Good morning, ladies and gentlemen, and welcome to the Canadian Natural Resources Earnings Results Conference Call and Webcast. After the presentation, we will conduct a question-and-answer session and instructions will be given at that time. Please note that this call is being recorded today, November 5, 2020, at 9:00 a.m. Mountain Time. I would now like to turn the meeting over to your host for today's call. Corey Bieber, Executive Advisor. Please go ahead, Mr. Bieber.

Thank you, operator. Good morning, everyone, and thanks for joining our third quarter 2020 conference call. With me this morning is our President, Tim McKay; and Mark Stainthorpe, our Chief Financial Officer. Before we begin, I’d refer you to the special note regarding non-GAAP measures contained within our press release. These measures used to evaluate the company's performance should not be considered to be more meaningful than those determined in accordance with IFRS. I would also like to refer you to the comments regarding forward-looking statements 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 noted. With that, I'll now pass the call over to Tim.

Thank you, Corey. Good morning everyone. Canadian Natural delivered top tier operational results in the third quarter, 79% of our liquids production from our high quality, long-life, low-decline assets, which were resilient in volatile pricing. And it was a result of our operational excellence, ability to enhance margin and capital discipline, we delivered significant substantial cash flow in a quarter. The strengths of Canadian Natural business model were also implied to environmental, social and governance, to deliver industry-leading performance across the board, a significant factor in our long-term sustainability. Canadian Natural and the entire Canadian oil and gas sector leads the world and has delivered game changing environmental performance. In the third quarter, we published our 2019 stewardship report to stakeholders and highlights from the report are, total recordable injury frequency at 0.28 down 51% since 2015, awarded approximately $550 million in contracts to 150 indigenous businesses. Three out of eight of our -- are female our independent directors, corporate GHG emissions down 16% from 2015, both science mining and in situ GHG intensity down 36% for 2016. At quest our 70% owned carbon capture facility, we reached a milestone in the third quarter with accumulative 5 million tons of CO2 injected equivalent to taking 1.25 million cars off the road annually. And we are a leading capture and sequester of CO2 in the oil and gas sector worldwide. These are just a few examples of our ESG excellence. In our oil sands operation, we can develop technologies using Canadian ingenuity to continue to move it closer to Canadian Natural’s aspirational goal of reaching net-zero emissions. Canadian Natural has multiple pathways to achieve net zero. With the actions identified in the near, mid and long-term and the strength of the Canadian Natural, Canadian Oil Sands Mining asset with its long…

Thanks, Tim. The third quarter was strong operationally and financially, as we delivered significant free cash flow of approximately CAD 1 billion after capital and approximately CAD 470 million after capital and dividends with adjusted funds flow of CAD 1.74 billion. These results reflect high planned maintenance and turnaround activity both horizon and Scotford in the quarter. Net earnings in the quarter, we're also strong at CAD 408 million. This clearly demonstrates the advantages of having a low cost structure with breakeven prices, including maintenance capital and the dividend at US$30 to US$$31 WTI, and a unique portfolio of assets with low decline supported by zero decline production for mining assets, which provide high quality, premium values synthetic crude oil production. Our balanced and diverse product mix limits our exposure to one product, with fourth quarter production targeting approximately 45% high value light crude oil, synthetic crude oil and NGLs, approximately a third heavy thermal crude oil and approximately a quarter of natural gas whole new basis. Importantly, approximately 80% of our liquids production is from long-life, low-decline assets, which require less maintenance capital, providing sustainability through volatile prices. In the fourth quarter, we are targeting over 1.6 bcf a day of natural gas production, including our recent acquisition. Based on the current Q4 strip pricing, including the value of the liquids, our natural gas assets are forecast to generate approximately CAD 1.2 billion in annual operating cash flow. The operating flexibility of our asset base and the ability of our teams to execute the plans was evident in the quarter as we balanced production within the asset base to increase funds flow and maximize value. Our flexible capital allocation ensures long-term free cash flow generation and continued balance sheet strength. Net debt decreased by 1.1 billion compared to Q2 2020 levels as free cash flow contributed to debt repayment in the quarter. Liquidity remained strong at the end of Q3, with total availability of CAD 4.2 billion, including cash and short-term investments. And we retired a $1 billion bond at maturity in August. Our long-life, low-decline assets and effective and efficient operations gives us the ability to sustain returns to shareholders over the long term. This is demonstrated by the 20 consecutive years of dividend increases and reflects our culture of continuous improvement, our ability to be effective and efficient, and the relentless focus on Canadian Natural in controlling our costs. This all contributed to significant free cash management generation and strong financial results in the quarter. With that, I'll turn it back to you Tim.

Thank you, Mark. Canadian Natural’s ability to deliver significant and sustainable cash flow is driven by our effective and efficient operations, our drive continuous improvement, and for 2020 we on track for targeted savings of approximately $745 million. As an example, Q3 2020, North American E&P liquids operating costs down 17% versus Q3 2019, as a result of our effective and efficient operations, the quality of our assets. We have a low free cash breakeven including capital expenditures plus current and dividend of approximately US$30 to US$31 per barrel. Canadian Natural continues to take proactive and effective steps to ensure the health and safety of our people working for us, and we continue to enhance our COVID-19 program across the company. We are on track to achieve our environmental targets, and we'll continue to lower intensity as we work towards our aspirational goal of net zero in the Oil Sands. In Q4, we are targeting over 1.6 Bcf natural gas production, including our recent acquisition based on the current natural gas strip pricing, including the value of liquids, our natural gas assets could generate approximately $1.2 billion on an annualized basis. In summary, we continue to focus on safe, reliable operations, reducing our GHG intensity, enhancing our top-tier operations. Our high quality diverse assets are delivering top-tier cash flow generation. We are unique, sustainable, robust, and clearly demonstrate the ability to deliver returns to shareholders by balancing our four pillars. That concludes our Q3 call. I will now open the line for questions.

[Operator Instructions] Your first question comes from Greg Pardy from RBC Capital Markets. Your line is open.

Thanks. Good morning. Couple of questions for you. Tim, maybe just to come back to the to the capacity growth at Scotford, and then, let's maybe just weave in Horizon, but do you see further low cost the bottleneck and capacity increases that you could do here either in 2021 or 2022? Is there much -- is there still much low range for therefore you to go after?

Well, at Scotford, there is still some capacity there. That won't happen till 2022, but that we're working through with our partner. And then as far as Horizon, yes, there is opportunities to further enhance that. We're proceeding with some work into 2021, and again in 2022. But there is some value enhancements there that can happen as we continue to operate these facilities. We're always looking for opportunities to enhance that production, as well as lower our costs.

Okay, terrific. And just the Scotford, I mean, just rough order of magnitude similar to what you've just done it at 20,000, or is that -- is it too early?

It's too early to say.

Okay. Okay. The second question is, sorry, sorry, go ahead, Tim.

Yeah, we really didn't get a chance to test Scotford here before curtailments here in November.

Okay. Okay, understood. And maybe just come back to the last conference call. And this is pre-Painted Pony, but questions for Mark, I think you're thinking at that time was this what our net debt should be, kind of, flat year-over-year, if you exclude Painted Pony, and then just look at how things shake out through the balance of the year, which still come close to that, do you think I mean, you've obviously made good progress with this quarter?

Yeah, thanks, Greg. I mean, certainly the commodity prices are ever changing here. And that was an August pricing kind of strip. But yeah, I think if you exclude the acquisition, from a capital perspective in Q4, we're going to generate strong free cash flow in the quarter. And if you exclude that, we'll be driving towards those levels. So that free cash flow, as you saw in Q3, going to debt repayment, and again seeing strong cash flow at cruncher pricing in q4.

Okay, terrific. Thanks guys.

Thank you.

Your next question comes from Neil Mehta from Goldman Sachs. Your line is open.

Hey, guys, congrats on a good quarter here. The first question I had was around your natural gas business. Can you talk about how you see this fitting in strategically in the context of CNQs portfolio, whether you want to grow gas as a percentage of mix over time? And then you talk about, strip being $1.2 billion cash flow business? Can you frame out what you think the free cash flow is? So help us understand the CapEx associated to fund that cash flow?

Yeah. So just in the context of our natural gas volumes, obviously, what we target to do is add value long-term. And so whether it's gas, oil, really with our asset base, try and maximize value all the time. So if you look at this year, we started off at $4.1 billion, we went down to $2.7 billion. Obviously, that original budget had more oil waiting, that it was greater pricing and better value for us. As we got into June, July, natural gas prices continued to strengthen. And obviously, we're reallocating capital within that context of 2.7 billion into natural gas because it's more value added in Septimus and Townsend so. So from a – there is no intent to grow one product or another. Every year we look at it, and every -- all the time, we're modifying our plan to maximize value. In terms of the free cash flow, it's really difficult to say we have a small program here at Septimus and Townsend here in the fourth quarter. But I mean, really a big part of that. It's all just free cash generation from our operations. So it's really -- that's the only way to look at it in the short-term.

Yeah, very clear. The follow-up is just around capital spending. So a couple questions there. Are you guys still planning on doing an open-house later this year? I guess, I'll be virtually -- is that when we'll get a sense of 2021 spend? I know you've mentioned some release in December. And any early thoughts and flavors of given where the curve is how it could look relative to the $2.7 billion this year.

Hey, Neil, it’s Mark, we're still working through that. We do plan to have an announcement or release in sometime in December, around what the budget is for 2021. We're still working through how that will actually be communicated whether it's, some more full blown presentation or not, but we’ll get there. We're going through it right now. So it's too early to really indicate directions, we got to kind of work through the final touches on it.

Okay, all right. Thanks, guys. Looking forward.

Thank you.

Your next question comes from Asit Sen from Bank of America. Your line is open.

Thanks. Good morning. Tim, we finally have started to see some M&A in the space both in the U.S. and Canada. Question for you, what do you think is triggering this mini wave? You've said, no holes in the portfolio. But from a broader industry standpoint in North America, do you see more consolidation? Or and what do you see -- the main impediments for consolidation?

Yes, I think, we probably are in a time of consolidation. Obviously, there's some very healthy companies, and there's some companies that aren't so healthy. Obviously, you know, to the consolidation thing, there are opportunities to improve your operations both on capital and G&A and such. So, you know, I think on broader basis, yes there will continue to be some consolidation here over the next year, as you know, we've seen. You know, whether -- how it happens, who does it, that's always hard to say. You know, really it's just -- to me just a cycle, and -- it's pretty common in the cycles that M&A does happen.

Okay, great. And Tim, on your international asset portfolio, and you have some good cash flow generating assets in North Sea and offshore Africa. How do you see that portfolio? Are there rooms to deepen or rationalize? How do you think about that portfolio?

No, we'd like our internal assets. They are free cash generating. We've made several billions of dollars over the years out of those assets overtime because they are free cash generation. No, we're very happy with them. And we'll just continue to invest prudently into those assets to continue to generate free cash flow.

Thanks.

Welcome.

Your next question comes from Menno Hulshof from TD Securities. Your line is open.

Good morning, everyone. I just have one question on your In Pit extraction process, given the potential for a pretty significant reduction to division and emissions. Just looking at the press release, you talked about pilot work have been slowed down because of COVID. But can you just give us an update on what the data looks like so far? Sort of your best guess on where things stand in terms of the timeline to commercialization if everything goes according to plan? And maybe some high level thoughts on how important this work is in the context of your net zero aspirational target? Thanks.

Yeah. I mean, IPEP is a great project. Obviously, we're piloting it. We wanted to pilot it again further this year to refine it. You know, from a sediment stacking perspective, it worked well. We needed to get a higher stackability in the higher refines areas, as well as recoveries on the higher refine material was -- was not as good as we wanted. So we wanted to do some refinements in the high refine area. That was supposed to happen this year. In the meantime, because we can't pilot it and the COVID seems to be dragging on a little longer, you know, we've been doing basically commercial -- commercial engineering, with the people that were involved with IPEP, just to keep that progressing there. You know, in terms of commercialability, you know, we're looking to step into it -- what it is, as you would step into it over time, and I believe it was 2026 kind of time range, that we had started converting over to IPEP. So it was going to be a very methodical process in terms of converting over to IPEP starting at 2026 around.

Okay. So the 2026 timeline still seems achievable.

I think so. Yes. We'd like to really get out there and do the final testing on the high fines material just to ensure that we feel comfortable with where it's -- it's ability. But yes, so far that's still the plan.

And then in terms of the conversions, you'd be thinking sort of 3 to 5 years or shorter a bit longer?

Yeah, 3 to 5. Nope, that's about right timeframe.

Perfect. Thanks Tim.

Thank you.

Your next question comes from Manav Gupta from Credit Suisse. Your line is open.

Hey guys, I think on the last earnings call, Tim, you specifically said that you will flex our total muscle in 3Q and I think it was under appreciated how strong that muscle was, because the volumes it -- 287 and the cost went to 785. So congratulations on that. My question here is, is that, as we thought about Thermal in situ for 4Q, we were thinking as horizon goes up, Thermal in situ comes down because of the production curtailments, but now that the curtailments are gone, obviously Thermal in situ might come down a little, but do you have to take it down to all the way to 230? Or could you run at a higher rate now that Thermal – the production curtailments are gone?

Yes. So, so yes. Thank you for the comments on the Thermo piece. It's -- yeah, so for the month of November, obviously a Thermal will be curtailed as well as ASOP and a few other properties. And then, when we hit into December, we will start to increase production. You will -- we'll -- obviously we'll take a look at how much we would want to increase our thermal production based on pricing, with the flexibility on the, that the cyclic steam side. We may be better off to delay a cycle and move it into next year. So we're always looking at that and seeing how we can maximize value, but this production in general for December would go up.

Okay. And one follow up, sir. Enbridge line 3, what's the next important milestone or data point we can watch. And in your opinion, could this be a 2021 event -- the start-up and Enbridge line 3?

Yeah. I understand that there is a -- some information that's supposed to come out of the courts potentially next week, which would then kind of give them that kind of stepping stone into finishing line three. So, hopefully that all proceeds, they're kind of in the mid 2021 timeframe. So but I believe it's next week, but really you'd have to talk to Enbridge.

Thank you for taking my question.

You’re welcome.

Your next question comes from Matt Murphy from Tutor, Pickering, Holt. Your line is open.

Thanks. Good morning. Maybe just a quick follow-up on Manav’s question on IPEP and maybe broadly on capital associated with achieving net zero ambitions over time. I guess, just curious how you think about investment in emissions reduction technologies. For example, as part of the broader capital allocation process, is it coming down to returns versus returns and competing for capital, or is some incremental consideration for the environmental side, for example?

Really we try and balance both obviously returns are extremely important. And so, you know, if you look at something like IPEP, what was really so motivating to do that is; one, it reduced our GHG emissions. Secondly it got rid of our tailings pond. And with that, we had a reduced liability in terms of reclamation. So, what we try and do is find projects which complement their operation, add value long-term, as well as reduce our environmental footprint. So, we try and balance many different items and our teams are very good at coming up with creative ideas to reduce your environmental footprint and add value. So, I think, through our technology and innovation group under joy is very structured in terms of pushing projects that give us returns rather than just to do a project.

Thanks Tim, and maybe just a quick follow-up for Mark on the on the comments on maintaining largely flat net debt year-over-year. I think one of the key moving pieces that we talked about previously was some working capital movements over the course of the second half of the year. Just wondering if you could remind us how you're thinking about the progression of cash from that moment component in the fourth quarter. Thanks.

Yeah, sure Matt. I mean, it's always difficult to predict the changes in working cap as we go through, it will depend a little bit on pricing and how December looks as far as receivables as we get paid in the following quarter. So, you didn't see a pickup from it in Q3, which we kind of expected and contributing to that ability to repay debt along with the free cash flow. So, it's difficult to predict, but outside of that, again, with the assets, the ability to generate free cash flow in the fourth quarter will be evident I think even at lower commodity prices given the low breakevens.

Thanks guys.

[Operator Instructions] Your next question comes from Roger Reed from Wells Fargo. Your line is open.

Thank you. Good morning. Just what I'd like to maybe understand going back to -- I think it was Manav's last question a little bit on moving crude down and increasing production in December. We've seen fairly tight WCS to WTI differentials. As you think about your $31 breakeven and potentially wider differentials, I think whether or not you increase production, somebody else is, what do you think is kind of your tolerance for a wider, WCS differential as you increase production into -- I would guess, more like early 2021, more so than the end of 2020?

Yeah, if you look at what's gone on here the last year or two, really there hasn't been any significant production adds, not on the heavy oil thermal side. And so what we've seen here, basically, from March to, essentially, November, was a decline in oil storage in Alberta. I think it went down to around close to 20 million barrels. Obviously, with curtailment coming off, as well as maintenance being completed, whether it's horizon SOP or the other properties in Northern Alberta mining properties. So, typically we do the higher production during the winter months, obviously, because it's of the weather, and obviously, if we're going to run into winter, you have to be able to run the whole winter. So, there could be some pressure, but it's -- the storage levels were down at around 22 million barrels, the pipeline is essentially -- when storage was going down, September and October, ironically a portion of it was 12% and 18%, which makes zero sense. So obviously there's still gamesmanship being done on the apportionment side. But, I think other than just companies running out production there, I don't really see a lot of production ads, other than just people trying to run it the maximal capability of their properties.

No. I mean, that makes sense. So I mean, should we think about it temporarily, as whatever the market takes -- as what the market takes or not worry so much about a specific differential. And I'm thinking what ultimately kind of pushed the whole curtailment was obviously quite a collapse in the market. So do you think, if we were to go above say, $15, people will be a little more careful or pullback or after all it's the oil market. And we'll all just push, until we push too far and get pushed back the other way?

Yeah, I just look at it nobody really has added any capacity. So other than really ran into production, I don't see it being really a long-term thing. Again, during the winter months, so if you're going to run your operations, you're going to run kind of at a good rate, not necessarily full depending on the pricing. But once March hits, turnaround activities begin again. And that pressure comes off. So I really look at it as a short-term blip, but maybe some gamesmanship, in terms of apportionment and differentials. But, really there has not been a significant amount of supply. And it's just all going to be, how companies run during the winter months. And obviously what's, really important is our pipelines to continue to run safely and reliably over the winter months. In the past couple of years, there were some incidents on the pipeline side, right around the November timeframe that put the pressure on the differentials.

Okay. I appreciate it. Thank you.

Yeah.

There are no further questions, at this time. I'll turn the call back over to the presenters.

Thank you, operator, and thank you, everyone, for attending our conference call this morning. Canadian Natural's large, well diverse asset base continues to drive significant shareholder value. The ability of our teams to deliver effective and efficient operations with top-tier performance is contributing to substantial and sustainable free cash flow. This, together with effective capital allocation, contributes to our goal of maximizing shareholder value. If you do have any further questions, please don't hesitate to give us a call. Thanks and goodbye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.