CALGARY, Alberta, May 03, 2018 (GLOBE NEWSWIRE) -- Commenting on first quarter 2018 results, Steve Laut, Executive Vice-Chairman of Canadian Natural stated, "The strength of our well balanced and diverse portfolio, combined with our long life low decline asset base, delivered a strong first quarter for Canadian Natural. Our balanced production mix is a key component of our strategy to create shareholder value throughout the commodity price cycle. In 2018, the Company remains focused on delivering on its capital allocation program through disciplined economic resource development, strengthening the balance sheet, and increasing returns to shareholders. The Company continues to maximize value while operating with a top tier safety record and an ongoing commitment to reduce its environmental footprint in all aspects of its operations."
Canadian Natural's President, Tim McKay, added, "In the first quarter of 2018, Canadian Natural achieved record quarterly production of 1,123,546 BOE/d, growth of 10% over fourth quarter 2017 levels, primarily as a result of strong production performance at our Oil Sands Mining and Upgrading assets. A full quarter of production from the successful Phase 3 expansion at Horizon and strong operational performance at the Athabasca Oil Sands Project ("AOSP") resulted in record production of approximately 456,000 bbl/d of Synthetic Crude Oil ("SCO"). Our focus on cost control and efficiencies, high utilization rates and safe, reliable operations resulted in record low quarterly operating costs of $21.37/bbl (US$16.89/bbl) of SCO. As a result of our industry leading operations at both Horizon and the AOSP, the Company reduced the midpoint of annual Oil Sands Mining and Upgrading operating cost guidance by $2.00/bbl to $22.50/bbl of SCO. Canadian Natural continues to focus on effective and efficient operations, continuous improvement and leveraging technology, while maintaining its capital discipline, as a result the 2018 capital expenditure program remains unchanged."
Canadian Natural's Chief Financial Officer, Corey Bieber, continued, "The Company had a solid first quarter, achieving funds flow from operations of $2,323 million and net earnings of $583 million demonstrating the value of our diverse asset base as we remain on track to deliver strong financial results in 2018. As a result, free cash flow was significant at approximately $1,220 million before dividends and approximately $880 million after dividend commitments.
Our continued focus on balance sheet strength has resulted in the decrease of long term net debt and the retirement of the deferred AOSP acquisition liability, a total reduction of approximately $1.9 billion since Q2/17. Debt to adjusted EBITDA strengthened to 2.5x at quarter end and debt to book capitalization improved to 40.5%, within our targeted range.
As previously announced, the Company increased its quarterly dividend by 22% to $0.335 per common share and renewed and increased its Normal Course Issuer Bid ("NCIB") program. Subsequent to quarter end, Canadian Natural initiated share purchases as part of its NCIB program, evidence of our commitment to deliver returns to our shareholders. The Company will look to continue share purchases throughout the year on an opportunistic basis, if it makes economic sense to do so.”
QUARTERLY HIGHLIGHTS
Three Months Ended | ||||||||||
($ millions, except per common share amounts) | Mar 31 2018 | Dec 31 2017 | Mar 31 2017 | |||||||
Net earnings | $ | 583 | $ | 396 | $ | 245 | ||||
Per common share | – basic | $ | 0.48 | $ | 0.32 | $ | 0.22 | |||
– diluted | $ | 0.47 | $ | 0.32 | $ | 0.22 | ||||
Adjusted net earnings from operations (1) | $ | 885 | $ | 565 | $ | 277 | ||||
Per common share | – basic | $ | 0.72 | $ | 0.46 | $ | 0.25 | |||
– diluted | $ | 0.71 | $ | 0.46 | $ | 0.25 | ||||
Funds flow from operations (2) | $ | 2,323 | $ | 2,307 | $ | 1,639 | ||||
Per common share | – basic | $ | 1.90 | $ | 1.89 | $ | 1.47 | |||
– diluted | $ | 1.89 | $ | 1.88 | $ | 1.46 | ||||
Total net capital expenditures (3) | $ | 1,103 | $ | 1,143 | $ | 846 | ||||
Daily production, before royalties | ||||||||||
Natural gas (MMcf/d) | 1,614 | 1,656 | 1,673 | |||||||
Crude oil and NGLs (bbl/d) | 854,558 | 744,100 | 598,113 | |||||||
Equivalent production (BOE/d) (4) | 1,123,546 | 1,020,094 | 876,907 |
(1) Adjusted net earnings from operations is a non-GAAP measure that the Company utilizes to evaluate its performance. The derivation of this measure is discussed in the Management’s Discussion and Analysis (“MD&A”).
(2) Funds flow from operations is a non-GAAP measure that the Company considers key as it demonstrates the Company’s ability to fund capital reinvestment and debt repayment. The derivation of this measure is discussed in the MD&A.
(3) For additional information and details, refer to the net capital expenditures table in the Company's MD&A.
(4) 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.
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 and 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, facilitating improved 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 low decline, low reserves replacement costs, and effective and efficient operations means these assets provide substantial and sustainable cash 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
Three Months Ended Mar 31 | ||||
2018 | 2017 | |||
(number of wells) | Gross | Net | Gross | Net |
Crude oil | 127 | 122 | 164 | 155 |
Natural gas | 8 | 5 | 11 | 11 |
Dry | 2 | 2 | 1 | 1 |
Subtotal | 137 | 129 | 176 | 167 |
Stratigraphic test / service wells | 528 | 450 | 226 | 226 |
Total | 665 | 579 | 402 | 393 |
Success rate (excluding stratigraphic test / service wells) | 98% | 99% |
North America Exploration and Production
Crude oil and NGLs – excluding Thermal In Situ Oil Sands | |||
Three Months Ended | |||
Mar 31 2018 | Dec 31 2017 | Mar 31 2017 | |
Crude oil and NGLs production (bbl/d) | 245,609 | 259,416 | 231,591 |
Net wells targeting crude oil | 101 | 123 | 147 |
Net successful wells drilled | 99 | 120 | 147 |
Success rate | 98% | 98% | 100% |
Thermal In Situ Oil Sands | |||
Three Months Ended | |||
Mar 31 2018 | Dec 31 2017 | Mar 31 2017 | |
Bitumen production (bbl/d) | 111,851 | 124,121 | 128,372 |
Net wells targeting bitumen | 22 | 5 | 8 |
Net successful wells drilled | 22 | 5 | 8 |
Success rate | 100% | 100% | 100% |
North America Natural Gas | |||
Three Months Ended | |||
Mar 31 2018 | Dec 31 2017 | Mar 31 2017 | |
Natural gas production (MMcf/d) | 1,547 | 1,596 | 1,613 |
Net wells targeting natural gas | 5 | 2 | 12 |
Net successful wells drilled | 5 | 2 | 11 |
Success rate | 100% | 100% | 92% |
International Exploration and Production
Three Months Ended | |||
Mar 31 2018 | Dec 31 2017 | Mar 31 2017 | |
Crude oil production (bbl/d) | |||
North Sea | 21,584 | 19,548 | 23,042 |
Offshore Africa | 19,438 | 19,519 | 22,616 |
Natural gas production (MMcf/d) | |||
North Sea | 37 | 37 | 37 |
Offshore Africa | 30 | 23 | 23 |
Net wells targeting crude oil | 1.0 | — | — |
Net successful wells drilled | 1.0 | — | — |
Success rate | 100% | — | — |
North America Oil Sands Mining and Upgrading
Three Months Ended | |||
Mar 31 2018 | Dec 31 2017 | Mar 31 2017 | |
Synthetic crude oil production (bbl/d) (1) (2) | 456,076 | 321,496 | 192,491 |
(1) Q1/18 SCO production before royalties excludes 3,224 bbl/d of SCO consumed internally as diesel (Q4/17 – 1,730 bbl/d; Q1/17 – 428 bbl/d).
(2) Consists of heavy and light synthetic crude oil products.
MARKETING
Three Months Ended | |||||||||
Mar 31 2018 | Dec 31 2017 | Mar 31 2017 | |||||||
Crude oil and NGLs pricing | |||||||||
WTI benchmark price (US$/bbl) (1) | $ | 62.89 | $ | 55.39 | $ | 51.86 | |||
WCS heavy differential from WTI (US$/bbl) (2) | 39% | 22% | 28% | ||||||
SCO price (US$/bbl) | $ | 61.45 | $ | 58.64 | $ | 51.45 | |||
Condensate benchmark pricing (US$/bbl) | $ | 63.12 | $ | 57.96 | $ | 52.21 | |||
Average realized pricing before risk management (C$/bbl) (3) | $ | 43.06 | $ | 53.42 | $ | 47.05 | |||
Natural gas pricing | |||||||||
AECO benchmark price (C$/GJ) | $ | 1.75 | $ | 1.85 | $ | 2.79 | |||
Average realized pricing before risk management (C$/Mcf) | $ | 2.74 | $ | 2.55 | $ | 3.25 |
(1) West Texas Intermediate (“WTI”).
(2) Western Canadian Select (“WCS”).
(3) Average crude oil and NGL pricing excludes SCO. Pricing is net of blending costs and excluding risk management activities.
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 funds flow generation, credit facilities, US commercial paper program, 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.
OUTLOOK
The Company forecasts annual 2018 production levels to average between 815,000 and 885,000 bbl/d of crude oil and NGLs and between 1,650 and 1,710 MMcf/d of natural gas, before royalties. Q2/18 production guidance before royalties is forecast to average between 773,000 and 821,000 bbl/d of crude oil and NGLs and between 1,515 and 1,565 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 2018 capital expenditures are targeted to be approximately $4.3 billion.
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”), 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 operations and future expansions, 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 of construction and future operations of the North West Redwater bitumen upgrader and refinery, and 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 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 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 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, whether as a result of new information, future events or other factors, or the foregoing factors affecting this information, should circumstances or Management’s estimates or opinions change.
Special Note Regarding Currency, Production and Non-GAPP Financial Measures
The Company's MD&A of the financial condition and results of operations of the Company should be read in conjunction with the unaudited interim consolidated financial statements for the three months ended March 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 period ended March 31, 2018 and the Company's MD&A have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The Company's MD&A includes references to financial measures commonly used in the crude oil and natural gas industry, such as adjusted net earnings from operations, funds flow from operations, adjusted cash production costs and adjusted depreciation, depletion and amortization. These financial measures are not defined by IFRS and therefore are referred to as non-GAAP 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 and cash flows from operating activities, as determined in accordance with IFRS, as an indication of the Company's performance. The non-GAAP measures adjusted net earnings from operations and funds flow from operations are reconciled to net earnings, as determined in accordance with IFRS, in the “Financial Highlights” section of the Company's MD&A. The non-GAAP measure funds flow from operations is also reconciled to cash flows from operating activities in this section. The derivation of adjusted cash production costs and adjusted depreciation, depletion and amortization are included in the “Operating Highlights - Oil Sands Mining and Upgrading” section of the Company's MD&A. The Company also presents certain non-GAAP financial ratios and their derivation in the “Liquidity and Capital Resources” section of 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. 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 volumes and per unit statistics are presented throughout the Company's MD&A on a “before royalty” or “gross” basis, and realized prices are net of blending and feedstock costs and exclude the effect of risk management activities. Production on an “after royalty” or “net” basis is also presented for information purposes only. Results from operations for the three months ended March 31, 2017 presented in the Company's MD&A exclude the impact of the acquisition of interests in AOSP on May 31, 2017.
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.
CONFERENCE CALL
A conference call will be held at 8:00 a.m. Mountain Time, 10:00 a.m. Eastern Time on Thursday, May 3, 2018.
The North American conference call number is 1-866-393-4306 and the outside North American conference call number is 001-734-385-2616. 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, May 17, 2018. To access the rebroadcast in North America, dial 1-855-859-2056. Those outside of North America, dial 001-404-537-3406. The conference archive ID number is 9856698.
The conference call will also be webcast live and may 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, T2P4J8 Phone: 403-517-7777 Email: [email protected] www.cnrl.com |
STEVE W. LAUT Executive Vice-Chairman TIM S. MCKAY President COREY B. BIEBER Chief Financial Officer and Senior Vice-President, Finance MARK A. STAINTHORPE Vice-President, Finance – Capital Markets Trading Symbol - CNQ Toronto Stock Exchange New York Stock Exchange |
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