Mr. Tim McKay reports

CANADIAN NATURAL RESOURCES LIMITED ANNOUNCES 2023 FIRST QUARTER RESULTS

Commenting on the company's first quarter 2023 results, Tim McKay, president of Canadian Natural Resources Ltd., stated: "Canadian Natural delivered strong results in Q1 2023 with effective and efficient operations on our balanced and diverse portfolio of high-quality assets. Our culture of continuous improvement, focus on cost control and disciplined capital allocation continues to drive strong financial results and maximize value for our shareholders. In Q1 2023, we delivered total quarterly production of approximately 1,319 MBOE/d [thousand barrels of oil equivalent per day], including record natural gas production of 2,139 MMcf/d [million cubic feet per day] and liquids production of 962,908 bbl/d [barrels per day]. We generated strong quarterly free cash flow of approximately $1.4-billion, after dividends of approximately $900-million and net base capital expenditures of approximately $1.1-billion. In addition, our strategic growth capital expenditures of approximately $280-million in the quarter was targeted to provide midterm growth across our asset base as we unlock value from our projects with strong capital efficiencies. With ample liquidity on our balance sheet, we can add production with minimal capital while generating significant returns on capital and maximizing shareholder value.

"Canadian Natural is a leader on environmental, social and governance (ESG) and has made it a priority to work collaboratively with industry peers and governments to achieve meaningful greenhouse gas (GHG) emissions reductions in support of Alberta and Canada's climate goals. The Alberta government's recently announced emissions reduction and energy development plan (ERED) builds upon the province's long-standing climate leadership and achievements in emissions reductions. Canadian Natural looks forward to supporting the Province of Alberta in continuing to provide affordable, reliable, responsibly produced energy while reducing emissions and aspiring towards a net-zero economy by 2050. Canadian Natural's current environmental goals support Alberta's climate plan where large-scale carbon capture and storage (CCS) projects, like the Pathways Alliance's foundational CCS project, will have a significant role in reducing GHG emissions."

Canadian Natural's chief financial officer, Mark Stainthorpe, added: "At Canadian Natural, our culture of continuous improvement and strong employee ownership enables our teams to create significant value for our shareholders across all aspects of the company. Our effective and flexible capital allocation to our four pillars (returns to shareholders, balance sheet strength, resource value growth and opportunistic acquisitions) continue to deliver robust financial results.

"In Q1 2023, we generated approximately $1.9-billion in adjusted net earnings and approximately $3.4-billion in adjusted funds flow, resulting in significant free cash flow of approximately $1.4-billion after dividends and base capital expenditures. Year to date, we have returned approximately $2.8-billion to shareholders through dividends and share repurchases, up to and including May 3, 2023. Our commitment to increasing shareholder returns is evident in our sustainable and growing quarterly dividend, which was recently increased to 90 cents per share in March, 2023, up from 85 cents per share, marking 2023 as the 23rd consecutive year of dividend increases. The increasing dividend and the company's commitment to return 100 per cent of free cash flow to shareholders, when net debt reaches $10-billion, demonstrates the confidence the board of directors has in the company's world-class assets and its ability to generate significant and sustainable free cash flow throughout the commodity price cycle.

"When you combine our leading financial results with our top-tier reserves and asset base, this provides us with unique competitive advantages in terms of capital efficiency, flexibility and sustainability, all of which drive material free cash flow generation and strong returns on capital."

• The strength of Canadian Natural's long-life, low-decline asset base, supported by safe, effective and efficient operations, makes the company's business unique, robust and sustainable. In Q1 2023, the company generated strong financial results, including:
  • Net earnings of approximately $1.8-billion and adjusted net earnings from operations of approximately $1.9-billion;
  • Cash flows from operating activities of approximately $1.3-billion;
  • Adjusted funds flow of approximately $3.4-billion;
  • Free cash flow of approximately $1.4-billion after total dividend payments of approximately $900-million and base capital expenditures of approximately $1.1-billion.
• Returns to shareholders in Q1 2023 were strong, totalling approximately $1.6-billion, comprising approximately $900-million of dividends and approximately $700-billion of share repurchases:
  • Canadian Natural increased its sustainable and growing quarterly dividend in March, 2023, to 90 cents per common share, up 6 per cent from 85 cents per common share, marking 2023 as the 23rd consecutive year of dividend increases and demonstrating the confidence that the board of directors has in the sustainability of the company's business model, its strong balance sheet and the strength of its diverse, long-life, low-decline asset base;
  • In Q1 2023, the company repurchased approximately 8.9 million common shares for cancellation at a weighted average price of $76.96 per share for a total of approximately $700-million;
  • In March, 2023, the company renewed its normal course issuer bid (NCIB) which states that during the 12-month period commencing March 13, 2023, and ending March 12, 2024, the company can repurchase for cancellation up to 10 per cent of the public float (determined in accordance with the rules of the Toronto Stock Exchange), up to a maximum of approximately 92.3 million common shares.
• Yea to date, up to and including May 3, 2023, the company has returned approximately $2.8-billion to shareholders through approximately $1.9-billion in dividends and $900-million through the repurchase and cancellation of approximately 11.1 million common shares.
• Subsequent to quarter-end, the company declared a quarterly dividend of 90 cents per share, payable on July 5, 2023, to shareholders of record on June 16, 2023.
• Canadian Natural continues to maintain a strong balance sheet and financial flexibility, with approximately $11.9-billion in net debt and significant liquidity of approximately $6.1-billion at the end of Q1 2023:
  • As previously announced, the company made an early repayment in Q4 2022 of $1-billion (U.S.) of 2.95 per cent debt securities, originally due Jan. 15, 2023.
• The company's free cash flow allocation policy that states when net debt is between $10-billion and $15-billion, 50 per cent of free cash flow will be allocated to share repurchases and 50 per cent of free cash flow allocated to the balance sheet less strategic growth/acquisition opportunities. Free cash flow for the purpose of the policy is defined as adjusted funds flow less dividends, less base capital.
• In March, 2023, the company enhanced its free cash flow allocation policy to increase returns to shareholders to 100 per cent of free cash flow when net debt reaches $10-billion. When the net debt level is reached, the policy will be adjusted to define free cash flow as adjusted funds flow less dividends and less total capital expenditures in the year. This is a reflection of the board of director's confidence in the sustainability and resilience of the company to support accelerating incremental shareholder returns to 100 per cent of free cash flow.
• Canadian Natural has diverse, high-quality reserves that include significant undeveloped opportunities which support its strong, disciplined growth plan that targets to add capital efficient production across its entire asset base in the near term, midterm and long term, maximizing value for the company's shareholders.
• In Q1 2023, the company continued to focus on safe, effective and efficient operations, with quarterly average production volumes of 1,319,391 BOE/d, an increase of 3 per cent over Q1 2022 levels:
  • The company delivered record quarterly average natural gas production of 2,139 MMcf/d in Q1 2023, an increase of 133 MMcf/d or 7 per cent over Q1 2022 levels, primarily reflecting strong drilling results, partially offset by natural field declines and a third party pipeline outage;
  • Quarterly average liquids production of 962,908 bbl/d was achieved in Q1 2023, an increase of 2 per cent from Q1 2022 levels, primarily driven by increased SCO (synthetic crude oil) production in the oil sands mining and upgrading segment.
• The company's strategic growth plan targets to increase production from its long-life, no-decline oil sands mining and its low-decline thermal in situ assets with the following projects:
  • At Horizon, the reliability project is targeting to add approximately 5,000 bbl/d of high-value synthetic crude oil capacity in 2023, growing to approximately 14,000 bbl/d in 2025 as a result of shifting the maintenance schedule from once per year to once every two years, reducing downtime for maintenance activities and increasing overall reliability at Horizon:
    • Based on the forward strip as of May 3, 2023, these high-margin SCO barrels would capture strong pricing at approximately a $2 (U.S.)/bbl premium to WTI for the remainder of 2023, generating significant free cash flow for the company.
  • Thermal in situ production is targeted to increase in the second half of 2023 and into 2024 with new pads that were drilled in 2022 and pads targeted to be finished drilling in the first half of 2023. Production is targeted to grow by approximately 30,000 bbl/d from Q4 2022 to Q4 2023 levels, averaging approximately 280,000 bbl/d. This production growth utilizes existing facility capacity with strong capital efficiencies ranging from approximately $8,000/bbl/d to $10,000/bbl/d on its steam-assisted gravity drainage (SAGD) and cyclic steam stimulation (CSS) pads:
    • With the May 3, 2023, forward strip showing tighter WCS differentials of approximately $15.50 (U.S.)/bbl for the remainder of 2023, an improvement of approximately $9 (U.S.)/bbl from Q1 2023, these barrels would capture strong pricing and generate significant free cash flow.
• The company's 2023 capital budget of approximately $5.2-billion remains on track, with targeted base capital of approximately $4.2-billion that is targeted to deliver year-over-year near-term growth of approximately 70,000 BOE/d, with total 2023 production guidance of approximately 1.33 million BOE/d to 1,374,000 BOE/d:
  • Budgeted strategic growth capital in 2023 of approximately $1-billion is allocated to the company's long-life, low-decline assets, which targets to add incremental production growth beyond 2023.

Operations review and capital allocation

Canadian Natural has a balanced and diverse portfolio of assets, primarily Canadian-based, with international exposure in the U.K. section of the North Sea and offshore Africa. Canadian Natural's production is well balanced between light crude oil, medium crude oil, primary heavy crude oil, Pelican Lake heavy crude oil, bitumen (thermal oil) and SCO (herein collectively referred to as crude oil), and natural gas and NGLs (natural gas liquids). This balance provides optionality for capital investments, maximizing value for the company's shareholders.

Underpinning this asset base is the company's long-life, low-decline production, representing approximately 73 per cent of budgeted total liquids production in 2023, the majority of which is zero-decline, high-value SCO production from the company's world-class oil sands mining and upgrading assets. The remaining balance of the company's long-life, low-decline production comes from its top-tier thermal in situ oil sands operations and Pelican Lake heavy crude oil assets. The combination of these long-life, low-decline assets, low reserves replacement costs, and effective and efficient operations results in substantial and sustainable adjusted funds flow throughout the commodity price cycle.

In addition, Canadian Natural maintains a substantial inventory of low-capital-exposure projects within the company's conventional asset base. These projects can be executed quickly and, in the right economic conditions, provide excellent returns and maximize value for the company's shareholders. Supporting these projects is the company's undeveloped land base which enables large, repeatable drilling programs that can be optimized over time. Additionally, by owning and operating most of the related infrastructure, Canadian Natural is able to control major components of the company's operating costs and minimize production commitments. Low-capital-exposure projects can be quickly stopped or started depending upon success, market conditions or corporate needs.

Canadian Natural's balanced portfolio, built with both long-life, low-decline assets and low-capital-exposure assets, enables effective capital allocation, production growth and value creation.

• The company drilled a total of 106 net crude oil and natural gas producer wells in Q1 2023, representing an increase of 27 net producer wells relative to Q1 2022.

Environmental, social and governance highlights

Canada and Canadian Natural are well positioned to deliver affordable, reliable, safe and responsibly produced energy that the world needs, through leading ESG performance. Canadian Natural's diverse portfolio is supported by a large amount of long-life, low-decline assets which have low-risk, high-value reserves that require low-maintenance capital. This allows the company to remain flexible with its capital allocation and creates an ideal opportunity to pilot and apply technologies for GHG emissions reductions. Canadian Natural continues to invest in a range of technologies to reduce emissions, such as solvents for enhanced recovery and carbon capture, utilization and storage (CCUS) projects. Canadian Natural's culture of continuous improvement provides a significant advantage to delivering on its strategy of investing in GHG technologies across its assets, including opportunities for methane emissions reduction, which will enhance the company's environmental performance and long-term sustainability.

Environmental targets

Canadian Natural is committed to reducing its environmental footprint and, as previously announced, has committed to the following environmental targets:

• 40-per-cent reduction in corporate scope 1 and scope 2 absolute GHG emissions by 2035, from a 2020 baseline;
• 50-per-cent reduction in North America exploration and production (including thermal in situ) methane emissions by 2030, from a 2016 baseline;
• 40-per-cent reduction in thermal in situ fresh water usage intensity by 2026, from a 2017 baseline;
• 40-per-cent reduction in mining fresh river water usage intensity by 2026, from a 2017 baseline.

Canadian Natural is an industry leader in abandonment and reclamation activity, and through its active program, the company has abandoned more than 3,000 wells per year in each of the past two years. At this pace, the company would be able to achieve 100-per-cent abandonment of its current inventory of inactive wells in approximately 10 years.

Pathways Alliance

The six major oil sands companies in the Pathways Alliance, including Canadian Natural, operate approximately 95 per cent of Canada's oil sands production. The goal of this unique alliance is to support Canada in meeting its climate commitments and position Canada to be the preferred source of crude oil globally. Working collectively with the federal and provincial governments, Pathways has a goal to achieve net-zero GHG emissions from oil sands operations by 2050 and is pursuing realistic and workable solutions to deliver significant emissions reductions.

Pathways recognizes that there are multiple technologies toward achieving net-zero emissions in the oil sands, including the deployment of existing and emerging GHG reduction technologies such as direct air capture, clean hydrogen, process improvements, energy efficiency, fuel switching and electrification. The anchor project is a CO2 (carbon dioxide) trunkline connecting Fort McMurray and Cold Lake to a carbon sequestration hub. In January, 2023, Pathways entered into a carbon sequestration evaluation agreement with the government of Alberta, enabling Pathways to conduct a detailed evaluation of the proposed geological storage hub to safely inject and permanently store CO2. Members of Pathways continue to advance environmental field programs to minimize the project's environmental disturbance. Additionally, detailed engineering design and a subsurface development plan are continuing, including evaluation of data from two water injection test wells to refine Canadian Natural's understanding of storage capability and capacity, and ensure safe, effective and efficient CO2 sequestration.

The proposed carbon storage hub would be one of the world's largest carbon capture and storage projects and would be connected to a transportation line that would initially gather captured CO2 from an anticipated 14 oil sands facilities in the Fort McMurray, Christina Lake and Cold Lake regions. The plan is to grow the transportation network to include over 20 oil sands facilities, and to accommodate other industries in the region interested in CCS. Stakeholder engagement continues to progress with indigenous and local communities in Northern Alberta related to the Pathways CCS project.

Government support for emissions reductions and carbon capture, utilization and storage (CCUS)

Canadian Natural is a leader in CCUS and GHG reduction projects and sees many opportunities to work collaboratively with industry peers and governments to advance investments in CCUS and to achieve meaningful GHG emissions reductions in support of Canada's climate goals. The government of Canada has proposed an investment tax credit for CCUS projects in Canada. The government of Alberta's 2023 budget announcement on Feb, 28, 2023, included support for CCUS projects and co-ordination with federal CCUS initiatives.

In addition, the government of Alberta released its emissions reduction and energy development plan (ERED) on April 19, 2023, which outlines the importance of ensuring a globally competitive oil and natural gas industry while reducing emissions and an aspiration to achieve net zero by 2050. By working together, industry and governments have the opportunity to help achieve climate goals, meet economic objectives and support Canada's role in energy security.

Blueberry River First Nations

In January, 2023, the British Columbia government came to a resolution with the Blueberry River First Nations (BRFN) regarding the impact of resource development on the BRFN lands. The company continues to receive a number of permits and is progressing its targeted activities in 2023. Engagement is continuing with government and the regulator to understand the implementation of its land management framework and the impacts to Canadian Natural going forward. The company values its relationships with local first nation communities, including the BRFN, and meets regularly with communities to build and maintain positive relationships in order to create shared value and mutual benefit from its operations.

Governance

Canadian Natural believes in diversity and values the benefits that a diverse work force can bring to the entire organization. Diversity promotes the inclusion of different perspectives and ideas, mitigates against group bias, and ensures that the company has the opportunity to benefit from all available talent and ideas. The board of directors supports diversity in all its forms and in sufficient numbers to bring a wide range of perspectives to its decision-making processes. Director nominees are selected for their ability to exercise independent judgment, experience and expertise, and their individual diversity of gender, background, experience and skills is always considered. The board of directors believes that a board composition where a minimum of 40 per cent of its independent directors and a minimum of 30 per cent of all directors are women reflects appropriate gender diversity when the other factors relevant to board effectiveness are considered.

Conference call

A conference call will be held at 8 a.m. MDT/10 a.m. EDT on Thursday, May 4, 2023.

Dial-in to the live event: North America 1-888-886-7786/international 001-416-764-8658

Listen to the audio webcast: Access the audio webcast on the home page of the company's website.

Conference call playback: North America 1-877-674-7070/international 001-416-764-8692 (passcode: 617425 followed by pound key)

About Canadian Natural Resources Ltd.

Canadian Natural is a senior oil and natural gas production company, with continuing operations in its core areas located in Western Canada, the U.K. portion of the North Sea and offshore Africa.