- Production: 1.29 million BOEs per day, an increase of 8% compared to Q2 2023.
- Liquids Production: Approximately 934,000 barrels per day.
- Natural Gas Production: Approximately 2.1 Bcf per day.
- Primary Heavy Oil Production: Approximately 79,100 barrels per day, a 3% increase compared to Q2 2023.
- Primary Heavy Oil Operating Cost: $17.59 per barrel, down 12% from Q2 2023.
- Pelican Lake Production: Approximately 45,000 barrels per day, down 5% from Q2 2023.
- Pelican Lake Operating Cost: $8.92 per barrel, up 4% from Q2 2023.
- North American Light Crude Oil and NGL Production: 108,000 barrels per day, up 5% from Q2 2023.
- North American Light Crude Oil and NGL Operating Cost: $13.75 per barrel, down 24% from Q2 2023.
- North American Natural Gas Production: 2.1 Bcf per day, comparable to Q2 2023.
- North American Natural Gas Operating Cost: $1.19 per Mcf, down 12% from Q2 2023.
- Thermal In Situ Production: Just over 260,000 barrels per day, up 12% from Q2 2023.
- Thermal In Situ Operating Cost: $10.95 per barrel, down 25% from Q2 2023.
- SCO Production: Approximately 411,000 barrels per day, up 16% from Q2 2023.
- SCO Operating Cost: $25.95 per barrel, down 17% from Q2 2023.
- Adjusted Funds Flow: $3.6 billion.
- Adjusted Net Earnings: $1.9 billion.
- Returns to Shareholders: $1.9 billion, including $1.1 billion in dividends and $800 million in share buybacks.
- Quarterly Dividend: Increased to $0.525 per share in March 2024.
- Net Debt: $9.2 billion.
- Debt to EBITDA: 0.6 times.
- Liquidity: Approximately $6.4 billion.
Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Canadian Natural Resources Ltd (CNQ, Financial) reported a strong operational quarter with production of 1.29 million BOEs per day, an 8% increase compared to Q2 2023.
- The company achieved significant milestones, including the production of the 1 billionth barrel of bitumen at Horizon since operations began in 2009.
- Strong financial results were reported with adjusted funds flow of $3.6 billion and adjusted net earnings from operations of $1.9 billion.
- The company returned $1.9 billion to shareholders in the quarter, including $1.1 billion in dividends and $800 million in share buybacks.
- Canadian Natural Resources Ltd (CNQ) maintained a strong financial position with net debt at $9.2 billion and debt to EBITDA at 0.6 times at the end of Q2 2024.
Negative Points
- Pelican Lake production averaged approximately 45,000 barrels per day, down 5% from the second quarter of 2023.
- Operating costs at Pelican Lake increased by 4% compared to the second quarter of 2023, primarily due to lower production volumes.
- The company faced challenges with natural gas prices, leading to a shift in development activity to high-return multilateral heavy oil wells.
- The differential for Western Canadian crude oil widened, impacting realized pricing.
- The company is still working on finalizing the fiscal regime for the Pathways project, which is crucial for capturing CO2 emissions and future growth.
Q & A Highlights
Highlights of Canadian Natural Resources Ltd (CNQ) Q2 2024 Earnings Call
Q: Can you give us a sense of what the trajectory is going to look like for synthetic crude oil (SCO) through the end of the year and into 2025?
A: Our volumes are expected to remain strong, with the only planned interruption being the Scotford Upgrader turnaround, which has been reduced from 49 days to 39 days. For 2025, there will be no turnaround at Horizon, so production rates should be approximately 20,000 barrels a day higher.
Q: Can you provide an update on the solvent-enhanced oil recovery pilots at Kirby North and Primrose?
A: We recently placed the KN06 pad on solvent injection and are seeing early steam reduction results around 20%. We will continue to monitor and update over the following quarters, with a more comprehensive report expected by mid-next year.
Q: What are you doing differently with turnaround activities and optimization?
A: At Jackfish, strong drilling results and efficient execution led to production profiles exceeding previous type curves. At Primrose, we decoupled execution plans to bring on volume sooner. These improvements are a result of continuous improvement and better planning.
Q: What are the key factors needed to move forward with the IPEP and PFT projects?
A: A strong fiscal regime for our pathways project to capture CO2 emissions and additional egress capacity out of the basin, such as Enbridge debottlenecking and TMX, are crucial for moving forward with these projects.
Q: How do you view the current differentials and their impact on your operations?
A: The wider crack spreads, drawdown on Alberta inventory stock, and the addition of Mexican crude into the US Gulf Coast are impacting differentials. These factors have led to a differential increase from $11 in June to $15.5 currently.
Q: How are you managing natural gas production given the current weak pricing?
A: We have decided to drill and complete approximately half of our planned wells but will not put them on production until prices improve, likely in late Q4 or early Q1. We expect LNG Canada commissioning to help improve prices.
Q: Can you provide an update on the Pathways project and its progress?
A: The federal and provincial governments, along with the Pathways organization, are working diligently to finalize a financial regime package. There is a lot of effort and focus from all parties to bring this project forward.
Q: Given your current net debt position, should we expect returns in excess of 100% in the second half of the year?
A: We have been allocating 100% of free cash flow to shareholders since the beginning of 2024, and this will continue through the rest of the year.
Q: What is your current thinking on M&A activity?
A: We expect M&A activity to be quiet going forward. With our strong asset base and significant reserves, we are confident in our internal growth opportunities and do not foresee the need for acquisitions.
Q: What would be the price range for AECO that would prompt a reallocation of capital back to gas assets?
A: For Montney wells with significant liquids production, it doesn't take much of a gas price to be economic. However, for lower liquids production wells, we need to see stronger pricing than current levels. The forward strip pricing is sufficient to make it work.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
