Canadian Natural Resources(US:CNQ)2021-03-05 01:28Financial Data and Key Metrics Changes - Canadian Natural Resources reported a record annual corporate BOE production of 1.16 million BOEs per day, an increase of approximately 65,000 BOE/d over 2019 levels [8] - The company achieved record low annual operating costs of CAD 20.46 per barrel of SCO in Oil Sands Mining, a decrease of CAD 2.10 per barrel compared to 2019 [28] - Adjusted funds flow for Q4 was CAD 1.85 billion, with free cash flow of approximately CAD 700 million after capital and dividends [38] - Net debt balance at the end of 2020 was down approximately CAD 80 million from 2019 levels, with over CAD 2.2 billion returned to shareholders in 2020 [39] Business Line Data and Key Metrics Changes - North American natural gas production was 1.48 Bcf per day, comparable to 2019, with annual operating costs down 2% to CAD 1.14 per Mcf [13] - North American light oil and NGLs production was 84,658 barrels per day, down 13% from 2019, but annual operating costs were CAD 14.61 per barrel, 4% lower than 2019 [17] - International oil production averaged approximately 40,200 barrels per day, a decrease of 19% from 2019 levels [19] - Heavy oil production was 70,279 barrels per day, down from 82,189 barrels in 2019, with annual operating costs at CAD 17.59 per barrel [21] Market Data and Key Metrics Changes - AECO prices for 2021 are projected at CAD 2.78 per GJ, an increase of approximately 31% over 2020 levels [16] - The company reported a strong performance in thermal operations, with production reaching approximately 249,000 barrels a day in 2020 [25] Company Strategy and Development Direction - The company focuses on a balanced allocation of cash flow to four pillars: dividends, debt repayment, share buybacks, and capital expenditures [45] - Canadian Natural aims to leverage its long life low decline assets to generate sustainable free cash flow and enhance shareholder value [40] - The company is committed to achieving net zero emissions through various pathways and technologies [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to generate significant free cash flow in 2021, targeting between CAD 10.3 billion and CAD 10.8 billion of adjusted funds flow [44] - The company remains cautious about capital expenditures in 2021, focusing on debt reduction and shareholder returns [62] Other Important Information - The Board of Directors increased the dividend by 11% to CAD 1.88 per share annually, marking the 21st consecutive year of dividend increases [42] - The company has significant liquidity of approximately CAD 5.4 billion at year-end 2020 [41] Q&A Session Summary Question: Update on the solvent EOR pilot at Kirby South and Primrose - Management indicated that the Kirby South pilot requires one more year for recovery assessment, while the Primrose pilot is just beginning and will take two to three years for results [49][50] Question: Potential for Brownfield expansions in CCS - Management noted that there is potential for additional capacity at Primrose, pending approvals, and emphasized the importance of technical changes for carbon capture [52][54] Question: Plans for debt reduction and capital allocation - Management confirmed a focus on reducing debt towards a CAD 15 billion target, with significant free cash flow expected to facilitate this [57][60] Question: Impact of S&P downgrade on debt levels - Management stated that the sustainability of cash flow from long-life assets allows for a balanced approach to capital allocation despite industry risks [66] Question: Confirmation of December production levels - Management confirmed December production reached 490,800 barrels a day, attributing the success to enhanced capacity and operational excellence [70] Question: Thoughts on taxes and royalties - Management provided insights on cash taxes and royalties, indicating that cash taxes would increase significantly with higher WTI prices [79]