Q3 2025 Canadian Natural Resources Ltd Earnings Call

Good morning.

We would like to welcome everyone to Canadian Naturals 2025 third quarter earnings conference call and webcast.

After the presentation, we will conduct a question and answer session.

Instructions will be given at that time.

Please note that this call is being recorded.

Today November 6th 2025 at 9:00 a.m. Mountain Time.

I would now like to turn the meeting over to your host. For today's call, Lance cassen manager of investor relations. Please go ahead.

Thank you, operator. Good morning.

Thanks for joining Canadian Naturals 2025 third quarter earnings conference call.

As always I'd like to remind you of our forward-looking statements and it should be noted that in our reporting disclosures, everything is in Canadian dollars unless otherwise stated.

And we report a reserves and production before royalties.

Also, I would suggest review The Advisory section and our financial statements that includes comments on non-gaap disclosure.

Speaking on today's call, will be Scott stealth our president and Victor Durrell our Chief Financial Officer. Additionally in the room with us this morning are robbing Zach, CEO of VP and jrocks, you have oil sounds

Scott will Begin by running through our strong operational performance. That includes numerous production records in the quarter and are leading operating costs.

Victor will then summarize, our strong financial results and our significant returns to shareholders so far this year.

To close Scott will summarize priority open the line for questions with that over to you Scott.

Thank you, Lance. And good morning, everyone.

Corporate production during the quarter, both in liquids and natural gas production.

This is is the second time this year where we have achieved quarterly production records on strong performance by our teams, as we executed both organic growth and accretive acquisitions.

Our production totals approximately 1.62 million buies per day.

Which, as mentioned, includes records for both liquids and natural gas at approximately 1.18 million barrels per day and approximately 2.7 BCF per day, respectively.

The increase in production from Q3 2024 levels is very significant totaling approximately 257,000 Boise per day or up 19%.

Our world-class oil, sands Mining and upgrading assets. Continue to achieve strong. Operational performance as Q3 2025 production average. Approximately 581,000 barrels of SEO with strong utilization of 104% and industry-leading operating costs to approximately 21 dollars per barrel.

on November 1st, we closed the AOSP swap with Shell Canada Limited

Canadian natural. Now, owns and operates, 100% of the albian oil, sands minds and Associated reserves and retains a non-operated in 80% working interest in the scottford upgrader and Quest facilities.

This transaction adds approximately 31,000, barrels per day of annual, zero decline, fisherman, production to our portfolio, providing additional cash flow, driving long-term value creation for our shareholders.

This swap, also enhances our ability to integrate equipment and services across from mining operations, unlocking additional value through continuous Improvement initiatives.

Subsequent to the close of the swap transaction. We increased our 2025 corporate production, guidance range,

To 1,560,000 boies per day. 100 180.

Million barrels per day, while our operating capital forecast remained unchanged at approximately $5.9 billion, despite executing on additional activity on our larger asset base, reflecting acquisitions this year.

I will now run through a third quarter area, operating results. Starting with oil, sands Mining and upgrading

During the quarter, our world-class oil sands mining upgrading production was strong averaging 581,136 barrels per day.

Of the SEO, an increase of approximately 83,500 barrels per day or 17% from Q3 2024 levels reflecting the additional interest in the AOSP acquired in December 2024, combined with our effective and efficient operations with drove stronger utilization of approximately 104% in the quarter.

Additionally, Canadian Naturals, oil sands Mining and upgrading operating costs continue to be industry-leading. Averaging, 21 dollars, 29 cents per barrel of SEO and Q3 of 2025.

And our thermal insitu operations. We achieved strong thermal production in the quarter, averaging 274,752, barrels per day. 23 up slightly from, Q3 2024 levels,

Thermal and situ operating costs remain strong averaging, 10.35 cents per barrel in Q3 a decrease of 2% from the same quarter last year.

We continue to progress our pad development plans across the thermal assets Primrose. We began drilling a CSS pad in Q3 of 25 with production targeted to come on in the second half of 26.

Jackfish we brought a saggy pad on production in July 25th. As planned?

The Kirby we brought on a 5. Well, per se on production in late, October as planned.

And lastly, at Pike, the company tied in the 2 recruit SGD pads into the jackfish facilities.

These 2 saggy pads. Targeted to keep the jackfish facilities at full capacity for the first pad, targeted to come on production, in January 2026, the second pad Q2 of 26.

At the commercial scale. Solvent Bagdad Herbie, North, current, sore, reductions, and solvent. Recoveries are median expectations following recent work, overs and optimizations.

The conventional side of the business. Canadian natural is highly successful. Multilateral heavy crude oil, drilling programs continues to unlock opportunities on our approximately 3 million net Acres of high-quality land. Throughout our primary heavy oil, crew, crude oil assets,

Reflecting strong drilling results on our multilateral wells.

operating costs in our primary heavy oil, crude oil operations, averaged $16.46 per barrel in Q3, a decrease of 12% from Q3 of 2024 primarily reflecting higher production volumes in the increase in proportion of lower operating costs, multilateral production

Lake production averaged approximately 42,100 barrels per day. A decrease of 7% from Q3 of 24 reflecting plan maintenance that took place in Q3 of 25, the low nature of field declines from this long life, low decline asset,

Low operating costs of Pelican. Averaged $9 per barrel in the quarter.

North American Lake crude oil natural gas production. Averaged 180,100 barrels per day during the quarter and increase of 69% to approximately 74,000 barrels per day. From few 3 of 24, primarily reflecting production volumes from the acquisition of the liquid which do re Assets in December of 24 and light crude oil from the pallets or block Assets in Q2 of this year, as well as liquid-rich montney assets in the grand period era, you're in the third quarter.

Operating costs of companies in North American Lake crude oil and NGL operations, averaged 12.91, cents per barrel.

A decrease of 6% from Q3 24 primarily reflecting higher production volumes.

The natural gas site. North America, production, average, approximately 2.66 BCF for the quarter. An increase of 30% from Q3 2024 levels, primarily reflecting the Dwayne and Monty Acquisitions and strong billing results in our liquidity, natural gas assets.

North American Natural Gas operating costs, the average dollar 14 per mcf.

Q3 saw a decrease of 7% from Q3 at 24 levels of A123 per Mcf collecting.

Higher production volumes and cost efficiencies.

Our unique diverse asset base. Provides this with a competitive Advantage. We allocate Capital to the highest return projects without being reliant. On any 1 commodity.

Our consistent and top, tier results are driven by safe and reliable operations, our commitment to continuous Improvement ordered by a strong team culture and all areas of our company that focus on improving our cost driving execution of growth opportunities and increasing value to shareholders.

Now, I will turn it over to Victor for our third quarter financial review.

Thanks Scott and good morning, everyone.

In the third quarter of 2025, we achieved several production records as a result of a strong operational performance and the accretive acquisition over the past year.

Contributing to the strong results. This quarter.

our teams demonstrated excellent execution evidence through a strong operating cost performance in the

our results, including strategic Acquisitions in the last 12 months, supported strong quarterly, adjusted funds flow of approximately 3.9 billion.

And adjusted net earnings of 1.8 billion.

Returns to shareholders in the quarter were 1.5 billion including 1.2 billion of dividends and 300 million of share repurchases.

Dividend payments and share, repurchases is 2025 up to and including November 5th. Bring total year-to-date shareholder returns to approximately 6.2 billion and contributing significant production. Growth per share in 2025, targeted at 16% compared to 2024 demonstrating, very significant value creation this year.

As a reminder, Canadian natural has increased its dividend for 25. Consecutive years with a cagar of 21%. A truly impressive track record that is unique amongst our peer group,

Subsequent to quarter end. The board has approved a quarterly dividend, a 58.75 cents per share payable on January, 6th, 2026 to shareholders of record at the close of business on December 12th.

2025.

Our balance sheet remains strong with quarter, end debt of 0.9 times and debt to book Capital coming in at 29.8%.

Order and liquidity were also strong at over $4.3 billion, reflecting the undrawn revolving bank facility.

Cash on hand at period end. Additionally, during Q3 the company repaid, 600 million of US dollar debt. Securities and received a new long-term investment grade. Credit rating of Triple B plus from Fitch rating.

our third quarter results, reflect the impact of 3 of acquisition,

Which have immediately contributed to incremental production and additional free cash flow generation.

Demonstrates, our industry-leading cost structure large Reserve. Base of high-quality long-life low decline assets,

and our commitment to continuous Improvement and reliable execution.

These factors along the company's track record of delivering, strong shareholder returns.

For its significant long-term value creation for Canadian natural and our shareholders.

With that. I'll turn it back to you.

Thanks Victor in summary here at Canadian natural or culture of continuous Improvement ownership alignment with shareholders drives our teams to create significant value, across all of the areas company.

Once again, we achieved record production that will strong financial results through our effective and efficient operations. Driving strong Returns on Capital value creation for our shareholders.

Lastly just a reminder that we will be hosting our open house tomorrow. Morning started at 8:30. Eastern Standard Time where we will go over our strategy and unparalleled dependent.

Provide details on our assets and value creation opportunities.

We are also invited to listen to the management presentation and view, the presentation slides via webcast. We can look for our website for further details.

Not, we'll turn it over for questions.

Thank you.

Ladies and gentlemen, we will now begin the question and answer session.

Should you have a question? Please press star 1 and your touchtone phone.

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If you're using a speaker-phone, please lift the handset, before pressing any keys?

When moment, please for your first question.

Your first question comes from Dennis Fong of CIBC World Markets. Your line is already open.

Hi, good morning, and uh, thank you for taking my questions. Um, the first 1 is, is related to your recent closing of the, uh, uh, asset swap for the albian mine. Um, now that you can control to mining Assets in very close, proximity to each other. Can you talk to some of, um, the potential upside or opportunities that exist? I know you've already addressed, uh, Consulting inventory and and lowering kind of, uh, spare parts required in kind of various, uh, store rooms. But can you talk to us? Maybe operational benefits, uh, beyond that, uh, again given the proximity of the 2 assets?

Yeah, thanks. Dennis. And, and in addition to, to what you had mentioned, there's also the utilization of, uh, equipment so that would include the large Haul trucks and the, uh, support equipment such as dozers graders, and

And other, uh, assets that, uh, of the of that nature. But Dennis, I would, I would, uh, suggest that uh, um, it would be worthwhile for, uh, listening for more details tomorrow to run an open house and I we can get into some more detail in terms of the cost savings that uh, that we are uh working on and uh, working to achieve there. So I think that's probably the best way to explain it is uh, be a part of our open house tomorrow.

Perfect. I'll, I'll have to wait and see I guess on, on that basis. Um, I, I suspect this the second question may have a similar answer, but I I mean given the the continued development, um, and, and the the time of the, the wealth that Pike, um, I was just kind of looking through and it seems like gross, um, in close proximity to your Kirby assets, has a similar, uh, I guess opportunity. There you can, maybe outline, maybe some of the efficiencies that you could see via developing kind of proximal resource to your uh 2 other uh central processing facilities.

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

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

Thanks, Dennis.

Your next question comes from manav. Gupta of UBS.

Your line is already open.

Yesterday, Energy Transfer announced that they are looking to fit their South Illinois Connector pipeline, aiming to get more Canadian crude into Illinois and to the Gulf Coast. I just wanted to understand, would you be open to participating in any such project or any other major projects out there that could provide you with more incremental capacity towards the Midcontinent or Gulf Coast refiners, where your crude is highly valued?

Yeah, thanks for the question. And certainly we review those opportunities for e-grass, uh, when abled and, you know, I can just tell you that there are a number of opportunities, uh, whether it be in Bridge, uh, TMX or others. Certainly going to look at those and, uh, to see if, uh, we were participate and, um, volumes commitments on those, uh, or otherwise. But, uh, the good news is for the Basin and, uh, the egress opportunities that, uh, companies have been talking about old very well for strong differentials. And ultimately that's the most important part of the aspect, whether your barrels are locked up or whether they're sold in the uh, Hardesty Edmonton areas. It's a positive for for Canadian Crews. So looking forward to, uh,

Those opportunities they come about and uh we'll see where that goes.

Thank you. I'll turn it over.

Your next question comes from.

Dog.

Legate of Wolfe research.

Your line is already open.

Hey, good morning team. This is Carlos actually on for Doug who, by the way, is on his way to your Analyst Day. So, uh, he sends his apologies. But just to be real quick, with this, um, perspective of my peers' time. Number one, I wonder what your perception is today of the need to further consolidate West Canada gas in the context of weak AECO pricing and despite the ramp in LNG, perhaps similar to how your users have been doing in in the recent past.

Yeah, it's a good question. And you, you don't have to apologize for for a dog. That's good to see that he'll show up tomorrow. We're looking forward to those discussion in terms of, um, a consolidation. Uh, certainly we're seeing some of that evolved. I I think the most important thing to the Basin is, uh, maybe it's a certain degree of consolidation, but the most important thing is egress opportunities. So the more gas that we can move out of the base and the better, the LG projects that, uh, are are online. Now, I don't see Canada and others that are are coming on in the future are very much.

Uh needed for the Basin to fully unlock the potential. So you know, in spite of whether whatever uh Emily activity that may be going and then the Basin uh we look forward to more grass because ultimately that's uh what the Basin requires.

So thank you very much, appreciate that. And just a real quick housekeeping item looks like your Palace are in Denver and I might have contributed to your sequential um oil production growth. Just just wonder if you could share if that is the case. And if so how how does it set you up for your growth, Outlook into first half of 26?

Yeah. Certainly both of those areas will be part of our budgeting activities for for next year. Um, uh, We've Got Strong production growth in the do Renee. And, uh, I've been taking over the assets, uh, earlier this year and the policer block, we continue the capital allocation towards. Uh, the only light oil wells in that area and it'll be a part of our program for next year as well.

Thank you team. Appreciate it.

Thanks.

Your next question comes from Greg party of RBC Capital markets your line is already open.

Yeah, thanks, thanks. Good morning and Scott. I'll apologize because I I won't be there in person tomorrow, which is probably the first time in, you know, 20-something years but in any event. Um, I'll have a go at you, maybe, uh, ahead of tomorrow. Um, what what's your thinking now? I mean we've had a new federal government in place, uh, for a little bit of time now, uh, there's been a lot more dialogue with the industry, just curious, any broad Strokes on, uh, progress on things like Pathways. Um, how much easier is it maybe now to to work with the federal government? Is this sort of a cautious approach just interested in any any broad Strokes there that you might have.

More positive signs than we've seen in the past, uh, under previous leadership. So we liked the discussions that are going on Greg. But as always, there's lots of details to work through. In terms of uh carbon competitiveness, that's going to be key to understand. Uh the impacts that uh may come out of that level of discussion that the details at this point are not well understood and and uh we'll certainly be very anxious to work with the government and the government Alberta to make sure that we got a collaborative uh way to move forward to address the uh the need for a Pathways and certainly for future growth opportunities to again unlock uh additional value out of the Basin, whether it be oil, sands or conventional uh more egress is needed on both gas and oil. And so the more that we can do collectively working together with the governments

For the GDP to Canada. So I think it's really important to, to, to continue on these discussions. Um, good to see what we have seen so far. Uh, but want to get into the detailed discussions, Greg, and, and make sure we truly understand what carbon competitive actually means, and until we get those details, it's a little bit early to say, to say exactly how things were unfold, but we are encouraged by the engagement.

Okay. Okay. Thank you know, I I think that's probably as much as you can say right now. And as you say, there's there's a lot more water that needs to flow into the bridge. Maybe you'll pivot just on a specific question. Um,

That came in from from 1 investor which was just around, uh, the potential acceleration of the T. Block decommissioning. So if we look at your financing cost, uh, in 3Q significantly lower, I know some of that had to do with PRT and so forth. The abandonment expenditures tend to be a fairly large number. I'm just trying to get even though you may not want to talk too much about 26 capex and so forth. Maybe, uh, just want to get a sense maybe from Victor as to what the implications there could be. And to the extent, you can quantify it that would or even roughly quantify it. That would be super helpful.

Just in terms of the impacts on the 26, capital budget. Is that the question effectively Greg? Yeah, I mean so Victor. Like if I look at what 25 I think it was like what 756 million a good chunk of that. I know is North Sea and then there's PRT in there and you get cast, you know, you get cash, recoveries, but I'm just trying to understand, should we be directionally thinking about, you know, a bigger number than say, 750 next year if you decide to accelerate or, or would this all kind of come out in the wash

Yeah, the way I look at it Greg, is that 2025 coming into 2026 the expenditure levels? Do go up modestly in 26 overall um that would be the target. But uh we're working through that still and we're trying to uh, plan for our 2026 budget overall over. You look at the next 5 year period, you do have to remember that the tax recovery is on that ended through they're actually waited till the first 5 years. So the net increase after tax recovery is certainly modest. Um we're we'll see about a 75% tax recovery on the next 5 years.

Okay, very helpful. Thanks very much.

Thanks Greg. Thank you.

Your next question comes from Mino Hall. Schaaf of TB Cohen. Your line is already open.

Good morning, everyone. And thanks for taking my question. I'll just put—I'm just going to put a very short-term lens on things and...

um for my first question now that we're halfway through the fourth quarter, give or take. How, how would you describe the operational setup into the end of the year? And are there any assets that you would flag as having outperformed or underperformed quarter to date?

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

Terrific. Thanks Scott. And then you may or may not want to answer this 1 because it might cannibalize tomorrow a little bit. But second question is on maintenance. Maybe you could just remind us of which assets are scheduled for turnaround in 2026. Presumably Horizon is 1 of them. But what are the others and how large are these turnarounds expected to to be?

Yeah. Horizon would certainly be the most significant uh uh we uh likely in the third quarter of next year. So outside of that, it would be either our normal, uh, routine ones that we see every once 1 faces, our thermal facilities, go in for, uh, a turnaround. So uh, there'll be 1 next year as well, so nothing too significant and nothing stands out. The only real difference from 25 to 26 would be Horizon.

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

Your next question comes from Alexa Patrick.

Of Goldman Sachs your line is already open.

Good morning team and thank you for taking our question, you know, following, uh, the close of several creative Acquisitions. We were curious. What are your updated thoughts on m&a? And then, can you provide any broader commentary around your Capital, allocation strategy balancing dividend growth with Sherry purchases and potential for future further m&a? Thanks.

Yeah. Um not a lot to comment. Uh Alexa on the m&a activity uh, you know, certainly you you may reference to some recent acquisitions that uh, were opportunistic for us. Um, and you probably are aware. We do look at a lot of uh, opportunities of m&a we execute on very few but we certainly look at the ones that seem to be most accretive to our operations and generally in close proximity to our core areas. So um,

You know, I I think that uh in terms of uh our our allocation no significant changes there, um it's the allocation policy is is pretty straightforward. We we we don't have any plans to change that uh relative to m&a activity or not.

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

I think we expect to see Alexa the the differentials to be.

Stay in that range of, uh, you know, that 10 to 13 dollars a barrel and then, and and it'll go up and down, uh, vary depending on Turner activities in the refineries, uh, in the United States. So, I don't really see any of that, any of that changes changing, uh, in the near term and as, as long as we have strong egress out of western Canada, uh, those differentials will remain in that range. And so there's still, uh, some, uh, um, block capacity on the TMX system, which is very supportive for pricing. We're seeing in strong demand out of Asia, for our Canadian heavy crude. That's also very supportive and we like, what we see, what we've seen, essentially TMX has stabilized the entire Western Market here. So, um,

That's how it was some of our summarize it up for you.

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

There are no further questions at this time.

I would hand over the call to landscaping for closing remarks. Please go ahead.

Thank you operator. Excuse me. Thanks everyone for joining our call this morning. We look forward to seeing you all tomorrow at our investor open house or on the webcast. If you have any questions please give us a call.

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