Canadian Natural Resources Limited Announces 2018 Fourth Quarter
and Year End Results
Commenting on the Company's 2018 results, Steve Laut, Executive
Vice-Chairman of Canadian Natural stated, "In 2018 we demonstrated
the strength of our diverse and balanced asset base, and our
ability to create value for Canadian Natural's shareholders
throughout the commodity price cycle. Canadian Natural's continued
focus on effective and efficient operations, ability to exercise
capital flexibility and our mix of long life low decline assets
resulted in cash flows from operating activities of over $10.0
billion and adjusted funds flow of over $9.0 billion in 2018, a
significant achievement given industry challenges faced throughout
the year."
Canadian Natural's President, Tim McKay, added,
"We had a strong operational year in 2018 despite the volatility in
commodity prices, as the Company was able to react quickly and
strategically to changing market conditions. The Company achieved
record annual production of approximately 1,079,000 BOE/d,
delivering 12% production growth and 14% production per share
growth over 2017 levels. Our industry leading Oil Sands Mining and
Upgrading operations delivered record annual production of 426,190
bbl/d of Synthetic Crude Oil ("SCO") as a result of strong
production at Horizon and a full year of production from the
Athabasca Oil Sands Project. Additionally, record low annual
adjusted operating costs of $21.05/bbl (US$16.24/bbl) of SCO and
unadjusted operating costs of $21.75/bbl (US$16.78/bbl) of SCO were
achieved as a result of safe, steady and reliable operations, high
utilization, and leveraging expertise to capture synergies.
In 2018, crude oil price differentials widened
due to market access restrictions and as a result, the Company made
the proactive and strategic decisions throughout the year to
voluntarily curtail crude oil production and reduce activity.
Canadian Natural strongly supports the Government of Alberta's
mandatory production curtailment program announced in late 2018 and
as expected after this announcement, crude oil price differentials
have since significantly narrowed. The Western Canadian Select
("WCS") differential index has narrowed to US$12.38/bbl for Q1/19
from the US$39.36/bbl experienced in Q4/18 and
the differential between SCO and West Texas Intermediate
("WTI") benchmark pricing has narrowed to US$2.70/bbl for Q1/19
from the US$21.35/bbl experienced in Q4/18. As previously
announced, the Company will continue to evaluate progress on export
pipelines before enacting increases, if any, to its base 2019
capital budget.
Canadian Natural's mix of long life low decline
assets and effective and efficient operations resulted in total
Company Gross proved reserves increasing at the end of 2018 by 12%
to 9.893 billion BOE, replacing 359% of 2018 production, with a
reserves life index of 27.7 years. The Company's continued focus on
continuous improvement, innovation and leveraging technology has
lowered our overall cost structure, and as a result, proved
finding, development and acquisition costs, including changes in
future development capital, were excellent in 2018 and decreased
from 2017 levels by 24% to $9.39/BOE."
Canadian Natural's Chief Financial Officer,
Corey Bieber, continued, "Throughout 2018, Canadian Natural
demonstrated its financial strength and resilience to market
challenges through reduced long-term debt and upgraded credit
ratings. Net earnings of approximately $2.6 billion and adjusted
net earnings of approximately $3.3 billion were achieved in 2018,
contributing to the reduction in absolute long-term debt by
approximately $1.8 billion. Free cash flow was significant in the
year at approximately $2.8 billion after net capital expenditures
and dividend commitments. Canadian Natural's free cash flow
allocation policy that came into effect November 1, 2018 was
demonstrated in 2018 as approximately 46% of annual 2018 free cash
flow was allocated to share purchases and approximately 54% was
allocated to the Balance Sheet, including the impact of foreign
exchange, working capital and other adjustments. Returns to
shareholders were significant in 2018, totaling over $2.8 billion
with over $1.2 billion returned through share purchases and
approximately $1.6 billion returned through dividends.
Subsequent to year end, our Board of Directors
approved a quarterly dividend increase of 12% to $0.375 per share,
payable on April 1, 2019. The increase marks the 19th consecutive
year of dividend increases, confirming our commitment to
sustainable and increasing returns to shareholders."
HIGHLIGHTS
|
|
Three Months Ended |
|
|
Year Ended |
|
|
|
|
|
|
|
|
|
|
|
|
($
millions, except per common shareamounts) |
|
Dec 31 2018 |
|
|
Sep 30 2018 |
|
|
Dec 31 2017 |
|
|
|
Dec 31 2018 |
|
|
Dec 31 2017 |
|
Net earnings
(loss) |
|
$ |
(776 |
) |
|
$ |
1,802 |
|
|
$ |
396 |
|
|
|
$ |
2,591 |
|
|
$ |
2,397 |
|
Per common share |
– basic |
|
$ |
(0.64 |
) |
|
$ |
1.48 |
|
|
$ |
0.32 |
|
|
|
$ |
2.13 |
|
|
$ |
2.04 |
|
|
– diluted |
|
$ |
(0.64 |
) |
|
$ |
1.47 |
|
|
$ |
0.32 |
|
|
|
$ |
2.12 |
|
|
$ |
2.03 |
|
Adjusted net
earnings (loss) from operations (1) |
|
$ |
(255 |
) |
|
$ |
1,354 |
|
|
$ |
565 |
|
|
|
$ |
3,263 |
|
|
$ |
1,403 |
|
Per common share |
– basic |
|
$ |
(0.21 |
) |
|
$ |
1.11 |
|
|
$ |
0.46 |
|
|
|
$ |
2.68 |
|
|
$ |
1.19 |
|
|
– diluted |
|
$ |
(0.21 |
) |
|
$ |
1.11 |
|
|
$ |
0.46 |
|
|
|
$ |
2.67 |
|
|
$ |
1.19 |
|
Cash flows from operating
activities |
|
|
$ |
1,397 |
|
|
$ |
3,642 |
|
|
$ |
1,438 |
|
|
|
$ |
10,121 |
|
|
$ |
7,262 |
|
Adjusted funds
flow (2) |
|
$ |
1,229 |
|
|
$ |
2,830 |
|
|
$ |
2,307 |
|
|
|
$ |
9,088 |
|
|
$ |
7,347 |
|
Per common share |
– basic |
|
$ |
1.02 |
|
|
$ |
2.32 |
|
|
$ |
1.89 |
|
|
|
$ |
7.46 |
|
|
$ |
6.25 |
|
|
– diluted |
|
$ |
1.02 |
|
|
$ |
2.31 |
|
|
$ |
1.88 |
|
|
|
$ |
7.43 |
|
|
$ |
6.21 |
|
Cash
flows used in investing activities |
|
$ |
1,042 |
|
|
$ |
1,265 |
|
|
$ |
1,074 |
|
|
|
$ |
4,814 |
|
|
$ |
13,102 |
|
Net
capital expenditures (3) |
|
$ |
1,181 |
|
|
$ |
1,473 |
|
|
$ |
1,143 |
|
|
|
$ |
4,731 |
|
|
$ |
17,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily
production, before royalties |
|
|
|
|
|
|
|
|
|
|
|
Natural gas (MMcf/d) |
|
1,488 |
|
|
1,553 |
|
|
1,656 |
|
|
|
1,548 |
|
|
1,662 |
|
Crude oil and NGLs (bbl/d) |
|
833,358 |
|
|
801,742 |
|
|
744,100 |
|
|
|
820,778 |
|
|
685,236 |
|
Equivalent production (BOE/d) (4) |
|
1,081,368 |
|
|
1,060,629 |
|
|
1,020,094 |
|
|
|
1,078,813 |
|
|
962,264 |
|
- Adjusted net earnings (loss) from
operations is a non-GAAP measure that the Company utilizes to
evaluate its performance, as it demonstrates the Company's ability
to generate after-tax operating earnings from its core business
areas. The derivation of this measure is discussed in the
Management’s Discussion and Analysis (“MD&A”).
- Adjusted funds flow (previously
referred to as funds flow from operations) is a non-GAAP measure
that the Company considers key as it demonstrates the Company’s
ability to generate the cash flow necessary to fund future growth
through capital investment and to repay debt. The derivation of
this measure is discussed in the MD&A.
- Net capital expenditures is a
non-GAAP measure that the Company considers a key measure as it
provides an understanding of the Company’s capital spending
activities in comparison to the Company's annual capital budget.
For additional information and details, refer to the net capital
expenditures table in the Company's MD&A.
- 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,
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. In comparing the
value ratio using current crude oil prices relative to natural gas
prices, the 6 Mcf:1 bbl conversion ratio may be misleading as an
indication of value.
ANNUAL HIGHLIGHTS
- Net earnings of $2,591 million were
realized in 2018, an increase of $194 million over 2017 levels.
Adjusted net earnings of $3,263 million were achieved in 2018, a
$1,860 million increase over 2017 levels.
- Cash flows from operating
activities were $10,121 million in 2018, an increase of $2,859
million compared to 2017 levels.
- Canadian Natural generated
significant annual adjusted funds flow of $9,088 million in 2018,
an increase of 24% or $1,741 million over 2017 levels. The increase
year over year was primarily due to increased Synthetic Crude Oil
("SCO") production volumes, higher netbacks in the Oil Sands Mining
and Upgrading segment and higher netbacks in the International
segment, partially offset by lower crude oil, NGLs and natural gas
netbacks in the North America Exploration and Production
("E&P") segment, and significantly lower crude oil pricing in
Q4/18.
- On December 2, 2018, the Government of Alberta announced the
mandatory production curtailment program that resulted in crude oil
differentials narrowing to more normalized levels. Subsequent to
year end, the Western Canadian Select ("WCS") differential index
narrowed to US$12.38/bbl for Q1/19 from US$39.36/bbl for Q4/18 and
the differential between SCO and West Texas Intermediate
("WTI") benchmark pricing narrowed to US$2.70/bbl for Q1/19 from
US$21.35/bbl for Q4/18.
- Cash flows used in investing
activities were $4,814 million in 2018, a decrease of $8,288
million compared to 2017 levels as a result of acquisitions
completed in 2017.
- Consistent with the Company's four
pillar strategy, the Company maintained balance in the allocation
of its annual adjusted funds flow throughout 2018:
- The Company remained disciplined in its economic resource
development investments with annual net capital expenditures of
$4,731 million, or approximately $4,490 million, excluding net
acquisitions.
- The Company reduced long-term debt by approximately $1,835
million, including the impact of foreign exchange, working capital
and other adjustments. As a result, debt to adjusted EBITDA
strengthened to 2.0x and debt to book capitalization improved to
39.1%.
- Returns to shareholders are a key focus for Canadian Natural as
the Company returned a total of $2,844 million in the year, $1,562
million by way of dividends and $1,282 million by way of share
purchases.
- Share purchases for cancellation totaled 30,857,727 common
shares at a weighted average share price of $41.56.
- Subsequent to year end and up to and including March 6, 2019,
the Company executed on additional share purchases of 4,340,000
common shares for cancellation at a weighted average share price of
$35.86.
- Dividends increased 22% from 2017 levels to $1.34 per share.
Subsequent to year end, the Company declared a quarterly dividend
increase of 12% to $0.375 per share, payable on April 1, 2019. The
increase marks the 19th consecutive year that the Company has
increased its dividend, reflecting the Board of Directors'
confidence in Canadian Natural's sustainability and robustness of
the asset base driving the ability to generate significant adjusted
funds flow.
- The Company executed on opportunistic net acquisitions of $241
million, including net exploration and evaluation proceeds of $74
million. These core area acquisitions add significant future value
to the Company's long life low decline asset portfolio.
- Canadian Natural delivered annual
adjusted funds flow in excess of net capital expenditures of
approximately $4,360 million, including the deferred discounted
purchase consideration related to the Joslyn acquisition. After
dividend requirements, annual free cash flow totaled approximately
$2,795 million.
- Demonstrating Canadian Natural's commitment to balanced capital
allocation, the Company allocated approximately 46% of annual 2018
free cash flow, after dividends, to share purchases and
approximately 54% to the Company's Balance Sheet, including the
impact of foreign exchange, working capital and other
adjustments.
- The Company achieved record annual
production volumes of 1,078,813 BOE/d in 2018, an increase of 12%
over 2017 levels. The increase from 2017 was mainly due to a full
year of Horizon Phase 3 production and a full year of production
from acquisitions completed in 2017, partially offset by declines
in natural gas production along with voluntary natural gas and
crude oil curtailments, shut ins and reduced drilling activity.
- Annual BOE production per share growth was strong, increasing
14% when compared to 2017 levels.
- Canadian Natural's annual corporate
crude oil and NGLs production reached a record 820,778 bbl/d, an
increase of 20% over 2017 levels. The increase from 2017 was mainly
due to Horizon Phase 3 operating at high utilization rates and a
full year of production from acquisitions completed in 2017,
partially offset by voluntary crude oil production curtailments,
shut ins and reduced drilling activity.
- North America crude oil and NGLs,
excluding thermal in situ oil sands, averaged 243,122 bbl/d in
2018, representing a 2% increase from 2017 levels mainly due to the
successful integration of acquired assets at Pelican Lake,
partially offset by the impact of proactive measures taken to
reduce annual drilling in the second half of the year by
approximately 100 net wells, delay completion and ramp up of new
wells, and voluntarily curtail crude oil production.
- In 2018, Pelican Lake crude oil production averaged 63,082
bbl/d, a 22% increase when compared to 2017 levels primarily due to
assets acquired in late 2017. In 2018, polymer flood restoration on
the acquired lands was completed ahead of schedule, where
approximately 62% of acquired lands are now under polymer
flood.
- At the Company's world class Oil
Sands Mining and Upgrading assets, industry leading operations
provided record annual production of 426,190 bbl/d of SCO, an
increase of 51% from 2017 levels. The increase in production was
primarily due to a full year of Horizon Phase 3 operations and the
acquisition of the Athabasca Oil Sands Project ("AOSP") in 2017.
- The Company realized record low annual unadjusted operating
costs of $21.75/bbl (US$16.78/bbl) of SCO in 2018, a decrease of
13% from 2017 levels. Operating costs were top tier, below the
midpoint of guidance and were achieved through safe, steady and
reliable operations, high utilization, and leveraging expertise to
capture synergies. After normalizing for planned turnaround
downtime, operating costs decreased 10% to $21.05/bbl
(US$16.24/bbl) of SCO compared to $23.40/bbl of SCO in 2017.
- In the Company's thermal in situ
operations, pad additions at Primrose continue to be on budget and
ahead of schedule with initial production targeted to add
approximately 10,000 bbl/d in Q4/19. The program targets to add
approximately 26,000 bbl/d in the first 12 months of production.
These pad additions are high return activities as the Company
utilizes available excess oil processing and steam capacity at
Primrose.
- At Kirby North, top tier execution
and strong productivity have resulted in the project progressing
two quarters ahead of the sanctioned schedule. The project
now targets first steam in late Q2/19 with the flexibility to ramp
up production in late Q3/19. Cost performance remains on budget
with the overall project 87% complete. Kirby North's overall
capacity of 40,000 bbl/d of Steam Assisted Gravity Drainage
("SAGD") production is targeted for late 2020.
- International E&P annual
production volumes were strong in 2018, averaging 43,627 bbl/d,
comparable to 2017 levels. International production volumes receive
Brent pricing, which is not subject to the price differentials
experienced in Alberta. 2018 Brent pricing averaged US$71.12/bbl, a
31% increase from 2017 pricing of US$54.38/bbl, generating
significant adjusted funds flow in the Company's International
segment.
- The 2018 drilling program in the North Sea was successfully
completed on time and on budget with 3.9 net producer wells drilled
in the year. Current light crude oil production continues to be
strong at approximately 1,250 bbl/d net per well.
- In 2018, the Company successfully drilled 1.7 net producer
wells at Baobab. Current light crude oil production is exceeding
sanctioned expectations at approximately 2,500 bbl/d net per well.
As a result of the successful 2018 drilling program at Baobab,
Canadian Natural targets to drill one additional producer well at
Baobab in 2019.
- Subsequent to year end, the operator of the South Africa
exploration well announced a discovery of significant gas
condensate and targets to evaluate further exploration wells on
Block 11B/12B located offshore South Africa. Canadian Natural
expects the cost of the current exploration well to be fully
carried. In 2019, the operator targets to acquire 3D seismic on the
Block.
- Balance sheet strength and strong
financial performance were demonstrated in 2018 through reduced
long-term debt and upgraded credit ratings.
- In 2018, Moody's Investors Service, Inc. upgraded the Company's
senior unsecured rating to Baa2 from Baa3 and its short term rating
to P-2 from P-3 with a stable outlook. Additionally, Standard &
Poor's revised the Company's rating outlook to BBB+/stable from
BBB+/negative.
- Canadian Natural maintains strong financial stability and
liquidity represented by cash balances, and committed and demand
bank credit facilities. At December 31, 2018 the Company had
approximately $4,824 million of available liquidity, including cash
and cash equivalents, an increase of approximately $574 million
from 2017 levels.
RESERVES UPDATE
- Canadian Natural's crude oil, SCO,
bitumen, natural gas and NGL reserves were evaluated and reviewed
by Independent Qualified Reserves Evaluators. The following
highlights are based on the Company's reserves using forecast
prices and costs at December 31, 2018 (all reserves values are
Company Gross unless stated otherwise).
- Total proved reserves increased 12% to 9.893 billion BOE. The
increase is largely driven by the addition of the Horizon South
Pit, and pad additions and improved recovery at Primrose.
- Proved developed producing reserves additions and revisions are
1.109 billion BOE, replacing 2018 production by 281%. The total
proved developed producing BOE reserves life index is 21.3
years.
- Proved reserves additions and revisions are 1.416 billion BOE,
replacing 2018 production by 359%. The total proved BOE reserves
life index is 27.7 years.
- Proved plus probable reserves increased 13% to 13.382 billion
BOE. Proved plus probable reserves additions and revisions are
1.910 billion BOE, replacing 2018 production by 485%. The total
proved plus probable BOE reserves life index is 37.4 years.
- Proved finding, development and acquisition ("FD&A") costs,
excluding changes in future development capital ("FDC"), are
$3.11/BOE and proved plus probable FD&A costs, excluding
changes in FDC, are $2.31/BOE. Proved FD&A costs, including
changes in FDC, are $9.39/BOE and proved plus probable FD&A
costs, including changes in FDC, are $10.79/BOE.
- Proved net present value of future net revenues, before income
tax, discounted at 10%, is $106.6 billion, a 19% increase from the
year end 2017 evaluation. Proved plus probable net present value is
$131.0 billion, a 14% increase from year end 2017.
FOURTH QUARTER HIGHLIGHTS
- Due to a significant decline in
crude oil pricing, largely driven by an oversupplied domestic
market environment, lack of takeaway capacity and increased global
supply, the Company incurred a net loss of $776 million in Q4/18
and an adjusted net loss from operations of $255 million.
- Cash flows from operating
activities were $1,397 million and adjusted funds flow were $1,229
million in Q4/18. Adjusted funds flow decreased by $1,601 million
from Q3/18 levels and by $1,078 million from Q4/17 levels due to
significantly wider crude oil price differentials, largely driven
by market access restrictions.
- On December 2, 2018, the Government
of Alberta announced the mandatory production curtailment program
that resulted in crude oil differentials narrowing to more
normalized levels. Subsequent to year end, the WCS differential
index narrowed to US$12.38/bbl for Q1/19 from US$39.36/bbl for
Q4/18 and the differential between SCO and WTI benchmark
pricing narrowed to US$2.70/bbl for Q1/19 from US$21.35/bbl for
Q4/18.
- The Company's production volumes in
Q4/18 averaged 1,081,368 BOE/d, a 2% increase over Q3/18 levels and
a 6% increase over Q4/17 levels. The increase from the comparable
quarters was mainly due to strong production from the Oil Sands
Mining and Upgrading segment partially offset by reduced drilling
activity and the impact of strategic actions taken to voluntarily
curtail primary heavy and thermal in situ crude oil production
totalling approximately 24,500 bbl/d.
- At the Company's world class Oil
Sands Mining and Upgrading assets, top tier operations provided
quarterly production of 447,048 bbl/d of SCO, an increase of 39%
over Q4/17 levels mainly due to production from the Horizon Phase 3
expansion and a 13% increase over Q3/18 levels as operations
resumed following a major planned turnaround at Horizon.
- The Company realized industry leading operating costs of
$19.97/bbl (US$15.12/bbl) of SCO in Q4/18, through safe, steady and
reliable operations, high utilization, and leveraging expertise to
capture synergies. These results were comparable to Q3/18 levels
and a 20% decrease from Q4/17 levels.
- Offshore Africa quarterly
production volumes averaged 22,185 bbl/d in Q4/18, an 18% increase
over Q3/18 and a 14% increase over Q4/17 levels. The increase in
production from the comparable periods was primarily due to
production from new wells drilled at Baobab in 2018, partially
offset by natural field declines. International production receives
Brent pricing that averaged US$67.45/bbl in Q4/18, a 10% increase
from Q4/17 pricing of US$61.46/bbl, generating significant adjusted
funds flow in the Company's international segment.
- Share purchases for cancellation in
the quarter totaled 10,845,600 common shares at a weighted average
share price of $37.67.
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 and SCO (herein collectively referred to as
“crude oil”), natural gas and NGLs. This balance provides
optionality for capital investments, maximizing value for the
Company’s shareholders.
Underpinning this asset base is long life low
decline production from the Company's Oil Sands Mining and
Upgrading, thermal in situ oil sands and Pelican Lake heavy crude
oil assets. The combination of long life low decline, low
reserves replacement cost, and effective and efficient operations
results in substantial and sustainable adjusted funds flow
throughout the commodity price cycle.
Augmenting this, Canadian Natural maintains a
substantial inventory of low capital exposure projects within its
conventional asset base. These projects can be executed quickly and
with the right economic conditions, can provide excellent returns
and maximize value for shareholders. Supporting these projects is
the Company’s undeveloped land base which enables large, repeatable
drilling programs which can be optimized over time. Additionally,
by owning and operating most of the related infrastructure,
Canadian Natural is able to control a major component of its
operating cost 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.
Drilling Activity
|
Year Ended Dec 31 |
|
|
|
|
2018 |
2017 |
(number of wells) |
Gross |
|
Net |
|
Gross |
|
Net |
|
Crude oil |
513 |
|
483 |
|
529 |
|
495 |
|
Natural gas |
25 |
|
18 |
|
27 |
|
21 |
|
Dry |
9 |
|
9 |
|
7 |
|
7 |
|
Subtotal |
547 |
|
510 |
|
563 |
|
523 |
|
Stratigraphic test / service wells |
717 |
|
615 |
|
289 |
|
289 |
|
Total |
1,264 |
|
1,125 |
|
852 |
|
812 |
|
Success rate (excluding stratigraphic test / service wells) |
|
98 |
% |
|
99 |
% |
- The Company's total crude oil and
natural gas drilling program of 510 net wells for the year ended
December 31, 2018, excluding strat/service wells, was a decrease of
13 net wells from the same period in 2017. The Company's drilling
levels reflect the disciplined capital allocation process and
proactive actions to improve execution and control costs by
balancing overall drilling levels throughout the year.
North America Exploration and
Production
Crude oil and NGLs
– excluding Thermal In Situ Oil Sands |
|
|
|
Three Months Ended |
Year Ended |
|
|
|
|
|
|
|
Dec 31 2018 |
|
Sep 30 2018 |
|
Dec 31 2017 |
|
Dec 31 2018 |
|
Dec 31 2017 |
|
Crude oil and NGLs production (bbl/d) |
240,942 |
|
247,314 |
|
259,416 |
|
243,122 |
|
239,309 |
|
Net wells targeting crude
oil |
62 |
|
140 |
|
123 |
|
361 |
|
472 |
|
Net
successful wells drilled |
61 |
|
135 |
|
120 |
|
353 |
|
466 |
|
Success rate |
98 |
% |
96 |
% |
98 |
% |
98 |
% |
99 |
% |
- North America crude oil and NGLs
averaged 243,122 bbl/d in 2018, representing a 2% increase from
2017 levels mainly due to the successful integration of acquired
assets at Pelican Lake, partially offset by the impact of proactive
measures taken to reduce annual drilling in the second half of the
year by approximately 100 net wells, delay completion and ramp up
of new wells, and voluntarily curtail crude oil production.
- Canadian Natural's primary heavy
crude oil production averaged 86,312 bbl/d in 2018, a 10% decrease
from 2017 levels primarily due to strategic actions taken to reduce
drilling, delay completion and ramp of new wells and voluntarily
curtail primary heavy crude oil production due to widening price
differentials driven by market access restrictions.
- In the second half of 2018, to maximize value as a result of
widening price differentials, Canadian Natural implemented
proactive and strategic decisions to reallocate capital from
primary heavy crude oil assets to light crude oil assets. As a
result, the Company drilled 137 fewer net primary heavy crude oil
wells and delayed completion on 29 net wells in the year, compared
to the original budget.
- At the Company's Smith primary heavy crude oil play, production
from 6 net multilateral wells drilled in 2018 continues to exceed
sanctioned expectations with current rates of approximately 300
bbl/d per well and lower than expected decline rates. There is
significant development potential at Smith for approximately 118
net horizontal multilateral wells on the Company's 19 net sections
and the Company targets to evaluate the future development
opportunities at Smith as market access improves.
- Operating costs of $16.60/bbl were achieved in the Company's
primary heavy crude oil operations in 2018, a 6% increase from 2017
levels, strong results given lower production volumes due to the
Company's decision to curtail production.
- North America light crude oil and
NGL production averaged 93,728 bbl/d in 2018, an increase of 2%
from 2017 levels. The increase from 2017 is primarily as a result
of reallocation of capital from primary heavy crude oil to light
crude oil drilling projects.
- The Company successfully drilled 99 net light crude oil wells
in 2018, 32 net wells above budget as the Company reallocated
capital from primary heavy crude oil to light crude oil in the
second half of 2018. Production from the additional light crude oil
wells came on in late Q4/18 and in early Q1/19. Highlights from the
drilling program are as follows:
- Within the greater Wembley area, results continue to exceed
expectations. The Company drilled 27 net wells in 2018, 14 of which
came on production with initial 30 day liquids production rates
averaging approximately 600 bbl/d per well. The remaining wells are
targeted to come on production in Q1/19. Within the greater Wembley
area, the Company has identified 155 net Montney sections and 365
incremental potential premium light crude oil and liquids rich well
locations.
- The Company's core Wembley light crude oil play, included
within the greater Wembley area identified above, has 88 net
sections of land and 213 potential premium well locations. In the
core Wembley light crude oil area, production results have been
strong as the Company completed 12 net wells in 2018, 7 of which
came on production late in the year with initial 30 day liquids
production rates averaging approximately 785 bbl/d per well. The
remaining 5 wells are targeted to come on production in Q1/19.
- In Southeast Saskatchewan and Manitoba, the Company drilled 33
net light crude oil wells in 2018, an additional 18 wells than
budgeted as a result of the strategic decision to shift capital to
light crude oil assets. Currently, production from these wells is
averaging 2,750 bbl/d, in-line with expectations. Production from
these Saskatchewan and Manitoba wells are less impacted by the
price differentials experienced in Alberta.
- In 2018, operating costs of $15.29/bbl were realized in the
Company's North America light crude oil and NGL areas.
- Pelican Lake annual production
averaged 63,082 bbl/d, an increase of 22% from 2017 levels,
primarily as a result of the Company's successful integration of
acquired assets in late 2017. Canadian Natural's long life low
decline Pelican Lake assets along with the Company's industry
leading polymer flood technology are driving significant value.
- Polymer flood restoration in 2018 on the acquired lands was
completed ahead of schedule, where approximately 62% of acquired
lands are now under polymer flood.
- In Q4/18, the Company drilled 4 net strategic wells with
initial production results of approximately 100 bbl/d per well,
exceeding sanctioned expectations. The Company has identified
potential opportunities for an additional 31 producer wells.
- Facility consolidation is targeted to be complete in early
Q2/19, resulting in targeted operating cost savings of
approximately $6 million per year.
- Strong operating costs of $6.72/bbl were achieved in 2018 at
Pelican Lake.
- The Company’s 2019 North America
E&P crude oil and NGL annual production guidance remains
unchanged and is targeted to range between 221,000 bbl/d - 241,000
bbl/d.
Thermal In Situ
Oil Sands |
|
|
|
Three Months Ended |
Year Ended |
|
|
|
|
|
|
|
Dec 31 2018 |
|
Sep 30 2018 |
|
Dec 31 2017 |
|
Dec 31 2018 |
|
Dec 31 2017 |
|
Bitumen
production (bbl/d) |
102,112 |
|
112,542 |
|
124,121 |
|
107,839 |
|
120,140 |
|
Net wells targeting
bitumen |
41 |
|
41 |
|
5 |
|
125 |
|
27 |
|
Net
successful wells drilled |
40 |
|
41 |
|
5 |
|
124 |
|
27 |
|
Success rate |
98 |
% |
100 |
% |
100 |
% |
99 |
% |
100 |
% |
- Thermal in situ annual production
volumes averaged 107,839 bbl/d in 2018, a 10% decrease from 2017
levels, primarily due to proactive and strategic decisions to
voluntarily curtail production volumes of approximately 4,200
bbl/d.
- At Primrose, 2018 production volumes averaged approximately
70,000 bbl/d, a decrease of 14% from 2017 levels, primarily as a
result of proactive and strategic decisions to voluntarily curtail
production volumes and the cyclical nature of thermal production.
Including energy costs, operating costs were $14.03/bbl in 2018, an
increase of 14% from 2017 levels, reflecting lower volumes due to
voluntary curtailment and increased carbon tax and energy costs in
2018.
- Pad additions at Primrose continue to be on budget and ahead of
schedule with initial production targeted to add approximately
10,000 bbl/d in Q4/19. The program targets to add approximately
26,000 bbl/d in the first 12 months of production. These pad
additions are high return activities as the Company utilizes
available excess oil processing and steam capacity at
Primrose.
- At Kirby South, SAGD production volumes of 35,061 bbl/d were
achieved in 2018, a 3% decrease from 2017 levels. Including energy
costs, Kirby South achieved strong 2018 annual operating costs of
$9.54/bbl, comparable to $9.50/bbl in 2017.
- At Kirby North, top tier execution and strong productivity have
resulted in the project progressing two quarters ahead of the
sanctioned schedule. The project now targets first steam in late
Q2/19 with the flexibility to ramp up production in late Q3/19.
Cost performance remains on budget with the overall project 87%
complete. Kirby North's overall capacity of 40,000 bbl/d of SAGD
production is targeted for late 2020.
- The Company’s 2019 thermal in situ
annual production guidance remains unchanged and is targeted to
range between 104,000 bbl/d - 124,000 bbl/d.
North America
Natural Gas |
|
|
|
Three Months Ended |
Year Ended |
|
|
|
|
|
|
|
Dec 31 2018 |
|
Sep 30 2018 |
|
Dec 31 2017 |
|
Dec 31 2018 |
|
Dec 31 2017 |
|
Natural
gas production (MMcf/d) |
1,441 |
|
1,489 |
|
1,596 |
|
1,490 |
|
1,601 |
|
Net wells targeting natural
gas |
3 |
|
6 |
|
2 |
|
18 |
|
22 |
|
Net
successful wells drilled |
3 |
|
6 |
|
2 |
|
18 |
|
21 |
|
Success rate |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
95 |
% |
- North America natural gas
production was 1,490 MMcf/d in 2018, a decrease of 7% from 2017
levels, primarily due to strategic decisions to reduce drilling and
development activities, curtail and shut in production as a result
of low natural gas prices, reduced production rates at the Pine
River plant, operated by a third party, and natural field declines.
- Deferred capital and development activity, including
recompletions and workovers of certain natural gas assets, along
with production shut ins resulted in a production impact of
approximately 79 MMcf/d in 2018.
- Additionally, the Company's natural gas production capability
was reduced by approximately 48 MMcf/d in 2018 due to restrictions
at the Pine River plant, operated by a third party.
- The Pine River plant, operated by a
third party, is currently operating at restricted rates of
approximately 90 MMcf/d. As previously announced, Canadian Natural
agreed to acquire the facility from the third party and is awaiting
regulatory approval. The Company completed an engineering cost
assessment of the plant and has determined the optimal plant
capacity to be 120 MMcf/d compared to the previous estimate of 145
MMcf/d and targets to complete the work in Q3/19.
- Operating costs of $1.25/Mcf were
realized in 2018, an increase of 5% from 2017 levels, strong
results given lower natural gas production volumes.
- The Company's natural gas
reinjection pilot at Septimus has received regulatory approval and
is targeted to commence with first injection of 5 MMcf/d in late
Q2/19. If successful, natural gas reinjection has the potential to
add significant value by unlocking liquids rich development without
producing incremental natural gas in a constrained takeaway
environment.
- In 2018, Canadian Natural used the
equivalent of approximately 35% of its total corporate natural gas
production in its operations, providing a natural hedge from the
challenging Western Canadian natural gas price environment.
Approximately 32% of the Company's total 2018 natural gas
production was exported to other North American markets and sold
internationally at an average price of $4.32/Mcf. The remaining 33%
of the Company's 2018 natural gas production was exposed to
AECO/Station 2 pricing.
- The Company’s 2019 corporate
natural gas annual production guidance remains unchanged and is
targeted to range between 1,485 MMcf/d - 1,545 MMcf/d.
International Exploration and
Production
|
Three Months Ended |
Year Ended |
|
|
|
|
|
|
|
Dec 31 2018 |
|
Sep 30 2018 |
|
Dec 31 2017 |
|
Dec 31 2018 |
|
Dec 31 2017 |
|
Crude oil production
(bbl/d) |
|
|
|
|
|
North Sea |
21,071 |
|
28,702 |
|
19,548 |
|
23,965 |
|
23,426 |
|
Offshore Africa |
22,185 |
|
18,802 |
|
19,519 |
|
19,662 |
|
20,335 |
|
Natural gas production
(MMcf/d) |
|
|
|
|
|
North Sea |
22 |
|
38 |
|
37 |
|
32 |
|
39 |
|
Offshore Africa |
25 |
|
26 |
|
23 |
|
26 |
|
22 |
|
Net wells targeting crude
oil |
1.1 |
|
1.6 |
|
— |
|
5.6 |
|
1.8 |
|
Net
successful wells drilled |
1.1 |
|
1.6 |
|
— |
|
5.6 |
|
1.8 |
|
Success rate |
100 |
% |
100 |
% |
— |
|
100 |
% |
100 |
% |
- International E&P annual
production volumes were strong in 2018, averaging 43,627 bbl/d,
comparable to 2017 levels. International production volumes receive
Brent pricing, which is not subject to the price differentials
experienced in Alberta. 2018 Brent pricing averaged US$71.12/bbl, a
31% increase from 2017 pricing of US$54.38/bbl, generating
significant adjusted funds flow in the Company's international
segment.
- In the North Sea, production volumes of 23,965 bbl/d were
achieved in 2018, an increase of 2% over 2017 levels, primarily due
to the successful 2018 drilling program, partially offset by
natural field declines.
- The 2018 drilling program in the North Sea was successfully
completed on time and on budget with 3.9 net producer wells drilled
in the year. Current light crude oil production is as expected at
approximately 1,250 bbl/d net per well.
- The 2019 drilling program of 3.9 net producer wells in the
North Sea commenced in Q1/19 at the Ninian South Platform.
- Annual operating costs in the North Sea averaged $39.89/bbl
(£23.06/bbl), within annual corporate guidance, as the Company
continues to focus on production enhancements, increased
reliability and water flood optimization.
- Offshore Africa production volumes in 2018 averaged 19,662
bbl/d, a decrease of 3% from 2017 levels, primarily as a result of
natural field declines, partially offset by increased production in
Q4/18 from a successful drilling program at Baobab.
- Côte d'Ivoire crude oil operating costs in 2018 were $13.30/bbl
(US$10.26/bbl), a 7% increase from 2017 mainly due to timing of
liftings from Espoir and Baobab that have different cost
structures, fluctuating production volumes on a relatively fixed
cost base, planned maintenance activities and fluctuations in
foreign exchange rates.
- In 2018, the Company successfully drilled 1.7 net producer
wells at Baobab. Current light crude oil production is exceeding
sanctioned expectations at approximately 2,500 bbl/d net per well.
As a result of the successful 2018 drilling program at Baobab,
Canadian Natural targets to drill one additional producer well at
Baobab in 2019.
- In 2019, the Company targets to drill an appraisal well at
Kossipo, and if successful will lead to development drilling and a
pipeline tied-back to the Baobab Floating Production Storage and
Offloading ("FPSO") vessel, adding significant future value with
potential gross production capability of 20,000 bbl/d targeted in
2022.
- At Espoir, the Company targets to commence the Phase 4
development in Q4/19 with initial production targeted for early
2020.
- In Q4/18, the Gabonese Republic approved cessation of
production from the Company’s Olowi field, as well as the terms of
termination of the Olowi Production Sharing Contract and the
surrender of the permit area back to the Gabonese Republic.
- In late Q4/18, the Olowi field was shut in. Subsequent to year
end, well suspensions were completed and the Olowi FPSO was off
location in early Q1/19.
- In Q4/18, the Company farmed out a further 5% working interest
in the Exploration Right relating to Block 11B/12B located offshore
South Africa. Canadian Natural's working interest in the Block is
now 20%.
- As a result of the farm out agreements, Canadian Natural
received up front cash consideration and a financial carry on the
exploration well costs and subsequent operations. Subject to there
being a commercial discovery, the Company will receive further
bonus payments.
- Subsequent to year end, the operator of the South Africa
exploration well announced a discovery of significant gas
condensate and targets to evaluate further exploration wells on the
Block. Canadian Natural expects the cost of the current exploration
well to be fully carried. In 2019, the operator targets to acquire
3D seismic on the Block.
- The Company's 2019 International
annual production guidance remains unchanged and is targeted to
range from 42,000 bbl/d - 46,000 bbl/d.
North America Oil Sands Mining and
Upgrading
|
Three Months Ended |
Year Ended |
|
|
|
|
|
|
|
Dec 31 2018 |
|
Sep 30 2018 |
|
Dec 31 2017 |
|
Dec 31 2018 |
|
Dec 31 2017 |
|
Synthetic crude oil
production (bbl/d) (1) (2) |
447,048 |
|
394,382 |
|
321,496 |
|
426,190 |
|
282,026 |
|
- Q4/18 SCO production before
royalties excludes 3,363 bbl/d of SCO consumed internally as diesel
(Q3/18 – 2,758 bbl/d; Q4/17 – 1,730 bbl/d; 2018 – 3,093 bbl/d; 2017
– 651 bbl/d).
- Consists of heavy and light
synthetic crude oil products.
- At the Company's world class Oil
Sands Mining and Upgrading assets, top tier operations provided
record annual production of 426,190 bbl/d of SCO, an increase of
51% from 2017 levels. The increase in production was primarily due
to a full year of Horizon Phase 3 operations and the acquisition of
the AOSP in 2017.
- The Company realized record low annual unadjusted operating
costs of $21.75/bbl (US$16.78/bbl) of SCO in 2018, a decrease of
13% from 2017 levels. Operating costs were top tier, below the
midpoint of guidance and were achieved through safe, steady and
reliable operations, high utilization, and leveraging expertise to
capture synergies. After normalizing for planned turnaround
downtime, operating costs decreased 10% to $21.05/bbl
(US$16.24/bbl) of SCO compared to $23.40/bbl of SCO in 2017.
- The Company continues to progress
engineering work on the previously announced potential expansion
and reliability opportunities at Horizon to increase reliability
and lower costs, targeting to add production of 75,000 bbl/d to
95,000 bbl/d. The engineering and design specification work is
targeted to be complete in Q1/19. The remainder of the year will
target to focus on key procurement and detailed engineering.
- The potential Paraffinic Froth Treatment expansion at Horizon
is targeting 40,000 bbl/d to 50,000 bbl/d of high quality diluted
bitumen at significantly lower operating costs as the Company
leverages its existing infrastructure. The preliminary estimate of
the capital required is approximately $1.4 billion.
- Stage 1 and 2 reliability opportunities at Horizon are targeted
to add near-term growth of 35,000 bbl/d to 45,000 bbl/d of
SCO.
- The Company targets to sanction the potential expansion and
reliability opportunities with greater clarity on improved market
access.
- As a result of Canadian Natural's
continued focus on execution excellence and the Government of
Alberta's mandated production curtailments, the Company has
optimized planned maintenance timing within the Oil Sands Mining
and Upgrading operations, as follows:
- Canadian Natural has accelerated the timing of planned pit stop
maintenance activities at Horizon to March 2019 from April 2019,
optimizing production levels throughout the Company's assets. The
planned maintenance is targeted for 12 days on the Vacuum
Distillate and Diluent Recovery Unit furnaces at which time the
Upgrader will run at restricted rates of approximately 140,000
bbl/d of SCO. Additional planned turnaround activities at Horizon
are targeted for the fall of 2019.
- The planned 38 day turnaround at the Scotford Upgrader is
targeted for April and May 2019, at which time the Upgrader will
run at restricted net rates of approximately 162,000 bbl/d of SCO.
At AOSP, additional planned pit stop activities are targeted for
the fall of 2019.
- The Company's 2019 Oil Sands Mining
and Upgrading annual production guidance remains unchanged and is
targeted to range between 415,000 bbl/d - 450,000 bbl/d of
SCO.
MARKETING
|
|
Three Months Ended |
|
|
Year Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec 31 2018 |
|
|
Sep 30 2018 |
|
|
Dec 31 2017 |
|
|
|
Dec 31 2018 |
|
|
Dec 31 2017 |
|
Crude oil and NGLs
pricing |
|
|
|
|
|
|
|
|
|
|
|
WTI benchmark price (US$/bbl) (1) |
|
$ |
58.83 |
|
|
$ |
69.50 |
|
|
$ |
55.39 |
|
|
|
$ |
64.78 |
|
|
$ |
50.93 |
|
WCS heavy differential as a percentage of WTI (%) (2) |
|
67 |
% |
|
32 |
% |
|
22 |
% |
|
|
41 |
% |
|
23 |
% |
SCO price (US$/bbl) |
|
$ |
37.48 |
|
|
$ |
68.44 |
|
|
$ |
58.64 |
|
|
|
$ |
58.62 |
|
|
$ |
52.20 |
|
Condensate benchmark pricing (US$/bbl) |
|
$ |
45.27 |
|
|
$ |
66.82 |
|
|
$ |
57.96 |
|
|
|
$ |
60.98 |
|
|
$ |
51.65 |
|
Average realized pricing before risk management (C$/bbl) (3) |
|
$ |
25.95 |
|
|
$ |
57.89 |
|
|
$ |
53.42 |
|
|
|
$ |
46.92 |
|
|
$ |
48.57 |
|
Natural gas pricing |
|
|
|
|
|
|
|
|
|
|
|
AECO benchmark price (C$/GJ) |
|
$ |
1.80 |
|
|
$ |
1.28 |
|
|
$ |
1.85 |
|
|
|
$ |
1.45 |
|
|
$ |
2.30 |
|
Average realized pricing before risk management (C$/Mcf) |
|
$ |
3.46 |
|
|
$ |
2.32 |
|
|
$ |
2.55 |
|
|
|
$ |
2.61 |
|
|
$ |
2.76 |
|
- West Texas Intermediate
(“WTI”).
- Western Canadian Select
(“WCS”).
- Average crude oil and NGL pricing
excludes SCO. Pricing is net of blending costs and excluding risk
management activities.
- In Q4/18 there was a significant
decline in crude oil pricing as a result of increased global
supply, an oversupplied domestic market and a lack of takeaway
capacity, resulting in increased storage levels in Q4/18, impacting
pricing as follows:
- WTI prices decreased 15% in Q4/18 from Q3/18 levels, reflecting
increased global supply.
- The WCS heavy differential widened by 78% to US$39.36/bbl for
Q4/18 from US$22.17/bbl for Q3/18. Following the Government of
Alberta's announcement of a mandatory curtailment of crude oil
production on December 2, 2018, the WCS differential index narrowed
to US$12.38/bbl for Q1/19 from US$39.36/bbl for Q4/18.
- SCO prices in Q4/18 decreased 45% when compared to Q3/18
levels. Following the Government of Alberta's announcement of a
mandatory curtailment of crude oil production on December 2, 2018,
the differential between SCO and WTI benchmark pricing
narrowed to US$2.70/bbl for Q1/19 from US$21.35/bbl for Q4/18.
- Condensate pricing in Q4/18 decreased when compared to Q4/17
and Q3/18 due to increased condensate supply, incremental blending
of light crude oil into condensate and decreased demand due to
curtailment of crude oil production in the basin.
- AECO natural gas prices increased
in Q4/18 from Q3/18 and from Q2/18 levels reflecting the easing of
third party pipeline constraints as well as seasonal demand
factors. AECO natural gas prices decreased from 2017 levels,
reflecting third party pipeline constraints limiting flow of
natural gas to export markets as well as increased natural gas
production in the basin.
- The North West Redwater ("NWR") refinery, upon completion, will
strengthen the Company’s position by providing a competitive return
on investment and by creating incremental demand for approximately
80,000 bbl/d of heavy crude oil blends that will not require export
pipelines, helping to reduce pricing volatility in all Western
Canadian heavy crude oil.
- The Company has a 50% interest in the
NWR Partnership. For updates on the project, please refer to:
https://nwrsturgeonrefinery.com/whats-happening/news/.
ENVIRONMENTAL HIGHLIGHTS
- Canadian Natural has invested over
$3.1 billion in research and development since 2009 and continues
to invest in technology to unlock reserves, become more effective
and efficient, increase production and reduce the Company's
environmental footprint. Canadian Natural's culture of continuous
improvement leverages the use of technology and innovation to drive
sustainable operations and long-term value for shareholders.
- Canadian Natural has invested significant capital to capture
and sequester CO2. The Company has carbon capture and sequestration
facilities at Horizon, a 70% working interest in the Quest Carbon
Capture and Storage project at Scotford and carbon capture
facilities at its 50% interest through the NWR refinery. As a
result, Canadian Natural targets capacity to capture and sequester
2.7 million tonnes of CO2 annually, equivalent to taking 576,000
vehicles off the road per year, making the Company the 3rd largest
CO2 capturer and sequester for the oil and gas sector globally once
the NWR refinery is fully running.
- At Canadian Natural's Oil Sands Mining and Upgrading and
thermal in situ operations, which represent approximately 65% of
the Company's liquids production, the Company's emissions intensity
is only approximately 5% higher than the average intensity for all
global crude oils. By investing in and leveraging technology,
including carbon capture initiatives, Canadian Natural has
developed a pathway to reduce the Company's greenhouse gas
emissions intensity to below the average for global crude
oils.
- Canadian Natural's commitment to leverage technology, adopting
innovation and continuous improvement is evidenced by its In Pit
Extraction Process ("IPEP") pilot at Horizon, which will determine
the feasibility of producing stackable dry tailings. The project
has the potential to reduce the Company's carbon emissions and
environmental footprint by reducing the usage of haul trucks, the
size and need for tailings ponds and accelerating site reclamation.
In addition, this process has the potential to significantly reduce
capital and operating costs.
- The initial testing phase for the Company's IPEP pilot has
concluded and results have been positive with excellent recovery
rates and evidence of stackable tailings. As a result of the
positive results thus far, the Company continues to make
enhancements and will operate and test the pilot through 2019.
FINANCIAL REVIEW
The Company continues to implement proven
strategies and its disciplined approach to capital allocation. As a
result, the financial position of Canadian Natural remains strong.
Canadian Natural’s adjusted funds flow generation, credit
facilities, US commercial paper program, access to capital markets,
diverse asset base and related flexible capital expenditure
programs all support a flexible financial position and provide the
appropriate financial resources for the near-, mid- and
long-term.
- The Company’s strategy is to
maintain a diverse portfolio balanced across various commodity
types. The Company achieved production levels of 1,078,813 BOE/d in
2018, with approximately 98% of total production located in G7
countries.
- Canadian Natural maintains a balance of products with current
approximate product mix on a BOE/d basis of 52% light crude oil and
SCO blends, 24% heavy crude oil blends and 24% natural gas, based
upon annual 2018 production.
- Canadian Natural’s production is resilient, as long life low
decline assets make up approximately 73% of 2018 annual liquids
production, including the Oil Sands Mining and Upgrading, Pelican
Lake and thermal in situ oil sands assets.
- In 2018, Canadian Natural delivered
adjusted funds flow in excess of net capital expenditures of
approximately $4,360 million, including deferred discounted
purchase consideration. After dividend requirements, free cash flow
totaled approximately $2,795 million in the year.
- Balance sheet strength and strong
financial performance were demonstrated in 2018 through reduced
long-term debt and upgraded credit ratings.
- Canadian Natural settled the deferred AOSP acquisition
liability totaling $481 million and reduced long-term debt by
approximately $1,835 million, including the impact of foreign
exchange, compared to 2017 levels.
- In 2018, Moody's Investors Service, Inc. upgraded the Company's
senior unsecured rating to Baa2 from Baa3 and its short term rating
to P-2 from P-3 with a stable outlook. Additionally, Standard &
Poor's revised the Company's rating outlook to BBB+/stable from
BBB+/negative.
- Canadian Natural maintains strong financial stability and
liquidity represented by cash balances, and committed and demand
bank credit facilities. At December 31, 2018 the Company had
approximately $4,824 million of available liquidity, including cash
and cash equivalents, an increase of approximately $574 million
from 2017 levels.
- As at December 31, 2018, debt to book capitalization improved
to 39.1% from 41.4% in 2017 and debt to adjusted EBITDA
strengthened to 2.0x from 2.7x in 2017.
- Returns to shareholders are a key
focus for Canadian Natural as the Company returned a total of
$2,844 million in the year, $1,562 million by way of dividends and
$1,282 million by way of share purchases.
- In the quarter, share purchases for cancellation totaled
10,845,000 common shares at a weighted average share price of
$37.67.
- In 2018, share purchases for cancellation totaled 30,857,727
common shares at a weighted average share price of $41.56.
- Subsequent to year end and up to and including March 6, 2019,
the Company executed on additional share purchases of 4,340,000
common shares for cancellation at a weighted average share price of
$35.86.
- In 2018, the Board of Directors
approved a more defined free cash flow allocation policy in
accordance with the Company's four stated pillars. Under the new
policy, the Company will target to allocate, on an annual basis,
50% of its residual free cash flow, after budgeted capital
expenditures and dividends, to share purchases under its NCIB and
the remaining 50% to reducing debt levels on the Company's balance
sheet. This free cash flow policy will target a ratio of debt to
adjusted 12 months trailing EBITDA of 1.5x, and an absolute debt
level of $15.0 billion, at which time the policy will be reviewed
by the Board. At present, this policy is expected to be in
place until at least the Company's NCIB renewal in May 2019,
subject to quarterly review by the Board of Directors. This policy
was effective November 1, 2018.
- In addition to its strong adjusted
funds flow, capital flexibility and access to debt capital markets,
Canadian Natural has additional financial levers at its disposal to
effectively manage its liquidity. As at December 31, 2018, these
financial levers include the Company’s third party equity
investments of approximately $524 million, and cross currency swaps
and foreign currency forward contracts with a total value of $361
million.
- Subsequent to year end, Canadian
Natural increased its quarterly dividend by 12% to $0.375 per share
payable on April 1, 2019. The increase marks the 19th consecutive
year that the Company has increased its dividend, reflecting the
Board of Director's confidence in Canadian Natural's sustainability
and robustness of the asset base driving the ability to generate
significant adjusted funds flow.
CORPORATE UPDATE
- The Board of Directors approved the
previously announced leadership changes. The changes summarized
below will be effective March 29, 2019.
- Corey B. Bieber, Senior
Vice-President Finance and Chief Financial Officer will become
Executive Advisor.
- Mark Stainthorpe, Vice President –
Capital Markets, will assume the role of Chief Financial Officer
and Senior Vice President, Finance and will join the Management
Committee.
- Ron Kim, Vice President, Finance –
Corporate will assume the role of Principal Accounting Officer and
Vice President, Finance, reporting to Mark Stainthorpe.
OUTLOOK
The Company targets annual 2019 production
levels to average between 782,000 and 861,000 bbl/d of crude oil
and NGLs and between 1,485 and 1,545 MMcf/d of natural gas, before
royalties. Q1/19 production guidance before royalties is targeted
to average between 759,000 and 817,000 bbl/d of crude oil and NGLs
and between 1,490 and 1,520 MMcf/d of natural gas. Detailed
guidance on production levels, capital allocation and operating
costs can be found on the Company’s website at www.cnrl.com.
Canadian Natural's annual 2019 capital
expenditures are targeted to be approximately $3.7 billion.
2018 YEAR-END RESERVES
Determination of Reserves
For the year ended December 31, 2018, the
Company retained Independent Qualified Reserves Evaluators (IQREs),
Sproule Associates Limited, Sproule International Limited and GLJ
Petroleum Consultants Limited, to evaluate and review all of the
Company’s proved and proved plus probable reserves. The IQREs
conducted the evaluation and review in accordance with the
standards contained in the Canadian Oil and Gas Evaluation
Handbook. The reserves disclosure is presented in accordance with
NI 51-101 requirements using forecast prices and escalated
costs.
The Reserves Committee of the Company’s Board of
Directors has met with and carried out independent due diligence
procedures with the IQREs as to the Company’s reserves. All
reserves values are Company Gross unless stated otherwise.
Corporate Total
- Canadian Natural’s 2018 performance
has resulted in another year of excellent finding and development
costs:
- Finding, Development and Acquisition ("FD&A") costs,
excluding changes in Future Development Capital ("FDC"), are
$3.11/BOE for proved reserves and $2.31/BOE for proved plus
probable reserves.
- FD&A costs, including changes in FDC, are $9.39/BOE for
proved reserves and $10.79/BOE for proved plus probable
reserves.
- Proved reserves additions and
revisions replaced 2018 production by 359%. Proved plus probable
reserves additions and revisions replaced 2018 production by
485%.
- Proved reserves increased 12% to
9.893 billion BOE with reserves additions and revisions of 1.416
billion BOE. Proved plus probable reserves increased 13% to 13.382
billion BOE with reserves additions and revisions of 1.910 billion
BOE.
- The proved BOE reserves life index
is 27.7 years and the proved plus probable BOE reserves life index
is 37.4 years.
- Proved developed producing reserves
additions and revisions are 1.109 billion BOE, replacing 2018
production by 281%. The total proved developed producing BOE
reserves life index is 21.3 years.
- Recycle ratios are 8.7 times and
11.8 times for proved and proved plus probable reserves
respectively, excluding changes in FDC, recycle ratios are 2.9
times and 2.5 times for proved and proved plus probable reserves
respectively, including changes in FDC.
- The net present value of future net
revenues, before income tax, discounted at 10%, increased 19% to
$106.6 billion for proved reserves and increased 14% to $131.0
billion for proved plus probable reserves. The net present value
for proved developed producing reserves increased 24% to $84.2
billion reflecting the impact of the Horizon South Pit addition and
decreased operating costs at AOSP.
North America Exploration and
Production
- Canadian Natural’s North America
conventional and thermal assets delivered strong reserves results
in 2018:
- FD&A costs, excluding changes in FDC, are $6.51/BOE for
proved reserves and $3.50/BOE for proved plus probable
reserves.
- FD&A costs, including changes in FDC, are $7.23/BOE for
proved reserves and $10.54/BOE for proved plus probable
reserves.
- Proved reserves additions and
revisions replaced 187% of 2018 production. Proved plus probable
reserves additions and revisions replaced 349% of 2018
production.
- Proved reserves increased 6% to
3.588 billion BOE. This is comprised of 2.488 billion bbl of crude
oil, bitumen, and NGL reserves and 6.597 Tcf of natural gas
reserves.
- Proved plus probable reserves
increased 10% to 6.027 billion BOE. This is comprised of 4.421
billion bbl of crude oil, bitumen, and NGL reserves and 9.633 Tcf
of natural gas reserves.
- Proved reserves additions and
revisions are 341 million bbl of crude oil, bitumen and NGL and 411
Bcf of natural gas. Proved plus probable reserves additions and
revisions are 654 million bbl of crude oil, bitumen and NGL and 657
Bcf of natural gas.
- The proved BOE reserves life index
is 18.9 years and the proved plus probable BOE reserves life index
is 31.7 years.
North America Oil Sands Mining and
Upgrading
- Canadian Natural’s Oil Sands Mining
and Upgrading segment delivered strong reserves results in 2018:
- FD&A costs, excluding changes in FDC, are $1.47/bbl for
proved reserves and $1.29/bbl for proved plus probable
reserves.
- FD&A costs, including changes in FDC, are $10.49/bbl for
proved reserves and $11.33/bbl for proved plus probable
reserves.
- Proved SCO reserves increased 16%
to 6.091 billion bbl. Proved plus probable SCO reserves increased
16% to 7.032 billion bbl.
- SCO reserves account for 62% of the
Company’s proved BOE reserves and 53% of the proved plus probable
BOE reserves.
International Exploration and
Production
- North Sea proved reserves are
unchanged at 124 million BOE and proved plus probable reserves
increased 4% to 193 million BOE.
- Offshore Africa proved reserves
increased 5% to 90 million BOE and proved plus probable reserves
decreased 4% to 131 million BOE.
2018 FD&A Costs excluding changes in FDC
(10) |
Proved($/BOE) |
Proved plusProbable($/BOE) |
North America E&P |
$6.51 |
$3.50 |
Oil Sands Mining and
Upgrading |
$1.47 |
$1.29 |
Total
Canadian Natural |
$3.11 |
$2.31 |
2018 FD&A Costs including changes in FDC
(11) |
Proved($/BOE) |
Proved plusProbable($/BOE) |
North America E&P |
$7.23 |
$10.54 |
Oil Sands Mining and
Upgrading |
$10.49 |
$11.33 |
Total
Canadian Natural |
$9.39 |
$10.79 |
Corporate Total 2018 Reserves Replacement
(8) |
% of 2018 Production Replaced |
Proved Developed Producing |
281% |
Proved |
359% |
Proved
plus Probable |
485% |
Company Gross Reserves |
2017(MMBOE) |
2018(MMBOE) |
Increase |
Proved Developed
Producing |
6,908 |
7,623 |
10% |
Proved |
8,871 |
9,893 |
12% |
Proved
plus Probable |
11,866 |
13,382 |
13% |
2018 Recycle Ratios (12) |
Excluding changes in FDC |
Including changes in FDC |
Proved |
8.7x |
2.9x |
Proved
plus Probable |
11.8x |
2.5x |
Net Present Value of Future Net
Revenues, before income tax, discounted at
10% (13) |
2017($ billion) |
2018($ billion) |
Increase |
Proved Developed
Producing |
68.1 |
84.2 |
24% |
Proved |
89.8 |
106.6 |
19% |
Proved
plus Probable |
114.5 |
131.0 |
14% |
Summary of Company Gross
Reserves
As of December 31, 2018 Forecast Prices
and Costs
|
Light and Medium Crude Oil (MMbbl) |
|
Primary Heavy Crude Oil (MMbbl) |
|
Pelican Lake Heavy Crude Oil (MMbbl) |
|
Bitumen (Thermal Oil) (MMbbl) |
|
Synthetic Crude Oil (MMbbl) |
|
Natural Gas (Bcf) |
|
Natural Gas Liquids (MMbbl) |
|
Barrels of Oil Equivalent (MMBOE) |
|
North America |
|
|
|
|
|
|
|
|
Proved |
|
|
|
|
|
|
|
|
Developed Producing |
114 |
|
97 |
|
248 |
|
311 |
|
6,091 |
|
3,477 |
|
101 |
|
7,541 |
|
Developed Non-Producing |
14 |
|
16 |
|
— |
|
123 |
|
— |
|
326 |
|
10 |
|
218 |
|
Undeveloped |
66 |
|
69 |
|
57 |
|
1,106 |
|
— |
|
2,794 |
|
156 |
|
1,920 |
|
Total
Proved |
194 |
|
182 |
|
305 |
|
1,540 |
|
6,091 |
|
6,597 |
|
267 |
|
9,679 |
|
Probable |
74 |
|
70 |
|
140 |
|
1,519 |
|
941 |
|
3,036 |
|
130 |
|
3,379 |
|
Total Proved plus Probable |
268 |
|
252 |
|
445 |
|
3,059 |
|
7,032 |
|
9,633 |
|
397 |
|
13,058 |
|
|
|
|
|
|
|
|
|
|
North Sea |
|
|
|
|
|
|
|
|
Proved |
|
|
|
|
|
|
|
|
Developed Producing |
34 |
|
|
|
|
|
23 |
|
|
38 |
|
Developed Non-Producing |
4 |
|
|
|
|
|
— |
|
|
4 |
|
Undeveloped |
81 |
|
|
|
|
|
4 |
|
|
82 |
|
Total
Proved |
119 |
|
|
|
|
|
27 |
|
|
124 |
|
Probable |
67 |
|
|
|
|
|
11 |
|
|
69 |
|
Total Proved plus Probable |
186 |
|
|
|
|
|
38 |
|
|
193 |
|
|
|
|
|
|
|
|
|
|
Offshore Africa |
|
|
|
|
|
|
|
|
Proved |
|
|
|
|
|
|
|
|
Developed Producing |
41 |
|
|
|
|
|
17 |
|
|
44 |
|
Developed Non-Producing |
— |
|
|
|
|
|
— |
|
|
— |
|
Undeveloped |
45 |
|
|
|
|
|
11 |
|
|
46 |
|
Total
Proved |
86 |
|
|
|
|
|
28 |
|
|
90 |
|
Probable |
35 |
|
|
|
|
|
35 |
|
|
41 |
|
Total Proved plus Probable |
121 |
|
|
|
|
|
63 |
|
|
131 |
|
|
|
|
|
|
|
|
|
|
Total CNRL |
|
|
|
|
|
|
|
|
Proved |
|
|
|
|
|
|
|
|
Developed Producing |
189 |
|
97 |
|
248 |
|
311 |
|
6,091 |
|
3,517 |
|
101 |
|
7,623 |
|
Developed Non-Producing |
18 |
|
16 |
|
— |
|
123 |
|
— |
|
326 |
|
10 |
|
222 |
|
Undeveloped |
192 |
|
69 |
|
57 |
|
1,106 |
|
— |
|
2,809 |
|
156 |
|
2,048 |
|
Total
Proved |
399 |
|
182 |
|
305 |
|
1,540 |
|
6,091 |
|
6,652 |
|
267 |
|
9,893 |
|
Probable |
176 |
|
70 |
|
140 |
|
1,519 |
|
941 |
|
3,082 |
|
130 |
|
3,489 |
|
Total Proved plus Probable |
575 |
|
252 |
|
445 |
|
3,059 |
|
7,032 |
|
9,734 |
|
397 |
|
13,382 |
|
Summary of Company Net
Reserves
As of December 31, 2018 Forecast Prices
and Costs
|
Light and Medium Crude Oil (MMbbl) |
|
Primary Heavy Crude Oil (MMbbl) |
|
Pelican Lake Heavy Crude Oil (MMbbl) |
|
Bitumen (Thermal Oil) (MMbbl) |
|
Synthetic Crude Oil (MMbbl) |
|
Natural Gas (Bcf) |
|
Natural Gas Liquids (MMbbl) |
|
Barrels of Oil Equivalent (MMBOE) |
|
North America |
|
|
|
|
|
|
|
|
Proved |
|
|
|
|
|
|
|
|
Developed Producing |
101 |
|
81 |
|
189 |
|
252 |
|
5,125 |
|
3,183 |
|
80 |
|
6,358 |
|
Developed Non-Producing |
12 |
|
14 |
|
— |
|
104 |
|
— |
|
303 |
|
8 |
|
189 |
|
Undeveloped |
56 |
|
59 |
|
48 |
|
911 |
|
(8 |
) |
2,519 |
|
131 |
|
1,616 |
|
Total
Proved |
169 |
|
154 |
|
237 |
|
1,267 |
|
5,117 |
|
6,005 |
|
219 |
|
8,163 |
|
Probable |
61 |
|
57 |
|
100 |
|
1,210 |
|
761 |
|
2,676 |
|
104 |
|
2,740 |
|
Total Proved plus Probable |
230 |
|
211 |
|
337 |
|
2,477 |
|
5,878 |
|
8,681 |
|
323 |
|
10,903 |
|
|
|
|
|
|
|
|
|
|
North Sea |
|
|
|
|
|
|
|
|
Proved |
|
|
|
|
|
|
|
|
Developed Producing |
34 |
|
|
|
|
|
23 |
|
|
38 |
|
Developed Non-Producing |
4 |
|
|
|
|
|
— |
|
|
4 |
|
Undeveloped |
81 |
|
|
|
|
|
4 |
|
|
82 |
|
Total
Proved |
119 |
|
|
|
|
|
27 |
|
|
124 |
|
Probable |
67 |
|
|
|
|
|
11 |
|
|
69 |
|
Total Proved plus Probable |
186 |
|
|
|
|
|
38 |
|
|
193 |
|
|
|
|
|
|
|
|
|
|
Offshore Africa |
|
|
|
|
|
|
|
|
Proved |
|
|
|
|
|
|
|
|
Developed Producing |
36 |
|
|
|
|
|
12 |
|
|
38 |
|
Developed Non-Producing |
— |
|
|
|
|
|
— |
|
|
— |
|
Undeveloped |
36 |
|
|
|
|
|
9 |
|
|
38 |
|
Total
Proved |
72 |
|
|
|
|
|
21 |
|
|
76 |
|
Probable |
26 |
|
|
|
|
|
23 |
|
|
30 |
|
Total Proved plus Probable |
98 |
|
|
|
|
|
44 |
|
|
106 |
|
|
|
|
|
|
|
|
|
|
Total CNRL |
|
|
|
|
|
|
|
|
Proved |
|
|
|
|
|
|
|
|
Developed Producing |
171 |
|
81 |
|
189 |
|
252 |
|
5,125 |
|
3,218 |
|
80 |
|
6,434 |
|
Developed Non-Producing |
16 |
|
14 |
|
— |
|
104 |
|
— |
|
303 |
|
8 |
|
193 |
|
Undeveloped |
173 |
|
59 |
|
48 |
|
911 |
|
(8 |
) |
2,532 |
|
131 |
|
1,736 |
|
Total
Proved |
360 |
|
154 |
|
237 |
|
1,267 |
|
5,117 |
|
6,053 |
|
219 |
|
8,363 |
|
Probable |
154 |
|
57 |
|
100 |
|
1,210 |
|
761 |
|
2,710 |
|
104 |
|
2,839 |
|
Total Proved plus Probable |
514 |
|
211 |
|
337 |
|
2,477 |
|
5,878 |
|
8,763 |
|
323 |
|
11,202 |
|
Reconciliation of Company Gross
Reserves
As of December 31, 2018 Forecast Prices
and Costs
PROVED
North America |
Light and Medium Crude Oil (MMbbl) |
|
Primary Heavy Crude Oil (MMbbl) |
|
Pelican Lake Heavy Crude Oil (MMbbl) |
|
Bitumen (Thermal Oil) (MMbbl) |
|
Synthetic Crude Oil (MMbbl) |
|
Natural Gas (Bcf) |
|
Natural Gas Liquids (MMbbl) |
|
Barrels of Oil Equivalent (MMBOE) |
|
December 31, 2017 |
171 |
|
198 |
|
327 |
|
1,350 |
|
5,264 |
|
6,730 |
|
229 |
|
8,661 |
|
Discoveries |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Extensions |
12 |
|
14 |
|
— |
|
171 |
|
808 |
|
122 |
|
9 |
|
1,034 |
|
Infill Drilling |
17 |
|
6 |
|
— |
|
4 |
|
— |
|
470 |
|
38 |
|
143 |
|
Improved Recovery |
— |
|
— |
|
1 |
|
2 |
|
— |
|
3 |
|
— |
|
4 |
|
Acquisitions |
3 |
|
2 |
|
— |
|
— |
|
— |
|
82 |
|
4 |
|
22 |
|
Dispositions |
— |
|
(5 |
) |
— |
|
— |
|
— |
|
(3 |
) |
— |
|
(5 |
) |
Economic Factors |
— |
|
1 |
|
1 |
|
— |
|
— |
|
(305 |
) |
(4 |
) |
(53 |
) |
Technical Revisions |
10 |
|
(2 |
) |
(1 |
) |
52 |
|
175 |
|
42 |
|
6 |
|
247 |
|
Production |
(19 |
) |
(32 |
) |
(23 |
) |
(39 |
) |
(156 |
) |
(544 |
) |
(15 |
) |
(374 |
) |
December 31,
2018 |
194 |
|
182 |
|
305 |
|
1,540 |
|
6,091 |
|
6,597 |
|
267 |
|
9,679 |
|
|
|
|
|
|
|
|
|
|
North Sea |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
120 |
|
|
|
|
|
21 |
|
|
124 |
|
Discoveries |
— |
|
|
|
|
|
— |
|
|
— |
|
Extensions |
— |
|
|
|
|
|
— |
|
|
— |
|
Infill Drilling |
1 |
|
|
|
|
|
— |
|
|
1 |
|
Improved Recovery |
— |
|
|
|
|
|
— |
|
|
— |
|
Acquisitions |
8 |
|
|
|
|
|
— |
|
|
8 |
|
Dispositions |
— |
|
|
|
|
|
— |
|
|
— |
|
Economic Factors |
5 |
|
|
|
|
|
— |
|
|
5 |
|
Technical Revisions |
(6 |
) |
|
|
|
|
18 |
|
|
(3 |
) |
Production |
(9 |
) |
|
|
|
|
(12 |
) |
|
(11 |
) |
December 31,
2018 |
119 |
|
|
|
|
|
27 |
|
|
124 |
|
|
|
|
|
|
|
|
|
|
Offshore Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
83 |
|
|
|
|
|
20 |
|
|
86 |
|
Discoveries |
— |
|
|
|
|
|
— |
|
|
— |
|
Extensions |
— |
|
|
|
|
|
— |
|
|
— |
|
Infill Drilling |
— |
|
|
|
|
|
— |
|
|
— |
|
Improved Recovery |
— |
|
|
|
|
|
— |
|
|
— |
|
Acquisitions |
— |
|
|
|
|
|
— |
|
|
— |
|
Dispositions |
— |
|
|
|
|
|
— |
|
|
— |
|
Economic Factors |
— |
|
|
|
|
|
— |
|
|
— |
|
Technical Revisions |
10 |
|
|
|
|
|
17 |
|
|
13 |
|
Production |
(7 |
) |
|
|
|
|
(9 |
) |
|
(9 |
) |
December 31,
2018 |
86 |
|
|
|
|
|
28 |
|
|
90 |
|
|
|
|
|
|
|
|
|
|
Total Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
374 |
|
198 |
|
327 |
|
1,350 |
|
5,264 |
|
6,771 |
|
229 |
|
8,871 |
|
Discoveries |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Extensions |
12 |
|
14 |
|
— |
|
171 |
|
808 |
|
122 |
|
9 |
|
1,034 |
|
Infill Drilling |
18 |
|
6 |
|
— |
|
4 |
|
— |
|
470 |
|
38 |
|
144 |
|
Improved Recovery |
— |
|
— |
|
1 |
|
2 |
|
— |
|
3 |
|
— |
|
4 |
|
Acquisitions |
11 |
|
2 |
|
— |
|
— |
|
— |
|
82 |
|
4 |
|
30 |
|
Dispositions |
— |
|
(5 |
) |
— |
|
— |
|
— |
|
(3 |
) |
— |
|
(5 |
) |
Economic Factors |
5 |
|
1 |
|
1 |
|
— |
|
— |
|
(305 |
) |
(4 |
) |
(48 |
) |
Technical Revisions |
14 |
|
(2 |
) |
(1 |
) |
52 |
|
175 |
|
77 |
|
6 |
|
257 |
|
Production |
(35 |
) |
(32 |
) |
(23 |
) |
(39 |
) |
(156 |
) |
(565 |
) |
(15 |
) |
(394 |
) |
December 31,
2018 |
399 |
|
182 |
|
305 |
|
1,540 |
|
6,091 |
|
6,652 |
|
267 |
|
9,893 |
|
Reconciliation of Company Gross
Reserves
As of December 31, 2018 Forecast Prices
and Costs
PROBABLE
North America |
Light and Medium Crude Oil (MMbbl) |
|
Primary Heavy Crude Oil (MMbbl) |
|
Pelican Lake Heavy Crude Oil (MMbbl) |
|
Bitumen (Thermal Oil) (MMbbl) |
|
Synthetic Crude Oil (MMbbl) |
|
Natural Gas (Bcf) |
|
Natural Gas Liquids (MMbbl) |
|
Barrels of Oil Equivalent (MMBOE) |
|
December 31, 2017 |
68 |
|
74 |
|
142 |
|
1,230 |
|
799 |
|
2,790 |
|
106 |
|
2,884 |
|
Discoveries |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Extensions |
4 |
|
7 |
|
— |
|
59 |
|
71 |
|
93 |
|
5 |
|
162 |
|
Infill Drilling |
6 |
|
2 |
|
— |
|
1 |
|
— |
|
391 |
|
22 |
|
97 |
|
Improved Recovery |
1 |
|
— |
|
2 |
|
2 |
|
— |
|
1 |
|
— |
|
4 |
|
Acquisitions |
1 |
|
1 |
|
— |
|
403 |
|
— |
|
22 |
|
1 |
|
410 |
|
Dispositions |
— |
|
(1 |
) |
— |
|
— |
|
— |
|
(2 |
) |
— |
|
(2 |
) |
Economic Factors |
(1 |
) |
— |
|
— |
|
— |
|
— |
|
(104 |
) |
(1 |
) |
(19 |
) |
Technical Revisions |
(5 |
) |
(13 |
) |
(4 |
) |
(176 |
) |
71 |
|
(155 |
) |
(3 |
) |
(157 |
) |
Production |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
December 31,
2018 |
74 |
|
70 |
|
140 |
|
1,519 |
|
941 |
|
3,036 |
|
130 |
|
3,379 |
|
|
|
|
|
|
|
|
|
|
North Sea |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
60 |
|
|
|
|
|
11 |
|
|
61 |
|
Discoveries |
— |
|
|
|
|
|
— |
|
|
— |
|
Extensions |
— |
|
|
|
|
|
— |
|
|
— |
|
Infill Drilling |
— |
|
|
|
|
|
— |
|
|
— |
|
Improved Recovery |
— |
|
|
|
|
|
— |
|
|
— |
|
Acquisitions |
5 |
|
|
|
|
|
— |
|
|
5 |
|
Dispositions |
— |
|
|
|
|
|
— |
|
|
— |
|
Economic Factors |
(5 |
) |
|
|
|
|
— |
|
|
(5 |
) |
Technical Revisions |
7 |
|
|
|
|
|
— |
|
|
8 |
|
Production |
— |
|
|
|
|
|
— |
|
|
— |
|
December 31,
2018 |
67 |
|
|
|
|
|
11 |
|
|
69 |
|
|
|
|
|
|
|
|
|
|
Offshore Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
42 |
|
|
|
|
|
47 |
|
|
50 |
|
Discoveries |
— |
|
|
|
|
|
— |
|
|
— |
|
Extensions |
— |
|
|
|
|
|
— |
|
|
— |
|
Infill Drilling |
— |
|
|
|
|
|
— |
|
|
— |
|
Improved Recovery |
— |
|
|
|
|
|
— |
|
|
— |
|
Acquisitions |
— |
|
|
|
|
|
— |
|
|
— |
|
Dispositions |
— |
|
|
|
|
|
— |
|
|
— |
|
Economic Factors |
— |
|
|
|
|
|
— |
|
|
— |
|
Technical Revisions |
(7 |
) |
|
|
|
|
(12 |
) |
|
(9 |
) |
Production |
— |
|
|
|
|
|
— |
|
|
— |
|
December 31,
2018 |
35 |
|
|
|
|
|
35 |
|
|
41 |
|
|
|
|
|
|
|
|
|
|
Total Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
170 |
|
74 |
|
142 |
|
1,230 |
|
799 |
|
2,848 |
|
106 |
|
2,995 |
|
Discoveries |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Extensions |
4 |
|
7 |
|
— |
|
59 |
|
71 |
|
93 |
|
5 |
|
162 |
|
Infill Drilling |
6 |
|
2 |
|
— |
|
1 |
|
— |
|
391 |
|
22 |
|
97 |
|
Improved Recovery |
1 |
|
— |
|
2 |
|
2 |
|
— |
|
1 |
|
— |
|
4 |
|
Acquisitions |
6 |
|
1 |
|
— |
|
403 |
|
— |
|
22 |
|
1 |
|
415 |
|
Dispositions |
— |
|
(1 |
) |
— |
|
— |
|
— |
|
(2 |
) |
— |
|
(2 |
) |
Economic Factors |
(6 |
) |
— |
|
— |
|
— |
|
— |
|
(104 |
) |
(1 |
) |
(24 |
) |
Technical Revisions |
(5 |
) |
(13 |
) |
(4 |
) |
(176 |
) |
71 |
|
(167 |
) |
(3 |
) |
(158 |
) |
Production |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
December 31,
2018 |
176 |
|
70 |
|
140 |
|
1,519 |
|
941 |
|
3,082 |
|
130 |
|
3,489 |
|
Reconciliation of Company Gross
Reserves
As of December 31, 2018 Forecast Prices
and Costs
PROVED PLUS PROBABLE
North America |
Light and Medium Crude Oil (MMbbl) |
|
Primary Heavy Crude Oil (MMbbl) |
|
Pelican Lake Heavy Crude Oil (MMbbl) |
|
Bitumen (Thermal Oil) (MMbbl) |
|
Synthetic Crude Oil (MMbbl) |
|
Natural Gas (Bcf) |
|
Natural Gas Liquids (MMbbl) |
|
Barrels of Oil Equivalent (MMBOE) |
|
December 31, 2017 |
239 |
|
272 |
|
469 |
|
2,580 |
|
6,063 |
|
9,520 |
|
335 |
|
11,545 |
|
Discoveries |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Extensions |
16 |
|
21 |
|
— |
|
230 |
|
879 |
|
215 |
|
14 |
|
1,196 |
|
Infill Drilling |
23 |
|
8 |
|
— |
|
5 |
|
— |
|
861 |
|
60 |
|
240 |
|
Improved Recovery |
1 |
|
— |
|
3 |
|
4 |
|
— |
|
4 |
|
— |
|
8 |
|
Acquisitions |
4 |
|
3 |
|
— |
|
403 |
|
— |
|
104 |
|
5 |
|
432 |
|
Dispositions |
— |
|
(6 |
) |
— |
|
— |
|
— |
|
(5 |
) |
— |
|
(7 |
) |
Economic Factors |
(1 |
) |
1 |
|
1 |
|
— |
|
— |
|
(409 |
) |
(5 |
) |
(72 |
) |
Technical Revisions |
5 |
|
(15 |
) |
(5 |
) |
(124 |
) |
246 |
|
(113 |
) |
3 |
|
90 |
|
Production |
(19 |
) |
(32 |
) |
(23 |
) |
(39 |
) |
(156 |
) |
(544 |
) |
(15 |
) |
(374 |
) |
December 31,
2018 |
268 |
|
252 |
|
445 |
|
3,059 |
|
7,032 |
|
9,633 |
|
397 |
|
13,058 |
|
|
|
|
|
|
|
|
|
|
North Sea |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
180 |
|
|
|
|
|
32 |
|
|
185 |
|
Discoveries |
— |
|
|
|
|
|
— |
|
|
— |
|
Extensions |
— |
|
|
|
|
|
— |
|
|
— |
|
Infill Drilling |
1 |
|
|
|
|
|
— |
|
|
1 |
|
Improved Recovery |
— |
|
|
|
|
|
— |
|
|
— |
|
Acquisitions |
13 |
|
|
|
|
|
— |
|
|
13 |
|
Dispositions |
— |
|
|
|
|
|
— |
|
|
— |
|
Economic Factors |
— |
|
|
|
|
|
— |
|
|
— |
|
Technical Revisions |
1 |
|
|
|
|
|
18 |
|
|
5 |
|
Production |
(9 |
) |
|
|
|
|
(12 |
) |
|
(11 |
) |
December 31,
2018 |
186 |
|
|
|
|
|
38 |
|
|
193 |
|
|
|
|
|
|
|
|
|
|
Offshore Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
125 |
|
|
|
|
|
67 |
|
|
136 |
|
Discoveries |
— |
|
|
|
|
|
— |
|
|
— |
|
Extensions |
— |
|
|
|
|
|
— |
|
|
— |
|
Infill Drilling |
— |
|
|
|
|
|
— |
|
|
— |
|
Improved Recovery |
— |
|
|
|
|
|
— |
|
|
— |
|
Acquisitions |
— |
|
|
|
|
|
— |
|
|
— |
|
Dispositions |
— |
|
|
|
|
|
— |
|
|
— |
|
Economic Factors |
— |
|
|
|
|
|
— |
|
|
— |
|
Technical Revisions |
3 |
|
|
|
|
|
5 |
|
|
4 |
|
Production |
(7 |
) |
|
|
|
|
(9 |
) |
|
(9 |
) |
December 31,
2018 |
121 |
|
|
|
|
|
63 |
|
|
131 |
|
|
|
|
|
|
|
|
|
|
Total Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
544 |
|
272 |
|
469 |
|
2,580 |
|
6,063 |
|
9,619 |
|
335 |
|
11,866 |
|
Discoveries |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Extensions |
16 |
|
21 |
|
— |
|
230 |
|
879 |
|
215 |
|
14 |
|
1,196 |
|
Infill Drilling |
24 |
|
8 |
|
— |
|
5 |
|
— |
|
861 |
|
60 |
|
241 |
|
Improved Recovery |
1 |
|
— |
|
3 |
|
4 |
|
— |
|
4 |
|
— |
|
8 |
|
Acquisitions |
17 |
|
3 |
|
— |
|
403 |
|
— |
|
104 |
|
5 |
|
445 |
|
Dispositions |
— |
|
(6 |
) |
— |
|
— |
|
— |
|
(5 |
) |
— |
|
(7 |
) |
Economic Factors |
(1 |
) |
1 |
|
1 |
|
— |
|
— |
|
(409 |
) |
(5 |
) |
(72 |
) |
Technical Revisions |
9 |
|
(15 |
) |
(5 |
) |
(124 |
) |
246 |
|
(90 |
) |
3 |
|
99 |
|
Production |
(35 |
) |
(32 |
) |
(23 |
) |
(39 |
) |
(156 |
) |
(565 |
) |
(15 |
) |
(394 |
) |
December 31,
2018 |
575 |
|
252 |
|
445 |
|
3,059 |
|
7,032 |
|
9,734 |
|
397 |
|
13,382 |
|
Reserves Notes:
- Company Gross reserves are working interest share before
deduction of royalties and excluding any royalty interests.
- Company Net reserves are working interest share after deduction
of royalties and including any royalty interests.
- BOE values may not calculate due to rounding.
- Forecast pricing assumptions
utilized by the Independent Qualified Reserves Evaluators in the
reserves estimates were provided by Sproule Associates
Limited:
|
2019 |
|
2020 |
|
2021 |
|
2022 |
|
2023 |
|
Average annual increasethereafter |
Crude oil and
NGL |
|
|
|
|
|
|
WTI at Cushing (US$/bbl) |
$ |
63.00 |
|
$ |
67.00 |
|
$ |
70.00 |
|
$ |
71.40 |
|
$ |
72.83 |
|
2.00% |
Western Canada Select (C$/bbl) |
$ |
59.47 |
|
$ |
62.31 |
|
$ |
67.45 |
|
$ |
69.53 |
|
$ |
71.66 |
|
2.00% |
Canadian Light Sweet (C$/bbl) |
$ |
75.27 |
|
$ |
77.89 |
|
$ |
82.25 |
|
$ |
84.79 |
|
$ |
87.39 |
|
2.00% |
Cromer LSB (C$/bbl) |
$ |
75.27 |
|
$ |
76.89 |
|
$ |
81.25 |
|
$ |
83.79 |
|
$ |
86.39 |
|
2.00% |
Edmonton Pentanes+ (C$/bbl) |
$ |
75.32 |
|
$ |
80.00 |
|
$ |
83.75 |
|
$ |
85.50 |
|
$ |
87.29 |
|
2.00% |
North Sea Brent (US$/bbl) |
$ |
70.00 |
|
$ |
72.00 |
|
$ |
73.00 |
|
$ |
74.46 |
|
$ |
75.95 |
|
2.00% |
Natural gas |
|
|
|
|
|
|
AECO (C$/MMBtu) |
$ |
1.95 |
|
$ |
2.44 |
|
$ |
3.00 |
|
$ |
3.21 |
|
$ |
3.30 |
|
2.00% |
BC Westcoast Station 2 (C$/MMBtu) |
$ |
1.35 |
|
$ |
1.94 |
|
$ |
2.60 |
|
$ |
2.81 |
|
$ |
2.90 |
|
2.00% |
Henry Hub (US$/MMBtu) |
$ |
3.00 |
|
$ |
3.25 |
|
$ |
3.50 |
|
$ |
3.57 |
|
$ |
3.64 |
|
2.00% |
Note: A foreign exchange rate of
0.7700 US$/C$ for 2019 and 0.8000 US$/C$ after 2019 was used in the
2018 evaluation.
- A barrel of oil
equivalent (“BOE”) is derived by converting six thousand cubic feet
of natural gas to one barrel of crude oil (6 Mcf:1 bbl). This
conversion may be misleading, particularly if used in isolation,
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. In comparing the
value ratio using current crude oil prices relative to natural gas
prices, the 6 Mcf:1 bbl conversion ratio may be misleading as an
indication of value.
- Metrics included herein are
commonly used in the oil and natural gas industry and are
determined by Canadian Natural as set out in the notes below.
These metrics do not have standardized meanings and may not be
comparable to similar measures presented by other companies and may
be misleading when making comparisons. Management uses these
metrics to evaluate Canadian Natural’s performance over time.
However, such measures are not reliable indicators of Canadian
Natural’s future performance and future performance may vary.
- Reserves additions and revisions
are comprised of all categories of Company Gross reserves changes,
exclusive of production.
- Reserves replacement or Production
replacement ratio is the Company Gross reserves additions and
revisions, for the relevant reserves category, divided by the
Company Gross production in the same period.
- Reserves Life Index is based on the
amount for the relevant reserves category divided by the 2019
proved developed producing production forecast prepared by the
Independent Qualified Reserves Evaluators.
- Finding, Development and
Acquisition ("FD&A") costs are calculated by dividing the sum
of total exploration, development and acquisition capital costs
incurred in 2018 by the sum of total additions and revisions for
the relevant reserves category. All values used in the calculation
are not rounded.
- FD&A costs including changes in
Future Development Capital ("FDC") are calculated by dividing the
sum of total exploration, development and acquisition capital costs
incurred in 2018 and net changes in FDC from December 31, 2017 to
December 31, 2018 by the sum of total additions and revisions for
the relevant reserves category. FDC excludes all abandonment and
reclamation costs. All values used in the calculation are not
rounded.
- Recycle Ratio is the operating
netback ($27.13/BOE for 2018) divided by the FD&A (in
$/BOE). Operating netback is production revenues, excluding
realized gains and losses on commodity hedging, less royalties,
transportation and production expenses, calculated on a per BOE
basis.
- Abandonment and reclamation costs
included in the calculation of the Future Net Revenue (FNR) for
2018 consist of both forecast estimates of abandonment and
reclamation costs attributable to future development activity, as
well as certain costs already included in the Company’s Asset
Retirement Obligation (ARO) for development existing as at December
31, 2018. The portion of the Company’s estimated ARO included in
the reserves FNR is escalated at 2.0% per year after 2019.
Specifically, for North America (excluding SCO assets), FNR
includes the ARO costs associated with abandonment and reclamation
of wells (wells, well sites, well site equipment and pipelines)
with assigned reserves. For SCO assets, FNR includes the ARO
costs associated with the abandonment and reclamation of the mine
site and all mining facilities and for Horizon assets, it also
includes abandonment and reclamation of the upgrading facilities.
For North Sea and Offshore Africa, FNR includes the ARO costs
associated with the abandonment and reclamation of offshore wells
and facilities with assigned reserves.
ADVISORY
Special Note Regarding Forward-Looking
Statements
Certain statements relating to Canadian Natural
Resources Limited (the “Company”) in this document or documents
incorporated herein by reference constitute forward-looking
statements or information (collectively referred to herein as
“forward-looking statements”) within the meaning of applicable
securities legislation. Forward-looking statements can be
identified by the words “believe”, “anticipate”, “expect”, “plan”,
“estimate”, “target”, “continue”, “could”, “intend”, “may”,
“potential”, “predict”, “should”, “will”, “objective”, “project”,
“forecast”, “goal”, “guidance”, “outlook”, “effort”, “seeks”,
“schedule”, “proposed” or expressions of a similar nature
suggesting future outcome or statements regarding an outlook.
Disclosure related to expected future commodity pricing, forecast
or anticipated production volumes, royalties, production expenses,
capital expenditures, income tax expenses and other guidance
provided throughout the Company's Management’s Discussion and
Analysis (“MD&A”) of the financial condition and results of
operations of the Company, constitute forward-looking statements.
Disclosure of plans relating to and expected results of existing
and future developments, including but not limited to the Horizon
Oil Sands ("Horizon"), the Athabasca Oil Sands Project ("AOSP"),
Primrose thermal projects, the Pelican Lake water and polymer flood
project, the Kirby Thermal Oil Sands Project, the cost and timing
of construction and future operations of the North West Redwater
bitumen upgrader and refinery, construction by third parties of new
or expansion of existing pipeline capacity or other means of
transportation of bitumen, crude oil, natural gas or synthetic
crude oil (“SCO”) that the Company may be reliant upon to transport
its products to market, development and deployment of technology
and technological innovations and the assumption of operations at
processing facilities also constitute forward-looking statements.
These forward-looking statements are based on annual budgets and
multi-year forecasts, and are reviewed and revised throughout the
year as necessary in the context of targeted financial ratios,
project returns, product pricing expectations and balance in
project risk and time horizons. These statements are not guarantees
of future performance and are subject to certain risks. The reader
should not place undue reliance on these forward-looking statements
as there can be no assurances that the plans, initiatives or
expectations upon which they are based will occur.
In addition, statements relating to “reserves”
are deemed to be forward-looking statements as they involve the
implied assessment based on certain estimates and assumptions that
the reserves described can be profitably produced in the future.
There are numerous uncertainties inherent in estimating quantities
of proved and proved plus probable crude oil, natural gas and
natural gas liquids (“NGLs”) reserves and in projecting future
rates of production and the timing of development expenditures. The
total amount or timing of actual future production may vary
significantly from reserves and production estimates.
The forward-looking statements are based on
current expectations, estimates and projections about the Company
and the industry in which the Company operates, which speak only as
of the date such statements were made or as of the date of the
report or document in which they are contained, and are subject to
known and unknown risks and uncertainties that could cause the
actual results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. Such risks and uncertainties include, among others:
general economic and business conditions which will, among other
things, impact demand for and market prices of the Company’s
products; volatility of and assumptions regarding crude oil and
natural gas prices; fluctuations in currency and interest rates;
assumptions on which the Company’s current guidance is based;
economic conditions in the countries and regions in which the
Company conducts business; political uncertainty, including actions
of or against terrorists, insurgent groups or other conflict
including conflict between states; industry capacity; ability of
the Company to implement its business strategy, including
exploration and development activities; impact of competition; the
Company’s defense of lawsuits; availability and cost of seismic,
drilling and other equipment; ability of the Company and its
subsidiaries to complete capital programs; the Company’s and its
subsidiaries’ ability to secure adequate transportation for its
products; unexpected disruptions or delays in the resumption of the
mining, extracting or upgrading of the Company’s bitumen products;
potential delays or changes in plans with respect to exploration or
development projects or capital expenditures; ability of the
Company to attract the necessary labour required to build its
thermal and oil sands mining projects; operating hazards and other
difficulties inherent in the exploration for and production and
sale of crude oil and natural gas and in mining, extracting or
upgrading the Company’s bitumen products; availability and cost of
financing; the Company’s and its subsidiaries’ success of
exploration and development activities and its ability to replace
and expand crude oil and natural gas reserves; timing and success
of integrating the business and operations of acquired companies
and assets; production levels; imprecision of reserves estimates
and estimates of recoverable quantities of crude oil, natural gas
and NGLs not currently classified as proved; actions by
governmental authorities; government regulations and the
expenditures required to comply with them (especially safety and
environmental laws and regulations and the impact of climate change
initiatives on capital expenditures and production expenses); asset
retirement obligations; the adequacy of the Company’s provision for
taxes; and other circumstances affecting revenues and expenses.
The Company’s operations have been, and in the
future may be, affected by political developments and by national,
federal, provincial and local laws and regulations such as
restrictions on production, changes in taxes, royalties and other
amounts payable to governments or governmental agencies, price or
gathering rate controls and environmental protection regulations.
Should one or more of these risks or uncertainties materialize, or
should any of the Company’s assumptions prove incorrect, actual
results may vary in material respects from those projected in the
forward-looking statements. The impact of any one factor on a
particular forward-looking statement is not determinable with
certainty as such factors are dependent upon other factors, and the
Company’s course of action would depend upon its assessment of the
future considering all information then available.
Readers are cautioned that the foregoing list of
factors is not exhaustive. Unpredictable or unknown factors not
discussed in the Company's MD&A could also have adverse effects
on forward-looking statements. Although the Company believes that
the expectations conveyed by the forward-looking statements are
reasonable based on information available to it on the date such
forward-looking statements are made, no assurances can be given as
to future results, levels of activity and achievements. All
subsequent forward-looking statements, whether written or oral,
attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by these cautionary
statements. Except as required by applicable law, the Company
assumes no obligation to update forward-looking statements, whether
as a result of new information, future events or other factors, or
the foregoing factors affecting this information, should
circumstances or the Company’s estimates or opinions change.
Special Note Regarding non-GAAP and other Financial
Measures
This press release includes references to
financial measures commonly used in the crude oil and natural gas
industry, such as: adjusted net earnings (loss) from operations;
adjusted funds flow (previously referred to as funds flow from
operations); net capital expenditures; free cash flow; debt to
adjusted EBITDA; available liquidity; finding, development and
acquisition (“FD&A”) costs; recycle ratio; reserves life index;
production replacement ratio; adjusted operating costs; and
unadjusted operating costs. These financial measures are not
defined by International Financial Reporting Standards ("IFRS") and
therefore are referred to as non-GAAP measures and other financial
measures. The non-GAAP measures used by the Company may not be
comparable to similar measures presented by other companies. The
Company uses these non-GAAP measures to evaluate its performance.
The non-GAAP measures should not be considered an alternative to or
more meaningful than net earnings (loss), cash flows from operating
activities, cash flows used in investing activities, and cash flows
used in financing activities as determined in accordance with IFRS,
as an indication of the Company's performance.
Adjusted net earnings (loss) from operations is
a non-GAAP measure that represents net earnings (loss) as presented
in the Company's consolidated Statements of Earnings (Loss),
adjusted for the after-tax effects of certain items of a
non-operational nature. The Company considers adjusted net earnings
(loss) from operations a key measure in evaluating the Company's
performance, as it demonstrates the Company's ability to generate
after-tax operating earnings from its core business areas. The
reconciliation “Adjusted Net Earnings (Loss) from Operations, as
Reconciled to Net Earnings (Loss)" is presented in the Company’s
MD&A.
Adjusted funds flow (previously referred to as
funds flow from operations) is a non-GAAP measure that represents
cash flows from operating activities as presented in the Company's
consolidated Statements of Cash Flows, adjusted for the net change
in non-cash working capital, abandonment and certain movements in
other long-term assets. The Company considers adjusted funds flow a
key measure as it demonstrates the Company’s ability to generate
the cash flow necessary to fund future growth through capital
investment and to repay debt. The reconciliation “Adjusted Funds
Flow, as Reconciled to Cash Flows from Operating Activities” is
presented in the Company’s MD&A.
Net capital expenditures is a non-GAAP measure
that represents cash flows used in investing activities as
presented in the Company's consolidated Statements of Cash Flows,
adjusted for the net change in non-cash working capital, investment
in other long-term assets, share consideration in business
acquisitions and abandonment expenditures. The Company considers
net capital expenditures a key measure as it provides an
understanding of the Company’s capital spending activities in
comparison to the Company's annual capital budget. The
reconciliation “Net Capital Expenditures, as Reconciled to Cash
Flows used in Investing Activities” is presented in the Net Capital
Expenditures section of the Company’s MD&A.
Free cash flow is a non-GAAP measure that
represents cash flows from operating activities as presented in the
Company's consolidated Statements of Cash Flows, adjusted for the
net change in non-cash working capital from operating activities,
abandonment, certain movements in other long-term assets, less net
capital expenditures and dividends on common shares. The Company
considers free cash flow a key measure in demonstrating the
Company’s ability to generate cash flow to fund future growth
through capital investment, pay returns to shareholders, and to
repay debt.
Adjusted EBITDA is a non-GAAP measure that
represents net earnings (loss) as presented in the Company's
consolidated Statements of Earnings (Loss), adjusted for interest,
taxes, depletion, depreciation and amortization, stock based
compensation expense (recovery), unrealized risk management gains
(losses), unrealized foreign exchange gains (losses), and accretion
of the Company’s asset retirement obligation. The Company considers
adjusted EBITDA a key measure in evaluating its operating
profitability by excluding non-cash items.
Debt to Adjusted EBITDA is a non-GAAP measure
that is derived as the current and long-term portions of long-term
debt, divided by the 12 month trailing Adjusted EBITDA, as defined
above. The Company considers this ratio to be a key measure in
evaluating the Company's ability to pay off its debt.
Available liquidity is a non-GAAP measure that
is derived as cash and cash equivalents, total bank and term credit
facilities, less amounts drawn on the bank and credit facilities
including under the commercial paper program. The Company considers
available liquidity a key measure in evaluating the sustainability
of the Company’s operations and ability to fund future growth. See
note 9 - Long-term Debt in the Company’s consolidated financial
statements.
Finding, Development and Acquisition
(“FD&A”) costs is a non-GAAP measure that is derived by
dividing the sum of total net capital expenditures excluding
midstream, abandonments, and head office, by the sum of total
additions and revisions for the relevant reserves category. The
Company considers FD&A costs a key measure in evaluating the
Company's performance, as it provides the reader with an
understanding of the Company’s ability to effectively find and
develop reserves and make opportunistic acquisitions that add to
the Company’s reserves base.
Recycle Ratio is a non-GAAP measure that is
derived by dividing the operating netback by the FD&A cost for
the relevant category. Operating netback for a segment or product
is derived as product sales net of blending costs, less royalties,
transportation and production expenses, calculated on a per BOE
basis. The Company considers recycle ratio a key measure in
evaluating the Company’s ability to generate profitability on its
capital investment.
Reserves life index is based on the total
reserves amount for the relevant category divided by the 2019
proved developed producing production forecast prepared by the
Independent Qualified Reserves Evaluators.
Production replacement ratio is derived as the
Company Gross reserves additions and revisions, for the relevant
reserves category, divided by the Company Gross production in the
same period.
Adjusted operating costs are derived as
production expense based on sales volumes excluding costs incurred
in turnaround periods. See "Operating Highlights - Oil Sands Mining
and Upgrading" section in the Company’s MD&A.
Unadjusted operating costs also referred to as
cash production costs in the Company’s MD&A. See "Operating
Highlights - Oil Sands Mining and Upgrading" section in the
Company’s MD&A.
Special Note Regarding Currency, Financial Information
and Production
The Company's MD&A should be read in
conjunction with the unaudited interim consolidated financial
statements for the three months and year ended December 31,
2018 and the MD&A and the audited consolidated financial
statements for the year ended December 31, 2017. All dollar
amounts are referenced in millions of Canadian dollars, except
where noted otherwise. The Company’s unaudited interim consolidated
financial statements for the three months and year ended
December 31, 2018 and the Company's MD&A have been
prepared in accordance with IFRS as issued by the International
Accounting Standards Board ("IASB").
Production volumes and per unit statistics are
presented throughout the Company's MD&A on a “before royalty”
or “company gross” basis, and realized prices are net of blending
and feedstock costs and exclude the effect of risk management
activities. In addition, reference is made to crude oil and natural
gas in common units called barrel of oil equivalent ("BOE"). A 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,
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. In comparing the
value ratio using current crude oil prices relative to natural gas
prices, the 6 Mcf:1 bbl conversion ratio may be misleading as an
indication of value. In addition, for the purposes of the Company's
MD&A, crude oil is defined to include the following
commodities: light and medium crude oil, primary heavy crude oil,
Pelican Lake heavy crude oil, bitumen (thermal oil), and SCO.
Production on an “after royalty” or “net” basis is also presented
for information purposes only.
Additional information relating to the Company,
including its Annual Information Form for the year ended
December 31, 2017, is available on SEDAR at www.sedar.com, and
on EDGAR at www.sec.gov. Detailed guidance on production
levels, capital allocation and operating costs can be found on the
Company's website at www.cnrl.com.
CONFERENCE CALL
A conference call will be held at 9:00 a.m.
Mountain Time, 11:00 a.m. Eastern Time on Thursday, March 7,
2019.
The North American conference call number is
1-866-521-4909 and the outside North American conference call
number is 001-647-427-2311. Please call in 10 minutes prior to the
call starting time.
An archive of the broadcast will be available
until 6:00 p.m. Mountain Time, Thursday, March 21, 2019. To access
the rebroadcast in North America, dial 1-800-585-8367. Those
outside of North America, dial 001-416-621-4642. The conference
archive ID number is 4325867.
The conference call will also be webcast live
and can be accessed on the home page of our website at
www.cnrl.com.
Canadian Natural is a senior oil and natural gas
production company, with continuing operations in its core areas
located in Western Canada, the U.K. portion of the North Sea and
Offshore Africa.
CANADIAN NATURAL RESOURCES LIMITED |
2100, 855
- 2nd Street S.W. Calgary, Alberta, T2P4J8Phone: 403-514-7777
Email: ir@cnrl.comwww.cnrl.com |
|
|
STEVE W. LAUTExecutive Vice-Chairman TIM
S. MCKAYPresident COREY B. BIEBERChief
Financial Officer and Senior Vice-President, Finance MARK
A. STAINTHORPEVice-President, Finance – Capital Markets
Trading Symbol - CNQToronto Stock ExchangeNew York Stock
Exchange |
Canadian Natural Resources (TSX:CNQ)
Historical Stock Chart
From Mar 2024 to Apr 2024
Canadian Natural Resources (TSX:CNQ)
Historical Stock Chart
From Apr 2023 to Apr 2024