Canadian Natural Resources(CNQ) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported adjusted funds flow of CAD 5.2 billion and adjusted net earnings from operations of CAD 3.5 billion for Q3 2022, indicating strong financial performance [29] - Total forecast payments to Canadian governments from income taxes, property taxes, and royalties are estimated to be approximately CAD 11 billion in 2022, an increase of approximately CAD 6 billion or 120% from 2021 levels [12] - The company returned approximately CAD 4.9 billion to shareholders through dividends and CAD 5 billion through share repurchases, totaling about CAD 10 billion year-to-date [30] Business Line Data and Key Metrics Changes - Total quarterly production reached approximately 1.34 million BOEs per day, with natural gas production at a record of approximately 2.13 Bcf per day [7] - Liquids production was approximately 983,700 barrels per day, with SCO production comprising approximately 50% of total liquid production [8] - North American natural gas operating costs were CAD 1.13 per Mcf, down 2% from Q2 2022 [15] Market Data and Key Metrics Changes - The company captured a US$8.87 price premium for SCO above WTI, driving strong pricing and significant free cash flow [8][26] - International oil production was 24,493 barrels per day, down from 25,907 barrels in Q2 2022 due to maintenance [19] - Heavy oil production increased by 4% to 68,933 barrels per day, with operating costs lower at CAD 21.30 per barrel [20] Company Strategy and Development Direction - The company is focused on cost control and a disciplined approach to capital allocation, with a capital program of CAD 4.9 billion for 2022 [6] - The Pathways Alliance is progressing towards a CO2 injection hub, with significant investments planned for GHG emissions reduction projects [9][11] - The company aims to achieve net zero GHG emissions in the oil sands by 2050, with an investment of approximately CAD 24 billion between now and 2030 [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unique nature of recent outages at Horizon and Scotford, emphasizing the importance of learning from these events [41][42] - The company is optimistic about the solvent project at Primrose, with plans for commercial scale deployment expected by fall next year [46][48] - Management noted that while cost pressures are anticipated for 2023, no major showstoppers are expected [59] Other Important Information - The Board of Directors approved a 13% increase in the quarterly dividend to CAD 0.85 per share, marking the second increase in 2022 [31] - The company has maintained a strong liquidity position, with approximately CAD 6.5 billion available at the end of Q3 [33] Q&A Session Summary Question: Can you provide details on the outages at Horizon and Scotford? - Management explained that the outages were due to corrosion issues in equipment, which were not previously identified as risks. They emphasized the importance of improving maintenance practices to prevent future occurrences [41][42] Question: What is the timeline for increasing spending on the Pathways project? - Management indicated that spending has already started this year, with significant environmental work and regulatory submissions planned for 2023 [43][44] Question: What milestones are expected for the solvent project at Primrose? - Management stated that the project is on track, with expectations for commercial scale deployment by fall next year [46][48] Question: How is the Clearwater production ramp-up progressing? - Management confirmed that there are no significant obstacles, and production is being effectively managed with existing infrastructure [50] Question: What are the expectations for capital expenditures in 2023? - Management noted that while cost pressures are anticipated, no major changes to capital expenditures are expected at this time [59] Question: What is the outlook for Canadian gas prices? - Management indicated that increased gas production could put pressure on AECO prices, depending on maintenance schedules and expansion projects [66]