Canadian Natural Resources Limited Announces 2009 Budget
CALGARY, ALBERTA -- (MARKET WIRE) -- 11/06/08 -- Commenting on
Canadian Natural Resources Limited's ("Canadian Natural" or the
"Company") (TSX: CNQ) (NYSE: CNQ) 2009 budget, Canadian Natural's
President & Chief Operating Officer, Steve Laut, stated, "The capital
budget being implemented in 2009 allows Canadian Natural the
flexibility to address the challenges of a lower and more volatile
commodity price environment as well as capture the opportunities this
environment may present. Our assets are very strong with year over
year production growth of 11% in 2009 and exit to entry growth of 17%
in 2009. Our four major development projects undertaken in 2008 are
either onstream or will be onstream in the first quarter of 2009
meaning that we will have significant production growth - even in the
context of a reduced 2009 capital budget. Our high ownership levels
and scalable project portfolio mean that we can control our future -
we are able to further curtail spending if commodity prices continue
to deteriorate or accelerate capital spending during the second half
should the economics rebound. As always, we remain committed to
operational flexibility and a strong balance sheet."
John Langille, Vice Chairman further commented, "Our conventional
business has been a significant generator of free cash flow over the
years. In 2009, all businesses, including the Horizon Project, will
generate free cash flow. In addition, we have 92,000 bbl/d protected
with US$100/bbl WTI puts which will reduce the impact of any further
decline in crude oil prices. Using current strip pricing, we target
to have between $6.8 billion to $7.2 billion of cash flow from
operations. With a capital spending program of $4.0 billion we are
targeting to generate between $2.8 billion and $3.2 billion of free
cash flow. The initial use of these funds will be to pay down debt.
We are targeting to exit 2009 near the bottom of our target of debt
to book capitalization of 35% - 45% and below our target of debt to
EBITDA of 1.8x - 2.2x. This provides us with a strong balance sheet
to take advantage of opportunities should they arise."
Canadian Natural's Chairman, Allan Markin, concluded, "Canadian
Natural's key focus has always been on economic returns and our
project portfolio affords the flexibility to allocate our capital to
those areas where we can generate the best returns. We have the
assets, the people and the balance sheet to excel and to take
advantage of the current market volatility, making Canadian Natural
an even stronger, more robust company. We believe that our strategy
and adhering to our core principles will continue to create value for
our shareholders."
HIGHLIGHTS OF THE 2009 BUDGET
- Equivalent production target of 600,000 to 651,000 boe/d before
royalties, representing a midpoint increase of 11% from the midpoint
of 2008 revised annual guidance. Entry to exit production is targeted
to increase 17% in 2009.
- Crude oil and NGLs production target of 386,000 to 426,000 bbl/d
before royalties, representing a midpoint increase of 29% from the
midpoint of 2008 revised annual guidance. The increase reflects the
ramp up of operations at the Horizon Project, Primrose East and
Pelican Lake, but is offset by reduced activity in the North Sea.
- Natural gas production target of 1,285 to 1,350 mmcf/d before
royalties, representing a midpoint decrease of 12% from the midpoint
of 2008 revised annual guidance. The decrease reflects a 20%
reduction in drilling activity levels year over year, largely as a
result of the impact of increased royalties in Alberta commencing
January 1, 2009 and to a lesser degree, the impact of low natural gas
prices.
- Cash flow from operations targeted at $6.8 billion to $7.2 billion
($12.60 - $13.30 per common share) based upon November 3, 2008 strip
pricing with a forecast average West Texas Intermediate crude oil
price of US$69.00/bbl, a Western Canadian Select heavy oil
differential of 28%, a NYMEX natural gas price of US$7.37/mmbtu and
an exchange rate of C$1.00 = US$0.87.
- Capital spending in 2009 is budgeted at $4.0 billion, a 47%
decrease in capital spending.
- Free cash flow (cash flow after capital), is targeted between $2.8
billion and $3.2 billion based on November 3, 2008 strip pricing.
- Canadian conventional crude oil and natural gas capital
expenditures of $2.75 billion in 2009, representing a 15% increase in
capital spending from 2008 levels. The increase is due to a large
crude oil drilling program, continued expansion of the Pelican
polymer flood, increasing the focus on our unconventional natural gas
plays largely located in British Columbia and a large stratigraphic
well program to further delineate our thermal assets.
- International conventional crude oil and natural gas capital
expenditures are budgeted to be $681 million.
- Canadian Natural has significant capital flexibility in the 2009
capital program allowing the Company to quickly scale back capital
spending, or increase capital spending effectively if costs decrease
or commodity prices increase.
- In light of the reduced commodity pricing and the continued highly
inflationary cost environment in the Fort McMurray region, capital
spending at Horizon has been significantly reduced. Tranches 3 and 4
of the expansion of the Horizon Project are being re-profiled and
will not be executed until better cost management is attained and the
environment returns to a more normalized state.
- Continued strong balance sheet management which provides financial
flexibility for operating plans.
Production and Financial Guidance
Canadian Natural continues its strategy of maintaining a large
portfolio of varied projects, which enables the Company to provide
consistent growth in production and high shareholder returns over an
extended period of time. Annual budgets are developed, scrutinized
throughout the year and changed if necessary in the context of
project returns, product pricing expectations, and balance in project
risks and time horizons. Canadian Natural maintains a high ownership
level and operatorship in its properties and can therefore control
the nature, timing and extent of expenditures in each of its project
areas.
The budgeted capital expenditures in 2008 and 2009 are as follows:
------------------------------
($ millions) 2008 Forecast 2009
Budget
---------------------------------------------------------------------------
Conventional crude oil and natural gas
----------------------------------------------------------------------------
North American natural gas $ 620
$ 880
North American crude oil and NGLs 1,470
1,763
North Sea
325 122
Offshore West Africa
820 559
Property acquisitions, dispositions and
midstream
310 109
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$ 3,545 $
3,433
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Horizon Oil Sands Project
Phase 1 - Construction
2,772 183
Phase 1 - Operating inventory and capital
inventory
112 -
Phase 1 - Commissioning
319 -
Expansion - Tranche 2
374 184
Sustaining capital
- 145
Capitalized interest and other costs
487 62
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4,064 574
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$ 7,609 $
4,007
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----------------------------------------------------------------------------
The above capital expenditure budget incorporates the following
levels of
drilling activity:
-------------------------------
2008
Drilling activity (number of net wells) Forecast 2009
Budget
----------------------------------------------------------------------------
Targeting natural gas
269 216
Targeting crude oil
742 838
Stratigraphic test / service wells -
conventional
60 302
Stratigraphic test wells - mining
50 195
----------------------------------------------------------------------------
Total 1,121
1,551
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----------------------------------------------------------------------------
North American Natural Gas
The North American 2009 natural gas drilling program consists of:
--------------------------------------------
Natural gas -
(number of net wells) 2008 Forecast 2009 Budget
Change
----------------------------------------------------------------------------
Type of well
Coal Bed Methane and Shallow 107
59 -45%
Conventional 106
94 -11%
Cardium 15
8 -47%
Deep 39
51 +31%
Foothills 2 4
+100%
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Total 269
216 -20%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
- In 2009, the Company's priorities for natural gas drilling are
advancing development of the key resource projects and drilling
strategic wells in the high impact growth areas while maintaining an
efficient, cost effective program.
- Key resource projects that the Company will focus on will include,
the Montney / Doig shales and the Muskwa shale, located in British
Columbia.
- Our guidance range for North American natural gas production is
1,260 - 1,320 mmcf/d before royalties, a decrease of 13% from the
midpoint of 2008 revised guidance.
North American Conventional Crude Oil and NGLs
The North American 2009 crude oil and NGLs drilling program consists
of:
--------------------------------------------
Crude oil -
(number of net wells) 2008 Forecast 2009 Budget
Change
----------------------------------------------------------------------------
Type of well
Conventional heavy 443
485 +9%
Thermal heavy 77
93 +21%
Light 106
145 +37%
Pelican Lake 110
107 -3%
----------------------------------------------------------------------------
Total 736
830 +13%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
- At Primrose, the Company has a very active drilling program at
Primrose North and Primrose East focusing on the Clearwater cyclic
steam reservoir. The Company will continue the development program
that began in 2008 at Primrose North, drilling 93 horizontal wells
during 2009. Production from this program will begin in late 2009.
Primrose East production commenced in 2008 with plans to drill a
further 22 horizontal cyclic steam wells in 2009.
- As expected, total thermal production is targeted to peak in mid
2009 reflecting Primrose East expected first production cycle.
- At Pelican Lake, Canadian Natural is continuing to expand its
polymer flooding within the field. Results to date have met or
exceeded expectation, which provides the confidence to apply this
process to large regions of the pool. This will involve converting
many producers to polymer injection wells, which will require a
"reservoir fill-up" period of 12 to 18 months prior to seeing a
positive crude oil production response from the process. The result
is that 2009 targeted production increase at Pelican Lake is tempered
while awaiting response from these conversions. In 2009, 108 wells
will be drilled at Pelican.
- The guidance range for North American conventional crude oil and
NGLs production is 242,000 - 260,000 bbl/d before royalties.
International
---------------------------------------------
Crude oil -
(number of net wells) 2008 Forecast 2009 Budget
Change
----------------------------------------------------------------------------
UK North Sea 3.2
0.9 -72%
Offshore West Africa 2.3
7.9 +243%
----------------------------------------------------------------------------
Total 5.5
8.8 +60%
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----------------------------------------------------------------------------
North Sea
- Canadian Natural anticipates drilling approximately 0.9 net
platform wells with focus on building drilling and work over
inventory for 2010.
- As a result of reduced activity and three major turnarounds, the
2009 guidance range for North Sea crude oil production is 36,000 to
42,000 bbl/d, representing an expected decrease of 14% from midpoint
2008 revised guidance.
Offshore West Africa
- Canadian Natural anticipates spending $80 million in 2009 to
complete Phase 2 of the development of the Baobab Field in Cote
d'Ivoire. The Company is targeting to have 3 wells back on production
by early 2009.
- The Company is budgeted to spend approximately $212 million in 2009
to complete the Olowi project, in Gabon, with production targeting to
ramp-up to 20,000 bbl/d, net to Canadian Natural in early 2010.
- The 2009 guidance range for Offshore West Africa crude oil
production is 28,000 to 35,000 bbl/d before royalties. This
represents approximately 13% increase in entry to exit production.
Horizon Oil Sands Project ("Horizon Project")
- The Horizon Project is targeting production of Synthetic Crude Oil
("SCO") in late Q4/08. The operations are targeting to reach full
capacity of 110,000 bbl/d of SCO on a sustained basis by later in
2009.
- The Company decided in 2007 to implement a plan for the expansion
of the Horizon Project involving a four-tranche approach to develop
targeted capacity of 232,000 to 250,000 SCO bbl/d by 2013. Tranches 3
and 4 of the expansion are being re-profiled.
-- Tranche 1 was largely completed in 2006/07, which involved
front-end loading, building coker foundations and the pipe racks for
the expansion, and ordering certain long-lead vessels, which are on
site.
-- Tranche 2 involves procuring additional mining equipment,
constructing a third ore preparation plant, constructing additional
gas recovery and sulphur trains, and debottlenecking the existing
plant. Targeted production gains are between 6,000 and 15,000 SCO
bbl/d. A significant portion of Tranche 2 will be moved to 2010, when
a more reasonable cost environment is expected.
-- Tranche 3 involves additional mining equipment and construction of
extraction trains, coker expansions, and CO2 recovery units. This
tranche will result in lower operating costs, improved "uptime" and
reliability, and targeted production increases of 10,000 to 20,000
SCO bbl/d. Tranche 3 is being re-profiled to spread to capital
spending until better cost management is attained and the environment
returns to more reasonable levels.
-- Tranche 4 involves construction of two additional ore preparation
plants, additional froth treatment and extraction facilities, support
facilities, a diluent recovery unit, a vacuum recovery unit, and
further hydrotreating units. This will take the targeted production
to 232,000 to 250,000 SCO bbl/d, lower operating costs, and improve
"uptime" and reliability. The decision on Tranche 4 is waiting on the
re-profiled process.
-- The 2009 guidance range for the Horizon Project production is
80,000 to 89,000 SCO bbl/d.
Financial Review
- The current worldwide credit events and a corresponding economic
pullback creating uncertain commodity demand sets the stage for a
conservative capital expenditure program for 2009.
- Canadian Natural is committed to maintaining its strong financial
position, allowing maximum flexibility in a volatile crude oil and
natural gas commodity price environment.
- The Company continues to utilize certain risk management tools,
including commodity price hedge instruments, to underpin the cash
flow from operations to ensure the completion of the capital
expenditure budget plans.
- Cash flow from operations provides financial stability and
liquidity and is forecasted, on current strip pricing, to be between
$6.8 billion to $7.2 billion. This internally generated cash flow
from operations is augmented by available unused bank lines of $2.4
billion at September 30, 2008.
- In 2009, each of the North American Conventional, Horizon Project,
North Sea and Offshore West Africa business segments are expected to
be generating significant free cash flow available for Canadian
Natural's capital allocation process.
- Canadian Natural expects to exit 2009 at the lower end of the
targeted debt to book capitalization of 35% - 45% and below the
targeted debt to EBITDA of 1.8x - 2.2x utilizing the previously
discussed strip commodity price assumptions and guidance production
levels.
Guidance
Detailed guidance on revised production levels, capital allocation
and operating costs can be found on the Company's website at
http://www.cnrl.com/investor_info/corporate_guidance/.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this document or documents incorporated herein
by reference constitute forward-looking statements or information
(collectively referred to herein as "forward-looking statements")
within the meaning of applicable securities legislation.
Forward-looking statements can be identified by the words "believe",
"anticipate", "expect", "plan", "estimate", "target", "continue",
"could" "intend", "may", "potential", "predict", "should", "will",
"objective", "project", "forecast", "goal", "guidance", "outlook",
"effort" "seeks", "schedule" or expressions of a similar nature
suggesting future outcome or statements regarding an outlook.
Statements relating to "reserves" are deemed to be forward-looking
statements as they involve the implied assessment based on certain
estimates and assumptions that the reserves described can be
profitably produced in the future. There are numerous uncertainties
inherent in estimating quantities of proved crude oil and natural gas
reserves and in projecting future rates of production and the timing
of development expenditures. The total amount or timing of actual
future production may vary significantly from reserve and production
estimates. In addition, these statements are not guarantees of future
performance and are subject to certain risks and the reader should
not place undue reliance on these forward-looking statements as there
can be no assurance that the plans, initiatives or expectations upon
which they are based will occur.
The forward-looking statements are based on current expectations,
estimates and projections about Canadian Natural Resources Limited
(the "Company") and the industry in which the Company operates, which
speak only as of the date such statements were made or as of the date
of the report or document in which they are contained and are subject
to known and unknown risks, uncertainties and other factors that
could cause the actual results, performance or achievements of the
Company to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others:
general economic and business conditions which will, among other
things, impact demand for and market prices of the Company's
products; volatility of and assumptions regarding crude oil and
natural gas prices; fluctuations in currency and interest rates;
assumptions on which the Company's current guidance is based;
economic conditions in the countries and regions in which the Company
conducts business; political uncertainty, including actions of or
against terrorists, insurgent groups or other conflict including
conflict between states; industry capacity; ability of the Company to
implement its business strategy, including exploration and
development activities; impact of competition; the Company's defense
of lawsuits; availability and cost of seismic, drilling and other
equipment; ability of the Company and its subsidiaries to complete
its capital programs; the Company's and its subsidiaries' ability to
secure adequate transportation for its products; unexpected
difficulties in mining, extracting or upgrading the Company's bitumen
products; potential delays or changes in plans with respect to
exploration or development projects or capital expenditures; ability
of the Company to attract the necessary labour required to build its
thermal and oil sands mining projects; operating hazards and other
difficulties inherent in the exploration for and production and sale
of crude oil and natural gas; availability and cost of financing; the
Company's and its subsidiaries' success of exploration and
development activities and their ability to replace and expand crude
oil and natural gas reserves; timing and success of integrating the
business and operations of acquired companies; production levels;
imprecision of reserve estimates and estimates of recoverable
quantities of crude oil, bitumen, natural gas and liquids not
currently classified as proved; actions by governmental authorities;
government regulations and the expenditures required to comply with
them (especially safety and environmental laws and regulations and
the impact of climate change initiatives on capital and operating
costs); asset retirement obligations; the adequacy of the Company's
provision for taxes; and other circumstances affecting revenues and
expenses. Certain of these factors are discussed in more detail under
the heading "Risk Factors".
The Company's operations have been, and at times in the future may be
affected by political developments and by federal, provincial and
local laws and regulations such as restrictions on production,
changes in taxes, royalties and other amounts payable to governments
or governmental agencies, price or gathering rate controls and
environmental protection regulations. Should one or more of these
risks or uncertainties materialize, or should any of the Company's
assumptions prove incorrect, actual results may vary in material
respects from those projected in the forward-looking statements. The
impact of any one factor on a particular forward-looking statement is
not determinable with certainty as such factors are dependent upon
other factors, and the Company's course of action would depend upon
its assessment of the future considering all information then
available.
Readers are cautioned that the foregoing list of important factors is
not exhaustive. Unpredictable or unknown factors not discussed in
this report could also have material adverse effects on
forward-looking statements. Although the Company believes that the
expectations conveyed by the forward-looking statements are
reasonable based on information available to it on the date such
forward-looking statements are made, no assurances can be given as to
future results, levels of activity and achievements. All subsequent
forward-looking statements, whether written or oral, attributable to
the Company or persons acting on its behalf are expressly qualified
in their entirety by these cautionary statements. Except as required
by law, the Company assumes no obligation to update forward-looking
statements should circumstances or Management's estimates or opinions
change.
Investor Open House 2008 - Webcast
The members of Canadian Natural's Management team will be presenting
a discussion regarding our 2009 Budget at Canadian Natural's Investor
Open House 2008 commencing at 8:30 a.m. Mountain Time (10:30 a.m.
Eastern Time) this discussion can be accessed at
www.cnrl.com/investor_info/calendar.html
The day's presentations on Tuesday, November 11, 2008 will be
available on the Company's website at
www.cnrl.com/investor_info/calendar.html beginning at 8:30 a.m.
Mountain Time (10:30 a.m. Eastern Time). An audio re-broadcast of the
highlights will be available on Wednesday, November 12, 2008.
The webcast is also being distributed over PrecisionIR's Investor
Distribution Network to both institutional and individual investors.
Investors can listen to the call through www.vcall.com or by visiting
any of the investor sites in PrecisionIR's Individual Investor
Network.
Contacts:
Canadian Natural Resources Limited
Allan P. Markin
Chairman
(403) 514-7777
(403) 514-7888 (FAX)
Canadian Natural Resources Limited
John G. Langille
Vice-Chairman
(403) 514-7777
(403) 514-7888 (FAX)
Canadian Natural Resources Limited
Steve W. Laut
President and Chief Operating Officer
(403) 514-7777
(403) 514-7888 (FAX)
Canadian Natural Resources Limited
Douglas A. Proll
Chief Financial Officer and Senior Vice-President, Finance
(403) 514-7777
(403) 514-7888 (FAX)
Canadian Natural Resources Limited
Corey B. Bieber
Vice-President, Finance & Investor Relations
(403) 514-7777
(403) 514-7888 (FAX)
Canadian Natural Resources Limited
2500, 855 - 2nd Street S.W.
Calgary, Alberta
T2P 4J8
Email: ir@cnrl.com
Website: www.cnrl.com
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