Q4 2024 Canadian Natural Resources Ltd Earnings Call
Speaker Change: Good morning. We would like to welcome everyone to Canadian Natural's 2024-4th quarter and year-end earnings conference call and webcast. After the presentation, we will conduct the 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 Naturals 24th, fourth 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 we review our advisory section in our financial statements that includes comments on non-GAAP scoters.
Scott Steltz: Speaking on today's call, we'll be Scott Stelt, our President, Robin Zayback, our Chief Operating Officer of V&P, 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 Steltz: Scott will first provide some examples of our top chair performance and strong execution over recent years before getting into the numerous operational records achieved in 2024. Next, Robin will provide highlights of our growing, high-value reserves that compete on
Scott Steltz: 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 Steltz: Before I get into our 2024 results, I'd like to run through some key factors that highlight our talk to your 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 Steltz: 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 Steltz: 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 Steltz: 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 Steltz: Over the past three years, we have achieved the following successes. Absolute production growth and approximately 82,100 B.O. East per day, the vast majority of which was liquid growth.
We have delivered annual production per share cager of 7 percent.
Scott Steltz: 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 Steltz: We returned over $11 per share of shareholders through dividends and share repurchases.
Scott Steltz: We increased our annualized quarterly dividend by 59% to $2.25 per share from $1.42 per share and the board has subsequently increased the dividend by another 4%.
Scott Steltz: Our share count reduced by approximately 240, 34,000 shares, or 11% in closes of shares issued upon exercise of stock conference.
Scott Steltz: Addie Moore-Value at AOSP through the acquisition of clothes in Q424 and a Swapchance action targeted to clothes by the end of Q2 this year consolidating our working interest in the Albion Minds to 100%
Scott Steltz: In the NLB and mines, these transactions will add approximately 93,500 barrels per day of long-life zero decline production to our world-class oil-sense mining and upgrading assets.
Scott Steltz: 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 Steltz: Expanding even further on AOSP and going back to 2017, we unlock significant long-term values since we first acquired an interest in this world-class asset. We've increased production and reduced operating costs through process improvements and optimization projects.
that approved reliability and increased utilization.
Scott Steltz: 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 Steltz: 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 Steltz: With 100% working interest in the minds, once the swap transaction closes, we are targeted to unlock further value with the effective and efficient operations and relentless continuous improvement culture.
Scott Steltz: 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 Debalot on that keen and reliability projects are total oil-sense mining production capacity increases to approximately 500 and 92,000 barrels per day.
Scott Steltz: and further to that. You combine our top tier conventional crude oil and liquid-rich natural gas assets with our leading oil sands, mining and upgrading assets. You get a significant and sustainable free cash flow and the ability to organically grow production if it makes sense to use oil.
Scott Steltz: I will now run through our strong 2024 operational results and highlights.
Scott Steltz: We hit several new records across our assets in 2024, including—
Scott Steltz: Record annual total production of approximately 1.36 million buoys per day, including record liquids production of over 1 million buoys per day.
Scott Steltz: Record Annual Oil Sense Mining and Upgrading Production, 472,245 barrels per day, and Record Quarterly Production, 534,631,000 barrels per day.
Scott Steltz: These Reconproduction rates resulted in the higher upgrade or utilization of 99% in 2024, including planned turn-around and 105% utilization in the fourth quarter.
Scott Steltz: Our low 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.
Scott Steltz: Our oil sends mining and upgrading assets continue to achieve strong production and high utilization in January of 2025 and February of 2025, averaging on a gross basis approximately 634,000 barrels per day over the two months.
Deborah Ray
Scott Steltz: 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 Debaudelmeck Project at Scottford.
Scott Steltz: Additionally, further value has been unlocked from piping modifications completed during the recent devout on the project at Scott Product Creator.
Scott Steltz: These modifications unlock approximately 5,000 barrels per day of annual growth production from the Elbian mines, resulting in higher utilization during planned, upgraded turnarounds.
Scott Steltz: This increased zero decline production will continue to benefit Canadian natural for decades, including our increased ownership in the Albion Minds.
and our Thermal and Situ Operations.
Scott Steltz: 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 Path at Development Program.
Scott Steltz: 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 Steltz: We have significant available processing capacity of approximately 70,000 barrels per day in our thermal operations.
Scott Steltz: We continue to utilize this available capacity through our strong execution under Drill-de-Fill pad additions and have been able to bring these pads on production ahead of schedule. For example, a wolf lake.
Scott Steltz: 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 Steltz: 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 Steltz: Ajakfish, we drill the SEG-D pad in Q4-24 with Production Pardyth come on in Q3-25.
Scott Steltz: At Pike, we are drilling two SAG-D pads in the first half of 2025, which will be tied into existing jackfish facilities. These two pads are targeted to come on production in 2026 and keep the jackfish plant to fork velocity.
Scott Steltz: The Kirby, we are currently drilling a SAGD pad targeted to come on production in Q425, but the second SAGD pad targeted to be drilled in Q425 and come on production in Q4 or 2026.
on the committee on the side of the business.
Scott Steltz: Primary Heavy Oil Production, average approximately 79,100 barrels per day, a 2% increase over 2023, reflecting strong results from multilateral wells on our extensive heavy oil land base.
Scott Steltz: We drilled a 121 net horizontal multilateral primary heavy oil wells in 2024, compared to 104 in 2023.
Scott Steltz: Multilateral Wells combined increased reservoir capture and higher production with reduced servicing requirements which lowers operating cost.
Scott Steltz: As we shift more of our primary heavy oil assets to multilateral development, we are seeing overall operating costs coming down as these wells are more efficient and require less servicing activity.
Scott Steltz: In 2024, primary heavy oil operating cost averaged $18.11 per barrel, down 9% from 2023.
Scott Steltz: We continue to optimize well design length and length in our highly successful multilateral program, achieving talk to your average initial peak rates of approximately 250 barrels per day per well, which is 43% higher than the budgeted initial peak rate of 175 barrels per
Scott Steltz: and a further 9% higher than a previously disclosed rate of 230 barrels per day.
Scott Steltz: North American Lake Crude Oil and the NGL production average approximately 114,400 barrels per day in 2024, an increase of 5% compared to 2023. Half of this increase is driven by strong organic growth and liquid rich natural gas, with the remainder related to recently acquired duvernous assets.
Scott Steltz: North American Natural Gas Production, Average 2.14 BCF in 2024, which is comparable to 2023.
Scott Steltz: 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 Steltz: Operating costs in our North American natural gas averaged $1.19 per MCF in 2024 for 6% lower than 2023.
Scott Steltz: 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 Steltz: We will leverage this expanded portfolio of organic growth opportunities to continue.
Scott Steltz: 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 Steltz: We have a long track record of consistently delivering strong industry leading results driven by our safe, reliable operations and relentless focus on continuous improvement which maximizes long-term shareholder value.
Scott Steltz: Now I will turn it over to Robin to speak to our 2024 year-end reserves.
Thank you Scott, and good morning everyone.
Scott Steltz: 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 Steltz: 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 Steltz: As you just heard from Scott, Canadian Natural had a very strong year. One of the many places in which that is evident are the company's reserves.
Scott Steltz: For December 31st, 2024, Total Proof Reserves are 15.2 billion DOE, and Total Proof Plus probable reserves are 20.1 billion DOE.
Scott Steltz: This is a 9% increase in both proved and proved plus probable reserves compared to December 2023.
Scott Steltz: Canadian Natural Replace 2024 Production by 365% on a total-proof basis and 422% on a total-proof
Scott Steltz: 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 Steltz: It is also notable that even excluding the contribution of acquisitions in 2024, the company's organic reserves replacement would still have been about 118% of production in total proved, and about 128% of production in total proved, plus probable.
Scott Steltz: resulting in a total-proved reserve life index of 33 years and a total-proved plus probable reserve life index of 44 years.
Scott Steltz: 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 Steltz: In 2024, the strength of Canadian Natural's assets and results also continue to be reflected in our strong, finding, and development costs.
Scott Steltz: Decorporate finding, development and acquisition costs, excluding changes in future development costs, are $7.82 per VUE for total-proved reserves, and $6.76 per VUE for total-proved plus probable reserves.
Scott Steltz: Including changes in future development cost, corporate FDNA is 1356 per VLE for Total Proved and 1260 per VLE for Total Proved, plus probable.
Scott Steltz: The net present value of future net revenue before income tax using a 10% discount rate and including the
Scott Steltz: is approximately $170 billion for Total Proof Reserves and approximately $206 billion for Total Proof Plus Probable Reserves.
Scott Steltz: 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 Steltz: In summary, our twenty-twenty-four reserves reflect the strength and depth of Canadian Natural's asset base, the predictability of the company's long-life, low-declined reserves
Scott Steltz: The value of accretive acquisitions completed in 2024, and our proven ability to deliver organic reserves and value growth.
I will hand over to Mark now for financial highlights.
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
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.
Mark: to $58.3 per comment share, or $2.35 per comment 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.
Mark: After the recent acquisitions, our financial position remains strong and with the additional free cash flow generation, our US dollar WTI break even remains top tier in the low to mid-40 WTI, Proveiro.
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 decline assets, and reserve base combined with a relentless commitment to continuous improvement, continues to determine 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 Steltz: With that, I'll turn it back to you, Scott, for some final comments.
Scott Steltz: Thank you, Mark. In summary, our consistent and reliable results are underpin by safe and reliable operations.
Scott Steltz: 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.
Scott Steltz: We consistently deliver top-tier operational financial results, which is unique and sustainable.
Clearly demonstrating her ability to both. [inaudible]
Thank you.
Scott Steltz: economically grow and deliver returns to our shareholders by balancing across our four pillars of Capitol
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.
Thank you.
Speaker Change: 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 speakerphone, please lift the handset 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. Couple of questions in my end, I guess.
Greg Pardee: Scott, you talked about the shell swap and 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: 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 a jackpine 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.
So we have the opportunity for…
Speaker Change: Good strong growth opportunities in the Albion Mind, and I think it will take...
Let's work on egress opportunities.
Speaker Change: in order to ensure that those barrels can move to market, but there's certainly the opportunities there. And, uh, varies.
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.
Greg Pardee: 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 it on production such as the SIGD and CSS1000, that's because...
we employ our continuous improvement. [inaudible]
Greg Pardee: So every time we build a pad, we take the learnings from that and things that we could do better, 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.
Speaker Change: Thank you. The next question comes from Dennis Fong at CIBC. Please go ahead.
Dennis Fong: Hi, good morning everyone. And again, I would like to echo the congratulations to Mark on your new role.
Thank you.
Speaker Change: My first question may be followed along the line of great question there just around.
Your Oil Fence Binding Operations Fence.
Speaker Change: So, you guys have shown obviously a track record of really optimizing production and throwing in a little small, we'll call it debondled necking or just even driving better through put, 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 upgrade or capacity, what are maybe some of your options that you can look at doing, and what are the synergies in that like...
Speaker Change: Nearby asset structure that you can maybe lean on to kind of gain incremental margin.
Yeah, good question, Dennis. In terms of the AUSP minds,
Um
and relative to the Scottford production.
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 Ryzen, 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 these, 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 will be providing an expansion opportunity to bring on additional bitchman 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.
Speaker Change: Yeah, I think you got it being on Dennis. It's primarily in the Primrose Wolf Lake area. The SAGS sets are primarily full, certainly jackfishes. And so, yeah, I think if you just over time we're seeing 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 the 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.
Scott Steltz: Great. Really appreciate that color, Scott. I'll turn it back. Thanks.
Speaker Change: Thank you. The next question comes from Manav Gupta at UPS Financial. Please go ahead.
Speaker Change: 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. I think you see an uptick on the pricing going into 2026, obviously on the back of getting LNG Canada online.
and, you know, I think that...
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 liquid's rich.
Speaker Change: Kathy Areas, such as the Montany and Durinay, but certainly looks like to me that the market it is somewhat...
Speaker Change: I would say conservative, potentially on the pricing, but again, some of that's going to depend on how quickly that energy capacity can be backfilled, but...
I think those are some of the driving factors there.
Speaker Change: And in a quite 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 are 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 sounds to make the biggest contributions.
Speaker Change: We're certainly well positioned from that in our mining operations. We've talked about what's right in the past and...
Speaker Change: 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. The next question comes from Patrick or work at ATB Capital Markets. Please go ahead.
Speaker Change: Just wondering about your thoughts in terms of flexing the balance sheet here in the M&A market 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.
Speaker Change: 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,
Speaker Change: The fluctuations in pricing as a result of all this discussions on tariffs and so forth, it's going to take some time to start some of that out. But we're quite happy if you look at our reserve base we have.
Speaker Change: 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.
Speaker Change: of Organic Girls and taking advantage of opportunity to get acquisitions and unless there's something that changes significantly on the environment going forward, I don't see our strategy changing.
Speaker Change: OK, great. And then, maybe just on the operational side, looking through some of the numbers here, particular to the commercial.
Speaker Change: Solvent Project at Kirby North. I noticed that the solvent recoveries.
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?
Speaker Change: and then what the view is in terms of...
Speaker Change: Potential proliferation of this technology not through the rest of the portfolio, now that you've had it online for a while.
Speaker Change: Patrick, I don't think I could read anything into too much into the change.
in terms of the recovery.
Speaker Change: 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.
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 to determine 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.
Speaker Change: into areas such as Pike as we move forward. 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.
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 in our toolbox.
Okay, thank you very much.
Speaker Change: Thank you. The next question comes from Menno Hulshof at TV Securities. Please go ahead.
Manuel Halshov: Thanks and good morning everyone. Can you, can we begin by maybe having you elaborate on the...
Manuel Halshov: 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 Halshov: Are you seeing at the AOSP or the horizon that you're prepared to fly today? Thank you.
Manuel Halshov: Yeah, good question. You know, quite simply, the work that they've done there is just...
Manuel Halshov: Looking at debottle necking, some of the piping that allowed to transfer between the two
Manuel Halshov: Humps that the teams 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, these.
Manuel Halshov: The plows well understood, the engineering of part of it understood.
Manuel Halshov: Not overly complex, but still step through it very methodically, making sure that we're making the right moves there. I don't have a capital efficiency number for you off the top of my head.
Manuel Halshov: 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 Halshov: Additional opportunities. We'll continue to work on efficiencies and finding...
Manuel Halshov: Tweaks that we can do or create capacity in both our eyes and...
Manuel Halshov: and the Albion assets you saw, we had very strong production in the first quarter, started around 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 Halshov: have done on implementing the reliability project that has been in the D-Bottle Leg project. As Scott heard, the teams did very good work on that and the results of the work that they did on those projects.
Manuel Halshov: are turning out to be better than we actually anticipated. So we're getting strong run rates and we're getting more production through the facility than we originally had the engineering design for. So that's a very very good positive from a go forward basis here.
Speaker Change: Terrific. And then my second question is on the Ethanore C. We've seen a pretty big
Manuel Halshov: Ship in focus back to energy security in the UK and Europe more generally, and I think there's certainly growing view that European domestic supply growth becomes a much bigger.
Speaker Change: Priority looking forward. You have a very long history in the North Sea. I think everybody understands that. It's a basin with...
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 one of those aspects?
Speaker Change: Yeah, it's a good question. I think in what we know today, and where we're at with the development of the reserves there, we would continue to unwind and abandon the facilities, the facilities. 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
Speaker Change: Political 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 had the fiscal regime spend different to...
Speaker Change: 5, 10 years ago, it might be different for us today, but as we stand today, we're not likely investing 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 incremental investments, growth, but things you've done and things you may do. I'm just curious, how do you look at...
Speaker Change: from either a return standpoint or what your break evens are as you think about these investments and
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 objects.
Speaker Change: So Roger, you're referring to it 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.
Okay, I gotcha
Speaker Change: So really those types of projects, like the ones we've done in the past.
Speaker Change: where 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 we're adding to, in fact, any area in the company we're adding incremental barrels are, in fact, any area in the company we're adding
Speaker Change: and incremental barrels through facilities. It's a great project 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 look at them from...
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 equivalent to $30 break evens or 40 or 50? I mean, just how do you kind of scale that up?
Speaker Change: They would make sense at low-dollar cost, Roger. I think I follow what you're getting at. But, again, because they have some of the best capital efficiencies, you would always want to do those first Roger.
I'll leave it there. Thanks.
Thank you.
Speaker Change: Thank you. The next question comes from John Royall at JP Morgan. Please go ahead.
Hi, good morning. Thanks for taking my question.
Thank you.
Speaker Change: So, my first one's on the minds and I think you addressed this a little bit but they ran a very strong weight rates in January , February .
Speaker Change: in the 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 turnarounds and...
Speaker Change: 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 going to 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: 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 speakers in the past two months.
Speaker Change: We normally do budget for on planned downtime on any given months 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 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.
Speaker Change: 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 Opel's mind.
Speaker Change: Great, thank you. And then my next question is on the Chevron acquisition. Would 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 tax in 25?
Hi, it's Mark.
Speaker Change: You know, we don't guide to sort of tacticals, particularly on that. I know I've discussed it before when you look at...
Speaker Change: You know, the PP&E values of the acquisition, we do generate, you know, tax pools.
Speaker Change: and you saw that in Q4 where we're able to climb a full year of tax depreciation in that one quarter so that'll be on a go for it but you'll see it over the full year so that's just the difference and that's the impact of the taxes you see in Q4.
Thank you.
Speaker Change: Thank you. The next question comes from Neil Mehta at Goldman Sachs. Please go ahead.
Neil Mehta: Okay, thanks, team. So, my first question is just on the macro, obviously.
Neil Mehta: There's a lot of moving pieces around tariffs 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.
Speaker Change: Does has anything changed in that world view? How are you thinking about the impacts of tariffs, the extent that there is some durability to them, and any perspectives on how much is absorbed by the produce air versus?
Speaker Change: The refiner, so just a lot of moving pieces around the differential but your perspective on the market would be great.
Speaker Change: Yeah, good question, Neil. You know, 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, which is narrowed into around $2 to $3, so call it $2.50.
It suggests that maybe some of the ...
Speaker Change: Some of the costs of the tariffs would be passed on through to the consumer in the U.S.
on the WCS, HARTISTY, WTA, 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]
So there's some fluctuation. [inaudible]
Speaker Change: and in a hearted state on that. So still very fluid in terms of how this is all going to work out.
Speaker Change: It is our view that the, certainly that the US consumer is going to end up having to absorb.
of the cost of the tariff.
Speaker Change: It could be on a shared basis. It could be leaning more towards the US 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: 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. [inaudible]
Speaker Change: Yeah, another good question. Now, I think we'll see where the dollar goes. It's difficult to make a comment at this time. There's a lot of political activity driving that. So, you know,
Speaker Change: 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 break even low operating costs, 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 taking 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 a 7,500 barrels a day that's, you know, that we carry down a flat again in the keystone, and then of course, 169 dollars a barrels a day that we move to be...
Speaker Change: West Coast, which is basically isolated from the tariff. So most of our barrels are pretty much sold here in Alberta as well.
Speaker Change: Yes, depending on the arborals are dependent ones, WCF pricing certainly, but the underline or the underpinning factor for Canadian natural is a low cost structure.
Speaker Change: and you know, I just want to make sure that that message is well understood. We've had get superior netbacks and that low cost structure has 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 gets way down into the little single digits, certainly the cost of services dropped at that time.
Speaker Change: 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
Speaker Change: Yes, 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 Bustlinger 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 Klein Line 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: So in terms of the you know the decision to go ahead with something like that we've got the great thing about this is we have an ample opportunity for organic growth.
Um...
Speaker Change: The challenging thing in Canada is getting approval for large projects.
Speaker Change: The jackfish persuade 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.
Thank you.
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...
Speaker Change: for pricing, for egress, 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 barely a project in the mine, and it's going to run for 40 to 50 years.
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.