CALGARY, ALBERTA (NYSE: CNQ) Vice-Chairman, John Langille,
stated, "2008 will be a year of execution. Canadian Natural has
always taken the approach that focusing on economic returns is more
important than growth at any cost. 2008 is likely reflective of
this more than any other year in our history. On the natural gas
side of the business, we are faced with eroded economics due to low
commodity prices and a new royalty regime in Alberta that reduces
the returns on certain types of drilling. Canadian Natural
continues to high-grade our projects to ensure that the maximum
value to shareholders will be achieved in 2008. As expected, this
reduction in capital will result in a decrease in natural gas
production throughout 2008 due to normal production declines not
being offset by new resource production. The new royalty regime
introduced by the Province of Alberta effective for 2009 will take
the vast majority of any increases in natural gas prices for most
of our natural gas wells. As such, the ability to increase natural
gas drilling activity with increasing gas prices is severely
impacted."
Steve Laut, President & Chief Operating Officer, further
commented "Crude oil prices remain robust although muted by the
strong Canadian dollar. The disparity between low natural gas
prices and high crude oil prices affords us the opportunity at
Primrose to optimize the economics of production of mature
wellbores by steaming and producing these reserves now. As a
result, the Company is capturing reserves which may not otherwise
be economic under our long term price assumptions. New pad drilling
will be reduced in 2008 as will new production volumes. In 2009,
Primrose East will provide significant in-situ production growth
and new pad development will again occur in existing Primrose
Fields.
In addition to these initiatives, we are currently developing
four major projects with targeted productive capacity of between
176,000 and 180,000 barrels per day. As such, 2008 becomes a year
of emphasis on execution and optimization. The largest of these
projects is, of course, the Horizon Project Phase 1, which is
targeted for first oil in Q3 2008.
We are pleased to provide further clarity on our execution
strategy to expand the Horizon Project for Phase 2/3 to targeted
production levels between 232,000 to 250,000 barrels per day of SCO
by 2013. We believe we can have better control over execution and
costs by avoiding the mega-project mindset. Hence we have
reconfigured the expansion into four distinct tranches that
optimize our available human and financial resources and which help
to ensure a more controllable, effective execution. The first
tranche of this revised Phase 2/3 plan will be largely complete in
2007 through the completion of construction of certain
infrastructure on the Horizon site, the purchase of certain long
lead items, and front end engineering and design. During 2008, the
second tranche of Phases 2/3 of the Horizon Project is targeted to
remove redundancies in the Mining and Ore Preparation Area, and
debottlenecking the existing plant - resulting in increased
productive capacity of the facility between 6,000 and 15,000 SCO
bbl/d by 2010. Tranche 3 of Phases 2/3 of the Horizon Project is
targeted for approval in late 2008 and Tranche 4 in 2010. We now
have a better defined path forward and will continue execution on
this very economic project.
We are convinced that Canadian Natural has the people, the
assets and the resolve to continue to deliver superior returns to
our shareholders on our conventional crude oil and natural gas
assets, as well as on the Horizon Project over the longer
term."
HIGHLIGHTS OF THE 2008 BUDGET
- Crude oil and NGLs production target of 316,000 to 366,000
bbl/d before royalties, representing a midpoint increase of 3% from
the midpoint of 2007 annual guidance. The increase reflects the
commencement of operations at the Horizon Project, but is partially
offset by the long term production optimization cycle at Primrose,
polymer conversion at Pelican Lake, and reduced activity in the
North Sea.
- Natural gas production target of 1,429 to 1,513 mmcf/d before
royalties, representing a midpoint decrease of 12% from the
midpoint of 2007 annual guidance. The decrease reflects lower
activity levels due to reduced economics, relative to crude oil,
and the resulting lower drilling activity in Alberta largely due to
the anticipated changes from the Alberta Royalty Review.
- Equivalent production target of 554,000 to 618,000 boe/d
before royalties, representing a midpoint decrease of 4% from the
midpoint of 2007 annual guidance. Entry to exit production is
targeted to increase 6% in 2008.
- Cash flow from operations estimate of $4.6 billion to $5.1
billion ($8.50 - $9.40 per common share) based upon a forecast
average West Texas Intermediate crude oil price of US$73.00/bbl, a
Lloyd Blend heavy oil differential of 30%, a NYMEX natural gas
price of US$7.00/mmbtu and an exchange rate of C$1.00 =
US$1.00.
- Canadian conventional crude oil and natural gas capital
expenditures of $1.7 billion in 2008, representing a 33% reduction
in capital spending from 2007 levels. Of the reduction in capital
spending, 78% ($645 million) is due to a reduced drilling program
in Alberta largely as a result of the impact of the Royalty Review
changes.
- International conventional crude oil and natural gas capital
expenditures are budgeted to be $689 million.
- Construction capital expenditures on the Horizon Oil Sands
Project are budgeted at $600 to $1,020 million for completion of
Phase 1.
- The Company is moving forward with Phase 2/3 of the Horizon
Project with a four-tranche development plan increasing targeted
capacity to 232,000 to 250,000 Synthetic Crude Oil ("SCO") bbl/d of
by 2013. Tranche 2 of the Phase 2/3 expansion expenditures are
budgeted at $439 million in 2008. Tranche 1 of Phase 2/3 expansion
will be largely completed in 2007.
- Continued strong balance sheet management with targeted debt
to book capitalization at the end of 2008 of approximately 43% and
debt to EBITDA of 1.9x.
- The 2008 program is highlighted by the ongoing development of
four major development projects that will create value for 2009 and
in the Future:
Estimated
Reserves Target
Proved Reclassified 2008 Production
Reserves(1) by 2008 CAPEX Capacity
(mmbbl) (mmbbl) ($ millions) (bbl/d)
----------------------------------------------------------------------------
Conventional crude
oil and natural gas
Baobab 65 14(2) $ 150 6,000-10,000
Olowi 15 5(2) $ 235 20,000
Primrose East 174 50(2) $ 245 40,000
Oil Sands mining
Horizon - Phase 1
(SCO reserves) 1,596 1,596(3) $600-1,020 110,000
----------------------------------------------------------------------------
176,000-180,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Net reserves, after royalties, Dec. 31, 2006 Evaluation.
(2) Company estimates - reserves reclassification from Proved Undeveloped to
Proved Producing.
(3) Company estimates - reserves reclassification from development stage to
production stage.
Production and Financial Guidance
Canadian Natural continues its strategy of maintaining a large
portfolio of varied projects, which enables the Company to provide
consistent growth in production and high shareholder returns over
an extended period of time. Annual budgets are developed,
scrutinized throughout the year and changed if necessary in the
context of project returns, product pricing expectations, and
balance in project risks and time horizons. Canadian Natural
maintains a high ownership level and operatorship level in all of
its properties and can therefore control the nature, timing and
extent of expenditures in each of its project areas.
The budgeted capital expenditures in 2007 and 2008 are as follows:
($ millions) 2007 Forecast 2008 Budget
----------------------------------------------------------------------------
Conventional crude oil and natural gas
----------------------------------------------------------------------------
North America natural gas $ 991 $ 617
North America crude oil and NGLs 1,533 1,075
North Sea 474 231
Offshore West Africa 159 458
Property acquisitions, dispositions and
midstream (16) 390
----------------------------------------------------------------------------
$ 3,141 $ 2,771
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Horizon Oil Sands Project
----------------------------------------------------------------------------
Phase 1 - Construction $ 2,741 $ 600 - 1,020
Phase 1 - Operating inventory and
capital inventory - 109
Phase 1 - Commissioning costs - 184
Phase 2/3 - Tranche 1 133 -
Phase 2/3 - Tranche 2 - 439
Sustaining capital - 19
Capitalized interest and other costs 451 379
----------------------------------------------------------------------------
3,325 1,730 - 2,150
----------------------------------------------------------------------------
$ 6,466 $ 4,501 - 4,921
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The above capital expenditure budget incorporates the following levels of
drilling activity:
Drilling activity (number of net wells) 2007 Forecast 2008 Budget
----------------------------------------------------------------------------
Targeting natural gas 456 314
Targeting crude oil 615 537
Stratigraphic test / service wells 257 36
----------------------------------------------------------------------------
Total 1,328 887
----------------------------------------------------------------------------
----------------------------------------------------------------------------
North American Natural Gas
The North American 2008 targeted natural gas program will result in a
decreased drilling program in Alberta and increased drilling outside
Alberta.
Natural gas -(number of net wells) 2007 Forecast 2008 Budget Change
----------------------------------------------------------------------------
Alberta 346 195 -44%
British Columbia and Saskatchewan 110 119 +8%
----------------------------------------------------------------------------
Total 456 314 -31%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Type of well
Coal Bed Methane and Shallow 156 161 +3%
Conventional 233 104 -55%
Cardium 23 14 -39%
Deep 39 32 -18%
Foothills 5 3 -40%
----------------------------------------------------------------------------
Total 456 314 -31%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
- Natural gas drilling in Alberta is targeted to be reduced by
44% due to the anticipated future impact of royalty changes
effective 2009. In Alberta 36% of the wells targeted to be drilled
will be low rate shallow natural gas and coal bed methane wells.
The Company's activities outside Alberta are targeted to increase
8% due mainly to a large development program in the Hatton region
of Saskatchewan.
- The shift in natural gas spending between categories and
provinces reflects both changing economics due to commodity price
forecasts and the anticipated implementation of the new Royalty
Regime within the Province of Alberta, effective 2009. The new
Alberta royalty regime dramatically reduces drilling economics of
certain play types at current and higher price forecasts in future
years by extending the project payout period due to a front end
loaded royalty structure. As such, further cuts in both
conventional and high productive rate deep natural gas wells are
expected in future years as they would not benefit from first year
production under the current regime in Alberta.
- Our guidance range for North American natural gas production
is 1,405 - 1,485 mmcf/d before royalties, a decrease of 12% from
the midpoint of 2007 guidance.
North American Conventional Crude Oil and NGLs
The North American 2008 crude oil and NGLs drilling program consists of:
Crude oil - (number of net wells) 2007 Forecast 2008 Budget Change
----------------------------------------------------------------------------
Alberta 500 388 -22%
British Columbia / Saskatchewan /
Manitoba 106 138 +30%
----------------------------------------------------------------------------
Total 606 526 -13%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Type of well
Conventional heavy 356 311 -13%
Thermal heavy 58 32 -45%
Light 65 78 +20%
Pelican Lake 127 105 -17%
----------------------------------------------------------------------------
Total 606 526 -13%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
- At Primrose, the Company has chosen to concentrate the 2008
thermal drilling program on the new Primrose East Expansion project
and defer drilling at the existing Primrose North and South
projects until 2009. As a result, production from the existing
operations at Primrose will rely on relatively mature wells. As
part of the cyclic steam process, steam oil ratios ("SORs") climb
and well productivity declines as a well matures. The Company is
taking advantage of the opportunity of the robust economics of
steaming mature wells in the current commodity price environment of
low natural gas prices and high crude oil prices.
- As expected thermal production is targeted to peak in late
2007/early 2008 as the Primrose North wells commence their
production phase. Production will then decline throughout the
remainder of 2008, resulting in higher SORs and higher
corresponding operating costs. Drilling will resume at Primrose
North, Primrose South and Wolf Lake in 2009 as Canadian Natural
will continue to develop the excellent Clearwater, Grand Rapids and
McMurray reservoirs on these leases.
- At Pelican Lake, Canadian Natural is targeted to significantly
expand the polymer flood as a result of the success the Company has
had in 2007. Results have met or exceeded expectation, which
provides the confidence to apply this process to large regions of
the pool. This will involve converting many producers to polymer
injection wells, which will require a "reservoir fill-up" period of
12 to 18 months prior to seeing a positive crude oil production
response from the process. The result is that 2008 targeted
production at Pelican Lake will be essentially flat while awaiting
response from these conversions.
- The guidance range for North American conventional crude oil
and NGLs production is 221,000 - 245,000 bbl/d before
royalties.
International
2007 Forecast 2008 Budget Change
Crude oil -(number of net wells)
----------------------------------------------------------------------------
UK North Sea 5 4 -20%
Offshore West Africa 4 7 +75%
----------------------------------------------------------------------------
Total 9 11 +22%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
North Sea
- Canadian Natural anticipates drilling approximately 4 net
platform wells while continuing its successful workover and
recompletion program.
- As a result of reduced activity and major turnarounds, the
2008 guidance range for North Sea crude oil production is 44,000 to
54,000 bbl/d, representing an expected decrease of 12% from
midpoint 2007 guidance.
Offshore West Africa
- Canadian Natural anticipates spending approximately $150
million in 2008 on the development of the Baobab Field in Cote
d'Ivoire, Offshore West Africa, re-completing the wells that
experienced sanding issues. The Company is targeting to have 2
wells back on production by the end of 2008.
- The Company is budgeted to spend approximately $235 million
completing the Olowi project, in Gabon, Offshore West Africa,
targeting first crude oil in Q4/08. The peak production is targeted
to be 20,000 bbl/d, net to Canadian Natural.
- The 2008 guidance range for Offshore West Africa crude oil
production is 24,000 to 32,000 bbl/d before royalties. This
represents approximately 20% increase in entry to exit
production.
Horizon Oil Sands Project
- The Horizon Project is targeting first crude oil for Q3/08.
Phase 1 construction capital is targeted to range from $600 million
to $1,020 million in 2008, representing a cost to completion
forecast range of 8% to 14% over the original $6.8 billion
estimate.
- The Company has decided to implement a plan for Phases 2/3
involving a four-tranche approach to develop targeted capacity of
232,000 to 250,000 SCO bbl/d by 2013. The development plan for the
Phase 2/3 expansion is characterized by smaller incremental
projects. The execution strategy takes project control to the next
step where Canadian Natural will complete the detailed engineering
and design work, procure equipment, and award well defined,
complete construction work packages. This strategy will take more
time to complete but will ensure greater cost control and will
provide intermediate production gains.
- This execution strategy plan for Phase 2/3 gives Canadian
Natural better project control over execution and costs and allows
for greater capital flexibility. The incremental approach also
ensures the availability of the people and project teams to
complete the expansion while maximizing the learnings from Phase 1.
It will maintain the balance sheet strength of Canadian Natural and
the ability to respond accordingly to commodity price fluctuations.
This will minimize distraction for effective Phase 1 start-up and
optimization and allow the Company to maximize its learnings from
Phase 1. The Company will not be creating a mega project, allowing
access to a greater depth of contractors.
-- Tranche 1 was largely completed in 2006/07, which involved
front-end loading, building coker foundations and the pipe racks
for Phase 2/3, and ordering certain long-lead vessels, which are
targeted to arrive in Q1/08.
-- Tranche 2 will involve procuring additional mining equipment,
constructing a third ore preparation plant, constructing additional
gas recovery and sulphur trains, and debottlenecking the existing
plant. The capital cost over the next three years is estimated to
be $1.1 billion and will provide increased plant capacity and
targeted production gains of between 6,000 and 15,000 SCO
bbl/d.
-- Tranche 3 will involve additional mining equipment and
construction of extraction trains, coker expansions, and CO2
recovery units. This tranche will result in lower operating costs,
improved "uptime" and reliability, and targeted production
increases of 10,000 to 20,000 SCO bbl/d.
-- Tranche 4 will involve construction of two additional ore
preparation plants, additional froth treatment and extraction
facilities, support facilities, a diluent recovery unit, a vacuum
recovery unit, and further hydrotreating units. This will take the
targeted production to 232,000 to 250,000 SCO bbl/d, lower
operating costs, and improve "uptime" and reliability.
- The 2008 guidance range for the Horizon Project production is
27,000 to 35,000 SCO bbl/d.
Financial Review
- Canadian Natural is committed to maintaining its strong
financial position, allowing the Company to withstand volatile
crude oil and natural gas commodity prices and the operational
risks inherent in the crude oil and natural gas business
environment. The Company continues to build the necessary financial
capacity to complete the numerous projects under development in the
Company.
- Based upon the previously referenced price deck, capital
expenditure and production levels, Canadian Natural expects to exit
2008 with debt to book capitalization of approximately 43% and with
a debt to EBITDA of 1.9x.
- Canadian Natural expects to exit 2008 with new targeted
production capacities of 176,000 to 180,000 bbl/d from four major
projects. This significant increase in cash flow / net income
generation capacity is targeted to strengthen the Company's balance
sheet metrics to 35% to 39% debt to book capitalization and 1.3x to
1.5x debt to EBITDA by December 2009.
- In 2009, all business segments are expected to be generating
significant free cash flow available for Canadian Natural's capital
allocation process.
Guidance
Detailed guidance on revised production levels, capital
allocation and operating costs can be found on the Company's
website at
http://www.cnrl.com/investor_info/corporate_guidance/.
Forward-Looking Statements
Certain statements in this document or documents incorporated
herein by reference for Canadian Natural Resources Limited (the
"Company") constitute "forward-looking statements" within the
meaning of the United States Private Securities Litigation Reform
Act of 1995. These forward-looking statements can generally be
identified as such because of the context of the statements
including words such as the Company "believes", "anticipates",
"expects", "plans", "estimates", "targets", or words of a similar
nature.
The forward-looking statements are based on current expectations
and are subject to known and unknown risks, uncertainties and other
factors that may cause the actual results, performance or
achievements of the Company, or industry results, to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such
factors include, among others: general economic and business
conditions which will, among other things, impact demand for and
market prices of the Company's products; foreign currency exchange
rates; 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; availability and cost of seismic, drilling and other
equipment; ability of the Company to complete its capital programs;
ability of the Company to transport its products to market;
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
projects; operating hazards and other difficulties inherent in the
exploration for and production and sale of crude oil and natural
gas; availability and cost of financing; success of exploration and
development activities; timing and success of integrating the
business and operations of acquired companies; production levels;
uncertainty of reserve estimates; actions by governmental
authorities; government regulations and the expenditures required
to comply with them (especially safety and environmental laws and
regulations); asset retirement obligations; and other circumstances
affecting revenues and expenses. Our domestic operations are
subject to governmental risks that may impact our operations. Our
domestic operations have been, and at times in the future may be
affected by political developments and by 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. The impact of
any one factor on a particular forward-looking statement is not
determinable with certainty as such factors are interdependent upon
other factors, and the Company's course of action would depend upon
its assessment of the future considering all information then
available.
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.
Readers are cautioned that the foregoing list of important
factors is not exhaustive. 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 law, the Company assumes no
obligation to update forward-looking statements should
circumstances or Management's estimates or opinions change.
Investor Open House 2007 - Webcast
The members of Canadian Natural's Management team will be
presenting a detailed discussion regarding our 2008 Budget at
Canadian Natural's Investor Open House 2007 commencing at 8:30 a.m.
Mountain Time (10:30 a.m. Eastern Time) this discussion can be
accessed at www.cnrl.com/investor_info/calendar.html
The full day's presentations on Tuesday, November 27, 2007 will
be available on the Company's website at
www.cnrl.com/investor_info/calendar.html beginning at 8:30 a.m.
Mountain Time (10:30 a.m. Eastern Time). An audio re-broadcast of
the highlights will be available on Wednesday, November 29,
2007.
The webcast is also being distributed over PrecisionIR's
Investor Distribution Network to both institutional and individual
investors. Investors can listen to the call through www.vcall.com
or by visiting any of the investor sites in PrecisionIR's
Individual Investor Network.
Contacts: Canadian Natural Resources Limited Allan P. Markin
Chairman (403) 514-7777 (403) 514-7888 (FAX) Canadian Natural
Resources Limited John G. Langille Vice-Chairman (403) 514-7777
(403) 514-7888 (FAX) Canadian Natural Resources Limited Steve W.
Laut President and Chief Operating Officer (403) 514-7777 (403)
514-7888 (FAX) Canadian Natural Resources Limited Douglas A. Proll
Chief Financial Officer and Senior Vice-President, Finance (403)
514-7777 (403) 514-7888 (FAX) Canadian Natural Resources Limited
Corey B. Bieber Vice-President, Finance & Investor Relations
(403) 514-7777 (403) 514-7888 (FAX) Canadian Natural Resources
Limited 2500, 855 - 2nd Street S.W. Calgary, Alberta T2P 4J8 Email:
ir@cnrl.com Website: www.cnrl.com
Canadian Natural Resources (NYSE:CNQ)
Historical Stock Chart
From May 2024 to Jun 2024
Canadian Natural Resources (NYSE:CNQ)
Historical Stock Chart
From Jun 2023 to Jun 2024
