Good morning. We would like to welcome everyone to the Canadian Natural Resources 2022 Third Quarter Earnings Conference Call and Webcast. 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, 2022 at 9:00 a.m. Mountain Time. I would now like to turn the meeting over to your host for today's call, Lance Casson, Manager of Investor Relations.

Thank you, operator, good morning everyone, and welcome to Canadian Natural's Third Quarter 2022 Results Conference Call. Before we begin, I would like to remind you of our forward-looking statements and it should be noted that in our reporting disclosures, everything is in Canadian dollars unless otherwise stated, and reported reserves and production before royalties. Additionally, I would suggest you review our comments on non-GAAP disclosures in our financial statements. With me this morning is Tim McKay, our President and Mark Stainthorpe, our Chief Financial Officer. Tim will first speak to highlights on our safe reliable operations that continue to drive long-term shareholder value. This will include an overview of activities in the quarter, including specifics on our world-class assets and operations. Mark will then provide an update on our strong financial results, including our robust financial position, free cash flow generation and increasing shareholder returns. To close, Jim will summarize our call prior to open up the line for questions. With that, I'll turn it over to you, Tim.

Thank you, Lance. Good morning, everyone. Our focus on cost control, our culture of continuous improvement combined with our disciplined and balanced approach to capital allocation, continues to drive strong operational and financial results as our 2022 capital program remains unchanged at $4.9 billion, excluding acquisitions. In the third quarter, we achieved record total quarterly production of approximately 1.34 million BOEs per day, which included record natural gas production at approximately 2.13 Bcf per day, all of which received strong realized pricing in the quarter, averaging $6.57 per Mcf as a result of our diversified sales strategy. We also had liquids production at approximately 983,700 barrels per day, reflecting strong operational performance across all our assets, including our long-life, zero-decline oil sands mining and upgrading assets, which was 487,553 barrels per day of SCO comprising approximately 50% of the company's total liquid production in the quarter. Our higher valued SCO captured US$8.87 price premium to WTI in the quarter, driving strong SCO pricing and generate significant free cash flow for the company. Subsequent to the quarter end, on October 4, the Pathways Alliance reached an important milestone, securing the right to continue exploration work for our CO2 injection hub, allowing us to advance to the next stage of evaluation. As a result, we are continuing to progress our stakeholder engagement, detailed engineering work on our approximately 400 kilometer long trunk line that will carry captured CO2 from the oil sands to the storage hub. We'd like to thank the Alberta government for their continued support as we work together on this ambitious GHG Emissions reduction project. Additionally, we appreciate the federal government's recent public statements in support of Canadian oil and gas sector's role in global energy security, along with the commitment to be competitive on a fiscal framework for…

Thanks, Tim and good morning everyone. Our third quarter financial results were very strong with effective and efficient operations, driving adjusted funds flow of $5.2 billion and adjusted net earnings from operations of $3.5 billion, while our capital program for 2022 remains on track. Returns to shareholders have been significant and increasing throughout 2022, as we have returned year-to-date a total of approximately $10 billion to shareholders through $4.9 billion in dividends and $5 billion through share repurchases, equaling about 71 million shares repurchased year-to-date up to including November 2nd. Our dividend is growing and sustainable and is supported by our long life low decline assets, which deliver significant and sustainable free cash flow. Subsequent to quarter end, the Board of Directors has approved a 13% increase to our quarterly dividend to $0.85 per common share from $0.75 per common share. This represents the second dividend increase in 2022 and demonstrates the confidence that the Board has in the sustainability of our business model, the strength of our balance sheet, and the nature of our diverse long life low decline asset base. This continues the company's leading track record now with 23 consecutive years of dividend increases with a significant compound annual growth rate of 21% over that period of time. When compared to the beginning of 2021, our dividend has doubled to the current rate of $3.40 per share annually and has been sustainable through all cycles. This, of course, is in addition to the special dividend of $1.50 per share we paid in Q3. Our strong financial position continues to get stronger. Debt to EBITDA is at 0.5 times at Q3 with debt targeted to decline further throughout the year. As part of our financial strength, we continue to maintain strong liquidity and including revolving bank facilities, cash and short-term investments, liquidity at the end of Q3 was approximately $6.5 billion. Our disciplined approach to capital allocation maximizes shareholder value and our free cash flow allocation policy is unique and balanced, providing significant returns to shareholders and a strengthening balance sheet, all while continuing to grow our business. With that, I'll turn it back to you, Tim.

Thank you, Mark. Canadian Natural's advantage is our ability to effectively allocate cash flow to our four pillars. We have a well-balanced, diverse, large asset base, which a significant portion is long life, low decline assets, will require less maintenance capital to maintain volumes. We continue to allocate cash flow to our four pillars in a disciplined manner to maximize value for our shareholders, which is all driven by effective capital allocation, effective and efficient operations and by our teams who deliver top-tier results. We have a robust, sustainable free cash flow and through our free cash flow allocation policy returns to its shareholders are significant. Our dividend will increase by 13%, marking 2023 as our 23rd year of consecutive increases and has a CAGR of approximately 21% over that time. Year-to-date, Canadian Natural has returned approximately $10 billion to shareholders through approximately $4.9 billion in dividends and $5.1 million through share repurchases. In summary, we'll continue to focus on safe, reliable operations and enhancing our top-tier operations, and we will continue to drive our environmental performance. We were in a strong position and being nimble enhances our capacity to create value for our shareholders. We will continue to apply that same drive, GSG, environmental, social and governance, a significant factor in our long-term sustainability. As we move forward to lower our carbon emissions across the asset base and our journey to achieve our goal of net zero GHG emissions in the oil sands by 2050. Canadian Natural is delivering top-tier free cash flow generation, which is unique, sustainable and robust and clearly demonstrates our ability to both economically grow the business, deliver returns to shareholders by balancing our four pillars. With that, I will now open the call to questions.

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Greg Pardy with RBC. Please go ahead.

Yeah. Thanks, good morning. Thanks for the rundown guys. Tim, I was wondering, could we just dig a little bit into the -- just to the two outages. And good to hear that both plants are back up and running and so on. But was there anything unique or specific in terms of like it's pretty odd right for you guys to have two issues like this in a quarter?

Yeah. So the first one, which is probably the major portion of it was that Horizon. And what it was is a drain line of a coker charge pump basically had some corrosion erosion issues. And so while we change out these pumps periodically, it wasn't identified that this was a risk. And so -- it caused a little bit of an outage. Obviously, in our PM program, we're going to be doing a little more digging into when we change these pumps out to make sure the integrity of the drain lines are pristine so that we can deliver, say, from reliable operations. So that was really the big piece there with Horizon. And then with the Scotford piece, obviously, we don't operate that facility. But again, it was a corrosion on a water line that they successfully managed to put a device around it to stop the leaking. And again, the learnings from these obviously are you can apply them across not only at Horizon, but in Scotford. So yeah, it is very unique for us to have these kind of outages, but at the same time, one thing we do very well is, learn from these opportunities and start delivering even better. So it was quite rare and quite unique.

Okay. Understood. No, thanks for that. And then the second question is just on pathways. What does the runway time line look like in terms of increasing spending on this? Obviously, there's credits and there may be additional incentives to come -- but would spending in earnest and installation of hardware and so forth, is that really in the 2025 through 2030 corridor in terms of how we should think about it?

While the spending actually starts this year, there's a lot of environmental work. Obviously, we would like to submit the regulatory pieces as soon as possible, hopefully here in 2023. And then with that, you would love to order type for the trunk line. So there's a lot of work being done by approximately 200 different individuals between all the companies to exercise the project. So, obviously, with only getting it all a month ago today, there's a lot of work being done, but the whole -- as we start to put together the plan, we'll start to signal that out into the -- our plan. But it really is -- there's a lot of work happening right now. Obviously, we're trying to do it as quickly and as effectively as we can.

Okay. Thanks very much, Tim.

Thank you, Greg.

Thank you. Your next question comes from Dennis Fong with CIBC World Market. Please, go ahead.

Hi. Good morning and thanks for taking my questions. The first one is just on the solvent project that you have in your thermal in situ assets. The 50% or 40% to 45% depending on what timeline, I guess, reduction in GHG emission intensity is quite impressive. I was just curious as to what maybe some of the milestones or benchmarks you might have to further roll out the solvent program to other areas of Primrose, especially just given kind of some of the initial success that you're seeing there?

Yes. At Primrose, it's really just time. Everything is on track. We believe it's working very well. And probably by the fall of next year would be, when we believe that we'll have enough information to say, we can go more to our commercial scale. So that one actually is looking very positive, but it's early in that. And then, as well, if you recall, at Kirby, we're going to a commercial scale pad at Kirby North here in the near future. So that -- there's no showstoppers that we can see today, but it's obviously just making sure that we understand it. And then, as we put them into a commercial scale operation that it continues to meet what we expect.

Great. Great. Just as a quick follow-up to that. Are some of the build-outs for the deployment at a commercial scale already incorporated in some of your -- either sustaining or strategic capital, or would that be potentially incremental versus what we have for this year in there?

The Kirby North is in our plan today. Obviously, if the PRIMROSE 1 works very well, then we'd look to modify our plan in the future. But, obviously, it isn't into our capital next year, because we don't have the results of the pilot.

Great. Great. And then if you wouldn't mind, just a quick question on the Clearwater. You've seen frankly, very strong ramp-up of production there. I was just curious as to how we should be thinking about the production and infrastructure as well as the processing capabilities that you have within the region, obviously, being able to leverage off of Pelican is helpful. But just if you wouldn't mind providing a little bit more color on that side. Thanks.

Yes. There's really no showstoppers. Obviously, Pelican, we have ample capacity to handle the production and the gas handling is being directed to our calling gas plant, which has been in existing for many years. So there is no showstoppers to me, it's more about just following through with our development plans and delivering the production growth in the Clearwater.

Great. Thanks

Yes. Thank you, Dennis.

Thank you. Your next question comes from Menno Hulshof with TD Securities. Please go ahead.

Thank you and good morning, everyone. Maybe I'll start with a follow-up to Dennis' Clearwater question. Would you be in a position to walk us through some of the details on well design, cost and IP rates based on the 33 wells you've drilled to date. And more generally, how is that play currently competing for capital?

It competes very good from a capital basis. The wells generally are roughly in the range of about 275 to 300 barrels a day. The drilling costs are very good in the sense that because it's a very tight multi-lateral low area, you're able to control your costs and learn from as you drill the wells moving forward. So from an economic point of view, it competes very well. To me, it's just about managing the business in the area so that you don't start to escalate the costs. So obviously, if you look back in time when we had heavy oil, and a large heavy oil project, you basically started to escalate the cost pieces quite rapidly. So to me, it's just more -- the pace of development is important to make sure that we don't accelerate the cost piece. And there is -- they're actually doing quite low in terms of costs. On a BOE basis, you're probably looking in at $2,500 maybe $2,000 of BOED. So from a compete point of view, it competes extremely well across our base.

Thanks for the detail, Tim. And then just moving on to the Horizon reliability enhancement project. And the goal there is, as you talked about, is to move that major turnaround interval from one to two years. It looks like you're getting at least some of the benefit of that next year since you're guiding to a 5,000 barrel per day capacity on synthetic, but maybe you can confirm whether that correct and how Horizon’s turnarounds are going to get staged from here on in. And then the final piece, a lot of questions, my apologies. But the final piece is whether or not the plan is to get the AOSP on that every second year track as well?

Okay. So the first question related to Horizon. So what's – what is actually happening at Horizon is some of the equipment we installed this last year during the turnaround. And so that gives us a little bit of bump in terms of reliability and capacity into next year. And then what happens is when we do the second turnaround here at Horizon in 2023, additional equipment gets installed, and then basically commissioned and everything else there next year. So it's just doing it in a methodical way so that we see these increments happen. And then obviously, the reason why you see it in 2025, because that is when the year you actually would not do that turnaround. So it's just basically as we install the equipment, certain pieces are commissioned, and which get that benefit over time. As far as AOSP in terms of the upgraded there, what they do is similar, but different. What they do is they have two different pieces of equipment. They take one down one year. And then the second piece of the next year. And then I believe the third year, they have a full big outage. So we don't operate it. But historically, that's what we've kind of seen is that they do certain pieces every second year followed by a bigger turnaround outage.

Thanks, Tim. I'll turn it back.

Okay. Thank you.

Thank you. Your next question comes from Neil Mehta with Goldman Sachs. Please go ahead.

Hi. Thanks for taking the time. This is Nicolette Slusser on for Neil Mehta. So just first on CapEx, is there any sort of additional commentary you can provide around next year's spend as we think about the higher cost environment and with incremental production growth? And then if we should be thinking about any upward revisions to maintenance capital?

Yes. For 2023, we're still going through our budgeting process. And so it's a little early there. But to your point, we are seeing still cost pressures productivity pressures. And so we're walking through that today. But I don't see any big showstoppers. I just think that as we get busier into next year and companies start to have a little more activity. There's pressures on productivity and pressures on costs. So – it's a little early to say, but I don't see any major differences from this year to next year, just those two items.

Okay. Thank you for that. And then on the gas side, I understand close to 40%, I think, is exported to markets outside of AECO. As you ramp gas volumes in the 2023 and 2025 time frame, how should we be thinking about the marketing side relative to the current sales mix?

Yeah. Our marketing team, obviously, we have longer-term plans of what we can do in terms of the natural gas market. So I would be at very similar to that going forward. Obviously, we are looking ahead. And I think you see it in our gas pricing that we are looking ahead in terms of whether it's outages, whether it's export capacity that's needed, we're always looking ahead for opportunities to diversify our sales portfolio. So I would potentially look at it along the same lines of what we have today, which is roughly 37%. But yeah, we're always looking ahead and we're always diversifying, and we're always looking ahead and we're always diversifying, and we're always making sure that we have a strategy for our natural gas.

Great. Thanks so much.

Yes.

Thank you. Your next question comes from John Royall with JPMorgan. Please go ahead.

Hey, guys. Good morning. Thanks for taking my question. Do you have any thoughts at this point on when you would expect to hit your $8 billion net debt for? I think you did kind of mathematically push it out this quarter just with the payment of the special dividend. How do you think about that decision between doing further incremental returns like you did with the special versus kind of working your way down to towards that floor level?

Hey, John, it's Mark here. Thanks for the question. Yes, when you think about the capital allocation, it's really a function of being balanced. And I think you've seen that with significant debt repayment, of course, dividends increasing on a base dividend as well as the special you mentioned. And then, of course, we have our significant share buyback program ongoing. So it's really more of a balanced approach on how we do that. And you're right, you push out the debt balance. So now when we were looking before, it was kind of Q4, Q1. But now, of course, with the special in Q3, that will push out later into next year. It really depends, of course, on your price forecasting. There's significant sensitivity some of those items. So it really depends on what you're thinking on price forecast.

Okay. Thank you. And then just another one on gas as such a large producer. Maybe you can speak to your view on the fundamentals in Canadian gas and prices going into 4Q and next year. Just any outlook you can share there?

Well, obviously, what we've seen is some of the export capacity pieces have taken longer to get into service. So -- to me, there's a lot of activity on the natural gas side. I think the results for ourselves have been extremely good. And I suspect other companies have similar good results. So I think it will put a little pressure on it depending on the timing of some of these expansion projects. So -- and I actually haven't seen the maintenance outages scheduled here for next year. But what we've seen is with the increased gas -- and depending on what kind of maintenance is being done on the line, it can put some undue pressure on the AECO price here into next year. So it's difficult to say. Directionally, though, it looks like more gas, it's going to put more pressure on the system. And so the timing of these expansions and incremental volume expansions are important.

That's very helpful. Thank you.

Okay. Operator: Thank you. There are no further questions at this time. You may proceed. End of Q&A:

Thank you, operator, and thank you to those who joined us this morning. If you have any follow-up questions, please give us a call. Thanks, and have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating. And ask that you please disconnect your lines.