2014 budget summary - canadian natural resources
TRANSCRIPT
2014 Budget Summary November 7, 2013
1
PROVEN EFFECTIVE STRATEGY
2014 BUDGET SUMMARY
November 7, 2013
CNQ
Certain statements relating to Canadian Natural Resources Limited (the “Company”) in this document or documents incorporated herein by reference constitute forward-looking statements or information (collectively referred to herein as “forward-looking statements”) within the meaning of applicable securities legislation. Forward-looking statements can be identified by the words “believe”, “anticipate”, “expect”, “plan”, “estimate”, “target” or “targeted”, “continue”, “could”, “intend”, “may”, “potential”, “predict”, “should”, “will”, “objective”, “project”, “forecast”, “goal”, “guidance”, “outlook”, “effort”, “seeks”, “schedule”, “proposed” or expressions of a similar nature suggesting future outcome or statements regarding an outlook. Disclosure of plans relating to and expected results of existing and future developments, including but not limited to the Horizon Oil Sands operations and future expansions, Primrose thermal projects, Pelican Lake water and polymer flood project, the Kirby Thermal Oil Sands Projects, construction of the proposed Keystone XL Pipeline from Hardisty, Alberta to the US Gulf Coast, construction of the proposed Northern Gateway Pipeline from Edmonton, Alberta to Kitimat British Columbia ,construction of the proposed Energy East pipeline to transport crude oil from Alberta to Quebec and New Brunswick, the proposed Kinder Morgan Trans Mountain pipeline expansion from Edmonton, Alberta to Vancouver, British Columbia, and the construction and future operations of the North West Redwater bitumen upgrader and refinery also constitute forward-looking statements. This forward-looking information is based on annual budgets and multi-year forecasts, and is reviewed and revised throughout the year as necessary in the context of targeted financial ratios, project returns, product pricing expectations and balance in project risk and time horizons. These statements are not guarantees of future performance and are subject to certain risks and the reader should not place undue reliance on these forward-looking statements as there can be no assurances that the plans, initiatives or expectations upon which they are based will occur. In addition, statements relating to “reserves” are deemed to be forward-looking statements as they involve the implied assessment based on certain estimates and assumptions that the reserves described can be profitably produced in the future. There are numerous uncertainties inherent in estimating quantities of proved and proved plus probable crude oil and natural gas and natural gas liquids (NGLs”) reserves and in projecting future rates of production and the timing of development expenditures. The total amount or timing of actual future production may vary significantly from reserve and production estimates. The forward-looking statements are based on current expectations, estimates and projections about the Company and the industry in which the Company operates, which speak only as of the date such statements were made or as of the date of the report or document in which they are contained, and are subject to known and unknown risks and uncertainties that could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others: general economic and business conditions which will, among other things, impact demand for and market prices of the Company’s products; volatility of and assumptions regarding crude oil and natural gas prices; fluctuations in currency and interest rates; assumptions on which the Company’s current guidance is based; economic conditions in the countries and regions in which the Company conducts business; political uncertainty, including actions of or against terrorists, insurgent groups or other conflict including conflict between states; industry capacity; ability of the Company to implement its business strategy, including exploration and development activities; impact of competition; the Company’s defense of lawsuits; availability and cost of seismic, drilling and other equipment; ability of the Company and its subsidiaries to complete capital programs; the Company’s and its subsidiaries’ ability to secure adequate transportation for its products; unexpected disruptions or delays in the resumption of the mining, extracting or upgrading of the Company’s bitumen products; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; ability of the Company to attract the necessary labour required to build its thermal and oil sands mining projects; operating hazards and other difficulties inherent in the exploration for and production and sale of crude oil and natural gas and in mining, extracting or upgrading the Company’s bitumen products; availability and cost of financing; the Company’s and its subsidiaries’ success of exploration and development activities and their ability to replace and expand crude oil and natural gas reserves; timing and success of integrating the business and operations of acquired companies; production levels; imprecision of reserve estimates and estimates of recoverable quantities of crude oil, natural gas and NGLs not currently classified as proved; actions by governmental authorities; government regulations and the expenditures required to comply with them (especially safety and environmental laws and regulations and the impact of climate change initiatives on capital and operating costs); asset retirement obligations; the adequacy of the Company’s provision for taxes; and other circumstances affecting revenues and expenses. The Company’s operations have been, and in the future may be, affected by political developments and by federal, provincial and local laws and regulations such as restrictions on production, changes in taxes, royalties and other amounts payable to governments or governmental agencies, price or gathering rate controls and environmental protection regulations. Should one or more of these risks or uncertainties materialize, or should any of the Company’s assumptions prove incorrect, actual results may vary in material respects from those projected in the forward-looking statements. The impact of any one factor on a particular forward-looking statement is not determinable with certainty as such factors are dependent upon other factors, and the Company’s course of action would depend upon its assessment of the future considering all information then available. For additional information refer to the “Risks Factors” section of the AIF. Readers are cautioned that the foregoing list of factors is not exhaustive. Unpredictable or unknown factors not discussed in this report could also have material adverse effects on forward-looking statements. Although the Company believes that the expectations conveyed by the forward-looking statements are reasonable based on information available to it on the date such forward-looking statements are made, no assurances can be given as to future results, levels of activity and achievements. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Except as required by law, the Company assumes no obligation to update forward-looking statements, whether as a result of new information, future events or other factors, or the foregoing factors affecting this information, should circumstances or Management’s estimates or opinions change.
Forward Looking Statements
Slide 2
2014 Budget Summary November 7, 2013
2
CNQ
Reporting Disclosures Special Note Regarding Currency, Production and Reserves In this document, all references to dollars refer to Canadian dollars unless otherwise stated. Reserves and production data are presented on a before royalties basis unless otherwise stated. In addition, reference is made to crude oil and natural gas in common units called barrel of oil equivalent ("BOE"). A BOE is derived by converting six thousand cubic feet of natural gas to one barrel of crude oil (6Mcf:1bbl). This conversion may be misleading, particularly if used in isolation, since the 6Mcf:1bbl ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In comparing the value ratio using current crude oil prices relative to natural gas prices, the 6Mcf:1bbl conversion ratio may be misleading as an indication of value. This document , herein incorporated by reference, have been prepared in accordance with IFRS, as issued by the International Accounting Standards Board. For the year ended December 31, 2012 the Company retained Independent Qualified Reserves Evaluators (“Evaluators”), Sproule Associates Limited and Sproule International Limited (together as “Sproule”) and GLJ Petroleum Consultants Ltd. (“GLJ”), to evaluate and review all of the Company’s proved and proved plus probable reserves with an effective date of December 31, 2012 and a preparation date of February 11, 2013. Sproule evaluated the North America and International light and medium crude oil, primary heavy crude oil, Pelican Lake heavy crude oil, bitumen (thermal oil), natural gas and NGLs reserves. GLJ evaluated the Horizon SCO reserves. The evaluation and review was conducted in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and disclosed in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) requirements. In previous years, Canadian Natural had been granted an exemption order from the securities regulators in Canada that allowed substitution of U.S. Securities Exchange Commission (“SEC”) requirements for certain NI 51-101 reserves disclosures. This exemption expired on December 31, 2010. As a result, the 2011 and 2012 reserves disclosure is presented in accordance with Canadian reporting requirements using forecast prices and escalated costs. The Company annually discloses net proved reserves and the standardized measure of discounted future net cash flows using 12-month average prices and current costs in accordance with United States Financial Accounting Standards Board Topic 932 “Extractive Activities - Oil and Gas” in the Company’s Form 40-F filed with the SEC in the “Supplementary Oil and Gas Information” section of the Company’s Annual Report targeted to be released in late March 2013. Resources Other Than Reserves The contingent resources other than reserves (“resources”) estimates provided in this presentation are internally evaluated by qualified reserves evaluators in accordance with the COGE Handbook as directed by NI 51-101. No independent third party evaluation or audit was completed. Resources provided are best estimates as of December 31, 2012. The resources are evaluated using deterministic methods which represent the expected outcome with no optimism or conservatism. Resources, as per the COGE Handbook definition, are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but are not currently considered commercially viable due to one or more contingencies. There is no certainty that it will be commercially viable to produce any portion of these resources. Due to the inherent differences in standards and requirements employed in the evaluation of reserves and contingent resources, the total volumes of reserves or resources are not to be considered indicative of total volumes that may actually be recovered and are provided for illustrative purposes only. Crude oil, bitumen or natural gas initially-in-place volumes provided are discovered resources which include production, reserves, contingent resources and unrecoverable volumes. Special Note Regarding non-GAAP Financial Measures This document includes references to financial measures commonly used in the crude oil and natural gas industry, such as cash flow from operations, adjusted net earnings from operations, cash production costs, and net asset value. These financial measures are not defined by IFRS and therefore are referred to as non-GAAP measures. The non-GAAP measures used by the Company may not be comparable to similar measures presented by other companies. The Company uses these non-GAAP measures to evaluate its performance. The non-GAAP measures should not be considered an alternative to or more meaningful than net earnings, as determined in accordance with IFRS, as an indication of the Company’s performance. The non-GAAP measures adjusted net earnings from operations and cash flow from operations are reconciled to net earnings, as determined in accordance with IFRS in the “Financial Highlights” section of the Company’s MD&A which is incorporated by reference into this document. The derivation of cash production costs is included in the “Operating Highlights – Oil Sands Mining and Upgrading” section of the Company’s MD&A which is incorporated by reference into this document. The volumes shown are Company share before royalties unless otherwise stated.
Slide 3
CNQ PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 4
Q3/13 Highlights
• Record quarterly production
‒703,000 boe/d
‒509,000 bbl/d crude oil & NGLs
• Record primary heavy crude oil production
• Record Pelican Lake crude oil production
• Kirby South commissioned ahead of schedule, on budget
• Horizon reliable operations
‒112,000 bbl/d
• Septimus expansion on-stream
‒September - 125 MMcf/d - 12,200 bbl/d liquids
• South Africa partner finalization, validated value
• Strong crude oil pricing
• Very strong cash flow and earnings
• Dividend increase to $0.20 per quarter – 60% increase
2014 Budget Summary November 7, 2013
3
CNQ
Prudent Balance Sheet Management
• History of prudent Balance Sheet management
‒ Strong Balance Sheet metrics
• Confidence in the Defined Plan
‒ Sustainability of cash flow stream through the business cycle
‒ Capital flexibilty supports effective capital allocation and downside protection
‒ Prudent hedging practices affords additional downside protection
• 60% Dividend increase - $0.20 per quarter
‒ Strong endorsement of our confidence in the defined plan and sustainability of
free cash flow
‒ 14 consecutive years of sustainable dividend increases
31% CAGR since 2009
‒Growing the business and returning shareholder value
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 5
Prudent Use of Cash Flow
2013F 2014B
Debt/Book 26.4% 25.4-26.2%
Debt to EBITDA 1.01x 1.0-1.05x
CNQ
$0.05 $0.02 $0.01
$0.02 $0.02
$0.03 $0.02
$0.03 $0.01
$0.09
$0.06
$0.06
$0.08
$0.30
$0.05 $0.07 $0.08
$0.10 $0.12
$0.15 $0.17
$0.20 $0.21
$0.30
$0.36
$0.42
$0.50
$0.80
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014B
CNQ Annual Dividend Increase
Note: Dividend restated to reflect two-for-one share splits in May 2010, May 2005 and May 2004. Dividend yield based on weighted average share price for years
2001-2012 and based on share price of $32.50 for 2013F and 2014B.
Dividend Increase - 40% 14% 25% 20% 27% 13% 18% 5% 43% 20% 17% 19% 60%
Dividend Per Share ($) Annual Increase ($) Dividend Yield (%)
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 6
2014 Budget Summary November 7, 2013
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CNQ
Canadian Natural Advantage
Value Growth
Driven by
• Effective capital allocation
• Effective and efficient operations
• Strong Management teams
Our Strategy Works
Near term growth
requirements
Increasing Free
Cash Flow to Allocate
Large Resource
Base
Return to Shareholders (Dividends /Repurchases)
Balance Sheet (Repay debt)
Opportunistic
Acquisitions
Increased Asset
Strength
Strong Balanced
Asset Base Free
Cash Flow
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 7
CNQ
Size of Canadian Natural Reserve Base
2012 1P Reserves After Royalties
Significant Value to Unlock
Note: Per BMO Capital Markets Research - 2012 Oil & Gas Global Cost Study.
Peers include: APA, APC, EOG, CVE, CHK, DVN, ECA, HSE, IMO, OXY, NBL, SU, TLM.
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 8
(MMBOE)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
CNQ
2014 Budget Summary November 7, 2013
5
CNQ
Size of Canadian Natural Reserve Base
2012 2P Reserves Before Royalties
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 9
Significant Value to Unlock
(MMBOE)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Based on forecast pricing assumptions.
Note: Sourced from 2012 corporate reports. Peers include: CVE, ECA, HSE, IMO, SU, TLM.
CNQ PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 10
Large Resource Base to Develop
Vast Resource Base Holds Significant Future Value
0
5,000
10,000
15,000
20,000
25,000
Reserves* Resources** Reserves & Resources
*Company gross proved and probable reserves at December 31, 2012.
**Company gross best estimate contingent resources other than reserves at December 31, 2012.
Note: Contingent resource includes Thermal, Pelican Lake, Horizon, Montney and Deep Basin.
Please see reporting disclosures for additional information.
7,886
14,529
(MMBOE)
22,415 Gross Proved Reserves*
Gross Probable Reserves*
Resources**
2014 Budget Summary November 7, 2013
6
CNQ PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 11
Long Life Assets = More Sustainable Cash Flow
Transitioning to a Longer Life Asset Base
0%
10%
20%
30%
40%
50%
60%
70%
2007 2011 2015F 2018F
Horizon - Sold as Synthetic Crude Oil
Thermal In Situ - Sold as Heavy Crude Oil
Pelican Lake - Sold as Heavy Crude Oil
*2015F - 2018F based on company internal forecast as at May 2013. Dependent upon economic and regulatory conditions, commodity prices, global
economic factors, project sanction and capital allocation.
(% of CNQ liquids production)*
CNQ
$0
$1
$2
$3
$4
$5
$6
$7
2013F 2014B 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F
Canadian Natural
Targeted Total Corporate Free Cash Flow
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 12
Free Cash Flow Growing to the Wall of Free Cash Flow
Note: Dependent upon economic and regulatory conditions, commodity prices, global economic factors, project sanction and capital allocation. Free cash flow represents cash flow (cash flow net of corporate costs, interest, foreign exchange and taxes) less capital before dividends and share repurchases. Capital targeted between $7.0 and $7.8 billion for 2013F-2017F and significantly less thereafter. 2013F and 2014B based upon Nov. 7 guidance and budget numbers – see website for pricing assumptions. 2015F to 2017F based upon constant pricing assumptions forecasted at May 2013; WTI of US$94.95/bbl, AECO of C$3.50/GJ-C$4.00/GJ, and WCS differential of 26%. 2018F to 2022F based upon average strip pricing assumptions forecasted at May 2013; WTI of US$82.75/bbl, AECO of C$4.82/GJ, and WCS differential of 22%.
($ billion)
2014 Budget Summary November 7, 2013
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CNQ
Free Cash Flow Uses
1. Resource development
‒ Executing our defined plan
2. Dividends
‒ 14 consecutive years of dividend increases
31% CAGR (2009 – 2014)
‒ Must be sustainable
3. Share purchases
‒ 11.0 million common shares purchased at an average price of
$28.91/share in 2012
‒ 9.256 million common shares purchased at an average price of
$31.13/share YTD
4. Opportunistic acquisitions
5. Pay down debt
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 13
Prudent Use of Cash Flow
CNQ
0
100
200
300
400
500
600
700
800
900
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F
Dividend Share Purchase
Horizon build years
Balanced Free Cash Flow Allocation
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 14
($ million) Return to Shareholders
Note: CAGR represents 2009-2013F. 11.0 million common shares purchased in 2012 at a weighted average price of $28.91/share. Year to date, 9.26 million
common shares have been purchased in 2013 at a weighted average price of $31.13/share.
2014 Budget Summary November 7, 2013
8
CNQ
2014 Targeted Free Cash Flow Uses
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 15
($ million) 2013F 2014B
Expected Cash Flow $ 7,640 $8,700
Capital Program 7,175 7,700
Free Cash Flow 465 1,000
Dividends $523 $870
Share Purchase* 300 ?
Flex Capital Program** - 0 - 400
Balance Sheet – (Build)/Draw $(358) $(270) - $130
Debt/Book 26.4% 25.4 - 26.2%
Debt/EBITDA 1.04x 1.0 - 1.05x
*Dependent on CNQ share price and commodity prices. **Dependent on construction market conditions at Horizon Projects. Note: Does not include any potential Montney land sale proceeds.
CNQ
0
200
400
600
800
1,000
1,200
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014
Dividend Share Purchase
Horizon build years
Balanced Free Cash Flow Allocation
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 16
($ million) Return to Shareholders
Potential
Note: CAGR represents 2009-2014 Potential. 11.0 million common shares purchased in 2012 at a weighted average price of $28.91/share. Year to date,
9.26 million common shares have been purchased in 2013 at a weighted average price of $31.13/share.
?
2014 Budget Summary November 7, 2013
9
CNQ
Canadian Natural
2014 Budget Summary
2014B
Cash Flow $8.7 billion
Capital $7.7 - 8.1 billion
Crude oil & NGLs production growth 9% growth
Capital for future production $3.6 billion ~45%
Capital flexibility in original budget $3.2 billion
2013F 2014B
Production (MBOE/d) 663 - 704 711 - 757
Year End Debt ($ billion) $9.2 - 9.6 $9.6 - $10.0
Year End Debt / Book* 26.4% 25.4 - 26.2%
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 17
Focused on Value Creation
Note: 2014 Strip Pricing: WTI US$96.67, AECO C$3.47/GJ, C$/US$ $0.96.
*Midpoint of Guidance.
CNQ
Canadian Natural
2014 Capital Budget Capital ($ million) 2013F 2014B
Natural gas $540 $590
Crude oil
Pelican Lake 400 245
Primary Heavy 1,125 1,200
Thermal In Situ 1,260 1,130
Light
Canada 530 545
North Sea 350 470
Offshore Africa 160 280
Total crude oil $3,825 $3,870
Horizon
Sustaining Capital 290 260
Turnarounds, Reclamation & Other 270 330
Capital Projects 2,035 2,520 - 2,920
Technology and Phase 4 25 35
Total Horizon $2,620 $3,145 - 3,545
Acquisitions, Midstream & Other 190 135
Total $7,175 $7,740 - 8,140
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 18
Developing Highest Return on Capital, Balanced Near-, Mid- and Long-Term
2014 Budget Summary November 7, 2013
10
CNQ
Canadian Natural
2014 Production Budget
Targeted Production 2013F* 2014B* %Change
Crude oil (Mbbl/d)
North America Light Oil & NGLs 65-69 72-76
Pelican Lake 46-50 47-51
Primary Heavy 139-143 142-146
Thermal In Situ Oil Sands 100-107 120-135
International 32-36 33-37
Horizon Oil Sands 100-108 107-115
Total Crude Oil & NGLs 482-513 521-560 9%
Natural Gas (MMcf/d) 1,085-1,145 1,140-1,180 4%
MBOE/D 663-704 711-757 7%
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 19
Strategic, Defined Growth Plan
*Rounded to the nearest 1,000 bbl/d.
Note: Numbers may not add due to rounding.
CNQ
North American Crude Oil Markets
Canadian Natural’s Viewpoint
• Pipeline/transportation infrastructure is complex
‒Misconceptions are common
• Significant North American heavy oil demand
‒260,000 bbl/d PADD II demand increase
‒3,000,000+ bbl/d Gulf Coast demand
• Opportunities provided by existing infrastructure projects
‒ Mainline optimization 400,000 bbl/d
‒ Flanagan South Q2-2014 600,000 bbl/d
‒ Keystone XL Q4-2015 830,000 bbl/d
‒ Gateway 525,000 bbl/d
‒ TMX 890,000 bbl/d
‒ Energy East 1,100,000 bbl/d
• Rail to fill in any pipeline shortfalls
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 20
Oil Transportation Issues Manageable
2014 Budget Summary November 7, 2013
11
CNQ
Asset Overview
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 21
CNQ
North America Natural Gas
Core Area Summary
• 2nd largest producer of
natural gas in Canada
• Large resource base
‒ 5.6 Tcf 2P reserves*
‒ Significant unconventional
assets
Montney and Duvernay
• Proved and unproved
land position
‒ 16.2 million net acres
• High working interest
• Dominant infrastructure
• $1 increase in AECO =
~$310 million additional
annual cash flow**
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 22
Strong Asset Base
*Company Gross proved plus probable reserves at December 31, 2012.
**Dependent upon economic and regulatory conditions, commodity prices, global economic factors, project sanction and capital allocation.
Note: Reflects Q3/13 actual production, before royalties. Does not include NGLs production.
NEBC
347 MMcf/d
BC
AB SK
Northern Plains
163 MMcf/d
NW Alberta
463 MMcf/d
Southern Plains
163 MMcf/d
CNQ Land
Calgary
Edmonton
Fort St. John
MB
2014 Budget Summary November 7, 2013
12
CNQ
0 200,000 400,000 600,000 800,000 1,000,000 1,200,000
North America Natural Gas
Top Montney Land Holders by Net Acres
• Largest Unconventional Land Base
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 23
Canadian Natural ~1,043,800 Net Acres
~243,000 acres Potential Sale
CNQ internal and Cormark Reports (June 2013) for peers.
Peers include: ARX, BIR, CLT, ECA, GO, MUR, POU, PRQ, RDS, TLM, TOU.
Duvernay Lands ~500,000 Net Acres
CNQ
2013F 2014B % Change
Production (MMcf/d) 1,065-1,135 1,100-1,140 2%
Drilling (net wells) 42 61
Capital ($ million) $540 $590
North America Natural Gas
2014 Plan
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 24
Most Efficient and Effective Producer
• Capital discipline
• Significant flexibility to quickly respond to strengthening gas prices
• Efficient and effective operations provide operating free cash flow
• Preserve land base for increasing gas prices
• In midst of process to potentially monetize approximately ~243,000 net acres of
liquids rich Montney land
2014 Budget Summary November 7, 2013
13
CNQ
Thermal In Situ Oil Sands
Tremendous Potential
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 25
Massive Resource to Exploit
McMurray
49 billion barrels
Wabiskaw
9 billion barrels
Carbonates
10 billion barrels
Clearwater
14 billion barrels
Grand Rapids
15 billion barrels
97 billion barrels total BIIP*
*Discovered Bitumen Initially in Place.
**Company Gross proved plus probable reserves as at December 31, 2012.
***Best estimate contingent resources other than reserves as at December 31, 2012.
Produced to Date 0.4 billion bbl
Resources*** 8.4 billion bbl
Probable Reserves** 1.0 billion bbl
Proved Reserves** 1.1 billion bbl
CNQ
Thermal In Situ Oil Sands
Growth Plan
Phase Reservoir
Oil Facility
Capacity Target
(bbl/d)
Target Steam-In
Timing
(year)
Primrose South/North – CSS Clearwater 80,000 On Stream
Primrose East – CSS Clearwater 40,000 On Stream
Kirby South – SAGD McMurray 40,000 On Stream
Kirby North Phase 1 – SAGD McMurray 40,000 2016
Grouse – SAGD McMurray 40,000 2017-2019
Primrose Expansion – CSS / SAGD Clwtr/GrRpds 50,000 2020-2021
Kirby North Phase 2 – SAGD Wabiskaw 60,000 2022-2023
Gregoire Phase 1 – SAGD McMurray 60,000 2024-2025
Pelican – SAGD Grand Rapids 40,000 2026-2027
Gregoire Phase 2 – SAGD McMurray 60,000 2028-2029
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 26
Significant Potential – Taking the Time to Do It Right
• 510,000 bbl/d of oil facility capacity in the defined growth plan
• 40,000-60,000 bbl/d addition every 2-3 years
• 100% working interest and operatorship
2014 Budget Summary November 7, 2013
14
CNQ
Thermal In Situ Oil Sands
2014 Plan
2013F 2014B %Change
Production (Mbbl/d) 100-107 120-135 23%
Drilling (net wells)
Primrose producers 134 15
Kirby South producers 8 -
Strats 73 130
Service / observation wells 64 54
Total 279 199
Capital ($ million) $1,260 $1,130
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 27
Continued Volume Growth with Long Term Focus on Spending
Note: Rounded to the nearest 1,000 bbl/d.
CNQ
Primrose Seepage to Surface Update
• Seepage contained
• Cleanup >80% complete
• Causation review well underway
• Confident wellbore failure is root cause
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 28
2014 Budget Summary November 7, 2013
15
CNQ
Primrose Causation Review Update
Wellbore Pathway
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 29
• Clearwater reservoir is
500m deep
• 3 barriers
‒Clearwater Shale
‒Grand Rapids Formation
‒Colorado Group Shales
Paleo
CNQ
Primrose Causation Review Update
• Working well with the AER
• Results to date:
‒4 legacy wells identified as likely wellbore failures
‒2 of 4 have identified mechanical failures
Further delineation required to prove conclusively
‒1 under investigation
‒1 waiting on access
• Over entire Primrose area 31 legacy wells identified as high risk
potential wellbore failure candidates
‒16 are within 1 kilometer of areas to be steamed in 2014
‒1 confirmed as inadequate and repaired
‒1 confirmed as adequate and equipped with enhanced monitoring
‒14 waiting on access
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 30
2014 Budget Summary November 7, 2013
16
CNQ
Primrose Plan – Going Forward*
• All wells, including old legacy wells, thoroughly reviewed for the
potential to fail mechanically
• All wells with identified potential to fail will be repaired prior to
additional steaming
• Enhanced monitoring of any potential release from Clearwater into
Grand Rapids
• Enhanced response to subsurface releases to Grand Rapids
‒Cease injection into Clearwater
‒And/or blowdown horizontal injector/producer
• Modified steam injection volumes
‒Reduction in steam volume growth as cycles progress
• Convert Primrose East to steam flooding after initial steam cycles
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 31
*Subject to AER approval.
CNQ
Primary Heavy Crude Oil
Core Area Summary
• Largest primary producer
in Canada
• 2P reserves
‒284 million barrels*
• Dominant land base and
infrastructure
‒Over 8,500 drilling locations
‒5 major processing facilities
‒ECHO sales pipeline
Vast Land Base and Infrastructure Captures Value
~138 Miles
ECHO Pipeline
CNQ Producing
Properties
CNQ Lands
*Company Gross proved plus probable reserves as at December 31, 2012.
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 32
2014 Budget Summary November 7, 2013
17
CNQ
2013F 2014B %Change
Production (Mbbl/d) 139-143 142-146 2%
Drilling (net wells) 852 898
Recompletion (net wells) 565 503
Capital ($ million) $1,125 $1,200
Primary Heavy Crude Oil
2014 Plan
• Tremendous potential through technology advancements
• Low operating costs strong netbacks
• High return on capital
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 33
Strong Cash on Cash Returns
Note: Rounded to the nearest 1,000 bbl/d.
CNQ
• Massive Wabiskaw heavy crude oil pool
• Industry leading EOR project
‒ Amongst the largest polymerfloods in
the world
‒ Technology development continues
to improve crude oil recovery
‒ Leading example of technology
driving value growth
• Industry leading operating costs
• Strong operating free cash flow
Pelican Lake Crude Oil Pool
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 34
Massive Resource to Exploit
How much of that crude oil
is recoverable?
OIIP*
4.1
billion
barrels
Developed
Region
18% RF
Produced to Date 181 MMbbl
Resources*** 204 MMbbl
Probable Reserves** 105 MMbbl
Proved Reserves** 267 MMbbl
*Discovered heavy crude oil initially in place.
**Company Gross proved plus probable reserves as at December 31, 2012.
***Best estimate contingent resources other than reserves as at December 31, 2012.
2014 Budget Summary November 7, 2013
18
CNQ
2013F 2014B %Change
Production (bbl/d) 46-50 47-51 2%
Drilling (net wells) – Producers 33 17
Capital ($ million) $400 $245
Pelican Lake
2014 Plan
• Increasing free cash flow wedge as capital requirements are reduced and
polymer driven performance is realized
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 35
Technology Advancement Can Provide Significant Upside
Note: Rounded to the nearest 1,000 bbl/d.
CNQ
North America Light Crude Oil and NGLs
2014 Plan
• 2014 forecast activity
‒ Drill 93 wells
‒ Target multiple formations across basin
• Leverage technology, horizontal multifracs
‒ 80% of total drilling – Horizontal
• 1.4 million net acres of Triassic lands to develop
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 36
Grande Prairie Focus = Steady Growth
2013F 2014B % Change
Production* (Mbbl/d) 65-69 72-76 10%
Drilling (net wells) – Producers 109 93
Capital ($ million) $530 $545
Note: Rounded to the nearest 1,000 bbl/d.
*Includes NGLs.
2014 Budget Summary November 7, 2013
19
CNQ
International Light Crude Oil
2014 Plan
• 2P light crude oil reserves 490 million barrels*
• Light oil balance in portfolio Brent pricing
• Exposure to offshore operations and geographic diversification in asset base
‒ North Sea
5 net production wells and 2 net injectors planned in 2014
‒ Offshore Africa
Espoir development targeted for 2nd half of 2014
1 exploration well expected for 2014 on Block 514 in Côte d’Ivoire
36% working interest
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 37
Free Cash Flow Generation
2013F 2014B %Change
Crude oil production (Mbbl/d) 32-36 33-37 3%
Capital ($ million) $510 $750
Note: Rounded to the nearest 1,000 bbl/d.
*Company gross proved plus probable reserves at December 31, 2012..
CNQ
International Light Crude Oil
South Africa
• Partnering with Total
SA (50% WI, Total
as operator)
• 5 structures ranging
up to 1 billion barrels
• First exploration well
targeted to be drilled
in 2014
• Partner to carry the
costs of first
exploration well up
to US$150 million
• Long lead
equipment ordered
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 38
High Impact Potential
Mossel Bay Plettenberg Bay
South Africa
Canadian Natural
Block 11B/12B
Superior
Gas Discovery
Sable
Oil Field
FA Gas Field
Oryx & Oribi
Oil Fields
FO Gas Field
2014 Budget Summary November 7, 2013
20
CNQ
Horizon Oil Sands
Core Area Summary
• World Class asset
• 14.4 billion barrels BIIP*
‒ 2P SCO reserves – 3.4 billion barrels**
‒ Best estimate contingent resources other
than reserves – 3.3 billion barrels of
bitumen***
• Phased development (SCO)
‒ 110,000 bbl/d capacity (Phase 1)
‒ Targeted completion of Phase 2/3
to 250,000 bbl/d
‒ Potential future expansion to ~500,000
bbl/d of SCO or Bitumen equivalent
• 40+ years of production with no declines
• 100% working interest
• Significant free cash flow generation
for decades
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 39
World Class Opportunity
UTS
SYN
SHC
SYN
SYN
DVN
PCA SU
PCA
IOL
ECA
SU
SU
IOL
HSE
XOM
SHC
SU
Synenco SHC
XOM
ECA
ECA
Deer Creek
SU
Fort
McMurray
~4
3 m
ile
s
CNQ
CNQ
CNQ
Horizon Oil Sands
*Discovered Bitumen Initially in Place. **Company Gross proved plus probable reserves as at December 31, 2012. ***Best estimate contingent resources other than reserves as at December 31, 2012.
CNQ
Horizon Oil Sands
2014 Operations Plan
• Enhance reliability
‒8% unplanned downtime post turnaround in 2013
6% - North America refinery average
• Greater focus on operating cost reductions
‒2014 Guidance: $36.00–$39.00/bbl
• Early completion of Coker expansion
‒Debottlenecking tie-ins, August 2014
‒Outage to complete tie-in 20-25 days
• Increase stream day capacity to 133,000 bbl/d
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 40
2014 Budget Summary November 7, 2013
21
CNQ
2013F 2014B % Change
Production (Mbbl/d) 100-108 107-115 7%
Sustaining Capital ($ million) $290 $260
Turnarounds, Reclamation & Other ($ million)
$270 $330
Operating Cost ($/bbl)* $42.50 - $44.50 $36.00 - $39.00
Horizon Oil Sands
2014 Operations Plan
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 41
Focus on Operational Excellence
Note: Rounded to the nearest 1,000 bbl/d.
*2013F and 2014B operating costs reflects production downtime.
CNQ
2013F 2014B
Project Capital ($ million)
Reliability – Tranche 2 $90 $40
Directive 74 55 200
Phase 2A 165 100
Phase 2B 1,005 1,325-1,575
Phase 3 495 550-700
Owner’s Costs & Other 225 305
Total $2,035* $2,520-2,920*
Horizon Oil Sands
2014 Plan – Project Expansion Capital
• CNQ execution strategy is working
‒ Cost tracking on or below budget which has opened up a window of opportunity
for increased expansion expenditures
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 42
Focus on Operational Excellence
*Excludes Technology and Phase 4 project capital.
2014 Budget Summary November 7, 2013
22
CNQ
Horizon Oil Sands
Production Capacity Plan*
• Moving Phase 2A into 2014*
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 43
Future Expansion 110 Mbbl/d up to 250 Mbbl/d
75,000
100,000
125,000
150,000
175,000
200,000
225,000
250,000
275,000
300,000
2012 2013F 2014B 2015F 2016F 2017F 2018F 2019F
Forecast/Budget Capacity Target
(bbl/d)
12 Mbbl/d
added
45 Mbbl/d
added
80 Mbbl/d
added
Phase 2A* Phase 2B Phase 3
Note: Capacity additions – 3-6 months required to ramp up to full rates. Project progress dependent upon economic and regulatory conditions, commodity prices, global economic factors, project sanction and capital allocation. 2013F - 2019F based on Company internal forecast as at Nov. 2013.
CNQ
Horizon Oil Sands
Targeted Fixed vs. Variable Operating Costs
• Labour is a major portion of fixed costs
• Production increases 2.4x while labour increases 1.4x
• Introduction of thickeners, saves energy, reduces cost
• Increase yield
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 44
Significant Positive Impact on Expansion Economics
($/bbl) ($ million)
Targeted Operating Cost per Barrel Targeted Operating Cost per Year
Note: Cost estimated with mine diesel and gas/energy as the major variable costs. No sustaining capital or major unplanned outage costs are included. 2014B cost per barrel reflects production lost downtime in 2014. Based on company internal forecast as at Nov 2013. Dependent upon economic and regulatory conditions, commodity prices, global economic factors, project sanction and capital allocation.
0
500
1,000
1,500
2,000
2,500
2014B Phase 1 Phase 1-2-3
Fixed Variable
0
20
40
2014B Phase 1 Phase1-2-3
Fixed Variable
2014 Budget Summary November 7, 2013
23
CNQ
Normalized Remaining NPV Profile
Horizon Delivers Sustainable Asset Value
Value of Long Life Assets
0.2
0.4
0.6
0.8
1
1.2
1.4
0 5 10 15 20 25 30 35 40 45
Horizon Phase 2/3 Light Oil Horizontal Multifrac's Typical SAGD
Note: Remaining NPV – reflects at any point in time the Net Present Value remaining for the project. Projects with long reserve lives have an NPV that
remains stable over time.
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 45
CNQ
Asset Summary
• Balanced high quality diverse asset base
• Vast long life, low decline resource base
• Sustainable, organic, profitable growth
• Unlocks significant value
• Delivers increasing and sustainable free cash flow
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 46
2014 Budget Summary November 7, 2013
24
CNQ
$0
$1
$2
$3
$4
$5
$6
$7
2013F 2014B 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F
Canadian Natural
Targeted Total Corporate Free Cash Flow
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 47
Free Cash Flow Growing to the Wall of Free Cash Flow
Note: Dependent upon economic and regulatory conditions, commodity prices, global economic factors, project sanction and capital allocation. Free cash flow represents cash flow (cash flow net of corporate costs, interest, foreign exchange and taxes) less capital before dividends and share repurchases. Capital targeted between $7.0 and $7.8 billion for 2013F-2017F and significantly less thereafter. 2013F and 2014B based upon Nov. 7 guidance and budget numbers – see website for pricing assumptions. 2015F to 2017F based upon constant pricing assumptions forecasted at May 2013; WTI of US$94.95/bbl, AECO of C$3.50/GJ-C$4.00/GJ, and WCS differential of 26%. 2018F to 2022F based upon average strip pricing assumptions forecasted at May 2013; WTI of US$82.75/bbl, AECO of C$4.82/GJ, and WCS differential of 22%.
($ billion)
CNQ
Free Cash Flow Uses
1. Resource development
‒ Executing our defined plan
2. Dividends
‒ 14 consecutive years of dividend increases
31% CAGR (2009 – 2014)
‒ Must be sustainable
3. Share purchases
‒ 11.0 million common shares purchased at an average price of
$28.91/share in 2012
‒ 9.256 million common shares purchased at an average price of
$31.13/share YTD
4. Opportunistic acquisitions
5. Pay down debt
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 48
Prudent Use of Cash Flow
2014 Budget Summary November 7, 2013
25
CNQ
2014 Targeted Free Cash Flow Uses
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 49
($ million) 2013F 2014B
Expected Cash Flow $ 7,640 $8,700
Capital Program 7,175 7,700
Free Cash Flow 465 1,000
Dividends $523 $870
Share Purchase* 300 ?
Flex Capital Program** - 0 - 400
Balance Sheet – (Build)/Draw $(358) $(270) - $130
Debt/Book 26.4% 25.4 - 26.2%
Debt/EBITDA 1.04x 1.0 - 1.05x
*Dependent on CNQ share price and commodity prices. **Dependent on construction market conditions at Horizon Projects. Note: Does not include any potential Montney land sale proceeds.
CNQ
Canadian Natural Advantage
• Strong, balanced assets deliver excess cash flow over near term
growth requirements
• Excess (free) cash flow allocation choices (competition)
‒ Increase asset strength and free cash flow
Resource development
Opportunistic acquisitions
‒Return to shareholders
Dividends
Share purchases
‒Balance sheet strength
Repay debt
• Effective and efficient operations
• Strong Management teams
PREMIUM VALUE | DEFINED GROWTH | INDEPENDENT Slide 50
Consistent History of Value Creation