Canadian Natural Resources Limited · TSX:CNQ
Canadian Natural Resources — Investor Presentation (January 2004)
45 slides from Canadian Natural Resources's investor presentation, January 2004
Slide 1: Corporate Presentation
CNQ TSX / NYSE January 2004 Corporate Presentation The Premium Value, Defined Growth Independent
Slide 2: Delivering Value and Growth
Delivering Value and Growth SNAPSHOT (All production and reserve information shown before royalties) 2004B(1) 2003F(1) 2002 Earnings (Cdn $ millions) 630 – 830 1,300 – 1,400 570 Per share - basic 4.70 – 6.20 9.75 – 10.45 4.46 - diluted -- -- 4.31 Cash Flow (Cdn $ millions) 2,400 – 2,700 3,000 – 3,20
Slide 3: Agenda: Who is Canadian Natural?
Corporate Presentation January 2004 Agenda • Who is Canadian Natural? • Why own Canadian Natural? • Company overview • Strategy • Operations • North America • North Sea • Offshore West Africa • Financials • Investment recap CNQ The Premium Value, TSX/NYSE Defined Growth Independent Who is Canadian N
Slide 4: Who is Canadian Natural?
Corporate Presentation January 2004 Who is Canadian Natural? • Canadian based E&P company with international exposure • Canada • North Sea • Offshore West Africa • Significant exposure to North American natural gas Production mix (2004B) • Measured approach to growth North Sea Offshore West Africa a
Slide 5: Why Own Canadian Natural?
Corporate Presentation January 2004 Who is Canadian Natural? • Consistent growth in Reserve History reserves over the last (mmboe gross proved, 6:1) decade through 1,600 1,496 • Exploitation 1,400 1,245 1,201 • Exploration 1,200 • Acquisitions 1,000 918 • 90% of reserves subject 800 605 to independe
Slide 6: Why Own Canadian Natural? Balanced Product Mix
Corporate Presentation January 2004 Why Own Canadian Natural? • Balanced product mix • Large independent producer • Significant exposure to North American natural gas • Low cost competitive advantage • Track record of value creation • Proven/committed management • Winning strategy - defined plan CNQ
Slide 7: Large Independent Producer; Significant Exposure to Natural Gas
Corporate Presentation January 2004 Large Independent Producer • Canadian Natural Net Production – Q3/03 ranks as the 7th (mmboe/d) largest independent 800 E&P company based 700 689 621 on total current 600 541 production 500 449 441 425 400 400 324 300 258 188 185 200 100 0 DVN ECA APC APA UCL BR C
Slide 8: Natural Gas Exposure Defined; Low-cost Competitive Advantage
Corporate Presentation January 2004 Natural Gas Exposure Defined Q3 2003 Net N.A. Natural Gas Production (cubic feet per day per US $1,000 equity investment) 200 189 180 160 152 146 145 143 140 132 129 120 100 95 80 78 77 60 57 (US $1,000 investment divided by 40 December 29, 2003 NYSE close price t
Slide 9: Track Record of Value Creation; Shareholder Return
Corporate Presentation January 2004 Track Record of Value Creation • Share price CAGR of 20% Monthly Closing Share Price from 1992 to Dec 2003 (Cdn $) $70 • Market cap. increased from Cdn$1.6 billion in $60 1992 to Cdn$7.5 billion in GR $50 CA 2003 20% $40 • Current annual dividend of Cdn$0.60 $30 •
Slide 10: Committed Management
Corporate Presentation January 2004 Committed Management • Substantial Management and Directors Stock Ownership management and (US $ millions) director wealth at 350 $309 stake 300 • Strong motivation for 250 management to perform 200 • Delivers alignment 150 with shareholder $98 interests 100 $89 $
Slide 11: Objectives Defined; Our Strategy
Corporate Presentation January 2004 Objectives Defined • Value creation on “per share” basis • Production • Reserves • Cash flow • Net asset value • Returns on employed capital • Before future tax • EBITDA CNQ Our Goal is 10% p.a. TSX/NYSE Rolling Average Value Growth Our Strategy • Capital allocati
Slide 12: Company Overview: Operations Defined Plan
Corporate Presentation January 2004 Company Overview: Operations Defined Plan CNQ The Premium Value, TSX/NYSE Defined Growth Independent Overview of Global Operations Canada Liquids Gas BOE % of Total 2004B Production (mboe/d) 177-189 215-225 392-414 79% 2002 Proved Reserves (mmboe) 665 508 1,173 78
Slide 13: North American Overview; Natural Gas Future Plan
Corporate Presentation January 2004 North American Overview • One of North America’s largest BC natural gas producers NE BC AB SK • >3 Tcf of proved natural gas reserves 365 mmcf/d N AB 7.4 mbbls/d 456 mmcf/d • ~1.3 bcf/d of production 138.0 mbbls/d • 5% growth p.a. after 2003 • 2 highly prospective
Slide 14: Natural Gas Growth Prospects
Corporate Presentation January 2004 Natural Gas Growth Prospects Northwest Alberta BC AB SK • 1.8 million acres of net undeveloped land • 26 facilities/1,800 mi pipe • Average decline 26% • 800-900 expected future locations • New reserve potential, next 5 years • Cardium targets • > 0.5 Tcf potentia
Slide 15: North American Liquids Future Plan and Resource Base
Corporate Presentation January 2004 North American Liquids Future Plan • Near-Term • Primary heavy oil drilling • Pelican Lake emulsion/waterflood • High pressure steam at Primrose • Work to expand heavy oil markets • Mid/Long-Term • Primrose, Gregoire Lake, and Horizon in-situ projects CNQ TSX/NYSE
Slide 16: Crude Oil Strategy; Customer Focus Strategy
Corporate Presentation January 2004 Crude Oil Strategy • Displace Medium Sour Crudes from PADD II • Blend crudes to yield similar product slate • Support / participate pipeline additions • Support / participate in projects to add conversion capacity CNQ A Multi-faceted, Simple Strategy Will Help Unl
Slide 17: Chicago Synbit Value; Horizon Oil Sands Project Overview
Corporate Presentation January 2004 Chicago Synbit Value (US $/bbl) Syn/Bit 50% SCO USGC SCO + Bitumen Medium 50% Sour Bitumen $ 23.78 $ 14.70 $ 19.24 $ 20.95 $1.71 discount LLB (Dil/Bit) 25% COND COND + Bitumen 75% Maya Bitumen $ 26.70 $ 14.70 $ 17.70 $ 19.50 $1.80 discount CNQ Replicate Strategy U
Slide 18: Execution Strategy - Principles; Project Economics
Corporate Presentation January 2004 Execution Strategy - Principles • Front end engineering & design (complete before proceeding) • Benchmarking (and lessons learned) • Labour strategy • Managed Open Site (maximize access to key resources) • Manageable pieces (accountability) • Canadian Natural mana
Slide 19: Sensitivity Analysis On Project Economics; Project Horizon Future Plan
Corporate Presentation January 2004 Sensitivity Analysis On Project Economics WTI US $ 20 US $ 26 Capital Increase $ 1 billion Decrease $ 1 billion Prod @ 209/d @ 255/d Cdn $ Cdn $ = 0.765 US $ Cdn $ = 0.705 US $ Op Costs $ 13.36 per bbl SCO $ 11.36 per bbl SCO Nat Gas $ 5.66 per GJ $ 3.66 per GJ 12
Slide 20: Financing Horizon – Source of Funds; International Plan Defined
Corporate Presentation January 2004 Financing Horizon – Source of Funds 2004 - 2008 Cash flow in excess of conventional capital requirements ($0.2 to $0.5 billion annually) $ 1.0 - 2.5 Financial hedge program TBD Bank financing - Horizon credit facility 1.5 Balance sheet growth capacity 1.5 Business
Slide 21: North Sea; Côte d'Ivoire
Corporate Presentation January 2004 North Sea • ~60,000 bbl/d of liquids production with Murchison Hub associate natural gas • Exploitation base similar to WCSB • Operate ~99% and own ~80% of Northern Ninian Hub North Sea production • 2004 Plans Banff /Kyle • Drill 18 wells • Banff gas reinjection •
Slide 22: Angola
Corporate Presentation January 2004 Angola • High risk / high impact addition to our portfolio 14 • One prospect Kizomba Pluto 15 1 Angola drilled in 2003 Northern ultra-deep 31 16 16 2 Rosa Lirio BLOCK 16 West 3 • A second prospect 32 Girassol/ 17 Dalia 4 to be drilled late Omba 18 2004/early 2005
Slide 23: A History of Value Creation; Future Growth – Current Dev't Projects
Corporate Presentation January 2004 A History of Value Creation Daily Production per 1,000 shares Reserves per share (boe/d) (boe) 4.0 16 3.5 14 AGR 3.0 12 R 2.5 19 %C 10 CAG 2.0 8 21 % 1.5 6 1.0 4 0.5 2 0.0 0 1995 1996 1997 1998 1999 2000 2001 2002 1995 1996 1997 1998 1999 2000 2001 2002 Gas Oil Ga
Slide 24: Guidance; Financial Strength
Corporate Presentation January 2004 Guidance 2004B 2003F Production Natural gas (mmcf/d) 1,320 – 1,395 1,295 – 1,300 Oil and liquids (mbbl/d) 247 – 272 241 – 245 Financial ($ millions) (1) 2004 based upon the following Cash flow(1) 2,400 – 2,700 3,000 – 3,200 price assumptions: Earnings(1) 630 – 830
Slide 25: Wrap Up – The Canadian Natural Story
Corporate Presentation January 2004 Wrap Up – The Canadian Natural Story • Attractive stock price based upon base E&P metrics • Debt-adjusted cash flow per share multiple • Enterprise value per flowing barrel • Strong growth profile • History of growth • Strong inventory supporting future growth • S
Slide 26: Wrap Up (cont'd); Investment Recap
Corporate Presentation January 2004 Wrap Up – The Canadian Natural Story (cont’d) • Horizon, a world class project adds significant value • Financial plan identified • High degree of project definition • High degree of definition in execution strategy • High caliber, experienced team • Overall execu
Slide 27: Forward-Looking Statements
Corporate Presentation January 2004 Forward-Looking Statements This presentation contains forward-looking statements under applicable securities laws, including, in particular, statements about Canadian Naturals’ plans, strategies and prospects. Although the Company believes that the expectations re
Slide 28: Appendices: Current Valuation Metrics – Peer Group
Corporate Presentation January 2004 Appendices CNQ The Premium Value, TSX/NYSE Defined Growth Independent Current Valuation Metrics – Peer Group Current Enterprise Value per BOED/US $ $40,000 $35,000 APC NXY APA ECA BR $30,000 DVN $25,000 TLM CNQ $20,000 4.0 4.5 5.0 5.5 6.0 6.5 7.0 2004 Enterprise V
Slide 29: Nine Month Highlights; Sensitivity Analysis
Corporate Presentation January 2004 Nine Month Highlights Nine Months Ended Sept 30, 2003 2002 Daily production Crude oil and natural gas liquids (bbl) 241.8 206.8 Natural gas (mmcf) 1,308 1,188 Net earnings ($MM) 1,156 361 Per share 8.61 2.87 Cash flow ($MM) 2,426 1,477 Per share 18.06 11.73 Debt/(
Slide 30: Crude Oil and Natural Gas Hedging Summary - 2004
Corporate Presentation January 2004 Crude Oil Hedging Summary - 2004 Q4/03 1H/04 Q3/04 Q4/04 Oil Collars WTI Volume (mbbl/d) 125.0 122.5 120.0 60.0 Average floor price (US $/bbl) 25.56 25.15 25.63 25.50 Average ceiling price (US $/bbl) 31.37 30.36 30.41 30.32 CNQ TSX/NYSE Natural Gas Hedging Summary
Slide 31: History of Growth – Reserves and Production per Share
Corporate Presentation January 2004 History of Growth – Reserves / Share 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% CNQ DVN APA NBL TLM ECA NXY BR UCL APC PXD KMG -4% -6% Source: Merrill Lynch 1998 – 2002 reserves/share CNQ TSX/NYSE History of Growth – Production / Share 20% 15% 10% 5% 0% CNQ APC DVN TLM EC
Slide 32: Clean Balance Sheet – No Goodwill; Strong Balance Sheet Compared to Industry
Corporate Presentation January 2004 Clean Balance Sheet – No Goodwill Goodwill as Percentage of Debt + Equity 30% 25% 20% 15% 10% 5% 0% DVN ECA APC BR TLM NXY AVERAGE AVERAGE APA UCL PXD NBL KM G CNQ DVN ECA APC BR TLM NXY APA UCL PXD NBL KMG CNQ As at Sept 30, 2003. CNQ TSX/NYSE Strong Balance Shee
Slide 33: 2004 Capital Budget; Total Discretionary Capital
Corporate Presentation January 2004 2004 Capital Budget Region $ millions North America Natural Gas 928 North America Oil 615 Total North American Capital 1,543 North Sea Oil 340 Offshore West Africa Oil 350 Property Acquisitions 59 2,292 Horizon Oil Sands Project 200 – 600 Total 2004 Capital Budget
Slide 34: Summary of Horizon Capital Cost Estimate; Capital Cost - Benchmark
Corporate Presentation January 2004 Summary of Horizon Capital Cost Estimate Phase Phase Phase Total Area 1 Only 2 Only 3 Only Project in millions in millions in millions in millions Mining $ 443.7 $ 250.8 $ 144.6 $ 839 Bitumen Production $ 682.8 $ 708.3 $ 232.1 $ 1,623 Upgrading $ 1,343.6 $ 740.0 $
Slide 35: Project Schedule; Competing Projects
Corporate Presentation January 2004 Project Schedule Task Name 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Scoping study Design base memorandum EUB application submitted Engineering design spec Project approval (CNQ) Detailed engineering and procurement Construction (facilities) Proj
Slide 36: Expanding Pipeline Options; Ninian Operating Philosophy
Corporate Presentation January 2004 Expanding Pipeline Options Prince Rupert Terasen expansion of existing line and possible Edmonton Enbridge 400 mbbl/d line to twinning with 400 mbbl/d of Hardisty deepwater port targeted for heated heavy oil 2008 Vancouver Expansion of Enbridge/Lakehead Express co
Slide 37: Ninian Reservoir Management; Cardium Well Cost Reductions
Corporate Presentation January 2004 Ninian Reservoir Management North Ninian Gross Oil Prod (bbls/d) 12,000 10,000 CNQ takes over control 8,000 6,000 10% decline p.a. 4,000 2,000 65% decline p.a. 0 2002 2003 CNQ Improved Waterflood Management, TSX/NYSE Arrests Decline, Adds Reserves, Extends Life Ca
Slide 38: NW Alberta - 5 Year Comparison; Fort St. John - Reserve Additions
Corporate Presentation January 2004 NW Alberta - 5 Year Comparison Production Reserves (mmcfe/d) (bcfe) 600 1200 2002 2003 Forecast Forecast 500 1000 5 year locations 500 800 - 900 400 800 Drilled/year 100 160 - 180 Reserves/well (bcfe) 1.7 1.7 300 600 Prod/well (mmcfe/d) 0.9 1.0 200 400 100 200 0 0
Slide 39: Helmet - Reserve Additions; North American Natural Gas – Forward Plans
Corporate Presentation January 2004 Helmet - Reserve Additions Production Reserves (mmcfe/d) (bcfe) 180 600 2002 2003 160 Forecast Forecast 500 • Future locations 200 300 140 120 400 • Drill/year 40 52 100 • Reserves/well (bcf) 2.4 2.5 300 80 • Prod/well (mmcf/d) 0.7 0.8 60 200 • Ultimate potential
Slide 40: Thermal Oil Summary - Future Growth; Primrose Expansion Economics
Corporate Presentation January 2004 Thermal Oil Summary - Future Growth Thermal Production • Primrose North (bbls/d) • Production in 2006 120,000 • 30,000 bbls/d 100,000 • Burnt Lake 80,000 • First production 2009-2011 60,000 • 30,000 bbls/d 40,000 • Horizon/Gregoire 20,000 • First production ~2012
Slide 41: North American Liquids – Forward Plans
Corporate Presentation January 2004 North American Liquids – Forward Plans Drilling 2003F 2004 2005 2006 2007 2008 Light oil 58 60 85 75 60 60 Pelican Lake 39 87 40 20 20 - Heavy oil 329 180 220 250 220 220 Thermal oil 41 57 50 25 50 150 Total 467 384 395 370 350 430 CNQ Defined Plan TSX/NYSE 39
Slide 42: NOTES:
NOTES:
Slide 43: Key Historic Data
Key Historic Data 1998 1999 2000 2001 2002 9M 2003 Operational Information Daily Production, before royalties Crude oil and NGLs (mbbl/d) 76 87 174 206 215 241.8 Natural gas (mmcf/d) 673 721 794 918 1,232 1,308 Barrels of oil equivalent (mboe/d) 188 207 306 359 421 460 Daily Production, after royalt
Slide 44: Corporate Guidance
Corporate Guidance November 5, 2003 Fourth Quarter 2003 2003 Forecast 2004 Budget Daily Production Volumes, before royalties Natural Gas (mmcf/d) North America 1,205 - 1,220 1,245 - 1,248 1,290 - 1,350 North Sea 40 - 45 42 - 43 25 - 35 Offshore West Africa 10 - 15 8 - 9 5 - 10 1,255 - 1,280 1,295 -
Slide 45: Contact Information
CONTACT INFORMATION Allan P. Markin John G. Langille Steve W. Laut Chairman President Chief Operating Officer Corey B. Bieber Director, Investor Relations (403) 517-6878 Laura Campbell Investor Relations Analyst (403) 514-7911 CANADIAN NATURAL RESOURCES LIMITED 2500, 855 - 2nd Street S.W., Calgary,
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