Good morning. We would like to welcome everyone to the Canadian Natural Resources First Quarter 2021 Earnings Conference Call and Webcast. Presentation slides are available to view with the webcast and in PDF format at www.cnrl.com. 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 to May 6, 2021 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, and good morning, everyone, and welcome to Canadian Natural's first quarter 2021 corporate update conference call. As mentioned, to facilitate today's call, you'll find a copy of the presentation slides on our Web site, which I would encourage you to download now in order to follow along. Canadian Natural had a strong first quarter financially and operationally. Our asset base is unique amongst our peer group, underpinned by long life low decline assets, complemented by our conventional assets that allow significant flexibility and all of which can generate significant free cash flow. Beyond our robust asset base, there is a corporate strategy that focuses on generating real returns for shareholders and a driven management team and corporate culture that focuses on being effective and efficient. Over the years, Canadian Natural has demonstrated its robustness, sustainability and the strength of its business plan. For 2021 and beyond, I believe we are one of a few companies capable of delivering meaningful economic growth, increasing returns to shareholders and reducing absolute debt in a responsible manner. For today's call, Tim McKay, our President, will first provide a corporate update. Mark Stainthorpe, our Chief Financial Officer, will then provide an update on our 2021 financial outlook as well as our strong financial position. Tim will then provide a summary prior to opening up for questions. Before we kick off, I'd like to remind you of our forward-looking statements shown on Slide 3, and our reporting disclosures shown on Slide 4. Of note in our reporting disclosures is that everything will be in Canadian dollars unless otherwise stated. And as well, we report our reserves and production before royalties. I would also suggest to review our comments on non-GAAP disclosures. So with that, I'll turn it over to you, Tim.

Thank you, Corey. Good morning, everyone. Starting with Slide 5. Canadian Natural is in a very strong position. We have great assets, operating excellence and with our capital the ability to strengthen our balance sheet and deliver returns to our shareholders. This also applies to environmental, social and governance side of the business, ESG, where we are delivering industry leading performance across the board, a significant factor in our long sustainability. Canadian natural takes a long term view on ESG, aimed at creating long term value ensuring we identify, assess, quantify, adopt and align ourselves and then execute. We are developing plans to address these risks by applying technology and innovation so we can continuously improve our performance in the near, mid and long term, always ensuring it's adding value. Moving to Slide 6. If you look at the overall ESG performance in terms of investment priority, it's very clear that Canada is a world leader and scores the highest in every category and should be an investment priority. Slide 7, a few weeks ago, our federal government had two announcements. First on April 19 was the federal budget, which recognizes that carbon capture, utilization of storage, CCUS is an important pathway for Canada to achieve its environmental goals. As well a few days later, federal government announced that counter will be increasing its goal from 40% to 45% reduction in GHG emissions by 2030. As part of the federal government budget announcement, we will participate in the consultation process with respect to CCUS, as well we'll work to align with these new goals. Next slide. [In a natural] -- Canadian -- Canada's oil and gas sector recognize the need to reduce GHG emissions, and we have been able to leverage technology and Canadian ingenuity to deliver impressive results. Canadian…

Thanks, Tim, and good morning, everyone. I'll start on Slide 28 with the Q1 financial highlights. Q1 was a very strong financial quarter as effective and efficient operations, along with the improved commodity price backdrop, led to adjusted funds flow over $2.7 billion. The free cash flow generated was over $1.4 billion after the prudent capital program and dividends in the quarter. This led to substantial balance sheet deleveraging as absolute debt was reduced by $1.4 billion compared to Q4 '20 levels. This represents $2.9 billion of debt reduction since June of 2020, further underscoring the ability of our long life low-decline assets, combined with safe, effective and efficient operations to generate leading free cash flow. The sustainability of our funds flow allows for consistent and increasing returns to shareholders. In March of this year, we increased our quarterly dividend by 11% to $0.47 per share, which contributed to a year-to-date shareholder return of about $1.1 billion. This year's dividend increase represents the 21st consecutive year of dividend increases at Canadian Natural. Canadian Natural's balanced approach to capital allocation, coupled with our sustainable free cash flow allows us for increasing returns to shareholders. While paying down absolute debt and growing our diverse asset base, something that sets Canadian Natural apart. This can be seen on Slide 29, the ability to deliver significant and sustainable free cash flow. As you can see, in 2020, we generated strong free cash flow in a lower commodity price environment. Now with the economic rebound and increased demand and pricing for commodities at approximately $60 WTI, Canadian Natural is targeted to deliver substantial free cash flow in the range of $5.7 billion to $6.2 billion after budgeted capital and dividends. And as Tim mentioned, our free cash flow yields are tracking higher than global peers.…

Thanks, Mark. In summary, Slide 40, Canadian Natural's ability to deliver significant free cash flow in today's environment starts with our large reserve base, of which 83% be in long life, low decline. Of our approximately 1.246 million BOEs a day, long life, low decline asset based makeup approximately 770,000 barrels a day, of which approximately 455,000 barrels a day is no decline, high value SCO production. We have a diversified product and asset that is driven by our effective efficient operations, our area knowledge, our ownership and operatorship of infrastructure, and we have a low sustainable in capital. We have 1.6 Bcf of natural gas and with our diverse assets ability to add low cost production. We have flexible and effective capital allocation and our ability to be nimble to capture opportunities. We simply optimize capital allocation to maximize value for our shareholders. Our culture of continuous improvement is unique among our peers as our teams are focused on delivering safe, reliable, active and efficient operations across our asset base. Next slide. With oil at approximately $60 per barrel, in 2021, Canadian Natural can deliver leading free cash flow generation of approximately $5.7 billion to $6.2 billion, which supports our sustainable growing dividend of 21 years. We have significant debt reduction, improving our already strong balance sheet. Finally, across the company our teams are focused on reducing our environmental footprint through technology and innovation, and we look forward to participating in the federal government consultation period. With that, I'll turn it over for questions. Thank you.

[Operator Instructions] Your first question comes from the line of Menno Hulshof from TD Securities.

I'll start with a question on the balance sheet. So your debt metrics, as you talked about, they're coming down really quickly. And you've made it very clear that the the balance sheet will continue to attract the vast majority of free cash flow over the near term. So my question is, what is the endgame in terms of the leveraging process pre COVID, I believe you're targeting 1.5 times and $15 billion of total debt. So do those targets still apply? And at what point can we reasonably expect buybacks to ramp back up again?

I think that when you look at the free cash flow generation, there is lots of optionality going forward here. As you have recognized the focus, though, is going to be on the balance sheet or on absolute debt repayment in the near term. We evaluate this all the time and we'll continue to do that go forward. As far as the buyback, right now, we're looking at really just offsetting our dilution through the rest of this year, and that's the target today.

And then my follow-up would be on base and egress. Maybe we could just get your thoughts on current market access, including any thoughts on apportionment and inventories and how that is, impacting your very early thoughts, I suppose, on pure maintenance versus growth into 2022.

There's a lot of speculation on that one, because there's a lot of different items going in the news here today. But I think we'll just going to step through it as we expect the egress to continue to improve. Line 3 looks like it will be Q4, TMX maybe a little late, but still moving forward. Obviously, there are issues with Line 5 and potentially the Dakota Access. But it's too early to speculate. I mean, if you look at in Alberta today, the light oil side has zero apportionment. And so it's hard to speculate what that impact of those two items will be. Obviously, it will hurt Alberta to some extent if there's apportionment and a discount. And as well with the Dakota Access, again, if oil starts to come back in through Cromer, may or may not impact us, because I would suspect the people that are on the Dakota Access are making their own arrangements ahead of time if they need to. So it's just really -- there's a lot of different issues there. I'm still very bullish in terms of that a lot of these egress issues will continue to move forward.

So fair to say that you're in a holding pattern through the end of the year?

Well, we're not changing our capital. We're basically just staying with the status quo.

Your next question comes from the line of Greg Pardy from RBC Capital Markets.

Tim, just in your -- I guess it was Corey in the opening remarks, you talked about solvents and so forth. And I'm just wondering if you can maybe give us an update on where you'd expect to apply the solvent technology? And then just anything you might have to say on in pit extraction and then also just potentially on autonomous haul trucks, just interested in where you're going with that technology?

So for the solvents, obviously, the pilot at Kirby South is very advanced. And if we look across our asset base, both the Kirby sites and the Jackfish sites could be very amenable to that technology. So we're very happy with the results today and now it's just trying to work out a plan of going forward. In terms of Primrose, the steam plant area, that's a little more experimental. We obviously have to pilot it for a couple of years to see if that can be applied to the Primrose area and the steam plant pieces. So too early to say at Primrose, but I would say for the SAGD it looks very promising. IPEP, we continue to advance our commercial engineering. There's a lot of benefits to IPEP but there's also a lot of capital costs upfront. So our teams are still evaluating it. And we hope to have something this year to say whether we're moving forward with it or not. It obviously is a leading technology. But again, one of the things we pride ourselves on is doing a detailed work and ensuring that the capital forecast that we use is correct. And then I guess, what was the last question there, Greg?

It’s autonomous haul trucks -- I was throwing everything in there…

You know what, the autonomous trucks, some operators have more benefit because of the way they operate in that and we have less benefit. But having said that, I mean, our teams are looking at electric and hydrogen technologies as well to reduce their environmental footprint. That's probably the biggest thing we see for our benefit is reducing our GHG and how to do it with either electric or hydrogen. But autonomous trucks, there is a bit of a cost piece there to that and it really depends how efficient you are. And our teams do a great job, they measure our performance down to the second. So I'm really proud of the way our teams have operated in the oil sands.

And just as a second question. You touched on carbon capture storage at the outset you guys have done this very early on, I think, with Horizon. And obviously, you'd mentioned AOSP and the Northwest upgrader as well. But maybe just focusing on Horizon for a moment. I think you've got that carbon capture starts right off the hydrogen plant. Would there be scope for you to increase how much of the CO2 you're capturing off of the Horizon facility overall, or are you doing much of that now? Just trying to get a sense there.

What we did early on and part of it was the sequestering CO2 and the tailings. So off of one of the hydrogen plants we have capture it's not fully utilized, because there's only so much CO2 that we can put into the tailings. And so there is available capacity there as well as on the second hydrogen unit that we could expand, capture and obviously increase more CO2 capture at Horizon. So there is those opportunities for sure.

Your next question comes from the line of Dennis Fong from CIBC World Markets.

The first maybe just to follow along with the solvent strategy. I appreciate that you kind of gave us a little bit more context as to the stage of development for your work at Primrose versus the SAGD component of things. And obviously, you guys have been doing quite a bit in terms of lowering your GHG intensity as well. I'm just curious as to how much of the implementation of solvent technology at Kirby and Jackfish are currently potentially within your 2025 goals of reducing GHG intensity across your platform? And secondarily, how much do you think could be incremental to that with a successful pilot out of Primrose?

Yes, I would say it depends, obviously, on how aggressive you want to be on that target. So if you look at just a normal approval building and that you're probably looking in that time frame for something like the SAGD piece here to really start to get into service. But that would be, in my mind, pretty aggressive. Obviously, I think the best thing for our company is to step through it and make sure that we do the right homework. But just from a construction point of view, considering that we're basically halfway through 2021 that would be, in my mind, kind of on the aggressive side to start to -- well, we would have to start almost to date to get it in place by 2025.

So the idea then would be that any of these technologies could provide incremental benefit versus your existing 2025 goal of GHG intensity reduction, i.e., like the benefits are not currently kind of included in your goals added yet?

Yes, that's correct. If you look at what -- there's a number of technologies we're working on. Obviously, in the meantime, there's a lot of other work being done to reduce our GHG emissions. But yes, carbon capture the solvents are all future technologies. And same with the molten fuel carbonate cells. They're all future technologies that will actually help us to reduce the absolute CO2 emissions.

And then just following on from Menno's question there, just around capital allocation. Obviously, the primary focus here is around reducing the absolute debt number and getting to a lower leverage situation. How should we be thinking about kind of the longer term strategy, obviously, balancing between the four pillars thinking about returning value back to shareholders? But also there are a number of projects that are fairly low capital intensity and actually have fairly significant economic upside. How should we be thinking about maybe some of the criteria from a leverage perspective that you would consider before -- as well as egress before you would consider moving forward on things like IPEP, obviously, versus what you kind of described before or even debottlenecking projects at Horizon, or some of the other low cost projects that you've kind of discussed at AOSP as well?

Well, that's a very -- the hard part of that is that we would have to kind of speculate in certain conditions, whether it's egress or pricing, and and it's really difficult to say. What I can say is, if you look out -- I can't see us doing a major project in terms of capital expenditure, in terms of Horizon expansion. If we do anything, I suspect, it will be very small. We'll leverage off our our facilities. We're doing drill to fill on the gas side. With the oil side, it would be essentially brownfield small developments. I just don't see really anybody in the industry really being aggressive on any kind of major capital program.

Your next question comes from the line of Neil Mehta from Goldman Sachs.

You guys have proven out M&A is a core competency for your business. Tim, I just wanted your perspective on how you're seeing the A&D market at this point and are there active opportunities either to buy or to sell?

What we see in that market today is that a lot of the smaller entities are doing deals emerging and that and I think they need to. On a bigger scale, I really don't see anything. If I look at ourselves, we have no gaps. We have lots of opportunities within our own portfolio today. So what I see is there will probably be a little more consolidation but it will still continue at the smaller company's level.

And you guys did the Painted Pony acquisition, your large natural gas producer. Just curious what your thoughts are on the [ECHO] market here and any comments on how the natural gas part of your business is contributing to the cash flow 2021?

The Painted Pony asset was really an opportunistic acquisition about a year ago. Gas prices were obviously quite a bit different and even the forecast was quite a bit different at that time. And with it, gas prices have strengthened. I think everybody is being, for the most part, significantly more capital disciplined now than they ever have been. And so I don't see any big concerns on the egress here in the short term. But I think people are getting their balance sheets in order, and the [ECHO] price is looking strong. In our budget, had about [250], I think, around [270], maybe [275] for the year now. So it's a little bit stronger. Obviously, we're continuing with our gas program as it seems to be holding in.

[Operator Instructions] Your next question comes from the line of Phil Gresh from JPMorgan.

I want to try just the balance sheet follow-up question, maybe just worded a little bit of a different way. The 1.5 times leverage target has historically correlated. It was something around $15 billion of net debt, your target for the end of the year. At these prices would be below that. It looked like closer to $14 billion. So I was just curious -- has the net debt target having gone through COVID and things like that. Has that longer term target changed at all in your view? Do you still think it's a fair bogey for us to be thinking about, recognizing that even moving forward, if you shifted the mix that there would still be a debt paydown element to it, I would think.

I mean, when we were going into 2020, we were obviously forecasting some large debt reductions in that year. Things changed a little bit, we were able to kind of enter and exit pretty much flat and do that acquisition at the end of the year, which was strong. And now as we go into 2021, we're just back on that track of paying down absolute debt. And as I mentioned, with that maturity profile to actually facilitate being able to do that on an absolute basis. So I think, yes, as we track down lower, there's always going to be opportunity to look at that free cash flow and the optionality there to balance the four pillars. But just here in the near term, we're focused on that absolute deviation.

My second question is just around the sustaining CapEx of the business. Coming into the downturn, I think it was around $3.7 billion forecast, [now] it's $3 billion. And I was just wondering how much of that in retrospect do you view as cyclical versus structural factors that you've just improved and taken costs out? And just with your updates here around GHG, do you think that there will be incremental capital spending required to achieve these objectives that maybe would be considered sustaining capital?

Well, the sustaining capital, I mean, obviously, there's lot of factors that change from year to year. Obviously, the absolute cost of doing business changes the cost of steel and everything else. So today, we're at the $3 billion it's based on a balance of pretty much equal of oil and gas growth. So to me -- it depends on what kind of program we do in the future. A lot of times depends on the where our sustaining capital would be. In terms of the GHG piece, it's too early to say in terms of what that capital profile would be. Obviously, a big part of it is going to come out of what the federal government has in mind after this consultation period. And so today, I think we'll just look at participate in that process and then we'll figure out what that capital profile could look like. Obviously, carbon capture the way they had it obviously lends itself very good for the bigger facilities, whether they're cement plants or oil sands plants or fertilizer companies, it seems to be targeting some of the larger [emitters]. So we'll have to see what that program looks like here in the future.

There are no further questions at this time. I turn the call back to management for closing remarks.

Thank you, operator, and that wraps up our formal presentation. I'd like to thank all of you for your participation this morning. If you do have any questions or follow-ups, please don't hesitate to give us a shout at the IR team. Thank you very much. Take care. Bye.

That concludes today's conference call. Thank you, everybody, for joining. You may now disconnect.