CNQ - Earnings call transcript Q2 2021 | Canadian Natural Resources Limited

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Operator

Good morning. We would like to welcome everyone to the Canadian Natural Resources 2021 Second Quarter Earnings Conference Call and Webcast. After the presentation, we will conduct a question-and-answer session. Instructions will be given at that time. Please note that this call is being recorded today, August 5, 2021 at 9:00 a.m. Time. Mountain like call, meeting Corey now host to turn today’s for Bieber, to would over the your I Executive Advisor. sir. ahead go Please

Corey Bieber

Thank Corporate morning, Natural’s good quarter financially Natural you, welcome strong operator, Canadian operationally. to had everyone, another Second Conference Update and XXXX and Call. Canadian Quarter and

can our all before, assets significant and unique complemented generate our base conventional amongst of long-life, your I commented asset by assets, As peer allows low-decline flexibility, significant that which I believe flow. cash is group underpinned free by

our asset that and effective management that returns and Beyond robust a culture base, corporate being driven focuses for efficient. there strategy a team is corporate on real and a on generating focuses shareholders

the its strength Over plan. of demonstrated years, the Natural and has business Canadian clearly sustainability its robustness,

only manner. beyond, companies be discuss Mark both returns substantial will to will pillars. disbursed and I few on how flows delivering economic debt are amongst future absolute And to we’re responsible reducing our free pleased we believe in growth, cash a meaningful four XXXX a our as shareholders increasing additional of clarity capable and For Tim and

then Stainthorpe, President, Chief today’s then prior opening financial strong Tim then update, a provide Financial will our provide Mark financial update an up For summary a to well call, Officer, corporate first will as our on our McKay, for will XXXX provide as our outlook position. questions. Tim

suggest we non-GAAP our be of Canadian report to well, review production you is like off, on our statements stated. will we Before reporting comments disclosures. would royalties. I’d I and otherwise reserves And dollars in in remind disclosures also before of forward-looking kick to that our everything unless as note our

it you, turn I’ll over to that, with Tim. So

Tim McKay

as everyone. Thank day. Canadian strong quarter, million results Good production you, morning, in achieved BOEs quarterly of the per X.XXX second Natural we approximately operational Corey. delivered

balance shareholders. the returned free long-life opportunistic discipline, will of we environmental, value. deliver our maximizing generated the our four model Canadian to which our free to cash industry-leading Natural’s assets, $X.X quarters dividends to add We pillars of for two operational maintained of discipline, flow on capital The capital robust, significant significant in executed factor long-term billion approximately In and are and shareholders our cash also capital first with across debt transactions, result strengths repurchases, governance sustainability. long-term XXXX, share our social $X.X net flow. of to through low-decline a performance board, a allocation by business As our billion reduced excellence, have and applied value

to we methane intensity and over XXXX sector worldwide. this above, time have from are oil sands period North taken the equivalent For one to we operation, XXXX are off annually. emissions American XX%. sequester million down E&P the quarter road In [ph] in GHG XX%. cars in down COX our oil in the is the and leading of capture And over and gas our

can important delivering sustainable help announced to zero development. initiative alliance oil strengthen our meaningful of through the a Pathway top is net Canada’s we’ll in sands ESG in XX% from balancing we XXXX. levels. In reduction industry a emissions achieving and corporate together economic emission we have tier participants of the net recordable XXXX of record Oil X.XX improved will Canadian goals. by operations the zero safety frequency in industry and Our with goal while Alberta oil oil XXXX further industry participants Natural governments is require sands achieve initiative climate And collaboration June, This in total leading the as that reduction Sands to federal sands performance

breakdown is positive increased annual $XXX our outlook have capital million. follows. commodity budget we by XXXX the for The With for prices as

$XXX by primarily and extended the per to primarily additional and us $XX of increased South, wells Kirby low-decline scope at Our which million BOE, quarter. XXXX efficiency flowing conventional relates approximately production is second related development in in capital Horizon turnaround the million additional turnaround two support and with budget drilling the million to rate $XXX is per for of of North long-life, of targeted assets, $XX and to three exit $X,XXX time and which will Kirby pads at two a beyond. completed XX Primrose, of approximately million $XXX BOEs unconventional XX,XXX additions million the XXXX the day. at construction complete giving activities, has and of for

abandonment we highly based an cost our a area do and footprint. XXXX to additional target continue XXX as and an effective as additional abandonments manage been liabilities budget $XX million to programs Our we well prudently result our to environmental and have added have capital

result across All jobs British X,XXX of expenditures these an Alberta, additional will and increase of in estimated Columbia Saskatchewan.

X.XXX was River from million increase the day, American X.XXX X.XXXX Bcf, of Bcf and to was an approximately full day. of with of Moving production gas. for though QX QX our natural Bcf Overall, down per With today natural North even assets up from Bcf QX QX X.XXX production per XXX production gas quarter. starting the Pine

XXX million XX, plant day. is July of producing resumed As a operation a currently and approximately

gas. our budgeted excellence came of a into Production day million per costs natural five as total in stream Septimus versus per North on was second capital Townsend current to of approximately million with limited was and June million natural BOE. well approximately operational to stream June of continue XXX $X.XX with operating strong XX pad in came on flowing gas on QX QX a At second approximately over the feet total American achieved Mcf. a We and quarter economics rates, in at $X.XX XXXX strong focus strong time the rate and in on net improving per of XXXX. liquids, at production XX on of to AECO gas remains gas gas of approximately full in pad It prices a natural a the a for day. capacity million approximately per natural and remainder $X.XX gas at gas cubic had a GJ the target efficiency XXXX, feet of value Townsend, is well cost, of day million barrels at more to for is to our natural full day per half projects, six not remain to at of approximately X,XXX of capital Septimus strong natural of exit cubic XXX targets approximately At XXX continues natural $X,XXX Look cubic at look of of efficiencies production. rates flowing adding capacity strip $X,XXX feet BOE.

guidance our gas Bcf per day. target day in revised up target to X.X natural XXXX and of X.XX X.XX to per we excess Bcf Bcf As exit

periods XXXX in Kyle in planned primarily well the North as operating NGL the be strong as BOE Smith, to activities. fields in per XX,XXX due At development costs costs QX Production XXX of from exit and of per to mid-August barrels a XX% costs QX $X,XXX to to levels, the high XXXX QX wells and declines operating stream resulting these stream and increased extent XXXX, barrels activities, the of advance from barrels result of wells lower Wembley, all prior volumes efficiencies has to maintenance light field XXXX. XXXX gas. X,XXX crude been wells flowing day strong, up the activities crude Sea. and approximately higher and of company multilaterals per net and company’s have XX have day net per QX from on QX XX,XXX of on prior North and now XXXX, lower periods and on XX International drilling, costs Wembley on approximately XXXX. a barrels related barrels new production primarily to of XX under from in a $XX.XX of day net E&P primarily budgeted per Our capital under day the barrels the and –approximately to in decreased currently exceeding QX stream. company’s Banff schedule, a oil totaling as oil This with and in value Clearwater averaged to costs to of where in American ahead day. approximately in than and increase X% at total North drilling budgeted production targeted be energy Cost targeted in The XX% Crude with on-stream. QX a XX per once up realized development by continues tier is play six Construction to as at its QX primarily barrel. as the $XX.XX oil rates from of production approximately $XX.XX decrease a production a to XX,XXX continues the barrel was The crude result operating $XX.XX XX%. X% of are heavy budget QX, of company’s gathering million efficiency The are light Offshore cost, in from from production quarter. targeted increased per ahead shut permanent barrel, approximately to a now oil development was feet targeted battery schedule the XX,XXX day, be budgeted result a system Montney natural drilled prices QX Africa and in was increased program X,XXX of GHG of top activities operating barrels horizontal levels. is maintenance drilling be per costs by and to the rates Sea planned levels lesser cubic day increased costs been XX,XXX targeted QX of project a natural to costs liquids date, barrel. operating oil days and of oil versus changes versus the result per

X,XXX This flood edge assets day. rates Smith. our deliver is company long-life, A to world-class includes additional is pad is our significant on stream low-decline horizontal value. part component of where XX additional multi-flow key be and drilled also drill heavy productive which of come polymer targeting in we’ll another to wells, leading approximately capital, Pelican at a of targeting As QX. pad strong net of pool, laterals barrels six oil continues And the

primarily barrel XX,XXX, quarter approximately per day drilling be operating quarter costs $X.XX as to per Second per quarter program strong in well production a XX,XXX of costs continue field $X.XX at was activities declines. first natural QX barrel. offset result by to very versus comparable Operating of the barrels of

stream capacity quarter brought of of wells, net approximately the has $X,XXX capital company barrels BOE. low on day X,XXX which XX efficiencies the at current flowing During production per

netbacks. operational continues our low Pelican decline and drive excellence to Our an Pelican to costs, with very low operating team excellent continues at have and

per first to barrels Primrose, of from of we of cost volumes South the QX. operate target higher XXXX Horizon $XX.XX in were barrel the for down of with XXX,XXX year and in and per Mining was Kirby production quarter. operating our Sands pilot the lower day, plant costs X% At and Thermal injection primarily maintenance had operating to versus pilot with the period. production strong due a $XX.XX a two Scotford At quarter strong day, at from per similar quarter track in of second per the operations, in at is XXX,XXX SCO. a barrels QX Our flood Oil $XX.XX inclusive commence this a barrel area, solvent to quarter steam to on second Operating barrel costs QX X% is QX

Mining to between improvement costs at utilization The the down and Our efficiencies, reliability services, the with leverage focus our expertise delivered assets. company’s operating and driving consistency. continues teams sites, initiatives Sands high on two Upgrading Oil continue technical

of December record a approximately review. the an barrels turn in was a result, monthly XXXX. will to financial day a XXXX, barrels increase of from previous in XXX,XXX a XXX,XXX record now I As approximately June it day over the production for SCO achieved Mark of SCO

Mark Stainthorpe

good morning Thanks, Tim, everyone. and

capital the second was of cash $X.XX and quarter and approximately financially after dividends $X.XX delivering $X.X of acquisitions. flow significant free The quarter a billion billion adjusted of in funds and flow strong net earnings operational excluding billion

of of $X.X our of full the facility the and par our term interest debt in We’ve $X.XXX in November This acquisition August, the generation, Devon the balance on free flow from XXXX XXXX. $XX.X cash QX And was cancellation absolute quarter. XXXX $X.X exercised reduction reduction a reduction. debt resulting cost As includes option in billion billion debt repayment an is QX end significant approximately debt at of savings the result repay billion. net the down early also our billion and due of net from further call bonds to

that up through August way of dividend over By returned and was in XXXX. to X, share to have Additionally, our in repurchases. QX billion we increased $X.X shareholders

a where was of our low-decline long-life, marking and Our the with prices period sustainable, commodity assets we year XXXX, through growing This predictable XXst increases. challenging in maintained increased increase a the further dividend. support evident and dividend March in XXXX, of dividend of

maintain to approximately in reserved in to significant as to bank at $X.X $XXX funds billion. approximately a revolving including annual be billion is capital flow XXXX, and targeted barrel, commercial short-term average range adjusted substantial. free paper, capacity under $X.X $X.X budgeted investments. of had XXXX cash was which between QX cash an WTI billion. And continue approximately targeted defined less using dividends flow flow is Free cash US$XX We million and revolving we facilities liquidity Liquidity facilities. generation We to

and result revised of repurchase our shareholders quarter. through incremental shares of to to X, Directors the strength or balance of shares July XXXX approximately management strong a increasing increase flow, policy outstanding, repurchases share returns approximately cash XXXX, of million X% sheet and XX authorize through As has per free Board effective this share

to XX% allocation of and that business the efficient provide billion, allocated currently and new turn to allocated operations on development flow. execute economic further the of is company’s targeted debt unique shareholders, XXXX, our our provides the an to the targeted occur clearly with share increased This Additionally, of flow company Tim. I’ll long-life, policy base reductions, capital resource to low with pillars to debt balance demonstrates opportunistic repurchases requirements be of acquisitions. significant back to provides QX four the generate ability effective reaches once With absolute ability XX% that, the This strengthening in asset model, cash $XX free the remaining sheet. to to further low-decline of it sustainability free and balance returns with maintenance capital our to level you cash of

Tim McKay

Thank Canadian operations, efficient ability four you, ability Canadian driven assets, low and flow deliver We our our quality, maintenance by high significant allocate and to Natural’s Natural’s to cash capital our is reserves. effective pillars. advantage Mark. sustainable is significant flow low-decline effectively our balanced long-life, have cash to XX% our X.XXX And we our light exposure million natural X.XXX with commodities commodity XX% BOEs, guidance which oil approximately gives us of heavy, in production per gas, all QX XX, to million BOEs crude increased our annual XX% to improving to prices. day. SCO and – have BOEs

and manner, allocate We XX And March, disciplined at our and our have to who top in allocation, capital and our up was effective the less once repurchasing cash defined common will continue balance dividend flow operations is per our fund consecutive to a allocate flow, our tier quarter, four pillars then shareholders, X, and adjusted of delivered dividends, CAGR shares value teams budgeted below cash XXXX for free all Effective dividend management effective sheet. as X% we and years Board efficient maximizing repurchase of $XX to that is increased billion; is up increases XX% to XX%. by which flows, July by the capital a by strengthen XX% shares during In outstanding results. XX% time. driven debt authorized net

and XXXX set reduced our reduce our XXXX freshwater, usage we intensity we make mining, situ, XX% methane emissions baseline. have by in from water XXXX environmental interim achieved As new XXXX by XX% by targets, by targets, river baseline, from freshwater

will industry zero of with work Pathway as advance our our net and milestones, key towards Sands Oil work our initiative, to partners operations, generation. top XXXX. we operations. well net is As environmental our goal reducing zero enhancing we to oil our summary, focus on Natural flow In Canadian continue cash with to safe, tier delivering footprint, tier top sands reliable we by

it line the unique, to are clearly concludes pillars. We now by our our deliver will call. demonstrate up sustainable, robust QX open four balancing returns the I to questions. and That our for ability shareholders

Operator

Your Capital first RBC question Markets. with Greg [Operator from Pardy Instructions] is

Greg Pardy

rundown and for questions morning, Couple you. for Good thanks the Thanks. guys.

day XXX,XXX curious on setting a number was June an achievable is wondering barrels that on The of Horizon, that I’m something anomalous and basis up is there? how just first the more sustained one just in just is and AOSP a or

Tim McKay

Yes, XXX,XXX, you’ve our on kind the six that it’s In that Greg. our all from reliability to exactly about us, XXX,XXX. site, last and roughly It’s the about. improve of sites to that’s that’s what the two on predictability And seen enhance we’re production. – improvement for months improve doing doing on continuous increments, the it’s what our exactly little

is closer of – – sustainable can you and a goal to numbers basis. period over time a and on those over get there so the And closer to long

Greg Pardy

Okay. And down prices where absorb it’ll much higher Or your something to have higher power bearing is gas or on prices? does costs? either you this that allow operating you’re

Tim McKay

in Yes, are operationally, incremental barrels those low efficiencies. terms very, very of cost

absorb will it and of such. seeing the and the and fuel commodity the labor we’re help some with steel cost yes, various, some So of inflation’s like of

yes, actually those costs sands. and So, in continually helps just oil it’s mitigate drive that the down

Greg Pardy

terrific. Okay, got so last for understand is, operationally, the me it’s, and Upgrader, West changes so operationally an frequently, forth. have what’s don’t North the involved you there with you one the interest, a to we financial happening bearing we West made you’ve view going at But And good hear as what’s equity North guys but on. Upgrader? really it Are becoming about more we

Tim McKay

say would that’s I correct. Yes,

we to help going help generate and some that become But over conduct who that one get And Natural this operation operational Canadian is we’ve we Horizon, just utilization, what yes, take have will capable reliable, cash. time. which improve, time we’re role. So, persons very expect will our some into person higher conduct at it to that of obviously, more done is, from we’ve operation

Greg Pardy

Thanks traffic. very Okay, much.

Tim McKay

Greg Thanks, Okay.

Operator

with from Mehta Sachs. question Goldman next Neil is Your

Neil Mehta

morning, A guidance Good cash in of this here to morning, guys. lot good the see.

you that, a year up that level this And financing around up thinking $X related dividend? we $X.X that there’s to in you on first the fairway? questions follow picked do couple the billion think as that one that came I around capital question the or spending, any a Should flavors Or guys So number? early of to XXXX? some be had then billion upside through, to is back downside that

Tim McKay

the traditionally time fall, too it’s read call budget with port early, commodities, our prudent different pricing look that the the then where at capital we Yes, be our here and try and and we at do capital what budget. in

too it’s I go XXX. mean, you’re back our XXXX, capital when based say. So early budget was started if to we in WTI on XX time, and

to it So, spending, just of little keeps here, – going activities capital, that bit of doing the very we’re in to opportunistic well, the some here in just that capital additional me the more increase is gather opportunity efficiently. some

to me to say on So, just too it’s that. early

Neil Mehta

just think flat? reminds of do production your And the keep where Tim, view us level to again, CapEx is sustaining you

Tim McKay

in Well, was not This it’s X types do here. X.X the on it to that X. year, and of always activities depends we

me, And so range. generally to that just – it it’s in

Neil Mehta

just up the Okay. is follow around The dividend.

have years And raise you doing in in another long the a amount dividend record model, go said, the the dividend later track of this on the you thoughts As a year? thoughts growth it. the of of profile basis? on cash half raising just forward of back given Any

Mark Stainthorpe

always board It’s, has, typically been and timeframe. as it’s and predictable. XX dividend, done that it straight And for increased the raised the the mentioned, question. it’s Neil, Mark. years, growing Hi, you as in Thanks the March it’s

much plenty really that has the opportunity see flow there’ll of continue because you cash look billion the free it’s and out to board As so at $XX flow The growing going XXXX, significant, the so that debt fast. target XXXX, into comes allocation that’s for strategy. be and cash XXXX policy in in is accelerated come QX that in repayment dividend here free

through I rest more pillars, of think just here. the capital year the additional that allocation the four gives So, the to of the, our returns to going shareholders balance

that period. think predictable So, I our at dividend time that in gets revisited regular

Neil Mehta

Okay, perfect. guys. Thanks,

Operator

Your next Credit Suisse. Gupta with question is Manav from

Manav Gupta

line on are a and guys a some have as details? you three, very you term apportionments Hey, inventories is, us view differentials risk outlook if first capacity near where it of the what those all, informed relates of could for to always give your

Tim McKay

Sure.

being at is been look three. Alberta apportionment XX%, record you range. there inventory at maintenance pretty XX the flowing, some high, have is If line around But today, XX%, the done in in is barrel the steady levels actually obviously, on highs at every

at and WTI. So, then, have extremely been strong differentials and course, the XX% of less than

we in So, and us three as view the in to that TMX come capacity will XXXX. with We on ahead line as on don’t continues give to that that QX, look expect progress extra line going well. come

here positive in So we’re the right today moving direction. things that, are very,

Manav Gupta

the besides increase production, from price Okay. post to deck? dividend simple else quick X.X, here deck gratification price so, X.X flow that drove in in of And a there cost revised the was discretionary went X.X, change anything or guidance as change the which cash is oil as was X.X it

Tim McKay

of the targeted most as as the change reliable year. for the price its No, continued, rest of in deck well operations

Manav Gupta

Thank questions. you you taking clarification. And for my for the thank

Tim McKay

Thank you.

Operator

Your with Wells from Roger is next Read Fargo. question

Roger Read

of Yes. think the do improved the them other of Good better cash of reductions. gets improved terms the it benefits term is, kind And as would then be flows opportunities think is you various just in When operations, do returns, those? to follow of I goals something of about some targets? question like that up here? that? kind on medium ratable think some it What are a on years happening? are part what basis other bit the parceled upside CapEx regulatory longer of other just than Is driven Or some you the ancillary of of the like of overall emissions, to a going little it on call on to the, guess spent a let’s I to out already morning,

Tim McKay

the high in. early line, sites are only started the level that it’s we’ve Yes, really say conceptual and trunk basis going to the on

most of terms in is cost Our site. terms our the evaluated in COXs what reducing we think efficient, of teams on different have technologies

a it’s early lot in got now, process, of right we do to the So, work. engineering very

with cost estimates. We have on side, up appropriate to engineering come basically the the

real it’s net So mean, there. it’s zero in by is do benefit me, the we’re looking what I oil to the sands of the the at end to just to that day be it. as got clarity allocated we as get of we we And milestones through they’re process, up and partners that, talked through initiative. about step costs move on we’ll the the too come is, me, and between XXXX. to And different the more early to to just; with how

really, economic So have early too today. it’s just to that model to

Roger Read

I I’m the reduction here I Well. appreciate the anyway. XXXX, won’t on oil XXXX that to then the pretty account freshwater the be sands, targets about decrease sure more No, you methane, holding I usage. was really I appreciate thinking to in in

Tim McKay

Yes.

So operation on teams job in the done teams the field what a or field. the if reductions, methane have fabulous

We’re opportunities using technologies emissions to of terms in the some of it. latest of identifying reduce leaks and fugitive

natural more end So will be we of because that benefit, see some that Obviously, and can feel sold. benefit. the more in economically, we’ll the actually, gas we consolidate yes, sites get

yes, actually is is on benefit So energy, some, and there be operations. the the we more recycle, freshwater the there’s obviously, the more efficient And same, to those. less economic it’ll water

operating goals complementary and progress what all they’re opportunities, the And very economic are our the to those working so but and teams that’s they’re to costs. very

Roger Read

great. you. Okay, Thank

Operator

Your from next securities. with Menno TD is question Hulshof

Menno Hulshof

of free are precludes of XX% in of I is obviously buybacks special achieved, debt dividends that play that bit a and stretch? morning, variable Or ever is $XX and of U.S. to you’re the a or quite too have getting philosophically once become mechanisms everyone. of committed just cash the just allocation you of shareholder and of could remind one whether flow, Good special just conversation? part think you billion different on how the us dividends, a a Can much shareholder about the variable returns, which clearly return

Mark Stainthorpe

I Menno, and really asset flow; the we low-decline, dividend. Yes, type of that look base, sustainable, long-life, growing when think supports it the predictable year-after-year cash at

with dividend. course, fits, shareholders these, decisions. been that’s see shareholders dividends opportunity way and board flow. gone really returns generate has we well and buybacks to we’ve asset how base value us But return the the of allocations about today as cash that just to growing gives that it the to So really returns focus, fits share we our through free or more It

Tim McKay

and you look very we dividend grew maintain the of balance I XXXX at sheet. if And companies mean, one few that our were,

So, to predictable growing very a are amenable the dividend. assets

Menno Hulshof

Perfect, thanks a lot.

Operator

further no call back the Bieber. to are I’ll There turn Mr. questions.

Corey Bieber

Thank you very Operator. much,

And sorry – today those thank joined who us you you on and very call. much thank to operator the

do please a us you have you. Thank questions, If don’t hesitate Goodbye. up. follow to any give

Operator

That conference. concludes today’s

disconnect. now may You

Canadian Natural Resources Limited (CNQ) 5 Aug 212021 Q2 Earnings call transcript