Mr. Tim McKay reports

CANADIAN NATURAL RESOURCES LIMITED ANNOUNCES 2023 SECOND QUARTER RESULTS

Commenting on Canadian Natural Resources Ltd.'s second quarter 2023 results, Tim McKay, president, stated: "Canadian Natural's Q2 2023 results demonstrated the advantages of our diverse and balanced asset base by delivering adjusted funds flow of approximately $2.7-billion. As well, we delivered average daily production volumes of approximately 1,194 Mboe/d [million barrels of oil equivalent per day] in the quarter, which was impacted by wildfires in Western Canada, the continued unplanned third party pipeline outage and planned company turnarounds during the quarter. Wildfires in Western Canada did not cause any significant property damage to our assets, and we would like to acknowledge our field personnel and their families, as well as the first responders and emergency response agencies for their efforts in the affected communities over the last few months.

"As a result of strong execution on our thermal growth plan, Q3 2023 average thermal production is now targeted to be approximately 280,000 bbl/d [barrels per day], which represents growth of approximately 30,000 bbl/d from Q4 2022 levels. Thermal production targets to capture strong realizations, as Western Canadian Select (WCS) pricing has improved significantly year-to-date which, as of today, is forecasted to continue for the remainder of 2023.

"Additionally, following the completion of planned turnarounds at our world-class oil sands mining and upgrading assets, synthetic crude oil (SCO) production was strong, with July, 2023, volumes averaging approximately 513,000 bbl/d, capturing SCO pricing which continues to be priced at a premium to WTI [West Texas Intermediate].

"Environmental, social and governance (ESG) remains a priority for us, as evidenced in our 2022 stewardship report to stakeholders which was released today. This report highlights several of our ESG achievements, including top-tier safety performance and the shared value achieved by working together across our operations with 167 indigenous businesses, through which approximately $684-million in contracts were awarded in 2022. Additionally, Canadian Natural is an investment leader in research and development (R&D). In 2022, we increased our investment in R&D by 30 per cent over 2021 levels, with over $587-million invested in technology development and deployment focusing on reductions in our environmental footprint, including reductions in greenhouse gas (GHG) emissions and productivity improvements. The company's strong track record of R&D investment will continue in 2023 and beyond, and will be targeted to grow with our participation in the Pathways Alliance. Working together with the federal government of Canada and the Alberta government, the Pathways Alliance is a transformative industry collaboration with an actionable plan that includes the foundational carbon capture and storage (CCS) project, a significant opportunity to achieve meaningful GHG emissions reductions in support of industry, Alberta and Canada's climate goals. Canadian Natural continues to work together with governments on the importance of balancing environmental and economic objectives along with being able to support Canada's allies by providing affordable, reliable, responsibly produced energy."

Mark Stainthorpe, Canadian Natural's chief financial officer, added: "Canadian Natural delivered solid results in a heavy planned turnaround quarter, as profitability and value from our diverse asset base generated adjusted net earnings of approximately $1.3-billion and adjusted funds flow of approximately $2.7-billion. Our effective and flexible capital allocation to our four pillars: returns to shareholders, balance sheet strength, resource value growth and opportunistic acquisitions continues to deliver robust financial results.

"Year-to-date, up to and including Aug. 2, 2023, we have returned approximately $4.3-billion to shareholders through dividends and share repurchases. Our commitment to increasing shareholder returns is evident in our sustainable and growing quarterly dividend, which was increased for the 23rd consecutive year in March, 2023. As planned maintenance activities were completed in Q2 2023, we are targeting strong production volumes and free cash flow for the second half of 2023 as we move towards our $10-billion net debt level and our commitment to return 100 per cent of free cash flow to shareholders. 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.

"This quarter marked the sixth anniversary of the acquisition of 70 per cent of the Athabasca oil sands project (AOSP). As part of the acquisition we issued approximately 97.6 million shares, resulting in shares outstanding at May 31, 2017, of approximately 1,215 million shares. Shareholder returns through share repurchases since the acquisition closed have been significant, resulting in a reduction of approximately 122.7 million shares over that period, to approximately 1,092.3 million shares outstanding as of June 30, 2023, fewer shares outstanding than before acquiring AOSP. Additionally, since the closing, total corporate production has grown by roughly 50 per cent, or 442 Mboe/d, from approximately 877 Mboe/d in Q1 2017 to approximately 1,319 Mboe/d in Q1 2023. This demonstrates our focus on safe, reliable production and our culture of continuous improvement."

Quarterly highlights:

• The strength of Canadian Natural's long-life, low-decline asset base, supported by safe, effective and efficient operations, makes its business unique, robust and sustainable. In Q2 2023, the company generated strong financial results, including:
  • Net earnings of approximately $1.5-billion and adjusted net earnings from operations of approximately $1.3-billion;
  • Cash flows from operating activities of approximately $2.7-billion;
  • Adjusted funds flow of approximately $2.7-billion;
  • Free cash flow of approximately $400-million after total dividend payments of approximately $1-billion and base capital expenditures of approximately $1.4-billion.
• This quarter marked the sixth anniversary of the acquisition of 70 per cent of the Athabasca oil sands project. As part of the acquisition, the company issued approximately 97.6 million shares, resulting in shares outstanding at May 31, 2017, of approximately 1,215 million shares. Shareholder returns through share repurchases since the acquisition closed have been significant, resulting in a reduction of approximately 122.7 million shares over that period to approximately 1,092.3 million shares outstanding as of June 30, 2023, fewer shares outstanding than before acquiring AOSP:
  • Additionally, since the closing, total corporate production has grown by approximately 50 per cent, or 442,484 boe/d, from 876,907 boe/d in Q1 2017 to 1,319,391 boe/d in Q1 2023.
• Returns to shareholders in Q2 2023 were strong, totalling approximately $1.5-billion, composed of approximately $1-billion of dividends and approximately $500-million of share repurchases:
  • In Q2 2023, the company repurchased approximately 6.4 million common shares for cancellation at a weighted average price of $76.57 per share, for a total of approximately $500-million.
  • Canadian Natural increased its sustainable and growing quarterly dividend in March, 2023, to 90 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 its business model, its strong balance sheet and the strength of its diverse, long-life, low-decline asset base.
• Year-to-date, up to and including Aug. 2, 2023, the company has returned approximately $4.3-billion to shareholders through approximately $2.9-billion in dividends, and $1.4-billion through the repurchase and cancellation of approximately 17.6 million common shares.
• Subsequent to quarter-end, the company declared a quarterly dividend of 90 cents per share, payable on Oct. 5, 2023, to shareholders of record on Sept. 15, 2023.
• Canadian Natural continues to maintain a strong balance sheet and financial flexibility, with net debt of approximately $12-billion and significant liquidity of approximately $5.6-billion at the end of Q2 2023:
  • In June, 2023, the company extended its $2.425-billion revolving credit facility by three years, now maturing June, 2027, and, subsequent to quarter-end, the company filed Canadian and United States base shelf prospectuses, providing the company with additional liquidity options.
• The company's free cash flow allocation policy provides that 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 will be 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. When net debt reaches $10-billion, returns to shareholders increases to 100 per cent of free cash flow, with the free cash flow definition modified to adjusted funds flow less dividends and less total capital expenditures for 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.
• In Q2 2023, the company continued to focus on safe, effective and efficient operations, with quarterly average production volumes of 1,194,326 boe/d, comparable with Q2 2022 levels:
  • Natural gas production averaged 2,085 MMcf/d (million cubic feet per day) in Q2 2023, compared with Q2 2022 levels of 2,105 MMcf/d.
  • Liquids production averaged 846,909 bbl/d in Q2 2023, compared with Q2 2022 levels of 860,338 bbl/d.
  • Quarterly production in Q2 2023 was negatively impacted by wildfires and the previously mentioned third party pipeline outage, which began in Q1 2023 and has now been resolved, resulting in a Q2 2023 average production impact of approximately 24,400 boe/d (99 MMcf/d and 7,900 bbl/d):
    • At present, wildfires in Western Canada continue to have a minor impact on production volumes as the company continues to actively monitor the situation.
  • Following the completion of planned turnarounds at Horizon and the non-operated Scotford upgrader, the company achieved strong monthly average production in July, 2023, of approximately 513,000 bbl/d of SCO.
• 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 enhancement project is targeting to add approximately 14,000 bbl/d of additional SCO production capacity 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:
    • During the planned turnaround at Horizon, and as part of the reliability enhancement project, the company completed tie ins of two furnaces. In August, 2023, both furnaces are targeted to be operational, increasing SCO production capacity by approximately 5,000 bbl/d, which is included in the company's 2023 production guidance.
    • Based on the forward strip as of July 24, 2023, these high-margin SCO barrels will capture strong pricing with an average premium to WTI pricing of approximately $3 (U.S.)/bbl in Q3 2023 and Q4 2023, generating significant free cash flow for the company.
  • Thermal in situ production is targeted to increase to an average of approximately 280,000 bbl/d in Q3 2023, as a result of strong execution, enabling the company to optimize the production schedule on the new Primrose CSS pads, combined with the Kirby SAGD (steam-assisted gravity drainage) pads coming on stream earlier and ramping up ahead of plan. This represents production growth of approximately 30,000 bbl/d from Q4 2022 levels, utilizing existing facility capacity:
    • Based on the forward strip as of July 24, 2023, the tighter average WCS differential of approximately $15 (U.S.)/bbl in Q3 2023 and Q4 2023 is an improvement compared with Q1 2023, when WCS differentials averaged approximately $25 (U.S.)/bbl. Thermal in situ and heavy crude oil production is well positioned to capture strong pricing, generating significant free cash flow.
• The 2023 capital budget in oil sands mining and upgrading and North America E&P (exploration and production) has been increased by a combined $200-million compared with the original budget. In particular, oil sands mining and upgrading 2023 capital has increased by approximately $130-million, largely reflecting increased scope and third party service costs relating to sustaining activities to ensure safe and effective operations. The remaining approximately $70-million relates to North America E&P and thermal operations, as a result of increased non-operated and workover activity on the company's properties, as well as inflationary pressures. The result is an increase to the company's 2023 targeted total capital program of roughly 4 per cent, to approximately $5.4-billion:
  • Despite the wildfires in Western Canada, the third party pipeline outage in the first half of the year and the previously announced unplanned outages at Horizon in January, 2023, Canadian Natural's 2023 production is still targeted to be within the company's corporate guidance range of 1.33 Mboe/d to 1,374,000 boe/d, but closer to the lower end.

Operations review and capital allocation

Canadian Natural has a balanced and diverse portfolio of assets, primarily Canadian-based, with international exposure in the United Kingdom 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 its 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.

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.

Sustainability reporting

Canadian Natural has been producing its sustainability report, the stewardship report to stakeholders, since 2004 to report on the company's continuing commitment to environmental performance, social responsibility and continuous improvement. Today, Canadian Natural released its 2022 stewardship report to stakeholders in conjunction with its Q2 2023 results, which is now available on the company's website. This report displays how Canadian Natural continues to focus on safe, reliable, effective and efficient operations while minimizing its environmental footprint. It provides a performance overview across the full range of the company's operations in Western Canada, the U.K. portion of the North Sea and offshore Africa.

The company aligns its reporting with recommendations from the Task Force on Climate-Related Financial Disclosures, the reporting framework from the Sustainability Accounting Standards Board and the Global Reporting Initiative. Canadian Natural's 2022 report includes independent third party reasonable assurance on its scope 1 and 2 emissions (including methane emissions), and limited assurance on its scope 3 emissions.

Highlights from the company's 2022 report include:

• 43-per-cent reduction in total recordable injury frequency (TRIF) and an 80-per-cent reduction in corporate lost time incident frequency (LTI) from 2018 to 2022.
• Invested approximately $587-million in research, technology development and deployment, with $151-million in GHG-reduction technology and implementation projects.
• Announced a new environmental target: 40-per-cent reduction in corporate scope 1 and 2 absolute GHG emissions by 2035 from a 2020 baseline.
• Continued reductions to corporate direct GHG emissions intensity with an 8-per-cent reduction from 2018 to 2022.
• 50-per-cent reduction in 2022 in absolute methane emissions in its North America E&P operations from its 2016 baseline.
• 66-per-cent reduction in 2022 of in situ fresh water use intensity from its 2017 baseline.
• 36-per-cent reduction in 2022 of oil sands mining fresh river water use intensity from its 2017 baseline.
• Abandoned 3,121 inactive wells in its North America E&P operations in 2022. The company has abandoned more than 3,000 wells per year, in each of 2022 and 2021. 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.
• Awarded approximately $684-million in contracts with indigenous businesses, a 20-per-cent increase from 2021.

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 E&P (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.

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. Pathways has a defined plan, including its foundational CCS project involving a CO2 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. During the first half of 2023, technical teams advanced detailed evaluations for the proposed storage hub to enhance understanding of the geology in the hub region. 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.

Members of Pathways continue to advance community engagement and environmental field programs to minimize the project's environmental disturbance. Project engineering and environmental field programs are on schedule for this anchor project to meet timelines set out, subject to government support on these efforts. 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

Canadian Natural is a leader in CCS and GHG-reduction projects, and sees many opportunities to work collaboratively with industry peers and governments to advance investments in CCS 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 CCS projects in Canada. The government of Alberta's 2023 budget announcement on Feb. 28, 2023, included support for CCS projects and co-ordination with federal CCS 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.

Conference call

Canadian Natural Resources will be issuing its 2023 second quarter earnings results on Thursday, Aug. 3, 2023, before market open.

A conference call will be held at 9 a.m. MT (11 a.m. ET) on Thursday, Aug. 3, 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: 518528 followed by the 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.

We seek Safe Harbor.