Good morning, ladies and gentlemen, and welcome to the Canadian Natural Resources Q2 2017 Earnings Results Conference 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, August 3, 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.

Thank you, Heidi. Good morning, everyone, and thank you for joining our conference call, where we will discuss our operational and financial results for the second quarter of 2017 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, and thank you for joining the call this morning. The strength of our well-balanced and diverse portfolio, combined with Canadian Natural's ability to effectively and efficiently execute, continues to deliver with a strong second quarter. In Q2, cash flow was strong and exceeded capital expenditures by CAD 800 million, excluding the acquisition of the Athabasca Oil Sands Project, reflecting the superior cash flow capacity of our asset base. In Q4, with Horizon Phase 3 on stream, we target a strip pricing deliver CAD 1 billion of cash flow over capital requirements, a number that will grow in Q1 2018 when Horizon Phase 3 is on for a full quarter and the Horizon turnaround is behind us. Q2 production was up 16% over Q2 2016 and up 4% over Q1 2017. In June, we achieved a record production volume of over 1 million BOE a day, impressive growth considering the difficult commodity price environment for the last two and half years and even more impressive considering we underspent cash flow by CAD 800 million in Q2. Our focus on safe, reliable, effective and efficient operations, while minimizing our environmental footprint, continues to payoff. Canadian Natural has grown our production and, at the same time, effectively lowered our cost structure across the board. As you've all seen in the press release, we've lowered our capital spending forecast for 2017 and, at the same time, increased oil production guidance, reflecting the strength of our assets and our ability to execute. In addition, Canadian Natural has also taken significant steps to reduce our environmental footprint. Canadian Natural is committed to reducing our greenhouse gas emissions and we're delivering meaningful results. Since 2012, we reduced our methane emissions in our conventional and thermal operations by 35%, well on the…

Thank you, Steve. Good morning, everyone. I will now do a brief overview of our assets and talk to our 2017 second quarter results. Starting with North American natural gas, our second quarter production of 1.603 Bcf was slightly down from our Q1 2017, but below our expectations, as the quarter was impacted by the poor reliability at a third-party plant in British Columbia. At this facility, we only produce 52 million cubic feet per day of natural gas sales, well below our estimate of 88 million cubic feet, which was less than our Q1 average of 100 million a day. On June 6, the plant was, once again, shut down and only returned to service July 28 at restricted rates of approximately 100 million cubic feet per day, well below our capacity of 170 million cubic feet per day. There is also a planned turnaround for September 11 to October 9. As a result of this continued poor reliability, we now target Q3 forecast for this facility at 68 million cubic feet per day. And we have reflected it in our overall Q3 guidance of 1.65 Bcf to 1.71 Bcf per day and our yearly guidance has also been revised to 1.655 Bcf to 1.705 Bcf per day. After the planned turnaround in September, we're targeting better reliability to the end of 2017. In Q2, we drilled five net gas wells. It was a small, focused program that targeted low cost tie-ins to our owned and operated infrastructure with all the wells targeted to be on production in Q3 this year. North America natural gas operating costs were CAD 1.17 for Q2 2017, which was comparable to Q2 2016. Our North American light oil and NGL production for Q2 2017 was approximately 90,800 barrels a day, an increase of…

Thank you, Jim, for that operations update. We also had strong financial performance during the first half. Net earnings of CAD 1.3 billion were achieved as compared with a loss of CAD 400 million in 2016 first half. This improvement reflects stronger commodity pricing as well as higher production volumes. Q2 2017 also included a CAD 265 million gain on acquisitions and dispositions, principally related to the AOSP acquisition. Adjusted earnings for the first half of 2017 were CAD 600 million as compared with a loss of CAD 750 million for the prior year, again inflecting higher commodity pricing and production volumes. First half fund flow for the corporation was also robust at CAD 3.4 billion, more than twice that recorded during the first half of 2016. This translates to underlying free cash flow after CapEx excluding the AOSP acquisition and dividends of over CAD 1 billion during the first half. Excluding the financing, directly related to the AOSP acquisition, net debt would have decreased by about CAD 1.2 billion. This means that since September 2016 and following the completion of Horizon Phase 2B, fund flow from operations has exceeded CapEx and dividends by over CAD 2 billion. With completion of Horizon Phase 3 targeted for this fall and the acquisition of AOSP completed, the company will make another step in its ability to generate sustainable free cash flow, well in excess of current dividend levels and maintenance CapEx. For the full year and based upon recent strip pricing, we would expect funds from operations to be approximately CAD 1.5 billion in excess of pre-acquisition CapEx and current dividends. This also reflects the approximately CAD 180 million reduction in 2017 targeted capital expenditures. The AOSP acquisition was largely funded by an issuance of 97.6 million shares to Shell, CAD 3…

Thanks, Corey. As you've heard this morning, Canadian Natural has a unique combination of asset base strength, diversity and balance. Combined with our strategy and 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 a long-life, low decline and lower capital exposure assets. Canadian Natural may be the only company in our peer group that has the quality in both asset types, the technical and operational expertise to execute in both asset types, 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, makes Canadian Natural a very robust company 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. Canadian Natural is focused on enhancing return on capital by ensuring we deliver safe, reliable, effective, efficient operations that minimize our environmental footprint. In Q2, we delivered. 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'd now be happy to answer any questions you may have.

And your first question comes from the line of Greg Pardy with RBC Capital Markets. Greg, your line is now open. Please go ahead.

Thanks. Good morning. Couple questions for you. Just given the duration of the turnaround you've got going on at Horizon this year, do you expect to do a turnaround in 2018 or would it be pushed out further than that?

I think right now we're planning to do a small turnaround in 2018. Greg, we're still working through the plan, but we would probably do that. And that will be likely – we might do some work there depending on the results after we bring on Phase 3.

Okay. Great. And then the second thing is just with respect to AOSP reporting. Will you break that out as a separate line item or will you – are you planning to combine the two for reporting purposes?

In the short run, we'll break it out. But as it becomes more mature, we'll combine it into the segment as we have for financial reporting, Greg.

Okay. Great. Thanks, guys. Nice quarter.

Your next question comes from the line of Neil Mehta with Goldman Sachs. Neil, your line is now open. Please go ahead. Neil Mehta - Goldman Sachs & Co.: Good morning, everyone. Congrats on a good quarter here. First question was related to capital spending. You did lower CapEx here in 2017, but you cited in the release that there is CAD 300 million that was deferred into 2018. So just want you talk about what the deferral was. And then in terms of your prior slide deck, you've talked about 2018 capital at the strip being CAD 4.7 billion or something like that. So just any thoughts in terms of whether this deferral affects the way you think about 2018 CapEx.

Thanks, Neil. And I think, look, we haven't done 2018 budget yet. That will come up this fall. But our plan is that the capital spending will be in that range of CAD 4.5 billion – CAD 4.3 billion to CAD 4.7 billion, all depending on commodity prices. And so that would have taken account as deferral. I think Tim could probably provide more details on the deferral. It actually makes a lot of sense to do. We're doing here and we're going to gain capital efficiency.

Yes, Neil. So Tim McKay here, and so to do with the CAD 300 million that we are deferring into 2018, as you can appreciate, we have now two sites that are very close to each other and both sites, very, very strong technical people. And so with this, we're seeing the synergies not only in the mining, the froth, but in the tailings of how we can manage and do things more efficiently across both sites. And so, as we go forward, there is real opportunity to take people's technical expertise and learnings from both sites, combining them, to come with a better plan, better way to execute MFT into 2018. So, we will expect savings out of this, as well as a better plan going into 2018.

So, this is one of the synergies we anticipated having when we did the acquisition, although I can say it wasn't one that we had identified. So, we think as we go forward, we'll find more synergies between Horizon and Albian as we move forward. Neil Mehta - Goldman Sachs & Co.: That's great, guys. And then just wanted you guys to comment a little bit on dividend growth. We had a nice dividend bump earlier this year. As Phase 3 comes online, how do you think about resuming or continuing to accelerate that dividend growth?

Well, Neil, as you know, we're very committed to dividends. We like dividends as a management team and the board of directors. The dividend decision is a board of directors' decision. But we have increased dividends for the last 17 years and the base of those dividend increase is on our robustness and sustainability of cash flow. And clearly when we have Q3 on and up and running, we'll have more sustainability and we'll be more robust, but we can't promise anything. It's a board of directors' decision. Neil Mehta - Goldman Sachs & Co.: Fair enough. And last question is just relating to natural gas. Appreciate the comments in the prepared remarks, but as we get through the balance of 2017, can you give us the lay of the land as it relates to reliability in terms of making sure that those assets perform at capacity and what gives you confidence that this can be resolved sustainably?

I think, Neil, this is one of the reasons Canadian Natural owns and controls almost all its infrastructure, because we can control it and deliver the reliability we need as a company to succeed. This is a third-party facility. We have limited control. So it's tough for us to give you a real strong confidence level of what it will look like after this turnaround. They've been making a lot of promises throughout the last half of 2016 and 2017 and have difficulty delivering. I think that's fair, Tim?

Yeah. And then, looking in the fourth quarter, we're hoping that we'd be up in the 140 million cubic feet per day range. That's about 80% reliability. But so far, we've been very disappointed.

Just for reference, we run about 94% to 95% reliability on our existing gas facilities. Neil Mehta - Goldman Sachs & Co.: Got it. If I could sneak one last one then, sorry. Just CAD/USD is certainly strengthened up here. How do you think about that having any impact on your operating costs?

I think most of our operating costs are based in Canadian dollars. And obviously on – we don't see any change that way, because most of our products are bought here in Canadian. So, it should help if we buy U.S. products but most of those are Canadian purchases. So, I don't think it will have that much impact. Neil Mehta - Goldman Sachs & Co.: I appreciate it, guys. Thank you.

Your next question comes from the line of Nima Billou with Veritas Investment. Nima, your line is now open. Please go ahead.

Thank you very much. Just looking at your range for operating costs, Athabasca is between CAD 27 and CAD 31, Horizon CAD 24 and CAD 27. So, Athabasca is about 13% to 15% higher. Yet your quarter over the previous quarter over March 2017, your op cost only went up by 8.7%. Are you able to manage the AOSP at the lower end of the range? And also just wanted some specific initiatives that have allowed you to outperform significantly on Horizon's op cost. You have a CAD 24 to CAD 27 range, but on a consolidated basis you're at the CAD 22. So, just some more clarity on that would be great.

Okay. I'll answer the first question first. Obviously, we're running at CAD 22 roughly for the first two quarters. Remember we have a turnaround here. That's going to happen in September. And so, that will bring our operating cost on an average basis for the year are up because you have no production but you still have a lot of the cost. So, you get the average. That makes sense? Obviously we work on continuous improvement and continually look for ways to be innovative, more effective and more efficient and take waste out of the system. So, that is ongoing. And what was the first question again?

No, it was along those lines. You're saying that it really is because of the turnaround that will lift the average for the rest of the year, but it seems as if your operating costs aren't going up with the full impact of Athabasca. I know structurally Athabasca is higher than Horizon, but it seems like you're managing both Athabasca and Horizon at the low end of the range.

Yeah. I think, Tim, you might want to comment on Athabasca. But, remember, we only have one month in Q2, so it's really not a good sample size.

Yeah. With Athabasca, there is some found turnaround activity in the fall here, September and October. So, as Steve alluded to, we're early in the process. Obviously, we're very focused on reliability and operating cost piece, but it is very early.

And do you see – you see opportunity though for improvements now that the assets changed hands? I mean obviously Shell is a pretty good operator, but you still see an opportunity to bring some best practices from Horizon to Athabasca and further drive down cost?

Absolutely and actually, there is very good leveraging the people from Athabasca over into Horizon. It is very collaborative. They're working very well together. And I will see benefits – I believe we'll see benefits on both sides.

Great. Thank you.

Your next question comes from the line of Menno Hulshof with TD Securities. Menno, your line is now open. Please go ahead.

Good morning. I just have one question on Horizon debottlenecking. If I remember correctly, you talked about 5,000 to 15,000 barrels per day in capacity adds for something in the range of CAD 70 million. And as of this morning, it sounds like you're talking about scope increase is a cost of something in the range of CAD 170 million and a question mark in terms of what that means for capacity creep. So should we be thinking about an upward or downward bias on that 5,000 to 15,000 barrels a day?

So, Menno, I think that the big thing here is the 5,000 to 15,000 we talked about before was for the frac tower and that would have been CAD 70 million. And, as you know – so we had to do the full analysis and do all process engineering. We've done most of that. And as Tim explained, this plant was designed for 250,000 barrels a day. And so there is going to be other limiting components in the plant. We know the furnaces are – going to be a limited component. So we're going to do some of that work as well. That increases the scope and gets us up to the CAD 170 million with other miscellaneous. But when we do all the process engineering with all components of the plant, sort of, lined up together, and you have – as you can appreciate, there is sort of ranges of capacity for each component. And then a lot of this is all done with computer simulation. And we just don't have the confidence when you put all those sort of ranges together to say exactly what we're getting creep capacity. I think what we're going to do here, which makes sense, is the most prudent, is actually run that plant once you get it up after Phase 3 is tied in and then we'll see exactly what we can do. But we're setting ourselves up to get that creep capacity. We made that decision to take that extra time now and get it, so that we can do it before – if we got creep capacity we'll capture it before the next turnaround rather than wait for the next turnaround to do it. So that's the plan.

Okay. So we should have a better sense of all that, call it, towards the middle of 2018?

I think we'll see something probably before that, Tim, but by then for sure.

Okay. Thanks, Steve.

And your next question comes from the line of Phil Gresh with JPMorgan. Phil, your line is now open. Please go ahead.

Hi. Good morning. This is John Royall sitting in for Phil. So, on CapEx, given the current run rate and given where we are in oil price, just wondering your thoughts around any flexibility into rates to the current guide?

So, at this point in time, as you see, we've reduced some of the capital spending this year, mainly at Horizon. The rest of the capital budget will probably execute as planned. As you remember, back in 2016, we did have additional capital flexibility that we said we could utilize, if we've seen strength in commodity prices. Clearly, for commodity prices we're seeing now, we're not going to access additional capital flexibility and keep the budget where we are.

Great. And can you talk about whether or not asset monetization is currently a priority such that we should think about that as a leverage reduction tailwind over the next 12 months to 18 months or so?

We continue to look at it. Obviously, we haven't got any perm plans right now and we like the assets we owned and the royalty assets. We do have additional royalty assets that we haven't monetized at this point in time, about 1,000 BOEs a day, but that's something we'll look at here probably the next year.

Thank you.

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

Thanks, Heidi, and thank you, everyone, for attending our conference call. As you heard this morning, Canadian Natural is on track to deliver significant and increasing free cash flow with a successful integration of the Athabasca Oil Sands assets, completion of the Horizon expansion later this year, and continued effective and efficient operations in the remaining areas of our diverse asset base. This enhances our flexibility going forward to effectively allocate capital in a disciplined manner to our four pillars of capital allocation, which are designed to create long-term shareholder value. If you have any further questions, please give us a call. Thank you again and we look forward to our Q3 conference call in November. Good bye.

Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect.