.

Scott Stauth: In 2024, the strength of Canadian Natural's assets and results also continue to be reflected in our strong finding and development costs.

Scott Stauth: Decorporate finding, development and acquisition costs, excluding changes in future development costs, our $7.82 per BOE for total-proved reserves, and $6.76 per BOE for total-proved plus probable reserves.

Scott Stauth: Including changes in future development cost, corporate FDA is 1356 per BOE for total approved, and 1260 per BOE for total approved, thus probable.

Scott Stauth: The net-present value of future net revenue before income tax using a 10% discount rate and including the full company ARO

Scott Stauth: is approximately $170 billion dollars for total-proved reserves and approximately $206 billion dollars for total-proved plus probable reserves.

Scott Stauth: This equates to net asset values of $74.83 per share for total proof, and $91.72 per share for total proof, plus probable.

Scott Stauth: In summary, our 2024 reserves reflect the strength and depth of Canadian Natural's asset base. The predictability of the company's long-life low-declined reserves, the value of accrued of 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.

Mark: 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 Q424 adjusted funds flow of 4.2 billion.

Mark: Our capital program for 2024 was approximately 100 million under budget, a 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 dividends and share

Mark: 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.

Mark: to 58 and 3.4 cents 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.

2024.

Mark: liquidity remained strong, and including undrung revolving bank facilities and cash liquidity at the end of the quarter was approximately 4.7 billion.

Mark: Our industry leading cost structure, predictable long life, low decoy assets, and reserve base combined with a relentless commitment to continuous improvement, continues to drive significant value of Canadian natural.

Mark: 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.

Mark: This is a unique competitive advantage and facilitates driving strong, long-term returns on

Scott Stauth: With that, I'll turn it back to you, Scott, for some final comments.

Thank you.

Speaker Change: Thank you, Mark, and summary are consistent and reliable results are underpin by safe and reliable operations.

Speaker Change: Our commitment to continue some improvement is driven by a strong team culture in all areas of our company to focus on improving our cost, strong execution of organic growth opportunities and increasing value to shareholders.

Speaker Change: We consistently deliver top tier operational financial results, which is unique and sustainable.

Clearly demonstrating our ability to both. [inaudible]

Speaker Change: The Economically Girl and Deliver Returns to our shareholders by balancing across our four pillars of capital

Speaker Change: I'd like to take this opportunity to thank Mark for all of his services, 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.

Speaker Change: 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.

Speaker Change: Should you wish a decline from the polling process, please press star followed by the two. And if you are using a microphone, please lift the hands up before pressing any keys.

Speaker Change: The first question comes from Greg Pardy at RBC Capital Markets. Please go ahead.

Greg Pardee: 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.

Greg Pardee: 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?

Speaker Change: Thanks, Greg. So, yeah, those two acquisitions, you know, I talked about adding 93,000 barrels a day of production through those acquisitions.

Speaker Change: And obviously there 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,

Speaker Change: I would point out that there is already existing approvals in place for Jack Pine mine expansion.

Speaker Change: in the order of 100,000 barrels a day. And it also point out that we have license capacity of eligibility in the existing JPM and MRM licenses as well.

Speaker Change: So we have the opportunity for good strong growth opportunities in the Albion Mind, and I think it'll take...

Let's work on egress opportunities.

Speaker Change: in order to ensure that those barrels can move to market, but certainly the opportunities

Speaker Change: very well laid out in terms of the reserve life that we can get out of that project with no decline. So there's a lot of overall value wrapped up in that.

Speaker Change: Thanks for that. Maybe all the switch gears. In your opening remarks, you talked about a number of the thermal developments where you're ahead of schedule. So is this intentional? Is there something kind of bigger going on with the series of projects you're laying out?

Speaker Change: Yeah, I think, Greg, what's happened over time, and folks shouldn't be overly surprised at times when we do, when we're able to exceed our expectations when we sanction a project to get an on production such as the SIGD and CSS1000, that's because...

We employ our continuous improvement. We employ our continuous improvement.

Speaker Change: So every time we build a pad, we take the learnings from that and things that we could do better when we apply it to the next pad. So 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 CLBC. Please go ahead.

Speaker Change: Hi, good morning everyone. And again, I would like to echo the congratulations to Mark on your new role.

Speaker Change: My first question maybe follows along the line of great question there, just around.

Your Oil Fence Binding Operations Washington.

Speaker Change: 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 debondled necking or just even driving better kind of throughput, frankly, since you started owning this asset and operating it as well.

Speaker Change: Eventually, in a situation where, say, you are able to optimize the assets in such a way that it feeds Scott for an upgraded capacity, what are maybe some of your options that you can look at doing and what are the synergies in that, like, nearby asset structure that you can maybe lean on to kind of gain incremental margin.

Yeah, good question, Dennis. In terms of the AOSP minds,

Um...

and relative to the Scottford production. And, you know,

Speaker Change: 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 paraphernal treat of treatment opportunities.

Speaker Change: So that's where you would get bitumen barrels, you would move to market, call it around that you least got for it up greater, but obviously number one.

Speaker Change: Ensure the operator is full of kept full at all times, and secondly, it be providing a expansion of opportunity to bring on additional vitamin barrels and move those to market.

Greg.

Speaker Change: 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 Wolflick and Primrose. [inaudible]

Speaker Change: Yeah, I think you got it being on, Dennis. It's primarily in the Promose Wolf Lake area.

Speaker Change: The SAGDS sets are primarily full, certainly jackfishes, and so yeah, I think if you just over time, we'll think capacity availability.

Speaker Change: We'll continue to do our padads and we're also working and continue to work on, you know, the

Speaker Change: Implementation of Assolvents in those areas. And so I think I talked about this on the last call, Dennis because you know that primarily we'll be looking to do padded opportunities in criminals probably before we would do this solvent injection

Speaker Change: But they certainly go ahead and hand in the teams are working on both both those opportunities, but

Speaker Change: To get to your point, the steam availability is the key factor there, but we would plan on having pad ads to ensure we're maximizing our capacity available from our steam plants.

Speaker Change: Great, really appreciate that color, Scott. I'll turn it back. Thanks.

Thank you.

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

Manav Gupta: Good morning, you guys have very informed you of the markets out there. I'm just trying to understand how we're thinking about the echo prices next 18 to 24 months given some of the energy projects which are expected to ramp up over in Canada.

Speaker Change: 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 what, I think that...

Speaker Change: Those opportunities will continue to allow us to move gas out of the basin here. Our focus is going to primarily be on liquids rich.

Speaker Change: Kathy Areas, such as the Montany and Durinay, but certainly looks like to me that the market is somewhat...

I think those are some of the driving factors there.

Speaker Change: And in 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 a longer term, I think they allocated two billion in capital, so they're looking to increase it to

Speaker Change: 300,000 barrels. 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?

Speaker Change: Well, you know, it's a good question and I would say yes over the long-term it will.

Speaker Change: The primarily I'd suggest that the growth opportunities are at least the most significant growth opportunities.

Speaker Change: 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 horizon and 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...

Speaker Change: Other operators do have additional opportunities as well, so I think I'll combine that capacity will be utilized in the long term.

Thank you so much.

Thank you for watching. I'll see you next time.

Speaker Change: Thank you. The next question comes from Patrick or work at ATB Capital Markets. Please go ahead.

Patrick O'rourke: 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.

Patrick O'rourke: Yeah, good question, Patrick. You know, I think that we're quite happy with our assets and in terms of, in terms of M&A activity, we'll just see how things have full and, you know,

Patrick O'rourke: The fluctuations in pricing as a result of all these discussions on tariffs and so forth. It's going to take some time to start some of that out. But, you know, we're quite happy if you look at our reserve base we have.

Patrick O'rourke: Apple Opportunity Grow Organically. We've always liked acquisitions that bring that additional value and a creative to the company. So, as in the past, for the past 35 years, that's not been one of our strengths.

Patrick O'rourke: of Organic Rules, and taking advantage of opportunity to get acquisitions. And, you know, unless there's something that changes significantly in the environment going forward, I don't see our strategy changing.

Speaker Change: Okay, great. And then maybe just on the operational side, looking through some of the numbers here, particular to the commercial.

Speaker Change: came down very slightly in the quarter from 85% to 80%.

Speaker Change: 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, not through the rest of the portfolio, now that you've had it online for a while.

Speaker Change: Yep, Patrick, it'll take a read anything into too much into the change.

Speaker Change: in terms of the recovery. It has to do with some of the nuances just with certain wells on stream or certain wells on 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 recovery and the S.O.R. reductions.

Speaker Change: 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.

Bum.

Speaker Change: and then once we've reached that state, we'll be able to certainly have access to all the information, all the data that's been gathered over the past year.

Speaker Change: and just determined exactly how we want to move forward from here.

Speaker Change: Now I will say that in parallel our teams are looking at, you know, expanding the opportunity further.

into areas such as Pike is a new forward.

Speaker Change: Those opportunities would be, you know, a few years down the road, see into 27 and 28, where we would look at doing the next implementation of our projects such as that, but we are seeing good positive results.

Speaker Change: We like the opportunity to be able to bring reserves forward.

Speaker Change: 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 a capital allocation program, so it's another good tool that our tool blocks.

Okay, thank you very much.

Manuel Haushoff: Thank you. The next question comes from Menno Hulshof at TV Securities. Please go ahead.

Manuel Haushoff: Thanks, and good morning everyone. Can you, can we begin by maybe having you elaborate on the

Manuel Haushoff: Pipeline Modification that allowed you to add 5,000 barrels per day of capacity at Albion. What exactly got done there? What was the capital efficiency and then higher level, what other near-term to bottlenecking opportunities?

Manuel Haushoff: Are you seeing at the AOSP or horizon that you're prepared to flag today? Thank you.

Manuel Haushoff: Yeah, good question. You know, quite simply, the work that they've done there is just...

Manuel Haushoff: Looking at debottle necking, some of the piping that allowed to transfer between the two

Manuel Haushoff: Pumps that the team had increased the sizing on just modification to certain sizes of piping, so really it was just about ensuring that the teams had the, you know, the, you know, these.

Manuel Haushoff: The plows well understood, the engineering of part of it understood.

Manuel Haushoff: But the key to this is their low capital dollars overall and you look at it that's 5,000 barrels a day for 50 years.

Manuel Haushoff: Additional opportunities. You know, we'll continue to work on efficiencies and finding

Manuel Haushoff: Tweaks that we can do are a creek capacity in both our eyes and...

Manuel Haushoff: 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.

Manuel Haushoff: have done on implementing the reliability project enhancement and the de-bottle-like project as Scott heard. The teams did very good work on that and the results of the work that they did on those projects.

Speaker Change: Terrific. And then my second question is on the North Sea. We've seen a pretty big

Speaker Change: Shift and 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 base and width.

Speaker Change: on unconstrained market egress. And so my question is, is there any scenario where you consider building up your position again, or is the most likely scenario still a slow wind down of those aspects?

Speaker Change: Yeah, it's a good question. You know, I think in what we know today and and and where we're out with the development of the reserves there, we would continue to unwind and abandon the facilities, the facilities that that development in the North Sea has, you know,

Speaker Change: The downward direction and the production has not something new as you know, there's been significant

I would say uh...

Speaker Change: Public Regime to move away from oil and gas and to your point in out 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 have the fiscal regimes been different to...

Speaker Change: 5-10 years ago, it might be different for us today, but as we stand today, we're not likely to invest in more capital in those areas.

Thanks, Scott. I'll turn it back.

Speaker Change: Thank you. The next question comes from Roger Read at Wells Fargo. Please go ahead.

Yes, thanks. Good morning.

Speaker Change: What a talk on here about, you know, incremental investments growth, but things you've done and things you may do. Oh, just curious, how you look at...

Speaker Change: from either a return standpoint or what your break evens are as you think about these investments.

Speaker Change: You know, where you've been able to deep bottle that 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 thoughts. [inaudible]

Speaker Change: So Roger, you're referring to like a larger project? Is that what you mean by it?

for your commentary.

Speaker Change: 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...

Speaker Change: You know, in a, 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. Thanks.

Okay, I gotcha I gotcha.

Speaker Change: So, really, those types of projects, like the ones we've done in the past.

Speaker Change: We get these incremental barrels on a year-over-year basis. Those are the first projects that you want to look at them 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. You actually helps your operating cost because most of your costs are already on a fixed basis, Roger. So all these areas where we're especially in the mines where we're adding incremental barrels are in fact any area in the company where we're adding to the company where we're adding incremental barrels are in the company where we're adding

Speaker Change: and incremental barrels through facilities. They're great projects with the best returns because the infrastructure is mostly built.

Speaker Change: Yeah, well, I guess I was just curious. I mean, how do you, how do you look at them from, uh,

Speaker Change: I'm just trying to think about what makes sense here in terms of investment in a, you know, called a flatish oil outlook. Seems like you've got these opportunities. I mean, are they going to be equivalent to $30 break evens or 40 or 50? I mean, just how do you kind of scale that up?

Speaker Change: 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 the best, some of the best capital efficiencies.

He would always want to do those first Roger.

Speaker Change: I will leave it there. Thank you. This is for any investment environment.

Thank you.

Speaker Change: Thank you. The next question comes from John Moil at JB Morgan. Please go ahead.

Hi, good morning. Thanks for taking my question.

Thank you.

Speaker Change: So my first one's on the mind and I think you addressed this a little bit but they ran a very strong weight rates in January , February

Speaker Change: in context of your now-raised capacity. There's no turnaround at a rise in this year. You do have one at AOSP and two Q, but outside of the scope of turnaround and, of course, excluding the impact of the clothes 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?

Speaker Change: Yeah, they're not seasonal. You know, when I think you just have to look at it, these two months, very strong rates, the rates increase from the fourth quarter coming into the first quarter and that is because we're optimized.

Speaker Change: of the projects that I talked about at both Scottford and Horizon, and so...

Speaker Change: So those are definitely strong rates. There was essentially no unplanned on time.

to speak of in the past two months.

Speaker Change: We normally do budget for on planned downtime on any given month throughout the entire year.

Speaker Change: So, I would expect that, you know, while in the one hand, our teams are going to focus on ensuring they're optimizing.

Speaker Change: The production opportunities as much as they possibly can, we still understand that from time to time there could be some unplanned down time due to an unforeseen event.

that budgeted and so you know

Speaker Change: 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 Opal's minds.

Speaker Change: 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.

Speaker Change: 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

Speaker Change: 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 climb a full year of tax appreciation in that one quarter. So that'll be on a go for it, but you'll see it all over the fold.

Speaker Change: of the full year. So that's just the difference and that's the impact of the taxes you see in Q4.

Thank you.

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

Neil Mehta: Thanks, team. So my first question is just on the macro, obviously.

Neil Mehta: There's a lot of moving pieces around here, around WCS in the 25 presentation.

Speaker Change: You guys talked about using a $14 planning assumption for WTI WCS, which I guess was the strip at the time, and does has anything changed in that world view? How are you thinking about the impacts?

Speaker Change: of tariffs to the extent that there is some durability to them, and, you know, any perspectives on how much is absorbed by the produced services, the refiners, I just a lot of moving pieces around the differential, but your perspective on the market would be great.

Yeah, good question, Neil.

Speaker Change: I think what you're seeing in the market today, we've seen WCS to Houston, you know, change over the past month here in and around that $4 range, it's narrowed into around $2 to $3, so call it $2.50.

Speaker Change: It suggests that maybe some of the costs of the tariffs would be passed on through to the consumer in the U.S.

on the WCS, HARTISTY, WTI, WCS, and HARTISTY side.

Speaker Change: We've seen fluctuations. I saw this morning, April in and around.

Speaker Change: Some sales at 12.50 or the last couple of days they're up or upwards of 14.50 [inaudible]

Speaker Change: So there's some fluctuation in the hardesty on that. So still very fluid in terms of how this is all going to work out and

Speaker Change: It is our view that the, certainly that the US consumer is going to end up having to absorb.

The Cost of the Tariffs,

Speaker Change: to what degree or not exactly sure how the market is going to play out.

Speaker Change: 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.

Speaker Change: Yeah, that's helpful. And then, you know, the offset to that could be currency, right? Because the cat is now out to a $1.44 or so. So just love your perspective on how that can provide an offset. And as you think about...

Speaker Change: As you think about in general, which inning you are in terms of driving your operating costs per barrel lower. How much more is there to go as we work our way through the year.

Speaker Change: Yeah, 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. I think we'll probably just not comment on that. Sorry, the second part of your question was to repeat that.

Speaker Change: was just on Opex Per Barrel. How much can you drive that lower within without currency, right?

Speaker Change: 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.

Speaker Change: It's one of the key differentiators relative to our peers. We've got a low breakeven, low operating cost, low maintenance capital, and significant capital flexibility in our 2025 budget.

Speaker Change: And so, I think that both very well. And then you look at and you say, okay, well half of our production essentially is SCO production. So, you know, it's taken pricing, you know, plus or minus WTI. So, there's another strength for Canadian Natural.

Speaker Change: and so, if you look at how our barrels are marketed and...

Speaker Change: Most of our barrels are marketed here in Canada with the exception of 8,500 barrels a day, that's, you know, that we carry down a flat again in Keystone and then of course, 169,000 barrels per day that we move to the...

West Coast which is basically isolated. [inaudible]

Speaker Change: from the tariff. So most of our barrels are pretty much sold here.

Speaker Change: and I just want to make sure that that message is well understood. We've had superior netbacks and that low cost structure has.

Speaker Change: helped us through the, you know, previous times, such as COVID. We're able to, you know,

Speaker Change: Work with our vendors when oil pricing dipped to weight rate down into the little single digits. Certainly the cost of services dropped at that time.

Speaker Change: and so, you know, 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.

Speaker Change: 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 site and especially on the oil-sense mining site.

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

Thank you, thank you.

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

Speaker Change: Hi, gentlemen, great quarter and results into this first part of the year. Just following up on the Jack Pline Potential Expansion, 100,000 barrels a day.

Speaker Change: One is, what's the limiting factor in sanctioning that tomorrow? And two, is that included in your base reserves for 2024?

Speaker Change: In terms of the decision to go ahead with something like that, we've got the great thing about this as we have an ample opportunity for organic growth.

Speaker Change: The challenging thing in Canada is getting approval for large projects.

Speaker Change: The jackfish, the jackpine mine expansion already has that approval in place.

Speaker Change: So, we could build that out over time here in our capital allocation.

Model. I think it's a great tool to have in our…

in our tool chest here.

Um...

Speaker Change: 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

Pracing for egress.

Speaker Change: for carbon capture. So there's a number of factors that are going to go into making that decision because they are, as you know, you build a 100 or 150,000-barrel-aid project in the mine and it's going to run for 40 to 50 years.

Great. Thank you.

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

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

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