Canadian Natural Resources Limited, 2013 Guidance/Update Call, Dec 04, 2012
December 4, 2012 2:40 PM ET
Canadian Natural Resources, Ltd. (CNQ)
December 04, 2012 11:00 am ET
John G. Langille - Vice Chairman
Steve W. Laut - Principal Executive Officer, President and Director
Christopher Feltin - Macquarie Research
Good morning, ladies and gentlemen. Welcome to the Canadian Natural Resources 2013 Budget Conference Call. The slides for this conference call are available to view with the webcast and in PDF format at www.cnrl.com. I would like to meeting over to Mr. John Langille, Vice Chairman of Canadian Natural Resources. Please go ahead, Mr. Langille.
John G. Langille
Thank you, operator, and good morning, everyone. Thanks for attending this conference call where we will review our planned budget for 2013, which was included in our press release issued earlier today. Participating with me today is Steve Laut, our President. Doug Proll, our Chief Financial Officer is also here, available to answer any questions at the end of Steve's presentation.
Steve will be referring to certain information contained on slides which, as the operator indicated, can be accessed through our website at www.cnrl.com. Before we start, I would refer you to the comments regarding forward-looking information contained in our press release, and also note that all dollar amounts are in Canadian dollars and production of reserves are both expressed as before royalties, unless otherwise stated.
We'll make some additional comments before I turn the call over to Steve.
Our targeted 2013 budget reflects our established business principles. We have maintained our overall balance in a number of ways. CapEx is established in the context of cash flow, with allowance for excess cash flow to pursue dividends and share repurchases, which we have been completing more aggressively; spending on mid- and long-term projects, but not affecting capital to realize current short-term production increases; slowing production of 9% in high return oil projects, offsetting an overall decline in natural gas production due to continued reduced capital directed to lower return natural gas projects; continued free cash flow derived from international operations where CapEx has been increased we drill additional infill-producing wells; and we have built in flexibility in our capital allocation through all of 2013.
I'll now turn the call over to Steve for his detailed comments.
Steve W. Laut
Thanks, John, and good morning, everyone. Before I go through the 2013 budget overview and our assets, I'll spend a few minutes talking about our -- what sets Canadian Natural apart from our peer group in terms of our objectives, strengths and advantages starting at Slide 4.
Canadian Natural has and will continue to build a premium value defined growth independent. We're one of the few companies in our peer group that has the assets that deliver free cash flow on a sustainable basis, a direct result of our ability to effectively execute our strategies.
Canadian Natural has the largest reserve base in our peer group, a reserve base that ranks of global industry players. It's balanced and is delivering significant cash flow. Critical to our ability to continue to grow free cash flow is our very large, undeveloped resources that we own and control. Resources that are long life and low decline.
Importantly, we require only a portion of our cash flow to grow current year production, about 40% in 2013, reflecting the strength of our assets and Canadian Natural's tremendous capital flexibility. The remaining cash flow can be utilized to increase the strength of our free cash flowing reserves by unlocking the value of our undeveloped resources; return to shareholders through increasing dividends and share buybacks, acquisitions or pay down debt. Probably the most important of all, we have the people, the expertise and the experience to execute our programs and operate effective, efficient operations.
Looking out, you'll see that we are not undertaking any projects that are new to Canadian Natural.
Our balance sheet is strong with the capacity to capture opportunities and weather any commodity price volatility we might encounter. Canadian Natural is in a very enviable position, and has a clear advantage compared to many of our peers, when it comes to unlocking the value and the free cash flow from our long life, low decline resources. Illustrating Canadian Natural's advantage and the robustness of our model is shown on Slide 5.
Canadian Natural reserve base is balanced and very strong, generating significant cash flow. Only a portion of our cash flow is required to deliver near-term production growth, about 47% in 2013, and delivers 9% oil growth, allowing Canadian Natural to allocate the free cash which continues to grow between 4 choices: The development of our large resource base, which received the lion's share of the capital allocation at this point; and/or opportunistic acquisitions, which in turn increases the strength of our asset base and increases our ability to generate even greater amounts of cash flow and due to the long life, low decline nature of these resources, even greater amounts of more sustainable free cash flow going forward; or we can allocate the free cash flow to strengthening the balance sheet, a balance sheet that is already very strong; or return the cash to shareholders through increasing dividends at share buybacks. Over the past number of years, Canadian Natural's effectively balanced the allocation of free cash flow between all of these choices.
This model is highly effective and is driven by effective capital allocation, effective and efficient operations and strong management. It all starts with the strength of our large well-balanced asset base, Slide 6, at 4 billion BOEs, Canadian Natural has largest proved reserve base amongst our Canadian and U.S. peer group.
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