Exhibit Number | Description |
99.1 | |
Canadian Natural Resources Limited Announces 2020 First Quarter Results | |
99.2 | |
99.3 |
Canadian Natural Resources Limited (Registrant) | |||
Date: May 7, 2020 | By: | /s/ Paul M. Mendes | |
Paul M. Mendes | |||
VP, Legal, General Counsel & Corporate Secretary | |||
▪ | Canadian Natural has taken proactive and effective steps to ensure the safety and health of our employees, service providers and communities where we work during the outbreak of the novel coronavirus ("COVID-19"), some of which are over and above guidance from the Public Health Agency of Canada and provincial health authorities. |
• | Canadian Natural's proactive measures are allowing for continued effective and efficient operations with minimal impact to the Company's operations at its head office and in the field, both Internationally and in North America. Currently the Company has approximately 6,000 employees working remotely and approximately 4,000 field personnel working under safety protocols to maintain safe reliable operations. |
• | Canadian Natural has pandemic response and business continuity plans in place to protect the health and safety of our personnel while maintaining safe, reliable operations and supporting the aggressive measures being taken by public health officials to limit the spread of COVID-19. |
• | Canadian Natural monitors government updates daily and follows the guidance of public health officials. As the situation with COVID-19 evolves, the Company has enhanced precautionary measures and ensured actions are implemented and followed. Precautionary measures are currently in effect across the Company's work locations. Canadian Natural will continue to strengthen these measures at the advice of public health officials as needed. |
▪ | Canadian Natural is in a robust overall financial position with strong liquidity. The Company continues to manage effectively through the current short term commodity price environment. As at March 31, 2020, the Company had approximately $5.0 billion of liquidity available, an increase of $116 million over Q4/19 levels. Liquidity is represented by cash and cash equivalents of approximately $1.1 billion and committed bank credit facilities. The liquidity is more than sufficient to retire, when due, any upcoming debt maturities. |
▪ | Subsequent to quarter end, the Company's $750 million non-revolving term credit facility, originally due February 2021 was increased by $250 million to $1,000 million and extended to February 2022, further increasing liquidity. |
▪ | Canadian Natural continues to maintain strong investment grade credit ratings. The Company has a high degree of communication with credit rating agencies to ensure they understand the robust and sustainable nature of the Company's assets. Their understanding is evident in the following results: |
• | On March 20, 2020, Moody’s Investors Service, Inc. (“Moody’s”) affirmed the Company's long term and short term investment grade credit ratings of Baa2 and P-2 with a stable outlook. |
• | On March 26, 2020, Standard & Poor’s Rating Services (“S&P”) rating action on the Company resulted in long term and short term investment grade credit ratings of BBB and A-2 with a stable outlook. |
• | DBRS Limited (“DBRS”) current credit rating for the Company is BBB high. |
▪ | Canadian Natural’s vast and diverse asset base is robust, unique and sustainable. The Company has a significant advantage during volatile pricing scenarios because its long life low decline assets have low sustaining capital requirements, low operating costs and low to no reservoir risk. This results in the Company producing an immaterial percentage of its total proved reserves during challenged commodity price periods, resulting in very little impact to net asset value, thereby preserving value for all of the Company's stakeholders. |
▪ | In Q1/20, the Company effectively executed on its curtailment optimization strategy within the Government of Alberta curtailment guidelines and achieved maximum allowable production, resulting in record production volumes. Production was optimized across the asset base to produce the highest value products, maximizing the Company's netback and adjusted funds flow. |
▪ | Canadian Natural continues to be prudent and proactive in managing its production volumes. The current operating plan is targeting to reduce well servicing activity and to shut-in higher cost volumes in North America Conventional E&P business. In addition the Company targets to temporarily curtail production in its thermal in situ assets. The majority of these volumes can be brought back on quickly when commodity prices recover. Details are as follows: |
• | North America Conventional E&P crude oil production volumes are targeted to be approximately 36,000 bbl/d lower in May 2020 than it would be in a more normalized price environment, as the Company has shut-in high variable cost volumes and stopped well servicing activities. |
Canadian Natural Resources Limited | 2 | Three Months Ended March 31, 2020 |
• | Thermal in situ production volumes are targeted to be approximately 38,000 bbl/d lower in May 2020 than it would be in a more normalized price environment, as the Company has temporarily slowed down production volumes and is conducting planned maintenance activities. |
▪ | The Company's strength of operations and diverse asset base allows Canadian Natural to optimize activities within its Oil Sands Mining and Upgrading assets as follows: |
• | Canadian Natural has planned routine de-coking activities at Horizon that were deferred from Q1/20 to May 2020 which will result in Horizon volumes being 50,000 bbl/d lower than normal in the month, running at restricted rates. |
• | In the second half of 2020, the Company is targeting planned turnaround activities at both AOSP and Horizon mines. The Company has the flexibility to shift timelines to ensure minimal, if any overlapping activities between the two sites, maximizing high value SCO production and operating cash flows. Details are as follows: |
◦ | At the non-operated Scotford Upgrader, a turnaround is targeted for early in Q3/20, at which time the plant will run at restricted rates. Timing of these activities at the AOSP mines are aligned with the planned turnaround at the Scotford Upgrader. During the turnaround, production from AOSP is targeted to average approximately 100,000 bbl/d net lower than normal, in the months of July 2020 and August 2020. |
◦ | At Horizon, the planned turnaround is targeted for the second half of 2020. Monthly average production is targeted to be impacted by approximately 80,000 bbl/d over a two month period once timing is finalized. |
▪ | Canadian Natural's natural gas portfolio is significant, providing the Company with additional production flexibility and opportunities to maximize value as prices improve. The Company has identified a number of highly economic opportunities to add additional natural gas volumes at less than $3,000 per flowing BOE. These activities are targeted to add approximately 60 MMcf/d of natural gas volumes, which equates to approximately 35 MMcf/d for 2020 annual natural gas production levels. |
• | Canadian Natural's natural gas volumes provide significant supportive operating cash flow, targeted at approximately $700 million over the next twelve months at AECO pricing of $2.50/GJ. |
▪ | Due to the current uncertainty around the COVID-19 pandemic, the Company is officially removing its 2020 corporate production guidance. However, if the current strip pricing continues for the remainder of 2020, the Company forecasts that targeted production will meet the previous issued corporate guidance range. |
▪ | Canadian Natural has top tier operating costs and as a result of the Company's culture of innovation, continued focus on effective and efficient operations and continuous improvement, Canadian Natural is targeting to lower operating costs throughout 2020 by approximately $745 million versus 2019 levels. |
($ million) | 2019 | 2020 Forecast | 2020 Targeted Operating Costs Savings | ||||||
North America Natural Gas | $ | 610 | $ | 575 | $ | 35 | |||
North America E&P Liquids (excluding Thermal) (1) | 1,230 | 930 | 300 | ||||||
Thermal In Situ (1) | 865 | 795 | 70 | ||||||
International | 500 | 410 | 90 | ||||||
Oil Sands Mining and Upgrading | 3,275 | 3,025 | 250 | ||||||
Total Targeted Operating Cost Savings | $ | 745 |
▪ | As previously announced, the Company has taken proactive steps to reduce administrative expenses. The Company targets an approximate reduction of $90 million in G&A compared to the original 2020 budget. |
▪ | The Company has executed on additional capital flexibility, reducing its 2020 capital expenditure budget by an additional $280 million beyond the March 18, 2020 update. Capital expenditures are now targeted to be approximately $2,680 million, a $1,370 million reduction from the Company's original 2020 budget released in December 2019. A summary of the 2020 targeted capital budget by area is as follows: |
Canadian Natural Resources Limited | 3 | Three Months Ended March 31, 2020 |
($ million) | 2020 Original Budget | 2020 Original Revision | 2020 Current Forecast | ||||||
Conventional/Unconventional | $ | 1,550 | $ | 990 | $ | 875 | |||
Long Life Low Decline | $ | 2,500 | $ | 1,970 | $ | 1,805 | |||
Total | $ | 4,050 | $ | 2,960 | $ | 2,680 |
▪ | 2020 capital expenditure requirements are targeted to be approximately $1.8 billion to be deployed over the last three quarters. |
▪ | Canadian Natural's flexibility and ability to be nimble was evident in Q1/20 as net capital expenditures were reduced quickly by approximately $200 million from the original Q1/20 capital budget. |
▪ | Canadian Natural’s business is unique, robust and sustainable. The strength of the Company's assets and its ability to generate significant and sustainable free cash flow over the long term combined with strong liquidity, production flexibility, significant capital reductions and targeted operating costs savings provided the Board of Directors with the confidence that the Company’s current dividend levels can be sustained through the commodity price cycle. |
• | As previously announced, on March 5, 2020 the Company declared a quarterly dividend increase of 13% to $0.425 per share, paid on April 1, 2020. The increase marks the 20th consecutive year that the Company has increased its dividend. |
• | Subsequent to quarter end, the Company declared a quarterly dividend of $0.425 per share, payable on July 1, 2020. |
▪ | Canadian Natural has many strengths when marketing its products that will benefit the Company going forward, these include: |
• | Balanced and diverse product mix of natural gas, conventional heavy crude oil, conventional light crude oil, thermal in situ and SCO. |
• | The Company's natural gas portfolio is robust with approximately 1.4 Bcf/d of economic production exposed to an improving natural gas market, supported by owned and controlled infrastructure and low operating costs. Canadian Natural's natural gas volumes provide significant supportive operating cash flow, targeted at approximately $700 million over the next twelve months at AECO pricing of $2.50/GJ. |
• | Canadian Natural has approximately 3.6 million barrels of crude oil storage at major hubs in Edmonton and Hardisty, which allows the Company to adjust monthly sales, manage pipeline logistical constraints, and production fluctuations, as well as pricing differences from month to month. |
• | Market egress continues to improve in the mid-term as the Trans Mountain Expansion and Keystone XL projects are progressing with construction, on which Canadian Natural has 94,000 bbl/d and 200,000 bbl/d of committed capacity respectively. Combining these two pipeline projects and including Enbridge Line 3 replacement, Western Canadian egress is targeted to increase by approximately 1.8 MMbbl/d in the mid-term. |
Canadian Natural Resources Limited | 4 | Three Months Ended March 31, 2020 |
Three Months Ended | |||||||||||||
($ millions, except per common share amounts) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||||||||
Net (loss) earnings | $ | (1,282 | ) | $ | 597 | $ | 961 | ||||||
Per common share | – basic | $ | (1.08 | ) | $ | 0.50 | $ | 0.80 | |||||
– diluted | $ | (1.08 | ) | $ | 0.50 | $ | 0.80 | ||||||
Adjusted net (loss) earnings from operations (1) | $ | (295 | ) | $ | 686 | $ | 838 | ||||||
Per common share | – basic | $ | (0.25 | ) | $ | 0.58 | $ | 0.70 | |||||
– diluted | $ | (0.25 | ) | $ | 0.58 | $ | 0.70 | ||||||
Cash flows from operating activities | $ | 1,725 | $ | 2,454 | $ | 996 | |||||||
Adjusted funds flow (2) | $ | 1,337 | $ | 2,494 | $ | 2,240 | |||||||
Per common share | – basic | $ | 1.13 | $ | 2.11 | $ | 1.87 | ||||||
– diluted | $ | 1.13 | $ | 2.10 | $ | 1.86 | |||||||
Cash flows used in investing activities | $ | 859 | $ | 854 | $ | 1,029 | |||||||
Net capital expenditures (3) | $ | 838 | $ | 1,056 | $ | 977 | |||||||
Daily production, before royalties | |||||||||||||
Natural gas (MMcf/d) | 1,440 | 1,455 | 1,510 | ||||||||||
Crude oil and NGLs (bbl/d) | 938,676 | 913,782 | 783,512 | ||||||||||
Equivalent production (BOE/d) (4) | 1,178,752 | 1,156,276 | 1,035,212 |
(1) | Adjusted net earnings (loss) from operations is a non-GAAP measure that the Company utilizes to evaluate its performance, as it demonstrates the Company’s ability to generate after-tax operating earnings from its core business areas. The derivation of this measure is discussed in the "Advisory" section of this press release. |
(2) | Adjusted funds flow is a non-GAAP measure that the Company considers key to evaluate its performance 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 derivation of this measure is discussed in the "Advisory" section of this press release. |
(3) | Net capital expenditures is a non-GAAP measure that the Company considers a key measure as it provides an understanding of the Company’s capital spending activities in comparison to the Company's annual capital budget. For additional information and details, refer to the net capital expenditures table in the "Advisory" section of this press release. |
(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. |
▪ | A net loss of $1,282 million was realized in Q1/20, while the adjusted net loss in Q1/20 was $295 million. |
▪ | Cash flows from operating activities were $1,725 million in Q1/20. |
▪ | Canadian Natural generated quarterly adjusted funds flow of $1,337 million in Q1/20, which was negatively impacted by charges taken in the first quarter of approximately $100 million including the impact of approximately $50 million of product inventory valuation adjustments and an additional $50 million related to certain pricing mechanisms impacting realized pricing in the North Sea. The decrease of $1,157 million from Q4/19 levels was also due to lower netbacks across all segments driven largely by lower crude oil and natural gas pricing, partially offset by increased higher value Oil Sands Mining and Upgrading production volumes. |
• | Adjusted funds flow was in excess of the Company's net capital expenditures of $838 million and dividend requirements of $444 million in Q1/20, resulting in free cash flow generation of $55 million reflecting the strength of the Company's long life low decline asset base and its effective and efficient operations. |
▪ | Cash flows used in investing activities were $859 million in Q1/20. |
▪ | Despite low commodity prices at March 31, 2020, upon review of the Company's stated book value of property, plant and equipment no impairment charge was required, reflecting the strength of the asset base. |
Canadian Natural Resources Limited | 5 | Three Months Ended March 31, 2020 |
▪ | Canadian Natural maintained a strong financial position in Q1/20 with significant liquidity of approximately $5.0 billion including cash balances of approximately $1.1 billion and committed and demand bank credit facilities as at March 31, 2020. |
▪ | Returns to shareholders totaled $715 million in Q1/20, $444 million by way of dividends and $271 million by way of share repurchases. As previously announced on March 18, 2020, share repurchases have been suspended and the Board of Directors have at the present time made the decision to not renew the Company's NCIB program, which expires in May 2020. |
▪ | The Company effectively executed on its curtailment optimization strategy, producing our maximum allowable volumes under the Government of Alberta curtailment program, achieving record quarterly production volumes of 1,178,752 BOE/d in Q1/20, increases of 14% and 2% from Q1/19 and Q4/19 levels respectively. |
▪ | Record liquids production was achieved by the Company in Q1/20 with volumes reaching 938,676 bbl/d, increases of 20% and 3% from Q1/19 and Q4/19 levels respectively. The increases from previous periods for BOE's and liquids primarily reflect the following: |
• | Increased production from the acquisition of thermal in situ and primary heavy crude oil assets from Devon Canada when compared to Q1/19 levels. |
• | Increased production from high utilization rates and reliable operations in Oil Sands Mining and Upgrading following a strong ramp up at Horizon after the successful completion of the turnaround in Q4/19 and the completion of the proactive piping replacement in January 2020, when compared to Q4/19 levels. |
• | Record production volumes were optimized across the asset base to achieve maximum allowable production under the mandatory Government of Alberta curtailment guidelines during Q1/20. |
• | Higher value SCO was maximized in Q1/20 with conventional crude oil and thermal in situ being curtailed as a result of mandatory Government of Alberta curtailments. |
◦ | The Company's product mix was enhanced in Q1/20 as light crude oil and SCO represented approximately 48% of total corporate production volumes, a 12% increase from Q4/19 levels. |
▪ | Canadian Natural's continued focus on delivering effective and efficient operations and cost control was demonstrated as the Company's liquids E&P Q1/20 operating costs were $13.71/bbl (US$10.19/bbl), a 15% reduction from Q1/19 levels. |
▪ | Canadian Natural's North America E&P crude oil and NGL production volumes, excluding thermal in situ, was slightly curtailed in Q1/20 averaging 228,574 bbl/d, comparable to Q1/19 and an 8% decrease from Q4/19 levels. The decrease from Q4/19 levels primarily reflects optimizing curtailment volumes across the asset base that resulted in increased production volumes of higher value SCO. |
▪ | At the Company's world class Oil Sands Mining and Upgrading assets quarterly production volumes were strong, averaging 438,101 bbl/d of SCO in Q1/20. Increases of 5% and 22% of high value SCO production over Q1/19 and Q4/19 levels respectively, were due to high utilization rates and reliable operations following a strong ramp up at Horizon after the successful completion of the turnaround in Q4/19 and the completion of the proactive piping replacement in January 2020. Production reflected the Company’s optimization of curtailment volumes across the Company's asset base. |
• | Industry leading operating costs averaged $20.76/bbl (US$15.43/bbl) of SCO in Q1/20, representing decreases of 3% and 17% from Q1/19 and Q4/19 levels respectively. The decreases in operating costs in Q1/20 from the comparable periods primarily reflects higher utilization rates following a strong ramp up at Horizon after the successful completion of the turnaround in Q4/19 and the proactive piping replacement in January 2020. |
◦ | Oil Sands Mining and Upgrading achieved operating costs of $809 million in Q1/20, a 5% decrease from $856 million in Q4/19. The decrease in operating costs on a total and per barrel basis demonstrated the Company’s continued focus on efficiencies and cost control. |
◦ | The Company's Oil Sands Mining and Upgrading operations are top tier, resulting in industry leading operating costs. Canadian Natural's teams continue to focus on efficiencies, innovation and cost control resulting in targeted operating costs to be reduced further. |
• | In March 2020, Oil Sands Mining and Upgrading achieved record production of approximately 478,300 bbl/d of SCO as a result of high utilization and safe, steady and reliable operations. Additionally, these strong operations resulted in low operating costs of approximately $18.42/bbl (US$13.20/bbl) of SCO in the month. |
◦ | Additionally, Horizon achieved a significant milestone in March 2020, producing its 500 millionth barrel of cumulative SCO. |
Canadian Natural Resources Limited | 6 | Three Months Ended March 31, 2020 |
▪ | Thermal in situ oil sands production volumes were strong in Q1/20. Including curtailed volumes, production in this segment averaged 228,303 bbl/d, a 142% increase over Q1/19 levels, primarily as a result of the Jackfish acquisition and increased production from Kirby North and pad additions at Primrose. Production decreased by 12% from Q4/19 levels primarily reflecting the optimization of curtailment volumes across the Company's asset base that resulted in increased production volumes of higher value SCO and planned turnaround activities in Q1/20 at Jackfish, which was successfully completed in mid-April 2020. |
• | Thermal in situ operating costs were strong in Q1/20 averaging $11.02/bbl (US$8.19/bbl), a decrease of 39% from Q1/19 levels, primarily as a result of higher production volumes, synergies captured to date from the Devon Canada asset acquisition and the Company's continued focus on cost control and lower energy costs. |
Canadian Natural Resources Limited | 7 | Three Months Ended March 31, 2020 |
Three Months Ended Mar 31 | ||||||||
2020 | 2019 | |||||||
(number of wells) | Gross | Net | Gross | Net | ||||
Crude oil | 37 | 35 | 30 | 30 | ||||
Natural gas | 12 | 11 | 10 | 8 | ||||
Dry | — | — | 1 | 1 | ||||
Subtotal | 49 | 46 | 41 | 39 | ||||
Stratigraphic test / service wells | 420 | 367 | 375 | 332 | ||||
Total | 469 | 413 | 416 | 371 | ||||
Success rate (excluding stratigraphic test / service wells) | 100 | % | 97 | % |
▪ | The Company's total crude oil and natural gas drilling program of 46 net wells for the three months ended March 31, 2020, excluding strat/service wells, represents an increase of 7 net wells from the same period in 2019. |
Crude oil and NGLs – excluding Thermal In Situ Oil Sands | ||||||
Three Months Ended | ||||||
Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||
Crude oil and NGLs production (bbl/d) | 228,574 | 247,184 | 225,291 | |||
Net wells targeting crude oil | 28 | 9 | 28 | |||
Net successful wells drilled | 28 | 9 | 28 | |||
Success rate | 100 | % | 100 | % | 100 | % |
▪ | Canadian Natural's North America E&P crude oil and NGL production volumes, excluding thermal in situ, was slightly curtailed in Q1/20 averaging 228,574 bbl/d, comparable to Q1/19 and an 8% decrease from Q4/19 levels. The decrease from Q4/19 levels primarily reflects optimizing curtailment volumes across the asset base that resulted in increased production volumes of higher value SCO. |
Canadian Natural Resources Limited | 8 | Three Months Ended March 31, 2020 |
• | Primary heavy crude oil production was curtailed in Q1/20, averaging 82,122 bbl/d, a 20% increase from Q1/19 levels and a decrease of 13% from Q4/19 levels. The decrease from Q4/19 was mainly as a result of the execution of the Company's curtailment optimization strategy and temporary shut-ins and deferral of well servicing given current market conditions. The increase from Q1/19 was as a result of additional volumes from the Devon Canada asset acquisition. |
◦ | Operating costs of $18.68/bbl (US$13.89/bbl) were realized in the Company's primary heavy crude oil operations in Q1/20, an increase of 8% from Q1/19 levels. |
• | Pelican Lake production averaged 57,986 bbl/d in Q1/20, a 5% decrease from Q1/19 levels and comparable to Q4/19 levels, strong results that reflect the low annual decline of this long life asset. |
◦ | At Pelican Lake, the Company continues to demonstrate effective and efficient operations as Q1/20 operating costs decreased by 8% from Q1/19 levels, averaging $6.18/bbl (US$4.59/bbl) in the quarter, primarily as a result of the Company's focus on cost control. |
• | North American light crude oil and NGL production averaged 88,466 bbl/d in Q1/20, 7% and 6% decreases from Q1/19 and Q4/19 levels respectively, primarily as a result of the Company's strategic decision to defer planned activities in response to current market conditions combined with the execution of the Company's curtailment optimization strategy. |
◦ | In Q1/20, operating costs were $15.99/bbl (US$11.89/bbl) in the Company's North America light crude oil and NGL areas, comparable with Q1/19 levels, strong results given lower production. |
Thermal In Situ Oil Sands | ||||||
Three Months Ended | ||||||
Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||
Bitumen production (bbl/d) | 228,303 | 259,387 | 94,146 | |||
Net wells targeting bitumen | 6 | 3 | — | |||
Net successful wells drilled | 6 | 3 | — | |||
Success rate | 100 | % | 100 | % | — | % |
▪ | Thermal in situ oil sands production volumes were strong in Q1/20. Including curtailed volumes, production in this segment averaged 228,303 bbl/d, a 142% increase over Q1/19 levels, primarily as a result of the Jackfish acquisition and increased production from Kirby North and pad additions at Primrose. Production decreased by 12% from Q4/19 levels primarily reflecting the optimization of curtailment volumes across the Company's asset base that resulted in increased production volumes of higher value SCO and planned turnaround activities in Q1/20 at Jackfish, which was successfully completed in mid-April 2020. |
• | Thermal in situ operating costs were strong in Q1/20 averaging $11.02/bbl (US$8.19/bbl), a decrease of 39% from Q1/19 levels, primarily as a result of higher production volumes, synergies captured to date from the Devon Canada asset acquisition and the Company's continued focus on cost control and lower energy costs. |
North America Natural Gas | ||||||
Three Months Ended | ||||||
Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||
Natural gas production (MMcf/d) | 1,407 | 1,411 | 1,454 | |||
Net wells targeting natural gas | 11 | 4 | 9 | |||
Net successful wells drilled | 11 | 4 | 8 | |||
Success rate | 100 | % | 100 | % | 89 | % |
▪ | North America natural gas production was 1,407 MMcf/d in Q1/20, a decrease of 3% from Q1/19 levels and comparable to Q4/19 levels, reflecting strong base production, high reliability and minimal declines given the strategic reduction of capital allocated to natural gas activities. |
Canadian Natural Resources Limited | 9 | Three Months Ended March 31, 2020 |
▪ | North America natural gas operating costs were strong in Q1/20, a decrease of 5% from Q1/19 levels to $1.24/Mcf. These results demonstrate the strength of the Company's strategy to own and control its infrastructure, continued focus on cost control and executing on efficiencies across the entire asset base. |
• | At the Company's high value Septimus Montney liquids rich area, operating costs were strong in Q1/20, a 17% decrease from Q1/19 levels, averaging $0.30/Mcfe. |
▪ | Canadian Natural's natural gas portfolio is significant, providing the Company with additional production flexibility and opportunities to maximize value as prices improve. The Company has identified a number of highly economic opportunities to add additional natural gas volumes at less than $3,000 per flowing BOE. These activities are targeted to add approximately 60 MMcf/d of natural gas volumes, which equates to approximately 35 MMcf/d for 2020 annual natural gas production levels. |
• | Canadian Natural's natural gas volumes provide significant supportive operating cash flow, targeted at approximately $700 million over the next twelve months at AECO pricing of $2.50/GJ. |
▪ | In 2020, Canadian Natural targets to use the equivalent of approximately 47% of corporate annual natural gas production within its operations, providing a natural hedge from Western Canadian natural gas prices. Approximately 40% is targeted to be exported to other North American markets and sold internationally, while the remaining 13% is targeted to be exposed to AECO/Station 2 pricing. |
Three Months Ended | ||||||
Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||
Crude oil production (bbl/d) | ||||||
North Sea | 27,755 | 30,860 | 25,714 | |||
Offshore Africa | 15,943 | 18,495 | 22,155 | |||
Natural gas production (MMcf/d) | ||||||
North Sea | 23 | 25 | 28 | |||
Offshore Africa | 10 | 19 | 28 | |||
Net wells targeting crude oil | 1.0 | — | 1.6 | |||
Net successful wells drilled | 1.0 | — | 1.6 | |||
Success rate | 100 | % | — | % | 100 | % |
▪ | International E&P crude oil production volumes averaged 43,698 bbl/d in Q1/20, decreases of 9% and 11% from Q1/19 and Q4/19 levels respectively. The decreases were primarily due to natural field declines, planned turnaround activities at Espoir partially offset by strong performance from the 2019 drilling program in the North Sea and at Baobab. |
• | In the North Sea, crude oil production volumes of 27,755 bbl/d were achieved in Q1/20, an 8% increase over Q1/19 levels and a 10% decrease from Q4/19 levels. The increase from Q1/19 primarily reflected the impact of added production from the 2019 drilling program, partially offset by natural field declines. The decrease from Q4/19 primarily reflects natural field declines. |
◦ | Q1/20 operating costs in the North Sea decreased by 25% and 12% from Q1/19 and Q4/19 levels respectively, averaging $29.73/bbl. The decreases from the comparable periods primarily reflect reduced maintenance activities in Q1/20 due to COVID-19. The decrease from Q1/19 also reflects the impact of higher production volumes in Q1/20. |
• | Offshore Africa crude oil production volumes in Q1/20 averaged 15,943 bbl/d, decreases of 28% and 14% from Q1/19 and Q4/19 levels respectively. The decrease in production from the comparable periods primarily reflects planned turnaround activities at Espoir and natural field declines. |
◦ | Offshore Africa crude oil operating costs averaged $11.88/bbl (US$8.83/bbl) in Q1/20, an increase of 21% from Q1/19 and a decrease of 29% from Q4/19 levels. The increase from Q1/19 was primarily due to decreased production volumes and natural field declines. The decrease from Q4/19 was primarily due to the timing of |
Canadian Natural Resources Limited | 10 | Three Months Ended March 31, 2020 |
◦ | Following the previously announced discovery of significant gas condensate in South Africa, where Canadian Natural has a 20% working interest, preparation is in progress by the operator for the 2020 drilling program including contingency plans to manage COVID-19 related disruption. |
Three Months Ended | ||||||
Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||
Synthetic crude oil production (bbl/d) (1) (2) | 438,101 | 357,856 | 416,206 |
(1) | SCO production before royalties and excludes volumes consumed internally as diesel. |
(2) | Consists of heavy and light synthetic crude oil products. |
▪ | At the Company's world class Oil Sands Mining and Upgrading assets quarterly production volumes were strong, averaging 438,101 bbl/d of SCO in Q1/20. Increases of 5% and 22% of high value SCO production over Q1/19 and Q4/19 levels respectively, were due to high utilization rates and reliable operations following a strong ramp up at Horizon after the successful completion of the turnaround in Q4/19 and the completion of the proactive piping replacement in January 2020. Production reflected the Company’s optimization of curtailment volumes across the asset base. |
• | Industry leading operating costs averaged $20.76/bbl (US$15.43/bbl) of SCO in Q1/20, representing decreases of 3% and 17% from Q1/19 and Q4/19 levels respectively. The decreases in operating costs in Q1/20 from the comparable periods primarily reflects higher utilization rates following a strong ramp up at Horizon after the successful completion of the turnaround in Q4/19 and the proactive piping replacement in January 2020. |
◦ | Oil Sands Mining and Upgrading achieved operating costs of $809 million in Q1/20, a 5% decrease from $856 million in Q4/19. The decrease in operating costs on a total and per barrel basis demonstrated the Company’s continued focus on efficiencies and cost control. |
◦ | The Company's Oil Sands Mining and Upgrading operations are top tier, resulting in industry leading operating costs. Canadian Natural's teams continue to focus on efficiencies, innovation and cost control targeting further operating costs reductions throughout 2020. |
• | In March 2020, Oil Sands Mining and Upgrading achieved record production of approximately 478,300 bbl/d of SCO as a result of high utilization, safe, steady and reliable operations. Additionally, these strong operations resulted in low operating costs of approximately $18.42/bbl (US$13.20/bbl) of SCO in the month. |
◦ | Additionally, Horizon achieved a significant milestone in March 2020, producing its 500 millionth barrel of cumulative SCO. |
◦ | Canadian Natural has planned routine de-coking activities at Horizon that were deferred from Q1/20 to May 2020 which will result in Horizon volumes being 50,000 bbl/d lower than normal in the month, running at restricted rates. |
• | In the second half of 2020, the Company is targeting planned turnaround activities at both AOSP and Horizon mines. The Company has the flexibility to shift timelines to ensure minimal, if any overlapping activities between the two sites, maximizing high value SCO production and operating cash flows. Details are as follows: |
◦ | At the non-operated Scotford Upgrader, a turnaround is targeted for early in Q3/20, at which time the plant will run at restricted rates. Timing of these activities at the AOSP mines are aligned with the planned turnaround at the Scotford Upgrader. During the turnaround, production from AOSP is targeted to average approximately 100,000 bbl/d net lower than normal, in the months of July 2020 and August 2020. |
◦ | At Horizon, the planned turnaround is targeted for the second half of 2020. Monthly average production is targeted to be impacted by approximately 80,000 bbl/d over a two month period once timing is finalized. |
Canadian Natural Resources Limited | 11 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||
Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||||||||
Crude oil and NGLs pricing | ||||||||||||
WTI benchmark price (US$/bbl) (1) | $ | 46.08 | $ | 56.96 | $ | 54.90 | ||||||
WCS heavy differential as a percentage of WTI (%) (2) | 44 | % | 28 | % | 23 | % | ||||||
SCO price (US$/bbl) | $ | 43.39 | $ | 56.32 | $ | 52.19 | ||||||
Condensate benchmark pricing (US$/bbl) | $ | 45.54 | $ | 52.99 | $ | 50.49 | ||||||
Average realized pricing before risk management (C$/bbl) (3) | $ | 25.90 | $ | 49.60 | $ | 53.98 | ||||||
Natural gas pricing | ||||||||||||
AECO benchmark price (C$/GJ) | $ | 2.03 | $ | 2.21 | $ | 1.84 | ||||||
Average realized pricing before risk management (C$/Mcf) | $ | 2.22 | $ | 2.64 | $ | 3.09 |
(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. |
▪ | Canadian Natural has approximately 3.6 million barrels of crude oil storage at major hubs in Edmonton and Hardisty, which allows the Company to adjust monthly sales, manage pipeline logistical constraints, and production fluctuations, as well as pricing differences from month to month. |
▪ | Market egress continues to improve in the mid-term as the Trans Mountain Expansion and Keystone XL projects are progressing with construction, on which Canadian Natural has 94,000 bbl/d and 200,000 bbl/d of committed capacity respectively. Combining these two pipeline projects and including Enbridge Line 3 replacement, Western Canadian egress is targeted to increase by approximately 1.8 MMbbl/d in the mid-term. |
▪ | Base Keystone export pipeline optimization expansion of approximately 50,000 bbl/d was recently announced. In Q3/19, Canadian Natural committed to approximately 10,000 bbl/d of the expansion, which is targeted to be available in 2020. |
▪ | The Company’s strategy is to maintain a diverse portfolio balanced across various commodity types. The Company achieved production of 1,178,752 BOE/d in Q1/20, with approximately 98% of total production located in G7 countries. |
▪ | Canadian Natural generated quarterly adjusted funds flow of $1,337 million in Q1/20, which was negatively impacted by charges taken in the first quarter of approximately $100 million including the impact of approximately $50 million of product inventory valuation adjustments and an additional $50 million related to certain pricing mechanisms impacting realized pricing in the North Sea. |
• | Adjusted funds flow was in excess of the Company's net capital expenditures of $838 million and dividend requirements of $444 million in Q1/20, resulting in free cash flow generation of $55 million reflecting the strength of the Company's long life low decline asset base and its effective and efficient operations. |
▪ | Returns to shareholders totaled $715 million in Q1/20, $444 million by way of dividends and $271 million by way of share repurchases. As previously announced on March 18, 2020 share repurchases have been suspended and the Board of Directors have at the present time made the decision to not renew the Company's NCIB program, which expires in May 2020. |
• | Share repurchases for cancellation from January 1, 2020 and March 10, 2020 totaled 6,970,000 common shares at a weighted average share price of $38.84. |
Canadian Natural Resources Limited | 12 | Three Months Ended March 31, 2020 |
▪ | Canadian Natural is confident that it can maintain a strong overall financial position and strong liquidity, while the Company manages effectively through the current short term commodity price environment. As at March 31, 2020, the Company had approximately $5.0 billion of liquidity available, an increase of $116 million over Q4/19 levels. Liquidity is represented by cash and cash equivalents of approximately $1.1 billion and committed and demand bank credit facilities. The liquidity is more than sufficient to retire, when due, any upcoming debt maturities. |
• | Debt to book capitalization and debt to adjusted EBITDA remained strong at 39.4% and 2.6x respectively. |
• | Subsequent to quarter end, the Company's $750 million non-revolving term credit facility, originally due February 2021 was increased by $250 million to $1,000 million and extended to February 2022, increasing liquidity. |
• | In addition to the Company's strong adjusted funds flow, capital flexibility and access to debt capital markets, Canadian Natural has additional financial levers at its disposal to effectively manage its liquidity. The current approximate value of these financial levers includes third party equity investments of $300 million and cross currency swaps with a total value of $360 million. |
▪ | Canadian Natural continues to maintain strong investment credit ratings. The Company has a high degree of communication with credit rating agencies to ensure they understand the robust and sustainable nature of the Company's assets. Their understanding is evident in the following results: |
• | On March 20, 2020, Moody’s Investors Service, Inc. (“Moody’s”) affirmed the Company's long term and short term investment grade credit ratings of Baa2 and P-2 with a stable outlook. |
• | On March 26, 2020, Standard & Poor’s Rating Services (“S&P”) rating action on the Company resulted in long term and short term investment grade credit ratings of BBB and A-2 with a stable outlook. |
• | DBRS Limited (“DBRS”) current credit rating for the Company is BBB high. |
▪ | Canadian Natural’s business is unique, robust and sustainable. The strength of the Company's assets and its ability to generate significant and sustainable free cash flow over the long term combined with strong liquidity, production flexibility, significant capital reductions and targeted operating costs savings provided the Board of Directors with the confidence that the Company’s current dividend levels can be sustained through the commodity price cycle. |
• | On March 5, 2020, the Company declared a quarterly dividend increase of 13% to $0.425 per share, paid on April 1, 2020. The increase marks the 20th consecutive year that the Company has increased its dividend, reflecting the Board of Directors' confidence in Canadian Natural's strength and robustness of the Company's assets and its ability to generate significant and sustainable free cash flow. |
• | Subsequent to quarter end, the Company declared a quarterly dividend of $0.425 per share, payable on July 1, 2020. |
Canadian Natural Resources Limited | 13 | Three Months Ended March 31, 2020 |
Canadian Natural Resources Limited | 14 | Three Months Ended March 31, 2020 |
Canadian Natural Resources Limited | 15 | Three Months Ended March 31, 2020 |
Canadian Natural Resources Limited | 16 | Three Months Ended March 31, 2020 |
CANADIAN NATURAL RESOURCES LIMITED |
2100, 855 - 2nd Street S.W. Calgary, Alberta, T2P4J8 Phone: 403-514-7777 Email: ir@cnrl.com www.cnrl.com |
TIM S. MCKAY President MARK A. STAINTHORPE Chief Financial Officer and Senior Vice-President, Finance JASON M. POPKO Manager, Investor Relations Trading Symbol - CNQ Toronto Stock Exchange New York Stock Exchange |
Canadian Natural Resources Limited | 17 | Three Months Ended March 31, 2020 |
Canadian Natural Resources Limited | 1 | Three Months Ended March 31, 2020 |
Canadian Natural Resources Limited | 2 | Three Months Ended March 31, 2020 |
Three Months Ended | |||||||||||||
($ millions, except per common share amounts) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||||||||
Product sales (1) | $ | 4,652 | $ | 6,335 | $ | 5,541 | |||||||
Crude oil and NGLs | $ | 4,312 | $ | 5,947 | $ | 5,082 | |||||||
Natural gas | $ | 335 | $ | 382 | $ | 456 | |||||||
Net earnings (loss) | $ | (1,282 | ) | $ | 597 | $ | 961 | ||||||
Per common share | – basic | $ | (1.08 | ) | $ | 0.50 | $ | 0.80 | |||||
– diluted | $ | (1.08 | ) | $ | 0.50 | $ | 0.80 | ||||||
Adjusted net earnings (loss) from operations (2) | $ | (295 | ) | $ | 686 | $ | 838 | ||||||
Per common share | – basic | $ | (0.25 | ) | $ | 0.58 | $ | 0.70 | |||||
– diluted | $ | (0.25 | ) | $ | 0.58 | $ | 0.70 | ||||||
Cash flows from operating activities | $ | 1,725 | $ | 2,454 | $ | 996 | |||||||
Adjusted funds flow (3) | $ | 1,337 | $ | 2,494 | $ | 2,240 | |||||||
Per common share | – basic | $ | 1.13 | $ | 2.11 | $ | 1.87 | ||||||
– diluted | $ | 1.13 | $ | 2.10 | $ | 1.86 | |||||||
Cash flows used in investing activities | $ | 859 | $ | 854 | $ | 1,029 | |||||||
Net capital expenditures (4) | $ | 838 | $ | 1,056 | $ | 977 |
(1) | Further details related to product sales, including 'Other' income, for the three months ended March 31, 2020 are disclosed in note 19 to the Company’s unaudited interim consolidated financial statements. |
(2) | Adjusted net earnings (loss) from operations is a non-GAAP measure that represents net earnings (loss) as presented in the Company's consolidated Statements of Earnings (Loss), adjusted for the after-tax effects of certain items of a non-operational nature. The Company considers adjusted net earnings (loss) from operations a key measure in evaluating its performance, as it demonstrates the Company’s ability to generate after-tax operating earnings from its core business areas. The reconciliation "Adjusted Net Earnings (Loss) from Operations, as Reconciled to Net Earnings (Loss)" is presented in this MD&A. Adjusted net earnings (loss) from operations may not be comparable to similar measures presented by other companies. |
(3) | Adjusted funds flow is a non-GAAP measure that represents cash flows from operating activities as presented in the Company's consolidated Statements of Cash Flows, adjusted for the net change in non-cash working capital, abandonment expenditures and movements in other long-term assets, including the unamortized cost of the share bonus program and prepaid cost of service tolls. The Company considers adjusted funds flow a key measure in evaluating its performance 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 "Adjusted Funds Flow, as Reconciled to Cash Flows from Operating Activities" is presented in this MD&A. Adjusted funds flow may not be comparable to similar measures presented by other companies. |
(4) | Net capital expenditures is a non-GAAP measure that represents cash flows used in investing activities as presented in the Company's consolidated Statements of Cash Flows, adjusted for the net change in non-cash working capital, investment in other long-term assets, share consideration in business combinations and abandonment expenditures. The Company considers net capital expenditures a key measure as it provides an understanding of the Company’s capital spending activities in comparison to the Company's annual capital budget. The reconciliation "Net Capital Expenditures, as Reconciled to Cash Flows used in Investing Activities" is presented in the "Net Capital Expenditures" section of this MD&A. Net capital expenditures may not be comparable to similar measures presented by other companies. |
Canadian Natural Resources Limited | 3 | Three Months Ended March 31, 2020 |
Adjusted Net Earnings (Loss) from Operations, as Reconciled to Net Earnings (Loss) | ||||||||||||
Three Months Ended | ||||||||||||
($ millions) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Net earnings (loss) | $ | (1,282 | ) | $ | 597 | $ | 961 | |||||
Share-based compensation, net of tax (1) | (221 | ) | 148 | 62 | ||||||||
Unrealized risk management (gain) loss, net of tax (2) | (15 | ) | 16 | 13 | ||||||||
Unrealized foreign exchange loss (gain), net of tax (3) | 1,121 | (225 | ) | (233 | ) | |||||||
Realized foreign exchange gain on settlement of cross currency swaps (4) | (166 | ) | — | — | ||||||||
Loss from investments, net of tax (5) (6) | 268 | 150 | 35 | |||||||||
Adjusted net earnings (loss) from operations | $ | (295 | ) | $ | 686 | $ | 838 |
(1) | Share-based compensation includes costs incurred under the Company's Stock Option Plan and Performance Share Unit ("PSU") plans. The Company’s employee stock option plan provides for a cash payment option. The PSU plan provides certain executive employees of the Company with the right to receive a cash payment, the amount of which is determined by individual employee performance and the extent to which certain other performance measures are met. 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 (loss) or are charged to (recovered from) the Oil Sands Mining and Upgrading segment. |
(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 (loss). 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 (loss). |
(4) | During the first quarter of 2020, the Company settled the US$500 million cross currency swaps designated as cash flow hedges of the US$500 million 3.45% US dollar debt securities due November 2021. The Company realized cash proceeds of $166 million on settlement. |
(5) | The Company's investment in the 50% owned North West Redwater Partnership ("Redwater Partnership") is accounted for using the equity method of accounting. Included in the non-cash loss from investments is the Company's pro rata share of the Redwater Partnership's equity loss recognized for the period. |
(6) | The Company’s investments in PrairieSky Royalty Ltd. ("PrairieSky") and Inter Pipeline Ltd. ("Inter Pipeline") have been accounted for at fair value through profit and loss and are measured each period with changes in fair value recognized in net earnings (loss). |
Adjusted Funds Flow, as Reconciled to Cash Flows from Operating Activities | ||||||||||||
Three Months Ended | ||||||||||||
($ millions) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Cash flows from operating activities | $ | 1,725 | $ | 2,454 | $ | 996 | ||||||
Net change in non-cash working capital | (595 | ) | (52 | ) | 1,016 | |||||||
Abandonment expenditures (1) | 89 | 84 | 108 | |||||||||
Other (2) | 118 | 8 | 120 | |||||||||
Adjusted funds flow | $ | 1,337 | $ | 2,494 | $ | 2,240 |
(1) | The Company includes abandonment expenditures in "Net Capital Expenditures, as Reconciled to Cash Flows used in Investing Activities" in the "Net Capital Expenditures" section of this MD&A. |
(2) | Movements in other long-term assets, including the unamortized cost of the share bonus program and prepaid cost of service tolls. |
Canadian Natural Resources Limited | 4 | Three Months Ended March 31, 2020 |
▪ | lower crude oil and NGLs and natural gas netbacks in the Exploration and Production segments; and |
▪ | lower realized SCO prices in the Oil Sands Mining and Upgrading segment. |
Canadian Natural Resources Limited | 5 | Three Months Ended March 31, 2020 |
($ millions, except per common share amounts) | Mar 31 2020 | Dec 31 2019 | Sep 30 2019 | Jun 30 2019 | ||||||||||||
Product sales (1) | $ | 4,652 | $ | 6,335 | $ | 6,587 | $ | 5,931 | ||||||||
Crude oil and NGLs | $ | 4,312 | $ | 5,947 | $ | 6,324 | $ | 5,597 | ||||||||
Natural gas | $ | 335 | $ | 382 | $ | 257 | $ | 324 | ||||||||
Net earnings (loss) | $ | (1,282 | ) | $ | 597 | $ | 1,027 | $ | 2,831 | |||||||
Net earnings (loss) per common share | ||||||||||||||||
– basic | $ | (1.08 | ) | $ | 0.50 | $ | 0.87 | $ | 2.37 | |||||||
– diluted | $ | (1.08 | ) | $ | 0.50 | $ | 0.87 | $ | 2.36 | |||||||
($ millions, except per common share amounts) | Mar 31 2019 | Dec 31 2018 | Sep 30 2018 | Jun 30 2018 | ||||||||||||
Product sales (1) | $ | 5,541 | $ | 3,831 | $ | 6,327 | $ | 6,389 | ||||||||
Crude oil and NGLs | $ | 5,082 | $ | 3,327 | $ | 5,967 | $ | 6,071 | ||||||||
Natural gas | $ | 456 | $ | 504 | $ | 360 | $ | 318 | ||||||||
Net earnings (loss) | $ | 961 | $ | (776 | ) | $ | 1,802 | $ | 982 | |||||||
Net earnings (loss) per common share | ||||||||||||||||
– basic | $ | 0.80 | $ | (0.64 | ) | $ | 1.48 | $ | 0.80 | |||||||
– diluted | $ | 0.80 | $ | (0.64 | ) | $ | 1.47 | $ | 0.80 |
(1) | Further details related to product sales, including 'Other' income, for the three months ended March 31, 2020 are disclosed in note 19 to the Company’s unaudited interim consolidated financial statements. |
Canadian Natural Resources Limited | 6 | Three Months Ended March 31, 2020 |
▪ | Crude oil pricing – Fluctuating global supply/demand including crude oil production levels from OPEC and its impact on world supply, the impact of geopolitical and market uncertainties, including those due to COVID-19 and in connection with governmental responses to COVID-19, 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 including the impact of a shortage of takeaway capacity out of the Western Canadian Sedimentary Basin (the "Basin"), the impact of the differential between WTI and Dated Brent ("Brent") benchmark pricing in the North Sea and Offshore Africa and the impact of production curtailments mandated by the Government of Alberta that came into effect January 1, 2019. |
▪ | Natural gas pricing – The impact of fluctuations in both the demand for natural gas and inventory storage levels, third-party pipeline maintenance and outages 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 and Kirby North, the results from the Pelican Lake water and polymer flood projects, fluctuations in the Company’s drilling program in North America and the International segments, the impact and timing of acquisitions, including the acquisition of assets from Devon Canada Corporation ("Devon") in the second quarter of 2019, as well as the impact of turnarounds and pitstops in the Oil Sands Mining and Upgrading segment, voluntarily curtailed production in late 2018 due to low commodity prices in North America and production curtailments mandated by the Government of Alberta that came into effect January 1, 2019 and the impact of shut-in production due to lower demand during COVID-19. 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 the Pine River 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 volumes, the impact of seasonal costs, the impact of increased carbon tax and energy costs, cost optimizations across all segments, the impact and timing of acquisitions, the impact of turnarounds and pitstops in the Oil Sands Mining and Upgrading segment, maintenance activities in the International segments, and the impact of the adoption of IFRS 16 on January 1, 2019. |
▪ | 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, the impact of turnarounds and pitstops in the Oil Sands Mining and Upgrading segment, and the impact of the adoption of IFRS 16 on January 1, 2019. |
▪ | Share-based compensation – Fluctuations due to the measurement of fair market value 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. |
▪ | Interest expense – Fluctuations due to the adoption of IFRS 16 on January 1, 2019, fluctuating long-term debt levels, and the impact of movements in benchmark interest rates on outstanding floating rate long-term debt. |
▪ | Foreign exchange rates – Fluctuations in the Canadian dollar relative to the US dollar, which impact the realized price the Company receives 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. |
▪ | Gains on acquisition, disposition and revaluation of properties and gains/losses on investments – Fluctuations due to the recognition of 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 on the Company's interest in the Redwater Partnership. |
▪ | Income tax expense – Fluctuations due to statutory tax rate and other legislative changes substantively enacted in the various periods. |
Canadian Natural Resources Limited | 7 | Three Months Ended March 31, 2020 |
Canadian Natural Resources Limited | 8 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||
(Average for the period) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
WTI benchmark price (US$/bbl) | $ | 46.08 | $ | 56.96 | $ | 54.90 | ||||||
Dated Brent benchmark price (US$/bbl) | $ | 50.42 | $ | 62.64 | $ | 63.34 | ||||||
WCS Heavy Differential from WTI (US$/bbl) | $ | 20.47 | $ | 15.84 | $ | 12.38 | ||||||
SCO price (US$/bbl) | $ | 43.39 | $ | 56.32 | $ | 52.19 | ||||||
Condensate benchmark price (US$/bbl) | $ | 45.54 | $ | 52.99 | $ | 50.49 | ||||||
Condensate Differential from WTI (US$/bbl) | $ | 0.54 | $ | 3.97 | $ | 4.40 | ||||||
NYMEX benchmark price (US$/MMBtu) | $ | 1.95 | $ | 2.50 | $ | 3.16 | ||||||
AECO benchmark price (C$/GJ) | $ | 2.03 | $ | 2.21 | $ | 1.84 | ||||||
US/Canadian dollar average exchange rate (US$) | $ | 0.7434 | $ | 0.7576 | $ | 0.7522 |
Canadian Natural Resources Limited | 9 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||
Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||
Crude oil and NGLs (bbl/d) | ||||||
North America – Exploration and Production | 456,877 | 506,571 | 319,437 | |||
North America – Oil Sands Mining and Upgrading (1) | 438,101 | 357,856 | 416,206 | |||
North Sea | 27,755 | 30,860 | 25,714 | |||
Offshore Africa | 15,943 | 18,495 | 22,155 | |||
938,676 | 913,782 | 783,512 | ||||
Natural gas (MMcf/d) | ||||||
North America | 1,407 | 1,411 | 1,454 | |||
North Sea | 23 | 25 | 28 | |||
Offshore Africa | 10 | 19 | 28 | |||
1,440 | 1,455 | 1,510 | ||||
Total barrels of oil equivalent (BOE/d) | 1,178,752 | 1,156,276 | 1,035,212 | |||
Product mix | ||||||
Light and medium crude oil and NGLs | 11% | 12% | 14% | |||
Pelican Lake heavy crude oil | 5% | 5% | 6% | |||
Primary heavy crude oil | 7% | 8% | 7% | |||
Bitumen (thermal oil) | 20% | 23% | 9% | |||
Synthetic crude oil (1) | 37% | 31% | 40% | |||
Natural gas | 20% | 21% | 24% | |||
Percentage of gross revenue (1) (2) | ||||||
(excluding Midstream and Refining revenue) | ||||||
Crude oil and NGLs | 92% | 94% | 91% | |||
Natural gas | 8% | 6% | 9% |
(1) | SCO production before royalties excludes SCO consumed internally as diesel. |
(2) | Net of blending costs and excluding risk management activities. |
Canadian Natural Resources Limited | 10 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||
Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||
Crude oil and NGLs (bbl/d) | ||||||
North America – Exploration and Production | 414,460 | 438,894 | 281,233 | |||
North America – Oil Sands Mining and Upgrading | 432,936 | 340,262 | 397,639 | |||
North Sea | 27,693 | 30,815 | 25,675 | |||
Offshore Africa | 15,296 | 17,294 | 20,260 | |||
890,385 | 827,265 | 724,807 | ||||
Natural gas (MMcf/d) | ||||||
North America | 1,374 | 1,351 | 1,399 | |||
North Sea | 23 | 25 | 28 | |||
Offshore Africa | 10 | 18 | 25 | |||
1,407 | 1,394 | 1,452 | ||||
Total barrels of oil equivalent (BOE/d) | 1,124,839 | 1,059,562 | 966,758 |
Canadian Natural Resources Limited | 11 | Three Months Ended March 31, 2020 |
(bbl) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||
North Sea | — | 344,726 | 851,919 | |||
Offshore Africa | 532,347 | 519,504 | 1,055,383 | |||
532,347 | 864,230 | 1,907,302 |
Canadian Natural Resources Limited | 12 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||
Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||||||||
Crude oil and NGLs ($/bbl) (1) | ||||||||||||
Sales price (2) | $ | 25.90 | $ | 49.60 | $ | 53.98 | ||||||
Transportation | 3.87 | 3.53 | 3.26 | |||||||||
Realized sales price, net of transportation | 22.03 | 46.07 | 50.72 | |||||||||
Royalties | 2.34 | 6.03 | 5.95 | |||||||||
Production expense | 13.71 | 12.46 | 16.04 | |||||||||
Netback | $ | 5.98 | $ | 27.58 | $ | 28.73 | ||||||
Natural gas ($/Mcf) (1) | ||||||||||||
Sales price (2) | $ | 2.22 | $ | 2.64 | $ | 3.09 | ||||||
Transportation | 0.46 | 0.43 | 0.46 | |||||||||
Realized sales price, net of transportation | 1.76 | 2.21 | 2.63 | |||||||||
Royalties | 0.05 | 0.11 | 0.12 | |||||||||
Production expense | 1.31 | 1.17 | 1.33 | |||||||||
Netback | $ | 0.40 | $ | 0.93 | $ | 1.18 | ||||||
Barrels of oil equivalent ($/BOE) (1) | ||||||||||||
Sales price (2) | $ | 21.90 | $ | 39.20 | $ | 39.27 | ||||||
Transportation | 3.50 | 3.24 | 3.06 | |||||||||
Realized sales price, net of transportation | 18.40 | 35.96 | 36.21 | |||||||||
Royalties | 1.70 | 4.37 | 3.78 | |||||||||
Production expense | 11.87 | 10.79 | 12.68 | |||||||||
Netback | $ | 4.83 | $ | 20.80 | $ | 19.75 |
(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 | 13 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||
Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||||||||
Crude oil and NGLs ($/bbl) (1) (2) | ||||||||||||
North America | $ | 23.48 | $ | 46.06 | $ | 50.92 | ||||||
North Sea | $ | 45.85 | $ | 87.76 | $ | 87.61 | ||||||
Offshore Africa | $ | 58.16 | $ | 70.73 | $ | 81.00 | ||||||
Average | $ | 25.90 | $ | 49.60 | $ | 53.98 | ||||||
Natural gas ($/Mcf) (1) (2) | ||||||||||||
North America | $ | 2.15 | $ | 2.52 | $ | 2.88 | ||||||
North Sea | $ | 3.75 | $ | 5.10 | $ | 10.05 | ||||||
Offshore Africa | $ | 8.94 | $ | 8.58 | $ | 7.34 | ||||||
Average | $ | 2.22 | $ | 2.64 | $ | 3.09 | ||||||
Average ($/BOE) (1) (2) | $ | 21.90 | $ | 39.20 | $ | 39.27 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
(2) | Net of blending costs and excluding risk management activities. |
Three Months Ended | ||||||||||||
(Quarterly average) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Wellhead Price (1) (2) | ||||||||||||
Light and medium crude oil and NGLs ($/bbl) | $ | 38.15 | $ | 47.32 | $ | 49.13 | ||||||
Pelican Lake heavy crude oil ($/bbl) | $ | 27.75 | $ | 51.66 | $ | 56.28 | ||||||
Primary heavy crude oil ($/bbl) | $ | 25.01 | $ | 49.72 | $ | 52.27 | ||||||
Bitumen (thermal oil) ($/bbl) | $ | 16.53 | $ | 42.93 | $ | 48.27 | ||||||
Natural gas ($/Mcf) | $ | 2.15 | $ | 2.52 | $ | 2.88 |
(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 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||
Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||||||||
Crude oil and NGLs ($/bbl) (1) | ||||||||||||
North America | $ | 2.49 | $ | 6.52 | $ | 6.22 | ||||||
North Sea | $ | 0.10 | $ | 0.13 | $ | 0.13 | ||||||
Offshore Africa | $ | 2.36 | $ | 4.60 | $ | 6.93 | ||||||
Average | $ | 2.34 | $ | 6.03 | $ | 5.95 | ||||||
Natural gas ($/Mcf) (1) | ||||||||||||
North America | $ | 0.05 | $ | 0.11 | $ | 0.11 | ||||||
Offshore Africa | $ | 0.51 | $ | 0.39 | $ | 0.85 | ||||||
Average | $ | 0.05 | $ | 0.11 | $ | 0.12 | ||||||
Average ($/BOE) (1) | $ | 1.70 | $ | 4.37 | $ | 3.78 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Canadian Natural Resources Limited | 15 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||
Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||||||||
Crude oil and NGLs ($/bbl) (1) | ||||||||||||
North America | $ | 12.69 | $ | 10.74 | $ | 15.07 | ||||||
North Sea | $ | 29.73 | $ | 33.67 | $ | 39.68 | ||||||
Offshore Africa | $ | 11.88 | $ | 16.75 | $ | 9.79 | ||||||
Average | $ | 13.71 | $ | 12.46 | $ | 16.04 | ||||||
Natural gas ($/Mcf) (1) | ||||||||||||
North America | $ | 1.24 | $ | 1.11 | $ | 1.30 | ||||||
North Sea | $ | 3.45 | $ | 3.25 | $ | 2.41 | ||||||
Offshore Africa | $ | 5.56 | $ | 3.19 | $ | 2.12 | ||||||
Average | $ | 1.31 | $ | 1.17 | $ | 1.33 | ||||||
Average ($/BOE) (1) | $ | 11.87 | $ | 10.79 | $ | 12.68 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Canadian Natural Resources Limited | 16 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||
($ millions, except per BOE amounts) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Expense | $ | 1,095 | $ | 1,083 | $ | 843 | ||||||
$/BOE (1) | $ | 15.75 | $ | 14.98 | $ | 15.54 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Three Months Ended | ||||||||||||
($ millions, except per BOE amounts) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Expense | $ | 35 | $ | 36 | $ | 28 | ||||||
$/BOE (1) | $ | 0.50 | $ | 0.49 | $ | 0.54 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Canadian Natural Resources Limited | 17 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||
($/bbl) (1) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
SCO realized sales price (2) | $ | 50.88 | $ | 68.67 | $ | 65.86 | ||||||
Bitumen value for royalty purposes (3) | $ | 16.82 | $ | 44.88 | $ | 48.16 | ||||||
Bitumen royalties (4) | $ | 0.87 | $ | 3.47 | $ | 2.31 | ||||||
Transportation | $ | 1.28 | $ | 1.33 | $ | 1.17 |
(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. |
Three Months Ended | ||||||||||||
($ millions) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Production costs | $ | 809 | $ | 856 | $ | 822 | ||||||
Less: costs incurred during turnaround periods | — | (71 | ) | — | ||||||||
Adjusted production costs | $ | 809 | $ | 785 | $ | 822 | ||||||
Adjusted production costs, excluding natural gas costs | $ | 773 | $ | 743 | $ | 779 | ||||||
Natural gas costs | 36 | 42 | 43 | |||||||||
Adjusted production costs | $ | 809 | $ | 785 | $ | 822 |
Three Months Ended | ||||||||||||
($/bbl) (1) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Adjusted production costs, excluding natural gas costs | $ | 19.83 | $ | 21.79 | $ | 20.33 | ||||||
Natural gas costs | 0.93 | 1.23 | 1.13 | |||||||||
Adjusted production costs | $ | 20.76 | $ | 23.02 | $ | 21.46 | ||||||
Sales (bbl/d) | 428,515 | 370,468 | 425,790 |
(1) | Amounts expressed on a per unit basis are based on sales volumes excluding turnaround periods. |
Canadian Natural Resources Limited | 18 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||
($ millions, except per bbl amounts) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Expense | $ | 440 | $ | 464 | $ | 417 | ||||||
Less: depreciation incurred during turnaround periods | — | (46 | ) | — | ||||||||
Adjusted depletion, depreciation and amortization | $ | 440 | $ | 418 | $ | 417 | ||||||
$/bbl (1) | $ | 11.28 | $ | 12.25 | $ | 10.88 |
(1) | Amounts expressed on a per unit basis are based on sales volumes excluding turnaround periods. |
Three Months Ended | ||||||||||||
($ millions, except per bbl amounts) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Expense | $ | 17 | $ | 14 | $ | 16 | ||||||
$/bbl (1) | $ | 0.44 | $ | 0.44 | $ | 0.41 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Canadian Natural Resources Limited | 19 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||
($ millions) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Revenue | $ | 21 | $ | 26 | $ | 21 | ||||||
Less: | ||||||||||||
Production expense | 6 | 5 | 6 | |||||||||
Depreciation | 4 | 3 | 3 | |||||||||
Equity loss from investment | — | 73 | 60 | |||||||||
Segment earnings (loss) before taxes | $ | 11 | $ | (55 | ) | $ | (48 | ) |
Canadian Natural Resources Limited | 20 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||
($ millions, except per BOE amounts) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Expense | $ | 108 | $ | 95 | $ | 70 | ||||||
$/BOE (1) | $ | 1.00 | $ | 0.90 | $ | 0.76 |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Three Months Ended | ||||||||||||
($ millions) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
(Recovery) expense | $ | (223 | ) | $ | 161 | $ | 62 |
Three Months Ended | ||||||||||||
($ millions, except per BOE amounts and interest rates) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Expense, gross | $ | 214 | $ | 225 | $ | 211 | ||||||
Less: capitalized interest | 8 | 8 | 20 | |||||||||
Expense, net | $ | 206 | $ | 217 | $ | 191 | ||||||
$/BOE (1) | $ | 1.90 | $ | 2.04 | $ | 2.06 | ||||||
Average effective interest rate | 3.9% | 3.9% | 4.1% |
(1) | Amounts expressed on a per unit basis are based on sales volumes. |
Canadian Natural Resources Limited | 21 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||
($ millions) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Foreign currency contracts | $ | (57 | ) | $ | 5 | $ | — | |||||
Natural gas financial instruments | 10 | 6 | (1 | ) | ||||||||
Crude oil and NGLs financial instruments | — | — | 28 | |||||||||
Realized (gain) loss | (47 | ) | 11 | 27 | ||||||||
Foreign currency contracts | (9 | ) | 10 | 9 | ||||||||
Natural gas financial instruments | (8 | ) | 7 | — | ||||||||
Crude oil and NGLs financial instruments | — | — | 5 | |||||||||
Unrealized (gain) loss | (17 | ) | 17 | 14 | ||||||||
Net (gain) loss | $ | (64 | ) | $ | 28 | $ | 41 |
Three Months Ended | ||||||||||||
($ millions) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Net realized gain | $ | (199 | ) | $ | (4 | ) | $ | (6 | ) | |||
Net unrealized loss (gain) | 1,121 | (225 | ) | (233 | ) | |||||||
Net loss (gain) (1) | $ | 922 | $ | (229 | ) | $ | (239 | ) |
(1) | Amounts are reported net of the hedging effect of cross currency swaps. |
Canadian Natural Resources Limited | 22 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||
($ millions, except income tax rates) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
North America (1) | $ | (194 | ) | $ | (20 | ) | $ | 163 | ||||
North Sea | 9 | 40 | 29 | |||||||||
Offshore Africa | 4 | 7 | 12 | |||||||||
PRT (2) – North Sea | — | — | (42 | ) | ||||||||
Other taxes | 2 | 4 | 3 | |||||||||
Current income tax (recovery) expense | (179 | ) | 31 | 165 | ||||||||
Deferred income tax expense | 20 | 194 | 94 | |||||||||
$ | (159 | ) | $ | 225 | $ | 259 | ||||||
Effective income tax rate on adjusted net earnings (loss) from operations (3) | 36 | % | 26 | % | 26 | % |
(1) | Includes North America Exploration and Production, Midstream and Refining, and Oil Sands Mining and Upgrading segments. |
(2) | Petroleum Revenue Tax. |
(3) | Excludes the impact of current and deferred PRT and other current income tax. |
Canadian Natural Resources Limited | 23 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||
($ millions) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Exploration and Evaluation | ||||||||||||
Net property (dispositions) acquisitions | $ | (18 | ) | $ | — | $ | 1 | |||||
Net expenditures | 25 | — | 32 | |||||||||
Total Exploration and Evaluation | 7 | — | 33 | |||||||||
Property, Plant and Equipment | ||||||||||||
Net property acquisitions | 13 | 20 | 24 | |||||||||
Well drilling, completion and equipping | 202 | 169 | 254 | |||||||||
Production and related facilities | 214 | 238 | 287 | |||||||||
Capitalized interest and other | 12 | 15 | 29 | |||||||||
Net expenditures | 441 | 442 | 594 | |||||||||
Total Exploration and Production | 448 | 442 | 627 | |||||||||
Oil Sands Mining and Upgrading | ||||||||||||
Project costs | 56 | 121 | 76 | |||||||||
Sustaining capital | 201 | 334 | 140 | |||||||||
Turnaround costs | 23 | 57 | 8 | |||||||||
Capitalized interest and other | 9 | 9 | 10 | |||||||||
Total Oil Sands Mining and Upgrading | 289 | 521 | 234 | |||||||||
Midstream and Refining | 1 | 1 | 2 | |||||||||
Abandonments (2) | 89 | 84 | 108 | |||||||||
Head office | 11 | 8 | 6 | |||||||||
Total net capital expenditures | $ | 838 | $ | 1,056 | $ | 977 | ||||||
By segment | ||||||||||||
North America | $ | 395 | $ | 330 | $ | 524 | ||||||
North Sea | 26 | 63 | 36 | |||||||||
Offshore Africa | 27 | 49 | 67 | |||||||||
Oil Sands Mining and Upgrading | 289 | 521 | 234 | |||||||||
Midstream and Refining | 1 | 1 | 2 | |||||||||
Abandonments (2) | 89 | 84 | 108 | |||||||||
Head office | 11 | 8 | 6 | |||||||||
Total | $ | 838 | $ | 1,056 | $ | 977 |
(1) | Net capital expenditures exclude the impact of lease assets and fair value and revaluation adjustments, and include non-cash transfers of property, plant and equipment to inventory due to change in use. |
(2) | Abandonments represent expenditures to settle asset retirement obligations and have been reflected as capital expenditures in this table. |
Canadian Natural Resources Limited | 24 | Three Months Ended March 31, 2020 |
Net Capital Expenditures, as Reconciled to Cash Flows used in Investing Activities | ||||||||||||
Three Months Ended | ||||||||||||
($ millions) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Cash flows used in investing activities | $ | 859 | $ | 854 | $ | 1,029 | ||||||
Net change in non-cash working capital | (110 | ) | 118 | (160 | ) | |||||||
Abandonment expenditures (1) | 89 | 84 | 108 | |||||||||
Net capital expenditures | $ | 838 | $ | 1,056 | $ | 977 |
(1) | The Company excludes abandonment expenditures from “Adjusted Funds Flow, as Reconciled to Cash Flows from Operating Activities” in the "Financial Highlights" section of this MD&A. |
Three Months Ended | |||||||||
(number of wells) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | ||||||
Net successful natural gas wells | 11 | 4 | 8 | ||||||
Net successful crude oil wells (2) | 35 | 12 | 30 | ||||||
Dry wells | — | — | 1 | ||||||
Stratigraphic test / service wells | 367 | 89 | 332 | ||||||
Total | 413 | 105 | 371 | ||||||
Success rate (excluding stratigraphic test / service wells) | 100% | 100% | 97% |
(1) | Includes drilling activity for North America and International segments. |
(2) | Includes bitumen wells. |
Canadian Natural Resources Limited | 25 | Three Months Ended March 31, 2020 |
($ millions, except ratios) | Mar 31 2020 | Dec 31 2019 | Mar 31 2019 | |||||||||
Working capital (1) | $ | 683 | $ | 241 | $ | 319 | ||||||
Long-term debt (2) (3) | $ | 22,687 | $ | 20,982 | $ | 20,990 | ||||||
Less: cash and cash equivalents | 1,071 | 139 | 90 | |||||||||
Long-term debt, net | $ | 21,616 | $ | 20,843 | $ | 20,900 | ||||||
Share capital | $ | 9,517 | $ | 9,533 | $ | 9,358 | ||||||
Retained earnings | 23,425 | 25,424 | 22,852 | |||||||||
Accumulated other comprehensive income | 320 | 34 | 58 | |||||||||
Shareholders’ equity | $ | 33,262 | $ | 34,991 | $ | 32,268 | ||||||
Debt to book capitalization (3) (4) | 39.4% | 37.3% | 39.3% | |||||||||
Debt to market capitalization (3) (5) | 48.7% | 29.5% | 32.2% | |||||||||
After-tax return on average common shareholders’ equity (6) | 9.4% | 16.1% | 9.2% | |||||||||
After-tax return on average capital employed (3) (7) | 6.8% | 10.9% | 6.6% |
(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 (loss) for the twelve month trailing period; as a percentage of average common shareholders’ equity for the twelve month trailing period. |
(7) | Calculated as net earnings (loss) plus after-tax interest and other financing expense for the twelve month trailing period; as a percentage of average capital employed for the twelve month trailing period. |
▪ | Monitoring cash flows from operating activities, which is the primary source of funds; |
▪ | 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; |
▪ | 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; |
▪ | Monitoring the Company's ability to fulfill financial obligations as they become due or ability to monetize assets in a timely manner at a reasonable price; |
Canadian Natural Resources Limited | 26 | Three Months Ended March 31, 2020 |
▪ | Reviewing the Company's borrowing capacity: |
◦ | Borrowings under the non-revolving term credit 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. As at March 31, 2020, the non-revolving term credit facilities were fully drawn. |
◦ | Subsequent to March 31, 2020, the $750 million non-revolving term credit facility, originally due February 2021, was extended to February 2022 and increased to $1,000 million. |
◦ | Each of the $2,425 million revolving syndicated credit 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 the Company's revolving term credit 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. |
◦ | 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 revolving bank credit facilities for amounts outstanding under this program. |
◦ | In July 2019, the Company filed new 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, expiring in August 2021. 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. |
Canadian Natural Resources Limited | 27 | Three Months Ended March 31, 2020 |
Less than 1 year | 1 to less than 2 years | 2 to less than 5 years | Thereafter | ||||||||||||
Long-term debt (1) | $ | 2,803 | $ | 1,869 | $ | 10,087 | $ | 8,031 | |||||||
Other long-term liabilities (2) | $ | 250 | $ | 188 | $ | 412 | $ | 971 | |||||||
Interest and other financing expense (3) | $ | 900 | $ | 829 | $ | 1,849 | $ | 5,071 |
(1) | Long-term debt represents principal repayments only and does not reflect interest, original issue discounts and premiums or transaction costs. |
(2) | Lease payments included within other long-term liabilities reflect principal payments only and are as follows: less than one year, $221 million; one to less than two years, $163 million; two to less than five years, $391 million; and thereafter, $971 million. |
(3) | Includes interest and other financing expense on long-term debt and other long-term liabilities. Payments were estimated based upon applicable interest and foreign exchange rates as at March 31, 2020. |
Remaining 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | ||||||||||||||||||
Product transportation (1) | $ | 563 | $ | 733 | $ | 641 | $ | 728 | $ | 701 | $ | 7,911 | |||||||||||
North West Redwater Partnership service toll (2) | $ | 113 | $ | 168 | $ | 162 | $ | 160 | $ | 154 | $ | 2,828 | |||||||||||
Offshore vessels and equipment | $ | 57 | $ | 70 | $ | 10 | $ | — | $ | — | $ | — | |||||||||||
Field equipment and power | $ | 24 | $ | 21 | $ | 20 | $ | 21 | $ | 20 | $ | 249 | |||||||||||
Other | $ | 19 | $ | 20 | $ | 17 | $ | 17 | $ | 17 | $ | 29 |
(1) | Includes commitments pertaining to a 20 year transportation agreement on the Trans Mountain Pipeline Expansion. In addition, the Company has entered into certain product transportation agreements on pipelines that have not yet received regulatory and other approvals. The Company may be required to reimburse certain construction costs to the service provider under certain conditions. |
(2) | Pursuant to 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 tolls, currently consisting of interest and fees, with principal repayments beginning in 2020. Included in the cost of service tolls is $1,222 million of interest payable over the 30 year tolling period. |
Canadian Natural Resources Limited | 28 | Three Months Ended March 31, 2020 |
Canadian Natural Resources Limited | 29 | Three Months Ended March 31, 2020 |
As at | Note | Mar 31 2020 | Dec 31 2019 | ||||||
(millions of Canadian dollars, unaudited) | |||||||||
ASSETS | |||||||||
Current assets | |||||||||
Cash and cash equivalents | $ | 1,071 | $ | 139 | |||||
Accounts receivable | 1,281 | 2,465 | |||||||
Current income taxes receivable | 243 | 13 | |||||||
Inventory | 4 | 940 | 1,152 | ||||||
Prepaids and other | 201 | 174 | |||||||
Investments | 8 | 222 | 490 | ||||||
Current portion of other long-term assets | 9 | 226 | 54 | ||||||
4,184 | 4,487 | ||||||||
Exploration and evaluation assets | 5 | 2,572 | 2,579 | ||||||
Property, plant and equipment | 6 | 66,341 | 68,043 | ||||||
Lease assets | 7 | 1,717 | 1,789 | ||||||
Other long-term assets | 9 | 1,265 | 1,223 | ||||||
$ | 76,079 | $ | 78,121 | ||||||
LIABILITIES | |||||||||
Current liabilities | |||||||||
Accounts payable | $ | 802 | $ | 816 | |||||
Accrued liabilities | 2,214 | 2,611 | |||||||
Current portion of long-term debt | 10 | 2,803 | 2,391 | ||||||
Current portion of other long-term liabilities | 7,11 | 485 | 819 | ||||||
6,304 | 6,637 | ||||||||
Long-term debt | 10 | 19,884 | 18,591 | ||||||
Other long-term liabilities | 7,11 | 6,024 | 7,363 | ||||||
Deferred income taxes | 10,605 | 10,539 | |||||||
42,817 | 43,130 | ||||||||
SHAREHOLDERS’ EQUITY | |||||||||
Share capital | 13 | 9,517 | 9,533 | ||||||
Retained earnings | 23,425 | 25,424 | |||||||
Accumulated other comprehensive income | 14 | 320 | 34 | ||||||
33,262 | 34,991 | ||||||||
$ | 76,079 | $ | 78,121 |
Canadian Natural Resources Limited | 1 | Three Months Ended March 31, 2020 |
Three Months Ended | |||||||||
(millions of Canadian dollars, except per common share amounts, unaudited) | Note | Mar 31 2020 | Mar 31 2019 | ||||||
Product sales | 19 | $ | 4,652 | $ | 5,541 | ||||
Less: royalties | (152 | ) | (293 | ) | |||||
Revenue | 4,500 | 5,248 | |||||||
Expenses | |||||||||
Production | 1,684 | 1,530 | |||||||
Transportation, blending and feedstock | 1,432 | 1,039 | |||||||
Depletion, depreciation and amortization | 6,7 | 1,564 | 1,263 | ||||||
Administration | 108 | 70 | |||||||
Share-based compensation | 11 | (223 | ) | 62 | |||||
Asset retirement obligation accretion | 11 | 52 | 44 | ||||||
Interest and other financing expense | 206 | 191 | |||||||
Risk management activities | 17 | (64 | ) | 41 | |||||
Foreign exchange loss (gain) | 922 | (239 | ) | ||||||
Loss from investments | 8,9 | 260 | 27 | ||||||
5,941 | 4,028 | ||||||||
Earnings (loss) before taxes | (1,441 | ) | 1,220 | ||||||
Current income tax (recovery) expense | 12 | (179 | ) | 165 | |||||
Deferred income tax expense | 12 | 20 | 94 | ||||||
Net earnings (loss) | $ | (1,282 | ) | $ | 961 | ||||
Net earnings (loss) per common share | |||||||||
Basic | 16 | $ | (1.08 | ) | $ | 0.80 | |||
Diluted | 16 | $ | (1.08 | ) | $ | 0.80 |
Three Months Ended | ||||||||
(millions of Canadian dollars, unaudited) | Mar 31 2020 | Mar 31 2019 | ||||||
Net earnings (loss) | $ | (1,282 | ) | $ | 961 | |||
Items that may be reclassified subsequently to net earnings (loss) | ||||||||
Net change in derivative financial instruments designated as cash flow hedges | ||||||||
Unrealized income during the period, net of taxes of $5 million (2019 – $5 million) | 39 | 29 | ||||||
Reclassification to net earnings (loss), net of taxes of $1 million (2019 – $5 million) | (7 | ) | (33 | ) | ||||
32 | (4 | ) | ||||||
Foreign currency translation adjustment | ||||||||
Translation of net investment | 254 | (60 | ) | |||||
Other comprehensive income (loss), net of taxes | 286 | (64 | ) | |||||
Comprehensive income (loss) | $ | (996 | ) | $ | 897 |
Canadian Natural Resources Limited | 2 | Three Months Ended March 31, 2020 |
Three Months Ended | |||||||||
(millions of Canadian dollars, unaudited) | Note | Mar 31 2020 | Mar 31 2019 | ||||||
Share capital | 13 | ||||||||
Balance – beginning of period | $ | 9,533 | $ | 9,323 | |||||
Issued upon exercise of stock options | 31 | 83 | |||||||
Previously recognized liability on stock options exercised for common shares | 9 | 4 | |||||||
Purchase of common shares under Normal Course Issuer Bid | (56 | ) | (52 | ) | |||||
Balance – end of period | 9,517 | 9,358 | |||||||
Retained earnings | |||||||||
Balance – beginning of period | 25,424 | 22,529 | |||||||
Net earnings (loss) | (1,282 | ) | 961 | ||||||
Dividends on common shares | 13 | (502 | ) | (449 | ) | ||||
Purchase of common shares under Normal Course Issuer Bid | 13 | (215 | ) | (189 | ) | ||||
Balance – end of period | 23,425 | 22,852 | |||||||
Accumulated other comprehensive income | 14 | ||||||||
Balance – beginning of period | 34 | 122 | |||||||
Other comprehensive income (loss), net of taxes | 286 | (64 | ) | ||||||
Balance – end of period | 320 | 58 | |||||||
Shareholders’ equity | $ | 33,262 | $ | 32,268 |
Canadian Natural Resources Limited | 3 | Three Months Ended March 31, 2020 |
Three Months Ended | |||||||||
(millions of Canadian dollars, unaudited) | Note | Mar 31 2020 | Mar 31 2019 | ||||||
Operating activities | |||||||||
Net earnings (loss) | $ | (1,282 | ) | $ | 961 | ||||
Non-cash items | |||||||||
Depletion, depreciation and amortization | 1,564 | 1,263 | |||||||
Share-based compensation | (223 | ) | 62 | ||||||
Asset retirement obligation accretion | 52 | 44 | |||||||
Unrealized risk management (gain) loss | (17 | ) | 14 | ||||||
Unrealized foreign exchange loss (gain) | 1,121 | (233 | ) | ||||||
Realized foreign exchange gain on settlement of cross currency swaps | (166 | ) | — | ||||||
Loss from investments | 8,9 | 268 | 35 | ||||||
Deferred income tax expense | 20 | 94 | |||||||
Other | (118 | ) | (120 | ) | |||||
Abandonment expenditures | (89 | ) | (108 | ) | |||||
Net change in non-cash working capital | 595 | (1,016 | ) | ||||||
Cash flows from operating activities | 1,725 | 996 | |||||||
Financing activities | |||||||||
Issue of bank credit facilities and commercial paper, net | 10 | 649 | 635 | ||||||
Proceeds on settlement of cross currency swaps | 17 | 166 | — | ||||||
Payment of lease liabilities | 7,11 | (65 | ) | (52 | ) | ||||
Issue of common shares on exercise of stock options | 31 | 83 | |||||||
Dividends on common shares | (444 | ) | (403 | ) | |||||
Purchase of common shares under Normal Course Issuer Bid | 13 | (271 | ) | (241 | ) | ||||
Cash flows from financing activities | 66 | 22 | |||||||
Investing activities | |||||||||
Net expenditures on exploration and evaluation assets | (7 | ) | (33 | ) | |||||
Net expenditures on property, plant and equipment | (742 | ) | (836 | ) | |||||
Net change in non-cash working capital | (110 | ) | (160 | ) | |||||
Cash flows used in investing activities | (859 | ) | (1,029 | ) | |||||
Increase (decrease) in cash and cash equivalents | 932 | (11 | ) | ||||||
Cash and cash equivalents – beginning of period | 139 | 101 | |||||||
Cash and cash equivalents – end of period | $ | 1,071 | $ | 90 | |||||
Interest paid on long-term debt, net | $ | 213 | $ | 228 | |||||
Income taxes paid | $ | 41 | $ | 226 |
Canadian Natural Resources Limited | 4 | Three Months Ended March 31, 2020 |
Canadian Natural Resources Limited | 5 | Three Months Ended March 31, 2020 |
Mar 31 2020 | Dec 31 2019 | |||||||
Product inventory | $ | 257 | $ | 468 | ||||
Materials and supplies | 683 | 684 | ||||||
$ | 940 | $ | 1,152 |
Exploration and Production | Oil Sands Mining and Upgrading | Total | |||||||||||||
North America | North Sea | Offshore Africa | |||||||||||||
Cost | |||||||||||||||
At December 31, 2019 | $ | 2,258 | $ | — | $ | 69 | $ | 252 | $ | 2,579 | |||||
Additions | 24 | — | 1 | — | 25 | ||||||||||
Transfers to property, plant and equipment | (32 | ) | — | — | — | (32 | ) | ||||||||
Disposals/derecognitions | (3 | ) | — | — | — | (3 | ) | ||||||||
Foreign exchange adjustments | — | — | 3 | — | 3 | ||||||||||
At March 31, 2020 | $ | 2,247 | $ | — | $ | 73 | $ | 252 | $ | 2,572 |
Canadian Natural Resources Limited | 6 | Three Months Ended March 31, 2020 |
Exploration and Production | Oil Sands Mining and Upgrading | Midstream and Refining | Head Office | Total | |||||||||||||||||||||||
North America | North Sea | Offshore Africa | |||||||||||||||||||||||||
Cost | |||||||||||||||||||||||||||
At December 31, 2019 | $ | 72,627 | $ | 7,296 | $ | 3,933 | $ | 45,016 | $ | 451 | $ | 466 | $ | 129,789 | |||||||||||||
Additions | 384 | 26 | 26 | 289 | 2 | 11 | 738 | ||||||||||||||||||||
Transfers from E&E assets | 32 | — | — | — | — | — | 32 | ||||||||||||||||||||
Change in asset retirement obligation estimates | (794 | ) | (114 | ) | (29 | ) | (332 | ) | (1 | ) | — | (1,270 | ) | ||||||||||||||
Disposals/derecognitions | (152 | ) | — | — | (127 | ) | — | — | (279 | ) | |||||||||||||||||
Foreign exchange adjustments and other | — | 654 | 352 | — | — | — | 1,006 | ||||||||||||||||||||
At March 31, 2020 | $ | 72,097 | $ | 7,862 | $ | 4,282 | $ | 44,846 | $ | 452 | $ | 477 | $ | 130,016 | |||||||||||||
Accumulated depletion and depreciation | |||||||||||||||||||||||||||
At December 31, 2019 | $ | 46,577 | $ | 5,712 | $ | 2,712 | $ | 6,247 | $ | 153 | $ | 345 | $ | 61,746 | |||||||||||||
Expense | 925 | 91 | 35 | 415 | 3 | 6 | 1,475 | ||||||||||||||||||||
Disposals/derecognitions | (152 | ) | — | — | (127 | ) | — | — | (279 | ) | |||||||||||||||||
Foreign exchange adjustments and other | (26 | ) | 503 | 244 | 12 | — | — | 733 | |||||||||||||||||||
At March 31, 2020 | $ | 47,324 | $ | 6,306 | $ | 2,991 | $ | 6,547 | $ | 156 | $ | 351 | $ | 63,675 | |||||||||||||
Net book value | |||||||||||||||||||||||||||
- at March 31, 2020 | $ | 24,773 | $ | 1,556 | $ | 1,291 | $ | 38,299 | $ | 296 | $ | 126 | $ | 66,341 | |||||||||||||
- at December 31, 2019 | $ | 26,050 | $ | 1,584 | $ | 1,221 | $ | 38,769 | $ | 298 | $ | 121 | $ | 68,043 |
Canadian Natural Resources Limited | 7 | Three Months Ended March 31, 2020 |
Product transportation and storage | Field equipment and power | Offshore vessels and equipment | Office leases and other | Total | |||||||||||||||
At December 31, 2019 | $ | 1,166 | $ | 317 | $ | 182 | $ | 124 | $ | 1,789 | |||||||||
Additions | 1 | 15 | — | — | 16 | ||||||||||||||
Depreciation | (30 | ) | (14 | ) | (20 | ) | (7 | ) | (71 | ) | |||||||||
Derecognitions | (21 | ) | (2 | ) | (11 | ) | — | (34 | ) | ||||||||||
Foreign exchange adjustments and other | (1 | ) | (1 | ) | 17 | 2 | 17 | ||||||||||||
At March 31, 2020 | $ | 1,115 | $ | 315 | $ | 168 | $ | 119 | $ | 1,717 |
Mar 31 2020 | Dec 31 2019 | |||||||
Lease liabilities | $ | 1,746 | $ | 1,809 | ||||
Less: current portion | 221 | 233 | ||||||
$ | 1,525 | $ | 1,576 |
Mar 31 2020 | Dec 31 2019 | |||||||
Investment in PrairieSky Royalty Ltd. | $ | 168 | $ | 345 | ||||
Investment in Inter Pipeline Ltd. | 54 | 145 | ||||||
$ | 222 | $ | 490 |
Three Months Ended | ||||||||
Mar 31 2020 | Mar 31 2019 | |||||||
Fair value loss (gain) from investments | $ | 268 | $ | (25 | ) | |||
Dividend income from investments | (8 | ) | (8 | ) | ||||
$ | 260 | $ | (33 | ) |
Canadian Natural Resources Limited | 8 | Three Months Ended March 31, 2020 |
Mar 31 2020 | Dec 31 2019 | |||||||
North West Redwater Partnership subordinated debt (1) | $ | 668 | $ | 652 | ||||
Prepaid cost of service toll | 148 | 130 | ||||||
Risk management (note 17) | 386 | 290 | ||||||
Long-term inventory | 124 | 121 | ||||||
Other | 165 | 84 | ||||||
1,491 | 1,277 | |||||||
Less: current portion | 226 | 54 | ||||||
$ | 1,265 | $ | 1,223 |
(1) | Includes accrued interest. |
Canadian Natural Resources Limited | 9 | Three Months Ended March 31, 2020 |
Mar 31 2020 | Dec 31 2019 | |||||||
Canadian dollar denominated debt, unsecured | ||||||||
Bank credit facilities | $ | 2,496 | $ | 1,688 | ||||
Medium-term notes | 4,300 | 4,300 | ||||||
6,796 | 5,988 | |||||||
US dollar denominated debt, unsecured | ||||||||
Bank credit facilities (March 31, 2020 – US$3,677 million; December 31, 2019 - US$3,745 million) | 5,192 | 4,855 | ||||||
Commercial paper (March 31, 2020 – US$nil; December 31, 2019 – US$254 million) | — | 329 | ||||||
US dollar debt securities (March 31, 2020 – US$7,650 million; December 31, 2019 – US$7,650 million) | 10,802 | 9,918 | ||||||
15,994 | 15,102 | |||||||
Long-term debt before transaction costs and original issue discounts, net | 22,790 | 21,090 | ||||||
Less: original issue discounts, net (1) | 17 | 17 | ||||||
transaction costs (1) (2) | 86 | 91 | ||||||
22,687 | 20,982 | |||||||
Less: current portion of commercial paper | — | 329 | ||||||
current portion of other long-term debt (1) (2) | 2,803 | 2,062 | ||||||
$ | 19,884 | $ | 18,591 |
(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 $750 million non-revolving term credit facility maturing February 2021; |
• | a $2,425 million revolving syndicated credit facility maturing June 2022; |
• | a $3,250 million non-revolving term credit facility maturing June 2022; |
• | a $2,650 million non-revolving term credit facility maturing February 2023; |
• | a $2,425 million revolving syndicated credit facility maturing June 2023; and |
• | a £5 million demand credit facility related to the Company’s North Sea operations. |
Canadian Natural Resources Limited | 10 | Three Months Ended March 31, 2020 |
Mar 31 2020 | Dec 31 2019 | |||||||
Asset retirement obligations | $ | 4,551 | $ | 5,771 | ||||
Lease liabilities (note 7) | 1,746 | 1,809 | ||||||
Deferred purchase consideration (1) | 71 | 95 | ||||||
Share-based compensation | 64 | 297 | ||||||
Risk management (note 17) | 4 | 112 | ||||||
Other | 73 | 98 | ||||||
6,509 | 8,182 | |||||||
Less: current portion | 485 | 819 | ||||||
$ | 6,024 | $ | 7,363 |
Mar 31 2020 | Dec 31 2019 | |||||||
Balance – beginning of period | $ | 5,771 | $ | 3,886 | ||||
Liabilities incurred | 1 | 15 | ||||||
Liabilities (disposed) acquired, net | (1 | ) | 198 | |||||
Liabilities settled | (89 | ) | (296 | ) | ||||
Asset retirement obligation accretion | 52 | 190 | ||||||
Change in discount rates | (1,270 | ) | 1,412 | |||||
Foreign exchange adjustments | 87 | (46 | ) | |||||
Revision of cost, inflation rates and timing estimates | — | 412 | ||||||
Balance – end of period | 4,551 | 5,771 | ||||||
Less: current portion | 181 | 208 | ||||||
$ | 4,370 | $ | 5,563 |
Canadian Natural Resources Limited | 11 | Three Months Ended March 31, 2020 |
Mar 31 2020 | Dec 31 2019 | |||||||
Balance – beginning of period | $ | 297 | $ | 124 | ||||
Share-based compensation (recovery) expense | (223 | ) | 223 | |||||
Cash payment for stock options surrendered | (2 | ) | (2 | ) | ||||
Transferred to common shares | (9 | ) | (53 | ) | ||||
Charged to Oil Sands Mining and Upgrading, net | 1 | 5 | ||||||
Balance – end of period | 64 | 297 | ||||||
Less: current portion | 40 | 227 | ||||||
$ | 24 | $ | 70 |
Three Months Ended | ||||||||
Expense (recovery) | Mar 31 2020 | Mar 31 2019 | ||||||
Current corporate income tax – North America | $ | (194 | ) | $ | 163 | |||
Current corporate income tax – North Sea | 9 | 29 | ||||||
Current corporate income tax – Offshore Africa | 4 | 12 | ||||||
Current PRT (1) – North Sea | — | (42 | ) | |||||
Other taxes | 2 | 3 | ||||||
Current income tax | (179 | ) | 165 | |||||
Deferred income tax | 20 | 94 | ||||||
Income tax | $ | (159 | ) | $ | 259 |
Canadian Natural Resources Limited | 12 | Three Months Ended March 31, 2020 |
Three Months Ended Mar 31, 2020 | |||||||
Issued common shares | Number of shares (thousands) | Amount | |||||
Balance – beginning of period | 1,186,857 | $ | 9,533 | ||||
Issued upon exercise of stock options | 967 | 31 | |||||
Previously recognized liability on stock options exercised for common shares | — | 9 | |||||
Purchase of common shares under Normal Course Issuer Bid | (6,970 | ) | (56 | ) | |||
Balance – end of period | 1,180,854 | $ | 9,517 |
Three Months Ended Mar 31, 2020 | |||||||
Stock options (thousands) | Weighted average exercise price | ||||||
Outstanding – beginning of period | 47,646 | $ | 38.04 | ||||
Granted | 11,082 | $ | 33.45 | ||||
Exercised for common shares | (967 | ) | $ | 32.50 | |||
Surrendered for cash settlement | (315 | ) | $ | 34.04 | |||
Forfeited | (1,244 | ) | $ | 37.23 | |||
Outstanding – end of period | 56,202 | $ | 37.26 | ||||
Exercisable – end of period | 17,054 | $ | 38.90 |
Canadian Natural Resources Limited | 13 | Three Months Ended March 31, 2020 |
Mar 31 2020 | Mar 31 2019 | |||||||
Derivative financial instruments designated as cash flow hedges | $ | 103 | $ | 9 | ||||
Foreign currency translation adjustment | 217 | 49 | ||||||
$ | 320 | $ | 58 |
Mar 31 2020 | Dec 31 2019 | |||||||
Long-term debt, net (1) | $ | 21,616 | $ | 20,843 | ||||
Total shareholders’ equity | $ | 33,262 | $ | 34,991 | ||||
Debt to book capitalization | 39.4% | 37.3% |
(1) | Includes the current portion of long-term debt, net of cash and cash equivalents. |
Three Months Ended | |||||||||
Mar 31 2020 | Mar 31 2019 | ||||||||
Weighted average common shares outstanding – basic (thousands of shares) | 1,183,138 | 1,200,948 | |||||||
Effect of dilutive stock options (thousands of shares) | — | 2,339 | |||||||
Weighted average common shares outstanding – diluted (thousands of shares) | 1,183,138 | 1,203,287 | |||||||
Net earnings (loss) | $ | (1,282 | ) | $ | 961 | ||||
Net earnings (loss) per common share | – basic | $ | (1.08 | ) | $ | 0.80 | |||
– diluted | $ | (1.08 | ) | $ | 0.80 |
Canadian Natural Resources Limited | 14 | Three Months Ended March 31, 2020 |
Mar 31, 2020 | ||||||||||||||||||||
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 | $ | 1,281 | $ | — | $ | — | $ | — | $ | 1,281 | ||||||||||
Investments | — | 222 | — | — | 222 | |||||||||||||||
Other long-term assets | 668 | — | 386 | — | 1,054 | |||||||||||||||
Accounts payable | — | — | — | (802 | ) | (802 | ) | |||||||||||||
Accrued liabilities | — | — | — | (2,214 | ) | (2,214 | ) | |||||||||||||
Other long-term liabilities (1) | — | (4 | ) | — | (1,817 | ) | (1,821 | ) | ||||||||||||
Long-term debt (2) | — | — | — | (22,687 | ) | (22,687 | ) | |||||||||||||
$ | 1,949 | $ | 218 | $ | 386 | $ | (27,520 | ) | $ | (24,967 | ) |
Dec 31, 2019 | ||||||||||||||||||||
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 | $ | 2,465 | $ | — | $ | — | $ | — | $ | 2,465 | ||||||||||
Investments | — | 490 | — | — | 490 | |||||||||||||||
Other long-term assets | 652 | — | 290 | — | 942 | |||||||||||||||
Accounts payable | — | — | — | (816 | ) | (816 | ) | |||||||||||||
Accrued liabilities | — | — | — | (2,611 | ) | (2,611 | ) | |||||||||||||
Other long-term liabilities (1) | — | (21 | ) | (91 | ) | (1,904 | ) | (2,016 | ) | |||||||||||
Long-term debt (2) | — | — | — | (20,982 | ) | (20,982 | ) | |||||||||||||
$ | 3,117 | $ | 469 | $ | 199 | $ | (26,313 | ) | $ | (22,528 | ) |
(1) | Includes $1,746 million of lease liabilities (December 31, 2019 – $1,809 million) and $71 million of deferred purchase consideration payable over the next three years (December 31, 2019 – $95 million). |
(2) | Includes the current portion of long-term debt. |
Mar 31, 2020 | |||||||||||||||||
Carrying amount | Fair value | ||||||||||||||||
Asset (liability) (1) (2) | Level 1 | Level 2 | Level 3 (4) (5) | ||||||||||||||
Investments (3) | $ | 222 | $ | 222 | $ | — | $ | — | |||||||||
Other long-term assets | $ | 1,054 | $ | — | $ | 386 | $ | 668 | |||||||||
Other long-term liabilities | $ | (75 | ) | $ | — | $ | (4 | ) | $ | (71 | ) | ||||||
Fixed rate long-term debt (6) (7) | $ | (14,999 | ) | $ | (12,686 | ) | $ | — | $ | — |
Canadian Natural Resources Limited | 15 | Three Months Ended March 31, 2020 |
Dec 31, 2019 | |||||||||||||||||
Carrying amount | Fair value | ||||||||||||||||
Asset (liability) (1) (2) | Level 1 | Level 2 | Level 3 (4) (5) | ||||||||||||||
Investments (3) | $ | 490 | $ | 490 | $ | — | $ | — | |||||||||
Other long-term assets | $ | 942 | $ | — | $ | 290 | $ | 652 | |||||||||
Other long-term liabilities | $ | (207 | ) | $ | — | $ | (112 | ) | $ | (95 | ) | ||||||
Fixed rate long-term debt (6) (7) | $ | (14,110 | ) | $ | (15,938 | ) | $ | — | $ | — |
(1) | Excludes financial assets and liabilities where the carrying amount approximates fair value due to the short-term nature of the asset or liability (cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities). |
(2) | There were no transfers between Level 1, 2 and 3 financial instruments. |
(3) | The fair values of the investments are based on quoted market prices. |
(4) | The fair value of the deferred purchase consideration included in other long-term liabilities is based on the present value of future cash payments. |
(5) | The fair value of Redwater Partnership subordinated debt is based on the present value of future cash receipts. |
(6) | The fair value of fixed rate long-term debt has been determined based on quoted market prices. |
(7) | Includes the current portion of fixed rate long-term debt. |
Asset (liability) | Mar 31 2020 | Dec 31 2019 | ||||||
Derivatives held for trading | ||||||||
Natural gas AECO fixed price swaps | $ | (3 | ) | $ | (3 | ) | ||
Foreign currency forward contracts | (1 | ) | (10 | ) | ||||
Natural gas AECO basis swaps | — | (8 | ) | |||||
Cash flow hedges | ||||||||
Foreign currency forward contracts | 135 | (91 | ) | |||||
Cross currency swaps | 251 | 290 | ||||||
$ | 382 | $ | 178 | |||||
Included within: | ||||||||
Current portion of other long-term assets | $ | 143 | $ | 8 | ||||
Current portion of other long-term liabilities | (4 | ) | (112 | ) | ||||
Other long-term assets | 243 | 282 | ||||||
$ | 382 | $ | 178 |
Canadian Natural Resources Limited | 16 | Three Months Ended March 31, 2020 |
Asset (liability) | Mar 31 2020 | Dec 31 2019 | ||||||
Balance – beginning of period | $ | 178 | $ | 356 | ||||
Net change in fair value of outstanding derivative financial instruments recognized in: | ||||||||
Risk management activities | 17 | (13 | ) | |||||
Foreign exchange | 151 | (231 | ) | |||||
Other comprehensive income | 36 | 66 | ||||||
Balance – end of period | 382 | 178 | ||||||
Less: current portion | 139 | (104 | ) | |||||
$ | 243 | $ | 282 |
Three Months Ended | ||||||||
Mar 31 2020 | Mar 31 2019 | |||||||
Net realized risk management (gain) loss | $ | (47 | ) | $ | 27 | |||
Net unrealized risk management (gain) loss | (17 | ) | 14 | |||||
$ | (64 | ) | $ | 41 |
Remaining term | Volume | Weighted average price | Index | |||||
Natural Gas | ||||||||
AECO fixed price swaps | Apr 2020 | – | Oct 2020 | 102,500 GJ/d | $1.51 | AECO |
Canadian Natural Resources Limited | 17 | Three Months Ended March 31, 2020 |
Remaining term | Amount | Exchange rate (US$/C$) | Interest rate (US$) | Interest rate (C$) | ||||||
Cross currency | ||||||||||
Swap | Apr 2020 | – | Mar 2038 | US$550 | 1.170 | 6.25 | % | 5.76 | % |
Canadian Natural Resources Limited | 18 | Three Months Ended March 31, 2020 |
Less than 1 year | 1 to less than 2 years | 2 to less than 5 years | Thereafter | ||||||||||||
Accounts payable | $ | 802 | $ | — | $ | — | $ | — | |||||||
Accrued liabilities | $ | 2,214 | $ | — | $ | — | $ | — | |||||||
Long-term debt (1) | $ | 2,803 | $ | 1,869 | $ | 10,087 | $ | 8,031 | |||||||
Other long-term liabilities (2) | $ | 250 | $ | 188 | $ | 412 | $ | 971 | |||||||
Interest and other financing expense (3) | $ | 900 | $ | 829 | $ | 1,849 | $ | 5,071 |
(1) | Long-term debt represents principal repayments only and does not reflect interest, original issue discounts and premiums or transaction costs. |
(2) | Lease payments included within other long-term liabilities reflect principal payments only and are as follows; less than one year, $221 million; one to less than two years, $163 million; two to less than five years, $391 million; and thereafter $971 million. |
(3) | Includes interest and other financing expense on long-term debt and other long-term liabilities. Payments were estimated based upon applicable interest and foreign exchange rates at March 31, 2020. |
Remaining 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | ||||||||||||||||||
Product transportation (1) | $ | 563 | $ | 733 | $ | 641 | $ | 728 | $ | 701 | $ | 7,911 | |||||||||||
North West Redwater Partnership service toll (2) | $ | 113 | $ | 168 | $ | 162 | $ | 160 | $ | 154 | $ | 2,828 | |||||||||||
Offshore vessels and equipment | $ | 57 | $ | 70 | $ | 10 | $ | — | $ | — | $ | — | |||||||||||
Field equipment and power | $ | 24 | $ | 21 | $ | 20 | $ | 21 | $ | 20 | $ | 249 | |||||||||||
Other | $ | 19 | $ | 20 | $ | 17 | $ | 17 | $ | 17 | $ | 29 |
(1) | Includes commitments pertaining to a 20 year product transportation agreement on the Trans Mountain Pipeline Expansion. In addition, the Company has entered into certain product transportation agreements on pipelines that have not yet received regulatory and other approvals. The Company may be required to reimburse certain construction costs to the service provider under certain conditions. |
(2) | Pursuant to 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 tolls, which currently consists of interest and fees, with principal repayments beginning in 2020. Included in the cost of service tolls is $1,222 million of interest payable over the 30 year tolling period (see note 9). |
Canadian Natural Resources Limited | 19 | Three Months Ended March 31, 2020 |
North America | North Sea | Offshore Africa | Total Exploration and Production | |||||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||||
Mar 31 | Mar 31 | Mar 31 | Mar 31 | |||||||||||||
(millions of Canadian dollars, unaudited) | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||
Segmented product sales | ||||||||||||||||
Crude oil and NGLs | 1,841 | 1,839 | 133 | 134 | 84 | 109 | 2,058 | 2,082 | ||||||||
Natural gas | 273 | 375 | 8 | 25 | 8 | 18 | 289 | 418 | ||||||||
Other (1) | 1 | 2 | 1 | — | 2 | 1 | 4 | 3 | ||||||||
Total segmented product sales | 2,115 | 2,216 | 142 | 159 | 94 | 128 | 2,351 | 2,503 | ||||||||
Less: royalties | (114 | ) | (193 | ) | — | — | (4 | ) | (11 | ) | (118 | ) | (204 | ) | ||
Segmented revenue | 2,001 | 2,023 | 142 | 159 | 90 | 117 | 2,233 | 2,299 | ||||||||
Segmented expenses | ||||||||||||||||
Production | 709 | 602 | 94 | 67 | 22 | 18 | 825 | 687 | ||||||||
Transportation, blending and feedstock | 1,070 | 524 | 7 | 6 | — | 1 | 1,077 | 531 | ||||||||
Depletion, depreciation and amortization | 955 | 743 | 99 | 54 | 41 | 46 | 1,095 | 843 | ||||||||
Asset retirement obligation accretion | 27 | 20 | 7 | 7 | 1 | 1 | 35 | 28 | ||||||||
Risk management activities (commodity derivatives) | 2 | 31 | — | — | — | — | 2 | 31 | ||||||||
Equity loss from investments | — | — | — | — | — | — | — | — | ||||||||
Total segmented expenses | 2,763 | 1,920 | 207 | 134 | 64 | 66 | 3,034 | 2,120 | ||||||||
Segmented earnings (loss) before the following | (762 | ) | 103 | (65 | ) | 25 | 26 | 51 | (801 | ) | 179 | |||||
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 (loss) before taxes | ||||||||||||||||
Current income tax (recovery) expense | ||||||||||||||||
Deferred income tax expense | ||||||||||||||||
Net earnings (loss) |
Canadian Natural Resources Limited | 20 | Three Months Ended March 31, 2020 |
Oil Sands Mining and Upgrading | Midstream and Refining | Inter–segment elimination and other | Total | |||||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||||
Mar 31 | Mar 31 | Mar 31 | Mar 31 | |||||||||||||
(millions of Canadian dollars, unaudited) | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||
Segmented product sales | ||||||||||||||||
Crude oil and NGLs (2) | 2,200 | 2,854 | 21 | 21 | 33 | 125 | 4,312 | 5,082 | ||||||||
Natural gas | — | — | — | — | 46 | 38 | 335 | 456 | ||||||||
Other (1) | 1 | — | — | — | — | — | 5 | 3 | ||||||||
Total segmented product sales | 2,201 | 2,854 | 21 | 21 | 79 | 163 | 4,652 | 5,541 | ||||||||
Less: royalties | (34 | ) | (89 | ) | — | — | — | — | (152 | ) | (293 | ) | ||||
Segmented revenue | 2,167 | 2,765 | 21 | 21 | 79 | 163 | 4,500 | 5,248 | ||||||||
Segmented expenses | ||||||||||||||||
Production | 809 | 822 | 6 | 6 | 44 | 15 | 1,684 | 1,530 | ||||||||
Transportation, blending and feedstock (2) | 270 | 360 | — | — | 85 | 148 | 1,432 | 1,039 | ||||||||
Depletion, depreciation and amortization | 440 | 417 | 4 | 3 | 25 | — | 1,564 | 1,263 | ||||||||
Asset retirement obligation accretion | 17 | 16 | — | — | — | — | 52 | 44 | ||||||||
Risk management activities (commodity derivatives) | — | — | — | — | — | — | 2 | 31 | ||||||||
Equity loss from investments | — | — | — | 60 | — | — | — | 60 | ||||||||
Total segmented expenses | 1,536 | 1,615 | 10 | 69 | 154 | 163 | 4,734 | 3,967 | ||||||||
Segmented earnings (loss) before the following | 631 | 1,150 | 11 | (48 | ) | (75 | ) | — | (234 | ) | 1,281 | |||||
Non–segmented expenses | ||||||||||||||||
Administration | 108 | 70 | ||||||||||||||
Share-based compensation | (223 | ) | 62 | |||||||||||||
Interest and other financing expense | 206 | 191 | ||||||||||||||
Risk management activities (other) | (66 | ) | 10 | |||||||||||||
Foreign exchange loss (gain) | 922 | (239 | ) | |||||||||||||
Loss (gain) from investments | 260 | (33 | ) | |||||||||||||
Total non–segmented expenses | 1,207 | 61 | ||||||||||||||
Earnings (loss) before taxes | (1,441 | ) | 1,220 | |||||||||||||
Current income tax (recovery) expense | (179 | ) | 165 | |||||||||||||
Deferred income tax expense | 20 | 94 | ||||||||||||||
Net earnings (loss) | (1,282 | ) | 961 |
Canadian Natural Resources Limited | 21 | Three Months Ended March 31, 2020 |
Three Months Ended | ||||||||||||||||||||||||
Mar 31, 2020 | Mar 31, 2019 | |||||||||||||||||||||||
Net expenditures | Non-cash and fair value changes (2) | Capitalized costs | Net expenditures | Non-cash and fair value changes (2) | Capitalized costs | |||||||||||||||||||
Exploration and evaluation assets | ||||||||||||||||||||||||
Exploration and Production | ||||||||||||||||||||||||
North America | $ | 6 | $ | (17 | ) | $ | (11 | ) | $ | 30 | $ | (18 | ) | $ | 12 | |||||||||
North Sea | — | — | — | — | — | — | ||||||||||||||||||
Offshore Africa | 1 | — | 1 | 3 | — | 3 | ||||||||||||||||||
$ | 7 | $ | (17 | ) | $ | (10 | ) | $ | 33 | $ | (18 | ) | $ | 15 | ||||||||||
Property, plant and equipment | ||||||||||||||||||||||||
Exploration and Production | ||||||||||||||||||||||||
North America | $ | 389 | $ | (919 | ) | $ | (530 | ) | $ | 494 | $ | (101 | ) | $ | 393 | |||||||||
North Sea | 26 | (114 | ) | (88 | ) | 36 | — | 36 | ||||||||||||||||
Offshore Africa (3) | 26 | (29 | ) | (3 | ) | 64 | (1,515 | ) | (1,451 | ) | ||||||||||||||
441 | (1,062 | ) | (621 | ) | 594 | (1,616 | ) | (1,022 | ) | |||||||||||||||
Oil Sands Mining and Upgrading (4) | 289 | (459 | ) | (170 | ) | 234 | (84 | ) | 150 | |||||||||||||||
Midstream and Refining | 1 | — | 1 | 2 | — | 2 | ||||||||||||||||||
Head office | 11 | — | 11 | 6 | (3 | ) | 3 | |||||||||||||||||
$ | 742 | $ | (1,521 | ) | $ | (779 | ) | $ | 836 | $ | (1,703 | ) | $ | (867 | ) |
(1) | This table provides a reconciliation of capitalized costs, reported in note 5 and note 6, to net expenditures reported in the investing activities section of the statements of cash flows. The reconciliation excludes the impact of foreign exchange adjustments. |
(2) | Derecognitions, asset retirement obligations, transfer of exploration and evaluation assets, and other fair value adjustments. |
(3) | Includes a derecognition of property, plant and equipment of $1,515 million following the FPSO demobilization at the Olowi field, Gabon in the first quarter of 2019. |
(4) | Net expenditures include capitalized interest and share-based compensation. |
Mar 31 2020 | Dec 31 2019 | |||||||
Exploration and Production | ||||||||
North America | $ | 30,042 | $ | 30,963 | ||||
North Sea | 1,660 | 1,948 | ||||||
Offshore Africa | 1,580 | 1,529 | ||||||
Other | 84 | 30 | ||||||
Oil Sands Mining and Upgrading | 41,152 | 42,006 | ||||||
Midstream and Refining | 1,333 | 1,418 | ||||||
Head office | 228 | 227 | ||||||
$ | 76,079 | $ | 78,121 |
Canadian Natural Resources Limited | 22 | Three Months Ended March 31, 2020 |
Interest coverage ratios for the twelve month period ended March 31, 2020: | |
Interest coverage (times) | |
Net earnings (1) | 3.5x |
Adjusted funds flow (2) | 11.6x |
(1) | Net earnings plus income taxes and interest expense; divided by the sum of interest expense and capitalized interest. |
(2) | Adjusted funds flow plus current income taxes and interest expense; divided by the sum of interest expense and capitalized interest. |
Canadian Natural Resources Limited | 23 | Three Months Ended March 31, 2020 |
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