Canadian Natural Resources(US:CNQ)2019-11-07 21:43Financial Data and Key Metrics Changes - Canadian Natural reported net earnings of over CAD 1 billion and adjusted net earnings of over CAD 1.2 billion for Q3 2019, with cash flow from operations exceeding CAD 2.5 billion and adjusted funds flow around CAD 2.9 billion [32] - Free cash flow for Q3 was approximately CAD 1.5 billion after net capital expenditures of CAD 963 million and dividends of CAD 447 million [32][34] - The company reduced gross debt by over CAD 1 billion in the quarter, with a target to exit 2019 with a debt-to-adjusted EBITDA below 1.9x [33][34] Business Line Data and Key Metrics Changes - Natural gas production for Q3 was 1.469 Bcf, down from 1.532 Bcf in Q2, with operating costs decreasing to CAD 1.07 per Mcf from CAD 1.15 in Q2 [14][15] - North American light oil and NGL production decreased to approximately 96,100 barrels, down 6% from Q2, while heavy oil production increased to approximately 88,000 barrels a day, up from 77,700 barrels in Q2 [16][20] - Oil sands mining operations produced at the top end of guidance with 432,203 barrels per day and industry-leading operating costs of CAD 20.05 per barrel [26] Market Data and Key Metrics Changes - The company noted improved egress capacity with the expectation of additional 225,000 barrels a day from various pipelines and crude by rail in 2020 [29][30] - Canadian Natural's diverse natural gas sales portfolio includes 44% used within operations, 32% exported, and only 24% exposed to AECO pricing [15] Company Strategy and Development Direction - The company focuses on optimizing cash flow allocation between its four pillars and leveraging competitive advantages to drive top-tier value creation [5][6] - Canadian Natural aims to enhance margin growth on existing and future production while continuing to support government decisions to curtail production to stabilize differentials [29][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver robust and sustainable free cash flow, emphasizing the strength of the balance sheet and diverse asset base [35] - The company is currently working through the complexities of the 2020 budget, with expectations for capital spending to remain relatively flat compared to 2019 [47][48] Other Important Information - Canadian Natural has reduced overall corporate emissions intensity by 29% since 2012, with significant achievements in environmental performance [8][9] - The company has a strong commitment to ESG criteria, positioning Canada as a top-tier investment priority for institutional investors [12] Q&A Session Summary Question: Can you move all of those barrels by pipe? - Management indicated that the majority of production should be able to move by pipeline, with some production available for short periods under the curtailment optimization strategy [38] Question: What is the rationale behind the debt reduction strategy? - The company maintains a free cash flow allocation policy of 50% to buybacks and 50% to debt repayment, with no change in strategy expected [42][43] Question: What are the expectations for 2020 capital spending? - Management is currently working through the 2020 budget, indicating complexities and uncertainties that may affect capital spending [47] Question: How do you see the impact of the new greenhouse gas tax structure? - Management noted a positive step forward with the new TIER system, expecting a reduction in costs compared to the previous CCIR structure [61][62]