Good morning. We would like to welcome everyone to the Canadian Natural Resources 2021 Second Quarter Earnings Conference Call and Webcast. 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 5, 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 sir.

Thank you, operator, and good morning, everyone, and welcome to Canadian Natural’s Second Quarter 2021 Corporate Update Conference Call. Canadian Natural had another strong quarter financially and operationally. As I commented before, I believe our asset base is unique amongst your peer group underpinned by long-life, low-decline assets, and complemented by our conventional assets that allows significant flexibility, 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 a corporate culture that focuses on being effective and efficient. Over the years, Canadian Natural has clearly demonstrated its robustness, sustainability and the strength of its business plan. For 2021 and beyond, I believe we are only a few companies capable of delivering meaningful economic growth, increasing returns to shareholders and reducing absolute debt in a responsible manner. And as both Tim and Mark will discuss we’re pleased to additional clarity on how our substantial future free cash flows will be disbursed amongst our four pillars. For today’s call, Tim McKay, our President, will first provide a corporate update, then 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 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. Canadian Natural delivered strong operational results in the second quarter, as we achieved quarterly production of approximately 1.142 million BOEs per day. As a result of our long-life robust, low-decline assets, operational excellence, and with our capital discipline, generated significant free cash flow. We balance free cash flow to our four pillars of capital allocation maximizing value for our shareholders. In the first two quarters of 2021, we have reduced net debt by $3.1 billion returned approximately $1.3 billion to our shareholders through dividends and share repurchases, maintained capital discipline, executed on opportunistic transactions, which will add long-term value. The strengths of Canadian Natural’s business model are also applied to environmental, social and governance to deliver industry-leading performance across the board, a significant factor in our long-term sustainability. For the period from 2016 to 2020 in our oil sands operation, our GHG intensity is down 38%. North American E&P methane emissions are down 28%. In quarter [ph] in this time we have taken equivalent to over one million cars off the road annually. And over and above, we are the leading capture and sequester of CO2 in the oil and gas sector worldwide. Our safety record is top tier as corporate total recordable industry frequency improved to 0.21 in 2020 a reduction of 58% from 2016 levels. In June, we announced the Oil Sands Pathway to net zero through initiative alliance of oil sands industry participants have a goal of achieving net zero emissions in the oil sands operations by 2050. This is important initiative in the oil sands industry participants in Canadian Natural will further strengthen our leading ESG performance while delivering meaningful emission reduction and balancing sustainable economic development. And we’ll require collaboration with the federal and Alberta governments that together we…

Thanks, Tim, and good morning everyone. The second quarter was a strong operational and financially delivering net earnings of $1.55 billion significant adjusted funds flow of $3.05 billion and free cash flow of approximately $1.5 billion after capital and dividends in the quarter excluding acquisitions. As a result of the significant free cash flow generation, our net debt balance at Q2 2021 of $18.2 billion is down $3.1 billion from the end of 2020. And the net debt reduction from Q1 2021 was approximately $1.7 billion. This debt reduction includes the full repayment and cancellation of our Devon acquisition term facility of $2.125 billion in the quarter. We’ve also exercised the par call option on our bonds due in November to repay early in August, resulting an interest cost savings and further absolute debt reduction. Additionally, up to August 4, we have returned over $1.5 billion to shareholders in 2021. By way of our dividend that was increased in Q1 and through share repurchases. Our long-life, low-decline assets support a sustainable, growing and predictable dividend. This was evident through the period of challenging commodity prices in 2020, where we increased and maintained our dividend with a further increase in March of 2021, marking the 21st year of dividend increases. We continue to maintain significant liquidity including revolving bank facilities cash and short-term investments. Liquidity at Q2 2021 was approximately $5.6 billion. We had approximately $680 million in commercial paper, which we reserved capacity under revolving facilities. Free cash flow generation in 2021, defined as adjusted funds flow less budgeted capital and dividends is targeted to be substantial. And using an annual average WTI of approximately US$66 a barrel, free cash flow is targeted to range between $7.2 billion to $7.7 billion. As a result of this strong free cash flow, and increasing balance sheet strength through 2021 the Board of Directors has revised our share repurchase policy effective July 1, 2021, and authorize management to increase returns to shareholders through incremental share repurchases of approximately 1% of shares outstanding, or approximately 11 million shares per quarter. Additionally, the new policy provides that once the company reaches an absolute debt level of $15 billion, currently targeted to occur in Q4 of 2021, 50% of free cash flow is targeted to be allocated to share repurchases with the remaining 50% allocated to further strengthening the company’s balance sheet. This provides balance to our four pillars of capital allocation with increased returns to shareholders, further debt reductions, the ability to provide economic resource development and execute on opportunistic acquisitions. This clearly demonstrates the sustainability of our business model, the ability of our unique long-life, low-decline asset base with low maintenance capital requirements and effective and efficient operations to generate significant free cash flow. With that, I’ll turn it back to you Tim.

Thank you, Mark. Canadian Natural’s ability to deliver significant sustainable cash flow is driven by our effective and efficient operations, our high quality, long-life, low-decline assets, have low maintenance capital and significant reserves. Canadian Natural’s advantage is our ability to effectively allocate cash flow to our four pillars. We balanced our commodities in Q2 21, with approximately 43% of our BOEs, light crude oil SCO 34% heavy, and 23% natural gas, which gives us exposure to all improving commodity prices. And we have increased our annual production guidance – to 1.220 million BOEs to 1.267 million BOEs per day. We will continue to allocate cash flow to our four pillars in a disciplined manner, maximizing value for our shareholders, which is all driven by effective capital allocation, effective up and efficient operations and by our teams who delivered top tier results. In March, our dividend was increased by 11%. And we have 21 years of consecutive dividend increases at a CAGR up 20% during that time. Effective July 1, 2020 the Board is authorized management to repurchase 1% of the common outstanding shares per quarter, and then once net debt is below $15 billion; allocate free cash flow, defined as adjusted fund flows, less budgeted capital and dividends, 50% repurchasing shares and 50% to strengthen our balance sheet. As we achieved our interim environmental targets, we have set new targets, by 2030 reduced methane emissions by 50% from 2016 make baseline, by 2026 reduce in situ, freshwater and mining, freshwater, river water usage intensity by 40% from our 2017 baseline. As well with our Oil Sands Pathway to net zero initiative, we will work with our industry partners to advance key milestones, as we work towards our goal of net zero and oil sands by 2050. In summary, we continue to focus on safe, reliable operations, reducing our environmental footprint, enhancing our top tier operations. Canadian Natural is delivering top tier cash flow generation. We are unique, sustainable, robust and clearly demonstrate the ability to deliver returns to our shareholders by balancing our four pillars. That concludes our Q2 call. I will now open it up the line for questions.

[Operator Instructions] Your first question is from Greg Pardy with RBC Capital Markets.

Thanks. Good morning, and thanks for the rundown guys. Couple questions for you. The first one is just on Horizon, AOSP and I’m just wondering how anomalous was the 495,000 barrels a day in June and or is that something that is setting up more of an achievable number on a sustained basis just curious there?

Yes, that’s exactly what it’s doing for us, Greg. In the last kind of six months that you’ve seen continuous improvement from the 491,000, roughly to the 495,000. And that’s exactly what it’s all about. It’s about little increments, that we’re doing on site, on the two sites to improve our reliability and improve – enhance our predictability on our production. And so there you can – over and over a long period of time – the goal is to get closer and closer to those numbers on a sustainable basis.

Okay. And does that have much bearing down on your operating costs? Or is this something where you’re it’ll allow you to absorb either higher gas prices or higher power prices?

Yes, operationally, those incremental barrels are very, very low in terms of cost efficiencies. So yes, it will help absorb like some of the cost of fuel and some of the commodity inflation’s we’re seeing with the various, labor and steel and such. So, yes, it’s actually just helps mitigate that and drive those costs continually down in the oil sands.

Okay, terrific. And last one for me is, you made changes with the North West Upgrader, so we understand the financial bearing and so forth. But what’s happening there operationally, it’s, you’ve got an equity interest, we hear about it frequently, but we don’t really have a good view as to what’s going on. Are you guys becoming more operationally involved at the North West Upgrader?

Yes, I would say that’s correct. So, what we’ve done is, we’ve just conduct one of our operational persons from Horizon, who is very capable at help that operation to become more reliable, get higher utilization, and obviously, it will take some time. But yes, we have this conduct Canadian Natural person into that role. And we’re going to help that operation improve, which we expect over time will generate some cash.

Okay, traffic. Thanks very much.

Okay. Thanks, Greg

Your next question is from Neil Mehta with Goldman Sachs.

Good morning, guys. A lot of cash in the guidance here this morning, good to see. So a couple questions related to that, the first one is capital spending, as you guys picked up that level this year on the back of some financing that came through, any early flavors around 2022? Should we be thinking in that $3.5 billion to $4 billion fairway? Or do you think that there’s upside or downside to that number? And then I had a follow up question around the dividend?

Yes, it’s too early, we traditionally do our capital budget here in the fall, where we read call the different commodities, and then look at what the port pricing at that time and try and be prudent with our capital budget. So it’s too early to say. I mean, if you’re go back in time, when we started 2021, our capital budget was based on 45 WTI and 250. So, that the little bit of increase in capital spending, to me is just the opportunistic – opportunity here just to gather in some additional capital, it keeps some of the activities that we’re doing very well, going here, more efficiently. So, to me it’s just too early to say on that.

And your view of sustaining CapEx again, just reminds us Tim, where do you think the level is to keep production flat?

Well, it’s in that 3 to 3.5 always depends on the types of activities we do and not here. This year, it was 3. And so – it to me, it’s just generally in that range.

Okay. The follow up is just around the dividend. As you said, you have a long track record of raising it. Any thoughts given the amount of cash in the model, in the back half of the years of doing another dividend raise later this year? And just thoughts on the dividend growth profile on a go forward basis?

Hi, Neil, it’s Mark. Thanks for the question. It’s, the dividend, as you mentioned, as increased 21 straight years, it’s been growing and it’s predictable. And the board has, typically always raised that and done it in the March timeframe. As you see the free cash flow in 2021 and going into 2022, it’s significant, so there’ll be plenty of opportunity for the board to look at that and continue that growing dividend strategy. The free cash flow allocation policy that’s come out here is really because that debt repayment has accelerated so much in 2021, the $15 billion target in Q4 comes fast. So, I think that the, the additional returns to shareholders just gives more balance to the capital allocation of our four pillars, going through the rest of the year here. So, I think that dividend gets revisited at our regular time in that predictable period.

Okay, perfect. Thanks, guys.

Your next question is from Manav Gupta with Credit Suisse.

Hey, guys first of all, you always have a very informed view on apportionments a risk capacity as it relates to line three, where the inventories are and what your near term outlook for differentials is, if you could give us some of those details?

Sure. If you look at today, apportionment is high, record highs actually at around 52%, 54%, there is some maintenance being done in on the line three. But obviously, every barrel is flowing, the inventory levels in Alberta have been pretty steady at the 35 range. So, and then, of course, the differentials have been extremely strong and less than 20% at WTI. So, we look going ahead with the view that line three will come on in Q4, give us that extra capacity and as TMX continues to progress in 2023. We don’t expect that line to come on as well. So we’re very, positive today here that, things are moving in the right direction.

Okay. And a quick gratification here so, the revised guidance of discretionary that is post dividend cash flow went from 5.7, 6.2 to 7.2, 7.7 besides the change in oil price deck was there anything else which drove the increase cost production, or it was as simple as change in price deck?

No, its most of the change in price deck as well as continued, reliable operations targeted for the rest of the year.

Thank you for the clarification. And thank you for taking my questions.

Thank you.

Your next question is from Roger Read with Wells Fargo.

Yes. Good morning, I just would like to follow up a little bit on some of the, I guess let’s call them medium to longer term goals on the emissions, reductions. When do you think the CapEx gets spent on those? Or is it already happening? Is it going to be parceled out kind of on a ratable basis to the various years of targets? And then the other part of that question is, what do you think some of the ancillary benefits are in terms of improved operations, improved returns, overall better cash flows like just kind of think about it as something other than a regulatory driven of that? What are some of the other upside opportunities here?

Yes, it’s early to say we’ve only really started the high level conceptual basis on the trunk line, and the sites that are going in. Our teams have evaluated different technologies in terms of what we think is the most cost efficient, in terms of reducing our CO2s on site. So, right now, it’s very early in the process, we got to do a lot of engineering work. We have to basically on the engineering side, come up with the appropriate cost estimates. So to me, it’s just too early to there. I mean, that the real benefit at the end of the day is, what we’re looking to do is to be net zero in the oil sands by 2050. And to me, it’s just; we got to step through it. And as we talked about that, as we move through the process, we’ll come up with milestones and get more clarity on costs and how they’re allocated between the different partners of the initiative. So it’s just really, too early to have that economic model to today.

Well. No, I appreciate that on the oil sands, I was really thinking more about the targets to 2030 the reduction in methane, the decrease in freshwater usage. I appreciate 2050, I’m pretty sure I won’t be here holding you to account then anyway.

Yes. So on the methane reductions, what if the teams or field operation teams have done a fabulous job in the field. We’re using some of the latest technologies in terms of identifying leaks and opportunities of fugitive emissions to reduce it. So actually, yes, in the end we’ll see more benefit, because more natural gas will be sold. Obviously, some of the sites that we feel we can consolidate economically, and get that benefit. So yes, there’s actually some, there is economic benefit to those. And the freshwater is the same, obviously, the more water we recycle, it’ll be less energy, and more efficient on the operations. And so that’s what the goals are the teams and they’re working to progress those opportunities, but they’re all very economic and very complementary to our operating costs.

Okay, great. Thank you.

Your next question is from Menno Hulshof with TD securities.

Good morning, everyone. I just have one on shareholder returns, you’re clearly committed to a 50% free cash flow, allocation of buybacks once the $15 billion of debt is achieved, and that obviously precludes variable and special dividends, which are getting quite a bit of play in the U.S. Can you just remind us of how you think about the different shareholder return mechanisms of philosophically and whether variable or special dividends could ever become a part of the conversation? Or is that just too much of a stretch?

Yes, I think Menno, when we look at the asset base, and the long-life, low-decline, predictable cash flow; it really supports that sustainable, growing year-after-year type of dividend. So that today has been the focus, of course, dividends and these, allocations returns to shareholders or board decisions. But that’s really how we see the dividend. It just fits, the way we’ve gone about it fits really well with our asset base and returns to shareholders through share buybacks gives us that opportunity to return more value as we generate growing free cash flow.

And if you look at 2020 I mean, we were, one of very few companies that grew our dividend and maintain the balance sheet. So, the assets are very amenable to a predictable growing dividend.

Perfect, thanks a lot.

There are no further questions. I’ll turn the call back to Mr. Bieber.

Thank you very much, Operator. And sorry – thank you very much operator and thank you to those who joined us today on the call. If you do have any questions, please don’t hesitate to give us a follow up. Thank you. Goodbye.

That concludes today’s conference. You may now disconnect.