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October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL)

Canadian Natural Resources Limited (CNRL) · Oct 10, 2017 · 61 slides

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Slides

  1. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 1
  2. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 2
    Delivering Value and Growth SNAPSHOT 2016 2017F Funds Flow (C$ million) (1) $4,293 $6,500 - $6,900 Per share $3.89 $5.35 - 5.65 Capital expenditures ? net (C$ million) (2) $3,794 $3,915 Annualized dividend (C$/share) $0.94 $1.10…
  3. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 3
    Oil WTI (US$/bbl) $43.37 $48.53 Natural gas NYMEX (US$/MMbtu) $2.45 $3.15 Natural gas AECO (C$/GJ) $1.98 $2.54 Heavy oil diff (%) 32% 25% Exchange rate (C$ = XUS$) $0.75 $0.77 Company Gross Reserves, before royalties, of crude oil…
  4. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 4
    Canadian Natural?s Strengths ? Proven, effective strategy ? Flexible capital allocation ? Nimble to capture opportunities ?Balanced cash flow allocation ?Cultural advantage ? Strong operations ? Effective, efficient and reliable…
  5. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 5
    ? Flexible capital allocation to maximize value ? Strong Balance Sheet to support investment grade credit ? Defined growth/value enhancement plans by product/basin ? Diverse, balanced asset base ?Product mix ? Project timelines ?…
  6. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 6
    FLEXIBLE CAPITAL ALLOCATION MAXIMIZIES SHAREHOLDER VALUE Balance & Optimize the Four Pillars of Cash Flow Allocation Maximizing Shareholder Value Balance Sheet Strength Returns to Shareholders Economic Resource Development…
  7. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 7
    ? Significant portion of portfolio long-life, low decline ? Provides robust, sustainable cash flow ?Low reserve replacement risk ? Facilitates capital flexibility to maximize returns ? Strong inventory of low capital exposure…
  8. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 8
    North America North Sea Offshore Africa ? Balanced, diverse production mix ? International exposure ? Vast, balanced resource base to develop ? Growing, sustainable cash flow BUILDING A WORLD CLASS COMPANY 6 Balanced, Diverse…
  9. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 9
    0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 SIGNIFICANT VALUE TO UNLOCK 1P Reserves After Royalties Note: Pro forma - CNQ Includes 70% ownership in AOSP. Excludes impacts of recently announced Pelican Lake acquisition.…
  10. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 10
    DECLINE RATE SIGNIFICANTLY REDUCED BY LONG-LIFE PRODUCTION Canadian Natural?s Advantage Impact of Long-Life Assets on Decline Rates Production levels maintained 9.1% Forecast 53% Reduction in Corporate Decline Rate 11.7%…
  11. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 11
    0 0.5 1 2010 2011 2012 2013 2014 2015 2016 SAFETY IS A CORE VALUE Delivering Safety Excellence ? Safety is a core value ? Committed to continuous improvement ? No harm to people, no safety incidents ? Top tier recordable injury…
  12. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 12
    0.055 0.060 0.065 0.070 0.075 2012 2013 2014 2015 2016 DELIVERING ENVIRONMENTALLY RESPONSIBLE OPERATIONS Environmental Performance ? Proactive environmentally responsible operations ? Continuous improvement to reduce…
  13. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 13
    TECHNOLOGY CREATES VALUE Leveraging Technology to Create Value & Enhance Performance ? Largest crude oil and natural gas R&D investor in Canada in 2015 ? 5th largest R&D investor for all industries in Canada in 2015* Research &…
  14. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 14
    ? Acquisition closed May 31, 2017 ? 70% operated working interest in the Athabasca Oil Sands Project (?AOSP?) Mines ?Ownership share equal to 196,000 bbl/d of mined bitumen capability ? Total Proved Producing Reserves of 2.3 billion…
  15. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 15
    ($ million) 2016 2017F North America natural gas & NGLs $277 $460 North America crude oil(1) 512 920 International crude oil 477 420 Total Exploration and Production $1,266 $1,800 Thermal In Situ Oil Sands(1) $192 $380 Horizon…
  16. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 16
    Targeted Production 2016 2017F % Change(1) Natural Gas (MMcf/d) 1,691 1,655 - 1,705 - Crude Oil & NGLs (Mbbl/d) North America(2) 240 236 - 246 1% North America ? Thermal In Situ 111 112 - 122 5% North America ? Horizon Oil Sands…
  17. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 17
    750 850 950 1,050 1,150 1,250 1,350 Capital ($ billion) 2016 2017F 2018F 2019F Strip Pricing $3.8 $3.9(2) $4.7 $4.9 HIGH VALUE PRODUCTION GROWTH 4 Year Production Growth (MBOE/d) (1) 2016 midpoint to 2019F midpoint using Strip…
  18. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 18
    4 Year Free Cash Flow ($ billion) Capital ($ billion) 2016 2017F 2018F 2019F Strip pricing $3.8 $3.9* $4.7 $4.9 Note: Free cash flow represents cash flow from operations less capital and current dividends. See Advisory for pricing…
  19. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 19
    $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 Balance Sheet Strength Returns to Shareholders Economic Resource Development Opportunistic Acquistions BALANCED FOUR PILLARS MAXIMIZES SHAREHOLDER VALUE Balanced Yet Flexible Capital…
  20. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 20
    ? Control of our destiny ? Control costs, development timing and pace ? eliminates commitments ? Operations flexibility with high working interest ? Minimal capital exposure and return on capital maximized ? Drill-to-fill strategy ?…
  21. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 21
    Natural Gas & NGLs Core Area Summary ? Largest natural gas producer in Canada ? Q2/17 natural gas production ? ~1,603 MMcf/d ? Q2/17 average NGL yield ? ~25 bbl/MMcf ? Large resource base ? 10.6 Tcfe reserves(1) ? Significant…
  22. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 22
    $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 Production Capability (Bcfe/d) STRONG PORTFOLIO OF LIQUIDS-RICH GAS PROJECTS Deep Basin/Montney Natural Gas Projects Return on Capital, 15% After Tax $2.00-$2.50 Tier 3…
  23. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 23
    North America Light Crude Oil Core Area Summary ? Q2/17 light crude oil and NGL production ?~91 Mbbl/d ? 2P reserves ? 233 million barrels(1) ? High quality light crude oil horizontal multi-frac opportunities ? ~182 active…
  24. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 24
    ? Q2/17 light crude oil production ? ~46 Mbbl/d ? 2P reserves ? 386 million barrels(1) ? North Sea ? Operating efficiency gains and more favorable tax regime increase returns ? C?te d?Ivoire ? High return development…
  25. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 25
    $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 DIVERSE ASSET PORTFOLIO Light Crude Oil Projects Return on Capital, 15% After Tax $45.00-$50.00 Tier 3 - Deep Basin $40.00-$45.00 Tier 2 ? Deep Basin $25.00-$40.00…
  26. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 26
    Primary Heavy Crude Oil Core Area Summary ? Largest primary heavy oil producer in Canada ? Q2/17 production of ~89 Mbbl/d ? Acquired Cliffdale asset ~8,400 bbl/d 2017F ? Large inventory of development opportunities ? Premium land…
  27. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 27
    $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 ABILITY TO ADD SIGNIFICANT GROWTH Primary Heavy Crude Oil Projects Return on Capital, 15% After Tax Tier 1 Tier 2 Tier 3 Tier 4 0 20,000 40,000 60,000 80,000 100,000…
  28. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 28
    ? Industry leading EOR technology ? Capital requirements are reduced and polymer driven performance is realized ? Q2/17 production ~47 Mbbl/d ? Industry leading operating costs ? Q2/17 operating costs $6.38/bbl ? 2P reserves ? 384…
  29. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 29
    0 10,000 20,000 30,000 40,000 50,000 60,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Primary Polymerflood after Waterflood Polymer After Primary THREE PRODUCING REGIMES ? THREE DIFFERENT…
  30. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 30
    $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 GROWING PRODUCTION WITH LEADING EDGE TECHNOLOGY Pelican Lake Projects Return on Capital, 15% After Tax WTI (US$/bbl) 0 5,000 10,000 15,000 20,000 Infill Drilling and…
  31. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 31
    Thermal In Situ Oil Sands Portfolio ? Q2/17 production volumes of ~106 Mbbl/d ? Acquired Carmon Creek asset ~5,400 bbl/d 2017F ? 2P reserves ? 2.52 billion barrels(1) ? Majority working interest and operatorship ? Effective and…
  32. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 32
    ? Strong performance ? Quarterly production in Q2/17 ? ~35 Mbbl/d with an SOR of 2.6 ? 2P reserves ? 164 million barrels* ? Reinitiated for development ? Major facility equipment purchased ? Lease delineated and ready for drilling…
  33. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 33
    ? Strong netbacks ? High quality crude oil ? Produced solution gas offsets fuel usage ? Significant development opportunities ? Steamflooding ? Follow-up process to CSS ? First commercial wells steamflood at Primrose East, Primrose…
  34. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 34
    $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 LONG-LIFE, LOW DECLINE ASSETS GROWTH POTENTIAL Thermal In Situ Oil Sands Projects Return on Capital, 15% After Tax WTI (US$/bbl) Primrose Pads Kirby North Wolf Lake…
  35. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 35
    ? June 2017 production 202,300 bbl/d (net to Canadian Natural) ? Annual production guidance increased to 102 - 116 Mbbl/d ? Muskeg River and Jackpine mines across the river from Horizon mine ? Uses paraffinic bitumen extraction…
  36. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 36
    ? The Quest Carbon Capture and Storage (?Quest?) facility is designed to capture and store 1 million tonnes of CO2 per year ?Canadian Natural is a 70% working interest owner ? CO2 is captured from the hydrogen manufacturing process…
  37. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 37
    ? World Class asset ? 2P SCO reserves ? 3.60 billion barrels(1) ? Phased development (SCO) ?Phase 2B on stream ? Q2/17 production of ~190 Mbbl/d of SCO ? Targeted start-up of Phase 3 Q4/17 ? Optimization and reliability project…
  38. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 38
    80 82 84 86 88 90 92 94 96 2013 2014 2015 2016* 2017F BEST IN CLASS OPERATIONAL PERFORMANCE Horizon Oil Sands Industry Leading Utilization Rate Note: Peers include AOSP, Suncor, Syncrude. *2016 reflects planned downtime of…
  39. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 39
    $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 50,000 100,000 150,000 200,000 250,000 Horizon Oil Sands Significant Operating Cost Reductions Production (bbl/d) Annual Operating Cost (C$/bbl) Phase 3 80,000 bbl/d…
  40. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 40
    Horizon Optimization & Reliability ? Early indications show Phase 2B may exceed design rates ? Q1/17 ~192,500 bbl/d ? Q2/17 ~190,000 bbl/d ? Fractionation tower as well as VDU and DRU furnace debottlenecking ?Determined to be…
  41. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 41
    ? Strong financial position as of June 30, 2017 ? Debt/book capitalization 43% ? Available bank lines of $3.7 billion ? Disciplined allocation of capital delivers sustainable dividend policy ? 17 consecutive years of dividend…
  42. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 42
    Balance Sheet Improves Quickly Debt / Book Cap (%) Bank Covenant Note: For illustrative purposes all 2017F values are annualized figures, assuming the AOSP transaction occurred on January 1, 2017. Forecast - Mid-point of 2017…
  43. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 43
    Balance Sheet Improves Quickly Long term range 1.8 to 2.2x (Debt / EBITDA) Transition to Lower Crude Oil Price Environment Note: 2017F reflects AOSP acquisition costs; Pro forma reflects impact of AOSP acquisition effective February…
  44. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 44
    (C$ million) Maturity Revolving bank line 1(1)(2) $2,425 June 2021 Revolving bank line 2(1) $2,425 June 2020 Non-revolving syndicated term facility(1) $2,200 October 2019 Non-revolving syndicated term facility (AOSP) (1)(3) $3,000 May…
  45. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 45
    0 200 400 600 800 1,000 1,200 1,400 1,600 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F Dividend Share Purchase PSK Distribution Horizon Phase 1 build years ($ million) 23% Dividend CAGR…
  46. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 46
    0.0% 0.5% 1.0% 1.5% 2.0% 2.5% CONSISTENT HISTORY OF VALUE CREATION Committed Management ? Substantial management and director wealth at stake ? Strong motivation for management to perform ? Delivers clear alignment with…
  47. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 47
    ? Strong balance sheet ? Large, diversified, well balanced asset base ? Transition to longer-life, low decline assets reduces capital requirements while maintaining production ? Delivering increasing and more sustainable cash flow to…
  48. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 48
  49. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 49
    -4% -2% 0% 2% 4% 6% 8% 10% CNQ Source: FactSet and RBC Research estimates at August 24, 2017. Note: Excludes impacts of recently announced Pelican Lake acquisition. Peers Include: APA, APC, COP, CVE, DVN, ECA, EOG, HSE, IMO,…
  50. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 50
    US Canada R.O.W. Super Majors Canadian Natural Change in Dividend vs. Peers Change in Dividend (Q4/14 to Current) Source: FactSet and RBC Research estimates at August 24, 2017. Peers Include: APA, APC, BP, CHK, COP, CVE, CVX, DVN,…
  51. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 51
    Canadian Natural ROE 2012-2016 Actual (30%) (25%) (20%) (15%) (10%) (5%) 0% 5% 10% Source: FactSet and RBC Research estimates at August 24, 2017. Note: Calculated as net income (including discontinued operations) divided by…
  52. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 52
    Cautionary Statement Project progress and financial results are dependent upon economic and regulatory conditions, commodity prices, global economic factors, project sanction and capital allocation. Pricing Assumptions 2016 2017F(1)…
  53. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 53
    Reserves Notes: (1) Company Gross reserves are working interest share before deduction of royalties and excluding any royalty interests. (2) Company Net reserves are working interest share after deduction of royalties and including any…
  54. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 54
    A foreign exchange rate of 0.7800 US$/C$ for 2017, 0.8200 US$/C$ for 2018, and 0.8500 US$/C$ after 2018 was used in the 2016 evaluation. (5) A barrel of oil equivalent (?BOE?) is derived by converting six thousand cubic feet of natural…
  55. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 55
    At June 30, 2017, the Company had the following derivative financial instruments outstanding to manage its commodity price risk: Sales Contracts Remaining term Volume Weighted average price Index Natural Gas AECO swaps Jul 2017 ? Oct…
  56. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 56
    Key Historic Data Operational Information 2011 2012 2013 2014 2015 2016 Daily production, before royalties Crude oil and NGLs (Mbbl/d) 389 451 478 531 564 524 Natural gas (MMcf/d) 1,257 1,220 1,158 1,555 1,726 1,691 Barrels of oil…
  57. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 57
    Key Historic Data Operational Information 2011 2012 2013 2014 2015 2016 Daily production, before royalties Crude oil and NGLs (Mbbl/d) 389 451 478 531 564 524 Natural gas (MMcf/d) 1,257 1,220 1,158 1,555 1,726 1,691 Barrels of oil…
  58. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 58
    Capital expenditures (net, including combinations) 6,414 6,308 7,274 11,744 3,853 3,794 Balance Sheet Info (C$ million) Property, plant and equipment (net) 41,631 44,028 46,487 52,480 51,475 50,910 Total assets 47,278 48,980 51,754…
  59. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 59
    Corporate Guidance August 3, 2017 Q3/17 Revised 2017 Daily Production Volumes (before royalties) Natural gas (MMcf/d) 1,650 - 1,710 1,655 - 1,705 Crude oil and NGLs (Mbbl/d) North America(1) 240 - 248 236 - 246 North America ?…
  60. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 60
    Turnarounds and reclamation 175 Capitalized interest and other 50 Total Horizon Project 1,565 Total Athabasca Oil Sands Project - Sustaining Capital 140 Total Capital Expenditures $ 3,915 Average Annual Cost Data Royalty Rate…
  61. October 2017 Corporate Presentation – Canadian Natural Resources Limited (CNRL) – slide 61
    Steve W. Laut President Tim S. McKay Chief Operating Officer Corey B. Bieber Chief Financial Officer and Senior Vice-President, Finance Mark Stainthorpe Director, Treasury and Investor Relations CANADIAN NATURAL RESOURCES…

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