Calgary, Alberta--(Newsfile Corp. - May 4, 2023) - Commenting on the Company's first quarter 2023 results, Tim McKay, President of Canadian Natural Resources Limited (TSX: CNQ) (NYSE: CNQ), stated, "Canadian Natural delivered strong results in Q1/23 with effective and efficient operations on our balanced and diverse portfolio of high quality assets. Our culture of continuous improvement, focus on cost control and disciplined capital allocation continues to drive strong financial results and maximize value for our shareholders. In Q1/23, we delivered total quarterly production of approximately 1,319 MBOE‍/‍d, including record natural gas production of 2,139 MMcf/d and liquids production of 962,908 bbl/‍d. We generated strong quarterly free cash flow of approximately $1.4 billion, after dividends of approximately $0.9 billion and net base capital expenditures of approximately $1.1 billion. In addition, our strategic growth capital expenditures of approximately $0.28 billion in the quarter was targeted to provide mid-term growth across our asset base as we unlock value from our projects with strong capital efficiencies. With ample liquidity on our balance sheet, we can add production with minimal capital while generating significant returns on capital and maximizing shareholder value.

"Canadian Natural is a leader on Environmental, Social and Governance ("ESG") and has made it a priority to work collaboratively with industry peers and governments to achieve meaningful greenhouse gas ("GHG") emissions reductions in support of Alberta and Canada's climate goals. The Alberta government's recently announced Emissions Reduction and Energy Development Plan ("ERED") builds upon the province's longstanding climate leadership and achievements in emissions reductions. Canadian Natural looks forward to supporting the Province of Alberta in continuing to provide affordable, reliable, responsibly produced energy while reducing emissions and aspiring towards a net zero economy by 2050. Canadian Natural's current environmental goals support Alberta's climate plan where large scale carbon capture and storage ("CCS") projects, like the Pathways Alliance's foundational CCS project, will have a significant role in reducing GHG emissions."

Canadian Natural's Chief Financial Officer, Mark Stainthorpe, added, "At Canadian Natural, our culture of continuous improvement and strong employee ownership enables our teams to create significant value for our shareholders across all aspects of the Company. Our effective and flexible capital allocation to our four pillars: returns to shareholders, balance sheet strength, resource value growth, and opportunistic acquisitions continue to deliver robust financial results.

"In Q1/23, we generated approximately $1.9 billion in adjusted net earnings and approximately $3.4 billion in adjusted funds flow, resulting in significant free cash flow of approximately $1.4 billion after dividends and base capital expenditures. Year-to-date, we have returned approximately $2.8 billion to shareholders through dividends and share repurchases, up to and including May 3, 2023. Our commitment to increasing shareholder returns is evident in our sustainable and growing quarterly dividend, which was recently increased to $0.90 per share in March 2023, up from $0.85 per share, marking 2023 as the 23^rd consecutive year of dividend increases. The increasing dividend and the Company's commitment to return 100% of free cash flow to shareholders, when net debt reaches $10 billion, demonstrates the confidence the Board of Directors has in the Company's world class assets and its ability to generate significant and sustainable free cash flow throughout the commodity price cycle.

"When you combine our leading financial results with our top tier reserves and asset base, this provides us with unique competitive advantages in terms of capital efficiency, flexibility and sustainability, all of which drive material free cash flow generation and strong returns on capital."

QUARTERLY HIGHLIGHTS

(1) Non-GAAP Financial Measure. Refer to the "Non-GAAP and Other Financial Measures" section of this press release and the "Non-GAAP and Other Financial Measures" section of the Company's MD&A for the three months ended March 31, 2023, dated May 3, 2023.
(2) Non-GAAP Ratio. Refer to the "Non-GAAP and Other Financial Measures" section of this press release and the "Non-GAAP and Other Financial Measures" section of the Company's MD&A for the three months ended March 31, 2023, dated May 3, 2023.
(3) Net capital expenditures, excluding net acquisition costs and strategic growth capital, is defined as base capital expenditures.
(4) A barrel of oil equivalent ("BOE") is derived by converting six thousand cubic feet ("Mcf") of natural gas to one barrel ("bbl") of crude oil (6 Mcf:1 bbl). This conversion may be misleading, particularly if used in isolation, or to compare the value ratio using current crude oil and natural gas prices since the 6 Mcf:1 bbl ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

• The strength of Canadian Natural's long life low decline asset base, supported by safe, effective and efficient operations, makes our business unique, robust and sustainable. In Q1/23, the Company generated strong financial results, including:

  • Net earnings of approximately $1.8 billion and adjusted net earnings from operations of approximately $1.9 billion.

  • Cash flows from operating activities of approximately $1.3 billion.

  • Adjusted funds flow of approximately $3.4 billion.

  • Free cash flow⁽¹⁾ of approximately $1.4 billion⁽²⁾ after total dividend payments of approximately $0.9 billion and base capital expenditures⁽³⁾ of approximately $1.1 billion.

• Returns to shareholders in Q1/23 were strong, totaling approximately $1.6 billion, comprised of approximately $0.9 billion of dividends and approximately $0.7 billion of share repurchases.

  • Canadian Natural increased its sustainable and growing quarterly dividend in March 2023 to $0.90 per common share, up 6% from $0.85 per common share, marking 2023 as the 23^rd consecutive year of dividend increases and demonstrating the confidence that the Board of Directors has in the sustainability of our business model, our strong balance sheet and the strength of our diverse, long life low decline asset base.

  • In Q1/23, the Company repurchased approximately 8.9 million common shares for cancellation at a weighted average price of $76.96 per share for a total of approximately $0.7 billion.

  • In March 2023, the Company renewed its Normal Course Issuer Bid ("NCIB") which states that during the 12 month period commencing March 13, 2023 and ending March 12, 2024, the Company can repurchase for cancellation up to 10% of the public float (determined in accordance with the rules of the TSX), up to a maximum of approximately 92.3 million common shares.

• Year-to-date, up to and including May 3, 2023, the Company has returned approximately $2.8 billion to shareholders through approximately $1.9 billion in dividends and $0.9 billion through the repurchase and cancellation of approximately 11.1 million common shares.

• Subsequent to quarter end, the Company declared a quarterly dividend of $0.90 per share, payable on July 5, 2023 to shareholders of record on June 16, 2023.

• Canadian Natural continues to maintain a strong balance sheet and financial flexibility, with approximately $11.9 billion in net debt⁽¹⁾ and significant liquidity⁽¹⁾ of approximately $6.1 billion at the end of Q1/23.

  • As previously announced, the Company made an early repayment in Q4/22 of US$1.0 billion of 2.95% debt securities, originally due January 15, 2023.

• The Company's free cash flow allocation policy that states when net debt is between $10 billion and $15 billion, 50% of free cash flow will be allocated to share repurchases and 50% of free cash flow allocated to the balance sheet less strategic growth / acquisition opportunities. Free cash flow for the purpose of the policy is defined as adjusted funds flow less dividends, less base capital.

• In March 2023, the Company enhanced its free cash flow allocation policy to increase returns to shareholders to 100% of free cash flow when net debt reaches $10 billion. When the net debt level is reached, the policy will be adjusted to define free cash flow as adjusted funds flow less dividends and less total capital expenditures in the year. This is a reflection of the Board of Director's confidence in the sustainability and resilience of the Company to support accelerating incremental shareholder returns to 100% of free cash flow.

• Canadian Natural has diverse, high quality reserves that include significant undeveloped opportunities which support our strong, disciplined growth plan that targets to add capital efficient production across its entire asset base in the near-, mid- and long-term, maximizing value for our shareholders.

• In Q1/23, the Company continued to focus on safe, effective and efficient operations, with quarterly average production volumes of 1,319,391 BOE/d, an increase of 3% over Q1/22 levels.

  • The Company delivered record quarterly average natural gas production of 2,139 MMcf/d in Q1/23, an increase of 133 MMcf/d or 7% over Q1/22 levels, primarily reflecting strong drilling results, partially offset by natural field declines and a third-party pipeline outage.

  • Quarterly average liquids production of 962,908 bbl/d was achieved in Q1/23, an increase of 2% from Q1/22 levels, primarily driven by increased SCO production in the Oil Sands Mining and Upgrading segment.

• The Company's strategic growth plan targets to increase production from our long life no decline oil sands mining and our low decline thermal in situ assets with the following projects:

  • At Horizon, the reliability project is targeting to add approximately 5,000 bbl/d of high value synthetic Crude Oil ("SCO") capacity in 2023, growing to approximately 14,000 bbl/d in 2025 as a result of shifting the maintenance schedule from once per year to once every two years, reducing downtime for maintenance activities and increasing overall reliability at Horizon.

    • Based on the forward strip as of May 3, 2023, these high margin SCO barrels would capture strong pricing at approximately a US$2.00/bbl premium to WTI for the remainder of 2023, generating significant free cash flow for the Company.

  • Thermal in situ production is targeted to increase in the second half of 2023 and into 2024 with new pads that were drilled in 2022 and pads targeted to be finished drilling in the first half of 2023. Production is targeted to grow by approximately 30,000 bbl/d from Q4/22 to Q4/23 levels, averaging approximately 280,000 bbl/d. This production growth utilizes existing facility capacity with strong capital efficiencies⁽⁴⁾ ranging from approximately $8,000/bbl/d to $10,000/bbl/d on its Steam Assisted Gravity Drainage ("SAGD") and Cyclic Steam Stimulation ("CSS") pads.

    • With the May 3, 2023 forward strip showing tighter WCS differentials of approximately US$15.50/bbl for the remainder of 2023, an improvement of approximately US$9.00/bbl from Q1/23, these barrels would capture strong pricing and generate significant free cash flow.

• The Company's 2023 capital budget⁽¹⁾ of approximately $5.2 billion remains on track, with targeted base capital⁽³⁾ of approximately $4.2 billion that is targeted to deliver year over year near-term growth of approximately 70,000 BOE/d, with total 2023 production guidance of approximately 1,330,000 BOE/d to 1,374,000 BOE/‍d.

  • Budgeted strategic growth capital⁽³⁾ in 2023 of approximately $1.0 billion is allocated to our long life low decline assets, which targets to add incremental production growth beyond 2023.

(1) Non-GAAP Financial Measure. Refer to the "Non-GAAP and Other Financial Measures" section of this press release and the "Non-GAAP and Other Financial Measures" section of the Company's MD&A for the three months ended March 31, 2023, dated May 3, 2023.
(2) Based on sum of rounded numbers.
(3) Item is a component of net capital expenditures. Refer to the "Non-GAAP and Other Financial Measures" section of Company's MD&A for the three months ended March 31, 2023, dated May 3, 2023 for more details on net capital expenditures.
(4) Supplementary financial measure. Refer to the "Non-GAAP and Other Financial Measures" section of this press release.

OPERATIONS REVIEW AND CAPITAL ALLOCATION

Canadian Natural has a balanced and diverse portfolio of assets, primarily Canadian-based, with international exposure in the UK section of the North Sea and Offshore Africa. Canadian Natural's production is well balanced between light crude oil, medium crude oil, primary heavy crude oil, Pelican Lake heavy crude oil, bitumen (thermal oil) and SCO (herein collectively referred to as "crude oil") and natural gas and NGLs. This balance provides optionality for capital investments, maximizing value for the Company's shareholders.

Underpinning this asset base is the Company's long life low decline production, representing approximately 73% of budgeted total liquids production in 2023, the majority of which is zero decline high value SCO production from the Company's world class Oil Sands Mining and Upgrading assets. The remaining balance of the Company's long life low decline production comes from its top tier thermal in situ oil sands operations and Pelican Lake heavy crude oil assets. The combination of these long life low decline assets, low reserves replacement costs, and effective and efficient operations results in substantial and sustainable adjusted funds flow throughout the commodity price cycle.

In addition, Canadian Natural maintains a substantial inventory of low capital exposure projects within the Company's conventional asset base. These projects can be executed quickly and, in the right economic conditions, provide excellent returns and maximize value for our shareholders. Supporting these projects is the Company's undeveloped land base which enables large, repeatable drilling programs that can be optimized over time. Additionally, by owning and operating most of the related infrastructure, Canadian Natural is able to control major components of the Company's operating costs and minimize production commitments. Low capital exposure projects can be quickly stopped or started depending upon success, market conditions or corporate needs.

Canadian Natural's balanced portfolio, built with both long life low decline assets and low capital exposure assets, enables effective capital allocation, production growth and value creation.

 
(1) Includes bitumen wells.

• The Company drilled a total of 106 net crude oil and natural gas producer wells in Q1/23, representing an increase of 27 net producer wells relative to Q1/22.

North America Exploration and Production

• North America E&P liquids production, excluding thermal in situ, averaged 234,465 bbl/d in Q1/23, a 5% increase from Q1/22 levels, primarily reflecting increased activity and strong drilling results on the Company's primary heavy oil assets, partially offset by natural field declines.

  • Primary heavy crude oil production averaged 77,690 bbl/d in Q1/23, a 23% increase from Q1/22 levels, reflecting increased activity and strong drilling results in the Bonnyville/Lloydminster and Clearwater fairways. The Company drilled 42 net primary heavy crude oil wells in Q1/23, of which 26 were multilateral wells.

    • Operating costs⁽¹⁾ in the Company's primary heavy crude oil operations averaged $21.47/bbl (US$15.87/‍bbl) in Q1/23, comparable to Q1/22 levels.

  • Pelican Lake production averaged 48,244 bbl/d in Q1/23, a decrease of 7% from Q1/22 levels, reflecting natural field declines and lower polymer injection rates which were reinstated in February 2023. The field is targeted to return to its historical decline rate of approximately 5% in the second half of 2023.

    • Operating costs at Pelican Lake averaged $9.63/bbl (US$7.12/bbl) in Q1/23, a 29% increase from Q1/22 levels of $7.48‍/‍bbl, primarily as a result of higher power costs, as well as higher service costs.

  • North America light crude oil and NGLs production averaged 108,531 bbl/d in Q1/23, comparable to Q1/22 levels, reflecting increased activity offset by natural field declines and a third-party pipeline outage impacting NGLs.

    • Operating costs on the Company's North America light crude oil and NGLs production averaged $18.62/‍bbl (US$13.77/bbl) in Q1/23, a 22% increase from Q1/22 levels, primarily reflecting higher power as well as service costs.

    • The Company drilled a total of 16 net light crude oil wells in Q1/23 as part of its light oil development plan, which are targeted to come on production in the second half of Q2/23 and the first half of Q3/23.

      • - At Wembley, as a part of the program, a 5 well light crude oil pad is targeted to come on production on May 15, 2023 with initial production rates of approximately 4,000 bbl/d of liquids and 14 MMcf/d of natural gas. This pad is part of the Company's budgeted 11 well program in the greater Wembley area in 2023.

 
(1) Calculated as production expense divided by respective sales volumes. Natural gas and NGLs production volumes approximate sales volumes.

• The Company's thermal in situ production averaged 242,884 bbl/d in Q1/23, a decrease of 7% as targeted, from Q1/22 levels, representing the long life low decline nature of these assets.

  • Thermal in situ operating costs averaged $15.94/bbl (US$11.78/bbl) in Q1/23, an increase of 11% over Q1/22 levels, primarily reflecting higher power costs as well as service costs.

• Canadian Natural continues to deliver safe, reliable production from its long life low decline thermal in situ assets which have decades of strong capital efficient growth opportunities. In 2022, we embarked on a strategic growth plan to increase production, utilizing available facility capacity. Included in this plan are new pads that were drilled in 2022 and pads currently being drilled, which target to add production in the second half of 2023 and beyond.

• Total thermal production in Q4/23 is targeted to average approximately 280,000 bbl/d, representing growth of approximately 30,000 bbl/d from Q4/22 levels, inclusive of natural field declines. A few highlights include:

  • At Primrose, the Company is targeting to grow production by approximately 25,000 bbl/d from Q4/22 to Q4/23 levels, primarily from its two CSS pads drilled in 2022. The first production cycle from these pads is targeted to begin in Q3/23, driving strong quarterly production at Primrose to approximately 100,000 bbl/d in Q4/23.

  • At Kirby, the Company is targeting to grow production by approximately 15,000 bbl/d from Q4/22 levels to approximately 65,000 bbl/d in Q4/23, as the Company progresses with the development of four SAGD pads in 2023. Production from the first pad which was drilled in 2022 is targeted to ramp up to full production capacity in Q3/23. The three remaining pads are targeted to ramp up to full production capacity over the first nine months of 2024, at a pace of one pad per quarter.

  • At Jackfish, production has been very strong since acquiring the asset in 2019, averaging approximately 115,000 bbl/d, with minimal capital invested. Two SAGD pads are currently being drilled, with production from these pads targeted to ramp up to their full production capacities in Q3/24 and Q4/24 respectively, supporting continued high utilizat