Canadian Natural Resources Limited · TSX:CNQ
Canadian Natural Resources — 2011 Budget Conference Call
50 slides from Canadian Natural Resources's conference presentation, Dec 2, 2010
Slide 1: 2011 Budget Conference Call
THE PREMIUM VALUE DEFINED GROWTH INDEPENDENT 2011 Budget Conference Call December 2, 2010
Slide 2: Canadian Natural Today
Canadian Natural Today • Strong well balanced, diversified assets with significant upside • Strong experienced teams; operational, technical, financial • Efficient operations (safe, minimize enviro footprint, low cost) • Significant free cash flow • Capital allocation flexibility and discipline • St
Slide 3: The Next Step in Our Evolution
Canadian Natural The Next Step in Our Evolution • Assets that provide significant free cash flow • Focus on effective allocation of cash flow • Ability to take on more mid and long term projects • Effective leverage of technology and expertise across our vast asset base CNQ 3
Slide 4: Going Forward
Canadian Natural Going Forward • Continued focus on oil development • Greater proportion of capital allocated to mid and long term projects – Thermal projects – Light oil EOR projects – Horizon Oil Sands expansion • Preserve natural gas assets for long term recovery • Focus on Execution Excellence -
Slide 5: Financial Objectives
Financial Objectives • To maintain a strong balance sheet – Debt / book capitalization target of 35% - 45% – Q3/10 at 26.3% – Debt / EBITDA target of 1.8x - 2.2x – Q3/10 at 1.1x • To maintain strong credit ratings allowing for access and flexibility in public debt markets • To finance the operations
Slide 6: Going Forward 2011
Going Forward 2011 • 6% boe production growth – 10% oil growth • Allocate $2.4 billion to $2.8 billion (>~ 45% of budget) to future production growth (post 2011) • Pay down debt • Deliver $1.0 billion to $1.8 billion of free cash flow CNQ 6
Slide 7: Canadian Natural 2011 Budget
Canadian Natural 2011 Budget Production 2010F* 2011B* % Change Crude oil (mbbl/d) Canada Light and NGLs 50-51 54-58 11% Pelican Lake 38-39 43-47 17% Heavy 93-94 101-105 10% Thermal 89-91 97-105 12% International 63-65 49-59 (16%) Horizon 90-93 105-112 19% Total 423-430 449-486 10% Natural gas (mmcf/
Slide 8: Canadian Natural 2011 Budget
Canadian Natural 2011 Budget Capital ($ million) 2010F 2011B % Change Natural gas 700 600 (14%) Crude oil Pelican Lake 500 615 23% Heavy 630 820 30% Thermal 555 1,345 142% Light Canada 315 460 46% North Sea 180 370 106% Offshore West Africa 250 135 (46%) Total crude oil 2,430 3,745 54% Horizon Susta
Slide 9: Canadian Natural 2011 Budget
Canadian Natural 2011 Budget 2010F 2011B Change Production (mboe/d) 630-638 645-694 6% Cash Flow* ($ million) $6,100-6,500 $7,000-7,400 14% Capital ($ million) $5,600 $5,575-5,975 0-7% Free Cash Flow ($ million) $500-900 $1,025-1,825 104% Debt ($ million) $8,900 $8,000 ($900) Debt/book 28.7% 25.6% (
Slide 10: Asset Overview
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Slide 11: Natural Gas Outlook
Natural Gas Outlook • Shale gas production is real • Shale gas reserves look real • Shale gas full cycle returns at $4.00 AECO not certain –Sweet spots – yes –Liquids rich – yes to maybe –Overall – too early to tell • LNG supply threat still exists • Anticipate North America natural gas market to be
Slide 12: Natural Gas Overall Strategy
Natural Gas Overall Strategy • Leverage our dominant infrastructure and land base –Maintain our position as most efficient producer • Continue to strengthen our unconventional / tight gas asset base • Continue to delineate new / emerging plays / technology • Stay prepared for strengthening of natura
Slide 13: North America Natural Gas 2011 Plan
North America Natural Gas 2011 Plan 2010F 2011B % Change Production (mmcf/d) 1,217-1,222 1,150-1,210 (3%) Drilling (net wells) 100 72 (28%) Capital ($ million) Turnaround / Maintenance $100 $120 20% Land / Seismic $50 $65 30% Drill, Complete, Tie-in $550 $415 (25%) Total $700 $600 (14%) CNQ 13
Slide 14: Natural Gas Future Growth Potential
Natural Gas Future Growth Potential (mmcf/d) 1,600 $6 plus tential 5% Growth Po 1,400 1,200 No Growth $4-$5 Upside Potential Option 1,000 12% P roacti ve De cline 800 Sub $ 4 600 Disciplined 400 Allocation of Capital 200 0 2010F 2011 2012 2013 2014 Natural Gas Forecast $6.00 plus Natural Gas Sub $4.
Slide 15: International Overall Strategy
International Overall Strategy • Maintain our existing operations • Convert undeveloped potential to production –As platform slots become available • North Sea • Offshore West Africa Ninian Espoir Tiffany Baobab Murchison • Progress near pool development in Côte d’Ivoire • Progress “Big E”
Slide 16: International Free Cash Flow
International Free Cash Flow Our International assets account for a substantial portion of Canadian Natural’s free cash flow Production Free Cash Flow International ~25% International ~8% 2011B 2011B Core Area with Significant Free Cash Flow CNQ 16
Slide 17: North Sea 2011 Plan
North Sea 2011 Plan 2010F 2011B % Change Crude oil production (mbbl/d) 33-34 27-32 (12%) Capital ($ million) $180 $370 106% • 10 workovers • 2.3 net wells drilled • Facility improvements – Lyell subsea pump, manifold upgrades • Turnaround on 4 platforms –Lower volumes due to turnarounds and fixed co
Slide 18: Offshore West Africa 2011 Plan
Offshore West Africa 2011 Plan 2010F 2011B % Change Crude oil production (mbbl/d) 30-31 22-27 (20%) Capital ($ million) $250 $135 (46%) • Complete Olowi development • 2 Gabon exploration wells (Gamba, Vandji) potential drills • Prepare for Espoir and Baobab infill programs • Progress South Africa “B
Slide 19: Canadian Light Oil 2011 Plan
Canadian Light Oil 2011 Plan 2010F 2011B % Change Production* (mbbl/d) 50-51 54-58 11% Drilling (net wells) 117 138 18% Capital ($ million) Drilling, completions and tie-ins 155 290 87% Technology, EOR 160 170 6% Total 315 460 46% • Target modest production growth of 2%-10% per year in 2012 and beyo
Slide 20: Canadian Light Oil
Canadian Light Oil • Mature basin (bbl/d) Gross Operated Light Oil Production 120,000 • Large land holdings across basin 100,000 • Optimize existing water floods to maximize value 80,000 • New pool exploration • New technology application 60,000 – Horizontal wells – Multistage fracs 40,000 • Tertiar
Slide 21: Technology Leverage / Implementation
Technology Leverage / Implementation Capital ($ million) 2010F 2011B Light Oil $160 $170 Primary Heavy Oil $20 $30 Thermal $20 $30 Pelican Lake $10 $10 Natural Gas $40 $65 Total $250 $305 CNQ 21
Slide 22: Primary Heavy Oil Production Areas
Primary Heavy Oil Production Areas • Current production – Crude oil 93 mbbl/d • Land (net) ECHO Pipeline – Developed 0.4 million acres CNQ Developed Lands CNQ Undeveloped Lands – Undeveloped 1.2 million acres • Facilities – 5 major crude oil processing facilities – 4 salt cavern disposal wells and 1
Slide 23: Primary Heavy Oil 2011 Plan
Primary Heavy Oil 2011 Plan 2010F 2011B % Growth Production (mbbl/d) 93-94 101-105 10% Drilling (net wells) 650 790 22% Recompletion (net wells) 522 465 (11%) Capital ($ million) 630 820 30% • Target production growth of roughly 10% per year for the next three years Strong Cash on Cash Returns CNQ 2
Slide 24: Pelican Lake Oil Pool
Pelican Lake Oil Pool • World class oil pool How much of that oil is producible? • Polymer flood successful both technically and economically Contingent Resources 198 mmbbl OOIP Probable Reserves • Technology enhancement will 4.1 103 mmbbl 17% continue to improve billion Proved Reserves barrels oil
Slide 25: Pelican Lake 2011 Plan
Pelican Lake 2011 Plan • Technology Success Story – Long reach horizontal wells – Leading edge polymer flood • Staged conversion to polymer flood - % of field polymer flooded – 2009 25% – 2010 44% – 2011 54% – 2012 61% – 2013 71% • Facility expansions for polymer and other developments – 2010 44,500
Slide 26: Pelican Lake Plan
Pelican Lake Plan 2010F 2011B % Growth Production (mbbl/d) 38-39 43-47 17% Drilling (net wells) Producers 30 11 (63%) Injectors 100 82 (18%) Capital ($ million) 500 615 23% • Significant pre-investment for future polymer volumes • Polymer response in 18 – 24 months from injection • Production target
Slide 27: Thermal Heavy Oil Sands
Thermal Heavy Oil Sands • Land Holdings (net) – McMurray - 373,000 acres • Birch Mountain • Gregoire Fort • Kirby McMurray Grande • Grouse Prairie • Germain Edmonton • Leismer • Ipiatik – Clearwater - 201,000 acres Oil Sands Deposits Calgary • Primrose • Wolf Lake • Hilda Lake • Marie Lake – Grand R
Slide 28: Thermal Heavy Oil Sands Potential
Thermal Heavy Oil Sands Potential McMurray 23.5 billion barrels Kirby Grouse Leismer Contingent Resources Birch Mountain 5.0 billion bbl Gregoire Probable Reserves 0.6 billion bbl Proved Reserves 0.7 billion bbl Clearwater Produced to Date 11 billion barrels 0.3 billion bbl Estimated Bitumen in Plac
Slide 29: Thermal Heavy Oil Sands Growth Plan
Thermal Heavy Oil Sands Growth Plan Oil Facility Target Steam-In Phase Reservoir Capacity Target Timing (bbl/d) (year) Primrose South/North - CSS Clearwater 80,000 On Stream Primrose East - CSS Clearwater 40,000 On Stream Kirby Phase 1- SAGD McMurray 40,000 2013 Kirby Phase 2- SAGD McMurray 30,000-6
Slide 30: Thermal Heavy Oil Sands 2011 Plan
Thermal Heavy Oil Sands 2011 Plan 2010F 2011B % Change Production (mbbl/d) 89-91 97-105 12% Drilling (net wells) Producers 40 201 403% Kirby SAGD pairs 0 16 - Strats 207 359 73% Service / Observations wells 6 16 167% Total 253 592 134% Capital ($ million) 555 1,345 142% • Thermal targeted production
Slide 31: Thermal Heavy Oil Sands Primrose Plan
Thermal Heavy Oil Sands Primrose Plan • Significant pad adds to fully develop • Optimize steaming techniques • Potential future facility debottleneck / expansion • Wolf Lake; McMurray / Grand Rapids development • Follow up process –In-fill drilling, steam flood, solvents • Leverage technology –Indus
Slide 32: Thermal Heavy Oil Sands Kirby
Thermal Heavy Oil Sands Kirby • Kirby will be developed through two phases plus debottleneck potential Contingent Steam-In Million barrels PIIP* Reserves Resources Date Kirby Phase 1 365 2013 Proved 69 Probable 116 Kirby Phase 2 726 350 2016 Kirby Phase 1 - Debottleneck 434 170 2024 • Kirby Phase 1
Slide 33: Thermal Heavy Oil Sands Kirby Land Holdings
Thermal Heavy Oil Sands Kirby Land Holdings • Acquired lands creates Kirby Phase 2 overall operating and capital cost synergies Kirby North Kirby North Plant (Remote Steam) • Similar to Primrose development Kirby Phase 1 –Kirby Phase 2 regulatory application 2011 Kirby Central Kirby South Plant (Ste
Slide 34: Thermal Heavy Oil Sands Kirby Phase 1 Development Plan
Thermal Heavy Oil Sands Kirby Phase 1 Development Plan • Kirby South Processing Plant –118,000 bw/d water treating –118,000 bs/d steam generation –40,000 bbl/d oil treating • Initial Field Development –47 SAGD horizontal well pairs (16 in 2011) –7 surface pads –5.2 km of field pipelines • Utilities
Slide 35: Thermal Heavy Oil Sands Key Kirby Milestones
Thermal Heavy Oil Sands Key Kirby Milestones Plant Site Earthworks November 2010 Initiate Pad Drilling April 2011 Site Mechanical Construction June 2011 Construction Complete August 2013 First Steam December 2013 First Oil February 2014 CNQ 35
Slide 36: Thermal Heavy Oil Sands Projects Update
Thermal Heavy Oil Sands Projects Update • Primrose field development • Kirby hub –Kirby Phase 1, Kirby Phase 2, debottleneck –Kirby Phase 2 regulatory application 2011/12 • Grouse –Strat well delineation –Regulatory application 2011/12 • Birch Mountain East –Strat well delineation –Regulatory applic
Slide 37: Horizon Oil Sands
Horizon Oil Sands • Mining resources –16 billion barrels petroleum initially in place, PIIP (bitumen) with 6 billion barrels* of SHC Synenco recoverable PIIP SU • Phased development (SCO) CNQ Horizon UTS 110 mbbl/d capacity Oil Sands SHC IOL SYN (Phase 1) Deer XOM SHC SU Target expansion to Cree
Slide 38: Horizon Oil Sands Phase 1 Evolution
Horizon Oil Sands Phase 1 Evolution • Start up Dec 2008 – May 2009 • Fine tune operating procedures May 2009 – Dec 2009 • Winter operating procedures Dec 2009 – Mar 2010 • Fine tune preventative maintenance Mar 2010 – Dec 2010 • Maintain reliability at design rates (110,000 bbl/d SCO) 2011 CNQ 38
Slide 39: Horizon Oil Sands Tranche 2 Reliability
Horizon Oil Sands Tranche 2 Reliability • Purpose: Increase reliability and lower operating costs • Ore Preparation Plant 3 on stream Q4 2011 • Hydro transport on stream Q4 2011 • Tank expansion on stream Q1 2011 • Upgrading –Sulfur Unit 3 on stream Q4 2013 –Gas recovery on stream Q2 2014 –Butane tr
Slide 40: Horizon Oil Sands Future Expansion
Horizon Oil Sands Future Expansion • Lessons learned complete • Execution strategy framework complete • Build to produce 34º API SCO - upgrade • Cost estimate progressing CNQ 40
Slide 41: Horizon Oil Sands Future Expansion
Horizon Oil Sands Future Expansion Reliability - OPP 3, Hydrotransport, Sulfur Unit 3 (Tranche 2) - 5,000 bbl/d SCO capacity increase in 2011/12 Directive 74 - Equipment and tailings process required to meet new ERCB regulations Phase 2A - Upgrading debottlenecking and coker expansion - 10,000 bbl/d
Slide 42: Horizon Oil Sands Expansion to 250,000 bbl/d 34º API SCO
Horizon Oil Sands Expansion to 250,000 bbl/d 34º API SCO • Execution strategy –Debottlenecking and expansion to be combined –Expansion will be broken into 46 individual projects • Stop and start at CNQ discretion –Each project (46) will be broken into Engineering & Procurement (E&P) and Construction
Slide 43: Horizon Oil Sands 2011 Plan
Horizon Oil Sands 2011 Plan 2010F 2011B % Production (mbbl/d) 90-93 105-112 19% Operating costs ($/bbl) $33-37 $30-36 (6%) Sustaining capital* ($ million) $130 $220 69% Project capital ($ million) Reliability - Tranche 2 $320 $370 Directive 74 and Technology $10 $130 Phase 2A $25 $200-230 Phase 2B $
Slide 44: Horizon Oil Sands Next Steps
Horizon Oil Sands Next Steps 1. Complete more detailed cost estimate Q1/11 2. Kick off E&P work in Q1/11 for • Directive 74 – 2 of 2 projects • Phase 2A – 4 of 5 projects • Phase 3 – 3 of 14 projects 3. If market conditions are favorable and economics meet threshold criteria Q1 – Kick off constructi
Slide 45: Canadian Natural 2011 and Beyond
Canadian Natural 2011 and Beyond • Vast balanced assets • Well defined yet flexible plan • Leveraging technology • Capital allocation flexibility • Significant free cash flow • 2011 –6% boe production growth – 10% oil growth –Allocate $2.4 billion to $2.8 billion (> 45% of budget) to future producti
Slide 46: Canadian Natural Free Cash Flow Uses
Canadian Natural Free Cash Flow Uses 1) Opportunistic acquisitions 2) Pre invest in long term developments – EOR – Strat wells – Strategic play development 3) Dividends – Ten consecutive years of dividend increases – Must be sustainable 4) Pay down debt 5) Share buybacks – Target to eliminate diluti
Slide 47: Canadian Natural Advantage
Canadian Natural Advantage • Management, business philosophy, practice • Strong, balanced assets –Vast opportunities • Balanced, proven, effective strategy • Control over capital allocation • Nimble –Capture opportunities –Willingness to make tough decisions • Significant free cash flow • Canadian N
Slide 48: The Future Clearly Defined
THE PREMIUM VALUE DEFINED GROWTH INDEPENDENT THE FUTURE CLEARLY DEFINED Canadian Natural Resources Limited 2500, 855 - 2 Street SW Calgary Alberta T2P 4J8 phone: 403.517.6700 fax: 403.517.7350 email: ir@cnrl.com www.cnrl.com VALUE CREATION • RETURN ON CAPITAL • LOW-COST PRODUCER • RETURN ON ASSETS C
Slide 49: Forward Looking Statements
Forward Looking Statements Certain statements in this document or documents incorporated herein by reference constitute forward-looking statements or information (collectively Certain statements relating to the Company in this document or documents incorporated herein by reference constitute forward
Slide 50: Reporting Disclosures
Reporting Disclosures Special Note Regarding Currency, Production and Reserves In this document, all references to dollars refer to Canadian dollars unless otherwise stated. Production data is presented on a before royalties basis unless otherwise stated. In addition, reference is made to oil and ga
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