Good morning, ladies and gentlemen and welcome to the Canadian Natural Resources Q4 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, March 2, 2017 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.

Good morning everyone, and thanks for joining our Fourth Quarter and Year End 2016 Conference Call, we will be discussing 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 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 Naturals fourth quarter was strong. The strength of our well balanced and diverse portfolio combined with Canadian Natural’s ability to effectively and efficiently execute continues to deliver. Our conventional, thermal and international operations delivered solid results. Canadian Natural grown up production and at the same time effectively lowered our cost structure across the board. A major driver of these strong numbers is Horizon execution. At Horizon production is exceeding Canadian Natural’s capacity of 182,000 barrels a day, with December and January production of 184,000 barrels a day and 195,000 barrels a day respectively. In February production was even stronger at 202,600 barrels a day. Horizon operating cost were also excellent with Q4 cost at $22.53 a barrel and so far in 2017 we’re running roughly $22.50 a barrel. In Q4, cash flow exceeded capital expenditures by $900 million and in Q1, we are running about $230 million a month of cash flow above capital expenditures. As a result, our balance sheet is strengthening quickly. Clearly Canadian Natural is in a very strong position in 2017. As a result we’ve increased the dividend by 10% on top of the 9% quarterly dividend increased announced in November 2016. In addition, the board has approved a normal course issuer bid to buy back up to 2.5% of our stock subject to regulatory approval. A reflection of our strong position at our confidence delivering in 2017 and beyond. The most difficult portion of our transition to long life low decline low decline assets is now complete. As a result, the size and sustainability of our cash flow has increased substantially. With 80,000 barrels Phase 3 set to come on in Q4, we will take another step change upward and sustainability…

Thank you, Steve. Good morning everyone. I will now do a brief overview of our assets and talk to our 2016 fourth quarter and year end results. Starting with natural gas, our fourth quarter production of 1.646 BCF a day was essentially flat to Q3 production. During the quarter we were impacted by the third party plant where we averaged only 76 million cubic feet per day of natural gas sales verse our 176 million cubic feet per day of capacity. Currently we’re producing at a constrained rate of approximately 120 million cubic feet per day. Our North American natural gas operating cost were down about 9% when comparing Q4, 2016 to Q4, 2015 also in comparing our annual operating cost of about 12%. We have a year-over-year reduction of 12% when compared to 2015. Overall for 2017, we target our North American natural gas operating cost guidance to be $1 to $1.20, a further 2% reduction from comparing mid quarter guidance. For Q1 activity we’re targeting 15 net natural gas wells, 10 which are targeting the liquid rich Montney and our Septimus and Gold Creek areas. Our program is focused low cost tie-ins to our own and operated infrastructure as well we’ve been able to assure low during the completion cost by being organized and proactive in our execution strategy. Q1, 2017 natural gas guidance is targeted to be 1.7 to 1.74 BCF a day up 74 million cubic feet per day or 4% more over Q4, 2016 volume. Our North American light oil and NGL production in Q4, 2016 was approximately 88,000 barrels a day down 3% from Q3, 2016 and is flat when compared to Q4 2015. In all areas, we’re continued to optimize our water floods and continue to improve our operating cost which were down…

Thank you Tim and good morning, everyone. As you’re all aware commodity pricing in 2016 was challenging with WTI averaging about $43.37 a barrel and ACO [ph] natural gas pricing sub $2. However despite these very low commodity prices and spending above $1.9 billion on Horizon expansion capital our net debt remained essentially flat versus prior year levels, well at the same time we delivered flat entry to exit production growth 4% proved reserve growth and an increase dividend to shareholders. In Q4, 2016 fund flow from operations were approximately $1 billion in excess of our net capital expenditures and our dividends. After working capital changes, this resulted in over $700 million in hard debt repayment as partially offset by FX losses on US debt of $220 million. We were steadfast in our commitment to delivering Horizon Phase 2B expansion on time and on budget and delivered a quick and efficient ramp up beyond name plate capacity. As such in Q3, we reached at an inflection point where major project capital spending dropped and additional production would bring in new cash flow. Result of this along with more constructive commodity pricing was quite striking. With our focus on cost control and effective and efficient operations, we returned to profitability with $566 million in earning during the fourth quarter. Additionally, during the fourth quarter the company completed the sale of non-strategic ownership interest in the Cold Lake pipeline for good value and an accounting gain of $218 million, again highlighting the number of internal financial levers that we have at our disposal. Furthermore, as expected our trailing 12-month debt-to-EBITDA declined from Q3, 2016 3.9 times to 3.6 times at December 31 and based on current strip pricing I would expect this metric to exit Q1, 2017 at about 2.8 times. Our…

Thanks Corey. As you heard this morning Canadian Natural has a unique combination of asset base strength, diversity and balance. Combined with our strategy and our competitive advantages, the effective capital allocation and a management team that is more aligned with our shareholders than any of our peers, allows us to deliver the best of all worlds in long life low decline and low cap exposure assets. Canadian Natural maybe the only company in our peer group that has 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 combine effective capital allocation makes Canadian Natural very robust and maximizes cash flow. We strive to balance and optimize the four pillars of cash flow allocation to maximize shareholder value. Balance sheet strength, returns to shareholders, resource development and opportunistic acquisitions. With free cash flow increasing roughly $203 million a month in Q1, we’re effectively balancing the four pillars to maximize shareholder value. The balance sheet is strengthening quickly and with two increases in dividends in last five months as well as over course issuer bid approved by the board yesterday reflects our commitment to returns to shareholders. In addition, we continue to lower the cost structure and grow midpoint production at 6%. Canadian Natural is in a great position and is now more robust and sustainable and the future looks even more robust and sustainable. With that we’ll be happy answer any questions now operator.

[Operator Instructions] your first question comes from the line of Philip Gresh with JP Morgan. Your line is open.

My first question is just on the return of capital. If you go back to the 2017 outlook call that you had not too long I had asked about return of capital back then it sounded like you had a dividend buyers in terms of potential increase in the dividend, but the turnaround buybacks at the time is maybe a little bit more muted to obviously, you’re taking another step forward. I guess maybe what would you say is changed since that time that make sure you’re willing to do the share buybacks as well.

This is Steve here. I’d say nothing is really changed that much we’ve always we tried to balance those four pillars and balance the returns of shareholders between dividends and share buybacks and it’s still the same, I think our bias is towards dividends but we will do share buybacks as part of that balance and I think we were effectively targeting to offset dilution and obviously part of that is with the stock prices makes a difference and so that’s maybe what the slight change in tone is, but it’s always been a balanced approach.

Yes and that’s fair enough, appreciate that the stemming of the stock price here. Corey just on the leverage target, the sub 2 times for the full year, is that inclusive of full 2.5% buyback?

No, that is not. We have not assumed in those forwards numbers that we would fully execute the NCIB, the NCIB would be opportunistic and is not contemplated in that number.

Okay, got it and just last question, on the opportunistic acquisition front, Steve there are some assets out there including some natural gas assets. I’m curious how you’re thinking about the opportunity for acquisitions nowadays, how does the market look to you in general relative to six months ago or 12 months ago in light of where pricing is both on oil and gas markets?

I think, Philip, I’ll start off by answering any question if, your answer in acquisition is always the same. We don’t have any gaps in our portfolio, so we have no mean to do any acquisitions. So any acquisitions we do, they have to be a fit, they have to make sense and they have to add value and that’s where we look for. We’re not looking for gas acquisition or oil acquisition or any acquisition for that matter. We were looking anything that comes in our core area that makes sense, is a great fit and adds value and I know you talked about some gas assets out there. I would say the market hasn’t changed much what’s out there really isn’t a great fit for us, so we’ll see what happens but not a great fit.

Okay very clear. Thank you.

Your next question comes from the line of Amir Arif with Cormark Securities, your line is open.

A couple of questions, just on the Horizon. The fractionation tower debottleneck opportunity, I mean the economics seem great, I know you will be firming that decision up in 2Q, but can you just give us some color on what you’re waiting for, to decide whether to ahead with that or not?

I’ll give you a quick answer, if I miss anything here Tim will fill you in a more detail. So what really I greatly see the economics are awesome for doing the debottleneck on the fractionation tower. What we’re really trying to do and probably Tim could give you more detail here is and we’re trying to optimize that debottleneck, as you can see the production in the fourth quarter and here in January and February, at Horizon it’s exceeding design by quite a bit and we need to know where all the potentials bottlenecks are so, the fractionation tower we know is there, we’re just trying to make sure we got the optimum debottleneck that goes with that. There’s other probably little things that we can see that may do, we may have to upgrade some pump some places, maybe do some adjustive [ph] differences. So really Tim I guess, we’re just making sure we get it right, before be build. Is that correct?

Absolutely, yes. We’re being very disciplined and as you can see with the production each month it’s been a bit stronger and we’re basically going through and very methodically and understanding each aspect of the plant, so that we can make the optimal decision.

We’ll be ashamed, the debottleneck, and then found out we still have more capacity, so we’re trying to cover that all of.

Okay and that’s good to know and then after you add, the next 80 [ph] expansion does that suggest you could be at, at 260 to 275 run rate instead of 250.

Yes, I know that Amir. It’s - you can do the math and probably going to be higher than 250, probably 260 I would say. It’s probably safe bet one of the things that’s happened here on every expansion and we can’t actually give you a guarantee, but if you look at Phase 2A or actually run rate exceeded design 2B, looks like run rate is going to exceed design and that’s part of what Tim and his team are doing here, doing analysis what’s the chance of Phase 3, will actually see design capacity and what do we have to do if that happens, so that’s why we’re taking our as Tim [indiscernible] disciplined and methodically go through it and make sure you get it all covered on.

Okay and the operating cost at that point in time, after you’re at 250 or 260, would it be closer to $20 a barrel or what do you think about that on that front?

Yes, we’re looking to exit, 2017 and about $120 a barrel.

$120 a barrel, okay. Thanks and then one final question, just strategically Steve as you’ve lowered your corporate decline rate and got high margin net backs in there. Anything changed strategically in terms of how you’re thinking of growth going forward like do you plan to do more exploration or more longer lead time or more international just anything changed with the longer decline rate and the better corporate net backs going forward.

I think it’s going to happen, Amir, as we talk quite a bit on the call, both Corey and I talk about balancing the four pillars of cash flow and how we’re going to allocate that. We’re going to keep that strategy in place and we’ll try to balance out between balance sheet strength and clearly you can see here in the fourth quarter. Most of that free cash flow went to the balance sheet better in the way and so that sort of gets up hurry to start here, but we’ll [indiscernible] as we go along between returns to shareholders you’re seeing the dividend increase here today. Resource development, we think we are at optimum levels. We have rooms, we can do more, if you want but there is a lot of bunch of bouncing factors there and opportunistic acquisitions and as I answered before, we don’t see any gaps from portfolio, with that being said we’re not afraid to acquisitions. We’re good at it and if something makes sense, it fits and adds value, we’d look at it.

Okay and that was sort of my question was more just within the resource development side, so within the organic growth side, is there a shift that you would do just given the corporate decline rate and the netbacks.

There’s no shift, we’ll keep at strategy. We’re all about adding value, creating value. So we don’t go for any particular product or area, where we create the most value and gives us highest return on capital that’s where we go.

Terrific. Thank you.

Your next question comes from the line of Neil Mehta with Goldman Sachs. Your line is open.

Congrats on the dividend rise. As you think about the dividend, Steve can you talk about in quarter, what you’re anchoring yourself to, are you targeting a competitive dividend yield or percentage of tax flow from operations, what’s the math that the board is looking at as you think about where the appropriate place is set the dividend.

Hi Neil its Corey. We don’t target to any particular item, we think there’s danger in doing that. What we like to do is, make sure that the dividend is sustainable throughout the commodity price cycle, so we stress tested at various commodity prices and based on our capital programs and really try to ensure that we’re giving those returns to the shareholders, but making sure that it is sustainable through the cycle. So we, think that artificially pinning it 2% of cash flow or yield or whatever is can lead you to some bad answers, so it’s really focused on what makes sense over the long-term.

Appreciate that. The company announced $350 million of the midstream pipeline sales in 4Q. Can you guys talk about potential asset sale opportunities recognizing this is a consistent part of portfolio management, but do you see any meaningful opportunities as you go through 2017 to monetize non-core assets?

I would say, something we look at all the time. I don’t see any major dispositions we’re always selling a little pieces in bits here as we go long, but nothing major. We have additional royalty lands or royalty assets that we may have disposed of as we go through 2017, but that’s not a material component of the company. It’s about 1,000 BOEs a day, so it’s a significant value actually, but not a major component strategically for the company.

Got it and last question from me is, this topic has probably been beaten to death, but the topic border adjustment tax here in the US. From your perspective any thoughts in terms of the political tax calculus and probability of implementation but also whether it would impacts, whether it’s on WCS pricing or as you think about the value of your Syncrude assets. As you guys have done some of the calculus within the Company, how do you think about any impact a border tax could possibly have?

Well and sort of first probably saying, yes we’re not sure if there’s going to be a border tax, but if there a border tax, there’s many factors are going to it. Number one, what it would look like and what the impact would that have on oil prices themselves not only in the US, but in Canada, would we see oil prices in US go up, as they have limited quantity to feed the refineries. As you know there’s significant amount of oil imported at the US. It is a raw material so manufacturing or refining actually happens in US, so what does that mean. The impact is, what’s it is going to mean to Canadian Dollar. As you know most of our cost almost all our cost are in Canadian Dollars. So the border tax would probably have a big impact on the Canadian dollar, would drop our cost and would happen to our actually profitability and net backs after that, we may indifferent but it’s too early for us to tell, it’s speculation at this point.

Appreciated guys. Thank you.

Your next question comes from the line of Roger Reed with Wells Fargo. Your line is open.

I guess maybe as a way to launch in here, talked a little bit in the various release documents about benefiting from lower service costs and I was just wondering we’re seeing more of an issue in the lower 48 on service costs starting to turnaround, but how should we think about that impacting drilling? And then what can you do or what do you think is still to be delivered on the drilling efficiency side to offset any of that?

It’s Tim McKay here, yes we’re seeing some cost pressures across the board in some areas Grand Prairie probably more than other areas, where activities is pretty muted, but we’re seeing that pressure but at the same time, our drilling is being more efficient. Grand Prairie we’re 10% faster than we were a year ago, so it’s - we’re seeing by having the same crews working for us day-after-day we were seeing those efficiencies on the other side.

Yes I think I would add, Roger what we’re seeing here is as Tim pointed out, it’s kind of slotty [ph]. In the Grand Prairie we have lots of Montney and Deep Basin activity, we’re starting to see some pressure mostly in refractories [ph] not so much on drilling. I would say in the rest areas and say particularly at Horizon on our expansion projects, we’re still getting cost coming in very good levels and actually seen some cost reductions still. So it’s spotty and as Tim pointed out I think the team is doing a good job of leveraging technology enhancing execution to offset those costs pressures that we’re seeing.

Okay thanks. And then in your opening comment about the 11% annual decline rates, I was wondering is that number off the total production of the Company or is that strictly to the conventional side, excluding the stable long live production?

No that’s the total company production.

Okay so the CapEx number, is that then the amount of CapEx to keep it flat should we think about that as the total Company number or is that mostly applicable to the more convention type production?

No that’s total rolled up for the company.

Okay so we could get an idea what it would take to back out on the Oil Sands side? Okay I appreciate it thank you.

Your next question comes from the line of Greg Pardy with RBC Capital Markets. Your line is open.

Thanks good morning. Steve, really just coming back to Amir’s question this is same thing I was going to ask. Back at your June investor open house you guys I think Murray had alluded to a $20 a barrel OpEx cost at Horizon by 2020, so if I heard you guys right you’re saying you’ll exit 2017 at sub $20. So that’s obviously moving a lot faster than it had been expected to is that fair?

Yes, I think obviously we’re very confident in June when we talked about it in at the Investment [indiscernible] but we’re making great progress the effectiveness and efficiencies that we’re gaining at Horizon combined with the, I’d say increase reliability and utilization have had a big impact on operating cost.

Okay terrific, thanks very much.

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

Yes, thank you most of my questions have been answered. Just looking at the resource development pillar that you have and looking at what appears to be a fairly lengthy list of projects that you could do, I was wondering how you’re thinking now about the price cost and investment requirements for those projects and what it would take for you to become more aggressive and move faster perhaps in expanding your producing asset base?

I think Frank, you look at our profile going forward with the capital program we have here in, at $4 billion range, we’re delivering 6% to 8% CAGR growth, we’re pretty comfortable in that range, obviously we could accelerate it, if we wanted, but the key thing is we want to make sure we maintain our capital efficiencies and by accelerating activity, you got to make sure you don’t inadvertently drive up cost and that’s what we are focused on.

Okay, thank you very much.

Your next question comes from the line of Nima Billou with Veritas Investment Research. Your line is open.

Good morning. One of the biggest questions I had was looking at your guidance across-the-board, there’s a wide range. I just want to go through what would account for ending up on the lower end of the range for production, let’s just focus on North America conventional thermal because Horizon is pretty well understood and what would account for ending up on the higher level production? Because there’s no real variability in your capital spend. Is it a question of productivity? I just wanted to get a sense why such a wide range?

Our range is pretty consistent, we use about the same range, we’ve done that probably for the last 10 years that same kind of percentage range, so it’s fair to account for variability if you look on the gas side for instance, we still have issues beyond our control with [indiscernible] transportation and third party outages, so we try to account for that, that’s probably the biggest range, now the rest is just to account for other variability I would say, Tim.

Yes on the case of thermal, as you can appreciate when we do a thermal cycle the ramp up can be very significant and if you happen to move it at couple weeks, that can change the quarter significantly.

So we try to give ourselves room on the range because what our focus here is to maximize value and we’ll adjust those cycles to make sure we capture the rate value and do the same thing here in the past, we have with lower oil prices cut shut back oil, shut in some oil. So I don’t see that happening here but we had to counter variability.

Okay appreciate that. Someone asked the question prior, to get a sense you can kind of build it from the guidance you provided and I don’t have your mostly recent presentation where you’ve gone through that yet. What would be a normal course sustaining capital amount out of that $4 billion given? Is it just basically all conventional and then add in the sustaining number for Horizon so $2.5 billion a year? Just wanted to get a sense of what the sustaining number would be to maintain volumes?

So to maintain volumes, our number is in that $2.7 billion to $2.8 billion that includes all capital for Horizon and conventional and we’d keep production flat at that range assume [ph] our cost structure doesn’t inflate.

Appreciate that and looking at your op cost is there any opportunity like you’ve talked about debottlenecking with respect to volumes but are there any high return opportunities in investing and logics and processing to lower op cost? Because there has been a little bit of cost creep on the North American side. So are there any high return projects you can invest in logistics and processing to bring costs down?

I don’t think there’s any big projects it’s just all sort of small gains, we make in efficiencies and effectiveness and Horizon I think it’s again about continuous improvement and we use that throughout the company but Horizon you see the biggest impact.

And final question, thank you. Appreciate you, you said there’s no gaps in your portfolio but it's not necessarily about gaps. What about dreaming bigger? You guys have excellent operational expertise, long life projects specifically in SAGD, why not a combination with a [indiscernible], a big splash? I think it would make sense, you’d have project growth for decades, it would be material, you’re of a material size, is that you could execute such a transaction and you both have similar expertise in sort of SAGD assets as low cost operators.

Yes we’re not going to do that, that doesn’t make sense for us. If you look at our terminal profile, we got decades of production growth here, matter of fact it makes actually probably no sense to do something like that because we’ve got our own, our organic value to grow.

Okay, there’s just no value, you don’t see that value it’s better to focus internally.

That’s correct.

Okay, appreciate the candor. Thank you.

Thanks.

[Operator Instructions] there are no further questions in queue at this time. I would now like to turn the conference back over to Mark Stainthorpe.

Thanks Tiffany and thank you everyone for attending our conference call, this morning. Canadian Natural is an enviable position with a large well diverse asset base, a strong balance sheet and strong free cash flow generation, all supported by effective and efficient operations, long life low decline assets and high quality low capital exposure project. This all contribute to Canadian Natural’s robustness and the ability to 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 2017 first quarter conference call in early May. Thanks again and bye for now.

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