Good morning ladies and gentlemen and welcome to the Canadian Natural Resources Q2 2016 Earnings Call. After the presentation, we will conduct a question-and-answer session. Instructions will be given at that time. Please note that this call is being recorded today, August 4, 2016 at 9 a.m. Mountain Standard Time. I would now like to turn the meeting over to your host for today's call, Mark Stainthorpe, Director, Treasury and Investor Relations of Canadian Natural Resources. Please go ahead, Mr. Stainthorpe.

Thanks, Andrew. Good morning everyone and thank you for joining our Second Quarter 2016 Conference Call, where we'll discuss our operational and financial results and provide an update regarding our ongoing projects and operations. With me this morning are Steve Laut, our President; Tim McKay, our Chief Operating Officer; and Corey Bieber, our Chief Financial Officer. Before we begin, I would like to refer you to the comments regarding forward-looking information contained in our press release and also note that all amounts are in Canadian dollars, and production and reserves are expressed as before royalties unless otherwise stated. I'll now pass the call over to Steve Laut. Steve? Steve W. Laut - President & Non-Independent Director: Thanks, Mark, and good morning, everyone. The second quarter was a good quarter for Canadian Natural. We delivered strong cash flow in the quarter, while facing a number of challenges ranging from low commodity prices, pipeline and facility issues at a third-party owned and operated natural gas facility, which impacted quarterly production. Yearly gas guidance has been impacted by this outage, but importantly, oil production guidance remains unchanged. At Horizon, we have essentially completed the turnaround and are now just closing up and expect to have on-spec production on August 11, with all the Phase 2B tie-ins completed as planned. Horizon Phase 2B and Phase 3 expansion are on track. Horizon 2B is now very close to start up in October and full 182,000 barrel a day production targeted for November. We also continue to lower our cost structure, a cost structure that is already top tier. During the first half of 2016 to the first half of 2015, we have saved $430 million in op cost alone. With stronger commodity prices and continued lower costs, we look forward to a very strong second…

Thank you, Steve. Good morning, everyone. I will now do a brief overview of our assets and talk to our second quarter 2016. Starting with natural gas, our gas production capacity was strong as expected, however the second quarter volumes of 1.689 Bcf was a decrease of approximately 5% from Q1 2016. This was primarily impacted by a third-party plant and an infrastructure damage due to flooding in Northeast B.C. in mid-June. The Pine River Gas Plant has been shut down and Canadian Natural has shut in 176 million cubic feet of natural gas. We are working with the third party to reroute 50 million a day of the gas and target to have it reinstated on August 8. Then an additional 40 million is to come back on in late September, with the balance of 86 million cubic feet targeted to be in December. The timeline for this reinstatement of gas is now reflected in our corporate guidance for Q3 and the annual corporate guidance now sits at 1.705 to 1.735 Bcf per day. Natural gas operating costs, we continue to see cost savings and we have reduced our natural gas operating costs by 9% when comparing Q1 2016, Q2 2016 to Q2 2015, particularly impressive considering the third-party impacts on our production. While this result is good, we expect further cost reductions in 2016. As expected, our North American light oil and NGL production in Q2 2016 was approximately 83,800 barrels a day, down 6% from Q1 2016. In all areas, we continue to optimize water floods, stimulate wells and leverage technology to maintain our volumes. As well we continue to drive our operating costs down 10% when comparing Q2 2016 to Q2 2015, with current operating costs of $13.84 per barrel. In the second half of 2016,…

Your first question comes from the line of Greg Pardy with RBC Capital Markets. Your line is open.

Thanks. Thanks for the summary this morning, guys. Steve, I just wanted to dig in a little bit into Primrose, not so much about the pipeline, but just more about what the outlook is from a production standpoint on a go-forward basis. You mentioned the cyclic nature of that steam obviously with CSS. But in addition to that, when do you start to steam again in earnest? And how should we think about this over the next couple of years in terms of oil prices, what have you? Steve W. Laut - President & Non-Independent Director: Thanks, Greg. And I think if you look at our guidance for Q3, you can see we're coming into the higher part of the cycle. And obviously, when we took the Primrose pipeline, that took longer than we had anticipated. That's a very unique stress corrosion cracking, as Tim talked about. We made sure that we took the time to do it right and make sure we got this thing set up perfectly for the future going ahead, particularly as we come into the higher production cycle in the third and fourth quarters. Steaming hasn't really changed. Obviously, we had to slow down the steaming in Primrose East, while we got the pipeline fixed, but the cyclic nature of you're always steaming in and steaming out, so there'll be no real change. If we look into a newer production, which we add in 2016 and 2017, it does take some time when you bring on new PADDs. And we'll look at that, how we do that when we do the 2017 budget. So it's too early to say what the long-term growth will be in Primrose going forward.

Okay, great. And maybe just to come back to the 130 wells that Tim touched on, the 45,000 barrels a day, pretty big number. These are what progressive cavity – can you just remind me of maybe the area that this is focused in and just what trajectory typically looks like on these wells? Steve W. Laut - President & Non-Independent Director: So, maybe Tim can add a little bit more color, but they're – basically they're 123 heavy oil prime, heavy oil wells, 125. And obviously, the profile on that is you start it with low production, it ramps up, stays fairly flat for four or five years and then goes into a rapid decline. So they're very quick payout, very good cash on cash returns. Then the others are light oil wells, which are more like a shale oil well. So you have a high production declining very quickly. And then we do have some thermal SAGD pads we're adding in the Wolf Lake area and Senlac, which will take a while to ramp up, but have very stable production once they go.

Okay. That's great. Thanks very much.

Your next question comes from the line of Harry Mateer with Barclays. Your line is open.

Hi. Good morning. Question for Corey. I know the company's on the cusp of an inflection point with Horizon ramping up in just a couple months. But with $1.7 billion available under your credit lines, can you just update us on how you're thinking about liquidity, given you're not totally done with Horizon yet, the commodity market's obviously uncertain and you do have about $1.8 billion converted of bonds coming due in the next nine months or so? Corey B. Bieber - Chief Financial Officer & Senior Vice-President, Finance: Right. Yeah, Harry, we do look at the debt capital markets in both Canada and the U.S. on a very regular basis and look for opportunities to issue in those markets. That being said, we also have several other financial levers in addition to our capital flexibility, which we obviously have been very good at exercising over the last little bit. And the strong cash flow, as you pointed out, is continuing to ramp up. But in addition to that we also have some levers, including the investment in PrairieSky, again, about $575 million in cross-currency swaps maturing post-2020, so post that Horizon completion window. And today, they have a mark of around $355 million. So those items are relatively quickly monetizable if we so chose to do. Right now, there's no current intent to do that today, but we could monetize those if needed. And additionally, there is that royalty land portfolio, about 2,500 BOEs a day, of which about 1,050 BOEs a day are third-party royalty volumes. And there is a lot of interest in the industry for those assets. So we do look at the debt capital markets, but we're not solely focused on that. There are a lot of other levers that we have at our disposal to manage that liquidity.

Okay. And the in terms of the credit lines themselves, I know they're a pretty efficient, low cost source of debt capital. But what do you sort of target to have drawn under those on a mid-cycle average basis? Corey B. Bieber - Chief Financial Officer & Senior Vice-President, Finance: We would – typically we would like to have in that $2 billion to $3 billion, probably closer to that $3 billion range of available liquidity.

Of available liquidity under the facilities? Corey B. Bieber - Chief Financial Officer & Senior Vice-President, Finance: Correct. Correct.

Got it. Okay. All right. Thank you.

Your next question comes from the line of Phil Gresh with JPMorgan. Your line is open.

Hi, good morning. A couple of quick questions. First question is just on the guidance for Horizon for the full year. If you could just remind us what you're assuming for Phase 2B contribution in the fourth quarter? Steve W. Laut - President & Non-Independent Director: Okay. So what we expect to do, as we said in the calls, we'll start up in October and we expect full production in November. And so, we'll get full production, it'll be about 182,000. So I think you can sort of target if you wanted to be sort of midpoint and we'd hit that by middle of November. And the startup would start I would say in mid-October and we'll sort of ramp up to that, but you really won't kick in until the first part of November.

Got. And then as you look – go ahead. Steve W. Laut - President & Non-Independent Director: Yes. No, go ahead.

So as you look ahead to 2017, there wouldn't be – there's nothing in particular that would prevent it from running at basically full utilization? Steve W. Laut - President & Non-Independent Director: We're going to look at taking another pit stop or turnaround in 2017 and be proactive on that, especially with the Phase 3 tie-ins. So we'll decide that here as we get approach November. So that may impact the full year not being at $182,000.

Right, okay. Fair enough. And then my second question is just a bit of a follow-up to the last one. It might be a little difficult to answer, I realize. But I'm just kind of wondering, as you look at those financial levers available to you, obviously we've seen a pullback in the oil price, just wondering maybe if you could put some parameters around what it would take for you to consider pulling one of those levers? It sounds like you don't want to proactively do it, given that there's an abundance of cash flow ahead. But just kind of curious if there's something – some particular triggers you would look for to do something on that front. Corey B. Bieber - Chief Financial Officer & Senior Vice-President, Finance: Phil, to put it in perspective what we do is we look at our forward cash flow and our CapEx and we don't assume strip pricing. We look at a stress case cash flow. We look at our capital commitments, any capital flexibility that we have, and of course, any upcoming bond maturities. And put all those into the mix, we have a very robust forecast system. So we have pretty good visibility into where our cash flow is going and our liquidity requirements. And then, we basically look at what are available levers and what has appropriate values. I would say that if you look at the cross currency swaps, obviously we entered into them for a hedge position. So it isn't necessarily something that we want to do, but it is something that is available to us and it's relatively easy to liquidate. PrairieSky is actually providing us very reasonable return today. And I think there's actually some upside potential in that stock as well. So it isn't necessarily that we're looking for specific triggers, it's something that we monitor all the time. We look forward 18 to 36 months and basically try to be proactive in terms of how we're looking at the visibility of the liquidity and the upcoming activities that are coming our way. Steve W. Laut - President & Non-Independent Director: I'd add to that, Phil, that you can tell with our answers here, we're very confident in our ability to execute on Horizon Phase 2B and the start-up and full production there. So if we were less confident, I think we'd be looking that more hard and more seriously, but clearly we feel very confident in our ability to execute on Horizon 2B and Horizon 3.

Right, right. And I guess maybe with PrairieSky specifically, I mean you noted you're happy with the cash flows. It doesn't sound like there is necessarily, I guess, a proactive reason that you would consider looking to sell those shares to provide some excess cash, whether it's to delever more quickly or anything like that. Steve W. Laut - President & Non-Independent Director: Not at this point in time. We're happy with PrairieSky shares. We like them and they perform well, so we're in no hurry.

Okay. Thanks so much.

Your next question comes from the line of Kristina Cibor with Goldman Sachs. Your line is open. Kristina Cibor with Goldman Sachs, your line is open. Your next question comes from the line of Nima Billou with Veritas Investment Research. Your line is open.

Thank you. Good morning. Can you update – obviously because of the production estimates have changed, can you update the cash flow ranges and what the financial – what the benchmark assumptions are behind that for 2016 from your July presentation? Steve W. Laut - President & Non-Independent Director: Of our July presentation?

Yeah. Steve W. Laut - President & Non-Independent Director: So I don't think – obviously it has a small impact because with the gas prices, it doesn't impact cash flow that much. So our cash flow ranges haven't really changed that much. We'll still be within the range we had in July.

Okay. So the $3.3 billion to $3.7 billion? Steve W. Laut - President & Non-Independent Director: Of capital spending?

Cash flow from operations from July. Steve W. Laut - President & Non-Independent Director: Yeah. That's correct.

Okay. And the other thing is you guys have – you've done great at controlling what you can control. It seems more and more that the oil market may be at risk in terms of rebalancing near-term. You're forward thinking in terms of going after Canadian natural gas assets albeit essentially a bit early, but that's hard to see in hindsight in terms of driving down costs, adding facilities. Just wanted to know, what do you see in the natural gas market with respect to a path to rebalancing or a path to higher prices? Is it associated gas production declining in the U.S.? What's going to help bring those prices up? And can you provide a figure as to what your free cash flow breakeven is for Canadian gas operations? Like what AECO price do you need to breakeven on a free cash flow basis? Steve W. Laut - President & Non-Independent Director: Yeah. I think our view on gas pricing is you're not going to see robust growth in gas pricing. It is very much a situation where prices will ration supply. And as you see gas prices, if they get up towards $3, $3.50 NYMEX, you'll see a lot of gas production come on and push that price right back down. And as prices get down below $2 NYMEX, then you'll see production declines, drilling will stop, production duct lines will come off and then prices will bounce back up or slowly rise back up. So we see gas pricing being range-bound. And clearly, if you looked at our Open House presentation we have, in our inventory a lot of gas that makes our 15% return, especially with your infrastructure advantages, between about $1.50 AECO. And that's even more at $2 to $2.50 AECO. So we're in a very good position here and we think within the range-bound gas prices, we'll be able to maintain and grow production as the market needs additional gas.

And so the key advantage that you reiterated here is the ownership of infrastructure and the ability to drive down costs. Steve W. Laut - President & Non-Independent Director: We have the infrastructure. We have the assets and they're high quality assets. If you look at our Montney Deep Basin assets, the Montney competes as a top tier play. It's either one or two in North America with Marcellus, depending on who does the analysis. So we're very confident in our ability, and actually the industry's ability here in Western Canada, to compete head-to-head on a supply cost basis.

And suffice it to say, you're happy with the suite of assets you have in the absence of the return to higher pricing. You're not necessarily on the look-out to consolidate or purchase more gas assets or oil assets at this time? Steve W. Laut - President & Non-Independent Director: We don't see any gaps in our portfolio, so we don't see any need to do acquisitions. That being said, we look at any property acquisition that will go through our core area. So we look at them all. We bid on a few of them and we get even less. So we look, but we don't have any gaps in our portfolio at this point.

Okay. Thank you. And the final question I have is, I guess given the current strip pricing, I know you've laid out a number of scenarios in terms of the capital you'll deploy, whether it's $60 or a low case. So given sort of current strip pricing, on a company-wide basis, what is your sustaining capital, either on a per BOE basis or a total dollar basis? Steve W. Laut - President & Non-Independent Director: Right now, we believe our sustaining capital is about $2.4 billion to $2.7 billion a year to keep production essentially flat.

Production at 2016 year-end guidance? Steve W. Laut - President & Non-Independent Director: Yeah.

Okay. All right. Thank you very much. I appreciate it. Steve W. Laut - President & Non-Independent Director: Thank you.

Your next question comes from the line of Paul Sankey with Wolfe Research. Your line is open.

Yeah. Hi, guys. I don't want this question to sound too negative or cynical, but we've been promised a wall of cash flow many times in the past and it hasn't arrived. What's different this time about the outlook over the next two or three years? Thanks. Steve W. Laut - President & Non-Independent Director: I think, clearly we're making that transition to long-life, low decline assets. We're coming to that. And I think what you got to look at is our portfolio. There's no gaps in our portfolio. We're able to execute. And if you want to look at a proxy for what we'll do with that cash flow, you can look what we do with the PrairieSky disposition. Roughly a third of that went to pay down debt to the balance sheet, a third back to shareholders and a third here we're going to reserve and decide what we're going to do with that later. So that's a significant distribution to shareholders, paying down debt, that's the $1.6 billion overall. So you can see that we're in a good position here and we've actually demonstrated that with the PrairieSky distribution and pay down of debt in a low price environment. So I don't know if this gives you any confidence, but that's we're already doing it.

Sure. I guess that's the implication is that you're almost jumping a step further. The obvious answer is that the Horizon is the difference, what you're highlighting is that the intention is then to very quickly rotate the free cash flow into distributions. Steve W. Laut - President & Non-Independent Director: I think what's going to happen, we're going to balance that cash flow. We talked about those four pillars. So I think initially probably more of the allocation will be weighted toward the balance sheet to get our balance sheet stronger, and then we'll be fairly well-balanced between the balance sheet, returns to shareholders, resource development and opportunistic acquisitions. And as I said earlier, there's really no gaps in our portfolio, so acquisitions have to make a lot of sense and add a lot of value. We've got to see if we can add value before we do it. Resource development, we're very disciplined. We're not going to bring on too much production. Obviously, you could add a lot of gas, but that doesn't make sense in this environment. So we've been very disciplined in our capital allocation, resource development, which really leave the balance sheet which will strengthen very quickly, as we pointed out earlier. That then leaves returns to shareholders, which would be the allocation that's the easiest and probably the most effective to do.

Perfect. Thank you.

Your next question comes from the line of Nima Billou with Veritas Investment Research. Your line is open.

Yeah. Just one follow-up – a couple of follow-up questions. Steve, I believe you listed once that if oil went back to $70, because everyone right now in Canada is communicating 15% to 20% improvement with respect to driving down capital costs per well across all plays, and in the U.S. it's on the order of 30% to 40% improvement. You said that, I believe, that if oil goes back to $70, whatever gains you realized now, you'd give back half of them. Is that on an operating cost basis or on a capital cost basis? Can you just clarify that, because I thought that was an important metric that people under-appreciate as oil prices move higher that you will give some, but not all of these savings back? Steve W. Laut - President & Non-Independent Director: Yeah. So let me clarify, I think actually, if you look at our drilling completion costs, facility costs, we're anywhere from 25% to 35% reduction right now. Operating costs are down 20%, it varies on what product you are. And I think how much is that's sustainable when prices increase and activity picks up will vary across the board. Obviously, a lot of our operating costs are based on fuel costs, so if gas prices go up, our costs will go up. But we think on an average basis if you look overall, we should be able to keep 50% to 60% of those cost savings as prices increase.

And that applies to both operating and capital? Steve W. Laut - President & Non-Independent Director: That's correct, yeah. It'll vary from each product, but in that range on average.

Okay. And the other question was just for the rest of the year, what it sort of implies on a CapEx basis. So you're quite confident that the second half of the year is going to trail by, it looks like $700 million, $1.5 billion in second half, $2.2 billion to-date. Can you just walk through the mechanics of why CapEx in the back half is going to be lower? Like what areas are diminishing or declining? Steve W. Laut - President & Non-Independent Director: It's all driven by Horizon. Obviously, Horizon Phase 2B is we're – capital spending is going down right now. Our manpower, we're de-manning right now at Horizon. And so your capital spending once you hit October drops dramatically at Horizon. We've only got Phase 3, and we're entering into the winter months and we do very little activity and expansion in December and January to better productivity. So that's what's driving it.

And to date you're confident that none of those estimates have changed? Steve W. Laut - President & Non-Independent Director: Correct.

Your full year CapEx guidance. Steve W. Laut - President & Non-Independent Director: Yeah. Nothing's changed at this point, yeah

Thank you very much.

There are no further questions at this time. I will now turn the call back over to Mr. Stainthorpe.

Thanks, Andrew, and thank you everyone for attending our conference call today. As shown on our results year-to-date, Canadian Natural's balanced and diversified asset base, coupled with a proven and effective strategy, continues to deliver. Our flexible and effective capital allocation strategy works in all market conditions, and has allowed us to remain on track with Horizon expansions and progress towards the final stages of our transition to long life, low decline assets, all while maintaining a strong financial position in an asset base with significant allocation opportunities to continue maximizing shareholder value as we move forward. If you have any further questions, please give us a call. Thank you again, and we look forward to our Q3 conference call in November. Thanks and good-bye.

This concludes today's conference call. You may now disconnect.