Canadian Natural Resources Ltd. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Operational Achievements: Achieved record quarterly production in Q1 2025, including liquids, natural gas, and oil sands. Successes in the Reliability Enhancement Project and Scotford Upgrader Debottle Network drove strong performance.
• Cost Efficiencies: Oil sands mining and upgrading operating costs were $7-$10 per barrel lower than peer average. Duvernay assets showed capital and operating cost efficiencies, with 14% target improvement in drilling/completions costs.
• Shareholder Returns: Returned $1.7 billion to shareholders in Q1 via $1.2 billion in dividends and $500 million in share repurchases. Board approved a 4% increase in quarterly dividend, marking 25th consecutive year of dividend increases.
• Capital Budget: Reduced 2025 capital budget by $100 million to $6.05 billion, with no impact on planned production volumes.

Segment Performance

• Oil Sands Mining and Upgrading: Record quarterly SCO production of approximately 595,000 barrels per day, up 34% from Q1 2024. Operating costs were $21.88 per barrel. Gross production was approximately 630,000 barrels per day with 106% upgrader utilization.
• Conventional Heavy Oil: Averaged approximately 85,600 barrels per day in Q1 2025, up 9% from Q1 2024. Operating costs averaged $18.13 per barrel, down 5% from Q1 2024.
• Pelican Lake: Averaged just over 43,000 barrels per day in Q1 2025, down 4% from Q1 2024. Operating cost was $9.77 per barrel.
• North American Light Crude Oil and NGL: Averaged approximately 147,800 barrels per day in Q1 2025, up 30% from Q1 2024. Operating costs averaged $13.15 per barrel, down 14% from Q1 2024.
• Duvernay Assets: On track to achieve 2025 budget production of approximately 60,000 barrels per day. Targeting 14% improvement in drilling and completions costs on a length normalized basis. Operating costs averaged approximately $9.52 per BOE in Q1 2025.
• North American Natural Gas: Record average of more than 2.45 BCF per day in Q1 2025, up 14% from Q1 2024. Operating costs averaged $1.16 per MCF, down 9% from Q1 2024.
• Thermal In Situ: Averaged approximately 284,700 barrels per day in Q1 2025, up 6% from Q1 2024. Operating costs averaged $11.23 per barrel, down 20% from Q1 2024.

Guidance

• Reduced 2025 capital budget by $100 million to $6.05 billion, with no impact on production targets.
• Targeting 14% improvement in drilling and completions costs in the Duvernay on a length normalized basis.
• Anticipates Shell swap closure by end of Q2 2025.

Risks

• Weather Impact: Potential challenges from extreme cold weather duration affecting operations.
• Commodity Price Volatility: Impact on capital allocation and operational decisions due to fluctuating commodity prices.
• Project Execution Risks: Uncertainties in solvent recovery optimization at Kirby and other thermal projects.

Question and Answer

• **Q: Can humans outperform autonomous haul in extreme conditions?

A: Scott Stauth stated he can't comment on autonomous, but focused on teams working through weather issues, noting the challenge depends on cold snap duration.**

• **Q: Prioritization of net debt reduction vs shareholder returns?

A: Victor Darel said there's a balanced approach with 60% to share buyback and 40% to balance sheet, monitored on a forward-looking annual basis.**

• **Q: Acquired assets meeting expectations?

A: Scott Stauth said Duvernay assets are meeting expectations, and the Shell swap is anticipated to close by end of Q2 2025.**

• **Q: Reason for CapEx reduction?

A: Victor Darel explained it was due to continuous improvement efforts, such as 14% cost reduction in the Duvernay on a length normalized basis.**

• **Q: Oil sands mining integration opportunities?

A: Scott Stauth mentioned opportunities for equipment/utilization, shared services, and interconnections between facilities.**

• **Q: Break-evens and conventional activity slowing?

A: Victor Darel said it's a holistic approach, with monitoring of cash flows to adjust capital as needed.**

• **Q: WCS market tightness?

A: Scott Stauth said differentials are directionally as per strip, influenced by turnarounds and crude flows.**

• **Q: Carbon emissions mitigation strategies?

A: Scott Stauth said the company is working to get back to the table with governments, but no immediate timeline was provided.**

• **Q: Kirby solvent recovery?

A: Scott Stauth stated it's not at steady state, with monitoring ongoing and workovers planned to optimize performance.**