Commenting on the Company's third quarter 2021 results, Tim McKay, President of Canadian Natural stated "Our
diverse product mix is a competitive advantage, as we can allocate capital to the highest return projects, without being
reliant on any one commodity. Our effective and efficient operations combined with disciplined capital allocation
generates significant free cash flow, which delivers substantial shareholder returns through our sustainable dividend and
ongoing share repurchases. Our world class long life low decline assets, which have low maintenance capital
requirements relative to the size and quality of the assets, delivered top tier Q3/21 operational and financial results with
average production volumes of approximately 1,238 MBOE/d achieved in the quarter, representing increases of 11%
and 8% over Q3/20 and Q2/21 levels respectively. Our strong operational results during Q3/21 delivered robust
quarterly adjusted funds flow of approximately $3.6 billion. After our disciplined capital program and dividend, the
Company generated quarterly free cash flow of approximately $2.2 billion.
Environmental, Social and Governance ("ESG") performance remains a priority. We continue to invest in technologies
and innovations designed to improve our environmental performance and reduce our environmental footprint. As
previously announced, the Oil Sands Pathways initiative to achieve net zero greenhouse gas emissions by 2050 is an
unprecedented initiative by the Canadian energy industry. Canadian Natural and Pathways alliance members are
developing several technology pathways that when implemented will strengthen our leading ESG performance through
meaningful emissions reductions while maintaining jobs in the oil sands sector and creating thousands of new
construction and permanent jobs in the energy and cleantech industries. Collaboration with the federal and Alberta
governments on this initiative will be critical for Canada to achieve its climate goals."
Canadian Natural's Chief Financial Officer, Mark Stainthorpe, added "During the third quarter of 2021 our robust
business model delivered strong net earnings of over $2.2 billion and adjusted net earnings of approximately
$2.1 billion. Our diversified portfolio of world class assets combined with effective and efficient operations in a strong
commodity price environment, allowed us to continue to enhance returns to shareholders by repurchasing shares and
reducing debt at a faster rate than originally targeted. The Company's balance sheet continues to be a priority and was
further strengthened during the quarter with ending net debt at approximately $15.9 billion, a reduction of approximately
$2.3 billion compared to Q2/21. We remain on track to meet our full year 2021 capital investment target of approximately
$3.48 billion.
Our commitment to returns to shareholders has been significant totaling $3.1 billion year to date through dividends and
share repurchases. Subsequent to quarter end the Board of Directors has approved a 25% increase to our quarterly
dividend to $0.5875 per share, payable on January 5, 2022. The increased dividend clearly demonstrates the
confidence that the Board of Directors have in the sustainability of our business model, the strength of our balance sheet
and the Company’s effective and efficient operations supported by our robust, long life low decline asset base and
associated low maintenance capital requirements. With this increase, 2022 will mark the 22nd consecutive year of
dividend increases for the Company, and this 25% increase from our previous quarterly dividend is in excess of our
historical dividend compound annual growth rate of 20% over the last 22 years.
Effective July 1, 2021 our free cash flow allocation policy authorized management to increase returns to shareholders
through accelerated share repurchases under the Company's Normal Course Issuer Bid (“NCIB”) by targeting the
repurchase of approximately 1% of shares outstanding per quarter. This policy further states that once the Company
reaches an absolute debt level of $15 billion, currently targeted to occur in Q4/21, 50% of free cash flow will be targeted
to share repurchases, with the remaining 50% of free cash flow allocated to further strengthen our balance sheet. Per
this policy, the Company repurchased approximately 12 million shares in the quarter and year-to-date as of
November 3, 2021 we have repurchased a total of approximately 21.5 million shares for approximately $940 million.
Subsequent to quarter end, and as an enhancement to the free cash flow allocation policy, the Board of Directors has
authorized management to target absolute debt at levels below $15 billion (approximately 1.0 times debt to EBITDA in
the current price environment). To the extent debt is below $15 billion, such amount will be available for strategic growth/
acquisition opportunities."
QUARTERLY HIGHLIGHTS
- Net earnings of $2,202 million and adjusted net earnings from operations of $2,095 million were realized in Q3/21,
significant increases from Q2/21 net earnings of $1,551 million and adjusted net earnings from operations of
$1,480 million, primarily as a result of higher realized pricing and effective and efficient operations.
- Cash flows from operating activities were $4,290 million in Q3/21, increases from $2,070 million in Q3/20 and
$2,940 million in Q2/21.
- The strength of our balanced asset base, supported by safe, effective and efficient operations generates
significant free cash flow over the long-term, making Canadian Natural’s business unique, robust and sustainable.
- Canadian Natural has a diverse asset base underpinned by low maintenance capital requirements and
effective and efficient operations that delivers significant free cash flow.
- Canadian Natural generated strong quarterly adjusted funds flow of $3,634 million in Q3/21, a significant
increase from Q2/21 levels of $3,049 million, primarily the result of higher realized pricing and effective and
efficient operations.
- Reflecting the strength of our effective and efficient operations and our high quality, long life low decline asset
base, Canadian Natural generated strong quarterly free cash flow of $2,195 million in Q3/21, after dividend
payments of $558 million and net capital expenditures of $881 million, excluding acquisitions.
- Returns to shareholders year to date in 2021 have been significant, as Canadian Natural has returned
approximately $3.1 billion by way of dividends and share repurchases up to and including November 3, 2021.
- Share repurchases for cancellation during Q3/21 per the free cash flow allocation policy, totaled 11,984,400
shares or 1% of common shares outstanding at a weighted average price of $42.26 per share. Share
repurchases for cancellation in 2021 up to and including November 3, 2021 total 21,464,400 common shares
at a weighted average price of $43.77 per share.
- Subsequent to quarter end the Board of Directors has approved a 25% increase to our quarterly dividend to
$0.5875 per share, payable on January 5, 2022. The increased dividend clearly demonstrates the confidence
that the Board of Directors have in the sustainability of our business model, the strength of our balance sheet
and the Company’s effective and efficient operations supported by our robust, long life low decline asset base
and associated low maintenance capital requirements.
- With this increase, 2022 will mark the 22nd consecutive year of dividend increases for the Company, and
this 25% increase from our previous quarterly dividend is in excess of our historical dividend compound
annual growth rate of 20% over the last 22 years.
- Canadian Natural executed on our commitment to further strengthen our balance sheet with strong financial
results in Q3/21, reducing net debt by approximately $2.3 billion from Q2/21 levels, while net debt has decreased
by approximately $5.8 billion over the last 12 months ended September 30, 2021. In Q3/21 the Company executed
on the following:
- On August 16, 2021 the Company repaid the US$500 million 3.45% notes originally due November 15, 2021.
- The Company repaid $500 million on its $2,650 million term credit facility due February 2023.
- Subsequent to quarter end the Company repaid an additional $1,000 million, which reduced the facility
balance to $1,150 million as at November 3, 2021.
- Effective July 1, 2021 our free cash flow allocation policy authorized management to increase returns to
shareholders through accelerated share repurchases under the Company's NCIB by targeting the repurchase of
approximately 1% of shares outstanding per quarter. This policy further states that once the Company reaches an
absolute debt level of $15 billion, currently targeted to occur in Q4/21, 50% of free cash flow will be targeted to
share repurchases, with the remaining 50% of free cash flow allocated to further strengthen our balance sheet.
Per this policy, the Company repurchased approximately 12 million shares in the quarter and year to date as of
November 3, 2021 we have repurchased a total of approximately 21.5 million shares for approximately
$940 million. Subsequent to quarter end, and as an enhancement to the free cash flow allocation policy, the Board
of Directors has authorized management to target absolute debt at levels below $15 billion (approximately 1.0
times debt to EBITDA in the current price environment). To the extent debt is below $15 billion, such amount will
be available for strategic growth/acquisition opportunities.
- In Q3/21 the Company continued its focus on safe, effective and efficient operations averaging quarterly
production volumes of 1,237,503 BOE/d, increases of 11% and 8% from Q3/20 and Q2/21 levels respectively. The
increases from prior periods are primarily as a result of robust natural gas production and strong Oil Sands Mining
and Upgrading performance after completion of planned turnaround activities.
- The Company delivered strong natural gas performance in Q3/21 with corporate natural gas production of
1,708 MMcf/d, an increase of 6% from Q2/21 levels. The increase from Q2/21 levels primarily reflects
reinstated production volumes from the Pine River Gas Plant, acquisitions, and strong drilling results, partially
offset by natural field declines.
- Corporate natural gas operating costs in Q3/21 averaged $1.17/Mcf, a decrease of 2% from Q2/21 levels.
- Strong quarterly liquids production volumes averaged 952,839 bbl/d in Q3/21, increases of 8% and 9% from
Q3/20 and Q2/21 levels respectively, primarily due to Canadian Natural's effective and efficient operations and
planned turnaround activities completed in prior periods.
- Canadian Natural's North America E&P liquids production, including thermal in situ, averaged 454,888 bbl/d during
Q3/21, decreases of 8% and 5% from Q3/20 and Q2/21 levels respectively. The decreases from Q3/20 and Q2/21
levels were primarily due to natural field declines, planned turnaround activities at Jackfish and lower NGL
production volumes largely due to third-party outages in the quarter.
- North American E&P liquids, including thermal in situ, operating costs averaged $13.33/bbl (US$10.58/bbl) in
Q3/21, an increase of 4% from Q2/21 levels. The increase in operating costs from Q2/21 was primarily due to
increased energy costs and lower production volumes.
- Canadian Natural's thermal in situ production averaged 248,113 bbl/d in Q3/21, decreases of 14% and 4% from
Q3/20 and Q2/21 levels respectively. The decrease in thermal in situ production during Q3/21 compared to Q3/20
and Q2/21 was primarily due to planned turnaround activities at Jackfish and natural field declines.
- Thermal in situ assets operating costs averaged $12.24/bbl (US$9.71/bbl) in Q3/21, an increase of 4% from
Q2/21 levels. The increase in operating costs from Q2/21 was primarily due to increased energy costs and
lower production volumes due to planned turnaround activities.
- The Company's world class Oil Sands Mining and Upgrading assets averaged quarterly production of
468,126 bbl/d of Synthetic Crude Oil ("SCO") in Q3/21, increases of 34% and 29% from Q3/20 and Q2/21 levels
respectively and comparable to the record average quarterly production volumes achieved in Q1/21. Strong Q3/21
production performance was due to the Company's focus on continuous improvement, effective and efficient
operations as well as planned turnaround activities completed during prior periods.
- Following recently completed maintenance and turnaround activities across the Oil Sands Mining and
Upgrading assets, top tier performance and utilization resulted in industry leading operating costs. During the
first nine months of 2021, as a result of the successful completion of the Scotford turnaround and expansion in
2020, the Company increased sales volumes by over 20,000 bbl/d of SCO.
- Operating costs from the Company's Oil Sands Mining and Upgrading assets were strong and remain top tier
averaging $19.86/bbl (US$15.76/bbl) of SCO during Q3/21, a decrease of 22% from Q2/21 levels. The
decrease from Q2/21 was primarily due to strong production volumes, the Company's culture of continuous
improvement and planned turnaround activities completed during the prior period.
- Oil Sands Mining and Upgrading continue to be top tier with production volumes for October 2021 of
approximately 477,000 bbl/d of SCO.
