Exhibit Number | Description |
99.1 | |
Canadian Natural Resources Limited Announces 2018 Second Quarter Results | |
99.2 | |
99.3 |
Canadian Natural Resources Limited (Registrant) | |||
Date: August 2, 2018 | By: | /s/ Paul M. Mendes | |
Paul M. Mendes | |||
VP, Legal, General Counsel & Corporate Secretary | |||
Three Months Ended | Six Months Ended | |||||||||||||||||||||
($ millions, except per common share amounts) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||||||||||||
Net earnings | $ | 982 | $ | 583 | $ | 1,072 | $ | 1,565 | $ | 1,317 | ||||||||||||
Per common share | – basic | $ | 0.80 | $ | 0.48 | $ | 0.93 | $ | 1.28 | $ | 1.16 | |||||||||||
– diluted | $ | 0.80 | $ | 0.47 | $ | 0.93 | $ | 1.27 | $ | 1.16 | ||||||||||||
Adjusted net earnings from operations (1) | $ | 1,279 | $ | 885 | $ | 332 | $ | 2,164 | $ | 609 | ||||||||||||
Per common share | – basic | $ | 1.05 | $ | 0.72 | $ | 0.29 | $ | 1.77 | $ | 0.54 | |||||||||||
– diluted | $ | 1.04 | $ | 0.71 | $ | 0.29 | $ | 1.76 | $ | 0.54 | ||||||||||||
Funds flow from operations (2) | $ | 2,706 | $ | 2,323 | $ | 1,726 | $ | 5,029 | $ | 3,365 | ||||||||||||
Per common share | – basic | $ | 2.20 | $ | 1.90 | $ | 1.50 | $ | 4.10 | $ | 2.97 | |||||||||||
– diluted | $ | 2.19 | $ | 1.89 | $ | 1.49 | $ | 4.08 | $ | 2.95 | ||||||||||||
Total net capital expenditures (3) | $ | 974 | $ | 1,103 | $ | 13,046 | $ | 2,077 | $ | 13,892 | ||||||||||||
Daily production, before royalties | ||||||||||||||||||||||
Natural gas (MMcf/d) | 1,539 | 1,614 | 1,656 | 1,576 | 1,664 | |||||||||||||||||
Crude oil and NGLs (bbl/d) | 793,899 | 854,558 | 637,127 | 824,060 | 617,728 | |||||||||||||||||
Equivalent production (BOE/d) (4) | 1,050,376 | 1,123,546 | 913,171 | 1,086,757 | 895,139 |
(1) | Adjusted net earnings from operations is a non-GAAP measure that the Company utilizes to evaluate its performance. The derivation of this measure is discussed in the Management’s Discussion and Analysis (“MD&A”). |
(2) | Funds flow from operations is a non-GAAP measure that the Company considers key as it demonstrates the Company’s ability to fund capital reinvestment and debt repayment. The derivation of this measure is discussed in the MD&A. |
(3) | For additional information and details, refer to the net capital expenditures table in the Company's MD&A. |
(4) | A barrel of oil equivalent (“BOE”) is derived by converting six thousand cubic feet (“Mcf”) of natural gas to one barrel (“bbl”) of crude oil (6 Mcf:1 bbl). This conversion may be misleading, particularly if used in isolation, since the 6 Mcf:1 bbl ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In comparing the value ratio using current crude oil prices relative to natural gas prices, the 6 Mcf:1 bbl conversion ratio may be misleading as an indication of value. |
▪ | Net earnings of $982 million were realized in Q2/18, an increase of 68% over Q1/18 levels, and adjusted net earnings of $1,279 million were achieved, a 45% increase over Q1/18 levels. |
▪ | Canadian Natural generated record quarterly funds flow from operations of $2,706 million in Q2/18, increases of $383 million and $980 million from Q1/18 and Q2/17 levels respectively. The increase over Q1/18 and Q2/17 primarily reflects higher realized prices from the Company's liquids production together with higher liquids production volumes when compared to Q2/17. |
▪ | In Q2/18, Canadian Natural delivered funds flow from operations in excess of capital expenditures of approximately $1,730 million, an increase of approximately $510 million and $890 million from Q1/18 and Q2/17 levels respectively. |
▪ | In the first half of 2018, after dividend requirements, free cash flow totaled approximately $2,200 million. |
▪ | The Company maintained balance in the allocation of its funds flow from operations, consistent with the Company's four pillar strategy: |
• | The Company remained disciplined in economic resource development with capital expenditures of $2,077 million in the first half of 2018. |
• | In the first half of the year the Company has reduced long term net debt by $1,106 million, resulting in debt to adjusted EBITDA strengthening to 2.1x and debt to book capitalization improving to 39.6%. |
• | Returns to shareholders remain a key focus for Canadian Natural as the Company has returned approximately $1,188 million by way of dividends and share buybacks in the first six months of 2018. Share buybacks for cancellation totaled 10,140,127 shares in Q2/18 at a weighted average share price of $43.52. |
Canadian Natural Resources Limited | 2 | Six months ended June 30, 2018 |
◦ | Subsequent to quarter end Canadian Natural declared a quarterly cash dividend on common shares of $0.335 per share payable on October 1, 2018. |
◦ | Subsequent to quarter end, the Company executed additional share buybacks of 722,600 common shares for cancellation at a weighted average price of $46.95 per common share. |
• | Opportunistic acquisitions have been minor in 2018, with year to date net expenditures of less than $100 million. |
▪ | The Company's production volumes in Q2/18 averaged 1,050,376 BOE/d, an increase of 15% from Q2/17 levels, mainly due to the Horizon Phase 3 expansion and acquisitions in 2017. Production decreased from Q1/18 levels by 7%, primarily as a result of major planned turnaround activities at the Company's Oil Sands Mining and Upgrading and thermal in situ operations as well as proactive and strategic actions taken to maximize value. |
▪ | Canadian Natural’s corporate crude oil and NGL production volumes averaged 793,899 bbl/d, a decrease of 7% from Q1/18 levels and a 25% increase from Q2/17 levels. The decrease from Q1/18 was primarily as a result of proactive turnaround activities at our Oil Sands Mining and Upgrading and thermal in situ operations as well as curtailments in Q2/18. The increase from Q2/17 was primarily as a result of production from the Horizon Phase 3 expansion, as well as high reliability and strong production from acquisitions completed in 2017. |
▪ | At the Company's world class Oil Sands Mining and Upgrading assets, operations were as expected in Q2/18 with quarterly production of 407,704 bbl/d of Synthetic Crude Oil ("SCO"), a decrease of 11% from Q1/18 levels, as planned turnaround and pit stop activities at all three of the Company's oil sands mines, as well as a major 62 day turnaround at the Scotford Upgrader were successfully completed in the quarter. |
• | Cost control remains a strong focus for the Company as costs continued to come down resulting in industry leading operating costs of $22.94/bbl (US$17.77/bbl) of SCO in Q2/18, a 2% decrease from Q2/17 levels and a 7% increase from Q1/18 levels, impressive results considering major turnarounds decreased production by 11% in Q2/18 from Q1/18 levels. |
• | At the Athabasca Oil Sands Project ("AOSP"), a significant milestone was reached in July, when the asset produced its 1 billionth barrel of mined bitumen during its first 15 years of operations, one of the few world class assets to reach such a milestone. This is a true demonstration of the quality, size and scale of the Company's Oil Sands Mining and Upgrading operations which through environmentally responsible, safe, reliable, effective and efficient operations, provide sustainable long life low decline production and significant value for stakeholders. |
• | At Horizon, following the successful completion of the Phase 3 expansion and after operating the plant for the last 8 months, the Company continues to evaluate potential expansions and has identified additional opportunities to increase reliability, lower costs and add production. |
◦ | Results at the potential Paraffinic Froth Treatment expansion at Horizon are evident as the engineering and design specification work completed year to date has shown that the optimal production range of the proposed expansion has increased by 10,000 bbl/d and is now targeted to be 40,000 bbl/d to 50,000 bbl/d. The expansion is targeted to produce high quality diluted bitumen at significantly lower operating costs as the Company leverages its existing infrastructure. Preliminary estimates of the capital required for the proposed expansion are approximately $1.4 billion. |
◦ | Defining and high grading additional opportunities is ongoing with the completion of the process targeted by year end. These opportunities are targeted to add near term growth of 35,000 bbl/d to 45,000 bbl/d of SCO. All opportunities will be executed in a disciplined and step wise manner, which preserves Canadian Natural's capital flexibility. The previously discussed Vacuum Gas Oil ("VGO") expansion will be included in the high grading process. |
◦ | In preparation to execute on these opportunities in 2019 and 2020, Canadian Natural has increased 2018 capital expenditures guidance by $170 million to advance engineering and procurement of certain long lead equipment. |
▪ | At Kirby North, top tier execution and strong productivity has resulted in the project progressing ahead of schedule, advancing targeted first oil by three months into Q4/19, one quarter earlier than originally planned. Cost performance remains on budget with 95% of the Central Processing Facility equipment delivered to site and Steam Assisted Gravity Drainage ("SAGD") drilling nearing 45% completion. Kirby North targets to add 40,000 bbl/d of SAGD production. |
Canadian Natural Resources Limited | 3 | Six months ended June 30, 2018 |
▪ | Balance sheet strength continues to be a focus of the Company and strong financial performance was demonstrated in Q2/18 through reduced long term debt and extensions of select credit facilities. |
• | In Q2/18, Standard & Poor's revised the Company's rating outlook from BBB+/negative to BBB+/stable. |
• | In Q2/18, the Company reduced absolute long term net debt by approximately $610 million, from Q1/18 levels. |
• | Canadian Natural maintains strong financial stability and liquidity represented by cash balances and committed bank credit facilities. At June 30, 2018 the Company had approximately $4,800 million of available liquidity, including cash and cash equivalents, an increase of approximately $800 million from Q1/18. |
• | In Q2/18 Canadian Natural continued to have significant support from its large and diverse banking group as indicated by extensions of certain credit facilities completed in the quarter. |
▪ | In Q2/18 Canadian Natural published its 2017 Stewardship Report to Stakeholders, now available on the Company's website at https://www.cnrl.com/corporate-responsibility/stewardship-report/#2017. The report displays how Canadian Natural continues to focus on safe, reliable, effective and efficient operations while minimizing the Company's environmental footprint. |
Canadian Natural Resources Limited | 4 | Six months ended June 30, 2018 |
Six Months Ended Jun 30 | ||||||||
2018 | 2017 | |||||||
(number of wells) | Gross | Net | Gross | Net | ||||
Crude oil | 210 | 203 | 236 | 216 | ||||
Natural gas | 13 | 9 | 16 | 16 | ||||
Dry | 2 | 2 | 3 | 3 | ||||
Subtotal | 225 | 214 | 255 | 235 | ||||
Stratigraphic test / service wells | 555 | 477 | 232 | 232 | ||||
Total | 780 | 691 | 487 | 467 | ||||
Success rate (excluding stratigraphic test / service wells) | 99 | % | 99 | % |
▪ | The Company's total Q2/18 crude oil and natural gas drilling program was 85 net wells, excluding strat/service wells, an increase of 17 net wells from the 68 net wells drilled in Q2/17. The Company's drilling levels reflects the disciplined capital allocation process and proactive actions to improve execution and control costs by balancing overall drilling levels throughout the year. |
Crude oil and NGLs – excluding Thermal In Situ Oil Sands | |||||||||||
Three Months Ended | Six Months Ended | ||||||||||
June 30 2018 | March 31 2018 | June 30 2017 | June 30 2018 | June 30 2017 | |||||||
Crude oil and NGLs production (bbl/d) | 238,631 | 245,609 | 227,083 | 242,101 | 229,325 | ||||||
Net wells targeting crude oil | 58 | 101 | 57 | 159 | 204 | ||||||
Net successful wells drilled | 58 | 99 | 55 | 157 | 202 | ||||||
Success rate | 100 | % | 98 | % | 96 | % | 99 | % | 99 | % |
Canadian Natural Resources Limited | 5 | Six months ended June 30, 2018 |
▪ | North America crude oil and NGLs averaged 238,631 bbl/d in Q2/18, within quarterly corporate guidance, representing a 3% decrease from Q1/18 levels and a 5% increase from Q2/17 levels. The volume decrease in Q2/18 compared to Q1/18 levels was primarily as a result of production curtailments and shut-in volumes of approximately 10,350 bbl/d as well as reduced drilling activity and delayed completion and ramp up of certain primary heavy crude oil wells drilled in Q1/18 and Q2/18. |
▪ | Due to current market conditions the Company has exercised its capital flexibility by shifting capital from primary heavy crude oil to light crude oil in 2018, resulting in an additional 7 net light crude oil wells targeted to be drilled in the second half of the year. Primary heavy crude oil drilling was reduced by 24 net primary heavy crude oil wells in Q2/18, with an additional 35 primary heavy crude oil well reduction targeted for the second half of the year. |
▪ | Canadian Natural's primary heavy crude oil production averaged 84,811 bbl/d in Q2/18, a 5% decrease from Q1/18 levels. In order to maximize value from the Company’s primary heavy crude oil assets, Canadian Natural implemented and executed on proactive decisions and strategic actions in the first half of 2018, such as: |
◦ | Disciplined capital allocation and proactive actions to target only the highest return wells in our primary heavy crude oil assets which resulted in 39 net wells drilled in Q2/18, less than originally budgeted. |
◦ | The shut in of marginal high cost primary heavy crude oil production in 2018, which impacted Q2/18 production by approximately 2,900 bbl/d. |
◦ | Proactive decisions to not sell marginal production in the wider spot WCS differential market versus the index WCS differential, caused by pipeline apportionment issues. As a result, the Company curtailed volumes of approximately 7,450 bbl/d in Q2/18. |
• | Controlling costs remains a focus with operating costs of $17.02/bbl in Q2/18, comparable to Q1/18 levels, strong results given the lower production volumes that were primarily as a result of proactive curtailments. |
• | At the Company's Smith primary heavy crude oil play, initial results have been strong from the 6 net multilateral wells drilled year to date and are currently producing approximately 340 bbl/d per well. There is significant potential at Smith for future development as Canadian Natural has 19 net sections in the fairway with the potential to add approximately 125 net horizontal multilateral primary heavy crude oil wells. Smith is an example of Canadian Natural's large, high quality primary heavy crude oil asset base. |
▪ | North America light crude oil and NGL quarterly production averaged 89,906 bbl/d, a decrease of 3% from Q1/18 levels and comparable to Q2/17 levels. Production from additional capital allocated to light crude oil assets is targeted to begin to be added in Q3/18. |
• | The Company successfully drilled 38 net light crude oil wells in the first half of the year. Some initial results from wells coming on production in the quarter are as follows: |
◦ | At the Company's light crude oil development at Tower, 7 net wells have been drilled and related facility construction has been completed. Operations are currently ramping up with initial well capacity targeted to be 850 bbl/d per well. Based on initial flow back rates, facility capacity of approximately 3,000 bbl/d is targeted to be reached in late Q3/18. There is additional potential at Tower with 41 targeted net light crude oil wells locations, on the Company's 11 net sections in the area. |
◦ | At Wembley, 2 net Montney wells that were drilled in Q1/18 came on production late in Q2/18. Initial results are strong with production currently reaching approximately 800 bbl/d per well. There is meaningful potential at Wembley with 175 targeted net light crude oil well locations, on the Company's 77 net sections of Montney lands in the area. |
• | Operating costs of $15.81/bbl were realized in Q2/18, comparable to Q1/18 levels in the Company's light crude oil and NGL areas. |
▪ | Pelican Lake quarterly production averaged 63,914 bbl/d, comparable with Q1/18 levels and an increase of 36% from Q2/17 levels. The increase from Q2/17 was as a result of the Company's successful integration of the acquired assets in 2017. |
• | Polymer flood restoration on the acquired lands continues to proceed ahead of schedule, where approximately 60% of acquired lands are now under polymer flood. To optimize long term oil recovery and effectiveness of the polymer flood, the Company is using modified injection parameters in the near term. As polymer flood conformance improves, the Company expects to increase oil recovery and further maximize value. |
• | Operating costs of $6.96/bbl were achieved in Q2/18, a 2% decrease from Q1/18 levels. |
Canadian Natural Resources Limited | 6 | Six months ended June 30, 2018 |
• | In the quarter, the Company successfully drilled 11 net producer wells. When incorporating the 7 net wells drilled in Q1/18, the Company has drilled 18 net Pelican Lake wells in the first half of the year, which are performing as expected and are currently producing approximately 90 bbl/d per well. |
▪ | The Company’s 2018 North America E&P crude oil and NGL annual production guidance remains unchanged and is targeted to range from 253,000 bbl/d - 263,000 bbl/d. |
Thermal In Situ Oil Sands | |||||||||||
Three Months Ended | Six Months Ended | ||||||||||
Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||
Bitumen production (bbl/d) | 104,907 | 111,851 | 105,719 | 108,359 | 116,983 | ||||||
Net wells targeting bitumen | 21 | 22 | 4 | 43 | 12 | ||||||
Net successful wells drilled | 21 | 22 | 4 | 43 | 12 | ||||||
Success rate | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
▪ | Thermal in situ quarterly production volumes averaged 104,907 bbl/d, within Q2/18 guidance and a decrease of 6% as expected from Q1/18 levels primarily as the Company advanced and completed turnaround activities in the quarter. Production curtailments impacted Q2/18 by approximately 700 bbl/d, mainly at Kirby South. |
• | At Primrose, Q2/18 production volumes averaged 67,569 bbl/d, a decrease of 6% from Q1/18 levels, primarily as a result of major turnaround activities. Including energy costs, operating costs were strong at $14.66/bbl in Q2/18, a decrease of 12% and 8% from Q1/18 and Q2/17 levels respectively, excellent results given downtime relating to the turnarounds in the quarter. |
◦ | Pad additions at Primrose are going as planned with the drilling targeted to add approximately 32,000 bbl/d in 2020, with initial production targeted late in 2019. These pad additions are high return activities as the Company utilizes available oil processing and steam capacity. |
• | At Kirby South, SAGD production volumes of 35,322 bbl/d were achieved in Q2/18, a decrease of 5% from Q1/18 levels following planned turnaround activities brought forward into Q2/18 and curtailments of approximately 700 bbl/d and a 2% increase from Q2/17 levels. |
◦ | Including energy costs, Kirby South achieved strong Q2/18 operating costs of $9.12/bbl, comparable to Q1/18 and a decrease of 11% from Q2/17 levels. |
• | At Kirby North, top tier execution and strong productivity has resulted in the project progressing ahead of schedule, advancing targeted first oil by three months into Q4/19, one quarter earlier than originally planned. Cost performance remains on budget with 95% of the Central Processing Facility equipment delivered to site and SAGD drilling nearing 45% completion. Kirby North targets to add 40,000 bbl/d of SAGD production. |
▪ | The Company’s 2018 thermal in situ annual production guidance remains unchanged and is targeted to range between 107,000 bbl/d - 127,000 bbl/d. |
North America Natural Gas | |||||||||||
Three Months Ended | Six Months Ended | ||||||||||
Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||
Natural gas production (MMcf/d) | 1,485 | 1,547 | 1,603 | 1,515 | 1,607 | ||||||
Net wells targeting natural gas | 4 | 5 | 5 | 9 | 17 | ||||||
Net successful wells drilled | 4 | 5 | 5 | 9 | 16 | ||||||
Success rate | 100 | % | 100 | % | 100 | % | 100 | % | 94 | % |
▪ | North America natural gas production was as expected at 1,485 MMcf/d in Q2/18, representing decreases of 4% and 7% from Q1/18 and Q2/17 levels respectively. |
Canadian Natural Resources Limited | 7 | Six months ended June 30, 2018 |
▪ | Operating costs of $1.28/Mcf were realized in Q2/18, a decrease of 2% from Q1/18 levels, strong results given lower natural gas volumes due to the Company's proactive decision to shut-in volumes and delay activity on certain natural gas assets. |
▪ | In Q2/18 the Company has made the following proactive and strategic actions to maximize value in the Company's natural gas assets, including: |
• | Completion of major turnaround activities at natural gas processing facilities to correspond with challenged natural gas prices. |
• | Deferred capital and development activity including recompletions and workovers of certain natural gas assets, resulting in a production impact of approximately 20 MMcf/d in Q2/18. The Company will look to execute these deferrals in Q3/18 or Q4/18 with improved natural gas prices. |
• | Q2/18 production volumes of approximately 27 MMcf/d were shut-in, due to low natural gas prices. |
• | Q2/18 production was impacted by 12 MMcf/d related to solution gas associated with the curtailment of primary heavy crude oil production. |
▪ | Additionally, the Company's natural gas production was reduced by approximately 65 MMcf/d in Q2/18 due to restrictions at the Pine River plant, operated by a third party. In Q2/18 Canadian Natural, subject to regulatory approval, agreed to acquire the facility from the third party, which needs to complete a meter upgrade that will take approximately four weeks, at which time the Company targets to complete maintenance work on the facility and will assess increasing plant throughput and reliability to match field capacity of approximately 145 MMcf/d. |
▪ | As a result of the items listed above and proactive actions going forward, the Company’s 2018 corporate natural gas annual production guidance has been revised and is targeted to range from 1,550 MMcf/d - 1,600 MMcf/d. |
▪ | The Company uses natural gas in its operations representing approximately 35% of its total equivalent gas production providing a natural hedge from the challenging Western Canadian natural gas price environment. Approximately 32% of the natural gas production is exported to other North American markets or sold internationally, with the remaining 33% of the Company's production being exposed to AECO/Station 2 pricing. |
Three Months Ended | Six Months Ended | ||||||||||
Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||
Crude oil production (bbl/d) | |||||||||||
North Sea | 24,456 | 21,584 | 26,304 | 23,028 | 24,682 | ||||||
Offshore Africa | 18,201 | 19,438 | 20,480 | 18,816 | 21,542 | ||||||
Natural gas production (MMcf/d) | |||||||||||
North Sea | 30 | 37 | 37 | 34 | 37 | ||||||
Offshore Africa | 24 | 30 | 16 | 27 | 20 | ||||||
Net wells targeting crude oil | 1.9 | 1.0 | 1.8 | 2.9 | 1.8 | ||||||
Net successful wells drilled | 1.9 | 1.0 | 1.8 | 2.9 | 1.8 | ||||||
Success rate | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
▪ | International E&P quarterly production volumes were within quarterly production guidance and reached 42,657 bbl/d in Q2/18, an increase of 4% from Q1/18 levels. |
• | In the North Sea, volumes of 24,456 bbl/d were achieved in Q2/18, an increase of 13% from Q1/18 levels and a decrease of 7% from Q2/17 levels. The increase in production in Q2/18 from Q1/18 levels was primarily due to new wells at Tiffany and Ninian. The decrease from Q2/17 levels was a result of the impact of the shut-in of the Ninian North platform in May 2017 in preparation for decommissioning and natural field declines, partially offset by new wells at Ninian South and production optimization. |
Canadian Natural Resources Limited | 8 | Six months ended June 30, 2018 |
◦ | The Company's continued focus on production enhancements, increased reliability and water flood optimization in the North Sea resulted in Q2/18 operating costs decreasing by 19% from Q1/18 levels to $35.12/bbl. |
◦ | In the first half of 2018, 2.9 net wells were drilled in the North Sea, with current light crude oil production exceeding 1,700 bbl/d per well. |
◦ | On April 26, 2018, the Ninian North platform was permanently de-manned in readiness for future removal as part of the ongoing decommissioning program. This milestone was achieved 3 months ahead of schedule and below budget. |
• | Offshore Africa production volumes in Q2/18 averaged 18,201 bbl/d, a decrease of 6% and 11% from Q1/18 and Q2/17 levels respectively. The decrease from Q2/17 was primarily as a result of planned maintenance activities at Espoir that were successfully completed in Q2/18, as well as natural field declines. |
◦ | Côte d'Ivoire crude oil operating costs in Q2/18 were strong at $16.39/bbl, a 5% decrease from Q2/17 levels. |
◦ | The Company is targeting to drill 1.7 net producing wells at Baobab, where drilling has commenced. The program targets to add average net production of approximately 5,700 bbl/d of light crude oil with the first well targeted to come on production in late Q3/18. |
▪ | The Company's 2018 International annual production guidance remains unchanged and is targeted to range from 40,000 bbl/d - 45,000 bbl/d. |
Three Months Ended | Three Months Ended | ||||||||||
Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||
Synthetic crude oil production (bbl/d) (1) (2) | 407,704 | 456,076 | 257,541 | 431,756 | 225,196 |
(1) | Q2/18 SCO production before royalties excludes 3,026 bbl/d of SCO consumed internally as diesel (Q1/18 – 3,224 bbl/d; Q2/17 – 438 bbl/d). |
(2) | Consists of heavy and light synthetic crude oil products. |
▪ | At the Company's world class Oil Sands Mining and Upgrading assets, operations were as expected in Q2/18 with quarterly production of 407,704 bbl/d of SCO, a decrease of 11% from Q1/18 levels as planned turnaround and pit stop activities at all three of the Company's oil sands mines as well as a major 62 day turnaround at the Scotford Upgrader were successfully completed in the quarter. |
• | Cost control remains a strong focus for the Company as costs continued to come down resulting in industry leading operating costs of $22.94/bbl (US$17.77/bbl) of SCO in Q2/18, a 2% decrease from Q2/17 levels and a 7% increase from Q1/18 levels, impressive results considering major turnarounds decreased production by 11% in Q2/18 from Q1/18 levels. |
• | At the AOSP, a significant milestone was reached in July, when the asset produced its 1 billionth barrel of mined bitumen during its first 15 years of operations, one of the few world class assets to reach such a milestone. This is a true demonstration of the quality, size and scale of the Company's Oil Sands Mining and Upgrading operations which through environmentally responsible, safe, reliable, effective and efficient operations, provide sustainable long life low decline production and significant value for stakeholders. |
• | At Horizon, following the successful completion of the Phase 3 expansion and after operating the plant for the last 8 months, the Company continues to evaluate potential expansions and has identified additional opportunities to increase reliability, lower costs and add production. |
◦ | Results at the potential Paraffinic Froth Treatment expansion at Horizon are evident as the engineering and design specification work completed year to date has shown that the optimal production range of the proposed expansion has increased by 10,000 bbl/d and is now targeted to be 40,000 bbl/d to 50,000 bbl/d. The expansion is targeted to produce high quality diluted bitumen at significantly lower operating costs as the Company leverages its existing infrastructure. Preliminary estimates of the capital required for the proposed expansion are approximately $1.4 billion. |
◦ | Defining and high grading additional opportunities is ongoing with the completion of the process targeted by year end. These opportunities are targeted to add near term growth of 35,000 bbl/d to 45,000 bbl/d of SCO. All opportunities will be executed in a disciplined and step wise manner, which preserves Canadian Natural's capital flexibility. The previously discussed VGO expansion will be included in the high grading process. |
Canadian Natural Resources Limited | 9 | Six months ended June 30, 2018 |
◦ | The Company's planned 21 day turnaround is targeted for September 2018. Subsequently, the plant will run at restricted rates of approximately 130,000 bbl/d for 12 days to perform maintenance on the Vacuum Distillate Unit ("VDU") furnaces. |
▪ | The Company's 2018 Oil Sands Mining and Upgrading annual production guidance remains unchanged and is targeted to range from 415,000 bbl/d - 450,000 bbl/d of upgraded products. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||||||||||||
Crude oil and NGLs pricing | |||||||||||||||||||||
WTI benchmark price (US$/bbl) (1) | $ | 67.90 | $ | 62.89 | $ | 48.29 | $ | 65.41 | $ | 50.07 | |||||||||||
WCS heavy differential as a percentage of WTI (%) (2) | 28 | % | 39 | % | 23 | % | 33 | % | 26 | % | |||||||||||
SCO price (US$/bbl) | $ | 67.27 | $ | 61.45 | $ | 49.83 | $ | 64.38 | $ | 50.63 | |||||||||||
Condensate benchmark pricing (US$/bbl) | $ | 68.85 | $ | 63.12 | $ | 48.44 | $ | 66.00 | $ | 50.31 | |||||||||||
Average realized pricing before risk management (C$/bbl) (3) | $ | 61.14 | $ | 43.06 | $ | 47.12 | $ | 52.32 | $ | 47.08 | |||||||||||
Natural gas pricing | |||||||||||||||||||||
AECO benchmark price (C$/GJ) | $ | 0.97 | $ | 1.75 | $ | 2.63 | $ | 1.36 | $ | 2.71 | |||||||||||
Average realized pricing before risk management (C$/Mcf) | $ | 1.95 | $ | 2.74 | $ | 2.97 | $ | 2.35 | $ | 3.11 |
(1) | West Texas Intermediate (“WTI”). |
(2) | Western Canadian Select (“WCS”). |
(3) | Average crude oil and NGL pricing excludes SCO. Pricing is net of blending costs and excluding risk management activities. |
▪ | In Q2/18, the WCS heavy differential narrowed as heavy crude oil began to be moved to market. The WCS heavy differential widened in Q1/18 as a result of third party pipeline outages backing up heavy crude oil into Western Canada. This resulted in anomalous heavy crude oil pricing as the pipeline operators and rail transport worked to remove the backlog of inventory. |
▪ | Canadian Natural and other industry participants, as part of a working committee, are working towards a more effective nomination process that verifies actual production and sales. |
• | Having an effective nomination process is significant to Canadian Natural as the Company is required to sell portions of its heavy crude oil production at a discount to the WCS index as a result of apportionment on the Enbridge pipeline. |
▪ | AECO natural gas prices for Q2/18 continued to reflect third party pipeline constraints limiting flow of natural gas to export markets, increased natural gas production in the basin and constraints on export capacity out of Western Canada. |
▪ | The North West Redwater ("NWR") refinery, upon completion, will strengthen the Company’s position by providing a competitive return on investment and by creating incremental demand for approximately 80,000 bbl/d of heavy crude oil blends that will not require export pipelines, helping to reduce pricing volatility in all Western Canadian heavy crude oil. |
• | The North West Redwater refinery began processing light crude oil late in November 2017 and continues to progress as expected. |
• | The Company has a 50% interest in the NWR Partnership. For updates on the project, please refer to: https://nwrsturgeonrefinery.com/whats-happening/news/. |
Canadian Natural Resources Limited | 10 | Six months ended June 30, 2018 |
• | Canadian Natural has invested significant capital to capture and sequester CO2. The Company has carbon capture and sequestration facilities at Horizon, a 70% working interest in the Quest Carbon Capture and Storage project at Scotford and has carbon capture facilities at its 50% interest in the NWR refinery. As a result, Canadian Natural targets capacity to capture and sequester 2.7 million tonnes of CO2 annually, equivalent to taking 570,000 vehicles off the road, making the Company the 5th largest capturer and sequester of CO2 globally once the NWR refinery is fully running. |
• | At Canadian Natural's Oil Sands operations, which represent approximately 66% of the Company's liquids production, the Company's emissions intensity is only approximately 5% higher than the average intensity for all global crude oils. By investing in and leveraging technology, specifically carbon capture initiatives, Canadian Natural has developed a pathway to reduce the Company's greenhouse gas ("GHG") emissions intensity to be below the average for global crude oils. |
• | Canadian Natural's commitment to leverage technology, adopting innovation and continuous improvement is evidenced by its In Pit Extraction Process ("IPEP") pilot at Horizon, which will determine the feasibility of producing stackable dry tailings. The project has the potential to reduce the Company's carbon emissions and environmental footprint by reducing the usage of haul trucks, the size and need for tailings ponds and accelerating site reclamation. In addition this process has the potential to significantly reduce capital and operating costs. |
• | The Company’s GHG emissions intensity has decreased materially by 18% from 2013 to 2017. |
• | Methane emissions have decreased 71% from 2013 to 2017 at the Company's Alberta primary heavy crude oil operations. |
▪ | The Company’s strategy is to maintain a diverse portfolio balanced across various commodity types. The Company achieved production levels of 1,050,376 BOE/d in Q1/18, with approximately 98% of total production located in G7 countries. |
• | Canadian Natural maintains a balance of products with current approximate product mix on a BOE/d basis of 50% light crude oil and SCO blends, 25% heavy crude oil blends and 25% natural gas, based upon the midpoint of annual 2018 production guidance. |
• | Canadian Natural’s production is resilient as long life low decline assets make up approximately 73% of 2018 liquids production guidance, including the AOSP, Horizon, Pelican Lake and thermal in situ oil sands assets. |
▪ | In Q2/18, Canadian Natural delivered funds flow from operations in excess of capital expenditures of approximately $1,730 million, an increase of approximately $510 million and $890 million from Q1/18 and Q2/17 levels respectively. |
▪ | Balance sheet strength continues to be a focus of the Company and strong financial performance was demonstrated in Q2/18 through reduced long term debt and extensions of select credit facilities. |
• | In Q2/18, Standard & Poor's revised the Company's rating outlook from BBB+/negative to BBB+/stable. |
• | In Q2/18, the Company reduced long term net debt by approximately $610 million, from Q1/18 levels. |
◦ | Additionally, the Company has reduced long term debt in the past 12 months since the AOSP acquisition by approximately $2,500 million, from Q2/17 levels, when including the retirement of the deferred AOSP acquisition liability. |
• | Canadian Natural maintains strong financial stability and liquidity represented by cash balances and committed bank credit facilities. At June 30, 2018 the Company had approximately $4,800 million of available liquidity, including cash and cash equivalents, an increase of approximately $800 million from Q1/18. |
Canadian Natural Resources Limited | 11 | Six months ended June 30, 2018 |
• | Canadian Natural continues to have significant support from its large and diverse banking group as indicated by credit facility extensions during the quarter. In Q2/18 the Company extended its $2,425 million revolving syndicated credit facility originally maturing in June 2020 to June 2022. Additionally in the quarter, Canadian Natural's $2,200 million non-revolving facility was extended from October 2019 to October 2020. |
• | As at June 30, 2018, debt to book capitalization improved to 39.6% from 40.5% in Q1/18 and debt to adjusted EBITDA strengthened to 2.1x from 2.5x from Q1/18. |
▪ | Returns to shareholders remains a key focus for Canadian Natural as the Company returned approximately $850 million by way of dividend and share buybacks in Q2/18. Share buybacks for cancellation totaled 10,140,127 shares in the quarter at an weighted average share price of $43.52. |
• | Subsequent to quarter end, the Company had additional share buybacks of 722,600 common shares for cancellation at a weighted average price of $46.95 per common share. |
▪ | In addition to its strong funds flow, capital flexibility and access to debt capital markets, Canadian Natural has additional financial levers at its disposal to effectively manage its liquidity. As at June 30, 2018, these financial levers include the Company’s third party equity investments of approximately $745 million. |
▪ | Subsequent to quarter end, Canadian Natural declared a quarterly cash dividend on common shares of $0.335 per share payable on October 1, 2018. |
Canadian Natural Resources Limited | 12 | Six months ended June 30, 2018 |
Canadian Natural Resources Limited | 13 | Six months ended June 30, 2018 |
Canadian Natural Resources Limited | 14 | Six months ended June 30, 2018 |
CANADIAN NATURAL RESOURCES LIMITED |
2100, 855 - 2nd Street S.W. Calgary, Alberta, T2P4J8 Phone: 403-517-7777 Email: ir@cnrl.com www.cnrl.com |
STEVE W. LAUT Executive Vice-Chairman TIM S. MCKAY President COREY B. BIEBER Chief Financial Officer and Senior Vice-President, Finance MARK A. STAINTHORPE Vice-President, Finance – Capital Markets Trading Symbol - CNQ Toronto Stock Exchange New York Stock Exchange |
Canadian Natural Resources Limited | 15 | Six months ended June 30, 2018 |
Canadian Natural Resources Limited | 1 | Six Months Ended June 30, 2018 |
Canadian Natural Resources Limited | 2 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
($ millions, except per common share amounts) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||||
Product sales | $ | 6,389 | $ | 5,735 | $ | 4,127 | $ | 12,124 | $ | 8,119 | |||||||||||||
Crude oil and NGLs | $ | 6,071 | $ | 5,303 | $ | 3,645 | $ | 11,374 | $ | 7,104 | |||||||||||||
Natural gas | $ | 318 | $ | 432 | $ | 482 | $ | 750 | $ | 1,015 | |||||||||||||
Net earnings | $ | 982 | $ | 583 | $ | 1,072 | $ | 1,565 | $ | 1,317 | |||||||||||||
Per common share | – basic | $ | 0.80 | $ | 0.48 | $ | 0.93 | $ | 1.28 | $ | 1.16 | ||||||||||||
– diluted | $ | 0.80 | $ | 0.47 | $ | 0.93 | $ | 1.27 | $ | 1.16 | |||||||||||||
Adjusted net earnings from operations (1) | $ | 1,279 | $ | 885 | $ | 332 | $ | 2,164 | $ | 609 | |||||||||||||
Per common share | – basic | $ | 1.05 | $ | 0.72 | $ | 0.29 | $ | 1.77 | $ | 0.54 | ||||||||||||
– diluted | $ | 1.04 | $ | 0.71 | $ | 0.29 | $ | 1.76 | $ | 0.54 | |||||||||||||
Funds flow from operations (2) | $ | 2,706 | $ | 2,323 | $ | 1,726 | $ | 5,029 | $ | 3,365 | |||||||||||||
Per common share | – basic | $ | 2.20 | $ | 1.90 | $ | 1.50 | $ | 4.10 | $ | 2.97 | ||||||||||||
– diluted | $ | 2.19 | $ | 1.89 | $ | 1.49 | $ | 4.08 | $ | 2.95 | |||||||||||||
Net capital expenditures | $ | 974 | $ | 1,103 | $ | 13,046 | $ | 2,077 | $ | 13,892 |
(1) | Adjusted net earnings from operations is a non-GAAP measure that represents net earnings as presented in the Company's consolidated Statements of Earnings, adjusted for certain items of a non-operational nature. The Company evaluates its performance based on adjusted net earnings from operations. The reconciliation “Adjusted Net Earnings from Operations” presented in this MD&A, presents the after-tax effects of certain items of a non-operational nature that are included in the Company’s financial results. Adjusted net earnings from operations may not be comparable to similar measures presented by other companies. |
(2) | Funds flow from operations is a non-GAAP measure that represents net earnings as presented in the Company's consolidated Statements of Earnings, adjusted for certain non-cash items. The Company evaluates its performance based on funds flow from operations. The Company considers funds flow from operations a key measure as it demonstrates the Company’s ability to generate the cash flow necessary to fund future growth through capital investment and to repay debt. The reconciliation “Funds Flow from Operations, as Reconciled to Net Earnings” presented in this MD&A, includes certain non-cash items that are disclosed in the Company’s financial results as presented in the Company's consolidated Statements of Cash Flows. Funds flow from operations may not be comparable to similar measures presented by other companies. |
Canadian Natural Resources Limited | 3 | Six Months Ended June 30, 2018 |
Adjusted Net Earnings from Operations | |||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Net earnings | $ | 982 | $ | 583 | $ | 1,072 | $ | 1,565 | $ | 1,317 | |||||||||||
Share-based compensation, net of tax (1) | 175 | (88 | ) | (104 | ) | 87 | (77 | ) | |||||||||||||
Unrealized risk management (gain) loss, net of tax (2) | (11 | ) | (31 | ) | 2 | (42 | ) | (29 | ) | ||||||||||||
Unrealized foreign exchange loss (gain), net of tax (3) | 178 | 162 | (355 | ) | 340 | (415 | ) | ||||||||||||||
Realized foreign exchange loss on repayment of US dollar debt securities, net of tax (4) | — | 146 | — | 146 | — | ||||||||||||||||
Loss (gain) from investments, net of tax (5) (6) | 38 | 113 | (27 | ) | 151 | 69 | |||||||||||||||
Gain on acquisition, disposition and revaluation of properties, net of tax (7) | (83 | ) | — | (256 | ) | (83 | ) | (256 | ) | ||||||||||||
Adjusted net earnings from operations | $ | 1,279 | $ | 885 | $ | 332 | $ | 2,164 | $ | 609 |
(1) | The Company’s employee stock option plan provides for a cash payment option. Accordingly, the fair value of the outstanding vested options is recorded as a liability on the Company’s balance sheets and periodic changes in the fair value are recognized in net earnings or are charged to (recovered from) Oil Sands Mining and Upgrading. |
(2) | Derivative financial instruments are recorded at fair value on the Company’s balance sheets, with changes in the fair value of non-designated hedges recognized in net earnings. The amounts ultimately realized may be materially different than those amounts reflected in the financial statements due to changes in prices of the underlying items hedged, primarily crude oil, natural gas and foreign exchange. |
(3) | Unrealized foreign exchange gains and losses result primarily from the translation of US dollar denominated long-term debt to period-end exchange rates, partially offset by the impact of cross currency swaps, and are recognized in net earnings. |
(4) | During the first quarter of 2018, the Company repaid US$600 million of 1.75% notes and US$400 million of 5.90% notes. |
(5) | The Company's investment in the 50% owned North West Redwater Partnership ("Redwater Partnership") is accounted for using the equity method of accounting. Included in the non-cash loss (gain) from investments is the Company's pro rata share of the Redwater Partnership's accounting loss (gain) for the period. |
(6) | The Company’s investments in PrairieSky Royalty Ltd. (“PrairieSky”) and Inter Pipeline Ltd. ("Inter Pipeline") have been accounted for at fair value through profit and loss and are remeasured each period with changes in fair value recognized in net earnings. |
(7) | During the second quarter of 2018, the Company recorded a pre-tax gain of $120 million ($72 million after-tax) on the acquisition of the remaining interest at Ninian and a pre-tax gain of $19 million ($11 million after-tax) relating to the revaluation of the Company's previously held interest at Ninian. During the second quarter of 2017, the Company recorded a pre and after-tax gain of $230 million on the acquisition of a direct and indirect 70% interest in AOSP and other assets from Shell Canada Limited and certain subsidiaries (“Shell”) and an affiliate of Marathon Oil Corporation (“Marathon"), and a pre-tax gain of $35 million ($26 million after-tax) on the disposition of certain exploration and evaluation assets in the North America segment. |
Canadian Natural Resources Limited | 4 | Six Months Ended June 30, 2018 |
Funds Flow from Operations, as Reconciled to Net Earnings | |||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Net earnings | $ | 982 | $ | 583 | $ | 1,072 | $ | 1,565 | $ | 1,317 | |||||||||||
Non-cash items: | |||||||||||||||||||||
Depletion, depreciation and amortization | 1,270 | 1,257 | 1,210 | 2,527 | 2,509 | ||||||||||||||||
Share-based compensation | 175 | (88 | ) | (104 | ) | 87 | (77 | ) | |||||||||||||
Asset retirement obligation accretion | 47 | 46 | 39 | 93 | 75 | ||||||||||||||||
Unrealized risk management gain | (8 | ) | (33 | ) | (6 | ) | (41 | ) | (46 | ) | |||||||||||
Unrealized foreign exchange loss (gain) | 178 | 162 | (355 | ) | 340 | (415 | ) | ||||||||||||||
Realized foreign exchange loss on repayment of US dollar debt securities, net of tax | — | 146 | — | 146 | — | ||||||||||||||||
Loss (gain) from investments | 38 | 113 | (27 | ) | 151 | 69 | |||||||||||||||
Deferred income tax expense | 163 | 137 | 162 | 300 | 198 | ||||||||||||||||
Gain on acquisition, disposition and revaluation of properties | (139 | ) | — | (265 | ) | (139 | ) | (265 | ) | ||||||||||||
Funds flow from operations | $ | 2,706 | $ | 2,323 | $ | 1,726 | $ | 5,029 | $ | 3,365 |
Funds Flow from Operations, as Reconciled to Cash Flows from Operating Activities | |||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Cash flows from operating activities | $ | 2,613 | $ | 2,469 | $ | 1,631 | $ | 5,082 | $ | 3,302 | |||||||||||
Net change in non-cash working capital | 57 | (235 | ) | (39 | ) | (178 | ) | (90 | ) | ||||||||||||
Abandonment expenditures | 50 | 90 | 105 | 140 | 146 | ||||||||||||||||
Other | (14 | ) | (1 | ) | 29 | (15 | ) | 7 | |||||||||||||
Funds flow from operations | $ | 2,706 | $ | 2,323 | $ | 1,726 | $ | 5,029 | $ | 3,365 |
Canadian Natural Resources Limited | 5 | Six Months Ended June 30, 2018 |
▪ | higher SCO sales volumes in the Oil Sands Mining and Upgrading segment, due to volumes associated with both the acquisition of AOSP and Phase 3 sales volumes at Horizon; |
▪ | higher realized SCO prices in the Oil Sands Mining and Upgrading segment; and |
▪ | higher crude oil and NGLs netbacks in the Exploration and Production segments; |
▪ | higher depletion, depreciation and amortization in the Oil Sands Mining and Upgrading segment; |
▪ | lower natural gas netbacks in the North America Exploration and Production segment; |
▪ | higher interest and financing expense; and |
▪ | the strengthening of the Canadian dollar relative to the US dollar. |
▪ | higher crude oil and NGLs netbacks in the Exploration and Production segments; |
▪ | higher crude oil and NGLs sales volumes in the International segment; and |
▪ | higher realized SCO prices in the Oil Sands Mining and Upgrading segment; |
▪ | lower SCO sales volumes in the Oil Sands Mining and Upgrading segment, due to the planned maintenance activities at Horizon and AOSP; |
▪ | lower natural gas netbacks in the Exploration and Production segments; and |
▪ | higher depletion, depreciation and amortization. |
Canadian Natural Resources Limited | 6 | Six Months Ended June 30, 2018 |
($ millions, except per common share amounts) | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sep 30 2017 | ||||||||||||
Product sales (1) | $ | 6,389 | $ | 5,735 | $ | 5,516 | $ | 4,725 | ||||||||
Crude oil and NGLs | $ | 6,071 | $ | 5,303 | $ | 5,098 | $ | 4,320 | ||||||||
Natural gas | $ | 318 | $ | 432 | $ | 418 | $ | 405 | ||||||||
Net earnings (loss) | $ | 982 | $ | 583 | $ | 396 | $ | 684 | ||||||||
Net earnings (loss) per common share | ||||||||||||||||
– basic | $ | 0.80 | $ | 0.48 | $ | 0.32 | $ | 0.56 | ||||||||
– diluted | $ | 0.80 | $ | 0.47 | $ | 0.32 | $ | 0.56 | ||||||||
($ millions, except per common share amounts) | Jun 30 2017 | Mar 31 2017 | Dec 31 2016 | Sep 30 2016 | ||||||||||||
Product sales (1) | $ | 4,127 | $ | 3,992 | $ | 3,672 | $ | 2,477 | ||||||||
Crude oil and NGLs | $ | 3,645 | $ | 3,459 | $ | 3,193 | $ | 2,106 | ||||||||
Natural gas | $ | 482 | $ | 533 | $ | 479 | $ | 371 | ||||||||
Net earnings (loss) | $ | 1,072 | $ | 245 | $ | 566 | $ | (326 | ) | |||||||
Net earnings (loss) per common share | ||||||||||||||||
– basic | $ | 0.93 | $ | 0.22 | $ | 0.51 | $ | (0.29 | ) | |||||||
– diluted | $ | 0.93 | $ | 0.22 | $ | 0.51 | $ | (0.29 | ) |
(1) | Comparative figures for product sales in 2016 are reported in accordance with the Company’s presentation prior to adoption of IFRS 15 on January 1, 2018. There were no changes to reported net earnings or retained earnings as a result of adopting IFRS 15. |
Canadian Natural Resources Limited | 7 | Six Months Ended June 30, 2018 |
▪ | Crude oil pricing – Fluctuating global supply/demand including crude oil production levels from the Organization of the Petroleum Exporting Countries (“OPEC”) and its impact on world supply, the impact of geopolitical uncertainties on worldwide benchmark pricing, the impact of shale oil production in North America, the impact of the Western Canadian Select ("WCS") Heavy Differential from the West Texas Intermediate reference location at Cushing, Oklahoma ("WTI") in North America and the impact of the differential between WTI and Dated Brent ("Brent") benchmark pricing in the North Sea and Offshore Africa. |
▪ | Natural gas pricing – The impact of fluctuations in both the demand for natural gas and inventory storage levels, third party pipeline maintenance and the impact of shale gas production in the US. |
▪ | Crude oil and NGLs sales volumes – Fluctuations in production due to the cyclic nature of the Company’s Primrose thermal projects, production from Kirby South, the results from the Pelican Lake water and polymer flood projects, fluctuations in the Company’s drilling program in North America, the impact and timing of acquisitions, including the acquisition of AOSP and other assets, new production from Horizon Phase 2B and Phase 3, the impact of turnarounds and pitstops in the Oil Sands Mining and Upgrading segment, shut-in production due to low commodity prices, and the impact of the drilling program in the International segments. Sales volumes also reflected fluctuations due to timing of liftings and maintenance activities in the International segments. |
▪ | Natural gas sales volumes – Fluctuations in production due to the Company’s allocation of capital to higher return crude oil projects, natural decline rates, fluctuating capacity at a third party processing facility, shut-in production due to third party pipeline restrictions and related pricing impacts, shut-in production due to low commodity prices, and the impact and timing of acquisitions. |
▪ | Production expense – Fluctuations primarily due to the impact of the demand and cost for services, fluctuations in product mix and production, the impact of seasonal costs that are dependent on weather, cost optimizations across all segments, the impact and timing of acquisitions, including the acquisition of AOSP and other assets, turnarounds and pitstops in the Oil Sands Mining and Upgrading segment, and maintenance activities in the International segments. |
▪ | Depletion, depreciation and amortization – Fluctuations due to changes in sales volumes including the impact and timing of acquisitions and dispositions, proved reserves, asset retirement obligations, finding and development costs associated with crude oil and natural gas exploration, estimated future costs to develop the Company’s proved undeveloped reserves, fluctuations in International sales volumes subject to higher depletion rates, fluctuations in depletion, depreciation and amortization expense in the North Sea due to the cessation of production at the Ninian North platform in the second quarter of 2017, and the impact of turnarounds at Horizon. |
▪ | Share-based compensation – Fluctuations due to the determination of fair market value based on the Black-Scholes valuation model of the Company’s share-based compensation liability. |
▪ | Risk management – Fluctuations due to the recognition of gains and losses from the mark - to - market and subsequent settlement of the Company’s risk management activities. |
▪ | Foreign exchange rates – Fluctuations in the Canadian dollar relative to the US dollar, which impacted the realized price the Company received for its crude oil and natural gas sales, as sales prices are based predominantly on US dollar denominated benchmarks. Fluctuations in realized and unrealized foreign exchange gains and losses were also recorded with respect to US dollar denominated debt, partially offset by the impact of cross currency swap hedges. |
▪ | Income tax expense – Fluctuations in income tax expense include statutory tax rate and other legislative changes substantively enacted in the various periods. |
▪ | Gains on acquisition, disposition and revaluation of properties and gains/losses on investments – Fluctuations due to the recognition of gains on the acquisition of AOSP and other assets, the acquisition, disposition and revaluation of properties in the various periods, fair value changes in the investments in PrairieSky and Inter Pipeline shares, and the equity loss (gain) in Redwater Partnership. |
Canadian Natural Resources Limited | 8 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
(Average for the period) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
WTI benchmark price (US$/bbl) | $ | 67.90 | $ | 62.89 | $ | 48.29 | $ | 65.41 | $ | 50.07 | |||||||||||
Dated Brent benchmark price (US$/bbl) | $ | 74.51 | $ | 66.99 | $ | 50.24 | $ | 70.77 | $ | 52.14 | |||||||||||
WCS heavy differential from WTI (US$/bbl) | $ | 19.24 | $ | 24.27 | $ | 11.11 | $ | 21.74 | $ | 12.84 | |||||||||||
SCO price (US$/bbl) | $ | 67.27 | $ | 61.45 | $ | 49.83 | $ | 64.38 | $ | 50.63 | |||||||||||
Condensate benchmark price (US$/bbl) | $ | 68.85 | $ | 63.12 | $ | 48.44 | $ | 66.00 | $ | 50.31 | |||||||||||
NYMEX benchmark price (US$/MMBtu) | $ | 2.80 | $ | 2.98 | $ | 3.18 | $ | 2.89 | $ | 3.25 | |||||||||||
AECO benchmark price (C$/GJ) | $ | 0.97 | $ | 1.75 | $ | 2.63 | $ | 1.36 | $ | 2.71 | |||||||||||
US/Canadian dollar average exchange rate (US$) | $ | 0.7746 | $ | 0.7905 | $ | 0.7436 | $ | 0.7824 | $ | 0.7495 |
Canadian Natural Resources Limited | 9 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | |||||||||
Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||
Crude oil and NGLs (bbl/d) | ||||||||||
North America – Exploration and Production | 343,538 | 357,460 | 332,802 | 350,460 | 346,308 | |||||
North America – Oil Sands Mining and Upgrading (1) | 407,704 | 456,076 | 257,541 | 431,756 | 225,196 | |||||
North Sea | 24,456 | 21,584 | 26,304 | 23,028 | 24,682 | |||||
Offshore Africa | 18,201 | 19,438 | 20,480 | 18,816 | 21,542 | |||||
793,899 | 854,558 | 637,127 | 824,060 | 617,728 | ||||||
Natural gas (MMcf/d) | ||||||||||
North America | 1,485 | 1,547 | 1,603 | 1,515 | 1,607 | |||||
North Sea | 30 | 37 | 37 | 34 | 37 | |||||
Offshore Africa | 24 | 30 | 16 | 27 | 20 | |||||
1,539 | 1,614 | 1,656 | 1,576 | 1,664 | ||||||
Total barrels of oil equivalent (BOE/d) | 1,050,376 | 1,123,546 | 913,171 | 1,086,757 | 895,139 | |||||
Product mix | ||||||||||
Light and medium crude oil and NGLs | 13% | 12% | 15% | 12% | 15% | |||||
Pelican Lake heavy crude oil | 6% | 6% | 5% | 6% | 5% | |||||
Primary heavy crude oil | 8% | 8% | 10% | 8% | 10% | |||||
Bitumen (thermal oil) | 10% | 10% | 12% | 10% | 13% | |||||
Synthetic crude oil | 39% | 40% | 28% | 40% | 26% | |||||
Natural gas | 24% | 24% | 30% | 24% | 31% | |||||
Percentage of gross revenue (1) (2) | ||||||||||
(excluding Midstream revenue) | ||||||||||
Crude oil and NGLs | 95% | 92% | 88% | 94% | 87% | |||||
Natural gas | 5% | 8% | 12% | 6% | 13% |
(1) | Second quarter 2018 SCO production before royalties excludes 3,026 bbl/d of SCO consumed internally as diesel (first quarter 2018 – 3,224 bbl/d; second quarter 2017 – 438 bbl/d; six months ended June 30, 2018 – 3,125 bbl/d; six months ended June 30, 2017 – 433 bbl/d). |
(2) | Net of blending costs and excluding risk management activities. |
Canadian Natural Resources Limited | 10 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | |||||||||
Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||
Crude oil and NGLs (bbl/d) | ||||||||||
North America – Exploration and Production | 293,080 | 310,783 | 291,716 | 301,883 | 302,334 | |||||
North America – Oil Sands Mining and Upgrading | 385,986 | 443,606 | 251,623 | 414,171 | 220,575 | |||||
North Sea | 24,411 | 21,521 | 26,246 | 22,974 | 24,632 | |||||
Offshore Africa | 16,502 | 18,652 | 19,231 | 17,571 | 20,461 | |||||
719,979 | 794,562 | 588,816 | 756,599 | 568,002 | ||||||
Natural gas (MMcf/d) | ||||||||||
North America | 1,407 | 1,473 | 1,528 | 1,439 | 1,515 | |||||
North Sea | 30 | 37 | 37 | 34 | 37 | |||||
Offshore Africa | 20 | 27 | 15 | 23 | 18 | |||||
1,457 | 1,537 | 1,580 | 1,496 | 1,570 | ||||||
Total barrels of oil equivalent (BOE/d) | 962,742 | 1,050,702 | 852,170 | 1,006,012 | 829,733 |
Canadian Natural Resources Limited | 11 | Six Months Ended June 30, 2018 |
Canadian Natural Resources Limited | 12 | Six Months Ended June 30, 2018 |
(bbl) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | |||
North Sea | 297,217 | 506,589 | 528,705 | |||
Offshore Africa | 1,466,074 | 1,141,282 | 1,510,446 | |||
1,763,291 | 1,647,871 | 2,039,151 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||||||||||||
Crude oil and NGLs ($/bbl) (1) | |||||||||||||||||||||
Sales price (2) | $ | 61.14 | $ | 43.06 | $ | 47.12 | $ | 52.32 | $ | 47.08 | |||||||||||
Transportation | 3.30 | 3.10 | 3.06 | 3.20 | 2.78 | ||||||||||||||||
Realized sales price, net of transportation | 57.84 | 39.96 | 44.06 | 49.12 | 44.30 | ||||||||||||||||
Royalties | 7.56 | 4.87 | 4.83 | 6.25 | 4.86 | ||||||||||||||||
Production expense | 15.64 | 15.70 | 15.51 | 15.67 | 14.92 | ||||||||||||||||
Netback | $ | 34.64 | $ | 19.39 | $ | 23.72 | $ | 27.20 | $ | 24.52 | |||||||||||
Natural gas ($/Mcf) (1) | |||||||||||||||||||||
Sales price (2) | $ | 1.95 | $ | 2.74 | $ | 2.97 | $ | 2.35 | $ | 3.11 | |||||||||||
Transportation | 0.51 | 0.51 | 0.34 | 0.50 | 0.39 | ||||||||||||||||
Realized sales price, net of transportation | 1.44 | 2.23 | 2.63 | 1.85 | 2.72 | ||||||||||||||||
Royalties | 0.08 | 0.10 | 0.12 | 0.09 | 0.15 | ||||||||||||||||
Production expense | 1.39 | 1.41 | 1.25 | 1.40 | 1.26 | ||||||||||||||||
Netback (3) | $ | (0.03 | ) | $ | 0.72 | $ | 1.26 | $ | 0.36 | $ | 1.31 | ||||||||||
Barrels of oil equivalent ($/BOE) (1) | |||||||||||||||||||||
Sales price (2) | $ | 41.63 | $ | 32.02 | $ | 33.94 | $ | 36.86 | $ | 34.99 | |||||||||||
Transportation | 3.20 | 3.05 | 2.67 | 3.13 | 2.62 | ||||||||||||||||
Realized sales price, net of transportation | 38.43 | 28.97 | 31.27 | 33.73 | 32.37 | ||||||||||||||||
Royalties | 4.75 | 3.10 | 3.09 | 3.93 | 3.24 | ||||||||||||||||
Production expense | 12.75 | 12.68 | 12.11 | 12.71 | 11.89 | ||||||||||||||||
Netback | $ | 20.93 | $ | 13.19 | $ | 16.07 | $ | 17.09 | $ | 17.24 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
(2) | Net of blending costs and excluding risk management activities. |
(3) | Natural gas netbacks exclude netbacks derived from the sale of NGLs. Combining natural gas and NGLs, the netback for the three months ended June 30, 2018 was $0.60/Mcfe (three months ended March 31, 2018 - $1.19/Mcfe, three months ended June 30, 2017 - $1.49/Mcfe). |
Canadian Natural Resources Limited | 13 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||||||||||||
Crude oil and NGLs ($/bbl) (1) (2) | |||||||||||||||||||||
North America | $ | 56.95 | $ | 40.66 | $ | 44.78 | $ | 48.82 | $ | 44.47 | |||||||||||
North Sea | $ | 93.49 | $ | 79.35 | $ | 64.37 | $ | 88.36 | $ | 67.49 | |||||||||||
Offshore Africa | $ | 102.57 | $ | 78.85 | $ | 69.93 | $ | 94.17 | $ | 65.25 | |||||||||||
Company average | $ | 61.14 | $ | 43.06 | $ | 47.12 | $ | 52.32 | $ | 47.08 | |||||||||||
Natural gas ($/Mcf) (1) (2) | |||||||||||||||||||||
North America | $ | 1.69 | $ | 2.44 | $ | 2.84 | $ | 2.07 | $ | 2.96 | |||||||||||
North Sea | $ | 10.32 | $ | 11.67 | $ | 6.89 | $ | 11.06 | $ | 7.78 | |||||||||||
Offshore Africa | $ | 7.37 | $ | 6.95 | $ | 6.84 | $ | 7.14 | $ | 6.49 | |||||||||||
Company average | $ | 1.95 | $ | 2.74 | $ | 2.97 | $ | 2.35 | $ | 3.11 | |||||||||||
Company average ($/BOE) (1) (2) | $ | 41.63 | $ | 32.02 | $ | 33.94 | $ | 36.86 | $ | 34.99 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
(2) | Net of blending costs and excluding risk management activities. |
(Quarterly Average) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | |||||||||
Wellhead Price (1) (2) | ||||||||||||
Light and medium crude oil and NGLs ($/bbl) | $ | 62.06 | $ | 53.48 | $ | 46.44 | ||||||
Pelican Lake heavy crude oil ($/bbl) | $ | 60.49 | $ | 41.63 | $ | 47.64 | ||||||
Primary heavy crude oil ($/bbl) | $ | 56.33 | $ | 36.85 | $ | 45.92 | ||||||
Bitumen (thermal oil) ($/bbl) | $ | 51.04 | $ | 32.22 | $ | 41.15 | ||||||
Natural gas ($/Mcf) | $ | 1.69 | $ | 2.44 | $ | 2.84 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
(2) | Net of blending costs and excluding risk management activities. |
Canadian Natural Resources Limited | 14 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||||||||||||
Crude oil and NGLs ($/bbl) (1) | |||||||||||||||||||||
North America | $ | 8.03 | $ | 5.11 | $ | 5.19 | $ | 6.57 | $ | 5.32 | |||||||||||
North Sea | $ | 0.17 | $ | 0.23 | $ | 0.14 | $ | 0.19 | $ | 0.13 | |||||||||||
Offshore Africa | $ | 9.58 | $ | 3.19 | $ | 4.26 | $ | 7.32 | $ | 3.23 | |||||||||||
Company average | $ | 7.56 | $ | 4.87 | $ | 4.83 | $ | 6.25 | $ | 4.86 | |||||||||||
Natural gas ($/Mcf) (1) | |||||||||||||||||||||
North America | $ | 0.06 | $ | 0.09 | $ | 0.12 | $ | 0.08 | $ | 0.15 | |||||||||||
Offshore Africa | $ | 1.17 | $ | 0.87 | $ | 0.51 | $ | 1.00 | $ | 0.58 | |||||||||||
Company average | $ | 0.08 | $ | 0.10 | $ | 0.12 | $ | 0.09 | $ | 0.15 | |||||||||||
Company average ($/BOE) (1) | $ | 4.75 | $ | 3.10 | $ | 3.09 | $ | 3.93 | $ | 3.24 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Canadian Natural Resources Limited | 15 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||||||||||||
Crude oil and NGLs ($/bbl) (1) | |||||||||||||||||||||
North America | $ | 13.78 | $ | 14.15 | $ | 13.74 | $ | 13.96 | $ | 12.96 | |||||||||||
North Sea | $ | 35.12 | $ | 43.39 | $ | 28.86 | $ | 38.12 | $ | 33.28 | |||||||||||
Offshore Africa | $ | 24.78 | $ | 30.99 | $ | 32.39 | $ | 26.98 | $ | 24.27 | |||||||||||
Company average | $ | 15.64 | $ | 15.70 | $ | 15.51 | $ | 15.67 | $ | 14.92 | |||||||||||
Natural gas ($/Mcf) (1) | |||||||||||||||||||||
North America | $ | 1.28 | $ | 1.31 | $ | 1.17 | $ | 1.29 | $ | 1.19 | |||||||||||
North Sea | $ | 5.81 | $ | 4.67 | $ | 3.40 | $ | 5.18 | $ | 3.23 | |||||||||||
Offshore Africa | $ | 3.00 | $ | 2.44 | $ | 3.88 | $ | 2.69 | $ | 3.66 | |||||||||||
Company average | $ | 1.39 | $ | 1.41 | $ | 1.25 | $ | 1.40 | $ | 1.26 | |||||||||||
Company average ($/BOE) (1) | $ | 12.75 | $ | 12.68 | $ | 12.11 | $ | 12.71 | $ | 11.89 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Canadian Natural Resources Limited | 16 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions, except per BOE amounts) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Expense | $ | 894 | $ | 850 | $ | 971 | $ | 1,744 | $ | 2,073 | |||||||||||
$/BOE (1) | $ | 15.20 | $ | 14.66 | $ | 16.38 | $ | 14.93 | $ | 17.05 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Canadian Natural Resources Limited | 17 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions, except per BOE amounts) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Expense | $ | 32 | $ | 31 | $ | 29 | $ | 63 | $ | 57 | |||||||||||
$/BOE (1) | $ | 0.53 | $ | 0.53 | $ | 0.48 | $ | 0.53 | $ | 0.47 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($/bbl) (1) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
SCO realized sales price (2) | $ | 80.17 | $ | 71.61 | $ | 63.39 | $ | 75.70 | $ | 65.25 | |||||||||||
Bitumen value for royalty purposes (3) | $ | 49.10 | $ | 31.48 | $ | 39.99 | $ | 39.94 | $ | 38.37 | |||||||||||
Bitumen royalties (4) | $ | 4.25 | $ | 1.98 | $ | 1.38 | $ | 3.06 | $ | 1.28 | |||||||||||
Transportation | $ | 1.63 | $ | 1.54 | $ | 1.32 | $ | 1.59 | $ | 1.26 |
(1) | Amounts expressed on a per unit basis are based on sales volumes excluding turnaround periods. |
(2) | Net of blending and feedstock costs. |
(3) | Calculated as the quarterly average of the bitumen valuation methodology price. |
(4) | Calculated based on bitumen royalties expensed during the period; divided by the corresponding SCO sales volumes. |
Canadian Natural Resources Limited | 18 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Cash production costs, excluding natural gas costs | $ | 834 | $ | 835 | $ | 515 | $ | 1,669 | $ | 854 | |||||||||||
Natural gas costs | 21 | 38 | 38 | 59 | 71 | ||||||||||||||||
Cash production costs | $ | 855 | $ | 873 | $ | 553 | $ | 1,728 | $ | 925 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($/bbl) (1) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Cash production costs, excluding natural gas costs | $ | 22.37 | $ | 20.45 | $ | 21.85 | $ | 21.36 | $ | 21.12 | |||||||||||
Natural gas costs | 0.57 | 0.92 | 1.59 | 0.76 | 1.75 | ||||||||||||||||
Cash production costs | $ | 22.94 | $ | 21.37 | $ | 23.44 | $ | 22.12 | $ | 22.87 | |||||||||||
Sales (bbl/d) | 409,603 | 453,850 | 259,033 | 431,604 | 223,353 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions, except per bbl amounts) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Expense | $ | 372 | $ | 404 | $ | 237 | $ | 776 | $ | 432 | |||||||||||
$/bbl (1) | $ | 9.99 | $ | 9.88 | $ | 10.05 | $ | 9.93 | $ | 10.69 |
Canadian Natural Resources Limited | 19 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions, except per bbl amounts) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Expense | $ | 15 | $ | 15 | $ | 10 | $ | 30 | $ | 18 | |||||||||||
$/bbl (1) | $ | 0.41 | $ | 0.38 | $ | 0.42 | $ | 0.39 | $ | 0.44 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Revenue | $ | 25 | $ | 27 | $ | 23 | $ | 52 | $ | 48 | |||||||||||
Production expense | 6 | 5 | 4 | 11 | 8 | ||||||||||||||||
Midstream cash flow | 19 | 22 | 19 | 41 | 40 | ||||||||||||||||
Depreciation | 4 | 3 | 2 | 7 | 4 | ||||||||||||||||
Equity loss (gain) on investment | 2 | 1 | (10 | ) | 3 | (12 | ) | ||||||||||||||
Segment earnings before taxes | $ | 13 | $ | 18 | $ | 27 | $ | 31 | $ | 48 |
Canadian Natural Resources Limited | 20 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions, except per BOE amounts) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Expense | $ | 76 | $ | 81 | $ | 75 | $ | 157 | $ | 162 | |||||||||||
$/BOE (1) | $ | 0.79 | $ | 0.82 | $ | 0.90 | $ | 0.81 | $ | 1.00 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Expense (recovery) | $ | 175 | $ | (88 | ) | $ | (104 | ) | $ | 87 | $ | (77 | ) |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions, except per BOE amounts and interest rates) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Expense, gross | $ | 207 | $ | 205 | $ | 166 | $ | 412 | $ | 322 | |||||||||||
Less: capitalized interest | 17 | 15 | 21 | 32 | 43 | ||||||||||||||||
Expense, net | $ | 190 | $ | 190 | $ | 145 | $ | 380 | $ | 279 | |||||||||||
$/BOE (1) | $ | 1.99 | $ | 1.92 | $ | 1.74 | $ | 1.95 | $ | 1.72 | |||||||||||
Average effective interest rate | 3.9% | 3.8% | 3.9% | 3.8% | 3.9% |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Canadian Natural Resources Limited | 21 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Crude oil and NGLs financial instruments | $ | — | $ | — | $ | (17 | ) | $ | — | $ | (18 | ) | |||||||||
Natural gas financial instruments | (3 | ) | — | (1 | ) | (3 | ) | (1 | ) | ||||||||||||
Foreign currency contracts | (24 | ) | (19 | ) | 5 | (43 | ) | (6 | ) | ||||||||||||
Realized gain | (27 | ) | (19 | ) | (13 | ) | (46 | ) | (25 | ) | |||||||||||
Crude oil and NGLs financial instruments | — | — | (30 | ) | — | (73 | ) | ||||||||||||||
Natural gas financial instruments | 16 | — | (1 | ) | 16 | (9 | ) | ||||||||||||||
Foreign currency contracts | (24 | ) | (33 | ) | 25 | (57 | ) | 36 | |||||||||||||
Unrealized gain | (8 | ) | (33 | ) | (6 | ) | (41 | ) | (46 | ) | |||||||||||
Net gain | $ | (35 | ) | $ | (52 | ) | $ | (19 | ) | $ | (87 | ) | $ | (71 | ) |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Net realized (gain) loss | $ | (7 | ) | $ | 116 | $ | 8 | $ | 109 | $ | 12 | ||||||||||
Net unrealized loss (gain) | 178 | 162 | (355 | ) | 340 | (415 | ) | ||||||||||||||
Net loss (gain) (1) | $ | 171 | $ | 278 | $ | (347 | ) | $ | 449 | $ | (403 | ) |
(1) | Amounts are reported net of the hedging effect of cross currency swaps. |
Canadian Natural Resources Limited | 22 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions, except income tax rates) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
North America (1) | $ | 247 | $ | 150 | $ | (47 | ) | $ | 397 | $ | (9 | ) | |||||||||
North Sea | 7 | 1 | 30 | 8 | 36 | ||||||||||||||||
Offshore Africa | 16 | 5 | 7 | 21 | 14 | ||||||||||||||||
PRT recovery – North Sea | (16 | ) | (4 | ) | (72 | ) | (20 | ) | (73 | ) | |||||||||||
Other taxes | 3 | 2 | 3 | 5 | 6 | ||||||||||||||||
Current income tax expense (recovery) | 257 | 154 | (79 | ) | 411 | (26 | ) | ||||||||||||||
Deferred corporate income tax expense | 156 | 127 | 110 | 283 | 138 | ||||||||||||||||
Deferred PRT expense – North Sea | 7 | 10 | 52 | 17 | 60 | ||||||||||||||||
Deferred income tax expense | 163 | 137 | 162 | 300 | 198 | ||||||||||||||||
$ | 420 | $ | 291 | $ | 83 | $ | 711 | $ | 172 | ||||||||||||
Effective income tax rate on adjusted net earnings from operations (2) | 23 | % | 24 | % | 20 | % | 23 | % | 20 | % |
(1) | Includes North America Exploration and Production, Midstream, and Oil Sands Mining and Upgrading segments. |
(2) | Excludes the impact of current and deferred PRT expense and other current income tax expense. |
Canadian Natural Resources Limited | 23 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
($ millions) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||||
Exploration and Evaluation | |||||||||||||||||||||
Net expenditures (2) (3) (4) | $ | 8 | $ | 56 | $ | 30 | $ | 64 | $ | 67 | |||||||||||
Property, Plant and Equipment | |||||||||||||||||||||
Net property acquisitions (2) (3) (4) | (70 | ) | 162 | 371 | 92 | 380 | |||||||||||||||
Well drilling, completion and equipping | 350 | 321 | 208 | 671 | 548 | ||||||||||||||||
Production and related facilities | 308 | 264 | 194 | 572 | 361 | ||||||||||||||||
Capitalized interest and other (5) | 25 | 23 | 21 | 48 | 42 | ||||||||||||||||
Net expenditures | 613 | 770 | 794 | 1,383 | 1,331 | ||||||||||||||||
Total Exploration and Production | 621 | 826 | 824 | 1,447 | 1,398 | ||||||||||||||||
Oil Sands Mining and Upgrading | |||||||||||||||||||||
Project costs (6) | 63 | 66 | 182 | 129 | 321 | ||||||||||||||||
Sustaining capital | 152 | 105 | 85 | 257 | 152 | ||||||||||||||||
Turnaround costs | 46 | 13 | 10 | 59 | 11 | ||||||||||||||||
Acquisitions of Exploration and Evaluation assets (2) (4) | — | — | 219 | — | 219 | ||||||||||||||||
Net property acquisitions (2) (4) | — | — | 11,604 | — | 11,604 | ||||||||||||||||
Capitalized interest and other (5) | 30 | (5 | ) | (3 | ) | 25 | 17 | ||||||||||||||
Total Oil Sands Mining and Upgrading | 291 | 179 | 12,097 | 470 | 12,324 | ||||||||||||||||
Midstream | 5 | 4 | 1 | 9 | 2 | ||||||||||||||||
Abandonments (7) | 50 | 90 | 105 | 140 | 146 | ||||||||||||||||
Head office | 7 | 4 | 19 | 11 | 22 | ||||||||||||||||
Total net capital expenditures | $ | 974 | $ | 1,103 | $ | 13,046 | $ | 2,077 | $ | 13,892 | |||||||||||
By segment | |||||||||||||||||||||
North America (2) (3) (4) | $ | 568 | $ | 772 | $ | 765 | $ | 1,340 | $ | 1,285 | |||||||||||
North Sea (3) | 3 | 35 | 41 | 38 | 76 | ||||||||||||||||
Offshore Africa | 50 | 19 | 18 | 69 | 37 | ||||||||||||||||
Oil Sands Mining and Upgrading (4) | 291 | 179 | 12,097 | 470 | 12,324 | ||||||||||||||||
Midstream | 5 | 4 | 1 | 9 | 2 | ||||||||||||||||
Abandonments (7) | 50 | 90 | 105 | 140 | 146 | ||||||||||||||||
Head office | 7 | 4 | 19 | 11 | 22 | ||||||||||||||||
Total | $ | 974 | $ | 1,103 | $ | 13,046 | $ | 2,077 | $ | 13,892 |
(1) | Net capital expenditures exclude fair value and revaluation adjustments, and include non-cash transfers of property, plant and equipment to inventory due to change in use. |
(2) | Includes business combinations. |
(3) | Includes proceeds from the acquisition and disposition of properties. |
(4) | In the second quarter of 2017, total purchase consideration for the acquisition of interests in AOSP of $12,157 million included $26 million of exploration and evaluation assets and $308 million of property, plant and equipment within the North America segment, and $219 million of exploration and evaluation assets and $11,604 million of property, plant and equipment within the Oil Sands Mining and Upgrading segment. |
(5) | Capitalized interest and other includes expenditures related to land acquisition and retention, seismic, and other adjustments. |
(6) | Includes Horizon Phase 2/3 construction costs. |
(7) | Abandonments represent expenditures to settle asset retirement obligations and have been reflected as capital expenditures in this table. |
Canadian Natural Resources Limited | 24 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||
(number of net wells) | Jun 30 2018 | Mar 31 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||
Net successful natural gas wells | 4 | 5 | 5 | 9 | 16 | ||||||||||
Net successful crude oil wells (1) | 81 | 122 | 61 | 203 | 216 | ||||||||||
Dry wells | — | 2 | 2 | 2 | 3 | ||||||||||
Stratigraphic test / service wells | 27 | 450 | 6 | 477 | 232 | ||||||||||
Total | 112 | 579 | 74 | 691 | 467 | ||||||||||
Success rate (excluding stratigraphic test / service wells) | 100% | 98% | 97% | 99% | 99% |
(1) | Includes bitumen wells. |
Canadian Natural Resources Limited | 25 | Six Months Ended June 30, 2018 |
($ millions, except ratios) | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Jun 30 2017 | ||||||||||||
Working capital (1) | $ | 942 | $ | 702 | $ | 513 | $ | 876 | ||||||||
Long-term debt (2) (3) | $ | 21,397 | $ | 21,978 | $ | 22,458 | $ | 23,276 | ||||||||
Less: cash and cash equivalents | 182 | 152 | 137 | 50 | ||||||||||||
Long-term debt, net | $ | 21,215 | $ | 21,826 | $ | 22,321 | $ | 23,226 | ||||||||
Share capital | $ | 9,405 | $ | 9,264 | $ | 9,109 | $ | 8,771 | ||||||||
Retained earnings | 22,994 | 22,785 | 22,612 | 22,203 | ||||||||||||
Accumulated other comprehensive income (loss) | 12 | (23 | ) | (68 | ) | 12 | ||||||||||
Shareholders’ equity | $ | 32,411 | $ | 32,026 | $ | 31,653 | $ | 30,986 | ||||||||
Debt to book capitalization (3) (4) | 39.6% | 40.5% | 41.4% | 42.8% | ||||||||||||
Debt to market capitalization (3) (5) | 26.7% | 30.5% | 28.9% | 33.8% | ||||||||||||
After-tax return on average common shareholders’ equity (6) | 8.3% | 8.7% | 8.0% | 5.7% | ||||||||||||
After-tax return on average capital employed (3) (7) | 5.9% | 6.0% | 5.6% | 4.2% |
(1) | Calculated as current assets less current liabilities, excluding the current portion of long-term debt. |
(2) | Includes the current portion of long-term debt. |
(3) | Long-term debt is stated at its carrying value, net of fair value adjustments, original issue discounts and premiums and transaction costs. |
(4) | Calculated as net current and long-term debt; divided by the book value of common shareholders’ equity plus net current and long-term debt. |
(5) | Calculated as net current and long-term debt; divided by the market value of common shareholders’ equity plus net current and long-term debt. |
(6) | Calculated as net earnings for the twelve month trailing period; as a percentage of average common shareholders’ equity for the period. |
(7) | Calculated as net earnings plus after-tax interest and other financing expense for the twelve month trailing period; as a percentage of average capital employed for the period. |
Canadian Natural Resources Limited | 26 | Six Months Ended June 30, 2018 |
▪ | Monitoring funds flow from operations, which is the primary source of funds; |
▪ | Actively managing the allocation of maintenance and growth capital to ensure it is expended in a prudent and appropriate manner with flexibility to adjust to market conditions. The Company continues to exercise its capital flexibility to address commodity price volatility and its impact on operating expenditures, capital commitments and long-term debt; |
▪ | For the six months ended June 30, 2018, the Company utilized funds flow from operations to facilitate net repayment of bank credit facilities and US dollar debt securities of $2,096 million, excluding the impact of foreign exchange on debt balances, including: |
◦ | repayment and cancellation of the $125 million non-revolving credit facility; |
◦ | repayment and cancellation of $150 million of the $3,000 million non-revolving term loan facility; and |
◦ | repayment of US$600 million of 1.75% notes and US$400 million of 5.90% notes. |
▪ | Additionally, the Company utilized available liquidity to settle the deferred payment to Marathon Oil Corporation for $481 million, resulting in total net repayments of debt of $1,615 million. |
▪ | Reviewing the Company's borrowing capacity: |
◦ | During the second quarter of 2018, the Company extended the $2,425 million revolving syndicated credit facility originally due June 2020 to June 2022. Each of the $2,425 million revolving facilities is extendible annually at the mutual agreement of the Company and the lenders. If the facilities are not extended, the full amount of the outstanding principal is repayable on the maturity date. Borrowings under these facilities may be made by way of pricing referenced to Canadian dollar bankers' acceptances, US dollar bankers’ acceptances, LIBOR, US base rate or Canadian prime rate. |
◦ | During the second quarter of 2018, the Company extended the $2,200 million non-revolving credit facility originally due October 2019 to October 2020. Borrowings under the $2,200 million non-revolving credit facility may be made by way of pricing referenced to Canadian dollar bankers’ acceptances, US dollar bankers’ acceptances, LIBOR, US base rate or Canadian prime rate. As at June 30, 2018, the $2,200 million facility was fully drawn. |
◦ | Borrowings under the $750 million non-revolving credit facility may be made by way of pricing referenced to Canadian dollar bankers’ acceptances, US dollar bankers’ acceptances, LIBOR, US base rate or Canadian prime rate. As at June 30, 2018, the $750 million facility was fully drawn. |
◦ | The Company’s borrowings under its US commercial paper program are authorized up to a maximum of US$2,500 million. The Company reserves capacity under its bank credit facilities for amounts outstanding under this program. |
◦ | In July 2017, the Company filed base shelf prospectuses that allow for the offer for sale from time to time of up to $3,000 million of medium-term notes in Canada and US$3,000 million of debt securities in the United States, which expires in August 2019. If issued, these securities may be offered in amounts and at prices, including interest rates, to be determined based on market conditions at the time of issuance. |
▪ | Reviewing bank credit facilities and public debt indentures to ensure they are in compliance with applicable covenant packages; and |
▪ | Monitoring exposure to individual customers, contractors, suppliers and joint venture partners on a regular basis and when appropriate, ensuring parental guarantees or letters of credit are in place, and as applicable, taking other mitigating actions to minimize the impact in the event of a default. |
Canadian Natural Resources Limited | 27 | Six Months Ended June 30, 2018 |
Canadian Natural Resources Limited | 28 | Six Months Ended June 30, 2018 |
($ millions) | Remaining 2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | |||||||||||||||||
Product transportation and pipeline | $ | 344 | $ | 610 | $ | 561 | $ | 541 | $ | 474 | $ | 3,892 | |||||||||||
North West Redwater Partnership debt service toll (1) | $ | 46 | $ | 79 | $ | 126 | $ | 157 | $ | 158 | $ | 3,015 | |||||||||||
Offshore equipment operating leases | $ | 91 | $ | 94 | $ | 70 | $ | 68 | $ | 7 | $ | — | |||||||||||
Long-term debt (2) | $ | 327 | $ | 1,150 | $ | 6,843 | $ | 1,412 | $ | 1,000 | $ | 10,796 | |||||||||||
Interest and other financing expense (3) | $ | 419 | $ | 828 | $ | 737 | $ | 596 | $ | 543 | $ | 5,629 | |||||||||||
Office leases | $ | 22 | $ | 42 | $ | 43 | $ | 40 | $ | 31 | $ | 121 | |||||||||||
Other | $ | 61 | $ | 44 | $ | 39 | $ | 36 | $ | 39 | $ | 365 |
(1) | As per the processing agreements, on June 1, 2018 the Company began paying its 25% pro rata share of the debt portion of the monthly cost of service toll, which currently consists of interest and fees, with principal repayments beginning in 2020. Included in the service toll is $1,340 million of interest payable over the 30 year tolling period. |
(2) | Long-term debt represents principal repayments only and does not reflect original issue discounts and premiums or transaction costs. |
(3) | Interest and other financing payments were estimated based upon applicable interest and foreign exchange rates as at June 30, 2018. |
Canadian Natural Resources Limited | 29 | Six Months Ended June 30, 2018 |
As at | Note | Jun 30 2018 | Dec 31 2017 | ||||||
(millions of Canadian dollars, unaudited) | |||||||||
ASSETS | |||||||||
Current assets | |||||||||
Cash and cash equivalents | $ | 182 | $ | 137 | |||||
Accounts receivable | 2,611 | 2,397 | |||||||
Current income taxes receivable | — | 322 | |||||||
Inventory | 1,041 | 894 | |||||||
Prepaids and other | 310 | 175 | |||||||
Investments | 7 | 745 | 893 | ||||||
Current portion of other long-term assets | 8 | 85 | 79 | ||||||
4,974 | 4,897 | ||||||||
Exploration and evaluation assets | 4 | 2,608 | 2,632 | ||||||
Property, plant and equipment | 5 | 64,859 | 65,170 | ||||||
Other long-term assets | 8 | 1,238 | 1,168 | ||||||
$ | 73,679 | $ | 73,867 | ||||||
LIABILITIES | |||||||||
Current liabilities | |||||||||
Accounts payable | $ | 970 | $ | 775 | |||||
Accrued liabilities | 2,542 | 2,597 | |||||||
Current income taxes payable | 119 | — | |||||||
Current portion of long-term debt | 9 | 826 | 1,877 | ||||||
Current portion of other long-term liabilities | 10 | 401 | 1,012 | ||||||
4,858 | 6,261 | ||||||||
Long-term debt | 9 | 20,571 | 20,581 | ||||||
Other long-term liabilities | 10 | 4,498 | 4,397 | ||||||
Deferred income taxes | 11,341 | 10,975 | |||||||
41,268 | 42,214 | ||||||||
SHAREHOLDERS’ EQUITY | |||||||||
Share capital | 12 | 9,405 | 9,109 | ||||||
Retained earnings | 22,994 | 22,612 | |||||||
Accumulated other comprehensive income (loss) | 13 | 12 | (68 | ) | |||||
32,411 | 31,653 | ||||||||
$ | 73,679 | $ | 73,867 |
Canadian Natural Resources Limited | 1 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | |||||||||||||||||
(millions of Canadian dollars, except per common share amounts, unaudited) | Note | Jun 30 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||||||||
Product sales | $ | 6,389 | $ | 4,127 | $ | 12,124 | $ | 8,119 | ||||||||||
Less: royalties | (437 | ) | (216 | ) | (698 | ) | (446 | ) | ||||||||||
Revenue | 5,952 | 3,911 | 11,426 | 7,673 | ||||||||||||||
Expenses | ||||||||||||||||||
Production | 1,622 | 1,293 | 3,252 | 2,414 | ||||||||||||||
Transportation, blending and feedstock | 1,142 | 762 | 2,294 | 1,505 | ||||||||||||||
Depletion, depreciation and amortization | 5 | 1,270 | 1,210 | 2,527 | 2,509 | |||||||||||||
Administration | 76 | 75 | 157 | 162 | ||||||||||||||
Share-based compensation | 10 | 175 | (104 | ) | 87 | (77 | ) | |||||||||||
Asset retirement obligation accretion | 10 | 47 | 39 | 93 | 75 | |||||||||||||
Interest and other financing expense | 190 | 145 | 380 | 279 | ||||||||||||||
Risk management activities | 16 | (35 | ) | (19 | ) | (87 | ) | (71 | ) | |||||||||
Foreign exchange loss (gain) | 171 | (347 | ) | 449 | (403 | ) | ||||||||||||
Gain on acquisition, disposition and revaluation of properties | 4, 5, 6 | (139 | ) | (265 | ) | (139 | ) | (265 | ) | |||||||||
Loss (gain) from investments | 7, 8 | 31 | (33 | ) | 137 | 56 | ||||||||||||
4,550 | 2,756 | 9,150 | 6,184 | |||||||||||||||
Earnings before taxes | 1,402 | 1,155 | 2,276 | 1,489 | ||||||||||||||
Current income tax expense (recovery) | 11 | 257 | (79 | ) | 411 | (26 | ) | |||||||||||
Deferred income tax expense | 11 | 163 | 162 | 300 | 198 | |||||||||||||
Net earnings | $ | 982 | $ | 1,072 | $ | 1,565 | $ | 1,317 | ||||||||||
Net earnings per common share | ||||||||||||||||||
Basic | 15 | $ | 0.80 | $ | 0.93 | $ | 1.28 | $ | 1.16 | |||||||||
Diluted | 15 | $ | 0.80 | $ | 0.93 | $ | 1.27 | $ | 1.16 |
Three Months Ended | Six Months Ended | ||||||||||||||||
(millions of Canadian dollars, unaudited) | Jun 30 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||||||||
Net earnings | $ | 982 | $ | 1,072 | $ | 1,565 | $ | 1,317 | |||||||||
Items that may be reclassified subsequently to net earnings | |||||||||||||||||
Net change in derivative financial instruments designated as cash flow hedges | |||||||||||||||||
Unrealized income (loss) during the period, net of taxes of $nil (2017 – $6 million) – three months ended; $2 million (2017 – $6 million) – six months ended | 1 | 40 | (15 | ) | 39 | ||||||||||||
Reclassification to net earnings, net of taxes of $1 million (2017 – $2 million) – three months ended; $3 million (2017 – $3 million) – six months ended | (12 | ) | (15 | ) | (22 | ) | (22 | ) | |||||||||
(11 | ) | 25 | (37 | ) | 17 | ||||||||||||
Foreign currency translation adjustment | |||||||||||||||||
Translation of net investment | 46 | (56 | ) | 117 | (75 | ) | |||||||||||
Other comprehensive income (loss), net of taxes | 35 | (31 | ) | 80 | (58 | ) | |||||||||||
Comprehensive income | $ | 1,017 | $ | 1,041 | $ | 1,645 | $ | 1,259 |
Canadian Natural Resources Limited | 2 | Six Months Ended June 30, 2018 |
Six Months Ended | |||||||||
(millions of Canadian dollars, unaudited) | Note | Jun 30 2018 | Jun 30 2017 | ||||||
Share capital | 12 | ||||||||
Balance – beginning of period | $ | 9,109 | $ | 4,671 | |||||
Issued for the acquisition of AOSP and other assets (1) | 6 | — | 3,818 | ||||||
Issued upon exercise of stock options | 273 | 224 | |||||||
Previously recognized liability on stock options exercised for common shares | 101 | 58 | |||||||
Purchase of common shares under Normal Course Issuer Bid | (78 | ) | – | ||||||
Balance – end of period | 9,405 | 8,771 | |||||||
Retained earnings | |||||||||
Balance – beginning of period | 22,612 | 21,526 | |||||||
Net earnings | 1,565 | 1,317 | |||||||
Purchase of common shares under Normal Course Issuer Bid | 12 | (363 | ) | — | |||||
Dividends on common shares | 12 | (820 | ) | (640 | ) | ||||
Balance – end of period | 22,994 | 22,203 | |||||||
Accumulated other comprehensive income | 13 | ||||||||
Balance – beginning of period | (68 | ) | 70 | ||||||
Other comprehensive income (loss), net of taxes | 80 | (58 | ) | ||||||
Balance – end of period | 12 | 12 | |||||||
Shareholders’ equity | $ | 32,411 | $ | 30,986 |
(1) | In connection with the acquisition of direct and indirect interests in the Athabasca Oil Sands Project ("AOSP") and other assets, the Company issued non-cash share consideration of $3,818 million in the second quarter of 2017. See note 6. |
Canadian Natural Resources Limited | 3 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | |||||||||||||||||
(millions of Canadian dollars, unaudited) | Note | Jun 30 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||||||||
Operating activities | ||||||||||||||||||
Net earnings | $ | 982 | $ | 1,072 | $ | 1,565 | $ | 1,317 | ||||||||||
Non-cash items | ||||||||||||||||||
Depletion, depreciation and amortization | 1,270 | 1,210 | 2,527 | 2,509 | ||||||||||||||
Share-based compensation | 175 | (104 | ) | 87 | (77 | ) | ||||||||||||
Asset retirement obligation accretion | 47 | 39 | 93 | 75 | ||||||||||||||
Unrealized risk management gain | (8 | ) | (6 | ) | (41 | ) | (46 | ) | ||||||||||
Unrealized foreign exchange loss (gain) | 178 | (355 | ) | 340 | (415 | ) | ||||||||||||
Realized foreign exchange loss on repayment of US dollar debt securities | — | — | 146 | — | ||||||||||||||
Loss (gain) from investments | 7, 8 | 38 | (27 | ) | 151 | 69 | ||||||||||||
Deferred income tax expense | 163 | 162 | 300 | 198 | ||||||||||||||
Gain on acquisition, disposition and revaluation of properties | 4, 5, 6 | (139 | ) | (265 | ) | (139 | ) | (265 | ) | |||||||||
Other | 14 | (29 | ) | 15 | (7 | ) | ||||||||||||
Abandonment expenditures | (50 | ) | (105 | ) | (140 | ) | (146 | ) | ||||||||||
Net change in non-cash working capital | (57 | ) | 39 | 178 | 90 | |||||||||||||
2,613 | 1,631 | 5,082 | 3,302 | |||||||||||||||
Financing activities | ||||||||||||||||||
(Repayment) issue of bank credit facilities and commercial paper, net | 9 | (760 | ) | 3,062 | (379 | ) | 2,634 | |||||||||||
Issue of medium-term notes, net | 9 | — | 1,791 | — | 1,791 | |||||||||||||
(Repayment) issue of US dollar debt securities, net | 9 | — | 2,733 | (1,236 | ) | 2,733 | ||||||||||||
Issue of common shares on exercise of stock options | 167 | 64 | 273 | 224 | ||||||||||||||
Purchase of common shares under Normal Course Issuer Bid | (441 | ) | — | (441 | ) | — | ||||||||||||
Dividends on common shares | (411 | ) | (306 | ) | (747 | ) | (583 | ) | ||||||||||
(1,445 | ) | 7,344 | (2,530 | ) | 6,799 | |||||||||||||
Investing activities | ||||||||||||||||||
Net expenditures on exploration and evaluation assets | (8 | ) | (4 | ) | (64 | ) | (41 | ) | ||||||||||
Net expenditures on property, plant and equipment | (916 | ) | (780 | ) | (1,873 | ) | (1,548 | ) | ||||||||||
Acquisition of AOSP and other assets, net of cash acquired (1) | 6 | — | (8,630 | ) | — | (8,630 | ) | |||||||||||
Investment in other long-term assets | (7 | ) | (23 | ) | (28 | ) | (23 | ) | ||||||||||
Net change in non-cash working capital | (207 | ) | 493 | (542 | ) | 174 | ||||||||||||
(1,138 | ) | (8,944 | ) | (2,507 | ) | (10,068 | ) | |||||||||||
Increase in cash and cash equivalents | 30 | 31 | 45 | 33 | ||||||||||||||
Cash and cash equivalents – beginning of period | 152 | 19 | 137 | 17 | ||||||||||||||
Cash and cash equivalents – end of period | $ | 182 | $ | 50 | $ | 182 | $ | 50 | ||||||||||
Interest paid, net | $ | 223 | $ | 123 | $ | 483 | $ | 322 | ||||||||||
Income taxes received | $ | (14 | ) | $ | (260 | ) | $ | (77 | ) | $ | (325 | ) |
(1) | The acquisition of AOSP in the second quarter of 2017 includes net working capital of $291 million and excludes non-cash share consideration of $3,818 million. See note 6. |
Canadian Natural Resources Limited | 4 | Six Months Ended June 30, 2018 |
Canadian Natural Resources Limited | 5 | Six Months Ended June 30, 2018 |
Canadian Natural Resources Limited | 6 | Six Months Ended June 30, 2018 |
Exploration and Production | Oil Sands Mining and Upgrading | Total | |||||||||||||
North America | North Sea | Offshore Africa | |||||||||||||
Cost | |||||||||||||||
At December 31, 2017 | $ | 2,282 | $ | — | $ | 91 | $ | 259 | $ | 2,632 | |||||
Additions | 57 | — | 7 | — | 64 | ||||||||||
Transfers to property, plant and equipment | (81 | ) | — | — | — | (81 | ) | ||||||||
Disposals/derecognitions and other | — | — | — | (7 | ) | (7 | ) | ||||||||
At June 30, 2018 | $ | 2,258 | $ | — | $ | 98 | $ | 252 | $ | 2,608 |
Canadian Natural Resources Limited | 7 | Six Months Ended June 30, 2018 |
Exploration and Production | Oil Sands Mining and Upgrading | Midstream | Head Office | Total | |||||||||||||||||||||||
North America | North Sea | Offshore Africa | |||||||||||||||||||||||||
Cost | |||||||||||||||||||||||||||
At December 31, 2017 | $ | 64,816 | $ | 7,126 | $ | 4,881 | $ | 42,084 | $ | 428 | $ | 414 | $ | 119,749 | |||||||||||||
Additions | 1,285 | 252 | 62 | 419 | 9 | 11 | 2,038 | ||||||||||||||||||||
Transfers from E&E assets | 81 | — | — | — | — | — | 81 | ||||||||||||||||||||
Disposals/derecognitions and other | (184 | ) | — | — | (60 | ) | — | — | (244 | ) | |||||||||||||||||
Foreign exchange adjustments and other | — | 360 | 246 | — | — | — | 606 | ||||||||||||||||||||
At June 30, 2018 | $ | 65,998 | $ | 7,738 | $ | 5,189 | $ | 42,443 | $ | 437 | $ | 425 | $ | 122,230 | |||||||||||||
Accumulated depletion and depreciation | |||||||||||||||||||||||||||
At December 31, 2017 | $ | 41,151 | $ | 5,653 | $ | 3,719 | $ | 3,628 | $ | 124 | $ | 304 | $ | 54,579 | |||||||||||||
Expense | 1,547 | 116 | 70 | 776 | 7 | 11 | 2,527 | ||||||||||||||||||||
Disposals/derecognitions | (184 | ) | — | — | (60 | ) | — | — | (244 | ) | |||||||||||||||||
Foreign exchange adjustments and other | — | 295 | 219 | (5 | ) | — | — | 509 | |||||||||||||||||||
At June 30, 2018 | $ | 42,514 | $ | 6,064 | $ | 4,008 | $ | 4,339 | $ | 131 | $ | 315 | $ | 57,371 | |||||||||||||
Net book value | |||||||||||||||||||||||||||
- at June 30, 2018 | $ | 23,484 | $ | 1,674 | $ | 1,181 | $ | 38,104 | $ | 306 | $ | 110 | $ | 64,859 | |||||||||||||
- at December 31, 2017 | $ | 23,665 | $ | 1,473 | $ | 1,162 | $ | 38,456 | $ | 304 | $ | 110 | $ | 65,170 |
Project costs not subject to depletion and depreciation | Jun 30 2018 | Dec 31 2017 | ||||||
Kirby Thermal Oil Sands – North | $ | 1,163 | $ | 944 |
Canadian Natural Resources Limited | 8 | Six Months Ended June 30, 2018 |
Jun 30 2018 | Dec 31 2017 | |||||||
Investment in PrairieSky Royalty Ltd. | $ | 587 | $ | 726 | ||||
Investment in Inter Pipeline Ltd. | 158 | 167 | ||||||
$ | 745 | $ | 893 |
Three Months Ended | Six Months Ended | ||||||||||||||||
Jun 30 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||
Fair value loss (gain) from PrairieSky | $ | 51 | $ | (34 | ) | $ | 139 | $ | 54 | ||||||||
Dividend income from PrairieSky | (4 | ) | (4 | ) | (8 | ) | (8 | ) | |||||||||
$ | 47 | $ | (38 | ) | $ | 131 | $ | 46 |
Three Months Ended | Six Months Ended | ||||||||||||||||
Jun 30 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | ||||||||||||||
Fair value (gain) loss from Inter Pipeline | $ | (15 | ) | $ | 17 | $ | 9 | $ | 27 | ||||||||
Dividend income from Inter Pipeline | (3 | ) | (2 | ) | (6 | ) | (5 | ) | |||||||||
$ | (18 | ) | $ | 15 | $ | 3 | $ | 22 |
Canadian Natural Resources Limited | 9 | Six Months Ended June 30, 2018 |
Jun 30 2018 | Dec 31 2017 | |||||||
Investment in North West Redwater Partnership | $ | 289 | $ | 292 | ||||
North West Redwater Partnership subordinated debt (1) | 563 | 510 | ||||||
Risk management (note 16) | 272 | 204 | ||||||
Other | 199 | 241 | ||||||
1,323 | 1,247 | |||||||
Less: current portion | 85 | 79 | ||||||
$ | 1,238 | $ | 1,168 |
(1) | Includes accrued interest. |
Canadian Natural Resources Limited | 10 | Six Months Ended June 30, 2018 |
Jun 30 2018 | Dec 31 2017 | |||||||
Canadian dollar denominated debt, unsecured | ||||||||
Bank credit facilities | $ | 1,912 | $ | 3,544 | ||||
Medium-term notes | 5,300 | 5,300 | ||||||
7,212 | 8,844 | |||||||
US dollar denominated debt, unsecured | ||||||||
Bank credit facilities (June 30, 2018 - US$2,996 million; December 31, 2017 - US$1,839 million) | 3,936 | 2,300 | ||||||
Commercial paper (June 30, 2018 - US$249 million; December 31, 2017 - US$500 million) | 326 | 625 | ||||||
US dollar debt securities (June 30, 2018 - US$7,650 million; December 31, 2017 - US$8,650 million) | 10,054 | 10,828 | ||||||
14,316 | 13,753 | |||||||
Long-term debt before transaction costs and original issue discounts, net | 21,528 | 22,597 | ||||||
Less: original issue discounts, net (1) | 18 | 18 | ||||||
transaction costs (1) (2) | 113 | 121 | ||||||
21,397 | 22,458 | |||||||
Less: current portion of commercial paper | 326 | 625 | ||||||
current portion of other long-term debt (1) (2) | 500 | 1,252 | ||||||
$ | 20,571 | $ | 20,581 |
(1) | The Company has included unamortized original issue discounts and premiums, and directly attributable transaction costs in the carrying amount of the outstanding debt. |
(2) | Transaction costs primarily represent underwriting commissions charged as a percentage of the related debt offerings, as well as legal, rating agency and other professional fees. |
• | a $100 million demand credit facility; |
• | a $2,850 million non-revolving term credit facility maturing May 2020; |
• | a $2,200 million non-revolving term credit facility maturing October 2020; |
• | a $750 million non-revolving term credit facility maturing February 2021; |
• | a $2,425 million revolving syndicated credit facility with $330 million maturing in June 2019 and $2,095 million maturing June 2021; |
• | a $2,425 million revolving syndicated credit facility maturing June 2022; and |
• | a £15 million demand credit facility related to the Company’s North Sea operations. |
Canadian Natural Resources Limited | 11 | Six Months Ended June 30, 2018 |
Canadian Natural Resources Limited | 12 | Six Months Ended June 30, 2018 |
Jun 30 2018 | Dec 31 2017 | |||||||
Asset retirement obligations | $ | 4,390 | $ | 4,327 | ||||
Share-based compensation | 405 | 414 | ||||||
Risk management (note 16) | 16 | 103 | ||||||
Other (1) | 88 | 565 | ||||||
4,899 | 5,409 | |||||||
Less: current portion | 401 | 1,012 | ||||||
$ | 4,498 | $ | 4,397 |
Jun 30 2018 | Dec 31 2017 | |||||||
Balance – beginning of period | $ | 4,327 | $ | 3,243 | ||||
Liabilities incurred | 9 | 12 | ||||||
Liabilities acquired, net | 52 | 784 | ||||||
Liabilities settled | (140 | ) | (274 | ) | ||||
Asset retirement obligation accretion | 93 | 164 | ||||||
Revision of cost, inflation rates and timing estimates | — | (40 | ) | |||||
Change in discount rate | — | 509 | ||||||
Foreign exchange adjustments | 49 | (71 | ) | |||||
Balance – end of period | 4,390 | 4,327 | ||||||
Less: current portion | 67 | 92 | ||||||
$ | 4,323 | $ | 4,235 |
Jun 30 2018 | Dec 31 2017 | |||||||
Balance – beginning of period | $ | 414 | $ | 426 | ||||
Share-based compensation expense | 87 | 134 | ||||||
Cash payment for stock options surrendered | (4 | ) | (6 | ) | ||||
Transferred to common shares | (101 | ) | (154 | ) | ||||
Charged to Oil Sands Mining and Upgrading, net | 9 | 14 | ||||||
Balance – end of period | 405 | 414 | ||||||
Less: current portion | 302 | 348 | ||||||
$ | 103 | $ | 66 |
Canadian Natural Resources Limited | 13 | Six Months Ended June 30, 2018 |
Three Months Ended | Six Months Ended | ||||||||||||||||
Expense (recovery) | Jun 30 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||||||||
Current corporate income tax – North America | $ | 247 | $ | (47 | ) | $ | 397 | $ | (9 | ) | |||||||
Current corporate income tax – North Sea | 7 | 30 | 8 | 36 | |||||||||||||
Current corporate income tax – Offshore Africa | 16 | 7 | 21 | 14 | |||||||||||||
Current PRT (1) – North Sea | (16 | ) | (72 | ) | (20 | ) | (73 | ) | |||||||||
Other taxes | 3 | 3 | 5 | 6 | |||||||||||||
Current income tax | 257 | (79 | ) | 411 | (26 | ) | |||||||||||
Deferred corporate income tax | 156 | 110 | 283 | 138 | |||||||||||||
Deferred PRT (1) – North Sea | 7 | 52 | 17 | 60 | |||||||||||||
Deferred income tax | 163 | 162 | 300 | 198 | |||||||||||||
Income tax | $ | 420 | $ | 83 | $ | 711 | $ | 172 |
Six Months Ended Jun 30, 2018 | |||||||
Issued common shares | Number of shares (thousands) | Amount | |||||
Balance – beginning of period | 1,222,769 | $ | 9,109 | ||||
Issued upon exercise of stock options | 8,242 | 273 | |||||
Previously recognized liability on stock options exercised for common shares | — | 101 | |||||
Purchase of common shares under Normal Course Issuer Bid | (10,140 | ) | (78 | ) | |||
Balance – end of period | 1,220,871 | $ | 9,405 |
Canadian Natural Resources Limited | 14 | Six Months Ended June 30, 2018 |
Six Months Ended Jun 30, 2018 | |||||||
Stock options (thousands) | Weighted average exercise price | ||||||
Outstanding – beginning of period | 56,036 | $ | 36.67 | ||||
Granted | 3,100 | $ | 44.57 | ||||
Surrendered for cash settlement | (298 | ) | $ | 33.09 | |||
Exercised for common shares | (8,242 | ) | $ | 33.12 | |||
Forfeited | (2,134 | ) | $ | 38.38 | |||
Outstanding – end of period | 48,462 | $ | 37.73 | ||||
Exercisable – end of period | 11,548 | $ | 35.65 |
Jun 30 2018 | Jun 30 2017 | |||||||
Derivative financial instruments designated as cash flow hedges | $ | 10 | $ | 44 | ||||
Foreign currency translation adjustment | 2 | (32 | ) | |||||
$ | 12 | $ | 12 |
Canadian Natural Resources Limited | 15 | Six Months Ended June 30, 2018 |
Jun 30 2018 | Dec 31 2017 | |||||||
Long-term debt, net (1) | $ | 21,215 | $ | 22,321 | ||||
Total shareholders’ equity | $ | 32,411 | $ | 31,653 | ||||
Debt to book capitalization | 39.6% | 41.4% |
(1) | Includes the current portion of long-term debt, net of cash and cash equivalents. |
Three Months Ended | Six Months Ended | |||||||||||||||||
Jun 30 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||||||||||
Weighted average common shares outstanding – basic (thousands of shares) | 1,226,021 | 1,150,335 | 1,225,820 | 1,131,740 | ||||||||||||||
Effect of dilutive stock options (thousands of shares) | 6,486 | 7,845 | 6,279 | 8,077 | ||||||||||||||
Weighted average common shares outstanding – diluted (thousands of shares) | 1,232,507 | 1,158,180 | 1,232,099 | 1,139,817 | ||||||||||||||
Net earnings | $ | 982 | $ | 1,072 | $ | 1,565 | $ | 1,317 | ||||||||||
Net earnings per common share | – basic | $ | 0.80 | $ | 0.93 | $ | 1.28 | $ | 1.16 | |||||||||
– diluted | $ | 0.80 | $ | 0.93 | $ | 1.27 | $ | 1.16 |
Canadian Natural Resources Limited | 16 | Six Months Ended June 30, 2018 |
Jun 30, 2018 | ||||||||||||||||||||
Asset (liability) | Financial assets at amortized cost | Fair value through profit or loss | Derivatives used for hedging | Financial liabilities at amortized cost | Total | |||||||||||||||
Accounts receivable | $ | 2,611 | $ | — | $ | — | $ | — | $ | 2,611 | ||||||||||
Investments | — | 745 | — | — | 745 | |||||||||||||||
Other long-term assets | 563 | 19 | 253 | — | 835 | |||||||||||||||
Accounts payable | — | — | — | (970 | ) | (970 | ) | |||||||||||||
Accrued liabilities | — | — | — | (2,542 | ) | (2,542 | ) | |||||||||||||
Other long-term liabilities | — | (16 | ) | — | — | (16 | ) | |||||||||||||
Long-term debt (1) | — | — | — | (21,397 | ) | (21,397 | ) | |||||||||||||
$ | 3,174 | $ | 748 | $ | 253 | $ | (24,909 | ) | $ | (20,734 | ) |
Dec 31, 2017 | ||||||||||||||||||||
Asset (liability) | Financial assets at amortized cost | Fair value through profit or loss | Derivatives used for hedging | Financial liabilities at amortized cost | Total | |||||||||||||||
Accounts receivable | $ | 2,397 | $ | — | $ | — | $ | — | $ | 2,397 | ||||||||||
Investments | — | 893 | — | — | 893 | |||||||||||||||
Other long-term assets | 510 | — | 204 | — | 714 | |||||||||||||||
Accounts payable | — | — | — | (775 | ) | (775 | ) | |||||||||||||
Accrued liabilities | — | — | — | (2,597 | ) | (2,597 | ) | |||||||||||||
Other long-term liabilities (2) | — | (38 | ) | (65 | ) | (469 | ) | (572 | ) | |||||||||||
Long-term debt (1) | — | — | — | (22,458 | ) | (22,458 | ) | |||||||||||||
$ | 2,907 | $ | 855 | $ | 139 | $ | (26,299 | ) | $ | (22,398 | ) |
(1) | Includes the current portion of long-term debt. |
(2) | Includes $469 million (US$375 million) of deferred purchase consideration which was paid to Marathon in March 2018. |
Jun 30, 2018 | |||||||||||||||||
Carrying amount | Fair value | ||||||||||||||||
Asset (liability) (1) (2) | Level 1 | Level 2 | Level 3 | ||||||||||||||
Investments (3) | $ | 745 | $ | 745 | $ | — | $ | — | |||||||||
Other long-term assets (4) | $ | 835 | $ | — | $ | 272 | $ | 563 | |||||||||
Other long-term liabilities | $ | (16 | ) | $ | — | $ | (16 | ) | $ | — | |||||||
Fixed rate long-term debt (5) (6) | $ | (15,223 | ) | $ | (16,047 | ) | $ | — | $ | — |
Canadian Natural Resources Limited | 17 | Six Months Ended June 30, 2018 |
Dec 31, 2017 | |||||||||||||||||
Carrying amount | Fair value | ||||||||||||||||
Asset (liability) (1) (2) | Level 1 | Level 2 | Level 3 | ||||||||||||||
Investments (3) | $ | 893 | $ | 893 | $ | — | $ | — | |||||||||
Other long-term assets (4) | $ | 714 | $ | — | $ | 204 | $ | 510 | |||||||||
Other long-term liabilities | $ | (103 | ) | $ | — | $ | (103 | ) | $ | — | |||||||
Fixed rate long-term debt (5) (6) | $ | (15,989 | ) | $ | (17,259 | ) | $ | — | $ | — |
(1) | Excludes financial assets and liabilities where the carrying amount approximates fair value due to the liquid nature of the asset or liability (cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and purchase consideration payable). |
(2) | There were no transfers between Level 1, 2 and 3 financial instruments. |
(3) | The fair value of the investments are based on quoted market prices. |
(4) | The fair value of Redwater Partnership subordinated debt is based on the present value of future cash receipts. |
(5) | The fair value of fixed rate long-term debt has been determined based on quoted market prices. |
(6) | Includes the current portion of fixed rate long-term debt. |
Asset (liability) | Jun 30 2018 | Dec 31 2017 | ||||||
Derivatives held for trading | ||||||||
Foreign currency forward contracts | $ | 19 | $ | (38 | ) | |||
Natural gas AECO swaps | (16 | ) | — | |||||
Cash flow hedges | ||||||||
Foreign currency forward contracts | 19 | (71 | ) | |||||
Cross currency swaps | 234 | 210 | ||||||
$ | 256 | $ | 101 | |||||
Included within: | ||||||||
Current portion of other long-term assets (liabilities) | $ | 30 | $ | (103 | ) | |||
Other long-term assets | 226 | 204 | ||||||
$ | 256 | $ | 101 |
Canadian Natural Resources Limited | 18 | Six Months Ended June 30, 2018 |
Asset (liability) | Jun 30 2018 | Dec 31 2017 | ||||||
Balance – beginning of period | $ | 101 | $ | 489 | ||||
Net change in fair value of outstanding derivative financial instruments recognized in: | ||||||||
Risk management activities | 41 | (37 | ) | |||||
Foreign exchange | 156 | (375 | ) | |||||
Other comprehensive (loss) income | (42 | ) | 24 | |||||
Balance – end of period | 256 | 101 | ||||||
Less: current portion | 30 | (103 | ) | |||||
$ | 226 | $ | 204 |
Three Months Ended | Six Months Ended | |||||||||||||||
Jun 30 2018 | Jun 30 2017 | Jun 30 2018 | Jun 30 2017 | |||||||||||||
Net realized risk management gain | $ | (27 | ) | $ | (13 | ) | $ | (46 | ) | $ | (25 | ) | ||||
Net unrealized risk management gain | (8 | ) | (6 | ) | (41 | ) | (46 | ) | ||||||||
$ | (35 | ) | $ | (19 | ) | $ | (87 | ) | $ | (71 | ) |
a) | Market risk |
Remaining term | Volume | Weighted average price | Index | |||||
Natural Gas | ||||||||
AECO swaps | Jul 2018 | - | Oct 2018 | 100,000 GJ/d | $1.01 | AECO | ||
Jul 2018 | - | Oct 2018 | 200,000 GJ/d | $1.08 | AECO |
Canadian Natural Resources Limited | 19 | Six Months Ended June 30, 2018 |
Remaining term | Amount | Exchange rate (US$/C$) | Interest rate (US$) | Interest rate (C$) | ||||||
Cross currency | ||||||||||
Swaps | July 2018 | — | Nov 2021 | US$500 | 1.022 | 3.45 | % | 3.96 | % | |
July 2018 | — | Mar 2038 | US$550 | 1.170 | 6.25 | % | 5.76 | % |
Canadian Natural Resources Limited | 20 | Six Months Ended June 30, 2018 |
Less than 1 year | 1 to less than 2 years | 2 to less than 5 years | Thereafter | ||||||||||||
Accounts payable | $ | 970 | $ | — | $ | — | $ | — | |||||||
Accrued liabilities | $ | 2,542 | $ | — | $ | — | $ | — | |||||||
Other long-term liabilities | $ | 16 | $ | — | $ | — | $ | — | |||||||
Long-term debt (1) (2) | $ | 977 | $ | 4,127 | $ | 6,942 | $ | 9,482 |
(1) | Long-term debt represents principal repayments only and does not reflect interest, original issue discounts and premiums or transaction costs. |
(2) | In addition to the financial liabilities disclosed above, estimated interest and other financing payments are as follows: less than one year, $837 million; one to less than two years, $806 million; two to less than five years, $1,739 million; and thereafter, $5,370 million. Interest payments were estimated based upon applicable interest and foreign exchange rates as at June 30, 2018. |
Remaining 2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | ||||||||||||||||||
Product transportation and pipeline | $ | 344 | $ | 610 | $ | 561 | $ | 541 | $ | 474 | $ | 3,892 | |||||||||||
North West Redwater Partnership service toll (1) | $ | 46 | $ | 79 | $ | 126 | $ | 157 | $ | 158 | $ | 3,015 | |||||||||||
Offshore equipment operating leases | $ | 91 | $ | 94 | $ | 70 | $ | 68 | $ | 7 | $ | — | |||||||||||
Office leases | $ | 22 | $ | 42 | $ | 43 | $ | 40 | $ | 31 | $ | 121 | |||||||||||
Other | $ | 61 | $ | 44 | $ | 39 | $ | 36 | $ | 39 | $ | 365 |
(1) | As per the processing agreements, on June 1, 2018 the Company began paying its 25% pro rata share of the debt portion of the monthly cost of service toll, which currently consists of interest and fees, with principal repayments beginning in 2020. Included in the service toll is $1,340 million of interest payable over the 30 year tolling period. See note 8. |
Canadian Natural Resources Limited | 21 | Six Months Ended June 30, 2018 |
North America | North Sea | Offshore Africa | Total Exploration and Production | |||||||||||||||||||||||||||||
(millions of Canadian dollars, unaudited) | Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
Jun 30 | Jun 30 | Jun 30 | Jun 30 | Jun 30 | Jun 30 | Jun 30 | Jun 30 | |||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
Segmented product sales | ||||||||||||||||||||||||||||||||
Crude oil and NGLs | 2,327 | 1,692 | 4,169 | 3,611 | 225 | 142 | 334 | 332 | 136 | 102 | 194 | 229 | 2,688 | 1,936 | 4,697 | 4,172 | ||||||||||||||||
Natural gas | 229 | 415 | 569 | 862 | 28 | 23 | 67 | 52 | 16 | 10 | 35 | 23 | 273 | 448 | 671 | 937 | ||||||||||||||||
Total segmented product sales | 2,556 | 2,107 | 4,738 | 4,473 | 253 | 165 | 401 | 384 | 152 | 112 | 229 | 252 | 2,961 | 2,384 | 5,368 | 5,109 | ||||||||||||||||
Less: royalties | (263 | ) | (176 | ) | (438 | ) | (380 | ) | (1 | ) | (1 | ) | (1 | ) | (1 | ) | (15 | ) | (6 | ) | (20 | ) | (13 | ) | (279 | ) | (183 | ) | (459 | ) | (394 | ) |
Segmented revenue | 2,293 | 1,931 | 4,300 | 4,093 | 252 | 164 | 400 | 383 | 137 | 106 | 209 | 239 | 2,682 | 2,201 | 4,909 | 4,715 | ||||||||||||||||
Segmented expenses | ||||||||||||||||||||||||||||||||
Production | 609 | 590 | 1,240 | 1,161 | 100 | 76 | 175 | 186 | 40 | 52 | 69 | 98 | 749 | 718 | 1,484 | 1,445 | ||||||||||||||||
Transportation, blending and feedstock | 699 | 522 | 1,433 | 1,154 | 6 | 7 | 12 | 18 | — | 1 | 1 | 1 | 705 | 530 | 1,446 | 1,173 | ||||||||||||||||
Depletion, depreciation and amortization | 780 | 773 | 1,558 | 1,572 | 72 | 156 | 116 | 401 | 42 | 42 | 70 | 100 | 894 | 971 | 1,744 | 2,073 | ||||||||||||||||
Asset retirement obligation accretion | 22 | 20 | 44 | 39 | 7 | 7 | 14 | 14 | 3 | 2 | 5 | 4 | 32 | 29 | 63 | 57 | ||||||||||||||||
Risk management activities (commodity derivatives) | 13 | (49 | ) | 13 | (101 | ) | — | — | — | — | — | — | — | — | 13 | (49 | ) | 13 | (101 | ) | ||||||||||||
Gain on acquisition, disposition and revaluation of properties | — | (35 | ) | — | (35 | ) | (139 | ) | — | (139 | ) | — | — | — | — | — | (139 | ) | (35 | ) | (139 | ) | (35 | ) | ||||||||
Equity loss (gain) from investments | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||
Total segmented expenses | 2,123 | 1,821 | 4,288 | 3,790 | 46 | 246 | 178 | 619 | 85 | 97 | 145 | 203 | 2,254 | 2,164 | 4,611 | 4,612 | ||||||||||||||||
Segmented earnings (loss) before the following | 170 | 110 | 12 | 303 | 206 | (82 | ) | 222 | (236 | ) | 52 | 9 | 64 | 36 | 428 | 37 | 298 | 103 | ||||||||||||||
Non–segmented expenses | ||||||||||||||||||||||||||||||||
Administration | ||||||||||||||||||||||||||||||||
Share-based compensation | ||||||||||||||||||||||||||||||||
Interest and other financing expense | ||||||||||||||||||||||||||||||||
Risk management activities (other) | ||||||||||||||||||||||||||||||||
Foreign exchange loss (gain) | ||||||||||||||||||||||||||||||||
Loss (gain) from investments | ||||||||||||||||||||||||||||||||
Total non–segmented expenses | ||||||||||||||||||||||||||||||||
Earnings before taxes | ||||||||||||||||||||||||||||||||
Current income tax expense (recovery) | ||||||||||||||||||||||||||||||||
Deferred income tax expense | ||||||||||||||||||||||||||||||||
Net earnings |
Canadian Natural Resources Limited | 22 | Six Months Ended June 30, 2018 |
Oil Sands Mining and Upgrading | Midstream | Inter–segment elimination and other | Total | |||||||||||||||||||||||||||||
(millions of Canadian dollars, unaudited) | Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
Jun 30 | Jun 30 | Jun 30 | Jun 30 | Jun 30 | Jun 30 | Jun 30 | Jun 30 | |||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
Segmented product sales | ||||||||||||||||||||||||||||||||
Crude oil and NGLs | 3,266 | 1,537 | 6,464 | 2,682 | 25 | 23 | 52 | 48 | 92 | 149 | 161 | 202 | 6,071 | 3,645 | 11,374 | 7,104 | ||||||||||||||||
Natural gas | — | — | — | — | — | — | — | — | 45 | 34 | 79 | 78 | 318 | 482 | 750 | 1,015 | ||||||||||||||||
Total segmented product sales | 3,266 | 1,537 | 6,464 | 2,682 | 25 | 23 | 52 | 48 | 137 | 183 | 240 | 280 | 6,389 | 4,127 | 12,124 | 8,119 | ||||||||||||||||
Less: royalties | (158 | ) | (33 | ) | (239 | ) | (52 | ) | — | — | — | — | — | — | — | — | (437 | ) | (216 | ) | (698 | ) | (446 | ) | ||||||||
Segmented revenue | 3,108 | 1,504 | 6,225 | 2,630 | 25 | 23 | 52 | 48 | 137 | 183 | 240 | 280 | 5,952 | 3,911 | 11,426 | 7,673 | ||||||||||||||||
Segmented expenses | ||||||||||||||||||||||||||||||||
Production | 855 | 553 | 1,728 | 925 | 6 | 4 | 11 | 8 | 12 | 18 | 29 | 36 | 1,622 | 1,293 | 3,252 | 2,414 | ||||||||||||||||
Transportation, blending and feedstock | 323 | 74 | 648 | 94 | — | — | — | — | 114 | 158 | 200 | 238 | 1,142 | 762 | 2,294 | 1,505 | ||||||||||||||||
Depletion, depreciation and amortization | 372 | 237 | 776 | 432 | 4 | 2 | 7 | 4 | — | — | — | — | 1,270 | 1,210 | 2,527 | 2,509 | ||||||||||||||||
Asset retirement obligation accretion | 15 | 10 | 30 | 18 | — | — | — | — | — | — | — | — | 47 | 39 | 93 | 75 | ||||||||||||||||
Risk management activities (commodity derivatives) | — | — | — | — | — | — | — | — | — | — | — | — | 13 | (49 | ) | 13 | (101 | ) | ||||||||||||||
Gain on acquisition, disposition and revaluation of properties | — | (230 | ) | — | (230 | ) | — | — | — | — | — | — | — | — | (139 | ) | (265 | ) | (139 | ) | (265 | ) | ||||||||||
Equity loss (gain) from investments | — | — | — | — | 2 | (10 | ) | 3 | (12 | ) | — | — | — | — | 2 | (10 | ) | 3 | (12 | ) | ||||||||||||
Total segmented expenses | 1,565 | 644 | 3,182 | 1,239 | 12 | (4 | ) | 21 | — | 126 | 176 | 229 | 274 | 3,957 | 2,980 | 8,043 | 6,125 | |||||||||||||||
Segmented earnings (loss) before the following | 1,543 | 860 | 3,043 | 1,391 | 13 | 27 | 31 | 48 | 11 | 7 | 11 | 6 | 1,995 | 931 | 3,383 | 1,548 | ||||||||||||||||
Non–segmented expenses | ||||||||||||||||||||||||||||||||
Administration | 76 | 75 | 157 | 162 | ||||||||||||||||||||||||||||
Share-based compensation | 175 | (104 | ) | 87 | (77 | ) | ||||||||||||||||||||||||||
Interest and other financing expense | 190 | 145 | 380 | 279 | ||||||||||||||||||||||||||||
Risk management activities (other) | (48 | ) | 30 | (100 | ) | 30 | ||||||||||||||||||||||||||
Foreign exchange loss (gain) | 171 | (347 | ) | 449 | (403 | ) | ||||||||||||||||||||||||||
Loss (gain) from investments | 29 | (23 | ) | 134 | 68 | |||||||||||||||||||||||||||
Total non–segmented expenses | 593 | (224 | ) | 1,107 | 59 | |||||||||||||||||||||||||||
Earnings before taxes | 1,402 | 1,155 | 2,276 | 1,489 | ||||||||||||||||||||||||||||
Current income tax expense (recovery) | 257 | (79 | ) | 411 | (26 | ) | ||||||||||||||||||||||||||
Deferred income tax expense | 163 | 162 | 300 | 198 | ||||||||||||||||||||||||||||
Net earnings | 982 | 1,072 | 1,565 | 1,317 |
Canadian Natural Resources Limited | 23 | Six Months Ended June 30, 2018 |
Six Months Ended | ||||||||||||||||||||||||
Jun 30, 2018 | Jun 30, 2017 | |||||||||||||||||||||||
Net expenditures | Non-cash and fair value changes (2) | Capitalized costs | Net (3) expenditures | Non-cash and fair value changes (2)(3) | Capitalized costs | |||||||||||||||||||
Exploration and evaluation assets | ||||||||||||||||||||||||
Exploration and Production | ||||||||||||||||||||||||
North America (4) | $ | 57 | $ | (81 | ) | $ | (24 | ) | $ | 89 | $ | (99 | ) | $ | (10 | ) | ||||||||
North Sea | — | — | — | — | — | — | ||||||||||||||||||
Offshore Africa | 7 | — | 7 | 4 | — | 4 | ||||||||||||||||||
Oil Sands Mining and Upgrading | — | (7 | ) | (7 | ) | 142 | 117 | 259 | ||||||||||||||||
$ | 64 | $ | (88 | ) | $ | (24 | ) | $ | 235 | $ | 18 | $ | 253 | |||||||||||
Property, plant and equipment | ||||||||||||||||||||||||
Exploration and Production | ||||||||||||||||||||||||
North America | $ | 1,283 | $ | (101 | ) | $ | 1,182 | $ | 1,115 | $ | 241 | $ | 1,356 | |||||||||||
North Sea | 38 | 214 | 252 | 76 | 20 | 96 | ||||||||||||||||||
Offshore Africa | 62 | — | 62 | 33 | 3 | 36 | ||||||||||||||||||
1,383 | 113 | 1,496 | 1,224 | 264 | 1,488 | |||||||||||||||||||
Oil Sands Mining and Upgrading (5) | 470 | (111 | ) | 359 | 8,480 | 5,777 | 14,257 | |||||||||||||||||
Midstream | 9 | — | 9 | 2 | — | 2 | ||||||||||||||||||
Head office | 11 | — | 11 | 22 | — | 22 | ||||||||||||||||||
$ | 1,873 | $ | 2 | $ | 1,875 | $ | 9,728 | $ | 6,041 | $ | 15,769 |
(1) | This table provides a reconciliation of capitalized costs including derecognitions and does not include the impact of foreign exchange adjustments. |
(2) | Asset retirement obligations, deferred income tax adjustments related to differences between carrying amounts and tax values, transfers of exploration and evaluation assets, transfers of property, plant and equipment to inventory due to change in use, and other fair value adjustments. |
(3) | Net expenditures on exploration and evaluation assets and property, plant and equipment for the six months ended June 30, 2017 exclude non-cash share consideration of $3,818 million issued on the acquisition of AOSP and other assets. This non-cash consideration is included in non-cash and other fair value changes. |
(4) | The above noted figures for 2017 do not include the impact of a pre-tax cash gain of $35 million on the disposition of certain exploration and evaluation assets. |
(5) | Net expenditures for Oil Sands Mining and Upgrading also include capitalized interest and share-based compensation. |
Jun 30 2018 | Dec 31 2017 | |||||||
Exploration and Production | ||||||||
North America | $ | 28,339 | $ | 28,705 | ||||
North Sea | 1,846 | 1,854 | ||||||
Offshore Africa | 1,445 | 1,331 | ||||||
Other | 46 | 29 | ||||||
Oil Sands Mining and Upgrading | 40,521 | 40,559 | ||||||
Midstream | 1,372 | 1,279 | ||||||
Head office | 110 | 110 | ||||||
$ | 73,679 | $ | 73,867 |
Canadian Natural Resources Limited | 24 | Six Months Ended June 30, 2018 |
Interest coverage ratios for the twelve month period ended June 30, 2018: | |
Interest coverage (times) | |
Net earnings (1) | 5.5x |
Funds flow from operations (2) | 12.6x |
(1) | Net earnings plus income taxes and interest expense excluding current and deferred PRT expense and other taxes; divided by the sum of interest expense and capitalized interest. |
(2) | Funds flow from operations plus current income taxes and interest expense excluding current PRT expense and other taxes; divided by the sum of interest expense and capitalized interest. |
Canadian Natural Resources Limited | 25 | Six Months Ended June 30, 2018 |
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