CANADIAN NATURAL RESOURCES LIMITED
| | |
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 |
| NOVEMBER 1, 2023 |
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| As at | Note | Sep 30
2023 | Dec 31
2022 |
| (millions of Canadian dollars, unaudited) |
| ASSETS | | | |
| Current assets | | | |
| Cash and cash equivalents | | $ | 125 | | $ | 920 | |
| Accounts receivable | | 4,224 | | 3,555 | |
| | | |
| Inventory | | 2,174 | | 1,815 | |
| Prepaids and other | | 374 | | 215 | |
| Investments | 6 | 565 | | 491 | |
| Current portion of other long-term assets | 7 | 51 | | 61 | |
| | | 7,513 | | 7,057 | |
| Exploration and evaluation assets | 3 | 2,227 | | 2,226 | |
| Property, plant and equipment | 4 | 64,647 | | 64,859 | |
| Lease assets | 5 | 1,392 | | 1,447 | |
| Other long-term assets | 7 | 534 | | 553 | |
| | | $ | 76,313 | | $ | 76,142 | |
| LIABILITIES | | | |
| Current liabilities | | | |
| Accounts payable | | $ | 1,235 | | $ | 1,341 | |
| Accrued liabilities | | 4,034 | | 4,209 | |
| Current income taxes payable | | 61 | | 1,324 | |
| Current portion of long-term debt | 8 | 1,604 | | 404 | |
| Current portion of other long-term liabilities | 5,9 | 1,317 | | 1,373 | |
| | | 8,251 | | 8,651 | |
| Long-term debt | 8 | 10,040 | | 11,041 | |
| Other long-term liabilities | 5,9 | 8,047 | | 8,161 | |
| Deferred income taxes | | 10,341 | | 10,114 | |
| | | 36,679 | | 37,967 | |
| SHAREHOLDERS' EQUITY | | | |
| Share capital | 11 | 10,654 | | 10,294 | |
| Retained earnings | | 28,772 | | 27,672 | |
| Accumulated other comprehensive income | 12 | 208 | | 209 | |
| | | 39,634 | | 38,175 | |
| | | $ | 76,313 | | $ | 76,142 | |
Commitments and contingencies (note 16)
Approved by the Board of Directors on November 1, 2023.
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| Canadian Natural Resources Limited | 1 | Three and nine months ended September 30, 2023 |
CONSOLIDATED STATEMENTS OF EARNINGS
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(millions of Canadian dollars, except per
common share amounts, unaudited) | Note | Sep 30
2023 | Sep 30
2022 | | Sep 30
2023 | Sep 30
2022 |
| Product sales | 17 | $ | 11,762 | | $ | 12,574 | | | $ | 30,156 | | $ | 38,518 | |
| Less: royalties | | (1,867) | | (2,117) | | | (3,741) | | (5,909) | |
| Revenue | | 9,895 | | 10,457 | | | 26,415 | | 32,609 | |
| Expenses | | | | | | |
| Production | | 2,049 | | 2,076 | | | 6,424 | | 6,403 | |
| Transportation, blending and feedstock | | 2,289 | | 2,235 | | | 6,953 | | 7,372 | |
| Depletion, depreciation and amortization | 4,5 | 1,537 | | 1,454 | | | 4,352 | | 4,224 | |
| Administration | | 108 | | 94 | | | 333 | | 307 | |
| Share-based compensation | 9 | 298 | | (4) | | | 434 | | 485 | |
| Asset retirement obligation accretion | 9 | 92 | | 82 | | | 275 | | 199 | |
| Interest and other financing expense | | 187 | | 150 | | | 519 | | 473 | |
| Risk management activities | 15 | 32 | | (92) | | | 22 | | (48) | |
| Foreign exchange loss (gain) | | 202 | | 736 | | | (14) | | 923 | |
| | | | | | |
| | | | | | |
| Gain from investments | 6 | (46) | | (39) | | | (90) | | (103) | |
| | | 6,748 | | 6,692 | | | 19,208 | | 20,235 | |
| Earnings before taxes | | 3,147 | | 3,765 | | | 7,207 | | 12,374 | |
| Current income tax expense | 10 | 602 | | 757 | | | 1,374 | | 2,507 | |
| Deferred income tax expense | 10 | 201 | | 194 | | | 227 | | 450 | |
| Net earnings | | $ | 2,344 | | $ | 2,814 | | | $ | 5,606 | | $ | 9,417 | |
| Net earnings per common share | | | | | | |
| Basic | 14 | $ | 2.15 | | $ | 2.52 | | | $ | 5.12 | | $ | 8.23 | |
| Diluted | 14 | $ | 2.13 | | $ | 2.49 | | | $ | 5.07 | | $ | 8.12 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| (millions of Canadian dollars, unaudited) | Sep 30
2023 | Sep 30
2022 | | Sep 30
2023 | Sep 30
2022 |
| Net earnings | $ | 2,344 | | $ | 2,814 | | | $ | 5,606 | | $ | 9,417 | |
| Items that may be reclassified subsequently to net earnings | | | | | |
| Net change in derivative financial instruments designated as cash flow hedges | | | | | |
Unrealized income during the period, net of taxes of $nil (2022 – $nil) – three months ended; $nil (2022 – $1 million) – nine months ended | 1 | | — | | | 2 | | 4 | |
Reclassification to net earnings, net of taxes of $nil (2022 – $nil) – three months ended; $nil (2022 – $1 million) – nine months ended | (3) | | (2) | | | (5) | | (6) | |
| | (2) | | (2) | | | (3) | | (2) | |
| Foreign currency translation adjustment | | | | | |
| Translation of net investment | 33 | | 185 | | | 2 | | 233 | |
| Other comprehensive income (loss), net of taxes | 31 | | 183 | | | (1) | | 231 | |
| Comprehensive income | $ | 2,375 | | $ | 2,997 | | | $ | 5,605 | | $ | 9,648 | |
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| Canadian Natural Resources Limited | 2 | Three and nine months ended September 30, 2023 |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | |
| | Nine Months Ended |
(millions of Canadian dollars, unaudited) | Note | Sep 30
2023 | Sep 30
2022 |
| Share capital | 11 | | |
| Balance – beginning of period | | $ | 10,294 | | $ | 10,168 | |
| | | |
| Issued upon exercise of stock options | | 274 | | 332 | |
| Previously recognized liability on stock options exercised for common shares | | 302 | | 276 | |
| | | |
| Purchase of common shares under Normal Course Issuer Bid | | (216) | | (614) | |
| Balance – end of period | | 10,654 | | 10,162 | |
| Retained earnings | | | |
| Balance – beginning of period | | 27,672 | | 26,778 | |
| Net earnings | | 5,606 | | 9,417 | |
| Dividends on common shares | 11 | (2,953) | | (4,237) | |
| Purchase of common shares under Normal Course Issuer Bid | 11 | (1,553) | | (4,211) | |
| Balance – end of period | | 28,772 | | 27,747 | |
| Accumulated other comprehensive income (loss) | 12 | | |
| Balance – beginning of period | | 209 | | (1) | |
| Other comprehensive (loss) income, net of taxes | | (1) | | 231 | |
| Balance – end of period | | 208 | | 230 | |
| Shareholders' equity | | $ | 39,634 | | $ | 38,139 | |
| | | | | | | | |
| Canadian Natural Resources Limited | 3 | Three and nine months ended September 30, 2023 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| (millions of Canadian dollars, unaudited) | Note | Sep 30
2023 | Sep 30
2022 | | Sep 30
2023 | Sep 30
2022 |
| Operating activities | | | | | | |
| Net earnings | | $ | 2,344 | | $ | 2,814 | | | $ | 5,606 | | $ | 9,417 | |
| Non-cash items | | | | | | |
| Depletion, depreciation and amortization | | 1,537 | | 1,454 | | | 4,352 | | 4,224 | |
| Share-based compensation | | 298 | | (4) | | | 434 | | 485 | |
| Asset retirement obligation accretion | | 92 | | 82 | | | 275 | | 199 | |
| Unrealized risk management loss (gain) | | 3 | | (48) | | | 19 | | (43) | |
| Unrealized foreign exchange loss | | 250 | | 785 | | | 16 | | 1,055 | |
| | | | | | |
| Gain from investments | 6 | (41) | | (36) | | | (74) | | (94) | |
| | | | | | |
| Deferred income tax expense | | 201 | | 194 | | | 227 | | 450 | |
| Realized foreign exchange gain on settlement of cross currency swap | | — | | — | | | — | | (69) | |
| Proceeds on settlement of cross currency swap | | — | | — | | | — | | 89 | |
| Other | | 25 | | (20) | | | 22 | | (79) | |
| Abandonment expenditures | 9 | (123) | | (147) | | | (360) | | (349) | |
| | | | | | |
| Net change in non-cash working capital | | (1,088) | | 1,024 | | | (2,979) | | (438) | |
| Cash flows from operating activities | | 3,498 | | 6,098 | | | 7,538 | | 14,847 | |
| Financing activities | | | | | | |
| (Repayment) issue of bank credit facilities and commercial paper, net | 8 | (731) | | — | | | 202 | | (1,156) | |
| Repayment of medium-term notes | 8 | — | | (341) | | | (11) | | (1,480) | |
| | | | | | |
| | | | | | |
| Proceeds on settlement of cross currency swap | | — | | — | | | — | | 69 | |
| Payment of lease liabilities | 5,9 | (71) | | (50) | | | (206) | | (149) | |
| Issue of common shares on exercise of stock options | 11 | 84 | | 23 | | | 274 | | 332 | |
| Dividends on common shares | | (984) | | (2,532) | | | (2,911) | | (4,092) | |
| Purchase of common shares under Normal Course Issuer Bid | 11 | (594) | | (1,737) | | | (1,769) | | (4,825) | |
| | | | | | |
| Cash flows used in financing activities | | (2,296) | | (4,637) | | | (4,421) | | (11,301) | |
| Investing activities | | | | | | |
| Net proceeds (expenditures) on exploration and evaluation assets | 3,17 | 3 | | (3) | | | (32) | | (24) | |
| Net expenditures on property, plant and equipment | 4,17 | (1,111) | | (1,132) | | | (3,902) | | (3,879) | |
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| Net change in non-cash working capital | | (91) | | 6 | | | 22 | | 178 | |
| Cash flows used in investing activities | | (1,199) | | (1,129) | | | (3,912) | | (3,725) | |
| Increase (decrease) in cash and cash equivalents | 3 | | 332 | | | (795) | | (179) | |
| Cash and cash equivalents – beginning of period | 122 | | 233 | | | 920 | | 744 | |
| Cash and cash equivalents – end of period | | $ | 125 | | $ | 565 | | | $ | 125 | | $ | 565 | |
| Interest paid on long-term debt, net | | $ | 187 | | $ | 179 | | | $ | 490 | | $ | 482 | |
| Income taxes paid, net | | $ | 349 | | $ | 312 | | | $ | 2,556 | | $ | 2,482 | |
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| Canadian Natural Resources Limited | 4 | Three and nine months ended September 30, 2023 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions of Canadian dollars, unless otherwise stated, unaudited)
1. ACCOUNTING POLICIES
Canadian Natural Resources Limited (the "Company") is a senior independent crude oil and natural gas exploration, development and production company. The Company's exploration and production operations are focused in North America, largely in Western Canada; the United Kingdom portion of the North Sea; and Côte d'Ivoire and South Africa in Offshore Africa.
The Oil Sands Mining and Upgrading segment produces synthetic crude oil through bitumen mining and upgrading operations at Horizon Oil Sands ("Horizon") and through the Company's direct and indirect interest in the Athabasca Oil Sands Project ("AOSP").
Within Western Canada in the Midstream and Refining segment, the Company maintains certain activities that include pipeline operations, an electricity co-generation system and an investment in the North West Redwater Partnership ("NWRP"), a general partnership formed to upgrade and refine bitumen in the Province of Alberta.
The Company was incorporated in Alberta, Canada. The address of its registered office is 2100, 855 - 2 Street S.W., Calgary, Alberta, Canada.
These interim consolidated financial statements and the related notes have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"), applicable to the preparation of interim financial statements, including International Accounting Standard ("IAS") 34 "Interim Financial Reporting", following the same accounting policies as the audited consolidated financial statements of the Company as at December 31, 2022, except as disclosed in note 2. These interim consolidated financial statements contain disclosures that are supplemental to the Company's annual audited consolidated financial statements. Certain disclosures normally required to be included in the notes to the annual audited consolidated financial statements have been condensed. These interim consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2022.
Critical Accounting Estimates and Judgements
The Company has made estimates, assumptions and judgements regarding certain assets, liabilities, revenues and expenses in the preparation of these interim consolidated financial statements, primarily related to unsettled transactions and events as of the date of these interim consolidated financial statements. Accordingly, actual results may differ from estimated amounts, and those differences may be material.
2. CHANGE IN ACCOUNTING POLICIES
In May 2023, the IASB issued amendments to IAS 12 "Income Taxes" related to the accounting for deferred taxes arising in those jurisdictions implementing the Organization for Economic Co-operation and Development's Pillar Two model rules ("Pillar Two Legislation"). The amendments were effective immediately and adopted in the second quarter of 2023 and did not have a significant impact on the Company's interim consolidated financial statements.
In May 2021, the IASB issued amendments to IAS 12 "Income Taxes" to require companies to recognize deferred tax on particular transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. The amendments were adopted on January 1, 2023 and did not have a significant impact on the Company's interim consolidated financial statements.
In February 2021, the IASB issued amendments to IAS 1 "Presentation of Financial Statements" to require companies to disclose their material accounting policy information rather than their significant accounting policies. To support this amendment the IASB also amended IFRS Practice Statement 2 "Making Materiality Judgements". The amendments were adopted on January 1, 2023 and did not have a significant impact on the Company's interim consolidated financial statements.
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| Canadian Natural Resources Limited | 5 | Three and nine months ended September 30, 2023 |
3. EXPLORATION AND EVALUATION ASSETS
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Exploration and Production | Oil Sands
Mining and
Upgrading | Total | | | | | | | | |
| | North
America | North
Sea | Offshore
Africa | | | | | | | | | | |
| Cost | | | | | | | | | | | | | |
| At December 31, 2022 | $ | 2,026 | | $ | — | | $ | 98 | | $ | 102 | | $ | 2,226 | | | | | | | | | |
| Additions | 34 | | — | | 1 | | — | | 35 | | | | | | | | | |
| Transfers to property, plant and equipment | (33) | | — | | — | | — | | (33) | | | | | | | | | |
| Derecognitions and other | (1) | | — | | — | | — | | (1) | | | | | | | | | |
| | | | | | | | | | | | | |
| At September 30, 2023 | $ | 2,026 | | $ | — | | $ | 99 | | $ | 102 | | $ | 2,227 | | | | | | | | | |
4. PROPERTY, PLANT AND EQUIPMENT
| | | | | | | | | | | | | | | | | | | | | | | |
| | Exploration and Production | Oil Sands
Mining and
Upgrading | Midstream and
Refining | Head
Office | Total |
| | North
America | North
Sea | Offshore
Africa | | | | |
| Cost | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| At December 31, 2022 | $ | 81,075 | | $ | 8,258 | | $ | 4,332 | | $ | 47,732 | | $ | 474 | | $ | 536 | | $ | 142,407 | |
| Additions / Acquisitions | 2,279 | | 22 | | 112 | | 1,479 | | 6 | | 23 | | 3,921 | |
| | | | | | | |
| Transfers from exploration & evaluation assets | 33 | | — | | — | | — | | — | | — | | 33 | |
| | | | | | | |
Derecognitions (1) | (444) | | — | | — | | (386) | | — | | — | | (830) | |
| | | | | | | |
| Foreign exchange adjustments and other | — | | 2 | | 2 | | — | | — | | — | | 4 | |
| | | | | | | |
| At September 30, 2023 | $ | 82,943 | | $ | 8,282 | | $ | 4,446 | | $ | 48,825 | | $ | 480 | | $ | 559 | | $ | 145,535 | |
| Accumulated depletion and depreciation | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| At December 31, 2022 | $ | 55,835 | | $ | 8,106 | | $ | 3,277 | | $ | 9,712 | | $ | 198 | | $ | 420 | | $ | 77,548 | |
| Expense | 2,642 | | 16 | | 123 | | 1,345 | | 11 | | 18 | | 4,155 | |
Derecognitions (1) | (444) | | — | | — | | (386) | | — | | — | | (830) | |
| | | | | | | |
| | | | | | | |
| Foreign exchange adjustments and other | — | | 11 | | 1 | | 3 | | — | | — | | 15 | |
| At September 30, 2023 | $ | 58,033 | | $ | 8,133 | | $ | 3,401 | | $ | 10,674 | | $ | 209 | | $ | 438 | | $ | 80,888 | |
| Net book value | | | | | | | |
| At September 30, 2023 | $ | 24,910 | | $ | 149 | | $ | 1,045 | | $ | 38,151 | | $ | 271 | | $ | 121 | | $ | 64,647 | |
| At December 31, 2022 | $ | 25,240 | | $ | 152 | | $ | 1,055 | | $ | 38,020 | | $ | 276 | | $ | 116 | | $ | 64,859 | |
(1)An asset is derecognized when no future economic benefits are expected to arise from its continued use or disposal.
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| Canadian Natural Resources Limited | 6 | Three and nine months ended September 30, 2023 |
5. LEASES
Lease assets
| | | | | | | | | | | | | | | | | |
| Product
transportation
and storage | Field
equipment
and power | Offshore
vessels and
equipment | Office leases
and other | Total |
| At December 31, 2022 | $ | 912 | | $ | 377 | | $ | 97 | | $ | 61 | | $ | 1,447 | |
| Additions | 17 | | 109 | | 41 | | 2 | | 169 | |
| Depreciation | (74) | | (78) | | (30) | | (15) | | (197) | |
| | | | | |
| Foreign exchange adjustments and other | (1) | | (1) | | (26) | | 1 | | (27) | |
| At September 30, 2023 | $ | 854 | | $ | 407 | | $ | 82 | | $ | 49 | | $ | 1,392 | |
| | | | | |
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Lease liabilities
The Company measures its lease liabilities at the discounted value of its lease payments during the lease term. Lease liabilities as at September 30, 2023 were as follows:
| | | | | | | | |
| | Sep 30
2023 | Dec 31
2022 |
| Lease liabilities | $ | 1,485 | | $ | 1,540 | |
| Less: current portion | 216 | | 244 | |
| | $ | 1,269 | | $ | 1,296 | |
Total cash outflows for leases for the three months ended September 30, 2023, including payments related to short-term leases not reported as lease assets, were $345 million (three months ended September 30, 2022 – $326 million; nine months ended September 30, 2023 – $1,023 million; nine months ended September 30, 2022 – $882 million). Interest expense on leases for the three months ended September 30, 2023 was $16 million (three months ended September 30, 2022 – $15 million; nine months ended September 30, 2023 – $48 million; nine months ended September 30, 2022 – $45 million).
6. INVESTMENTS
As at September 30, 2023, the Company had the following investment:
| | | | | | | | |
| Sep 30
2023 | Dec 31
2022 |
| Investment in PrairieSky Royalty Ltd. | $ | 565 | | $ | 491 | |
| | |
| | |
The gain from investments was comprised as follows:
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| Sep 30
2023 | Sep 30
2022 | | Sep 30
2023 | Sep 30
2022 |
| | | | | |
| Gain from investments | $ | (41) | | $ | (36) | | | $ | (74) | | $ | (94) | |
| Dividend income | (5) | | (3) | | | (16) | | (9) | |
| $ | (46) | | $ | (39) | | | $ | (90) | | $ | (103) | |
The Company's 22.6 million common share investment in PrairieSky Royalty Ltd. does not constitute significant influence, and is accounted for at fair value through profit or loss, measured at each reporting date. As at September 30, 2023, the market price per common share was $24.96 (December 31, 2022 – $21.70; September 30, 2022 – $17.81).
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| Canadian Natural Resources Limited | 7 | Three and nine months ended September 30, 2023 |
7. OTHER LONG-TERM ASSETS
| | | | | | | | | | | | |
| | Sep 30
2023 | Dec 31
2022 | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Prepaid cost of service tolls | $ | 187 | | $ | 199 | | | | | |
| Long-term inventory | 141 | | 137 | | | | | |
| Risk management (note 15) | 4 | | 9 | | | | | |
Long-term contracts, prepayments and other (1) | 253 | | 269 | | | | | |
| | 585 | | 614 | | | | | |
| Less: current portion | 51 | | 61 | | | | | |
| | $ | 534 | | $ | 553 | | | | | |
(1)Includes physical product sales contracts, accrued interest on the deferred PRT recovery, and the unamortized portion of the Company's share bonus program.
The Company has a 50% equity investment in NWRP. NWRP operates a 50,000 barrels per day bitumen upgrader and refinery that processes approximately 12,500 barrels per day (25% toll payer) of bitumen feedstock for the Company and 37,500 barrels per day (75% toll payer) of bitumen feedstock for the Alberta Petroleum Marketing Commission ("APMC"), an agent of the Government of Alberta. The Company is unconditionally obligated to pay its 25% pro rata share of the debt component of the monthly fee-for-service toll over the 40-year tolling period until 2058 (note 16). Sales of diesel and refined products and associated refining tolls are recognized in the Midstream and Refining segment (note 17).
The carrying value of the Company's interest in NWRP is $nil, and as at September 30, 2023, the cumulative unrecognized share of the equity loss and partnership distributions from NWRP was $550 million (December 31, 2022 – $551 million). For the three months ended September 30, 2023, the Company's recovery of its share of unrecognized equity losses was $18 million (nine months ended September 30, 2023 – recovery of unrecognized equity losses of $1 million; three months ended September 30, 2022 – unrecognized equity loss of $1 million; nine months ended September 30, 2022 – unrecognized equity loss of $26 million).
8. LONG-TERM DEBT
| | | | | | | | |
| | Sep 30
2023 | Dec 31
2022 |
| Canadian dollar denominated debt, unsecured | | |
| | |
| Medium-term notes | $ | 1,691 | | $ | 1,702 | |
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| US dollar denominated debt, unsecured | | |
| | |
| Commercial paper (September 30, 2023 – US$150 million; December 31, 2022 – US$nil) | 202 | | — | |
| US dollar debt securities (September 30, 2023 – US$7,250 million; December 31, 2022 – US$7,250 million) | 9,814 | | 9,812 | |
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| | 10,016 | | 9,812 | |
| Long-term debt before transaction costs and original issue discounts, net | 11,707 | | 11,514 | |
Less: original issue discounts, net (1) | 11 | | 13 | |
transaction costs (1) (2) | 52 | | 56 | |
| | 11,644 | | 11,445 | |
| Less: current portion of commercial paper | 202 | | — | |
current portion of other long-term debt (1) (2) | 1,402 | | 404 | |
| | $ | 10,040 | | $ | 11,041 | |
(1)The Company has included unamortized original issue discounts and premiums, and directly attributable transaction costs in the carrying amount of the outstanding debt.
(2)Transaction costs primarily represent underwriting commissions charged as a percentage of the related debt offerings, as well as legal, rating agency and other professional fees.
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| Canadian Natural Resources Limited | 8 | Three and nine months ended September 30, 2023 |
Bank Credit Facilities and Commercial Paper
As at September 30, 2023, the Company had undrawn revolving bank credit facilities of $5,450 million. Details of these facilities are described below. The Company also has certain other dedicated credit facilities supporting letters of credit. At September 30, 2023, the Company had $202 million drawn under its commercial paper program, and reserves capacity under its revolving bank credit facilities for amounts outstanding under this program.
▪a $100 million demand credit facility;
▪a $500 million revolving credit facility, maturing February 2025;
▪a $2,425 million revolving syndicated credit facility, maturing June 2025; and
▪a $2,425 million revolving syndicated credit facility, maturing June 2027.
During the third quarter of 2023, the Company extended its revolving credit facility originally maturing February 2024 to February 2025.
During the second quarter of 2023, the Company extended its revolving syndicated credit facility originally maturing June 2024 to June 2027.
Borrowings under the Company's revolving credit facilities may be made by way of pricing referenced to Canadian dollar bankers' acceptances, US dollar bankers' acceptances, SOFR, US base rate or Canadian prime rate.
The Company's borrowings under its US commercial paper program are authorized up to a maximum of US$2,500 million.
The Company's weighted average interest rate on commercial paper outstanding as at September 30, 2023 was 5.6% (September 30, 2022 – N/A), and on total long-term debt outstanding for the nine months ended September 30, 2023 was 4.7% (September 30, 2022 – 4.2%).
As at September 30, 2023, letters of credit and guarantees aggregating to $534 million were outstanding.
Medium-Term Notes
In July 2023, the Company filed a base shelf prospectus that allows for the offer for sale from time to time of up to $3,000 million of medium-term notes in Canada, which expires in August 2025, replacing the Company's previous base shelf prospectus which would have expired in August 2023. If issued, these securities may be offered in amounts and at prices, including interest rates, to be determined based on market conditions at the time of issuance.
US Dollar Debt Securities
In July 2023, the Company filed a base shelf prospectus that allows for the offer for sale from time to time of up to US$3,000 million of debt securities in the United States, which expires in August 2025, replacing the Company's previous base shelf prospectus which would have expired in August 2023. If issued, these securities may be offered in amounts and at prices, including interest rates, to be determined based on market conditions at the time of issuance.
| | | | | | | | |
| Canadian Natural Resources Limited | 9 | Three and nine months ended September 30, 2023 |
9. OTHER LONG-TERM LIABILITIES
| | | | | | | | |
| | Sep 30
2023 | Dec 31
2022 |
| Asset retirement obligations | $ | 6,844 | | $ | 6,908 | |
| Lease liabilities (note 5) | 1,485 | | 1,540 | |
| Share-based compensation | 860 | | 832 | |
| Transportation and processing contracts | 102 | | 159 | |
| Risk management (note 15) | 4 | | 3 | |
Other | 69 | | 92 | |
| | 9,364 | | 9,534 | |
| Less: current portion | 1,317 | | 1,373 | |
| | $ | 8,047 | | $ | 8,161 | |
Asset Retirement Obligations
The Company's asset retirement obligations are expected to be settled on an ongoing basis over a period of approximately 60 years and discounted using a weighted average discount rate of 5.6% (December 31, 2022 – 5.6%) and inflation rates of up to 2% (December 31, 2022 – up to 2%). Reconciliations of the discounted asset retirement obligations were as follows:
| | | | | | | | |
| | Sep 30
2023 | Dec 31
2022 |
| Balance – beginning of period | $ | 6,908 | | $ | 6,806 | |
| Liabilities incurred | 21 | | 20 | |
| Liabilities acquired, net | — | | 11 | |
| Liabilities settled | (360) | | (449) | |
| Asset retirement obligation accretion | 275 | | 281 | |
Revision of cost, inflation and timing estimates (1) | — | | 897 | |
Impact of regulatory changes (2) | — | | 982 | |
| Change in discount rates | — | | (1,698) | |
| Foreign exchange adjustments | — | | 58 | |
| Balance – end of period | 6,844 | | 6,908 | |
| Less: current portion | 468 | | 495 | |
| | $ | 6,376 | | $ | 6,413 | |
(1)Includes normal course revisions of cost, inflation and timing estimates, as well as revisions related to the acceleration of the abandonment of Ninian field assets in the North Sea at December 31, 2022.
(2)Reflects changes to the estimated timing of settlement of the Company's asset retirement obligations due to provincial regulatory changes in Alberta, British Columbia, and Saskatchewan in 2022.
| | | | | | | | |
| Canadian Natural Resources Limited | 10 | Three and nine months ended September 30, 2023 |
Share-Based Compensation
The liability for share-based compensation includes costs incurred under the Company's Stock Option Plan and Performance Share Unit ("PSU") plans. The Company's Stock Option Plan provides current employees with the right to elect to receive common shares or a cash payment in exchange for stock options surrendered. The PSU plan provides certain executive employees of the Company with the right to receive a cash payment, the amount of which is determined by individual employee performance and the extent to which certain other performance measures are met.
The Company recognizes a liability for potential cash settlements under these plans. The current portion of the liability represents the maximum amount of the liability payable within the next twelve month period if all vested stock options and PSUs are settled in cash.
| | | | | | | | |
| | Sep 30
2023 | Dec 31
2022 |
| Balance – beginning of period | $ | 832 | | $ | 489 | |
| Share-based compensation expense | 434 | | 804 | |
| Cash payment for stock options surrendered and PSUs vested | (108) | | (79) | |
| Transferred to common shares | (302) | | (387) | |
| Other | 4 | | 5 | |
| Balance – end of period | 860 | | 832 | |
| Less: current portion | 591 | | 559 | |
| | $ | 269 | | $ | 273 | |
10. INCOME TAXES
The provision for income tax was as follows:
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| Expense (recovery) | Sep 30
2023 | Sep 30
2022 | | Sep 30
2023 | Sep 30
2022 |
Current corporate income tax – North America (1) | $ | 587 | | $ | 755 | | | $ | 1,366 | | $ | 2,444 | |
| Current corporate income tax – North Sea | (11) | | 14 | | | (9) | | 36 | |
| Current corporate income tax – Offshore Africa | 23 | | 21 | | | 53 | | 51 | |
Current PRT (2) – North Sea | — | | (36) | | | (45) | | (37) | |
| Other taxes | 3 | | 3 | | | 9 | | 13 | |
| Current income tax | 602 | | 757 | | | 1,374 | | 2,507 | |
| Deferred corporate income tax | 195 | | 194 | | | 203 | | 450 | |
Deferred PRT (2) – North Sea | 6 | | — | | | 24 | | — | |
| Deferred income tax | 201 | | 194 | | | 227 | | 450 | |
| Income tax | $ | 803 | | $ | 951 | | | $ | 1,601 | | $ | 2,957 | |
(1)Includes North America Exploration and Production, Oil Sands Mining and Upgrading, and Midstream and Refining segments.
(2)Petroleum Revenue Tax.
| | | | | | | | |
| Canadian Natural Resources Limited | 11 | Three and nine months ended September 30, 2023 |
11. SHARE CAPITAL
Authorized
Preferred shares issuable in a series.
Unlimited number of common shares without par value.
| | | | | | | | |
| | Nine Months Ended Sep 30, 2023 |
| Issued Common Shares | Number of shares (thousands) | Amount |
| Balance – beginning of period | 1,102,636 | | $ | 10,294 | |
| Issued upon exercise of stock options | 7,190 | | 274 | |
| Previously recognized liability on stock options exercised for common shares | — | | 302 | |
| | |
| Purchase of common shares under Normal Course Issuer Bid | (22,500) | | (216) | |
| Balance – end of period | 1,087,326 | | $ | 10,654 | |
Dividend Policy
The Company has paid regular quarterly dividends in each year since 2001. The dividend policy undergoes periodic review by the Board of Directors and is subject to change.
On November 1, 2023, the Board of Directors approved an 11% increase in the quarterly dividend to $1.00 per common share, beginning with the dividend payable on January 5, 2024. On March 1, 2023, the Board of Directors approved a 6% increase in the quarterly dividend to $0.90 per common share. On November 2, 2022, the Board of Directors approved a 13% increase in the quarterly dividend to $0.85 per common share. On August 3, 2022, the Board of Directors approved a special dividend of $1.50 per common share. On March 2, 2022, the Board of Directors approved a 28% increase in the quarterly dividend to $0.75 per common share, from $0.5875 per common share.
Normal Course Issuer Bid
On March 8, 2023, the Company's application was approved for a Normal Course Issuer Bid to purchase through the facilities of the Toronto Stock Exchange, alternative Canadian trading platforms, and the New York Stock Exchange, up to 92,296,006 common shares, representing 10% of the public float, over a 12-month period commencing March 13, 2023 and ending March 12, 2024.
For the nine months ended September 30, 2023, the Company purchased 22,500,000 common shares at a weighted average price of $78.64 per common share for a total cost of $1,769 million. Retained earnings were reduced by $1,553 million, representing the excess of the purchase price of common shares over their average carrying value. Subsequent to September 30, 2023, up to and including October 31, 2023, the Company purchased 5,150,000 common shares at a weighted average price of $88.40 per common share for a total cost of $455 million.
Share-Based Compensation – Stock Options
The following table summarizes information relating to stock options outstanding as at September 30, 2023:
| | | | | | | | |
| | Nine Months Ended Sep 30, 2023 |
| | Stock options (thousands) | Weighted
average
exercise price |
| Outstanding – beginning of period | 31,150 | | $ | 42.37 | |
| Granted | 6,627 | | $ | 79.82 | |
| Exercised for common shares | (7,190) | | $ | 38.13 | |
| Surrendered for cash settlement | (181) | | $ | 38.65 | |
| Forfeited | (1,724) | | $ | 51.01 | |
| Outstanding – end of period | 28,682 | | $ | 51.59 | |
| Exercisable – end of period | 3,796 | | $ | 37.93 | |
The Stock Option Plan is a "rolling 7%" plan, whereby the aggregate number of common shares that may be reserved for issuance under the plan shall not exceed 7% of the common shares outstanding from time to time.
| | | | | | | | |
| Canadian Natural Resources Limited | 12 | Three and nine months ended September 30, 2023 |
12. ACCUMULATED OTHER COMPREHENSIVE INCOME
The components of accumulated other comprehensive income, net of taxes, were as follows:
| | | | | | | | |
| | Sep 30
2023 | Sep 30
2022 |
| Derivative financial instruments designated as cash flow hedges | $ | 72 | | $ | 75 | |
| Foreign currency translation adjustment | 136 | | 155 | |
| $ | 208 | | $ | 230 | |
13. CAPITAL DISCLOSURES
The Company has defined its capital to mean its long-term debt and consolidated shareholders' equity, as determined at each reporting date.
The Company's objectives when managing its capital structure are to maintain financial flexibility and balance to enable the Company to access capital markets to sustain its on-going operations and growth strategies. The Company primarily monitors capital on the basis of an internally derived financial measure referred to as its "debt to book capitalization ratio", which is the ratio of current and long-term debt less cash and cash equivalents divided by the sum of the carrying value of shareholders' equity plus current and long-term debt less cash and cash equivalents. The Company's internal targeted range for its debt to book capitalization ratio is 25% to 45%. This range may be exceeded in periods when a combination of capital projects, acquisitions, or lower commodity prices occurs. The Company may be below the low end of the targeted range when cash flow from operating activities is greater than current investment activities. As at September 30, 2023, the ratio was below the target range at 22.5%.
Readers are cautioned that the debt to book capitalization ratio is not defined by IFRS and this financial measure may not be comparable to similar measures presented by other companies. Further, there are no assurances that the Company will continue to use this measure to monitor capital or will not alter the method of calculation of this measure in the future.
| | | | | | | | |
| | Sep 30
2023 | Dec 31
2022 |
| Long-term debt | $ | 11,644 | | $ | 11,445 | |
| Less: cash and cash equivalents | 125 | | 920 | |
| Long-term debt, net | $ | 11,519 | | $ | 10,525 | |
| Total shareholders' equity | $ | 39,634 | | $ | 38,175 | |
| Debt to book capitalization | 22.5% | 21.6% |
The Company is subject to a financial covenant that requires debt to book capitalization as defined in its credit facility agreements to not exceed 65%. As at September 30, 2023, the Company was in compliance with this covenant.
14. NET EARNINGS PER COMMON SHARE
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | | Sep 30
2023 | Sep 30
2022 | | Sep 30
2023 | Sep 30
2022 |
| Weighted average common shares outstanding – basic (thousands of shares) | 1,090,131 | | 1,118,717 | | | 1,095,183 | | 1,144,705 | |
| Effect of dilutive stock options (thousands of shares) | 10,661 | | 12,712 | | | 10,980 | | 14,530 | |
| Weighted average common shares outstanding – diluted (thousands of shares) | 1,100,792 | | 1,131,429 | | | 1,106,163 | | 1,159,235 | |
| Net earnings | $ | 2,344 | | $ | 2,814 | | | $ | 5,606 | | $ | 9,417 | |
| | | | | |
| Net earnings per common share | – basic | $ | 2.15 | | $ | 2.52 | | | $ | 5.12 | | $ | 8.23 | |
| | – diluted | $ | 2.13 | | $ | 2.49 | | | $ | 5.07 | | $ | 8.12 | |
| | | | | | | | |
| Canadian Natural Resources Limited | 13 | Three and nine months ended September 30, 2023 |
15. FINANCIAL INSTRUMENTS
The Company's financial instruments are comprised of cash and cash equivalents, accounts receivable, investments, risk management assets and liabilities, accounts payable, accrued liabilities, lease liabilities and long-term debt. These financial instruments, with the exception of investments and risk management assets and liabilities, are classified as financial assets and liabilities at amortized cost. Investments are classified as financial assets at fair value through profit or loss. Risk management assets and liabilities are classified as derivatives held for trading or as cash flow hedges.
The estimated fair values of derivative financial instruments in Level 2 at each measurement date have been determined based on appropriate internal valuation methodologies and/or third party indications, including quoted forward prices for commodities, foreign exchange rates, interest yield curves and other volatility factors.
The changes in estimated fair values of derivative financial instruments included in the risk management asset (liability) were recognized in the financial statements as follows:
| | | | | | | | | | | |
| Asset (liability) | Sep 30
2023 | Dec 31
2022 | | | |
| Balance – beginning of period | $ | 6 | | $ | 55 | | | | |
| | | | | |
| Net change in fair value of outstanding derivative financial instruments recognized in: | | | | | |
Risk management activities (1) | (7) | | 70 | | | | |
| Foreign exchange | 1 | | (119) | | | | |
| | | | | |
| | | | | |
| | | | | |
| Balance – end of period | — | | 6 | | | | |
| Less: current portion | (3) | | — | | | | |
| | $ | 3 | | $ | 6 | | | | |
(1)Risk management assets and liabilities are disclosed in note 7 and note 9, respectively.
Net loss (gain) from risk management activities was as follows:
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| | Sep 30
2023 | Sep 30
2022 | | Sep 30
2023 | Sep 30
2022 |
| Net realized risk management loss (gain) | $ | 29 | | $ | (44) | | | $ | 3 | | $ | (5) | |
| Net unrealized risk management loss (gain) | 3 | | (48) | | | 19 | | (43) | |
| | $ | 32 | | $ | (92) | | | $ | 22 | | $ | (48) | |
The carrying amounts of the Company's financial instruments approximated their fair value, except for fixed rate long-term debt. The Company's financial instruments are categorized as Level 1 with the exception of risk management assets and liabilities, which are categorized as Level 2. There were no transfers between Level 1, 2, and 3 financial instruments. The fair values of the Company's fixed rate long-term debt is outlined below:
| | | | | | | | | | | | | |
| | Sep 30, 2023 | | |
| | |
| Carrying amount | | Level 1 Fair Value | | |
| | | | | |
| | | | | |
| | | | | |
Fixed rate long-term debt (1) (2) | $ | (11,442) | | | $ | (10,833) | | | |
(1)The fair value of fixed rate long-term debt has been determined based on quoted market prices.
(2)Includes the current portion of fixed rate long-term debt.
| | | | | | | | |
| Canadian Natural Resources Limited | 14 | Three and nine months ended September 30, 2023 |
Financial Risk Factors
The Company's financial risks are consistent with those discussed in notes 1, 4 and 19 of the Company's audited financial statements for the year ended December 31, 2022.
a) Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Company's market risk is comprised of commodity price risk, interest rate risk, and foreign currency exchange rate risk.
Commodity price risk management
The Company periodically uses commodity derivative financial instruments to manage its exposure to commodity price risk associated with the sale of its future crude oil and natural gas production and with natural gas purchases.
Interest rate risk management
The Company is exposed to interest rate price risk on its fixed rate long-term debt and to interest rate cash flow risk on its floating rate long-term debt. At September 30, 2023, the Company had no significant interest rate swap contracts outstanding.
Foreign currency exchange rate risk management
The Company is exposed to foreign currency exchange rate risk in Canada primarily related to its US dollar denominated long-term debt, commercial paper and working capital. The Company is also exposed to foreign currency exchange rate risk on transactions conducted in other currencies and in the carrying value of its foreign subsidiaries.
As at September 30, 2023, the Company had US$1,157 million of foreign currency forward contracts outstanding (December 31, 2022 - US$1,017 million), with original terms of up to 90 days, of which US$1,007 million were designated as derivatives held for trading (December 31, 2022 - US$1,017 million) and US$150 million were designated as cash flow hedges (December 31, 2022 - US$nil).
b) Credit risk
Credit risk is the risk that a party to a financial instrument will cause a financial loss to the Company by failing to discharge an obligation.
Counterparty credit risk management
The Company's accounts receivable are mainly with customers in the crude oil and natural gas industry and are subject to normal industry credit risks. The Company manages these risks by reviewing its exposure to individual companies on a regular basis and where appropriate, ensures that parental guarantees or letters of credit are in place to minimize the impact in the event of default. As at September 30, 2023, substantially all of the Company's accounts receivable were due within normal trade terms.
The Company is also exposed to possible losses in the event of nonperformance by counterparties to derivative financial instruments; however, the Company manages this credit risk by entering into agreements with counterparties that are substantially all investment grade financial institutions. As at September 30, 2023, the Company had net risk management assets of $2 million with specific counterparties related to derivative financial instruments (December 31, 2022 – $7 million). The carrying amount of financial assets approximates the maximum credit exposure.
c) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
Management of liquidity risk requires the Company to maintain sufficient cash and cash equivalents, along with other sources of capital, consisting primarily of cash flow from operating activities, available credit facilities, commercial paper and access to debt capital markets, to meet obligations as they become due. The Company believes it has adequate bank credit facilities to provide liquidity to manage fluctuations in the timing of the receipt and/or disbursement of operating cash flows.
| | | | | | | | |
| Canadian Natural Resources Limited | 15 | Three and nine months ended September 30, 2023 |
As at September 30, 2023, the maturity dates of the Company's financial liabilities were as follows:
| | | | | | | | | | | | | | |
| | Less than
1 year | 1 to less than
2 years | 2 to less than
5 years | Thereafter |
| Accounts payable | $ | 1,235 | | $ | — | | $ | — | | $ | — | |
| Accrued liabilities | $ | 4,034 | | $ | — | | $ | — | | $ | — | |
Long-term debt (1) | $ | 1,604 | | $ | 1,624 | | $ | 2,358 | | $ | 6,121 | |
Other long-term liabilities (2) | $ | 220 | | $ | 172 | | $ | 425 | | $ | 672 | |
Interest and other financing expense (3) | $ | 608 | | $ | 542 | | $ | 1,365 | | $ | 3,476 | |
(1)Long-term debt represents principal repayments only and does not reflect interest, original issue discounts and premiums or transaction costs.
(2)Lease payments included within other long-term liabilities reflect principal payments only and are as follows; less than one year, $216 million; one to less than two years, $172 million; two to less than five years, $425 million; and thereafter, $672 million.
(3)Includes interest and other financing expense on long-term debt and other long-term liabilities. Payments were estimated based upon applicable interest and foreign exchange rates as at September 30, 2023.
16. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company has committed to certain payments. The following table summarizes the Company's commitments as at September 30, 2023:
| | | | | | | | | | | | | | | | | | | | |
| | Remaining 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter |
Product transportation and processing (1) | $ | 299 | | $ | 1,406 | | $ | 1,292 | | $ | 1,169 | | $ | 1,118 | | $ | 11,423 | |
North West Redwater Partnership service toll (2) | $ | 38 | | $ | 158 | | $ | 156 | | $ | 139 | | $ | 125 | | $ | 5,092 | |
| Offshore vessels and equipment | $ | 11 | | $ | 35 | | $ | — | | $ | — | | $ | — | | $ | — | |
| Field equipment and power | $ | 15 | | $ | 27 | | $ | 25 | | $ | 23 | | $ | 22 | | $ | 215 | |
| Other | $ | 6 | | $ | 46 | | $ | 41 | | $ | 35 | | $ | — | | $ | — | |
(1)The Company's commitment for the 20-year product transportation agreement on the Trans Mountain Pipeline Expansion ("TMX") is subject to change pending approval of the interim toll filing by the Canada Energy Regulator.
(2)Pursuant to the processing agreements, the Company pays its 25% pro rata share of the debt component of the monthly fee-for-service toll. Included in the toll is $3,014 million of interest payable over the 40-year tolling period, ending in 2058 (note 7).
In addition to the commitments disclosed above, the Company has entered into various agreements related to the engineering, procurement and construction of its various development projects. These contracts can be cancelled by the Company upon notice without penalty, subject to the costs incurred up to and in respect of the cancellation.
The Company is defendant and plaintiff in a number of legal actions arising in the normal course of business. In addition, the Company is subject to certain contractor construction claims. The Company believes that any liabilities that might arise pertaining to any such matters would not have a material effect on its consolidated financial position.
| | | | | | | | |
| Canadian Natural Resources Limited | 16 | Three and nine months ended September 30, 2023 |
17. SEGMENTED INFORMATION
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | North Sea | Offshore Africa | Total Exploration and Production |
| Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended |
| Sep 30 | Sep 30 | Sep 30 | Sep 30 | Sep 30 | Sep 30 | Sep 30 | Sep 30 |
(millions of Canadian dollars, unaudited) | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Segmented product sales | | | | | | | | | | | | | | | | |
| Crude oil and NGLs | 5,135 | | 4,622 | | 12,924 | | 16,631 | | 78 | | 48 | | 272 | | 395 | | 138 | | 143 | | 401 | | 541 | | 5,351 | | 4,813 | | 13,597 | | 17,567 | |
| Natural gas | 543 | | 1,266 | | 1,815 | | 3,697 | | 1 | | 3 | | 5 | | 9 | | 13 | | 18 | | 38 | | 47 | | 557 | | 1,287 | | 1,858 | | 3,753 | |
Other income and revenue (1) | 1 | | 59 | | 5 | | 198 | | — | | — | | — | | 3 | | — | | 2 | | 7 | | 6 | | 1 | | 61 | | 12 | | 207 | |
| Total segmented product sales | 5,679 | | 5,947 | | 14,744 | | 20,526 | | 79 | | 51 | | 277 | | 407 | | 151 | | 163 | | 446 | | 594 | | 5,909 | | 6,161 | | 15,467 | | 21,527 | |
| Less: royalties | (863) | | (977) | | (1,858) | | (3,193) | | — | | — | | (1) | | (1) | | (11) | | (20) | | (39) | | (50) | | (874) | | (997) | | (1,898) | | (3,244) | |
| Segmented revenue | 4,816 | | 4,970 | | 12,886 | | 17,333 | | 79 | | 51 | | 276 | | 406 | | 140 | | 143 | | 407 | | 544 | | 5,035 | | 5,164 | | 13,569 | | 18,283 | |
| Segmented expenses | | | | | | | | | | | | | | | | |
| Production | 867 | | 911 | | 2,787 | | 2,771 | | 61 | | 46 | | 213 | | 241 | | 30 | | 25 | | 94 | | 78 | | 958 | | 982 | | 3,094 | | 3,090 | |
| Transportation, blending and feedstock | 1,324 | | 1,290 | | 4,278 | | 4,889 | | 1 | | 1 | | 6 | | 5 | | 1 | | 1 | | 1 | | 1 | | 1,326 | | 1,292 | | 4,285 | | 4,895 | |
| Depletion, depreciation and amortization | 947 | | 913 | | 2,708 | | 2,646 | | 12 | | 15 | | 28 | | 94 | | 47 | | 39 | | 147 | | 132 | | 1,006 | | 967 | | 2,883 | | 2,872 | |
| Asset retirement obligation accretion | 59 | | 50 | | 176 | | 120 | | 11 | | 10 | | 34 | | 23 | | 2 | | 2 | | 6 | | 5 | | 72 | | 62 | | 216 | | 148 | |
| Risk management activities (commodity derivatives) | — | | (49) | | 17 | | 6 | | — | | — | | — | | — | | — | | — | | — | | — | | — | | (49) | | 17 | | 6 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Total segmented expenses | 3,197 | | 3,115 | | 9,966 | | 10,432 | | 85 | | 72 | | 281 | | 363 | | 80 | | 67 | | 248 | | 216 | | 3,362 | | 3,254 | | 10,495 | | 11,011 | |
| Segmented earnings (loss) | 1,619 | | 1,855 | | 2,920 | | 6,901 | | (6) | | (21) | | (5) | | 43 | | 60 | | 76 | | 159 | | 328 | | 1,673 | | 1,910 | | 3,074 | | 7,272 | |
| Non–segmented expenses | | | | | | | | | | | | | | | | |
| Administration | | | | | | | | | | | | | | | | |
| Share-based compensation | | | | | | | | | | | | | | | | |
| Interest and other financing expense | | | | | | | | | | | | | | | | |
| Risk management activities (other) | | | | | | | | | | | | | | | | |
| Foreign exchange loss (gain) | | | | | | | | | | | | | | | | |
| Gain from investments | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Total non–segmented expenses | | | | | | | | | | | | | | | | |
| Earnings before taxes | | | | | | | | | | | | | | | | |
| Current income tax | | | | | | | | | | | | | | | | |
| Deferred income tax | | | | | | | | | | | | | | | | |
| Net earnings | | | | | | | | | | | | | | | | |
| | | | | | | | |
| Canadian Natural Resources Limited | 17 | Three and nine months ended September 30, 2023 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Oil Sands Mining and Upgrading | Midstream and Refining | Inter–segment elimination and other |
Total |
| Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended |
| Sep 30 | Sep 30 | Sep 30 | Sep 30 | Sep 30 | Sep 30 | Sep 30 | Sep 30 |
(millions of Canadian dollars, unaudited) | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Segmented product sales | | | | | | | | | | | | | | | | |
Crude oil and NGLs (2) | 5,591 | | 6,056 | | 13,619 | | 15,869 | | 20 | | 21 | | 56 | | 59 | | (18) | | 111 | | 199 | | 6 | | 10,944 | | 11,001 | | 27,471 | | 33,501 | |
| Natural gas | — | | — | | — | | — | | — | | — | | — | | — | | 42 | | 55 | | 114 | | 196 | | 599 | | 1,342 | | 1,972 | | 3,949 | |
Other income and revenue (1) | (25) | | 36 | | 2 | | 151 | | 237 | | 134 | | 690 | | 701 | | 6 | | — | | 9 | | 9 | | 219 | | 231 | | 713 | | 1,068 | |
| Total segmented product sales | 5,566 | | 6,092 | | 13,621 | | 16,020 | | 257 | | 155 | | 746 | | 760 | | 30 | | 166 | | 322 | | 211 | | 11,762 | | 12,574 | | 30,156 | | 38,518 | |
| Less: royalties | (993) | | (1,120) | | (1,843) | | (2,665) | | — | | — | | — | | — | | — | | — | | — | | — | | (1,867) | | (2,117) | | (3,741) | | (5,909) | |
| Segmented revenue | 4,573 | | 4,972 | | 11,778 | | 13,355 | | 257 | | 155 | | 746 | | 760 | | 30 | | 166 | | 322 | | 211 | | 9,895 | | 10,457 | | 26,415 | | 32,609 | |
| Segmented expenses | | | | | | | | | | | | | | | | |
| Production | 1,003 | | 1,005 | | 3,042 | | 3,059 | | 74 | | 72 | | 243 | | 208 | | 14 | | 17 | | 45 | | 46 | | 2,049 | | 2,076 | | 6,424 | | 6,403 | |
Transportation, blending and feedstock (2) | 768 | | 684 | | 1,900 | | 1,785 | | 183 | | 113 | | 498 | | 536 | | 12 | | 146 | | 270 | | 156 | | 2,289 | | 2,235 | | 6,953 | | 7,372 | |
| Depletion, depreciation and amortization | 527 | | 484 | | 1,457 | | 1,341 | | 4 | | 3 | | 12 | | 11 | | — | | — | | — | | — | | 1,537 | | 1,454 | | 4,352 | | 4,224 | |
| Asset retirement obligation accretion | 20 | | 20 | | 59 | | 51 | | — | | — | | — | | — | | — | | — | | — | | — | | 92 | | 82 | | 275 | | 199 | |
| Risk management activities (commodity derivatives) | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | (49) | | 17 | | 6 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Total segmented expenses | 2,318 | | 2,193 | | 6,458 | | 6,236 | | 261 | | 188 | | 753 | | 755 | | 26 | | 163 | | 315 | | 202 | | 5,967 | | 5,798 | | 18,021 | | 18,204 | |
| Segmented earnings (loss) | 2,255 | | 2,779 | | 5,320 | | 7,119 | | (4) | | (33) | | (7) | | 5 | | 4 | | 3 | | 7 | | 9 | | 3,928 | | 4,659 | | 8,394 | | 14,405 | |
| Non–segmented expenses | | | | | | | | | | | | | | | | |
| Administration | | | | | | | | | | | | | 108 | | 94 | | 333 | | 307 | |
| Share-based compensation | | | | | | | | | | | | | 298 | | (4) | | 434 | | 485 | |
| Interest and other financing expense | | | | | | | | | | | | | 187 | | 150 | | 519 | | 473 | |
| Risk management activities (other) | | | | | | | | | | | | | 32 | | (43) | | 5 | | (54) | |
| Foreign exchange loss (gain) | | | | | | | | | | | | | 202 | | 736 | | (14) | | 923 | |
| Gain from investments | | | | | | | | | | | | | (46) | | (39) | | (90) | | (103) | |
| Total non-segmented expenses | | | | | | | | | | | | | 781 | | 894 | | 1,187 | | 2,031 | |
| Earnings before taxes | | | | | | | | | | | | | 3,147 | | 3,765 | | 7,207 | | 12,374 | |
| Current income tax | | | | | | | | | | | | | 602 | | 757 | | 1,374 | | 2,507 | |
| Deferred income tax | | | | | | | | | | | | | 201 | | 194 | | 227 | | 450 | |
| Net earnings | | | | | | | | | | | | | 2,344 | | 2,814 | | 5,606 | | 9,417 | |
(1)Includes the sale of diesel and other refined products in the Midstream and Refining segment, and other income.
(2)Includes blending and feedstock costs associated with the processing of third party bitumen and other purchased feedstock in the Oil Sands Mining and Upgrading segment.
| | | | | | | | |
| Canadian Natural Resources Limited | 18 | Three and nine months ended September 30, 2023 |
Capital Expenditures (1)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended | | | | | | | | |
| | Sep 30, 2023 | Sep 30, 2022 | | | | | | | | |
| | Net expenditures | Non-cash and fair value changes (2) | Capitalized costs | Net expenditures | Non-cash and fair value changes (2) | Capitalized
costs | | | | | | | | |
| Exploration and evaluation assets | | | | | | | | | | | | | | |
| Exploration and Production | | | | | | | | | | | | | | |
North America | $ | 31 | | $ | (31) | | $ | — | | $ | 24 | | $ | (50) | | $ | (26) | | | | | | | | | |
| | | | | | | | | | | | | | |
| Offshore Africa | 1 | | — | | 1 | | — | | — | | — | | | | | | | | | |
| | | | | | | | | | | | | | |
| | 32 | | (31) | | 1 | | 24 | | (50) | | (26) | | | | | | | | | |
| Property, plant and equipment | | | | | | | | | | | | | | |
| Exploration and Production | | | | | | | | | | | | | | |
| North America | 2,260 | | (392) | | 1,868 | | 2,432 | | (17) | | 2,415 | | | | | | | | | |
| North Sea | 22 | | — | | 22 | | 78 | | (104) | | (26) | | | | | | | | | |
| Offshore Africa | 112 | | — | | 112 | | 67 | | (38) | | 29 | | | | | | | | | |
| | 2,394 | | (392) | | 2,002 | | 2,577 | | (159) | | 2,418 | | | | | | | | | |
| Oil Sands Mining and Upgrading | 1,479 | | (386) | | 1,093 | | 1,277 | | (654) | | 623 | | | | | | | | | |
| Midstream and Refining | 6 | | — | | 6 | | 7 | | — | | 7 | | | | | | | | | |
| Head Office | 23 | | — | | 23 | | 18 | | — | | 18 | | | | | | | | | |
| | 3,902 | | (778) | | 3,124 | | 3,879 | | (813) | | 3,066 | | | | | | | | | |
| $ | 3,934 | | $ | (809) | | $ | 3,125 | | $ | 3,903 | | $ | (863) | | $ | 3,040 | | | | | | | | | |
(1)This table provides a reconciliation of capitalized costs, reported in note 3 and note 4, to net expenditures reported in the investing activities section of the statements of cash flows. The reconciliation excludes the impact of foreign exchange adjustments.
(2)Derecognitions, asset retirement obligations, transfer of exploration and evaluation assets, and other fair value adjustments.
Segmented Assets
| | | | | | | | |
| | Sep 30
2023 | Dec 31
2022 |
| Exploration and Production | | |
| North America | $ | 30,628 | | $ | 31,135 | |
| North Sea | 413 | | 378 | |
| Offshore Africa | 1,338 | | 1,322 | |
| Other | 61 | | 54 | |
| Oil Sands Mining and Upgrading | 42,742 | | 42,102 | |
| Midstream and Refining | 967 | | 979 | |
| Head Office | 164 | | 172 | |
| | $ | 76,313 | | $ | 76,142 | |
| | | | | | | | |
| Canadian Natural Resources Limited | 19 | Three and nine months ended September 30, 2023 |
SUPPLEMENTARY INFORMATION
INTEREST COVERAGE RATIOS
The following financial ratios are provided in connection with the Company's continuous offering of medium-term notes pursuant to the short form prospectus dated July 2023. These ratios are based on the Company's interim consolidated financial statements that are prepared in accordance with accounting principles generally accepted in Canada.
| | | | | |
| Interest coverage ratios for the twelve month period ended September 30, 2023: | |
| Interest coverage (times) | |
Net earnings (1) | 15.3x |
Adjusted funds flow (2) | 29.2x |
(1)Net earnings plus income taxes and interest expense; divided by interest expense.
(2)Adjusted funds flow (as defined in the Company's Management's Discussion and Analysis), plus current income taxes and interest expense; divided by interest expense.
| | | | | | | | |
| Canadian Natural Resources Limited | 20 | Three and nine months ended September 30, 2023 |
