Energia
Canadian Natural Resources Limited Announces 2017 Fourth Quarter and Year End Results
CALGARY, Alberta, March 01, 2018 (GLOBE NEWSWIRE) -- Commenting on the Company's results, Steve Laut, Executive Vice Chairman of Canadian Natural stated, "In 2017, Canadian Natural continued to execute on its defined strategy and completed its transition to a long life low decline asset base with the completion and ramp-up of the Horizon Phase 3 expansion. The Company's focus on balanced capital allocation was evident in 2017 as economic resource development, increased balance sheet strength, execution on transformational acquisitions and free cash flow generation combined with our ability to execute with excellence, drove a strong year for the Company."
Canadian Natural's President, Tim McKay, added, "Strong production of Synthetic Crude Oil ("SCO") is targeted from our Oil Sands Mining and Upgrading operations with the midpoint of guidance at 450,000 bbl/d of SCO in the first quarter of 2018. With the completion of Phase 3 at Horizon, production has been strong averaging over 247,000 bbl/d of SCO since December 1, 2017 and operations at our Athabasca Oil Sands Project ("AOSP") continue to perform as expected with integration continuing during the Company's nine months of mine operations. The Company's Oil Sands Mining and Upgrading segment, conventional light oil in Canada and our international assets now make up over 50% of our corporate liquids production mix, a significant increase from approximately 32% in 2016. These products provide significant value to the Company as they are priced in close relation to the high value West Texas Intermediate ("WTI") crude oil commodity price.
Our focus on effective and efficient operations resulted in strong operating costs in 2017. Operating costs were within or on the lower end of corporate guidance ranges. Specifically, Horizon operating costs averaged $21.46/bbl of SCO in 2017, after adjusting for planned downtime, excellent results, with the Company looking to capture additional saving opportunities in 2018.
In 2017, Canadian Natural continued its strong track record of delivering excellent finding and development and acquisition costs and reserve replacement ratios, reflecting the strength of our assets and our ability to execute effectively and efficiently. Our reserve additions in the year were strong with gross proved crude oil, SCO, bitumen and NGL reserves increasing 59% to 7.74 billion barrels and proved natural gas reserves increasing 2% to 6.77 trillion cubic feet. Total proved plus probable BOE reserve life index of the Company is now 33.0 years, with low finding, development and acquisition costs of $12.29/BOE for proved reserves, including the change in future development capital. Additionally, our execution delivered strong reserve replacement ratios of 887% on proved developed producing reserves and 927% on total proved reserves, driven by our low sustaining capital requirement, resulting in significant free cash flow that provides sustainability through any commodity price cycle."
Canadian Natural's Chief Financial Officer, Corey Bieber, continued, "The financial strength of the Company was displayed in 2017 as we were able to opportunistically acquire accretive assets and bring the Horizon project to completion, making the Company much more robust and sustainable. As a result, annual funds flow and net earnings were significant at approximately $7.3 billion and $2.4 billion respectively, all achieved with an annual average WTI crude oil price under US$51.00/bbl. The resulting free cash flow allowed the Company to increase liquidity to $4.25 billion and reduce debt to annual adjusted EBITDA to 2.7x at year end.
In Q4/17 funds flow reached approximately $2.3 billion, resulting in a Q4/17 ending debt reduction of approximately $460 million, when compared to Q3/17 levels, supporting our near term focus to strengthen our balance sheet. Additionally, as of the April 1, 2018 dividend payment, the Company's Board of Directors has increased our quarterly dividend by 22% to $0.335 per share, reflecting the strength and robustness of our assets and our ability to generate free cash flow. The increase marks the 18th consecutive year of dividend increases, and confirms our commitment to sustainable and increasing returns to shareholders."
Annual Highlights
2017 Reserves Update
Fourth Quarter Highlights
OPERATIONS REVIEW AND CAPITAL ALLOCATION
Canadian Natural has a balanced and diverse portfolio of assets, primarily Canadian-based, with international exposure in the UK section of the North Sea and Offshore Africa. Canadian Natural's production is well balanced between light and medium crude oil, primary heavy crude oil, Pelican Lake heavy crude oil, bitumen and SCO (herein collectively referred to as "crude oil"), natural gas and NGLs. This balance provides optionality for capital investments, facilitating improved value for the Company's shareholders.
Underpinning this asset base is long life low decline production from Horizon mining and upgrading and the AOSP mining and upgrading, thermal in situ oil sands and Pelican Lake heavy crude oil assets. The combination of low decline, low reserve replacement costs, and effective and efficient operations means these assets provide substantial and sustainable cash flow throughout the commodity price cycle.
Augmenting this, Canadian Natural maintains a substantial inventory of low capital exposure projects within its conventional asset base. These projects can be executed quickly and with the right economic conditions, can provide excellent returns and maximize value for shareholders. Supporting these projects is the Company's undeveloped land base which enables large, repeatable drilling programs; which can be optimized over time. Additionally, by owning and operating most of the related infrastructure, Canadian Natural is able to control a major component of its operating cost and minimize production commitments. Low capital exposure projects can be quickly stopped or started depending upon success, market conditions, or corporate needs.
Canadian Natural's balanced portfolio, built with both long life low decline assets and low capital exposure assets, enables effective capital allocation, production growth and value creation.
Drilling Activity
North America Exploration and Production
International Exploration and Production
North America Oil Sands Mining and Upgrading - Horizon
North America Oil Sands Mining and Upgrading - AOSP
MARKETING
FINANCIAL REVIEW
The Company continues to implement proven strategies and its disciplined approach to capital allocation. As a result, the financial position of Canadian Natural remains strong. Canadian Natural's funds flow generation, credit facilities, US commercial paper program, diverse asset base and related flexible capital expenditure programs all support a flexible financial position and provide the appropriate financial resources for the near-, mid- and long-term.
OUTLOOK
The Company forecasts annual 2018 production levels to average between 815,000 and 885,000 bbl/d of crude oil and NGLs and between 1,650 and 1,710 MMcf/d of natural gas, before royalties. Q1/18 production guidance before royalties is forecast to average between 821,000 and 869,000 bbl/d of crude oil and NGLs and between 1,600 and 1,650 MMcf/d of natural gas. Detailed guidance on production levels, capital allocation and operating costs can be found on the Company's website at www.cnrl.com .
Canadian Natural's annual 2018 capital expenditures are targeted to be approximately $4.3 billion.
2017 YEAR-END RESERVES
Determination of Reserves
For the year ended December 31, 2017, the Company retained Independent Qualified Reserves Evaluators (IQREs), Sproule Associates Limited, Sproule International Limited and GLJ Petroleum Consultants Limited, to evaluate and review all of the Company's proved and proved plus probable reserves. The IQREs conducted the evaluation and review in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook. The reserves disclosure is presented in accordance with NI 51-101 requirements using forecast prices and escalated costs.
The Reserves Committee of the Company's Board of Directors has met with and carried out independent due diligence procedures with the IQREs as to the Company's reserves. All reserves values are Company Gross unless stated otherwise.
Corporate Total
North America Exploration and Production
North America Oil Sands Mining and Upgrading
International Exploration and Production
2017 FD&A Costs excluding change in FDC
2017 FD&A Costs including change in FDC
Corporate Total
2017 Reserve Replacement
Company Gross Reserves
2017 Recycle Ratios
Net Present Value of Future Net Revenues, before income tax, discounted at 10%
Reserves Notes:
Note: A foreign exchange rate of 0.7900 US$/C$ for 2018, 0.8200 US$/C$ for 2019, and 0.8500 US$/C$ after 2019 was used in the 2017 evaluation.
Forward-Looking Statements
Certain statements relating to Canadian Natural Resources Limited (the "Company") in this document or documents incorporated herein by reference constitute forward-looking statements or information (collectively referred to herein as "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements can be identified by the words "believe", "anticipate", "expect", "plan", "estimate", "target", "continue", "could", "intend", "may", "potential", "predict", "should", "will", "objective", "project", "forecast", "goal", "guidance", "outlook", "effort", "seeks", "schedule", "proposed" or expressions of a similar nature suggesting future outcome or statements regarding an outlook. Disclosure related to expected future commodity pricing, forecast or anticipated production volumes, royalties, operating costs, capital expenditures, income tax expenses and other guidance provided throughout the Company's Management's Discussion and Analysis ("MD&A"), constitute forward-looking statements. Disclosure of plans relating to and expected results of existing and future developments, including but not limited to the Horizon Oil Sands operations and future expansions, the Athabasca Oil Sands Project ("AOSP"), Primrose thermal projects, the Pelican Lake water and polymer flood project, the Kirby Thermal Oil Sands Project, the cost of construction and future operations of the North West Redwater bitumen upgrader and refinery, and construction by third parties of new or expansion of existing pipeline capacity or other means of transportation of bitumen, crude oil, natural gas or synthetic crude oil ("SCO") that the Company may be reliant upon to transport its products to market also constitute forward-looking statements. This forward-looking information is based on annual budgets and multi-year forecasts, and is reviewed and revised throughout the year as necessary in the context of targeted financial ratios, project returns, product pricing expectations and balance in project risk and time horizons. These statements are not guarantees of future performance and are subject to certain risks. The reader should not place undue reliance on these forward-looking statements as there can be no assurances that the plans, initiatives or expectations upon which they are based will occur.
In addition, statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied assessment based on certain estimates and assumptions that the reserves described can be profitably produced in the future. There are numerous uncertainties inherent in estimating quantities of proved and proved plus probable crude oil, natural gas and natural gas liquids ("NGLs") reserves and in projecting future rates of production and the timing of development expenditures. The total amount or timing of actual future production may vary significantly from reserve and production estimates.
The forward-looking statements are based on current expectations, estimates and projections about the Company and the industry in which the Company operates, which speak only as of the date such statements were made or as of the date of the report or document in which they are contained, and are subject to known and unknown risks and uncertainties that could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others: general economic and business conditions which will, among other things, impact demand for and market prices of the Company's products; volatility of and assumptions regarding crude oil and natural gas prices; fluctuations in currency and interest rates; assumptions on which the Company's current guidance is based; economic conditions in the countries and regions in which the Company conducts business; political uncertainty, including actions of or against terrorists, insurgent groups or other conflict including conflict between states; industry capacity; ability of the Company to implement its business strategy, including exploration and development activities; impact of competition; the Company's defense of lawsuits; availability and cost of seismic, drilling and other equipment; ability of the Company and its subsidiaries to complete capital programs; the Company's and its subsidiaries' ability to secure adequate transportation for its products; unexpected disruptions or delays in the resumption of the mining, extracting or upgrading of the Company's bitumen products; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; ability of the Company to attract the necessary labour required to build its thermal and oil sands mining projects; operating hazards and other difficulties inherent in the exploration for and production and sale of crude oil and natural gas and in mining, extracting or upgrading the Company's bitumen products; availability and cost of financing; the Company's and its subsidiaries' success of exploration and development activities and its ability to replace and expand crude oil and natural gas reserves; timing and success of integrating the business and operations of acquired companies and assets, including the interests in AOSP as well as additional working interests in certain other producing and non-producing oil and gas properties (the "other assets"), acquired by the Company on May 31, 2017; production levels; imprecision of reserve estimates and estimates of recoverable quantities of crude oil, natural gas and NGLs not currently classified as proved; actions by governmental authorities; government regulations and the expenditures required to comply with them (especially safety and environmental laws and regulations and the impact of climate change initiatives on capital and operating costs); asset retirement obligations; the adequacy of the Company's provision for taxes; and other circumstances affecting revenues and expenses.
The Company's operations have been, and in the future may be, affected by political developments and by national, federal, provincial and local laws and regulations such as restrictions on production, changes in taxes, royalties and other amounts payable to governments or governmental agencies, price or gathering rate controls and environmental protection regulations. Should one or more of these risks or uncertainties materialize, or should any of the Company's assumptions prove incorrect, actual results may vary in material respects from those projected in the forward-looking statements. The impact of any one factor on a particular forward-looking statement is not determinable with certainty as such factors are dependent upon other factors, and the Company's course of action would depend upon its assessment of the future considering all information then available.
Readers are cautioned that the foregoing list of factors is not exhaustive. Unpredictable or unknown factors not discussed in this report could also have material adverse effects on forward-looking statements. Although the Company believes that the expectations conveyed by the forward-looking statements are reasonable based on information available to it on the date such forward-looking statements are made, no assurances can be given as to future results, levels of activity and achievements. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Except as required by law, the Company assumes no obligation to update forward-looking statements, whether as a result of new information, future events or other factors, or the foregoing factors affecting this information, should circumstances or Management's estimates or opinions change.
Special Note Regarding Currency, Production and Non-GAPP Financial Measures
The Company's MD&A of the financial condition and results of operations of the Company should be read in conjunction with the unaudited interim Consolidated Financial Statements for the three months and year ended December 31, 2017 and the MD&A and the audited consolidated financial statements for the year ended December 31, 2016.
All dollar amounts are referenced in millions of Canadian dollars, except where noted otherwise. The Company's unaudited interim consolidated financial statements for the period ended December 31, 2017 and the Company's MD&A have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. The Company's MD&A includes references to financial measures commonly used in the crude oil and natural gas industry, such as adjusted net earnings (loss) from operations, funds flow from operations (previously referred to as cash flow from operations), and adjusted cash production costs. These financial measures are not defined by IFRS and therefore are referred to as non-GAAP measures. The non-GAAP measures used by the Company may not be comparable to similar measures presented by other companies. The Company uses these non-GAAP measures to evaluate its performance. The non-GAAP measures should not be considered an alternative to or more meaningful than net earnings (loss) and cash flows from operating activities, as determined in accordance with IFRS, as an indication of the Company's performance. The non-GAAP measures adjusted net earnings (loss) from operations and funds flow from operations are reconciled to net earnings (loss), as determined in accordance with IFRS, in the "Financial Highlights" section of the Company's MD&A. The non-GAAP measure funds flow from operations is also reconciled to cash flows from operating activities in this section. The derivation of adjusted cash production costs and adjusted depreciation, depletion and amortization are included in the "Operating Highlights - Oil Sands Mining and Upgrading" section of the Company's MD&A. The Company also presents certain non-GAAP financial ratios and their derivation in the "Liquidity and Capital Resources" section of the Company's MD&A.
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. In addition, for the purposes of the Company's MD&A, crude oil is defined to include the following commodities: light and medium crude oil, primary heavy crude oil, Pelican Lake heavy crude oil, bitumen (thermal oil), and SCO.
Production volumes and per unit statistics are presented throughout the Company's MD&A on a "before royalty" or "gross" basis, and realized prices are net of blending and feedstock costs and exclude the effect of risk management activities. Production on an "after royalty" or "net" basis is also presented for information purposes only.
Additional information relating to the Company, including its Annual Information Form for the year ended December 31, 2016, is available on SEDAR at www.sedar.com, and on EDGAR at www.sec.gov.
CONFERENCE CALL
A conference call will be held at 9:00 a.m. Mountain Time, 11:00 a.m. Eastern Time on Thursday, March 1, 2018.
The North American conference call number is 1-866-521-4909 and the outside North American conference call number is 001-647-427-2311. Please call in 10 minutes prior to the call starting time.
An archive of the broadcast will be available until 6:00 p.m. Mountain Time, Thursday, March 15, 2018. To access the rebroadcast in North America, dial 1-800-585-8367. Those outside of North America, dial 001-416-621-4642. The conference archive ID number is 9424719.
The conference call will also be Webcast live and may be accessed on the home page of our website at www.cnrl.com.
For further information, please contact:
2321 Rosecrans Avenue. Suite 2200
90245 El Segundo Stati Uniti