Canadian Natural Resources Limited Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Operational Performance: Relentless focus on continuous improvement and efficient operations drove strong year-to-date performance in 2025. Successfully completed a planned turnaround at AOSP 5 days ahead of schedule and on budget.
• Production: Q2 2025 production totaled approximately 1.420 million BOEs per day, including liquids production of 1.019 million barrels per day and natural gas production of 2.4 Bcf per day, up ~135,000 BOEs per day from Q2 2024.
• Acquisitions: Closed Palliser Block and Grand Prairie assets, adding production and high-quality land with significant inventory. The Grand Prairie acquisition was not in the original 2025 capital budget.
• Cost Savings: Lower operating costs in Duvernay assets (average $8.43 per barrel in Q2 2025, down from $9.52 per BOE in Q1 2025), North American natural gas ($1.07 per Mcf, down from $1.19 per Mcf in Q2 2024), and light oil/NGL operations ($10.94 per barrel, down from $13.75 per barrel in Q2 2024).

Segment Performance

• Oil Sands Mining and Upgrading: In the second quarter of 2025, production averaged approximately 463,800 barrels per day of SCO, an increase of 13% from the second quarter of 2024. Costs averaged $26.53 per barrel of SCO, up 2% due to the AOSP turnaround in Q2 2025.
• Conventional E&P:
  • Primary heavy oil: Averaged approximately 87,300 barrels per day in Q2 2025, an increase of 10% from Q2 2024.
  • Pelican Lake: Averaged approximately 43,100 barrels per day in Q2 2025, a decrease of 4% from Q2 2024.
  • North American light crude oil and NGL: Averaged approximately 140,700 barrels per day in Q2 2025, up 31% from Q2 2024.
  • North American natural gas: Averaged approximately 2.4 Bcf per day in Q2 2025, an increase of 14% from Q2 2024.
  • Thermal In Situ: Averaged approximately 274,800 barrels per day in Q2 2025, up 3% from Q2 2024.
• Acquisitions: Closed the Palliser Block on June 26 (added ~2,000 BOEs/day) and Grand Prairie assets on July 2 (added ~32,000 BOEs/day), with additional inventory and synergies from these acquisitions.

Guidance

• Target to provide similar shareholder returns in 2025 as 2024 despite allocating 60% of free cash flow to returns.
• Plan to update 2025 corporate production guidance after closing the AOSP swap in the third quarter.
• Board approved a quarterly dividend of $0.5875 per common share payable on October 3, 2025.

Risks

• Delayed acquisition closures: The Palliser Block acquisition closed later than budgeted, impacting Q2 production.
• Commodity price fluctuations: OPEC production, refinery turnaround timing, and North American market dynamics can impact differentials like WCS heavy differential and SCO premium.

Question and Answer

• Q: Patrick O'Rourke on liquidity management and 2027 maturities.

A: Victor Darel stated strong cash flow generation in 2025 and 2026, indicating refinancing needs may be lower than anticipated and they will look to opportune times to refinance.

• Q: Dennis Fong on M&A environment and policy.

A: Scott Stauth mentioned accretive acquisitions add cash flow and inventory, balancing organic growth and acquisitions, and noted the Palliser Block acquisition was a unique circumstance with a longer process than expected but expects fewer such situations going forward.

• Q: Greg Pardy on buybacks and net debt.

A: Victor Darel said they remain on track to reach the $15 billion net debt target by year-end 2026, with a strong rate of buyback expected in the second half of 2025.