According to the company’s website press release on May 4, 2023, commenting on the Company's first quarter 2023 results, Tim McKay, President, stated "Canadian Natural delivered strong results in Q1/23 with effective and efficient operations on our balanced and diverse portfolio of high quality assets. Our culture of continuous improvement, focus on cost control and disciplined capital allocation continues to drive strong financial results and maximize value for our shareholders. In Q1/23, we delivered total quarterly production of approximately 1,319 MBOE/d, including record natural gas production of 2,139 MMcf/d and liquids production of 962,908 bbl/d. We generated strong quarterly free cash flow of approximately $1.4 billion, after dividends of approximately $0.9 billion and net base capital expenditures of approximately $1.1 billion. In addition, our strategic growth capital expenditures of approximately $0.28 billion in the quarter was targeted to provide mid-term growth across our asset base as we unlock value from our projects with strong capital efficiencies. With ample liquidity on our balance sheet, we can add production with minimal capital while generating significant returns on capital and maximizing shareholder value.
Canadian Natural is a leader on Environmental, Social and Governance ("ESG") and has made it a priority to work collaboratively with industry peers and governments to achieve meaningful greenhouse gas ("GHG") emissions reductions in support of Alberta and Canada's climate goals. The Alberta government’s recently announced Emissions Reduction and Energy Development Plan ("ERED") builds upon the province’s longstanding climate leadership and achievements in emissions reductions. Canadian Natural looks forward to supporting the Province of Alberta in continuing to provide affordable, reliable, responsibly produced energy while reducing emissions and aspiring towards a net zero economy by 2050. Canadian Natural's current environmental goals support Alberta's climate plan where large scale carbon capture and storage ("CCS") projects, like the Pathways Alliance's foundational CCS project, will have a significant role in reducing GHG emissions."
Canadian Natural's Chief Financial Officer, Mark Stainthorpe, added "At Canadian Natural, our culture of continuous improvement and strong employee ownership enables our teams to create significant value for our shareholders across all aspects of the Company. Our effective and flexible capital allocation to our four pillars: returns to shareholders, balance sheet strength, resource value growth, and opportunistic acquisitions continue to deliver robust financial results.
In Q1/23, we generated approximately $1.9 billion in adjusted net earnings and approximately $3.4 billion in adjusted funds flow, resulting in significant free cash flow of approximately $1.4 billion after dividends and base capital expenditures. Year-to-date, we have returned approximately $2.8 billion to shareholders through dividends and share repurchases, up to and including May 3, 2023. Our commitment to increasing shareholder returns is evident in our sustainable and growing quarterly dividend, which was recently increased to $0.90 per share in March 2023, up from $0.85 per share, marking 2023 as the 23rd consecutive year of dividend increases. The increasing dividend and the Company's commitment to return 100% of free cash flow to shareholders, when net debt reaches $10 billion, demonstrates the confidence the Board of Directors has in the Company’s world class assets and its ability to generate significant and sustainable free cash flow throughout the commodity price cycle.
When you combine our leading financial results with our top tier reserves and asset base, this provides us with unique competitive advantages in terms of capital efficiency, flexibility and sustainability, all of which drive material free cash flow generation and strong returns on capital."
QUARTERLY HIGHLIGHTS
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 (thermal oil) and SCO (herein collectively referred to as “crude oil”) and natural gas and NGLs. This balance provides optionality for capital investments, maximizing value for the Company’s shareholders.
Underpinning this asset base is the Company's long life low decline production, representing approximately 73% of budgeted total liquids production in 2023, the majority of which is zero decline high value SCO production from the Company's world class Oil Sands Mining and Upgrading assets. The remaining balance of the Company's long life low decline production comes from its top tier thermal in situ oil sands operations and Pelican Lake heavy crude oil assets. The combination of these long life low decline assets, low reserves replacement costs, and effective and efficient operations results in substantial and sustainable adjusted funds flow throughout the commodity price cycle.
In addition, Canadian Natural maintains a substantial inventory of low capital exposure projects within the Company's conventional asset base. These projects can be executed quickly and, in the right economic conditions, provide excellent returns and maximize value for our shareholders. Supporting these projects is the Company’s undeveloped land base which enables large, repeatable drilling programs that can be optimized over time. Additionally, by owning and operating most of the related infrastructure, Canadian Natural is able to control major components of the Company's operating costs 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.
ADVISORY
Special Note Regarding Non-GAAP and Other Financial Measures
This press release includes references to non-GAAP and other financial measures as defined in National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure. These financial measures are used by the Company to evaluate its financial performance, financial position or cash flow and include non-GAAP financial measures, non-GAAP ratios, total of segments measures, capital management measures, and supplementary financial measures. These financial measures are not defined by IFRS and therefore are referred to as non-GAAP and other financial measures. The non-GAAP and other financial measures used by the Company may not be comparable to similar measures presented by other companies, and should not be considered an alternative to or more meaningful than the most directly comparable financial measure presented in the Company's financial statements, as applicable, as an indication of the Company's performance. Descriptions of the Company’s non-GAAP and other financial measures included in this press release, and reconciliations to the most directly comparable GAAP measure, as applicable, are provided below as well as in the “Non-GAAP and Other Financial Measures” section of the Company's MD&A for the three months ended March 31, 2023, dated May 3, 2023.
Free Cash Flow
Free cash flow is a non-GAAP financial measure that represents adjusted funds flow adjusted for base 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.
Capital Budget
Capital budget is a forward looking non-GAAP financial measure. The capital budget is based on net capital expenditures (Non-GAAP Financial Measure) and excludes net acquisition costs. Refer to the "Non-GAAP and Other Financial Measures" section of the Company's MD&A for more details on net capital expenditures.
Long-term Debt, net
Long-term debt, net (also referred to as net debt) is a capital management measure that is calculated as current and long-term debt less cash and cash equivalents.
Capital Efficiency
Capital efficiency is a supplementary financial measure that represents the capital spent to add new or incremental production divided by the current rate of the new or incremental production. It is expressed as a dollar amount per flowing volume of a product ($/bbl/d or $/BOE/d). The Company considers capital efficiency a key measure in evaluating its performance, as it demonstrates the efficiency of the Company's capital investments.
Break-even WTI Price
The break-even WTI price is a supplementary financial measure that represents the equivalent US dollar WTI price per barrel where the Company's adjusted funds flow is equal to the sum of maintenance capital and dividends. The Company considers the break-even WTI price a key measure in evaluating its performance, as it demonstrates the efficiency and profitability of the Company's activities. The break-even WTI price incorporates the non-GAAP financial measure adjusted funds flow as reconciled in the "Non-GAAP and Other Financial Measures" section of the Company's MD&A. Maintenance capital is a supplementary financial measure that represents the capital required to maintain annual production at prior period levels.
CONFERENCE CALL
Canadian Natural Resources Limited (TSX-CNQ / NYSE-CNQ) will be issuing its 2023 First Quarter Earnings Results on Thursday, May 4, 2023 before market open.
A conference call will be held at 8:00 a.m. MDT / 10:00 a.m. EDT on Thursday, May 4, 2023.
Dial-in to the live event: North America 1-888-886-7786 / International 001-416-764-8658
Listen to the audio webcast: Access the audio webcast on the home page of our website, www.cnrl.com.
Conference call playback: North America 1-877-674-7070 / International 001-416-764-8692 (Passcode: 617425#)
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, T2P4J8 Phone: 403-514-7777
Email: ir@cnrl.com www.cnrl.com
