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May 2019 Corporate Presentation – Canadian Natural Resources (CNRL)

Canadian Natural Resources (CNRL) · May 22, 2019 · 75 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 1
  2. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 2
    Delivering Value & Growth SNAPSHOT 2018 2019B Capital expenditures – net (C$ million) $4,731 $3,700 Annualized dividend (C$/share)* $1.34 $1.50 Production (annual average, before royalties) Crude Oil (Mbbl/d) 821 782 - 861 Natural…
  3. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 3
    TABLE OF CONTENTS • Corporate Strategy Page 1 • A World Class Company Built for All Cycles Page 2 • Delivering Real Value to Shareholders Page 6 • Value/Growth Opportunities Page 11 ? Montney Page 12 ? Heavy Crude Oil Page 13 ?…
  4. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 4
    Top tier free cash flow generation • CFPS, EPS, Production per share growth • Increasing ROCE, ROE, Dividend Yield • Increasing returns to shareholders through dividends and share purchases • Optionality to deliver significant…
  5. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 5
    Top tier free cash flow generation providing real returns to shareholders ?Dividend increases and share purchases • Strong Balance Sheet supports investment grade credit ratings • Flexible capital allocation to maximize value • Large,…
  6. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 6
    Balanced, diverse production mix • International exposure • Vast, balanced resource base to develop • Growing, sustainable adjusted funds flow • >50% light crude oil and SCO production BALANCED PRODUCT MIX PROVIDES FLEXIBILITY 2019…
  7. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 7
    Balanced Asset Model Robust Through All Cycles Time • Ability to ramp up production faster with improving prices • Stronger Balance Sheet • Long life low decline assets provide sustainable production and free cash flow •…
  8. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 8
    ong Life Low Decline Production ~57% Low Capital Exposure Production ~43% Maintenance Capital of ~$3.1 billion required in 2019 ~10% Corporate Decline Rate 8 Canadian Natural’s Advantage Low Corporate Decline Rate
  9. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 9
    • Significantly lower maintenance capital requirements than a typical E&P ? Strategic advantage of a long life low decline asset base ? Production of over 1,000,000 BOE/d maintained with investment of ~US$6/BOE ? Peer average…
  10. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 10
    1P Reserves After Royalties – 2018 MMBOE
  11. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 11
    Long-Term Ratings Outlook Short-Term Ratings DBRS BBB High Stable n/a Standard & Poor’s BBB+ Stable A-2 Moody’s Baa2 Stable P-2 • Moody’s upgraded long-term debt rating to Baa2 September 13, 2018 • Strong financial position as of…
  12. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 12
    • Balanced portfolio of assets ? Diverse product inventory and time horizons ? Owned and controlled infrastructure ? Long Life Low Decline assets ? Low maintenance capital requirements ? Size drives economies of scale • Strategic ?…
  13. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 13
    Free Cash Flow Yield – 2019F
  14. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 14
    Delivering Safe, Effective & Efficient Operations Total recordable injury frequency (per 200,000 hours) Operating Costs ($/BOE) Safety is a Core Value 0.3 0.5 0.8 2014 2015 2016 2017 2018 Effective & Efficient
  15. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 15
    Balance & Optimize the Four Pillars of Capital Allocation • Balance Sheet Strength ? Balance Sheet strengthens through free cash flow allocation policy • Economic Resource Development ? Disciplined corporate capital allocation ?…
  16. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 16
    Canadian Natural 2019 Targeted Free Cash Flow ($ billion) Note: Free cash flow represents adjusted funds flow less capital. See Advisory for cautionary statements, definitions and pricing assumptions. Free Cash Flow ~$2.9B (before…
  17. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 17
    Balance & Optimize the Four Pillars of Capital Allocation • Balance Sheet Strength ? Balance Sheet strengthens through free cash flow allocation policy • Economic Resource Development ? Disciplined corporate capital allocation ?…
  18. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 18
    Free Cash Flow Allocation Policy 18 Targets = 1.5x Debt/EBITDA and $15.0 billion in Absolute Debt Note: Policy is effective November 1, 2018 and targeted to be in place until at least the Company’s Normal Course Issuer Bid renewal in…
  19. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 19
    5 Year Production per Share Growth (Production/Share) Capital ($ billion) Strip pricing $4.7 $3.7 $4.7 $4.7 $4.5 *Based upon 2018 actuals to midpoint for indicated year range. Note: See Advisory for pricing assumptions, cautionary…
  20. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 20
    • Disciplined allocation of capital delivers sustainable dividend policy ? 19 consecutive years of dividend increases ? 12% increase to current quarterly dividend per common share over 2018 levels ? $1.50 per common share annualized…
  21. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 21
    Canadian Natural Returns to Shareholders
  22. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 22
    Committed Management Peers include APC, APA, CVE, DVN, ECA, EOG, PXD and SU. Note: Based on share ownership data from March 2019 (excluding options). Outstanding shares as at Q1/19 for peers per Bloomberg. Source: SEDI and BD…
  23. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 23
  24. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 24
    Potential Rate(1) (MMcf/d) Potential Rate(1) (bbl/d) Natural Gas & Light Crude Oil(2) 2,000 200,000 Heavy Crude Oil(2) - 250,000 Thermal in Situ Oil Sands - 120,000 Oil Sands Mining & Upgrading Near Term - 95,000 Long Term -…
  25. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 25
    Large inventory of defined development projects • Many large contiguous land holdings ? ~1.0 million net acres • Key liquids rich / light crude oil properties ? Greater Wembley Area ? Wembley, Albright, Knopcik, Gordondale ?…
  26. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 26
    Large, concentrated liquids rich Montney land base ? Facilitates efficient area program • Leveraging technology & area expertise to lower costs • ~155 net sections of land de-risked by proven production • Strategic owned…
  27. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 27
    Gas cycling/storage targets two objectives ? Increased liquids recovery ? Store produced gas during low price periods • 5 MMcf/d injection pilot targeted for Septimus late in Q2/19 • Opportunities throughout liquids rich land base…
  28. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 28
    Heavy Crude Oil Technological Advancement – Horizontal Multilateral Opportunities ~500 km AB SK CNQ Land Base CNQ Heavy Crude Oil Producing Properties Potential Multilateral Horizontal Opportunities Smith Golden Lake •…
  29. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 29
    ~5.4 billion barrels OBIP* ? Primrose and Wolf Lake potential phased facilities expansions of ~80,000 bbl/d • ~17.5 billion barrels OBIP* ? Peace River currently producing • ~44.0 billion barrels OBIP* ? Significant future…
  30. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 30
    Joslyn Lease Plan Estimated cost savings of over $500 million ? Significant value realized from savings and efficiencies through optimizing the mine plan • Paraffinic Froth Treatment Expansion 40,000 - 50,000 bbl/d of diluted bitumen ?…
  31. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 31
    Oil Sands Mining & Upgrading Potential Long Term Opportunities • Horizon Phase 4 & 5 ? Increase capacity by ~260,000 bbl/d of SCO ? Executed in a step wise and disciplined manner ? Significant potential, contingent on market access…
  32. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 32
    • 5 structures identified with up to ~1.0 billion barrels OOIP per structure • 20% working interest ? Upfront cash consideration and financial carry ? Future bonus payments on commercial discovery ? In Q1/19 the operator made a…
  33. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 33
  34. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 34
    Largest natural gas producer in Canada ? Q1/19 ~1,450 MMcf/d ? 9.6 Tcf 2P reserves* • Significant light crude oil and NGL production base ? Q1/19 ~95,600 bbl/d light oil & NGLs ? 665 million barrels 2P reserves* ? High quality…
  35. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 35
    Q1/19 light crude oil production ? ~47,900 bbl/d • 2P reserves ? 307 million barrels* • North Sea ? Low decline ? Low risk development opportunities • Côte d’Ivoire ? High return, low risk development opportunities ? Exploration…
  36. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 36
    Largest Primary heavy crude oil producer in Canada ? Q1/19 production of ~68,500 bbl/d • Industry leading polymer flood at Pelican Lake ? Q1/19 production of ~61,200 bbl/d • 2P reserves ? 697 million barrels* • Large inventory of…
  37. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 37
    • Industry leading Enhanced Oil Recovery (EOR) technology • Long Life Low Decline assets • Industry leading heavy crude oil recovery ? Polymer after primary 28% • Effective and efficient operations ? Q1/19 operating costs of…
  38. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 38
    • Long Life Low Decline assets • Facility capacity of ~220,000 bbl/d(1) ? Q1/19 production of ~94,100 bbl/d • 2P reserves ? 3.06 billion barrels(2) • Majority working interest and operatorship • Effective and efficient thermal…
  39. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 39
    Primrose & Wolf Lake Development Opportunities2018 pad add program drilled 63 wells ? Targeted first oil production in Q4/19, on budget and ahead of schedule ? Targeted first 12 month production of ~26,000 bbl/d • Significant…
  40. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 40
    Thermal In Situ Oil Sands Kirby SAGD Kirby South ? Q1/19 production of ~30,000 bbl/d and SOR of 3.1 ? Maximize value from consolidated land base • Kirby North ? Project on budget and ahead of schedule ? First steam May 1, 2019 ?…
  41. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 41
    Q1/19 production of ~416,200 bbl/d • 2P reserves ? 7.03 billion barrels(1) • Significant resource in place 50+ year life(2) • No decline, reservoir risk or reserve replacement cost • Significant economies of scale ? Operating…
  42. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 42
    Oil Sands Mining & Upgrading Operating Costs Note: Operating expenses reflect production downtime for turnarounds (unadjusted). Source: Company reports. (C$) Equivalent to ~$3.5 billion in additional margin in 2018 Bar Chart
  43. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 43
    Potential for cost savings of $2.00/bbl - $3.00/bbl for operating and sustaining costs • ~40% less GHG emissions during bitumen production • Eliminates tailings ponds • Overburden mining – shovel to conveyor – reducing haul truck…
  44. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 44
  45. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 45
    Natural gas ? WCSB production constrained by takeaway capacity ? Production base shifting to liquids rich natural gas and associated gas from crude oil ? Increased natural gas export pipeline access in 2021 and LNG in 2025+ ?…
  46. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 46
    Canadian Natural Balanced Portfolio of Natural Gas Sales 2019B* Export MMcf/d Dawn/Ontario 160 Empress 190 Emerson (Minnesota) 100 California 15 Canadian Natural Consumption 37% Exports 31% AECO Sales International
  47. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 47
    Crude Oil Curtailments (US$/bbl) Note: Based on strip pricing as of April 23, 2019. Line 3 In-Service Keystone Outage AB Government Curtailment Announcement • Canadian Natural actively engaged with Government of Alberta to…
  48. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 48
    Crude Oil Outlook Effective Takeaway Capacity Increasing Incremental 2019 Conventional declines(3) ~45,000 bbl/d Incremental rail(2) ~150,000 bbl/d NWR Refinery(1) ~50,000 bbl/d Total ~245,000 bbl/d Incremental 2020 Enbridge Line…
  49. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 49
    Demand / Pricing for low sulphur diesel likely to increase ? ~50% of BOE production is SCO and light crude oil ? Value of synthetic crude oil (“SCO”) likely to increase ? SCO has high distillate yield amenable to low sulphur diesel…
  50. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 50
  51. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 51
    Strategy • Maximize top tier free cash flow generation and shareholder value • Align capital spend and production growth with takeaway capacity in short-term • Disciplined capital allocation ? 2019 base capital budget slightly above…
  52. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 52
    2018 Actual 2019 Base Budget 2019 Normalized Budget North America Natural Gas & NGLs $485 $365 $365 North America Crude Oil 1,180 775 1,055 International Crude Oil 489 460 460 Total Exploration & Production $2,154 $1,600 $1,880…
  53. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 53
    2019 Base Budget Production Targeted Production 2018 2019B % Change(1) Natural Gas (MMcf/d) 1,548 1,485 - 1,545 (2%) Crude Oil & NGLs (Mbbl/d) North America 243 221 - 241 (5%) North America – Thermal In Situ 108 104 - 124 6% North…
  54. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 54
    2019 Base Budget Capital Breakdown Maintenance Capital ($ million)(1) 2019B Exploration & Production(2)(3) $1,490 Thermal In Situ Oil Sands 375 Oil Sands Mining & Upgrading 950 Abandonment & Reclamation 265 Total Maintenance…
  55. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 55
    2019 Value Adding Options Growth Projects ($ million) Value Oil Sands Mining* $200 Horizon Stages 1B/2 Horizon Paraffinic Froth On-stream date not delayed one year Increase reliability and lowers operating costs Restart execution,…
  56. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 56
  57. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 57
    Leading R&D investor ? ~$3.4 billion invested since 2009* • Benefits ? Unlocking reserves ? Becoming more effective and efficient ? Increasing production ? Reducing environmental footprint GHG emission reductions are a priority •…
  58. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 58
    Proactive environmentally responsible operations • Reducing corporate greenhouse gas emissions intensity ? ~29% reduction since 2012 • Meet or exceed all regulatory requirements • Continuous improvement initiatives have reduced…
  59. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 59
    Continuous improvement initiatives have reduced environmental emissions • Heavy Oil Casing Gas vent reduction ? Solution Gas Conservation has reduced GHG emissions STRENGTHENING ENVIRONMENTAL INITIATIVES 59 Heavy Crude Oil…
  60. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 60
    Top tier CO2 capturer and sequesterer in the world(1) • Reduced CO2 footprint • Reduced CO2 charges LEADING CANADA IN CARBON CAPTURE & STORAGE 60 Tonnes per Year Horizon 0.4 million Quest(2) 1.1 million NWR(3) 1.2 million 2.7…
  61. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 61
    Canadian Natural Delivering Climate Leadership at Horizon Oil Sands 0.06 0.07 0.08 0.09 0.10 0.11 2012 2013 2014 2015 2016 2017 2018 GHG Emissions Intensity (tonnes CO2e/BOE) 37% Reduction at Horizon 2012 - 2018 *Relative to…
  62. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 62
    Oil Sands Well-to-Combustion Note: Total emissions intensity includes: production and upgrading, transportation, refining, transportation of refined product and combustion. CNQ Oil Sands includes: Oil Sands Mining and Upgrading and…
  63. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 63
    Current Technology Execution Future Technology Execution Future Techology Development Intensity after Mitigation Aspiration Net Zero PATHWAY TO CONTINUE TO REDUCE GHG EMISSIONS 63 Capturing Technological Improvements in Oil…
  64. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 64
  65. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 65
    Canadian Natural A Unique E&P Company • Long Life Low Decline asset base • Low maintenance capital requirements • Effective and efficient operations • Flexible, disciplined free cash flow allocation • Strong Balance Sheet,…
  66. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 66
    Increasing Returns Unique, Balanced Asset Base Robust Throughout Cycles Proven Effective Strategy Optimal Cash Flow Allocation
  67. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 67
    Pricing Assumptions 2018 2019B 2019F 2020F 2021F 2022F Strip(1) Base Budget Dec 3, 2018 Guidance May 9, 2019 US$ WTI/bbl $ 64.78 $ 52.88 $ 62.71 $ 71.33 $ 72.07 $ 73.71 C$ AECO/GJ $ 1.45 $ 1.26 $ 1.44 $ 2.35 $ 2.70 $ 2.89 SCO…
  68. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 68
    Hedging Note: The Company’s outstanding commodity derivative financial instruments are expected to be settled monthly based on the applicable index pricing for the respective contract month. Sales Contracts Remaining term Volume…
  69. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 69
    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…
  70. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 70
    Key Historic Data Operational & Financial Information 2013 2014 2015 2016 2017 2018 Daily production, before royalties Crude oil and NGLs (Mbbl/d) 478 531 564 524 685 821 Natural gas (MMcf/d) 1,158 1,555 1,726 1,691 1,662 1,548…
  71. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 71
    Drilling activity, net wells Crude oil 1,117 1,023 115 174 495 483 Natural gas 44 75 19 9 21 18 Dry 30 19 6 7 7 9 Strats and service 384 437 166 268 289 615 Realized product pricing, before hedging activities & after transportation…
  72. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 72
    Ratios Debt to adjusted funds flow, trailing 12 months 1.3x 1.4x 2.6x 3.5x 3.1x 2.3x Debt to book capitalization 27% 33% 38% 39% 41% 39% Return on common equity, trailing 12 months 9% 14% (2%) (1%) 8% 8% Daily production before…
  73. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 73
    Corporate Guidance Daily Production Volumes (before royalties) Natural gas (MMcf/d) 1,500 - 1,530 1,485 - 1,545 Crude oil and NGLs (Mbbl/d) North America – E&P 224 - 232 221 - 241 North America – Thermal In Situ 100 - 106 104 - 124…
  74. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 74
    Capital Expenditures (C$ million) North America natural gas and NGLs $ 365 North America crude oil 775 International crude oil 460 Total Exploration and Production 1,600 Total Thermal In Situ Oil Sands 545 Net acquisitions,…
  75. May 2019 Corporate Presentation – Canadian Natural Resources (CNRL) – slide 75
    North America Average Annual Cost Data and Other Information Royalty Rate Operating Cost Natural Gas - North America (Mcf)(1) 3.0 - 5.0% $1.20 - 1.30 Crude oil and NGLs (bbl) North America (Excluding Oil Sands Mining)(1) 14.0 - 16.0%…

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