Good morning, ladies and gentlemen and welcome to the Canadian Natural Resources Q3 2016 Earnings Call. After the presentation, we will conduct a question-and-answer session. Instructions will be given at that time. Please note that this call is being recorded today, November 3, 2016 at 9 a.m. Mountain Time. I would now like to turn the meeting over to your host for today's call, Mark Stainthorpe, Director, Treasury and Investor Relations of Canadian Natural Resources. Please go ahead, Mr. Stainthorpe.

Thanks, Virgil. Good morning, everyone, and thank you for joining our third quarter 2016 conference call, where we will discuss our operational and financial results and provide an update regarding our ongoing projects and operations. With me this morning are Steve Laut, our President; Tim McKay, our Chief Operating Officer; and Corey Bieber, our Chief Financial Officer. Before we begin, I would like to refer you to the comments regarding forward-looking information contained in our press release and also note that all amounts are in Canadian dollars, and production and reserves are expressed as before royalties unless otherwise stated. With that, I'll now pass the call over to Steve Laut. Steve?

Thanks, Mark, and good morning, everyone. Thanks for joining the call this morning. Canadian Natural strengths and strategy are intact and we're effectively executing. As we come out of the third quarter, we are now even stronger and more robust. The most difficult portion of our transition to long life, low decline assets is now complete. As a result, the size, sustainability of our cash flow has increased substantially. Combining our long life, low decline assets with our large, low capital exposure assets allows Canadian Natural to generate significant, sustainable cash flow and a potential to grow production in the 8% CAGR range. And at the same time, enhance the strength of the balance sheet, provide increasing returns to shareholders and capture acquisition opportunities, if they fit, make sense and add value. Canadian Natural is a unique E&P company. In the third quarter Canadian Natural continue to lower costs. Our already top-tier operating costs are down an impressive 17% versus Q3 2015 at $12.37 a BOE. Cash flow was solid just over $1 billion or $0.93 a share. Q3 production was impacted by third-party pipeline outages, the planned turnarounds at Horizon and Primrose as well as being in the low portion of the thermal cycle at Primrose. With these issues behind us, and the thermal cycle at Primrose on the upswing, October production was approximately 825,000 BOEs a day. A major driver of October production numbers was a very effective start-up and commissioning of Horizon 2B. Horizon Phase 2B began the start up in October. With October rates at 160,500 barrels a day. And for the last two weeks, we've been running around 176,600 barrel a day mark. The hydrogen plant, which is the last major Phase 2B component, came on stream November 1. Current rates are 192,000 barrels a…

Thank you, Steve. Good morning, everyone. I will now do a brief overview of our assets and talk through our third quarter 2016. Starting with natural gas, our Q3 production volumes of 1.645 Bcf was a decrease of approximately 3% from Q2 2016. It was primarily impacted by the third-party plant and infrastructure issues that I talked to last quarter, which is currently taking restricted volumes. During Q3, we only averaged 37 million a day of the 176 million cubic feet of sales capacity to this facility. Currently, we're selling proximally 70 million a day so still about 106 million cubic feet shut-in. A third-party operator now targets production to be restated in the month of December. As a result, our total company natural gas is targeted to exit 2016 at approximately 1.7 Bcf a day. We are currently seeing cost savings in our North American natural gas operating costs and have been able to reduce them 17% compared to Q3 2015. Our third quarter operating costs are very good at $1.4 per Mcfe, and overall we target our annual natural gas operating cost to come in below our midpoint of guidance for 2016. Our North American light oil and NGL production in Q3 was approximately 90,200 barrels a day, up almost 8% from Q2 2016. In all areas, we continue to optimize water flood, stimulate wells as well complete minor acquisitions. We have started our small high-graded drilling program of five wells, and subsequent to the quarter end, two wells have come on and we're seeing initial rates of approximately 2,300 BOEs per day and 1,500 BOEs per day, respectively, well above our targeted rate of approximately 800 BOE per day per well. While results are early, we have at least 14 more sections that can be drilled over…

Thanks, Tim, and good morning, everyone. The third quarter loss largely reflected the reduced income from Horizon due to the major turnaround during the quarter, partially offset by a modest recovery in natural gas pricing. The quarter also included $107 million deferred tax benefit related to the UK government reducing the supplement recharge on oil and gas profits from 20% to 10%. Our third quarter cash flows from operations of $1.021 billion represented a 9% increase over second quarter 2016 levels and a 55% increase over the low of Q1 2016, a good achievement given the major turnaround occurring at our most significant cash flowing asset, Horizon. To put this in perspective, Q3 cash flows increased by $83 million even with field cash netbacks from Horizon decreasing by about $335 million versus Q2 due to the major turnaround. Benefiting cash tax recoveries during the quarter were lower pre-tax cash flow at Horizon due to the impact of the turnaround and associated higher maintenance turnaround costs; recognition of additional R&D qualifying expenditures in Canada and the meaningful progress on the topsides abandonment at Murchison in the North Sea recovering higher PRT and current tax. I believe this demonstrates how a balanced portfolio of assets delivers complementary and more sustainable financial results. Canadian Natural has reached inflection point with the recent additional production and incremental cash flows associated with the company's completion of Horizon Phase 2B being a major addition to the company's balanced asset portfolio. Coupled with lower Horizon project capital, our free cash flow profile significantly changes, making it more sustainable through the commodity price cycle. The targeted completion of the Horizon expansion to 250,000 barrels a day of SCO in 2017 will further increase our long life, low decline assets profile. In addition, we made great strides throughout the…

Good. Thanks, Corey and Tim, for giving us the highlights of our strong position on operations and our financial strengths. As you heard this morning, Canadian Natural has the new combination of asset-based strength, diversity and balance, combined with our strategy, competitive advantages, effective capital allocation and a management team that's more aligned with shareholders than any of our peers, allows us to deliver the best of all worlds in long life, low decline assets and low capital exposure assets. Canadian Natural may be the only company in our peer group that has a quality in both asset types, the technical and operational expertise to execute in both asset types, and to deliver effective and efficient operations and, importantly, the discipline to effectively allocate capital to grow production and maximize cash flow. The strength, size and power of both asset types, combined with the effective capital allocation, make Canadian Natural very robust and maximizes cash flow. We strive to balance and optimize our four pillars of cash flow allocation, as Corey mentioned; balance sheet strength, return to shareholders, resource development and opportunistic acquisitions. In the fourth quarter and into 2017, we target increasing free cash flow. And with free cash flow increasing, we see the balance sheet quickly strengthening. And today, we've increased the dividend by $0.08 to $1 a share. In Kirby North, we're now moving ahead with the 40,000 barrel a day SAGD project with first steam then in Q3 2019 and the first oil in Q1 2020. Canadian Natural is in a great position, and we are now more robust and sustainable. And to be honest with you, the future looks even more sustainable and robust. With that, we'll open up the call for any questions you might have.

Your first question comes from Phil Gresh from JPMorgan. Please go ahead.

Hey, good morning. First question, just on Kirby North, at the Analyst Day, you talked – you did a great job at the Analyst Day of highlighting all of the assets in the portfolio and the breakevens for 15% IRR. And it sounded like the focus was going to be more on shorter and medium cycle opportunities in the portfolio, whereas this seems a bit longer cycle, ties up the capital for a bit longer. So, maybe just elaborate on why you decided to move forward with this project, acknowledging that you're obviously moving forward on shorter cycle as well here?

I think that's a really good question, Phil. Thank you for that. Because we're doing both, obviously we haven't set 2017 budget. But if you look at what Tim pointed out, the capital allocation for Kirby North is $28 million in 2017, it's not that much. We still have the capital flexibility to pull back if we see commodity prices drop. But Kirby North will not be coming on until – steam-in in Q3 of 2019 and production in Q1 2020. So that's always out there. We have enough capital flexibility to manage that going forward. But we will continue and we will see that when we get to 2017 budget. I'm expecting that we'll have a greater focus on the low capital exposure projects to give you a quicker payout and higher return.

Okay. And the second question is just on the capital budget. Steve, I know you don't want to give a hard number here. Understood. You did give a wide range at the Analyst Day of kind of a low case of $2.7 billion, high case or $60 case of $4.5 billion. Your sustaining number, I believe, is between $2.4 billion and $2.7 billion. I think there is $1 billion for Horizon still in there. Is it going to be materially above kind of the sustaining plus Horizon number with the short cycle additions or is that the right way to think about it?

I'm not sure what the right way to think about it is, but the way we think about it is we're looking here to see what happens with commodity prices particularly on the oil side. As you know, there's quite a bit of volatility out there. I think we'll be, based on what we see right now with commodity prices, somewhere right in that range we talked about. So, you can almost draw a line between the low price forecast we had, which I think was in the $40 range or $38 range. That would be basically the sustaining capital. And somewhere below, I don't think we're going to see $60 oil. We don't count on that. So, it will be less than $4.5 billion. But we haven't finalized 2007 budget yet. We're still looking that. But I think one thing you will see in 2017 budget is a significant amount of capital flexibility, and our ability to flex-up the capital, if we see greater strength, and the ability to flex down the capital if we see lower strength in commodity prices. So I think we'll be very nimble in 2017.

Okay. And then just the last question is on production. I mean, obviously you're going to have the big step up here in the fourth quarter, particularly at thermal and obviously with Horizon. But as we look ahead to 2017 production and the run rate you're tracking at in the fourth quarter, is the fourth quarter a reasonable proxy for how to think about 2017?

It's too early for us to say because we don't know what the capital allocation is going to be. We haven't landed on it yet. But I would think that if you just look at the sort of strip placing we see today and sort of take a reasonable guess, our production will be greater than the fourth quarter on average for the next year.

Okay. Great. Thanks. I'll turn it over.

Your next question comes from Greg Pardy from RBC Capital Markets. Please go ahead.

Thanks. Good morning. Steve, with the uptick in spending here in the fourth quarter, and you mentioned going to 16 rigs in January, so is this going to be a significant push then on primary heavy oil? Could you just round out a little bit as to how you're going to spend the dollars?

We're going to take a balanced approach. I'll get maybe Tim just to talk to you about what the drilling program looks like, but we haven't just landed on 2017 yet, Greg. So, let's maybe talk about the drilling that we're doing here and the rest of 2016, Tim, where that allocation goes, give you a hint of what it will look like in 2017.

Sure, Greg. It's really quite balanced between heavy oil. We have some light oil drilling, some thermal wells. Strat setting up for Kirby North and at Primrose. It's really quite balanced between the different areas. What we want to do is we're seeing extremely good cost savings and productivity. And we want to make sure that if we do have a good budget that we have very efficient and effective program going into 2017.

One thing I'll add Greg...

Okay. Yeah.

...is that we talked about being nimble. I think Tim is going to be very reactive if we see cost increases start to happen out there. We'll react to that. We're not going to drive costs up by increased activity at any cost.

Okay. Okay. Perfect. And you mentioned the oil price volatility. I think most people will probably wait until post OPEC to talk about budgets. But directionally, should we be thinking about a December or January release?

Yes.

Can you give me either month on that one?

Sorry, I couldn't resist, Greg. But I think it's more likely to be in December than January, but we're not fixed in stone yet.

Okay. No problem. And the last one is just in terms of looking at the updated guidance. So, there is this capitalized interest in other line item here. That one's up like a over $100 million. Is that where you plug the additional maintenance capital or additional capital requirement? I'm just trying to understand what's in the number.

Greg, it's Corey. A lot of it is stock-based compensation that gets capitalized under the project itself. So, that's actually – the stock price has done reasonably well this year and that's a big chunk of it.

Okay. Okay. Perfect. You know what, I think that's it for me. Thanks very much, guys, and congrats on getting 2B up.

Thanks.

Your next question comes from the line of Neil Mehta from Goldman Sachs. Please go ahead. Neil Mehta - Goldman Sachs & Co.: Hey. Good morning, guys. Congrats on the dividend increase here. It's something that we haven't seen a lot of among producers. I wanted to continue on the theme. Can you talk a little bit as you think about 2017, how you think about the dividend – potential dividend growth versus buybacks versus debt reduction? And where do you prioritize free cash flow to the extent you see it?

I think, Neil, what we try to do and that's why we have this four pillars concept, we try to balance all those pillars; so balance sheet strength, returns to shareholders through dividends or buybacks, resource development and acquisition – opportunistic acquisitions. And we'll try to do that in 2017. I would think as we go into 2017, you will see that a greater proportion likely is going to go to the balance sheet. We want to make sure that's stronger as we go forward. Resource development, I think we've got a pretty balanced program. You won't see too much increase there. Acquisitions, we don't really have any gaps in our portfolio, Neil. So it's not like we need to do anything. That being said, we're not afraid to do them. We're good at it. And if it adds value and makes sense, we'd look at that as well. So, that really leaves you what's left as a good (34:42) choice is return to shareholders and we evaluate whether it's better to do dividends or share buybacks. And that's really a function of where we are in stock price and our cash flow that we have. So, it's a tough call. Right now, we've chosen to go with dividends first. Neil Mehta - Goldman Sachs & Co.: Yeah. And then, in terms of where you stand in terms of asset monetization opportunities, can you provide some color there, including how you think about PrairieSky and whether that's a core asset or one that you would consider monetizing?

I think what we said, Neil, is that we will consider monetizing, in one shape or form, PrairieSky. But that being said, we really like PrairieSky's shares. And as you've seen, the share price has gone up pretty good. We think it's still got room to run. So, we're happy with our holdings there. It's worked out well for us. Neil Mehta - Goldman Sachs & Co.: Yeah. Last question for me is that you guys are looking to get a little bit more confidence in the oil macro before you set the 2017 budget. What are the two or three things that you're looking out for, OPEC, obviously, being one of them as we get closer to the date?

I think OPEC's the biggest wildcard out there we have to watch. We're watching supply and demand. And you probably have just as good or better view than we do on that. And we see supply and demand going back into balance here, so that will be constructive for pricing. We'll just see what happens here with OPEC. Neil Mehta - Goldman Sachs & Co.: Got it. Thanks, guys.

Your next question comes from the line of Frank McGann from Bank of America Merrill Lynch. Your line is open.

Okay. Thank you very much. Yeah, just two to quick questions. One, in terms of acquisitions and how you're seeing the environment right now. Obviously, things have continued to evolve. It sounds like you're, in general, a little bit more confident than you were maybe six months ago, but still with some significant uncertainties. But how you're seeing the acquisition environment in terms of what types of assets are available and what you're looking for in terms of specific characteristics there. And then secondly, in terms of reserves, I was wondering if one of your competitors has talked about possible significant impairment in the fourth quarter, potentially if oil prices stay low, I was just wondering how you're looking at year-end reserves?

Okay. Thanks, Frank. And you're right, we are much more confident than we were in the past. And that confidence is driven, for the most part, by our results here at Horizon. It's been a very good startup. Our productions are – is doing really good. And we're seeing our costs come down across the board. So, we're doing well on Gary's (37:33) account here. So, we're much more confident going forward. The acquisition environment, I would say, it's about the same. We see a lot of properties flow through our core areas. We look at everything that goes through our core areas. We bid on some and we get very few. And what we're looking for is ability to essentially add value through lowering the cost structure, by leveraging our infrastructure and our economies of scale. So, those are very tough to find, but we look at everything that comes through our area. So, there seems to be quite a bit of deal flow, a lot of it doesn't make sense for us. As far as the reserves, we are one of the very low cost operators in our space and we are very confident. All reserves are, as you know, evaluated by external evaluators, engineering evaluators outside of the company and we don't see a write-down happening with the low prices we see today.

Okay. Thank you very much.

Your next question comes from the line of Jason Frew from Credit Suisse. Please go ahead. Jason Frew - Credit Suisse Securities (Canada), Inc: Hi, there. Steve, I was wondering if you could characterize sustaining capital in the oil sand, just to what degree that might be coming down and if there is any way to quantify that in your mind?

I think we're seeing costs come down across the board. And we expect to see better effectiveness and efficiency as we go forward. That being said, the sustained capital, particularly if you're talking about the mining and upgrading business, that's very lumpy. And it depends on where you are in sort of the reliability stage and whether you need to buy trucks or shovels. Those tend to be lumpy. So, we're going to be in that $6 to $9 a barrel range sustaining capital and we continue to work to drive those costs down. And part of that, as you've seen here in the turnaround in third quarter, we believe it makes sense to take the extra time and spend the extra money to get that increase in reliability. And I think that's paid off for us. I think you'll see when you compare our reliability and utilization, our uptime, compared to our peers, we're consistently in the top. And that pays off for us in terms of operating costs and netbacks. Jason Frew - Credit Suisse Securities (Canada), Inc: And what about – just on the in situ side, is there a different characterization there at all?

I think we've seen it come down. There's a lot of sustaining capital costs and Tim maybe you can comment on this. But a lot of sustaining costs or capital costs are actually drilling pads, facilitates and the drilling costs. Tim, I think we've seen significant cost drops there.

Yeah. On the thermal side, Steve, you're right. It's basically pad drilling. And what we're seeing is very good cost savings, not only on the rates, but the productivity is very, very much improved from what we've seen previously. So, it's a twofold piece that's helping us there. Jason Frew - Credit Suisse Securities (Canada), Inc: Is there any way to think about like per barrel what the cost might have been historically in the in situ business and where they may be going now?

I think we've seen probably – right now, I'd say, probably 20% to 25% reduction in costs. Jason Frew - Credit Suisse Securities (Canada), Inc: Okay. Thanks.

Your next question comes from Mike Dunn from GMP FirstEnergy. Please go ahead.

Thank you. Steve, you mentioned earlier – or either you or Tim mentioned that Horizon, the hard part is behind you and there is relatively – the scope of what needs to be completed going forward is relatively small. Just wondering about the Q4 2017 first oil timing, whether that's – is it sort of an October date you have in mind and whether or not there is a chance that it gets pushed into Q3? Thanks.

We'll still stick it to our Q4 2017, Mike. It's a little early. I would say our project teams and our commissioning and startup teams have done an excellent job here at 2B, but it's too early for us to say that we're going to come in early. We'll just wait and see how the first and second quarter shakes out before we can make any commitment to whether we're going to be early or where we're going to be in Q4. But we are targeting to be in the first half of Q4 and not the last half. Obviously, we want to start up in the summer – or in the fall, I should say.

Right. Thanks, Steve. That's all for me.

There are no further questions at this time. I'd turn the call back over to the presenters.

Thanks, Virgil. Thank you everyone for attending our conference call this morning. As was discussed today, Canadian Natural strengths lie in our effective strategy, our large well-balanced and diversified asset base, including a combination of long life, low decline assets and high-quality low-capital exposure projects. This, along with a strong financial position and effective capital allocation, makes Canadian Natural very robust, sets us apart from our peer group and ensures we achieve our goal of maximizing shareholder value. If you have any further questions, please give us a call. Thank you again. And we look forward to our fourth quarter and year-end conference call in early March. Thank you and goodbye.

This concludes today's conference call. You may now disconnect.