Canadian Natural Resources Limited (TSX:CNQ) (NYSE:CNQ)
In commenting on the Company's 2013 budget, John Langille,
Vice-Chairman, stated, "Canadian Natural's 2013 capital budget will
deliver near term production growth, enable continued development
of our long life, low decline asset base and provide unallocated
free cash flow. We target to generate approximately $7.6 billion of
cash flow and $0.7 billion of free cash flow, further strengthening
our financial position."
Steve Laut, President, continued, "Our 2013 budget reflects the
strength and breadth of our assets. Our capital program is balanced
in allocation to near term growth and longer term growth that will
support and drive sustainable free cash flow in 2013 and beyond. We
have developed the largest reserve base in our peer group and this
provides us options to allocate capital to the highest return
projects. This is evident in our ability to grow crude oil and NGL
volumes in 2013 by 9% while spending only half our capital budget
on projects that add production in 2013. Heavy oil is a significant
contributor to the growth in 2013. As new conversion capacity and
infrastructure come online in 2013 we expect to benefit from
stronger Canadian heavy oil pricing. We continue to execute on our
defined plan that will provide value to shareholders over the near,
mid and long term."
HIGHLIGHTS OF THE 2013 BUDGET
- Canadian Natural's 2013 capital budget is targeted at $6.9
billion. The 2013 capital budget delivers both near term crude oil
and NGLs production growth of approximately 9% and the effective
development of the Company's long life, low decline asset base,
which will provide greater and more sustainable free cash flow in
2014 and beyond.
- The Company's 2013 cash flow is targeted to be $7.6 billion at
the midpoint, providing approximately $0.7 billion of free cash
flow to allocate to dividends, share repurchases, opportunistic
acquisitions or debt repayment.
- The Company's balanced asset base, and high working interest
and operatorship allows for significant flexibility and efficiency
during the capital allocation decision making process.
Approximately 53% of 2013 total capital spending will be required
to grow production in 2013 and the remaining capital will be
allocated toward longer-life, more sustainable assets that will
generate significant incremental free cash flow in the future. In
addition, approximately $2.9 billion of the 2013 capital budget
represents capital flexibility which allows the Company to
reallocate capital over the course of 2013.
- Canadian Natural has a vast and balanced asset base that
contains both near and long term growth potential. The Company's
portfolio contains in excess of 7.5 billion BOE of proved and
probable reserves, the largest in its peer group.
- Canadian Natural's ability to allocate its free cash flow in a
balanced manner is evident in its return to shareholders.
-- Over the last decade, the Company has delivered a 21%
compound average growth rate (CAGR) in dividends per share.
-- Since the completion of construction at Horizon in 2008,
total dollars returned to shareholders in the form of dividends and
share repurchases have grown by a CAGR of 38% through 2012.
-- To date, share repurchases in 2012 have accumulated to
9,712,700 common shares at a weighted average price of $29.01 per
common share.
Crude Oil and NGLs
- Total crude oil and NGLs production target of 482,000 bbl/d to
513,000 bbl/d represents a midpoint increase of approximately 9%
from the midpoint of 2012 guidance.
North America - Exploration and Production
-- Primary heavy crude oil production is targeted to increase
from the 2012 midpoint guidance by 11% in 2013 to between 139,000
bbl/d and 143,000 bbl/d as the Company high-grades its large
(approx. 8,500 wells) inventory to effectively and efficiently
execute an 890 net well drilling program in 2013. The Company will
drill over 120 net horizontal wells that will target new play
types. Primary heavy crude oil currently generates the highest
return on capital in Canadian Natural's balanced portfolio.
-- Pelican Lake crude oil production is targeted to increase
from the 2012 midpoint guidance by 19% to between 46,000 bbl/d and
50,000 bbl/d as polymer response is now being realized from the
Company's 2011 and 2012 polymer flood expansions. The development
of Pelican Lake will continue to focus on injection optimization,
monitoring polymer response and expanding the polymer flood across
this long life field. Canadian Natural targets to have 56% of the
field converted to polymer flood by year end 2013. Pelican Lake
capital spending in 2013 includes completion of a new battery with
an initial start-up facility capacity of 25,000 bbl/d at Pelican
Lake. Completion of the battery is targeted in mid-2013 and will
handle the additional targeted polymer driven production from
Pelican Lake.
-- North America light crude oil and NGLs production is a
significant part of Canadian Natural's balanced portfolio.
Production volumes are targeted to increase from the 2012 midpoint
guidance by 6% to between 65,000 bbl/d and 69,000 bbl/d. North
America light oil capital is allocated to secondary and tertiary
recovery projects, and 114 net light oil wells, 41 of which are
targeting new play developments that were initiated in 2012. The
Company continues to advance horizontal well multi-frac technology
in pools across its land base. In addition, 70% of targeted total
drilling will be focused on horizontal wells.
North America - Thermal In Situ Oil Sands and Horizon Oil Sands
Mining
-- Canadian Natural continues to execute its defined, cost
effective plan of developing its oil sands projects providing
longer life, low decline assets which will generate significant
shareholder value for decades to come. Total oil sands production
from Thermal In Situ Oil Sands (Thermal In Situ) and Horizon Oil
Sands (Horizon) is targeted to range from 200,000 bbl/d to 215,000
bbl/d in 2013.
--- The Company targets to grow Thermal in situ production to
approximately 510,000 bbl/d of capacity by delivering projects that
will add 40,000 bbl/d to 60,000 bbl/d of production every two to
three years over the next two decades.
---- Thermal in situ production is targeted to increase from the
2012 midpoint guidance by 5% to between 100,000 bbl/d and 107,000
bbl/d as a result of continued low cost Primrose pad developments
(targeted at $13,000 per flowing bbl/d).
---- Kirby South Phase 1 continues to progress ahead of plan. To
date, the Company has reached 74% completion and 89% commitment of
total Kirby South Phase 1 capital expenditures. 2013 budgeted
capital is approximately $315 million to support the completion of
construction and 3 additional pads. Kirby South Phase 1 is targeted
for first steam injection in late 2013 with facility capacity of
40,000 bbl/d, further driving thermal production growth in
2014.
---- Budgeted capital for Kirby North Phase 1 is approximately
$205 million to progress detailed engineering, order modules and
construct camp facilities. Project sanction is targeted for the
first half of 2013.
---- Thermal in situ project timing has been modified to
accommodate the potential inclusion of recently acquired lands
adjacent to Canadian Natural's greater Kirby area and provide a
more balanced capital expenditures profile going forward. As a
result, Kirby North Phase 1 and Grouse are now scheduled for first
steam injection in 2016, and between 2017 and 2019
respectively.
--- In 2013,Horizon production is targeted between 100,000 bbl/d
to 108,000 bbl/d of synthetic crude oil (SCO). This range includes
production curtailment during an 18 day planned maintenance
turnaround that is scheduled for May 2013.
---- Canadian Natural continues to execute its disciplined
strategy of staged expansion to 250,000 bbl/d of SCO facility
capacity and work remains on track. Projects currently under
construction are trending at or below cost estimates. For 2013,
budgeted project capital expenditures at Horizon reflect the Board
of Directors approval of approximately $2.1 billion in targeted
strategic expansion.
---- Canadian Natural maintains a flexible schedule for Horizon
expansion construction to ensure capital efficiencies. To date, the
Company has reached 16% completion and 38% commitment of total
Horizon project capital expenditures and targets a 10,000 bbl/d
facility capacity increase in 2015, a 45,000 bbl/d facility
capacity increase in 2016 and an 80,000 bbl/d facility capacity
increase in 2017. For the next 5 years, the Company targets to
spend approximately $2.0 billion to $2.5 billion per year on
Horizon project expansions to achieve a step-wise increase in
production to 250,000 bbl/d of SCO.
International - Exploration and Production
-- International crude oil production is targeted to range
between 32,000 bbl/d and 36,000 bbl/d. Q4/12 to Q4/13 production is
targeted to increase approximately 6%. International light oil
activities in 2013 will include ramp up of drilling programs in the
North Sea and Espoir, Offshore Africa.
--- In the North Sea, the Company is targeting a second drilling
operation to commence in the last half of 2013 at Ninian.
--- Canadian Natural's eight well infill drilling program at the
Espoir
Field continues to progress. The drilling rig is in Cote
d'Ivoire and preparations are currently being undertaken to
commence drilling operations in 2013. The Company targets first oil
in the first half of 2013 ramping up to production of 6,500 BOE/d
at the completion of the Espoir drilling program, offsetting
natural declines. The cost of this program is targeted at $24,000
per flowing BOE/d.
--- Canadian Natural continues to make significant progress on
its exploration project in South Africa. Long leads equipment has
been ordered for the earliest potential drilling window beginning
in late 2013 or early 2014. This exploration project has
significant billion barrel type structures located on this 100%
owned Canadian Natural block. The Company is currently progressing
the plan to bring in a partner to drill this well. Interest has
been very strong from a select group of operators.
Natural Gas
- Total natural gas targeted production of 1,085 MMcf/d to 1,145
MMcf/d represents a midpoint decrease of 9% from the midpoint of
2012 forecasted annual guidance while Q4/12 to Q4/13 production is
targeted to decrease 2%. The annual decrease reflects low drilling
levels associated with the Company's strategic decision to allocate
capital to higher return crude oil projects.
- Canadian Natural is the second largest producer of natural gas
in Canada and a significant owner and operator of natural gas
infrastructure in Western Canada. The Company's large North America
natural gas and NGLs reserve base of 6.6 Tcfe, gross proved and
probable reserves, generates operating free cash flow and presents
significant upside potential for natural gas production and growth
in operating free cash flow when natural gas prices recover.
- The Company will recommence in 2013 the expansion of its
liquids rich Montney play, Septimus, due to forecasted higher
natural gas pricing. In 2013, the Company will complete 10 wells
that were initially drilled in early 2012, and will drill and
complete 14 additional wells. The plant expansion is targeted for
completion in late 2013 and will increase sales capacity to 125
MMcf/d, yielding 12,200 bbl/d of liquids following
processing through the plant and deep cut facilities. Canadian
Natural has the largest Montney land position in Western Canada of
approximately 1,043,800 net acres. In addition, other North America
natural gas activity includes drilling 16 net liquids rich natural
gas wells for strategic drilling and lease preservation.
Overall
- Total BOE production is targeted to range from 663,000 BOE/d
to 704,000 BOE/d, representing a midpoint increase of 3% from the
midpoint of 2012 average production guidance. Q4/12 to Q4/13
average production is targeted to increase approximately 6%.
- Canadian Natural's 2013 production and capital guidance is
based on average annual WTI strip pricing of US$89.36/bbl, AECO
strip pricing of C$3.41/GJ, and Western Canadian Select heavy oil
differential of US$17.87/bbl. Partly based on this forecast, the
Company's focus remains on growing higher return crude oil and NGLs
projects. Heavy oil differential volatility is expected to lessen
over the next year and a half as heavy oil conversion capacity is
added in the first half of 2013. PADD II heavy oil refining
capacity is anticipated to increase by 310,000 bbl/d, a 20%
increase from existing capacity. In late 2013 and into 2014,
pipeline constraints should reduce as pipelines from the US Midwest
to the US Gulf Coast are expanded.
- Work continues as scheduled on the North West Redwater 50,000
bbl/d bitumen refinery (78,000 bbl/d of bitumen blend). Completion
of the project is targeted for mid-2016 and is targeted to provide
Canadian Natural (50% owner) a minimum 10% after tax return on its
equity investment in the project. The Company will also provide
12,500 bbl/d of bitumen feedstock to the refinery as a toll
payer.
PRODUCTION AND CAPITAL GUIDANCE
Canadian Natural continues its strategy of maintaining a large
portfolio of varied projects. This 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 project risks and time horizons. Canadian Natural maintains
a high ownership level and operatorship in its properties and can
therefore control the nature, timing and extent of expenditures in
each of its project areas.
The production guidance for 2012F and 2013B are as follows:
----------------------------------
Daily production volumes, before royalties 2012 Forecast 2013 Budget
----------------------------------------------------------------------------
Natural gas (MMcf/d) 1,222 - 1,229 1,085 - 1,145
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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Crude oil and NGLs (Mbbl/d)
North America - Exploration and
Production 229 - 232 250 - 262
North America - Thermal In Situ 98 - 100 100 - 107
North America - Oil Sands Mining 87- 89 100 - 108
International 38 - 39 32 - 36
----------------------------------------------------------------------------
452 - 460 482 - 513
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The capital expenditure guidance for 2012F and 2013B are as
follows:
------------------------------
($ millions) 2012 Forecast 2013 Budget
----------------------------------------------------------------------------
North America natural gas $ 470 $ 445
North America crude oil 2,190 1,965
International crude oil 420 605
----------------------------------------------------------------------------
Total Exploration and Production $ 3,080 $ 3,015
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Thermal In Situ Oil Sands
Primrose and Future 970 770
Kirby South Phase 1 540 315
Kirby North Phase 1 - 205
----------------------------------------------------------------------------
Total Thermal In Situ Oil Sands $ 1,510 $ 1,290
----------------------------------------------------------------------------
Property acquisitions, dispositions and
other $ 185 $ 85
----------------------------------------------------------------------------
Horizon Oil Sands Mining
Project Capital
Reliability - Tranche 2 $ 75 $ 100
Directive 74 and Technology 135 60
Phase 2A 240 180
Phase 2B 505 940
Phase 3 240 535
Phase 4 15 20
Owner's costs and other 170 245
----------------------------------------------------------------------------
Total Capital Projects 1,380 2,080
Sustaining capital 200 180
Turnarounds and reclamation 25 105
Capitalized interest and other 70 190
----------------------------------------------------------------------------
Total Horizon Oil Sands Mining $ 1,675 $ 2,555
----------------------------------------------------------------------------
Total Capital Expenditures $ 6,450 $ 6,945
----------------------------------------------------------------------------
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The above capital expenditure guidance for 2012F and 2013B
incorporate the following levels of drilling activity:
----------------------------
Drilling activity (number of net wells) 2012 Forecast 2013 Budget
----------------------------------------------------------------------------
Targeting natural gas 35 30
Targeting crude oil 1,103 1,028
Targeting thermal in situ 165 132
Stratigraphic test / service wells - Exploration
and Production 23 31
Stratigraphic test / service wells - Thermal In
Situ 395 187
Stratigraphic test / service wells - Oil Sands Mining 311 353
----------------------------------------------------------------------------
Total 2,032 1,761
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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" or
expressions of a similar nature suggesting future outcome or
statements regarding an outlook. Disclosure related to expected
future commodity pricing, production volumes, royalties, operating
costs, capital expenditures and other guidance provided throughout
this Management's Discussion and Analysis ("MD&A"), constitute
forward-looking statements. Disclosure of plans relating to and
expected results of existing and future developments, including but
not limited to Horizon Oil Sands, Primrose East, Pelican Lake,
Olowi Field (Offshore Gabon), and the Kirby Thermal Oil Sands
Project also constitute forward-looking statements. This
forward-looking information is based on annual budgets and
multi-year forecasts, and is reviewed and revised throughout the
year if 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
crude oil and natural gas 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 reserve 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 difficulties in mining, extracting or
upgrading 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; availability and cost of financing; the Company's and
its subsidiaries' success of exploration and development activities
and their ability to replace and expand crude oil and natural gas
reserves; timing and success of integrating the business and
operations of acquired companies; production levels; imprecision of
reserve estimates and estimates of recoverable quantities of crude
oil, bitumen, natural gas and natural gas liquids ("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
and operating costs); 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 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 this
report could also have material 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 law, the Company assumes no obligation to update
forward-looking statements should circumstances or Management's
estimates or opinions change.
CONFERENCE CALL
A conference call will be held at 9:00 a.m. Mountain Time, 11:00
a.m. Eastern Time on Tuesday, December 4, 2012. The North American
conference call number is 1-877-240-9772 and the outside North
American conference call number is 001-416-340-8527. Please call in
about 10 minutes before the starting time in order to be patched
into the call. The conference call will also be broadcast live on
the internet and may be accessed through the Canadian Natural
website at www.cnrl.com.
WEBCAST
This call is being webcast and can be accessed on Canadian
Natural's website at www.cnrl.com. Presentation slides will be
available on Canadian Natural's website in PDF format shortly
before the live conference call webcast.
Contacts: John G. Langille Vice-Chairman Steve W. Laut President
Corey B. Bieber Vice-President, Finance & Investor Relations
Canadian Natural Resources Limited 2500, 855 2nd Street S.W.
Calgary, Alberta, T2P 4J8 Canada (403) 514-7777 (403) 514-7888
(FAX)ir@cnrl.com www.cnrl.com
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