CNQ - Earnings call transcript Q3 2021 | Canadian Natural Resources Limited

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Operator

Good morning. We would like to welcome everyone to the Canadian Natural Resources 2021 Third Quarter Earnings Conference Call and Webcast. After the presentation, we will conduct a question-and-answer session. Instructions will be given at that time. Please note that this call is being recorded today, November 4, 2021 at 9:00 AM Mountain Time. to call, meeting Mr. like host to now today's for would turn over the your I Corey Executive Bieber, Advisor. Please go ahead, Mr. Bieber.

Corey Bieber

Thank XXXX call. morning, Natural's very you, everyone, and and financially welcome good operator, operationally. to strong quarter third corporate Naturals Canadian quarter conference update had another and Canadian

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

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

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

are a beyond, the growth, increasing and I of capable delivering reducing we and responsible in shareholders that believe absolute meaningful one of XXXX debt manner. returns economic companies few For to

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

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

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

Timothy McKay

which capital by long for allocation, flow discipline, of decline and pillars in In through balanced transactions, flow. cash X.XXX executed Canadian returned achieved operational our as the We of life quarters per our everyone. as to capital shareholders. million $X.X approximately X dividends to our debt quarterly robust we a Corey. to capital all maximizing free shareholders across governance with value repurchases, XXXX, and a results cash are assets, production social have billion deliver significant Good and Thank maintained share Natural quarter delivered on industry-leading opportunistic approximately morning, we strong our discipline, reduced generated day result strengths BOEs model of third $X.X X Natural's billion, in of Canadian net free excellence; The we business you, the the applied low operational our environmental, add our also long-term board, factor to long-term sustainability. significant value. performance of

top improved total as is safety a levels. industry XXXX corporate record the recordable XXXX, frequency reduction tier XX% Our X.XXX of in from

period, the offset this North operation, participants, we the emissions annually. and the industry Oil are goal the period, And capture Sands achieving require resumed and per operations production gas. over E&P with in QX we Federal In net-zero climate American day alliance X.XXX sustainable XXXX performance, and down we will the natural down have delivering the will day, while X.XXX collaboration Sands our strong XX%. in ESG the Bcf announced with Alberta by methane XX%. equivalent economic operation, a industry Bcf government we've QX that Bcf worldwide. so COX Oil of a pathway June, QX of cars our Starting we the can above strengthen the of leading over is River and And and Natural from emission taken American XXXX, natural X million increase approximately corporately, In X.X goals. GHG participants to drilling Oil this, day, intensity X.X are from emission off emissions Overall, we For initiative. sequester initiative per plant with Oil net-zero An Pine approximately and to Bcf, was of gas oil Sands declines. development, Oil XXXX. North an Canadian our in up achieve leading production industry of natural balancing meaningful as acquisitions together, QX from This Sands gas further and Canada's of our reductions, Sands of road with

natural to achieved excellence, production X% the focus over cost QX, We of $X.XX QX. continue At an in Townsend, per North feet increase and on strong our Mcf of gas X million Tier cubic natural versus $X.XX at was Mcf. operating gas operational of was American of XXX per

facilities Capital With the inventory waiting production suspended And Bcf similar opportunities BC in XXXX been adding with natural volumes. approvals. and production of a and decision, to court AECO all X permit Alberta, temporary deep gas redeployed X.X in drill-to-fill GJ, development strong we gas has Townsend capital wells been day. $X pipeline over target our Northwest a stressing more have activities natural our exit with in of value efficiencies as to excess to with

A of wells NGL Montney and approximately NGL day additional net efficiency activities. offset per was barrel XX,XXX barrels at $XX.XX XX,XXX total horizontal cost partly of XX wells crude by a development operating on schedule day of cubic BOE/d. liquids barrel. approximately were that barrel. million $XX.XX costs maintenance were North gas, in in well Clearwater Smith, in natural activities a operating a barrels budgeted natural QX per and production in as QX. a per the to Sea of X periods planned levels. barrels and feet day of our more day, strong day XX,XXX in oil prior at Wembley. a X stream to of operating liquids our QX, QX operating in heavy averaged QX with QX, X activities and a approximately came light barrel, X,XXX the E&P polymer primarily the onstream versus barrels an wells of of new where targeting field declines, QX from costs representing flood on outage, from our At third-party energy of component primarily approximately result quarter. planned maintenance primarily XX,XXX to The costs American barrels giving Lake targeted day. production Crude key lower the oil International per and of day, impacted wells, from on an exceeding low-decline in per in increase changes XX,XXX barrels project North oil per by of the comparable a Sea. of its is costs the decrease natural increased of gas, in due rate from production a And long-life, deliver offshore assets strong X,XXX to stream significant field is operating which a per the of value. $X,XXX QX The The Our continues we're prior costs. oil company multilateral Africa increase increased costs North below and leading-edge crude barrels X,XXX QX, million day oil our approximately volumes crude and to targeted X,XXX are were natural production came with our QX to barrels high-value as result as down was new periods, unplanned approximately ahead approximately battery on than rates of oil XX we continues light come additional production targeting QX of world-class due capital advance a from declines. a the $XX.XX day QX, Pelican X% primarily an $XX.XX G&G stream production barrels a pool, the volumes result QX development day

quarter decline. to of barrels per $X.XX very was the operating Operating down cost costs continue barrel. to barrels Third of be strong from a at X% field XX,XXX XX,XXX primarily barrel $X.XX a day, due natural production per approximately versus day, QX QX

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

quarter. were QX at due at XXX,XXX Our barrel barrels, higher and thermal down operating was planned QX per third be of costs to costs of day, QX solvent reductions in from barrels declines. to as X% XXX,XXX quarter from projects of field X% $XX.XX and primarily intensity natural well turnaround Operating GHG ongoing Jackfish primarily to Results production in Kirby versus per SOR barrel, approximately as lower a the XX%. solvent recoveries volumes showing continue XX% of an positive, of $XX.XX South due

in a with XXX,XXX at the $XX.XX the a is operations, with per result, and the targets pad a At with the injection As This of commenced pilot At solid and barrel XX% to flood a our SCO. costs in strong quarter production North. third SAGD commercial-scale for steam of October of SOR GHG pilot progressing company XX% engineering Kirby period design operating intensity operate X-year recovery with development operations XX. second solvent day of and area. than greater Primrose, Sands reductions to had we Oil targeted strong per barrels at

Following costs. assets, the oil maintenance and utilization industry-leading operating and performance activities recent upgrade the top-tier sands, mining to across continues turnaround drive and

SCO. upgrading months sales production expansion has Oil XX,XXX and the of since of volumes mining increased our continues well the Scotford to of X our barrels barrels technical our leverage first in to with the XXX,XXX October enhance approximately reliability, over it sands, day teams a XXXX, XXXX, review. sites continued to financial Mark of During tier be both and completion top a a to drive turnaround consistency. volumes company over turn in of as our I cost that, for down operating With with will as as efficiency SCO finding improve day expertise, at production by now

Mark Stainthorpe

the flow strong cash approximately over and $X.X and excluding in billion, delivered dividends, We was third earnings billion $X.X in at quarter. significant billion. Tim. the business financial Thanks, of funds Adjusted acquisitions quarter our was net flow results $X.X over free as capital generation after realized

to of significant than generation, lower $X.X at result billion approximately a billion flow cash debt QX $XX.X levels. decreased As our net QX, free

approximately was the in billion share $X.X to repurchases. were with through repayment debt the and significant, returns dividends returned shareholders, so quarter While

facilities, including We strong at cash continue was bank short-term liquidity approximately liquidity, QX and $X.X investments, to maintain revolving billion.

year to further balance $X.XX share sheet annualized XXXX will per have sustainability increase, and of low by the the the the demonstrates that of dividend on mark sustainable, to low-decline represents of previous our maintained currently targeted X, the flow March XX% quarter of our increased is long-life, strengthen rate our Issuer for per XX% consecutive supported X% XXXX, then our January billion, targeted effective in Directors predictable dividend. this Bid flow growth through quarterly payable This annual end, from commodity of And the strength challenging company. company maintenance increase in $XX was increases XXnd reaches cash This repurchases of XX% robust, Subsequent debt prices historical quarterly of and efficient once of excess marking balance the clearly of to of dividend dividend base dividend With compound This decline of XXXX, business free This free Directors sheet. increased that confidence Our evident increase the Normal assets support Board targeting quarter. share to company's that company's dividend where the it of QX $X.XXXX the asset be discussed we long life shares XX% and share period XX returns XX% we states Board cash per in the years. outstanding management effective share year through our increase to has the a authorized shareholders low this quarter, an policy XXXX. increase. a repurchases remaining with approximately approved cash a a increases. dividend, absolute allocated associated July the and under model, repurchase XXXX, in the of allocation last the further XXXX, growing XXst operations, to to level of in by occur requirements. of over further our Course and will accelerated policy capital our Last X, free flow the to our

for below as free million an a to levels flow the allocation debt current repurchased and XX the shareholders available strong approximately a I'll the approximately opportunities billion, Board supported Tim. Subsequent to management and the year-to-date, quarter you, returns environment. $XX long-term is XX-XX to in $XX allocation policy, quarter. of debt increasing And enhancement this to debt repurchased our XX.X strategic target be sense. through for which and Directors flow million to such to it of increasing has Xx November policy, it that, below by if demonstrates shareholder is to EBITDA cash repurchases. authorized end, This reinforces And $XXX With in financial dividends million. shares of the X, commitment to position billion, price extent enhancement makes will we share to value, back our absolute the as turn total company when acquisition have growth approach For free amount and shares cash the and

Timothy McKay

which Thank gas, free to have significant effective our our us exposure which sustainable deliver manner XX% low-decline allocate XX% continue cash our shareholders, in flow to driven and assets efficient maximize oil, X allocation, crude to light effective to all commodities to all We who ability you, capital deliver improving ability Canadian and pillars BOEs, high-quality, by by a capital for to QX Natural's X approximately our disciplined by balanced commodity value cash SCO, significant, flow and Mark. effectively allocate our our gives is low our of teams advantage maintenance Canadian Natural's effective prices. is will efficient heavy that we and results. long-life, and natural XX% driven operations XXXX is with our top-tier to our pillars, operations, in NGL, reserves.

advance to In the our third a through increases quarter, absolute and a the end, the by totaling by methane company XX commitment growth years. from consecutive dividend XXnd set and has enhancing by XX% our to XXXX. with to our reduced increase over the $X.X our on share billion mark reduce year-to-date partners have and in XX% usage XX% approved as to environmental the now conference top-tier previous returns quarterly Sands industry quarter XXXX ability This been for flow in operations. delivering to Natural CAGR the on dividend Oil robust. is on intensity XXXX. Our deliver from baseline; call. excess net-zero targets; repurchases. our dividends by we emissions new by I the X, safe, our last generation, Directors we reliable our well pillars. goal balancing Canadian to will situ usage returns mining environmental from questions. of our initiative, to Subsequent quarterly -- as Sands clearly a dividend delivering freshwater and of unique, with our is X reducing freshwater the focus operations, payable XX% the by XXXX, of and historical shareholders summary, That XXXX, increase milestones XXXX baseline; we cash to towards work in line shareholders January sustainable year our of is work year significant, continue In net-zero pathway we top-tier QX open will And footprint, demonstrates concludes for will Oil key XX% our

Operator

Instructions]. [Operator

from question Your of Pardy the comes RBC Greg first from Capital Markets. line

Greg Pardy

to on about is how Mark, we're question number? first the just billion XQ, net Maybe are midway close you debt. through $XX that

Mark Stainthorpe

works or and in flow for and the significance in very balance to We're continues that policy allocation we're the free it's cash certainly the flow close The way that imminent, that to the free generating Greg. outlook of of Well, number QX sheet way the Yes. $XX cash scenario. billion. XXXX, that improve --

it's you expected. imminent we're to And the why maybe really originally So target, the to than see which earlier close. that getting really a that's shows getting little that policy, we're enhancement

Greg Pardy

static the to picking Okay. of is wanted most where go. And probably really that's I up. That's where we're that

wondering to sub-XX terms this So of or result does that $XX of I'm the that to is wave plan your but is billion limit language And policy just around I'm your the this just -- in like changed a opens game new has the acquisitions. growth what a as that in understand, release better language? flexibility? your just in look, up is trying big intended opportunities flag, number,

Mark Stainthorpe

the I flow. you as and flexibility, free some of we're continued of think significance going set Greg, the as balance provide been has getting target said, cash reinforces as we just I long-term and this, we've $XX got changed forward nothing returns mean sheet was I to billion planning. what shareholders the to And before. increasing with as This think a sooner. the there far like think as I saying strength far that had

of assets, remember capital life You flow apart. sets have free requirements long and because assets, think the of cash the those favorable to which we low that maintenance us is decline generated

Greg Pardy

one do Okay. you you how on for of if come this of think last cost. me, scale, when that? Terrific. on? big And Like just mind. wouldn't and is timing wondering would in any terms or you can address I'm Kirby Tim,

Timothy McKay

of It's design thing the is doing well, we're Yes. -- today. and just pad the the engineering first

And construction probably the So early. cost, we're years. -- starts too in X it looking it's

Operator

question line Sachs. Goldman from Mehta Neil next of Your from comes the

Neil Mehta

The opportunistic you couple done guys to tie Greg being first have good of in a and job is that question years creating on just M&A last around value to M&A. the over And way.

you see the is market sellers’ a buyers’ do And market acquisitions? or you Just how right do think landscape now? a potential this for

Timothy McKay

see we much Really, too today. really difference here don't

any gaps can at As I look in on areas. opportunistic don't then those you look they any don't we're in know, If change. And like opportunities. value we really have core create our portfolio. always we however, our our they But for see opportunities shareholders,

Neil Mehta

the And oil on here is Canadian Okay. just the macro. -- follow-up

surprising out WCS seen little is have which X of a bit, differentials Line in We coming widen light online.

into here? egress as production you differentials do into on the situation? OPEC have but And better market, see them heavy moving thoughts some back, coming your Canadian are some what coming a Just how you 'XX barrels

Timothy McKay

Obviously, in that change in WCS have adjustments Traditionally, People do they in feel historically, out the differential their December. demand. inventory Yes. I always a widens December.

much that next changing see we into still they're So really very and good, don't it year.

November, XX% up in the year. But they've historically, back still new and going then in widened tightened would that be So the going say next year. sub out in always to December I into it's

Operator

question of Your the next TD from Menno from Securities. comes Hulshof line

Menno Hulshof

of stood ago. So XX given stock things all-time months at highs pretty which your is out morning, effectively incredible this as where is

my And question And where you want we your stock? would cash aggressively XX% is? how flow much allocation the points? where play stand is, entry does buy free when how comes cycle So you to buybacks to reconsider to stock in into it ever it with your the come the back

Mark Stainthorpe

the talked And obviously, a Yes. the that dividends, Menno. development. the now, billion, repayment the What you debt resource today, increasing pillars, from Mark. but approach. we have balanced Right Tim balanced across approach Thanks, $XX to we see is policy. get X that's XX-XX allocation. buybacks, which It's you as about increase and economic the us, saw

So I continues foresee that, going balance that forward.

Menno Hulshof

Okay. Perfect. on sense believe. a I XXXX is Can going tax more just you, And the then of cash us look you one what like the strip? for give into Mark, profile to

Mark Stainthorpe

no, only forecasting, a it course, will on of benchmark price strip depend just royalties. on like Well, things your not but other on,

some So into of can that and we that down payouts, walk of are in projects -- XXXX you're kind IR royalty through see will that But you do coming the in we to XXXX. a happening tax. to and have help it we course, manage taxpayer get exact of

Operator

next of Your Gresh question comes from the JPMorgan. line from Phil

Philip Gresh

would First thoughts we as us? question look spending Any out early XXXX. you could share kind capital goalposts with of just on be to

Timothy McKay

through our have know, as No still a early goalpost yet. we working high-quality have base budget. opportunities that you on. numerous we asset large, We're And

where deciding of process we going just on strongest returns. and to generate allocate at the to looking it we're through the capital want So

process. in that still So we're just

Philip Gresh

second my debt just And targets. I question, additional one guess, on follow-up, Okay. then the

that company more the going additional billion another you're things -- there of with any kind to With is you flat framing would of the $XX some and other will the like and $XX words, leverage profile instead just and hold that $XX production around of this leverage like you're release in an view billion? the secondary it for size billion, level to the as interesting. of at say be of that that point a that to wording meant efficient in way target have not be Or color

Mark Stainthorpe

Phil. Thanks, Yes.

planning. that the think certainly there's you're go obviously, as through look when thing, you I target, at it different you one scenarios long-term as and budgeting a

range So as changes like billion, now, there about in I And Right EBITDA the it. we're today. quickly. focuses free approach. capital look continued a you at $XX getting way that And both to you'll strength. see on we right balanced discipline target policy, of that how and to a mentioned, allocation that looks forward, just as returns go Xx and long-term flow very now, continue the debt cash balance shareholders to again, sheet And

Operator

Fong next the from comes World CIBC Dennis of question Your Market. line from

Dennis Fong

Natural The strong brownfield Horizon. bolt-on debottlenecking project, which strong was is, first the projects and discussed seen obviously payout. potential and one second financial potential are here Canadian And Horizon, given you is between I a to X you've both very approaching historically, one has at light component Obviously, [PFT] production guys guess, and oil performance, the Horizon AOSP. production

guys of obviously you very very strong you at of that to So your as as as some may close are call of few these, I curious to some optimization over the hitting past with outlook And environment on net moving we kind the have how some well oil projects? secondarily, these that changed currently? we're target projects it, debt looking how debottlenecking your of forward was the, a price in are years of you've potential done now

Timothy McKay

Yes.

questions here. So that's good

Oil and have mining. on opportunities tremendous ground. the looking reason job at Sands And part Horizon we production such our done performance with out ASOP, of So a of at have that's seeing the we're teams the strong currently what

different look can so in different finding volumes, looking at changing that get get And ways actually further what as we because may we ways to projects those sites. reliability, opportunities to higher are different those ahead, do we're enhance extra and

a the in job of just that's have different envisioned. going inching because of originally terms great teams we there. and a had but the they're to kind such reliability what -- in our opportunities, higher than our up look of So done out creating they're still there in production range And

than are still be working we we it but had looking teams on, would -- the a got what envisioned. projects different similar it's that on look originally So forward,

Dennis Fong

I those as to lot on forward but continue those where burner, mind? guess, Great. Great. your I kind those past several been essentially IPEP put I then And How update and work back were -- on done you're I of don't over on engineering have proceeding say And of the of know questions. move then want to incremental there's the well years. with projects in be those the wouldn't potentially just my economics mind And that? would an a

Timothy McKay

continued the opportunities both So has in could and to actually we volumes sites costs progress, both on enhance our work terms do operating of what on looking at the enhance sites. to

have we So down. slowed not

what Our it's doing do again, have enhance capital, they at it, background enhancements to been still this part our still teams or terms on of to outlook. is The just Obviously, it's if compete And that's of time it do IPEP, a of to long-term of additional we project economics it. our of managing something working want in for keep of With a as of is lot and that part if deciding team we're work. part portfolio. do further well. advancing the It's matter it. work we

a So lot essential of year the was groundwork would as the, to it's the COVID, what we down on went work I this call, just it's personnel. shut down of a with last -- lot

engineering of side enhance need proven opportunity. still we bunch is can work to how it on to the absolutely still done process. up But a that would progressing at be of that least So

Operator

Wells comes of from Read from Your the Roger line Fargo. next question

Roger Read

about CapEx minimum bit an level follow-up CapEx little give of 'XX sort thinking from a a of or be? would of modest a your you decline think CapEx question 'XX us 'XX. just maintenance Can and in what rate for in we a Probably about of level as idea Phil's earlier, very

Timothy McKay

Yes. over too billion Well, than a not it And historically X it's -- has really into range. about $X that our decline XX%. little been is much different

for depends still obviously the kind it's most range. do, but range. to on want what in in So that of we commodities part, that It it's

Roger Read

with the exceptionally prices, in gas else not then higher helpful. everywhere high dealing in but certainly almost That's quite And stretched. Canada, world

negative Just that curious, positive how for both at businesses, are around you're gas all? you're a as as a looking you at and if managing your

Timothy McKay

gas. long We're Yes. where fortunate we're position in natural a very

So cost side. while commodity on is a it is a also us, the to benefit it

So fortunate the part, that for very it, way. most

Roger Read

is has was that I just curious, side at usage not yet? there to you've on anything the to all? Yes. is done risen level mitigate Or

Timothy McKay

for enhancements to looking constantly reduce it. we're Oh,

through You Oh, it focused solvents. and got to the opportunities yes, steam fuel absolutely, advancing. generation very our opportunities in we're thermal and are the see on We've consumption side Horizon lower always that. that teams Cogen, there's

Operator

more There please time. no continue. Presenters, questions at are this

Corey Bieber

to you, who and the this those joined operator, on you thank and call Thank us webcast morning.

If you don't Thanks, any to do have follow-up give great call. a teams hesitate our a day. questions, please have and

Operator

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

may You now disconnect.

Canadian Natural Resources Limited (CNQ) 4 Nov 212021 Q3 Earnings call transcript