CNR Posts Slight Decrease in '09 Cash Flow

Commenting on the fourth quarter 2009 and year end results, Allan Markin, Chairman of Canadian Natural Resources stated, "Canadian Natural's strong quarterly and annual results reflect the focus of management and all employees to deliver on the defined plan. We were proactive in our approach to the low crude oil and natural gas pricing environment by deferring capital in our original 2009 budget. Our capital discipline provides balance sheet strength throughout all business cycles. Last year was noteworthy for Canadian Natural as our diligent efforts were rewarded with the achievement of first oil at Horizon, helping 2009 become a record crude oil production year for the Company. We continue to strive to develop our assets in the most cost effective way and are committed to providing long-term shareholder value."

Canadian Natural's Vice-Chairman, John Langille, continued, "The commodity price environment in 2009 was challenging, particular in the first half of the year, as a result of economic concerns that continued from 2008. By maintaining capital and operating discipline in 2009, we were able to elevate the Company's financial strength. Debt to book capitalization exited 2009 at 33%, below current targeted ranges. We understand the importance of a strong balance sheet as it enables the Company to withstand commodity price cycles and provides the flexibility to take advantage of current and future opportunities. As well, in recognition of our strong financial position, large production base and sustainable cash flow, the Company has approved a 43% dividend increase to $0.15 per quarter per common share payable April 1, 2010."

Steve Laut, President of Canadian Natural concluded, "As always we focus our capital on projects that provide the greatest value and highest returns affording us the ability to generate significant free cash flow. We continue to progress our thermal crude oil growth plan and target to sanction the Kirby In-Situ Oil Sands Project by the end of 2010. At Horizon, we continue to focus on reaching sustainable production volumes, increasing reliability and reducing operating costs. Additionally, we continue engineering and procurement for Tranche 2 of the Phase 2/3 expansion. We are committed to completing lessons learned from the construction of Phase 1 to ensure an optimal strategy for the development of future expansions.

The Company had another solid year of adding new reserves with finding and on-stream costs (excluding Horizon SCO) of $19.81 per barrel of oil equivalent for proved reserves and $22.64 per barrel of oil equivalent for proved and probable reserves utilizing the new SEC commodity pricing assumptions. The significant reduction in natural gas pricing in 2009 resulted in the loss of late-life reserves and certain reserves associated with undeveloped drilling opportunities. The significant increase in crude oil prices resulted in calculated higher royalties and accelerated project payouts for oil sand projects, including Horizon and our thermal projects. While this improves the economics of the projects it also results in reduced net reserves. Excluding the impact of price revisions, our finding and on-stream costs would have been $12.28 per barrel of oil equivalent for proved reserves and $7.74 per barrel of oil equivalent for proved and probable reserves."

Annual

  • The Company's natural gas assets delivered as expected, averaging 1,315 mmcf/d for 2009, a decrease of 12% from 2008. As anticipated, 2009 natural gas production volumes declined due to reduced capital re-investment and an associated 59% reduction in natural gas net drilling activity.
  • Total crude oil and NGLs production in 2009 averaged 355,463 bbl/d, a 13% increase from 2008. Crude oil volumes were higher due to capital reallocation to crude oil drilling and the commencement of production at Horizon Oil Sands ("Horizon"), slightly offset by lower NGLs production and international light crude oil declines.
  • Cash flow from operations decreased 13% to $6.1 billion in 2009 from $7.0 billion in 2008, and net earnings decreased 68% in 2009 to $1.6 billion from $5.0 billion in 2008. The decrease in cash flow and earnings was primarily due to a decrease in product pricing, partially offset by the commencement of production at Horizon.

Fourth Quarter

  • Total crude oil and NGLs production for Q4/09 was 366,451 bbl/d. Q4/09 crude oil production volumes increased 2% from Q3/09 of 359,269 bbl/d, and increased 18% from Q4/08 of 309,570 bbl/d. The increase in volumes in Q4/09 from the same quarter last year was primarily due to production at Horizon. The increase from Q3/09 reflects increased production at Horizon and higher thermal volumes relating to the cyclic nature of the Company's thermal production.
  • Natural gas production volumes for the fourth quarter represented 36% of the Company's total production. Natural gas production for Q4/09 averaged 1,250 mmcf/d, down 3% from 1,293 mmcf/d for Q3/09 and down 12% from 1,427 mmcf/d for Q4/08 as expected. The decrease in volumes for Q4/09 from Q4/08 reflected the reallocation of capital towards higher return crude oil projects.
  • Quarterly cash flow from operations was approximately $1.7 billion, a 13% increase from Q3/09 and an increase of 8% from Q4/08. The increase from Q3/09 primarily reflected higher crude oil and natural gas price realizations, partially offset by a lower realized risk management gain for the quarter. The increase from Q4/08 reflects the impact of higher realized crude oil pricing, narrowing heavy oil differentials, and higher volumes primarily associated with production at Horizon. These factors were partially offset by the impact of lower natural gas volumes and pricing.
  • Quarterly net earnings for Q4/09 of $455 million included the effects of unrealized risk management activity, stock based compensation and fluctuations in foreign exchange. Excluding these items, quarterly adjusted net earnings from operations for Q4/09 were $667 million, a decrease of 4% from Q4/08.

Operational and Financial

  • Maintained a strong undeveloped conventional core land base in Canada of 10.5 million net acres - a key asset for continued value growth.
  • Completed the Q4/09 North America drilling program targeting 212 net crude oil wells and 28 net natural gas wells with a 93% 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.
  • Improvements at Pelican Lake continue with the conversion of waterflood wells to polymer flood wells, with production averaging approximately 38,000 bbl/d, a 2% increase over the previous quarter.
  • Q4/09 North America crude oil and NGLs production increased 3% from Q3/09 levels, reflecting the transition between steam and production cycles of Primrose wells.
  • Diagnostic steaming is proceeding according to plan at Primrose East and average production is targeted to be between 16,000 bbl/d and 20,000 bbl/d in 2010 as we cautiously return to normal steaming activities.
  • The Facility Upgrade Project at Espoir, which will increase capacity of the Floating Production Storage and Offtake vessel ("FPSO"), is progressing and commissioning is targeted to be complete in the second quarter of 2010.
  • At the Olowi Project in Offshore Gabon production volumes from the first platform continue to be below expectations and as a result the Company recognized a ceiling test impairment of $115 million (pre-tax) at December 31, 2009. The Company continues drilling at the next scheduled platform with production targeted for second quarter of 2010.
  • Independent qualified reserves evaluators evaluated and reviewed all of the Company's crude oil and natural gas reserves under twelve month average prices and current costs as at December 31, 2009:
  • Total corporate proved reserves were 3.03 billion barrels of crude oil and NGLs and 3.18 trillion cubic feet of natural gas equating to 3.56 billion barrels of oil equivalent. Total corporate proved and probable reserves were 4.74 billion barrels of crude oil and NGLs and 4.21 trillion cubic feet of natural gas equating to 5.44 billion barrels of oil equivalent.
  • As a result of the changes to United States Securities Exchange Commission ("SEC") regulations, the synthetic crude oil ("SCO") produced at Horizon is now considered a crude oil and natural gas producing activity and is therefore included with crude oil and NGL reserves.
  • Horizon net proved SCO reserves decreased by 296 million barrels to 1.65 billion barrels. The decrease included an economic revision due to price of 307 million barrels. The net proved and probable SCO reserves were 2.51 billion barrels. The significant increase in crude oil prices resulted in calculated higher royalties and accelerated project payout.
  • Total net proved reserves excluding Horizon SCO at the end of 2009 amounted to 1.38 billion barrels of crude oil and NGLs and 3.18 trillion cubic feet of natural gas equating to 1.91 billion barrels of oil equivalent. Total net proved reserves excluding Horizon SCO decreased by 53 million barrels of oil equivalent from 2008. As a direct result of lower natural gas prices, there was a reduction of net proved natural gas reserves of 327 billion cubic feet. There was also a decrease of 19 million barrels of proved crude oil and NGLs as a result of economic revisions due to higher royalties and accelerated project payouts resulting from higher crude oil prices.
  • Total net proved reserve additions excluding Horizon SCO equaled 69% of 2009 net production, at a finding and on-stream cost of $19.81 per barrel of oil equivalent. The Company's three-year average proved finding and on-stream cost was $17.76 per barrel of oil equivalent.
  • Total net proved and probable reserves, excluding Horizon SCO, at the end of 2009 amounted to 2.23 billion barrels of crude oil and NGLs and 4.21 trillion cubic feet of natural gas equating to 2.93 billion barrels of oil equivalent. Total proved and probable net reserves, excluding Horizon SCO, decreased by 69 million barrels of oil equivalent from 2008 as a result of economic revisions due to prices.
  • Total net proved and probable reserve additions, excluding Horizon SCO, equaled 61% of 2009 net production, at a finding and on-stream cost of $22.64 per barrel of oil equivalent. The Company's three-year average net proved and probable finding and on-stream cost was $17.41 per barrel of oil equivalent.
  • North America net proved reserve additions excluding economic revisions due to prices and Horizon SCO equaled 176% of 2009 production at a finding and on-stream cost of $6.45 per barrel of oil equivalent. Net proved and probable reserve additions excluding economic revisions due to prices and Horizon SCO equaled 213% of 2009 production at a finding and on-stream cost of $5.32 per barrel of oil equivalent.
  • Using the total net proved finding and on-stream costs, excluding Horizon SCO, the Company achieved an overall recycle ratio of 1.4x during 2009. By also excluding the revisions due to prices, the recycle ratio would be 2.3x.
  • Long-term debt was reduced by $3.3 billion to $9.7 billion in 2009 from $13.0 billion in 2008. As a result, 2009 debt to book capitalization improved to 33% (2008 - 41%) and debt to EBITDA improved to 1.4x (2008 - 1.7x).
  • Tenth consecutive year of dividend increases. The 2010 quarterly dividend on common shares increased by 43% to C$0.15 from C$0.105 per common share, payable April 1, 2010.
  • On March 3, 2010 the Board of Directors approved a resolution to file with the Toronto Stock Exchange a Notice of Intention to purchase by way of normal course issuer bid up to 2.5% of its issued and outstanding common shares. Subject to acceptance by the Toronto Stock Exchange of the Notice of Intention, the purchases would be made through the facilities of the Toronto Stock Exchange and the New York Stock Exchange.
  • On March 3, 2010, the Company's Board of Directors approved a resolution to subdivide the Company's common shares on a two for one basis, subject to shareholder approval. The proposal will be voted on at the Company's Annual and Special Meeting of Shareholders to be held on May 6, 2010.

FINANCIAL REVIEW

  • Although the negative worldwide economic conditions appear to be subsiding, the potential for continued volatility in the market and a long road to full economic recovery remain. The Company continually examines its liquidity position and ensures a low risk approach to finance. The Company understands the potential for commodity price declines and positions itself to endure and succeed in these times. The Company's financial strength continues to improve as an increase in production and free cash flow are expected in 2010. Financial strengths continue to be:
  • A diverse asset base spread over various commodity types with 94% of production located in G8 countries.
  • Financial stability and liquidity - cash flow from operations of $1.7 billion for Q4/09, with available unused bank lines of $2.0 billion at December 31, 2009.
  • Flexibility in asset base allowing for disciplined capital allocations.
  • A strengthening balance sheet with debt to book capitalization of 33% and debt to EBITDA of 1.4 times, both below targeted ranges. Long-term debt was reduced to $9.7 billion as at December 31, 2009, a reduction of $3.3 billion over the previous year.
  • Tenth consecutive year of dividend increases. The 2010 quarterly dividend on common shares increased by 43% to C$0.15 from C$0.105 per common share, payable April 1, 2010.
  • On March 3, 2010 the Board of Directors approved a resolution to file with the Toronto Stock Exchange a Notice of Intention to purchase by way of normal course issuer bid up to 2.5% of its issued and outstanding common shares. Subject to acceptance by the Toronto Stock Exchange of the Notice of Intention, the purchases would be made through the facilities of the Toronto Stock Exchange and the New York Stock Exchange.
  • On March 3, 2010, the Company's Board of Directors approved a resolution to subdivide the Company's common shares on a two for one basis, subject to shareholder approval. The proposal will be voted on at the Company's Annual and Special Meeting of Shareholders to be held on May 6, 2010.
Events  SUBSCRIBE TO OUR NEWSLETTER

Our Privacy Pledge
SUBSCRIBE


Most Popular Articles


From the Career Center
Jobs that may interest you
CFO/ Senior Financial Manager
Expertise: Accounting|Financial Analyst
Location: Carrizo Springs, TX
 
Sr. Accounting Specialist- Revenue, Severance Tax
Expertise: Accounting
Location: Houston, TX
 
Business Development Analyst
Expertise: Business Analyst|Business Development
Location: Chesapeake, VA
 
search for more jobs

Brent Crude Oil : $55.49/BBL 2.45%
Light Crude Oil : $52.42/BBL 2.04%
Natural Gas : $3.2/MMBtu 5.04%
Updated in last 24 hours