Canadian Natural Resources Ltd. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Production Growth: Over three years, absolute production grew by ~82,100 BOEs per day, with liquids growth being the majority. Annual production per share CAGR was 7%.
• Cost Reduction: Liquids margins improved by reducing operating costs by over $3 per barrel (15%), equating to an incremental margin of ~$1.2 billion based on 2024 production.
• Shareholder Returns: Returned over $11 per share to shareholders through dividends and share repurchases. Quarterly dividend increased by 59% to $2.25 per share and then by another 4%.
• Acquisitions: Acquired Chevron's 70% operator working interest in Duvernay assets (averaging ~60,000 BOEs per day in 2025) and completed a swap to consolidate Albion Mines to 100%, adding ~93,500 barrels per day of long-life, zero-decline production.
• Reserve Growth: 2024 proved reserves were 15.2 billion BOE, proved plus probable were 20.1 billion BOE, a 9% increase from 2023. Replaced 2024 production by 365% (proved) and 422% (proved plus probable)

Segment Performance

• Oil Sands Mining and Upgrading: In 2024, annual oil sands mining and upgrading production reached 472,245 barrels per day, with record quarterly production of 534,631 barrels per day. Operating costs were industry-leading at $22.88 per barrel in 2024 and $20.97 per barrel in Q4. The acquisition of Chevron's assets is expected to average ~60,000 BOEs per day in 2025.
• Thermal In-Situ Operations: 2024 production averaged just over 271,000 barrels per day, a 3% increase from 2023. Operating costs averaged $11.04 per barrel, down 16% from 2023, with ~70,000 barrels per day of available processing capacity.
• Conventional Primary Heavy Oil: Averaged ~79,100 barrels per day in 2024, a 2% increase from 2023. Operating costs averaged $18.11 per barrel, down 9% from 2023, with 121 net horizontal multilateral primary heavy oil wells drilled in 2024.
• North American Light Crude Oil and NGL: Averaged ~114,400 barrels per day in 2024, a 5% increase from 2023. Operating costs reduced by 17% to $13.55 per barrel.
• North American Natural Gas: Averaged 2.14 BCF in 2024, comparable to 2023. Operating costs averaged $1.19 per MCF, 6% lower than 2023

Guidance

• Dividend Increase: Board approved a 4% increase to the quarterly dividend to $0.5875 per common share, marking the 25th consecutive year of dividend increases.
• Production from Acquisitions: Acquired assets are expected to contribute ~60,000 BOEs per day on average in 2025.
• Organic Growth: Opportunities exist in Albion Mines with existing approvals for Jack Pine mine expansion (100,000 barrels per day) and license capacity availability

Risks

• Market Fluctuations: Uncertainty around commodity prices, including WTI-WCS differentials and tariffs, impacting shareholder returns and production economics.
• Regulatory Challenges: Potential regulatory changes in regions like the North Sea affecting asset wind-down and future investments.
• Operational Risks: Unforeseen events like unplanned downtime affecting production rates and financial results

Question and Answer

Q: What do the Shell swap and Chevron deal mean for shareholder returns and organic growth at AOSP?

A: The acquisitions add ~93,000 barrels per day of production, contributing to free cash flow and shareholder payments. There are organic growth opportunities in Albion Mines with existing approvals for Jack Pine mine expansion and license capacity.

Q: Thoughts on thermal developments ahead of schedule?

A: It's part of continuous improvement, where learnings from previous pads are applied to subsequent ones, leading to ahead-of-schedule production.

Q: Options for exceeding Scotford Upgrader capacity?

A: Likely a paraffinic froth treatment opportunity at Horizon to bring additional bitumen barrels to market.

Q: Pipeline modification at Albion and near-term debottlenecking?

A: Piping modifications to de-bottleneck allowed 5,000 barrels per day increase. Teams continue to find efficiencies in Horizon and Albion assets.

Q: North Sea operations and potential re-investment?

A: Likely to continue unwinding and abandoning facilities as the North Sea trend is downward due to political and market shifts away from oil and gas.

Q: Macro perspectives on tariffs and WCS differentials?

A: WCS to Houston differentials have fluctuated, with view that U.S. consumers may absorb part of tariff costs.

Q: Impact of Chevron acquisition on tax pools?

A: Tax pools generated from the acquisition allowed full year tax depreciation in Q4, with impacts seen over the full year