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February 28, 2008
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Canadian Natural Resources Limited Announces 2007 Fourth Quarter and Year End
Results
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CALGARY, ALBERTA--(Marketwire - Feb. 28, 2008) - Canadian Natural Resources Limited (TSX:CNQ)(NYSE:CNQ):
Commenting on the Fourth Quarter of 2007 and year end results, Canadian Natural Chairman, Allan Markin stated, "Another solid year of value creation was achieved in 2007 reflecting a strong, well-balanced asset base. Our North American and International conventional assets provide balance between natural gas and crude oil, a solid foundation for future growth and generate significant free cash flow. The Horizon Project, our world class oil sands project, is targeted to produce first oil in Q3/08, creating tremendous value for shareholders. We continue to have a direct and indirect, positive impact on the communities in which we operate and remain committed to working together with stakeholders in these communities. This is even more important in today's challenging environment of cost pressures, commodity price volatility and ever changing governmental regulation."
John Langille, Vice Chairman, stated, "Our balance sheet ended the year at 45% debt to book capitalization compared with 51% one year ago and we will continue to strengthen our balance sheet during 2008 and into 2009, creating additional flexibility to take advantage of opportunities as they arise. Based upon strip pricing and production guidance, we estimate that 2008 cash flow may approach $6.0 billion, resulting in a targeted 2008 year end debt to book capitalization of approximately 40%, even after the announced upward revisions to our 2008 capital cost guidance for the Horizon Project. We have the financial strength and the ability to execute on the growth opportunities which we have in the near, medium and long-term."
Steve Laut, President and Chief Operating Officer of Canadian Natural commented, "In 2007 we effectively executed on our program and delivered results at or exceeding our budget at reasonable costs. Our proved finding and on-stream costs of $14.28 per barrel of oil equivalent, represents a 12% decrease from 2006. Looking forward, 2008 is the year of execution for Canadian Natural as we deliver four major projects. First, Primrose East, the next stage in the development of our expansive thermal in-situ assets, will begin steaming in late 2008 and is targeted to add approximately 40,000 bbl/d of capacity in 2009. Secondly, the Olowi project in Offshore Gabon is targeted to start producing first oil in late 2008 and will reach peak production of 20,000 bbl/d. Thirdly, the deep water drilling rig for our Baobab project in Offshore Cote d'Ivoire is expected to arrive in mid-year 2008. It is anticipated that the resulting repairs to at least three of the five shut-in Baobab wells, will add up to 10,000 bbl/d of capacity by mid 2009. Lastly, we are targeting to have first oil at the Horizon Project, our 110,000 bbl/d oil sands mining project in Q3/08. Again, 2008 is the year of execution and 2009 is the year of reward."
HIGHLIGHTS
Quarterly Results Year End Results
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($ millions, except
as noted) Q4/07 Q3/07 Q4/06 2007 2006
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Net earnings $ 798 $ 700 $ 313 $ 2,608 $ 2,524
per common share,
basic and diluted $ 1.48 $ 1.30 $ 0.58 $ 4.84 $ 4.70
Adjusted net earnings from
operations (1) $ 546 $ 644 $ 412 $ 2,406 $ 1,664
per common share, basic
and diluted $ 1.02 $ 1.19 $ 0.77 $ 4.46 $ 3.10
Cash flow from
operations (2) $ 1,486 $ 1,577 $ 1,293 $ 6,198 $ 4,932
per common share, basic
and diluted $ 2.75 $ 2.92 $ 2.41 $ 11.49 $ 9.18
Capital expenditures,
net of dispositions $ 1,514 $ 1,442 $ 6,497 $ 6,425 $ 12,025
Daily production, before
royalties
Natural gas (mmcf/d) 1,589 1,647 1,620 1,668 1,492
Crude oil and NGLs
(bbl/d) 337,240 333,062 343,705 331,232 331,998
Equivalent production
(boe/d) 601,908 607,484 613,764 609,206 580,724
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(1) Adjusted net earnings from operations is a non-GAAP measure that the
Company utilizes to evaluate its performance. The derivation of this
item is discussed in the Management's Discussion and Analysis ("MD&A").
(2) Cash flow from operations is a non-GAAP measure that the Company
considers key as it demonstrates the Company's ability to fund capital
reinvestment and debt repayment. The derivation of this measure is
discussed in the MD&A.Annual
- Total natural gas production in 2007 averaged 1,668 mmcf/d, an increase of 12% from 2006, primarily due to a full year of production from the Anadarko Canada Corporation acquisition in November of 2006. As anticipated, 2007 entry to exit natural gas production volumes declined but the assets continued to perform well.
- Total crude oil and NGLs production in 2007 averaged 331,232 bbl/d, a slight decrease from 2006. North America grew 5%, offset by a decrease in production from the International operations.
- Cash flow from operations increased 26% to $6.2 billion in 2007 from $4.9 billion in 2006, and net earnings increased 3% in 2007 to $2.6 billion from $2.5 billion in 2006. Cash flow was primarily impacted due to increased sales volumes, higher realized pricing, and lower realized risk management losses, offset by increased production expense, higher interest costs, higher current taxes, and the impact of the stronger Canadian dollar relative to the US dollar.
Fourth Quarter
- Natural gas production for Q4/07 averaged 1,589 mmcf/d, down 2% from 1,620 mmcf/d for Q4/06 and down 4% from 1,647 mmcf/d for Q3/07. Volumes in Q4/07 reflected the continued reallocation of capital towards higher return projects in crude oil.
- Total crude oil and NGLs production for Q4/07 was 337,240 bbl/d. Q4/07 production was 2% lower than Q4/06 volumes of 343,705 bbl/d, and increased from Q3/07 volumes of 333,062 bbl/d. Volumes in Q4/07 reflect the transition from steam cycles to production cycles for a number of thermal wells and continued conversion of production wells to polymer injection wells at Pelican Lake.
- Quarterly cash flow from operations was $1.5 billion, an increase of 15% from Q4/06 and a decrease of 6% from Q3/07. The increase from Q4/06 primarily reflected higher crude oil realizations and the impact of higher sales volumes. The decrease from Q3/07 represented lower natural gas sales volumes in Q4/07 and higher risk management losses. Cash flow in Q4/07 continued to be negatively impacted by the strengthening of the Canadian dollar compared to the US dollar. The average exchange rate for Q4/07 was US$0.9810 per C$1.00 compared with US$1.0455 per C$1.00 for Q3/07 and US$1.1388 per C$1.00 for Q4/06.
- Q4/07 quarterly net earnings were $798 million, a 155% increase from Q4/06 and a 14% increase from Q3/07. Quarterly adjusted net earnings from operations for Q4/07 were $546 million, a 33% increase from Q4/06 and a decrease of 15% from Q3/07 results.
- Completed the Q4/07 North America drilling program targeting 172 net crude oil wells and 92 net natural gas wells with a 94% success rate in the quarter, excluding stratigraphic test and service wells. The success rate is a reflection of Canadian Natural's strong, predictable, low-risk asset base.
Operational and Financial
- Maintained a strong undeveloped conventional core land base in Canada of 12 million net acres - a key asset for continued value growth.
- Continued production improvements at the Pelican Lake Field were realized from new drilling activity and the expansion of the enhanced crude oil recovery program. Pelican Lake crude oil production averaged approximately 36,000 bbl/d during the quarter, up 24% or approximately 7,000 bbl/d from Q4/06.
- The Primrose East expansion, which is targeted to add 40,000 bbl/d of capacity, made significant progress and is targeted for first steaming in Q4/08 and production in 2009.
- Secured a deep water drilling rig for the Baobab Field. The equipment is targeted to be mobilized in mid-year 2008, enabling work to begin on the restoration of shut-in production. It is forecasted that a minimum 3 of the 5 shut-in Baobab wells should come back on stream over the course of 2008 and 2009.
- The Olowi project in Offshore Gabon continues on track. Drilling is targeted to commence in Q2/08 and first crude oil is targeted for late 2008.
- Work progress on the Horizon Oil Sands Project ("Horizon Project") exited Q4/07 at 90% complete and remains on track for first oil targeted for Q3/08.
- Independent qualified reserve evaluators evaluated 100% of the Company's conventional crude oil and natural gas reserves under constant prices and costs as at December 31, 2007:
-- Total net proved reserves from conventional operations at the end of 2007 amounted to 1.4 billion barrels of crude oil and NGLs and 3.7 trillion cubic feet of natural gas. Total net proved conventional reserves increased modestly from 2006 to 2007.
-- Net proved reserve additions from conventional operations equaled 110% of 2007 net production, at a finding and on-stream cost of $14.28 per barrel of oil equivalent. The Company's three-year average proved finding and on-stream costs were $15.07 per barrel of oil equivalent.
-- Total net proved and probable reserves from conventional operations at the end of 2007 amounted to 2.1 billion barrels of crude oil and NGLs and 4.8 trillion cubic feet of natural gas. Total proved and probable net conventional reserves remained relatively unchanged from the prior year.
-- Net proved and probable reserve additions from conventional operations equaled 87% of 2007 net production, at a finding and on-stream cost of $18.02 per barrel of oil equivalent. The Company's three-year average net proved and probable finding and on-stream costs were $11.03 per barrel of oil equivalent. As anticipated, the significantly reduced drilling program in 2007 resulted in less proved and probable reserves being booked.
-- Using net proved finding and on-stream costs, the Company achieved an overall recycle ratio of 2.3x during 2007.
- Independent qualified reserve evaluators evaluated 100% of the Company's Phase 1 to Phase 3 oil sands mining reserves for the Horizon Project under constant prices as at December 31, 2007, which resulted in 2.4 billion barrels of gross lease proved bitumen reserves and 3.5 billion barrels of gross lease proved and probable bitumen reserves. The gross lease proved synthetic crude oil reserves increased by 90 million barrels in 2007 to 2.0 billion barrels. The gross lease proved and probable synthetic crude oil reserves were 3.0 billion barrels.
- On October 25, 2007 the Province of Alberta issued the framework of its proposed changes to the Alberta crude oil and natural gas royalty regime, effective January 1, 2009. The Company is currently awaiting finalization of the royalty implementation regulations, however it expects that its 2009 and future Alberta royalty payments will increase as a result of the proposed royalty changes and that its level of activity in Alberta in aggregate will be reduced from what it otherwise would have been in the absence of such royalty changes.
- In December 2007, the Company issued $400 million of unsecured notes under a Canadian base shelf prospectus maturing December 2010, bearing interest at 5.50%. In January 2008, the Company issued US$1,200 million of unsecured notes under a US base shelf prospectus, comprised of US$400 million of 5.15% unsecured notes due February 2013, US$400 million of 5.90% unsecured notes due February 2018, and US$400 million of 6.75% unsecured notes due February 2039 which have been sold to investors in the United States. Net proceeds from the issue of these notes were used to repay bankers' acceptances.
- For the eighth consecutive year the Company's dividend was increased. The 2008 quarterly cash dividend on common shares has been increased to C$0.10 per common share, payable April 1, 2008, an 18% increase over the 2007 quarterly dividend.
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. Disclosure related to expected future commodity pricing, production volumes, royalties, operating costs, capital expenditures and other 2008 guidance provided throughout this Management's Discussion and Analysis ("MD&A"), constitutes forward-looking statements. In addition, 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.
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. 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 interdependent 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.
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CONTACT INFORMATION:
Canadian Natural Resources Limited
Allan P. Markin
Chairman
(403) 514-7777
Fax: (403) 514-7888
or
Canadian Natural Resources Limited
John G. Langille
Vice-Chairman
(403) 514-7777
Fax: (403) 514-7888
or
Canadian Natural Resources Limited
Steve W. Laut
President and Chief Operating Officer
(403) 514-7777
Fax: (403) 514-7888
or
Canadian Natural Resources Limited
Douglas A. Proll
Chief Financial Officer and Senior Vice-President, Finance
(403) 514-7777
Fax: (403) 514-7888
or
Canadian Natural Resources Limited
Corey B. Bieber
Vice-President, Finance & Investor Relations
(403) 514-7777
Fax: (403) 514-7888
or
Canadian Natural Resources Limited
2500, 855 - 2nd Street S.W.
Calgary, Alberta
T2P 4J8
Website: www.cnrl.com
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INDUSTRY: Energy and Utilities - Oil and Gas
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