Canadian Natural Resources Limited Announces 2001 Fourth Quarter Results.Business Editors CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta--(BUSINESS WIRE)--Feb. 27, 2002 Canadian Natural Resources Limited Canadian Natural Resources Limited TSX: CNQ NYSE: CNQ is an oil and natural gas exploration, development and production company based in Calgary, Alberta. Operations are focused in Western Canada, the North Sea and offshore West Africa. (NYSE NYSE See: New York Stock Exchange :CED (Capacitance Electronic Disc) An earlier videodisc technology from RCA that was released in 1981 and abandoned five years later. Like phonograph records, the analog disc contained grooves that a stylus rode over. ) (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :CNQ CNQ Cost of Non Quality CNQ Canadian Trading & Quotation System Inc. CNQ Club Neon Quebec (Quebec Neon Club) .) In commenting on fourth quarter and 2001 year end results, Chairman Allan Markin Allan P. Markin is the chairman of Canadian Natural Resources Limited and one of the owners of the Calgary Flames ice hockey franchise of the National Hockey League based in Calgary, Alberta. stated "2001 has been a year of strengthening our position as a product-diversified exploration and development company. Our assets in all areas have never looked better with defined growth strategies in place for natural gas, oil (light, medium and heavy) and synthetic Synthetic A financial instrument that is created artificially by simulating another instrument with the combined features of a collection of other assets. Notes: light oil. We grew our year-over-year natural gas exit volumes by close to 30%, we continued to develop our international portfolio of light oil assets and we made significant strides in making our Horizon oil sands project a reality." "As we look into 2002 we see further growth. Already this year we have achieved first oil at our international development in Cote d'Ivoire. The Espoir project was on time and on budget, and has initial production levels in excess of our original expectations. We hope to add to this international success with additional drilling in Cote d'Ivoire, where the Baobab baobab (bä`ōbăb', bā`ō–), gigantic tree of India and Africa, exceeded in trunk diameter only by the sequoia. The trunks of living baobabs are hollowed out for dwellings; rope and cloth are made from the bark and condiments exploration well was followed by the drilling of a second successful well and where a new nearby prospect called Kossipo will be drilled." "In Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , our natural gas success continues with new pipeline capacity to the Ladyfern field scheduled to commence in March and five new Ladyfern "lookalike look-a·like also look·a·like n. One that closely resembles another; a double. lookalike Noun a person or thing that is the double of another, often well-known, person or thing " structures being drilled this winter. At Pelican Lake, we will commence testing of our new emulsion emulsion: see colloid. emulsion Mixture of two or more liquids in which one is dispersed in the other as microscopic or ultramicroscopic droplets (see colloid). Emulsions are stabilized by agents (emulsifiers) that (e.g. flood flood, in hydrology flood, inundation of land by the rise and overflow of a body of water. Floods occur most commonly when water from heavy rainfall, from melting ice and snow, or from a combination of these exceeds the carrying capacity of the river that could add significantly to the total oil reserves Oil reserves refer to portions of oil in place that are claimed to be recoverable under economic constraints. Oil in the ground is not a "reserve" unless it is claimed to be economically recoverable, since as the oil is extracted, the cost of recovery increases incrementally recovered from the pool. On our world class oil sands project, Horizon, we initiate INITIATE. A right which is incomplete. By the birth of a child, the husband becomes tenant by the curtesy initiate, but his estate is not consummate until the death of the wife. 2 Bouv. Inst. n. 1725. formal regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. processes in June June: see month. with anticipated construction commencing in 2004." "Finally, our proactive curtailment Curtailment The act of contracting or reducing operations of a company in the hope of bringing it financial or operational stability. This management technique is often used when a company has grown too fast and is unable to effectively manage its operations. of heavy oil production, including a reduction in the number of heavy oil wells drilled and a change in the steaming pattern at Primrose primrose, common name for the genus Primula of the Primulaceae, a family of low perennial herbs with species found on all continents, most frequently in north temperate regions. , has helped to narrow the heavy oil differential back to historical levels. We continue to monitor this market and continue to work on strategies to eliminate some of the uncertainty surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. this commodity pricing." "The entire management team is very excited about our prospects, and we look forward to continuing to deliver top tier results to our shareholders." HIGHLIGHTS
-- Cash flow reached $1.9 billion ($15.83 per common share) consistent with the
$1.9 billion ($16.14 per common share) realized in 2000. Fourth quarter cash
flow was $326 million ($2.69 per common share).
-- Earnings amounted to $698 million ($5.76 per common share) compared with
$782 million ($6.70 per common share) earned in 2000. Fourth quarter earnings,
after reflecting an after tax loss of $19 million on sale of assets in the
United States, amounted to $52 million ($0.43 per common share).
-- Total average production of 359,347 barrels of oil equivalent per day in
2001, increased 17% over the 305,987 barrels of oil equivalent per day produced
in 2000.
-- Fourth quarter average natural gas sales were over one billion cubic feet
per day, an increase of 88 million cubic feet per day over third quarter
production levels and 180 million cubic feet per day over prior year amounts.
-- Fourth quarter oil and liquids sales were 198,000 barrels per day after
curtailment of heavy oil development and production.
-- Netback per barrel of oil equivalent in the fourth quarter averaged a
healthy $11.68 despite weakening North American commodity pricing.
-- Trailing 12-month after tax return on average common shareholders' equity
amounted to 20% and our after tax return on capital employed was 13%.
-- Completed testing and tie-in of Slave Point wells at Ladyfern, British
Columbia with production currently at a facility restricted rate of 170 to 180
million cubic feet per day.
-- Further consolidation of the Company's holdings in northeastern British
Columbia with the fourth quarter acquisition of our partner's interest in the
Helmet area.
-- Extension of the 100% owned ECHO Pipeline System to connect with other
Canadian Natural heavy oil producing properties.
-- Proven and probable reserve additions equalled 1.6 times 2001 production
(1.3 times using only proven reserves), at a finding, development and on stream
cost of $8.47 per barrel of oil equivalent ($9.97 using only proven reserves).
-- Total proven gross reserves at the end of 2001 amounted to 790 million
barrels of oil and liquids and 2.7 trillion cubic feet of natural gas (1.2
billion barrels of oil equivalent) with additional probable reserves of 169
million barrels of oil and liquids and 0.4 trillion cubic feet of natural gas.
-- Commenced role as operator of the Curlew Floating Production Storage and
Offtake ("FPSO") vessel in the central North Sea. This vessel processes the
volumes produced from the Kyle field and has the potential to handle additional
volumes.
-- Continued development of the Canadian Natural operated Espoir field in Cote
d'Ivoire with the arrival of the FPSO on time and on budget. First oil from
this development commenced in February, 2002.
-- In January 2002, completed a United States debt offering for US $400 million
of 30 year notes at an interest rate of 7.20%.
-- In January 2002, extended for an additional 12-month period its Normal
Course Issuer Bid through the facilities of the Toronto Stock Exchange and the
New York Stock Exchange for the purchase of up to 5% of our outstanding common
shares or 6 million shares at the market price if and when acquired.
-- In February 2002, the Board of Directors increased the Company's quarterly
dividend by 25% to $0.125 per share commencing with the April 1, 2002 payment.
OPERATIONS REVIEW Production The 2001 annual results show the strength of the Company's business approach to diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. among commodities produced, namely natural gas, light and medium oil and heavy oil. Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. Natural believes this diversification reduces price risk when compared with over leverage to one commodity. Natural gas continues to be Canadian Natural's largest product offering with fourth quarter 2001 natural gas production averaging over one billion cubic feet per day, an increase of 88 million cubic feet per day from the third quarter of 2001 and 180 million cubic feet per day from the fourth quarter of 2000. During the fourth quarter, production from the Ladyfern pool in northeast “Northeastern” redirects here. For the Boston college, see Northeastern University, Boston. Northeast or north east is the ordinal direction halfway between north and east. It is the opposite of southwest. See boxing the compass. British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography averaged a pipeline constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. 104 million cubic feet per day. Oil and liquids production in the fourth quarter of 2001 decreased 4% from the third quarter of this year, reflecting the reduced heavy oil drilling program and the proactive decision to defer de·fer 1 v. de·ferred, de·fer·ring, de·fers v.tr. 1. To put off; postpone. 2. To postpone the induction of (one eligible for the military draft). v.intr. 15,000 barrels of oil per day of production until heavy oil differentials narrow to more historical levels. The Company's production composition was as follows:
----------------------------------------
Q4 2001 Q3 2001 Q4 2000
mboe/d % mboe/d % mboe/d %
----------------------------------------
Natural gas 168.6 46 154.0 43 138.6 41
Light and medium oil 105.3 29 112.1 31 106.8 31
Heavy oil 92.7 25 94.9 26 96.0 28
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366.6 361.0 341.4
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Canadian Natural drilled an additional three net oil wells and 16 net natural gas wells during the fourth quarter. These wells were located in the Company's oil area of Pelican Lake, Alberta Alberta (ălbûr`tə), province (2001 pop. 2,974,807), 255,285 sq mi (661,188 sq km), including 6,485 sq mi (16,796 sq km) of water surface, W Canada. and its natural gas core areas in northeast British Columbia and south central Alberta Central Alberta (also named Alberta's Heartland) is a region located in the Canadian province of Alberta. Central Alberta is the most densely populated rural area in the province. Agriculture and energy make up an important part of the economy. . In addition, 103 stratigraphic stra·tig·ra·phy n. The study of rock strata, especially the distribution, deposition, and age of sedimentary rocks. strat tests were drilled at the oil sands leases in Project Horizon and in eastern Alberta. The total success rate for Canadian Natural's drilling program was 100% in the fourth quarter of the year, resulting in a success rate for the entire year of 97%. Based upon its $1.5 billion dollar budget in 2002, the Company expects to produce an average of 379,000 to 393,000 barrels of oil equivalent per day, a 7% increase over 2001 levels. This increase is comprised of natural gas volumetric volumetric /vol·u·met·ric/ (vol?u-met´rik) pertaining to or accompanied by measurement in volumes. vol·u·met·ric adj. Of or relating to measurement by volume. increases to between 1,075 and 1,100 million cubic feet per day (versus the average of 918 million cubic feet per day sold in 2001) and average oil and liquids sales to between 200 and 210 thousand barrels of oil per day (versus the average of 206 thousand barrels per day Barrels per day (abbreviated BPD, bbl/d, bpd, bd or b/d) is a measurement used to describe the amount of crude oil (measured in barrels) produced or consumed by an entity in one day. in 2001). Pricing Netbacks received for Canadian Natural's oil and liquids production were lower in the fourth quarter of 2001 than both the third quarter of 2001 and the fourth quarter of last year. This was primarily a reflection of lower WTI WTI West Texas Intermediate WTI Western Transportation Institute (Montana State University) WTI World Tribunal on Iraq WTI With The Idea (used in chess to point to the idea behind a specific move) benchmark A performance test of hardware and/or software. There are various programs that very accurately test the raw power of a single machine, the interaction in a single client/server system (one server/multiple clients) and the transactions per second in a transaction processing system. pricing. Similarly, natural gas price declines contributed to lower netbacks when compared with the same periods. This decline in natural gas prices is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a reduction in North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. demand and high natural gas storage levels in the North American markets. A comparison of the price received for the Company's natural gas and oil production is as follows:
---------------------------
Q4 2001 Q3 2001 Q4 2000
---------------------------
WTI benchmark price (US $/bbl) $ 20.49 $ 26.57 $ 31.83
Differential to LLB blend (US $/bbl) $ 10.07 $ 8.10 $ 14.56
Condensate benchmark price (US $/bbl) $ 19.64 $ 26.70 $ 33.91
NYMEX benchmark price (US $/mmbtu) $ 2.50 $ 3.00 $ 5.42
AECO benchmark price (Cdn $/mmbtu) $ 3.30 $ 3.92 $ 7.42
Canadian Natural's Wellhead Price:
Primary heavy oil ($/bbl) $ 15.77 $ 23.69 $ 16.78
Thermal heavy oil ($/bbl) $ 13.59 $ 22.46 $ 12.42
Pelican Lake oil ($/bbl) $ 17.40 $ 24.99 $ 17.55
Natural gas ($/mcf) $ 2.94 $ 3.12 $ 7.28
North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. Conventional At Ladyfern in northeastern north·east n. 1. Abbr. NE The direction or point on the mariner's compass halfway between due north and due east, or 45° east of due north. 2. An area or region lying in the northeast. 3. British Columbia, the Company's 2001 drilling program resulted in the drilling, completion and testing of six wells, each capable of production rates in excess of 100 million cubic feet per day. Total production from the Ladyfern area is subject to a production cap agreed to with other producers in the area. This cap will ensure that there is not an over building of facilities in the area. The total cap in place effective December December: see month. 1, 2001 amounted to 540 million cubic feet per day. As additional pipeline takeaway capacity is added in the first quarter of 2002, the cap will increase to 785 million cubic feet per day. Canadian Natural's share of this production cap will be established on the basis of productive well capability and it is expected Canadian Natural's share of the production will amount to between 35% and 45%. The results of wells drilled to date in the Ladyfern area confirm the anomalies identified on Canadian Natural's seismic. Extensive 2-D and 3-D seismic has been shot and processed over portions of Canadian Natural's land and the Company has identified additional locations with geophysical ge·o·phys·ics n. (used with a sing. verb) The physics of the earth and its environment, including the physics of fields such as meteorology, oceanography, and seismology. characteristics similar to the wells drilled to date. Canadian Natural owns a 100% interest in its Ladyfern wells and an additional 30,000 acres of undeveloped land in the area. In 2002, Canadian Natural will drill a further 10 to 12 wells to test the productive capability of Slave Slave, river, c.310 mi (500 km) long, Northwest Territories, Canada. It comprises the middle sections of the Mackenzie River system. The river channels the waters of Lake Athabasca and the Peace River into Great Slave Lake at Fort Resolution. Point structures identified in this area. This will include wells on the main Ladyfern structure as well as other structures located on Canadian Natural's land holdings. At its thermal thermal /ther·mal/ (ther´m'l) pertaining to or characterized by heat. ther·mal adj. 1. Of, relating to, using, producing, or caused by heat. 2. oil operations at Primrose, Alberta, Canadian Natural converted a further six low pressure cyclic cyclic /cyc·lic/ (sik´lik) pertaining to or occurring in a cycle or cycles; applied to chemical compounds containing a ring of atoms in the nucleus. cy·clic or cy·cli·cal adj. 1. pads to high pressure cyclic pads. This is in addition to the four pads which were previously approved for conversion in 2000. With these conversions, Canadian Natural is better able to control steam injection volumes and timing. As a result, oil production from these high pressure pads A pressure pad may be a trigger (pad) activated by weight often used as part of a security system. Supermarkets and big-box retailers often install pressure pads on their entrance and exit doors so that they open automatically when a customer with a shopping cart approaches. will be produced in the second and third quarter of 2002. In the fourth quarter Canadian Natural completed the extension to its 100% owned and operated ECHO Echo, in Greek mythology Echo, in Greek mythology, mountain nymph. She assisted Zeus in one of his amorous adventures by distracting Hera with her chatter. For this Hera made her unable to speak except to repeat another's last words. Pipeline System. This pipeline together with the Pelican Lake Pipeline (62% owned and operated) and the 15% ownership in the Cold Lake Pipeline, is part of the Company's focus to manage the development, and marketing of its heavy oil production. These midstream mid·stream n. 1. The middle part of a stream. 2. The part of a course that is neither at the beginning nor at the end: the midstream of life. Noun 1. assets allow Canadian Natural to transport its own production volumes as well as earn transportation revenues from third parties. At the time of acquiring Ranger Ranger Any of a series of unmanned probes launched from 1961 to 1965 by NASA. The project was NASA's earliest attempt to explore the Moon's surface. Ranger 4 (1962) became the first U.S. spacecraft to hit the Moon, crash-landing on its surface as planned. Oil in the summer of 2000, Canadian Natural evaluated the properties owned by Ranger Oil in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and determined that those properties would not constitute an ongoing core region for the Company. Accordingly, a large portion of these properties were sold in the fourth quarter for $49 million plus an overriding royalty interest overriding royalty interest A third-party interest in royalty income derived from oil and gas rights. in certain properties. Market prices of oil and natural gas properties had decreased in tandem Adv. 1. in tandem - one behind the other; "ride tandem on a bicycle built for two"; "riding horses down the path in tandem" tandem with commodity prices and, accordingly, an after tax loss on sale of $19 million was realized on the disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of . North America Project Horizon Canadian Natural's Horizon oil sands project has completed the first phase of its front-end front-end adj. 1. Of or relating to the initial phase of a project: a front-end investment. 2. Of or relating to the forward parts of a vehicle: a front-end alignment. engineering work. The Company's approach for this project is to extensively evaluate new technology options and predesign Pre`de`sign´ v. t. 1. To design or purpose beforehand; to predetermine. the infrastructure prior to construction. In this way, Canadian Natural will ensure cost certainty CERTAINTY, UNCERTAINTY, contracts. In matters of obligation, a thing is certain, when its essence, quality, and quantity, are described, distinctly set forth, Dig. 12, 1, 6. It is uncertain, when the description is not that of one individual object, but designates only the kind. Louis. before significant activity begins. A strong staff of experts with experience in design, construction and operations in each of mining, extraction extraction /ex·trac·tion/ (eks-trak´shun) 1. the process or act of pulling or drawing out. 2. the preparation of an extract. and upgrading has been assembled as·sem·ble v. as·sem·bled, as·sem·bling, as·sem·bles v.tr. 1. To bring or call together into a group or whole: assembled the jury. 2. to lead this work. With respect to bitumen bitumen (bĭty  `mən) a generic term referring to flammable, brown or black mixtures of tarlike hydrocarbons, derived naturally or by distillation from petroleum. upgrading,
Canadian Natural continues to evaluate various options, including both
full and partial upgrading. The applications for project approval with
regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interestregulatory agency administrative body, administrative unit - a unit with administrative responsibilities will be submitted in mid- mid- pref. Middle: midbrain. 2002. Canadian Natural continues to schedule the start of construction in 2004 with first synthetic oil Synthetic oil is oil consisting of chemical compounds which were not originally present in crude oil (petroleum) but were artificially made (synthesized) from other compounds. production as early as 2007. Offshore West Africa West Africa A region of western Africa between the Sahara Desert and the Gulf of Guinea. It was largely controlled by colonial powers until the 20th century. West African adj. & n. During 2001, Canadian Natural continued the development of the Espoir field located offshore Cote d'Ivoire. This development included batch drilling of seven wells to intermediate casing point from one wellhead well·head n. 1. The source of a well or stream. 2. A principal source; a fountainhead. 3. The structure built over a well. wellhead Noun 1. tower, installation of a natural gas pipeline onshore on·shore adj. 1. Moving or directed toward the shore: an onshore wind. 2. Located on the shore: an onshore beacon; an onshore patrol. adv. from the field and in December the arrival in the field of an FPSO FPSO Floating Production Storage and Off-loading (shipping & oil industry) FPSO Foster Parent Society of Ontario FPSO Fleet Publication Supply Office vessel VESSEL, mar. law. A ship, brig, sloop or other craft used in navigation. 1 Boul. Paty, tit. 1, p. 100. See sup. 2. By an act of congress, approved July 29, 1850, it is provided that any person, not being an owner, who shall on the high seas, willfully, with. , the "Espoir Ivoirien". The FPSO has a processing capacity of 40 thousand barrels of oil per day with a storage capacity of one million barrels. In February February: see month. 2002, the first producing well completed drilling and was placed on production through the FPSO at an initial rate of 8,500 barrels of oil per day. Canadian Natural is the operator of the Espoir field with a 59% ownership interest. In deeper water south of Espoir, Canadian Natural drilled an exploration well on the Baobab structure in the first quarter of 2001. This well tested oil at 6,700 barrels per day. A second successful well was drilled and tested at a rate in excess of 10,000 barrels of oil per day, in the first quarter of 2002. A second nearby structure, Kossipo, will also be drilled in 2002. Canadian Natural is operator and holds a 61% working interest in these projects. The Angolan government has been notified that production from the Kiame field will cease in April 2002. This field was acquired as part of the Ranger Oil acquisition during 2000 and at that time, it was expected that production would likely become uneconomic in 2001.
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ACTIVITY BY CORE REGION Undeveloped Land Drilling Activity
As at Year ended
December 31, 2001 December 31, 2001
(thousands of net acres) (net wells)
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Northeastern British Columbia/
Northwestern Alberta 1,553 92
North Central Alberta 2,573 185
Alberta Oil Sands 236 257
Eastern Alberta/
Western Saskatchewan 1,105 222
South Central Alberta 654 326
Williston Basin 151 4
United Kingdom North Sea 236 3
Offshore West Africa 1,258 2
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YEAR ENDED DECEMBER 31
2001 2000
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DRILLING ACTIVITY Gross Net Gross Net
Oil 270 231 375 333
Natural gas 576 476 474 408
Injection/strat tests 356 353 42 38
Dry 36 32 46 34
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Total 1,238 1,092 937 813
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Success rate 97% 96%
FINANCIAL REVIEW Canadian Natural recognizes the need for a strong financial position in order to withstand volatile oil volatile oil n. A rapidly evaporating oil of plant derivation, especially an essential oil, that is capable of distillation and that does not leave a stain. Also called ethereal oil. and natural gas commodity prices and the operational risks inherent in the oil and natural gas business environment. In 2001, Canadian Natural realized record cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses of over $1.9 billion and delivered a capital expenditure program of just under $1.9 billion. The Company also paid out dividends on common shares in the amount of $36 million ($0.40 per share) and initiated a Normal Course Issuer Bid whereby we purchased 2,537,800 common shares for a total cost of $113 million. Long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. at December 31, 2001 amounted to $2.7 billion and reflected a 1.4x debt to cash flow ratio and a debt to book capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. of 42.5%, both calculated on trailing 12-month activity basis and reflecting our preferred securities as debt equivalents. These ratios are well within the Company's guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. for balance sheet management. During 2001, we successfully undertook to diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. our borrowing base through the filing of shelf prospectuses in Canada and the United States The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. for the separate offering of up to $1 billion of medium term notes in Canada and up to US $1 billion of debt securities in the United States. The securities, if and when issued, will be unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. and will rank pari passu [Latin, By an equal progress; equably; ratably; without preference.] Used especially to describe creditors who, in marshalling assets, are entitled to receive out of the same fund without any precedence over each other. PARI PASSU. By the same gradation. with other senior unsecured indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. of Canadian Natural. In July July: see month. 2001, the Company issued US $400 million of ten year, 6.70% notes to purchasers in the United States under the above shelf. In January January: see month. 2002, the Company issued US $400 million of 30 year, 7.20% notes to purchasers in the United States. Net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from both issuances were used to repay bank indebtedness. The securities were rated "Baa1" by Moody's Investors Service Moody's Investors Service A leading global credit rating, research and risk analysis firm. Moody's Investors Service A leading firm engaged in credit rating, risk analysis, and research of fixed-income securities and their issuers. , Inc., "BBB BBB A medium grade assigned to a debt obligation by a rating agency to indicate an adequate ability to pay interest and repay principal. However, adverse developments are more likely to impair this ability than would be the case for bonds rated A and above. +" by Standard & Poor's Corporation and "BBB (high)" by Dominion Bond Rating Service Dominion Bond Rating Service is a credit rating agency based in Toronto, Ontario. Founded in 1976, it is one of the largest credit rating agencies in Canada. It is one of five Nationally Recognized Statistical Rating Organizations in the United States, though significantly smaller Limited. Future offerings under the shelf prospectuses will provide flexibility to the Company's debt investment base, extend maturities and provide balance in fixed/floating interest rate ratios. During 2001, Canadian Natural cancelled can·cel v. can·celed also can·celled, can·cel·ing also can·cel·ling, can·cels also can·cels v.tr. 1. To cross out with lines or other markings. See Synonyms at erase. 2. three bank lines of credit aggregating approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1 billion. The Company's unutilized bank lines of credit currently exceed $900 million and are in addition to funds that are available through the Company's Canadian and US shelf prospectuses. In response to the expected demand for oil and natural gas, the related pricing and to protect our capital expenditure programs, we have entered into several financial derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. contracts to manage our exposure to market volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the . The details of our positions are set out in note 6 to the Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge and are summarized as follows:
-----------------------------------
Q1 2002 Q2 2002 Q3/Q4 2002
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Oil Collars (US$ - WTI)
Volume (bbls/d) 100,500 100,000 50,500
Average floor price (US$/bbl) $19.61 $19.90 $20.09
Average ceiling price (US$/bbl) $23.60 $24.05 $24.74
Natural Gas Collars (C$-AECO)
Volume (GJ/d) 290,000 230,000 -
Average floor price (Cdn$/GJ) $3.52 $3.49 -
Average ceiling price (Cdn$/GJ) $4.38 $4.27 -
Our financial position is strong and we will continue to adhere to adhere to verb 1. follow, keep, maintain, respect, observe, be true, fulfil, obey, heed, keep to, abide by, be loyal, mind, be constant, be faithful 2. our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. targets ensuring our financial flexibility. In light of this, the Board of Directors announced that the quarterly dividend will increase to $0.125 per common share from $0.10 per common share commencing with the April 1, 2002 payment. The payment will be made to shareholders of record at the close of business on March 15, 2002. RESERVES Canadian Natural retains independent petroleum engineering consultants, Sproule Sproule may refer to:
Associates Limited ("Sproule"), to evaluate the Company's proven and probable PROBABLE. That which has the appearance of truth; that which appears to be founded in reason. oil and natural gas reserves and prepare Evaluation Reports on the Company's total reserves. For the year ended December 31, 2001, the independent evaluator's reports covered 91% of the Company's reserves with the Company internally evaluating the remaining 9%, which are generally comprised of reserves in properties not currently strategic to the Company's core business areas. The Board of Directors of the Company has a Reserve Committee, which has met with Sproule and carried out independent due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. procedures with Sproule as to the Company's reserves. Of interest is the change in proven undeveloped (PUD's) oil reserves year over year. In North America the percentage of PUD's decreased from 41.6% to 40.6% of total proven reserves. Almost all North American PUD's are attributed to heavy oil reserves. This is due to the multi-zone nature of primary heavy oil developments, as not all zones in each wellbore can be brought on stream at the same time when the well is drilled. Thermal heavy oil has a high degree of reservoir reservoir (rĕz`əvôr, -vwär), storage tank or wholly or partly artificial lake for storing water. Building an embankment or dam to preserve a supply of water for irrigation is an ancient practice; India and Egypt have many old and delineation (via strat test wells) before development and production is brought on stream. This results in a higher percentage of PUD's compared to conventional oil and natural gas reserve bases. Natural gas PUD's in North America are low at 10.8% of total proven reserves at the end of 2001, compared to 17.9% at the end of 2000. This reflects the Company's focus on increasing natural gas production in 2001 in a period of high commodity prices. In offshore West Africa a significant amount of reserves (51 million barrels) are booked as probable reserves. These are reserves associated with the water flood at Espoir in Cote d'Ivoire. These reserves were not booked as proven reserves at year end 2001 as water injection had not commenced. The Company has been injecting water at Espoir since the middle of February 2002, and on successful implementation of the waterflood Wa´ter`flood` n. 1. A flood of water; an inundation. these reserves will be moved to proven in the 2002 year end evaluation. No reserves have been assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. by the Company or Sproule to the Horizon oil sands project. Canadian Natural's internal estimate of recoverable reserves is 5.6 billion barrels of bitumen. Canadian Natural owns 100% of these estimated reserves with production scheduled to commence in 2007. Canadian Natural's reserves before royalties Not to be confused with Royal family. Royalties (sometimes, running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an asset, most typically an intellectual property (IP) right. are summarized in the following tables:
----------------------------------------------------------------------
December 31, 2001
Proven Proven Proven
Developed Undeveloped Total Probable Total
----------------------------------------------------------------------
Crude Oil & Natural Gas
Liquids (mmbbls)
North America 382 262 644 95 739
North Sea 54 31 85 23 108
Offshore West Africa 21 40 61 51 112
----------------------------------------------------------------------
457 333 790 169 959
----------------------------------------------------------------------
----------------------------------------------------------------------
Natural Gas (bcf)
North America 2,288 278 2,566 349 2,915
North Sea 19 75 94 24 118
Offshore West Africa 17 52 69 27 96
----------------------------------------------------------------------
2,324 405 2,729 400 3,129
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Total Reserves (mmboe 6:1) 845 400 1,245 236 1,481
----------------------------------------------------------------------
----------------------------------------------------------------------
Present value of reserves
(millions of dollars)(1)(2)
----------------------------------------------------------------------
10% discount $7,850 $1,699 $9,549 $ 847 $10,396
----------------------------------------------------------------------
----------------------------------------------------------------------
December 31, 2000
Proven Proven Proven
Developed Undeveloped Total Probable Total
----------------------------------------------------------------------
Crude Oil & Natural Gas
Liquids (mmbbls)
North America 375 267 642 88 730
North Sea 72 30 102 33 135
Offshore West Africa 3 34 37 9 46
----------------------------------------------------------------------
450 331 781 130 911
----------------------------------------------------------------------
----------------------------------------------------------------------
Natural Gas (bcf)
North America 1,937 423 2,360 402 2,762
North Sea 31 60 91 23 114
Offshore West Africa - 66 66 19 85
----------------------------------------------------------------------
1,968 549 2,517 444 2,961
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Total Reserves (mmboe 6:1) 778 423 1,201 204 1,405
----------------------------------------------------------------------
----------------------------------------------------------------------
Present value of reserves
(millions of dollars)(1)(2)
----------------------------------------------------------------------
10% discount $ 9,257 $2,295 $11,552 $ 868 $12,420
----------------------------------------------------------------------
(1) Excludes provisions for abandonment costs and income taxes
(2) Value of the probable reserves are reduced by 50% to account
for risk
Reserves Reconciliation
----------------------------------------------------------------------
Crude oil and liquids (mmbbls)
North North Offshore
Proven Reserves America Sea West Africa Total
----------------------------------------------------------------------
Reserves, December 31, 1999 554 - - 554
Discoveries and purchases 144 105 36 285
Property disposals (15) - - (15)
Production (57) (6) (1) (64)
Revisions of prior estimates 16 3 2 21
----------------------------------------------------------------------
Reserves, December 31, 2000 642 102 37 781
Discoveries and purchases 30 - 46 76
Property disposals (1) - - (1)
Production (61) (13) (1) (75)
Revisions of prior estimates 34 (4) (21) 9
----------------------------------------------------------------------
Proven Reserves, December
31, 2001 644 85 61 790
----------------------------------------------------------------------
Probable Reserves (Unrisked)
----------------------------------------------------------------------
Reserves, December 31, 1999 86 - - 86
Discoveries and purchases 22 35 9 66
Property disposals (10) - - (10)
Revisions of prior estimates (10) (2) - (12)
----------------------------------------------------------------------
Reserves, December 31, 2000 88 33 9 130
Discoveries and purchases - (1) 19 18
Property disposals - - - -
Revisions of prior estimates 7 (9) 23 21
----------------------------------------------------------------------
Probable Reserves, December
31, 2001 95 23 51 169
----------------------------------------------------------------------
Proven & Probable Reserves,
December 31, 2001 739 108 112 959
----------------------------------------------------------------------
----------------------------------------------------------------------
Natural gas (bcf)
North North Offshore
Proven Reserves America Sea West Africa Total
----------------------------------------------------------------------
Reserves, December 31, 1999 2,183 - - 2,183
Discoveries and purchases 517 89 64 670
Property disposals (41) - - (41)
Production (290) (1) - (291)
Revisions of prior estimates (9) 3 2 (4)
----------------------------------------------------------------------
Reserves, December 31, 2000 2,360 91 66 2,517
Discoveries and purchases 637 1 24 662
Property disposals (25) - - (25)
Production (331) (4) - (335)
Revisions of prior estimates (75) 6 (21) (90)
----------------------------------------------------------------------
Proven Reserves, December
31, 2001 2,566 94 69 2,729
----------------------------------------------------------------------
Probable Reserves (Unrisked)
----------------------------------------------------------------------
Reserves, December 31, 1999 364 - - 364
Discoveries and purchases 63 21 4 88
Property disposals (4) - - (4)
Revisions of prior estimates (21) 2 15 (4)
----------------------------------------------------------------------
Reserves, December 31, 2000 402 23 19 444
Discoveries and purchases 32 (1) 11 42
Property disposals (6) - - (6)
Revisions of prior estimates (79) 2 (3) (80)
----------------------------------------------------------------------
Probable Reserves, December
31, 2001 349 24 27 400
----------------------------------------------------------------------
Proven & Probable Reserves,
December 31, 2001 2,915 118 96 3,129
----------------------------------------------------------------------
Future oil and natural gas price forecasts used in the Evaluation Reports were based on Sproule's January 1, 2002 pricing model and adjusted for quality of reserves and transportation. The prices used for the subsequent five years in the Evaluation Reports are as follows:
Oil
YEAR Company WTI At Hardisty Brent
Average Cushing Heavy UK
Price Oklahoma 12 API
$CDN/BBL $US/BBL $CDN/BBL $US/BBL
As at December 31, 2001
2002 18.36 19.90 14.41 18.40
2003 20.85 20.64 18.44 19.11
2004 23.44 21.12 21.58 19.29
2005 23.75 21.44 22.13 19.58
2006 24.01 21.76 22.62 19.87
As at December 31, 2000
2001 28.52 28.20 21.87 26.60
2002 26.41 24.41 21.84 22.78
2003 23.64 21.12 20.54 19.47
2004 23.64 21.44 21.01 19.76
2005 23.59 21.76 20.98 20.06
Natural Gas
YEAR Company Henry Hub Alberta British
Average Louisiana Plantgate Columbia
Price Plantgate
$CDN/MCF $US/MMBTU $CDN/MMBTU $CDN/MMBTU
As at December 31, 2001
2002 3.80 2.89 3.80 3.75
2003 4.33 3.24 4.35 4.30
2004 4.32 3.25 4.36 4.26
2005 4.33 3.25 4.36 4.26
2006 4.42 3.29 4.44 4.34
As at December 31, 2000
2001 8.78 6.34 8.40 9.02
2002 6.00 4.56 5.87 6.09
2003 4.99 3.88 4.91 4.98
2004 4.78 3.73 4.76 4.59
2005 4.69 3.63 4.75 4.34
FINDING AND DEVELOPMENT COSTS
----------------------------------------------------------------------
2001 3 Year
----------------------------------------------------------------------
Net reserve replacement
expenditures ($ millions) $1,754 $6,476
Reserve additions (mmboe 6:1)
Proven reserves 176 959
Proven plus probable
reserves 207 1,046
On stream cost ($/boe)
Proven reserves $9.97 $6.75
Proven plus probable
reserves $8.47 $6.19
----------------------------------------------------------------------
Crude Oil & Natural Gas BOE
NGLs
(mmbbls) (bcf) (mmboe 6:1)
----------------------------------------------------------------------
Reserve Life Index
2001 Year end reserves
Proven reserves 790 2,729 1,245
Proven plus probable reserves 959 3,129 1,481
2001 Fourth quarter
production, annualized 72 369 134
Reserve Life Index (years)
Proven reserves 11.0 7.4 9.3
Proven plus probable reserves 13.3 8.5 11.1
MANAGEMENT'S DISCUSSION AND ANALYSIS Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial Management's discussion and analysis ("MD&A") of the financial condition and results of operations should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the unaudited consolidated financial statements for the periods ended December 31, 2001 and the MD&A and the audited consolidated financial statements for the year ended December 31, 2000. Per barrel of oil equivalent The barrel of oil equivalent (bboe, sometimes BOE) is a unit of energy based on the approximate energy released by burning one barrel of crude oil. The US Internal Revenue Service defines it as equal to 5.8 × 106 BTU [1]. 5. ("boe") amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel barrel: see English units of measurement. of oil.
----------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
DEC 31 SEPT 30 DEC 31 DEC 31 DEC 31
2001 2001 2000 2001 2000
----------------------------------------------------------------------
FINANCIAL HIGHLIGHTS ($ millions, except per share amounts)
Gross revenue $ 661 $ 806 $ 1,031 $ 3,561 $ 3,223
Cash flow attributable to
common shareholders (1) $ 326 $ 437 $ 553 $ 1,920 $ 1,884
Per share - basic $ 2.69 $ 3.63 $ 4.56 $ 15.83 $ 16.14
- diluted $ 2.63 $ 3.50 $ 4.39 $ 15.25 $ 15.64
Net earnings attributable to
common shareholders (1) $ 52 $ 132 $ 223 $ 698 $ 782
Per share - basic $ 0.43 $ 1.10 $ 1.84 $ 5.76 $ 6.70
- diluted $ 0.43 $ 1.08 $ 1.77 $ 5.56 $ 6.50
Capital expenditures, net of
dispositions $ 530 $ 352 $ 195 $ 1,885 $ 1,136
Acquisition of Ranger Oil
Limited $ - $ - $ - $ - $ 1,687
(1) After dividend on preferred securities
OPERATING HIGHLIGHTS
Oil and liquids
Daily production (bbls) 198,000 207,065 202,732 206,323 173,591
Sales price $ 21.28 $ 28.37 $ 25.37 $ 24.31 $ 29.99
Royalties 1.41 2.47 2.83 2.17 3.05
Operating costs 7.41 7.10 7.60 7.42 6.38
----------------------------------------------------------------------
Netback ($/bbl) $ 12.46 $ 18.80 $ 14.94 $ 14.72 $ 20.56
----------------------------------------------------------------------
Natural gas
Daily production (mmcf) 1,012 924 832 918 794
Sales price $ 2.94 $ 3.12 $ 7.28 $ 5.16 $ 4.53
Royalties 0.62 0.67 1.83 1.25 1.08
Operating costs 0.53 0.50 0.47 0.51 0.44
----------------------------------------------------------------------
Netback ($/mcf) $ 1.79 $ 1.95 $ 4.98 $ 3.40 $ 3.01
----------------------------------------------------------------------
Barrel of oil equivalent(6:1)
Daily production (boe) 366,594 361,029 341,369 359,347 305,987
Sales price $ 19.62 $ 24.25 $ 32.82 $ 27.15 $ 28.77
Royalties 2.47 3.14 6.13 4.42 4.51
Operating costs 5.47 5.36 5.66 5.57 4.76
----------------------------------------------------------------------
Netback ($/boe) $ 11.68 $ 15.75 $ 21.03 $ 17.16 $ 19.50
----------------------------------------------------------------------
Cash flow for the year ended December 31, 2001, increased over the prior year due to higher natural gas prices and increased production volumes. Fourth quarter cash flow decreased from third quarter 2001 due mainly to the continuing effects of weaker market prices for both oil and natural gas and lower oil and liquids production during the quarter. Net earnings for the year and quarter ended December 31, 2001 decreased as a result of higher depletion depletion n. when a natural resource (particularly oil) is being used up. The annual amount of depletion may, ironically, provide a tax deduction for the company exploiting the resource because if the resource they are exploiting runs out, they will no longer be able costs and the recognition of a loss on sale of United States assets acquired through the Ranger Oil Limited ("Ranger") acquisition.
----------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
DEC 31 SEPT 30 DEC 31 DEC 31 DEC 31
2001 2001 2000 2001 2000
----------------------------------------------------------------------
DAILY PRODUCTION
Oil and liquids (bbls/day)
North America 159,000 162,890 167,464 166,675 154,331
North Sea 35,749 40,356 30,721 36,252 17,195
Offshore West Africa 3,251 3,819 4,547 3,396 2,065
----------------------------------------------------------------------
Total 198,000 207,065 202,732 206,323 173,591
----------------------------------------------------------------------
Natural gas (mmcf/day)
North America 993 906 832 906 793
North Sea 19 18 - 12 1
----------------------------------------------------------------------
Total 1,012 924 832 918 794
----------------------------------------------------------------------
Production increased over the prior year due to the inclusion of a full year of results from the Ranger acquisition, which was completed in the third quarter of 2000, and the Company's focus on natural gas drilling. North America fourth quarter 2001 oil and liquids production decreased from third quarter 2001 due to the focus on natural gas drilling and reduced oil recovery from the deferral deferral - Waiting for quiet on the Ethernet. of steam stimulation stimulation /stim·u·la·tion/ (stim?u-la´shun) the act or process of stimulating; the condition of being stimulated. deep brain stimulation of thermal heavy oil production initiated in the first half of the year. Fourth quarter oil and liquids production was also affected by the Company's decision in mid-December Noun 1. mid-December - the middle part of December period, period of time, time period - an amount of time; "a time period of 30 years"; "hastened the period of time of his recovery"; "Picasso's blue period" Dec, December - the last (12th) month of the year 2001 to cap heavy oil production, resulting in production being reduced by 15,000 bbls per day. This decision was in response to recent declines in world oil prices and unusually high heavy oil differentials. Natural gas production in the fourth quarter of 2001 averaged over one bcf per day due to the acquisition of additional Canadian natural gas assets in the Helmet helmet Public health A personal protective device of hardened plastic worn on the head to ↓ severity of injuries in the event of an accident. See Pro cap helmet. area in northeastern British Columbia and the successful discovery at Ladyfern, where seven wells were drilled and completed in 2001 and production ended the year at 150 mmcf per day.
----------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
DEC 31 SEPT 30 DEC 31 DEC 31 DEC 31
2001 2001 2000 2001 2000
----------------------------------------------------------------------
PRODUCT PRICES
Oil and liquids ($/bbl)
North America $ 18.59 $ 26.02 $ 21.61 $ 21.00 $ 28.15
North Sea $ 33.39 $ 37.28 $ 43.86 $ 38.66 $ 44.61
Offshore West Africa $ 19.56 $ 34.66 $ 39.10 $ 33.57 $ 45.77
Company average $ 21.28 $ 28.37 $ 25.37 $ 24.31 $ 29.99
Natural gas ($/mcf)
North America $ 2.94 $ 3.13 $ 7.28 $ 5.19 $ 4.53
North Sea $ 3.00 $ 2.51 $ 3.78 $ 2.51 $ 3.66
Company average $ 2.94 $ 3.12 $ 7.28 $ 5.16 $ 4.53
The realized oil price for the year ended December 31, 2001 decreased from the comparable period in 2000 primarily due to lower world oil prices, which averaged US $25.91 per bbl in 2001 compared to US $30.20 per bbl in 2000. In the fourth quarter, world oil market prices continued to decline, averaging US $20.49 per bbl compared to US $26.57 per bbl in the third quarter 2001; while the heavy oil differential increased to US $10.07 per bbl from US $8.10 per bbl in the third quarter. The Company was able to mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. some of the effects of
lower WTI prices and the higher heavy oil differential through the use
of costless oil collars. The costless collars and other arrangements
entered into by the Company to fix a portion of the price realized from
the sale of oil increased the price by $4.79 per bbl in the quarter
ended December 31, 2001 ($0.22 and $2.13 reductions per bbl,
respectively, in the quarters ended September September: see month. 30, 2001 and December 31,
2000).North American realized natural gas prices increased in the year 2001 over the prior year due to a tighter supply environment in the first half of the year. Realized natural gas prices continued to decrease in the fourth quarter 2001 due to lower demand and high natural gas storage levels in the North American market. The price realized from the sale of natural gas was reduced by $0.03 per mcf in the fourth quarter 2001 ($0.10 and $0.63 reductions per mcf, respectively, in the quarters ended September 30, 2001 and December 31, 2000) due to price arrangements entered into by the Company.
----------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
DEC 31 SEPT 30 DEC 31 DEC 31 DEC 31
2001 2001 2000 2001 2000
----------------------------------------------------------------------
ROYALTIES
Oil and liquids ($/bbl)
North America $ 1.40 $ 2.61 $ 2.90 $ 2.22 $ 3.17
North Sea $ 1.52 $ 1.97 $ 2.89 $ 2.10 $ 2.40
Offshore West Africa $ 0.64 $ 2.03 $ - $ 0.93 $ -
Natural gas ($/mcf)
North America $ 0.63 $ 0.68 $ 1.83 $ 1.26 $ 1.08
Company average ($/boe) $ 2.47 $ 3.14 $ 6.13 $ 4.42 $ 4.51
Oil and liquids royalties declined in North America in the year 2001 from the prior year due to lower world oil prices and the continuing benefit of a lower royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced. structure on the Company's production of primary and thermal heavy oil. In the fourth quarter of 2001, North America oil and liquids royalties decreased from the third quarter 2001 due to lower realized prices as a result of the higher heavy oil differentials and lower world oil prices. North Sea oil and liquids royalties per bbl decreased in the year 2001 as a result of lower oil prices and increased production from the Banff Banff, former county, Scotland Banff, former county, Scotland: see Banffshire. Banff (bămf, bănf), town (1991 pop. 5,688), SW Alta., Canada, in the Rocky Mts., on the Bow River and the Trans-Canada Highway. and Kyle fields History The beginning In the fall of 1904, Edwin Jackson Kyle, an 1899 graduate of Texas A&M and professor of horticulture, was named president of the General Athletics Association. Kyle wanted to secure and develop an athletic field to promote the school's athletics. , which are non-royalty paying fields. In the fourth quarter, North Sea royalties decreased from the third quarter as a result of lower realized prices. Natural gas royalties increased in the year 2001 compared to the prior year due to the overall increase in natural gas prices.
----------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
DEC 31 SEPT 30 DEC 31 DEC 31 DEC 31
2001 2001 2000 2001 2000
----------------------------------------------------------------------
PRODUCTION EXPENSES
Oil and liquids ($/bbl)
North America $ 6.46 $ 6.57 $ 7.21 $ 6.78 $ 5.93
North Sea $ 10.54 $ 8.09 $ 8.09 $ 9.00 $ 8.66
Offshore West Africa $ 19.15 $ 19.05 $ 18.53 $ 21.77 $ 20.41
Natural gas ($/mcf)
North America $ 0.52 $ 0.50 $ 0.47 $ 0.50 $ 0.44
North Sea $ 1.34 $ 0.74 $ - $ 0.94 $ 0.79
Company average ($/boe) $ 5.47 $ 5.36 $ 5.66 $ 5.57 $ 4.76
The increase in North America oil and natural gas production expenses for the year 2001 from the prior year is attributable to higher associated costs for fuel, power and processing incurred during the first half of the year. The cost of processing thermal heavy oil in Canada has decreased in the last half of the year as a result of declining natural gas prices. Natural gas is used to produce the steam injected in·ject·ed adj. 1. Of or relating to a substance introduced into the body. 2. Of or relating to a blood vessel that is visibly distended with blood. injected 1. introduced by injection. 2. congested. into the oil formation for the production of thermal heavy oil. North Sea production expenses for both oil and natural gas increased from the third quarter and prior year primarily due to costs associated with higher tariff tariff, tax on imported and, more rarely, exported goods. It is also called a customs duty. Tariffs may be distinguished from other taxes in that their predominant purpose is not financial but economic—not to increase a nation's revenue but to protect domestic rates on the Columba Co·lum·ba n. A constellation in the Southern Hemisphere near Caelum and Puppis. Also called Dove. [Latin columba, dove.] Noun 1. B and D fields and decreased production over which fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). are allocated. Offshore West Africa operating costs operating costs npl → gastos mpl operacionales are mainly fixed in nature and therefore increased on a per bbl basis due to decreased oil production volumes from the Kiame field in Angola Angola (ăng-gō`lə), officially Republic of Angola (2005 est. pop. 11,191,000), including the exclave of Cabinda, 481,351 sq mi (1,246,700 sq km), SW Africa. .
----------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
DEC 31 SEPT 30 DEC 31 DEC 31 DEC 31
2001 2001 2000 2001 2000
----------------------------------------------------------------------
DEPLETION, DEPRECIATION AND AMORTIZATION
Expense ($ millions) $ 242.4 $ 236.2 $ 202.2 $ 903.8 $ 644.6
$/boe $ 7.19 $ 7.11 $ 6.43 $ 6.89 $ 5.75
Depletion costs increased in the year 2001 over the prior year due to higher costs associated with the Company's increased emphasis on natural gas drilling and completion in North America as well as higher depletion costs in the North Sea and offshore West Africa segments acquired with Ranger.
----------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
DEC 31 SEPT 30 DEC 31 DEC 31 DEC 31
2001 2001 2000 2001 2000
----------------------------------------------------------------------
ADMINISTRATION EXPENSE
Net expense ($ millions) $ 12.0 $ 9.4 $ 10.3 $ 37.6 $ 27.2
$/boe $ 0.36 $ 0.28 $ 0.33 $ 0.29 $ 0.25
Administration costs in 2001 have increased from the prior year mainly due to increased staffing levels. Costs increased in the fourth quarter of 2001 reflecting lower recoveries related to the capital program.
----------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
DEC 31 SEPT 30 DEC 31 DEC 31 DEC 31
2001 2001 2000 2001 2000
----------------------------------------------------------------------
INTEREST EXPENSE
Interest expense ($ millions) $ 31.4 $ 32.2 $ 45.8 $ 137.8 $ 162.3
$/boe $ 0.93 $ 0.97 $ 1.45 $ 1.05 $ 1.45
Average effective interest rate 4.23% 5.35% 6.61% 5.37% 6.38%
Interest expense decreased in 2001 from the prior year due to lower debt levels in the first three quarters of the year and declining interest rates. Interest expense decreased in the fourth quarter due to the decline in interest rates.
----------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
DEC 31 SEPT 30 DEC 31 DEC 31 DEC 31
2001 2001 2000 2001 2000
----------------------------------------------------------------------
TAXES ($ millions)
Taxes other than income tax
Current $ 10.1 $ 21.1 $ 29.9 $ 69.3 $ 57.1
Deferred $ 1.0 $ (1.3) $ (3.6) $ (0.2) $ (7.6)
Current income tax
North Sea $ 10.3 $ 16.5 $ 14.4 $ 61.8 $ 33.7
Large corporation tax $ 4.7 $ 3.2 $ 4.4 $ 15.1 $ 14.7
Future income tax $ 1.8 $ 61.0 $130.1 $282.5 $464.0
Effective tax rate 23.9% 37.6% 39.9% 33.8% 39.5%
North Sea current income tax increased for the year 2001 as a result of a full year of production from these properties acquired through the acquisition of Ranger. Current income tax decreased for this segment in the fourth quarter of 2001 due to decreased earnings before taxes. The future income tax expense in the fourth quarter of 2001 decreased from the third quarter of 2001 and fourth quarter 2000 as a result of lower earnings before tax and a decrease in a Province of Canada's corporate income tax rate, resulting in a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. $17 million reduction in the future income tax liability. Future income tax expense in 2001 decreased from 2000 due to reductions in certain Canadian provinces' corporate income tax rates during 2001, resulting in a one-time reduction in the future income tax liability in the aggregate amount of $63 million.
----------------------------------------------------------------------
DEC 31 SEPT 30 DEC 31
2001 2001 2000
----------------------------------------------------------------------
LIQUIDITY AND CAPITAL
RESOURCES
Working capital deficit $ 5.6 $ 154.1 $ 77.3
Long-term debt $ 2,669.2 $ 2,311.8 $ 2,454.5
Shareholders' equity
Preferred securities $ 118.3 $ 118.3 $ 118.3
Share capital and
contributed surplus 1,698.3 1,693.9 1,692.6
Retained earnings 1,979.5 1,939.5 1,406.0
Foreign currency translation
adjustment 72.8 - -
----------------------------------------------------------------------
Total shareholders' equity $ 3,868.9 $ 3,751.7 $ 3,216.9
----------------------------------------------------------------------
Debt to cash flow (1)(2) 1.4x 1.1x 1.3x
Debt to book capitalization (1) 42.5% 40.1% 45.4%
Debt to market
capitalization (1) 36.5% 33.0% 32.6%
After tax return on average
common shareholders' equity (2) 20.1% 26.4% 32.4%
After tax return on average
capital employed(2) 13.0% 16.4% 18.1%
(1) Includes preferred securities as debt equivalents
(2) Based on trailing 12-month activity
----------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
DEC 31 SEPT 30 DEC 31 DEC 31 DEC 31
2001 2001 2000 2001 2000
----------------------------------------------------------------------
CAPITAL EXPENDITURES ($ millions)
Acquisition of Ranger Oil
Limited $ - $ - $ - $ - $ 1,687.3
----------------------------------------------------------------------
Expenditures on property,
plant and equipment
Net property acquisitions
(dispositions) $ 248.4 $ 24.6 $ (92.7)$ 519.2 $ 150.2
Land acquisition and
retention 15.5 35.8 45.7 100.5 79.7
Seismic evaluations 28.8 8.6 18.1 94.6 40.5
Well drilling, completion
and equipping 109.9 153.6 125.8 644.7 524.0
Pipeline and production
facilities 68.9 109.7 98.2 395.0 335.7
----------------------------------------------------------------------
Total net reserve
replacement expenditures $ 471.5 $ 332.3 $ 195.1 $ 1,754.0 $ 1,130.1
Midstream operations 45.5 16.1 - 97.3 -
Oil sands 11.0 1.9 - 26.8 -
Head office 1.7 1.8 0.3 6.4 5.9
----------------------------------------------------------------------
Total net capital
expenditures $ 529.7 $ 352.1 $ 195.4 $ 1,884.5 $ 1,136.0
----------------------------------------------------------------------
By Segment
North America $ 452.3 $ 297.0 $ 144.6 $ 1,582.8 $ 1,041.8
North Sea 34.3 32.2 29.6 97.8 54.9
Offshore West Africa 43.1 22.9 21.2 203.9 39.3
----------------------------------------------------------------------
$ 529.7 $ 352.1 $ 195.4 $ 1,884.5 $ 1,136.0
----------------------------------------------------------------------
North America capital expenditures include the continuing development of the Ladyfern field where a total of seven wells were drilled and completed in 2001. North America fourth quarter capital expenditures include the acquisition of producing natural gas assets and undeveloped land in the Helmet area, the completion of phase one of the front-end engineering work for development of oil sands leases in the Horizon project, the disposal of substantially all of the US assets acquired in the Ranger acquisition, and the completion of the extension to our 100% owned ECHO Pipeline System. The expansion of the midstream assets, including Pelican Lake Pipeline (62% owned and operated) and the 15% ownership in the Cold Lake Pipeline, is part of the Company's ongoing focus to manage the development, production and marketing of its heavy oil. The midstream assets will allow the Company to transport its own production volumes at reduced operating costs as compared to other transportation alternati ves as well as earn third party transportation revenue. Internationally, fourth quarter capital expenditures include exploration in the Acorn/Beechnut field in the North Sea, and the continuing development of the Espoir field located offshore West Africa. SENSITIVITY ANALYSIS(1) Annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. sensitivities to certain factors, which would influence the Company's financial results, are as follows:
----------------------------------------------------------------------
Cash Flow from Cash Flow from Net Net
Operations(2) Operations(2) Earnings(2) Earnings(2)
(per share) (per share)
($ millions) (basic) ($ millions) (basic)
----------------------------------------------------------------------
Price changes
Oil - US $1.00/bbl(3)
Excluding financial
derivatives $98 $0.80 $69 $0.57
Including financial
derivatives $74-$98 $0.61-$0.80 $52-$69 $0.43-$0.57
Natural gas -
Cdn $1.00/mcf(3)
Excluding financial
derivatives $285 $2.35 $174 $1.43
Including financial
derivatives $231-$267 $1.90-$2.20 $141-$163 $1.16-$1.34
Volume changes
Oil - 10,000 bbls/day $36 $0.30 $6 $0.05
Natural gas -
10 mmcf/day $7 $0.05 $1 $0.01
Foreign currency rate change(3)
$0.01 increase in Cdn $ in
relation to US $
Excluding financial
derivatives $30 $0.25 $18 $0.15
Including financial
derivatives $24-$28 $0.20-$0.23 $15-$17 $0.12-$0.14
Interest rate change 1% $20 $0.16 $12 $0.10
(1) The sensitivities are calculated based on 2001 fourth quarter
results.
(2) Attributable to common shareholders
(3) For details of financial derivatives in place, see financial
statement note 6.
OTHER OPERATING HIGHLIGHTS
----------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
DEC 31 SEPT 30 DEC 31 DEC 31 DEC 31
2001 2001 2000 2001 2000
----------------------------------------------------------------------
NETBACK ANALYSIS
Barrel of oil equivalent
(6:1)
Daily production (boe) 366,594 361,029 341,369 359,347 305,987
Sales price $ 19.62 $ 24.25 $ 32.82 $ 27.15 $ 28.77
Royalties 2.47 3.14 6.13 4.42 4.51
Operating costs 5.47 5.36 5.66 5.57 4.76
----------------------------------------------------------------------
Netback per boe 11.68 15.75 21.03 17.16 19.50
Administration 0.36 0.28 0.33 0.29 0.25
Interest 0.93 0.97 1.45 1.05 1.45
Foreign exchange (gain) loss (0.09) 0.02 0.02 (0.01) -
Taxes other than income tax 0.30 0.64 0.95 0.53 0.51
Current income tax (North
Sea) 0.31 0.49 0.46 0.47 0.30
Current income tax (Large
Corporation Tax) 0.14 0.10 0.14 0.11 0.13
----------------------------------------------------------------------
Cash flow per boe $ 9.73 $ 13.25 $ 17.68 $ 14.72 $ 16.86
----------------------------------------------------------------------
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2001
North North Offshore
America Sea West Africa Total
----------------------------------------------------------------------
Oil and liquids
Daily production (bbls) 166,675 36,252 3,396 206,323
Sales price $ 21.00 $ 38.66 $ 33.57 $ 24.31
Royalties 2.22 2.10 0.93 2.17
Operating costs 6.78 9.00 21.77 7.42
----------------------------------------------------------------------
Netback ($/bbl) $ 12.00 $ 27.56 $ 10.87 $ 14.72
----------------------------------------------------------------------
Natural gas
Daily production (mmcf) 906 12 - 918
Sales price $ 5.19 $ 2.51 $ - $ 5.16
Royalties 1.26 - - 1.25
Operating costs 0.50 0.94 - 0.51
----------------------------------------------------------------------
Netback ($/mcf) $ 3.43 $ 1.57 $ - $ 3.40
----------------------------------------------------------------------
Barrel of oil equivalent
(6:1)
Daily production (boe) 317,658 38,293 3,396 359,347
Sales price $ 25.85 $ 37.42 $ 33.57 $ 27.15
Royalties 4.76 1.99 0.93 4.42
Operating costs 5.00 8.82 21.77 5.57
----------------------------------------------------------------------
Netback ($/boe) $ 16.09 $ 26.61 $ 10.87 $ 17.16
----------------------------------------------------------------------
----------------------------------------------------------------------
DECEMBER 31 DECEMBER 31
2001 2000
----------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET (millions of Canadian dollars) (unaudited)
Assets
Current assets
Cash $ 15.0 $ 28.0
Accounts receivable and other 509.0 584.0
----------------------------------------------------------------------
524.0 612.0
Property, plant and
equipment, net 8,442.9 7,141.5
Deferred charges 73.8 22.1
----------------------------------------------------------------------
$ 9,040.7 $ 7,775.6
----------------------------------------------------------------------
----------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable $ 249.5 $ 301.1
Accrued liabilities 264.2 371.7
Current portion of long-term
debt (note 3) 15.9 16.5
----------------------------------------------------------------------
529.6 689.3
Long-term debt (note 3) 2,669.2 2,454.5
Future site restoration 193.8 170.5
Future income tax (note 4) 1,779.2 1,244.4
----------------------------------------------------------------------
5,171.8 4,558.7
----------------------------------------------------------------------
Shareholders' Equity
Preferred securities 118.3 118.3
Share capital and
contributed surplus (note 5) 1,698.3 1,692.6
Retained earnings 1,979.5 1,406.0
Foreign currency translation
adjustment (note 1) 72.8 -
----------------------------------------------------------------------
3,868.9 3,216.9
----------------------------------------------------------------------
$ 9,040.7 $ 7,775.6
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
THREE MONTHS ENDED DEC 31 YEAR ENDED DEC 31
2001 2000 2001 2000
----------------------------------------------------------------------
CONSOLIDATED STATEMENT OF EARNINGS (millions of Canadian dollars,
except per share amounts)(unaudited)
Revenue
Oil and natural gas $ 661.5 $ 1,030.9 $ 3,561.4 $ 3,222.5
Less: royalties 83.2 192.6 580.3 506.2
----------------------------------------------------------------------
578.3 838.3 2,981.1 2,716.3
----------------------------------------------------------------------
Expenses
Production 184.5 177.8 730.5 532.9
Depletion, depreciation and
amortization 242.4 202.2 903.8 644.6
Administration 12.0 10.3 37.6 27.2
Interest 31.4 45.8 137.8 162.3
Foreign exchange loss 2.4 2.4 14.7 2.4
Loss on sale of United
States assets 24.1 - 24.1 -
----------------------------------------------------------------------
496.8 438.5 1,848.5 1,369.4
----------------------------------------------------------------------
Earnings Before Taxes 81.5 399.8 1,132.6 1,346.9
Taxes other than income tax 11.1 26.3 69.1 49.5
Current income tax 15.0 18.8 76.9 48.4
Future income tax (note 4) 1.8 130.1 282.5 464.0
----------------------------------------------------------------------
Net Earnings 53.6 224.6 704.1 785.0
Dividend on preferred
securities, net of tax (1.6) (1.4) (5.9) (2.8)
----------------------------------------------------------------------
Net Earnings Attributable to
Common Shareholders $ 52.0 $ 223.2 $ 698.2 $ 782.2
----------------------------------------------------------------------
----------------------------------------------------------------------
Net earnings per common
share attributable to common
shareholders (note 2)
Basic $ 0.43 $ 1.84 $ 5.76 $ 6.70
Diluted $ 0.43 $ 1.77 $ 5.56 $ 6.50
Weighted average common
shares outstanding
(thousands)(note 2)
Basic 121,300 116,701
Diluted 126,572 120,732
----------------------------------------------------------------------
YEAR ENDED DEC 31
2001 2000
----------------------------------------------------------------------
CONSOLIDATED STATEMENT OF RETAINED EARNINGS (millions of Canadian
dollars)(unaudited)
Balance - Beginning of Period $ 1,406.0 $ 623.8
Net earnings 704.1 785.0
Repurchase of common shares (note 5) (76.2) -
Dividend on common shares (note 5) (48.5) -
Dividend on preferred securities, net of tax (5.9) (2.8)
----------------------------------------------------------------------
Balance - End of Period $ 1,979.5 $ 1,406.0
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
THREE MONTHS ENDED DEC 31 YEAR ENDED DEC 31
2001 2000 2001 2000
----------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS (millions of Canadian dollars,
except per share amounts)(unaudited)
Operating Activities
Net earnings $ 53.6 $ 224.6 $ 704.1 $ 785.0
Non-cash items
Depletion, depreciation and
amortization 242.4 202.2 903.8 644.6
Loss on sale of United
States assets 24.1 - 24.1 -
Deferred petroleum revenue
tax (recovery) 1.0 (3.6) (0.2) (7.6)
Future income tax 1.8 130.1 282.5 464.0
Unrealized foreign exchange
loss 5.4 1.9 16.0 2.6
----------------------------------------------------------------------
Cash flow provided from
operations 328.3 555.2 1,930.3 1,888.6
Net change in non-cash
working capital (32.6) 11.0 (42.2) (55.4)
----------------------------------------------------------------------
295.7 566.2 1,888.1 1,833.2
----------------------------------------------------------------------
Financing Activities
Increase (repayment) of bank
credit facilities 350.6 (436.4) (442.3) (187.7)
Repayment of limited
recourse loan - (0.7) (11.8) (0.7)
Repayment of senior
unsecured notes (15.8) (15.1) (15.8) (15.1)
Issue of US debt securities - - 615.2 -
Issue of medium term notes - - - 125.0
Issue of capital stock 4.5 12.3 42.8 66.4
Repurchase of common shares - - (113.3) -
Dividend on common shares (12.1) - (36.4) -
Dividend on preferred
securities (2.6) (2.5) (10.3) (5.0)
Net change in non-cash
working capital (0.1) 38.1 7.4 5.8
-----------------------------------------------------------------------
324.5 (404.3) 35.5 (11.3)
-----------------------------------------------------------------------
Investing Activities
Expenditures on property,
plant and equipment (578.3) (327.7) (1,947.5) (1,294.6)
Corporate acquisitions - - - (722.8)
Net proceeds on sale of
property, plant and
equipment 48.6 134.0 63.0 160.3
----------------------------------------------------------------------
Net expenditure on property,
plant and equipment (529.7) (193.7) (1,884.5) (1,857.1)
Net change in non-cash
working capital (110.5) 39.3 (52.1) 63.1
----------------------------------------------------------------------
(640.2) (154.4) (1,936.6) (1,794.0)
----------------------------------------------------------------------
(Decrease) Increase in Cash (20.0) 7.5 (13.0) 27.9
Cash - Beginning of Period 35.0 20.5 28.0 0.1
----------------------------------------------------------------------
Cash - End of Period $ 15.0 $ 28.0 $ 15.0 $ 28.0
----------------------------------------------------------------------
----------------------------------------------------------------------
Cash flow per share from
operations attributable to
common shareholders (note 2)
Basic $ 2.69 $ 4.56 $ 15.83 $ 16.14
Diluted $ 2.63 $ 4.39 $ 15.25 $ 15.64
Supplemental disclosure of
cash flow information
Interest paid $ 28.4 $ 59.5 $ 127.4 $ 169.3
Taxes paid $ 42.7 $ 24.1 $ 161.2 $ 62.3
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (tabular tab·u·lar adj. 1. Having a plane surface; flat. 2. Organized as a table or list. 3. Calculated by means of a table. tabular resembling a table. amounts in millions of Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents ) 1. ACCOUNTING POLICIES The consolidated financial statements of Canadian Natural Resources Limited (the "Company") include the Company and all of its subsidiaries and partnerships, and have been prepared following the same accounting policies and methods of computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. as the consolidated financial statements as at December 31, 2000, except as described below and in note 2. Certain disclosures, which are normally required to be included in the notes to the annual consolidated financial statements, have been condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. for this presentation dated February 27, 2002 only. Foreign Currency Translation Effective October October: see month. 1, 2001, the assets and liabilities of foreign operations considered financially and operationally independent are translated into Canadian dollars from their functional currencies using exchange rates at the balance sheet dates. Revenue and expense items are translated using the average rates of exchange throughout the year. Gains and losses resulting from this translation process are included in the foreign currency translation adjustment in shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. in the Consolidated Balance Sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. . Transactions and monetary balances denominated in a currency other than a functional currency are translated into the functional currency using month-end exchange rates. Gains and losses arising from this translation process are included in net earnings. Foreign denominated long-term monetary liabilities of Canadian operations are translated using exchange rates at the balance sheet dates. In 2002, the Company has designated a portion of its United States dollar denominated net debt as a hedge against its net investment in United States dollar based self-sustaining self-sus·tain·ing adj. Able to sustain oneself or itself independently. self -sus·tain foreign operations and,
accordingly, gains and losses resulting from the translation of the net
debt will be included in the foreign currency translation adjustment in
shareholders' equity in the Consolidated Balance Sheet.2. CHANGE IN ACCOUNTING POLICY Effective January 1, 2001, the Company adopted the Canadian Institute of Chartered Accountants' new accounting standard with respect to the calculation and disclosure of per share amounts. Under the new standard, the treasury stock method of calculating per share amounts is used whereby any proceeds from the exercise of stock options or other dilutive instruments are assumed to be used to purchase common shares at the average market price during the period. In computing computing - computer diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. per share amounts, 5.3 million common shares were added for the year ended December 31, 2001 (December 31, 2000 - 4.0 million common shares) for the dilutive effect Dilutive effect Result of a transaction that decreases earnings per common share (EPS). of employee stock options, warrants and preferred securities. Dividends on preferred securities were added back to net earnings and cash flow attributable to common shareholders in computing diluted per share amounts. The new standard has been applied retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin and prior periods have been restated. The new standard has no effect on basic per share amounts but does affect diluted per share amounts. Had the new standard not been adopted, fully diluted net earnings and cash flow attributable to common shareholders per share for the year ended December 31, 2001, would have been $5.69 and $15.56. 3. LONG-TERM DEBT
----------------------------------------------------------------------
Pro Forma
January 1, December 31 December 31
2002(1) 2001 2000
----------------------------------------------------------------------
Bank facilities
Canadian dollar debt $ 678.5 $ 1,003.4 $ 1,445.7
US dollar debt (2002 - US
$100 million, 2001 - US $296
million) 159.3 471.4 444.0
Limited recourse loan - - 11.8
Medium term notes 250.0 250.0 250.0
US debt securities (2002 -
US $800 million, 2001 - US
$400 million) 1,274.0 637.0 -
Senior unsecured notes (2001
- US $203 million, 2000 - US
$213 million) 323.3 323.3 319.5
----------------------------------------------------------------------
2,685.1 2,685.1 2,471.0
Current portion of long-term
debt 15.9 15.9 16.5
----------------------------------------------------------------------
$ 2,669.2 $ 2,669.2 $ 2,454.5
----------------------------------------------------------------------
(1) On January 23, 2002, the Company issued US $400 million debt
securities (note 3(c)). The pro forma calculation gives effect to the
proceeds and their initial use.
Credit Facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities (a) Bank Facilities At December 31, 2001, the Company had unsecured bank credit facilities of approximately $1,840 million comprised of a $100 million operating demand facility, a revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. and term loan facility totalling $1,500 million and a revolving credit and term loan facility of US $150 million. During the year ended December 31, 2001, the Company repaid and cancelled two credit facilities totalling $975 million as well as the limited recourse Limited recourse A term describing a type of loan in which the lender has limited or no claim against the parent company if the collateral is insufficient to repay the debt. See:Nonrecourse. loan of $22.1 million. (b) Medium Term Notes In July 2001, the Company authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: a new medium term notes program in the aggregate principal amount of up to $1 billion for issue in Canada. The notes bear interest as determined at the date of issue of the notes. No amounts are currently drawn under this program. The Company has $250 million of medium term notes outstanding from a previous medium term note program. (c) US Debt Securities In July 2001, the Company authorized a US debt securities program in the aggregate principal amount of up to US $1 billion for issue in the United States. The notes bear interest as determined at the date of issue of the notes. On July 24, 2001, the Company issued US $400 million of US debt securities, maturing July 15, 2011 bearing interest at 6.70%. In August 2001, the Company entered into four interest rate swap Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. contracts which convert the fixed rate interest coupon A certificate evidencing the obligation to pay an installment of interest or a dividend that must be cut and presented to its issuer for payment when it is due. Coupons are usually attached to a document, such as a promissory note, bond, share of stock, or a bearer into a floating interest rate (see note 6 - Interest Rate Swaps). On January 23, 2002, the Company issued US $400 million of US debt securities, maturing January 15, 2032 bearing interest at 7.20%. Subsequently, the Company entered into three interest rate swap contracts which convert a portion of the fixed rate interest coupon into a floating interest rate (see note 6 - Interest Rate Swaps). 4. INCOME TAXES The Company's future income tax liability has been reduced by $63 million to reflect reductions in certain Canadian provinces' corporate income tax rates during the year. 5. SHARE CAPITAL AND CONTRIBUTED SURPLUS
----------------------------------------------------------------------
December 31 December 31
2001 2000
----------------------------------------------------------------------
Common shares $ 1,698.3 $ 1,688.0
Warrants - 2.7
Contributed surplus - 1.9
----------------------------------------------------------------------
$ 1,698.3 $ 1,692.6
----------------------------------------------------------------------
Issued
December 31, 2001
----------------------------------------------------------------------
Number
of shares
(000's) Amount
----------------------------------------------------------------------
Common shares
Balance - January 1, 2001 122,279 $ 1,688.0
Exercise of stock options 1,005 29.2
Exercise of warrants 455 16.3
Repurchase of shares under
Normal Course Issuer Bid (2,538) (35.2)
----------------------------------------------------------------------
Balance - December 31, 2001 121,201 $ 1,698.3
----------------------------------------------------------------------
Warrants
Balance - January 1, 2001 465 $ 2.7
Exercised during the period (455) (2.7)
Expired during the period (10) (0.0)
----------------------------------------------------------------------
Balance - December 31, 2001 - $ -
----------------------------------------------------------------------
Stock Options
December 31, 2001
----------------------------------------------------------------------
Share options Weighted average
(000's) exercise price
----------------------------------------------------------------------
Outstanding - January 1, 2001 10,664 $ 32.78
Granted 3,500 $ 40.85
Exercised (1,005) $ 29.12
Forfeited (1,108) $ 39.89
----------------------------------------------------------------------
Outstanding - December 31, 2001 12,051 $ 34.77
----------------------------------------------------------------------
Exercisable - December 31, 2001 3,615 $ 31.42
----------------------------------------------------------------------
Normal Course Issuer Bid On January 17, 2001, the Company announced its intention to make a Normal Course Issuer Bid through the facilities of the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. and the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. to purchase up to 6,114,726 common shares or 5% of the outstanding common shares of the Company on the date of announcement during the 12-month period beginning January 22, 2001 and ending January 21, 2002. As at December 31, 2001, the Company had purchased 2,537,800 common shares for a total cost of $113.3 million. In January 2002, the Company renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. its Normal Course Issuer Bid, allowing the Company to purchase up to 6,060,180 shares, being 5% of the Company's outstanding common shares on the date of announcement, during the 12-month period beginning January 23, 2002 and ending January 22, 2003. Dividend Policy On January 17, 2001, the Company announced the payment of a regular quarterly dividend of $0.10 per common share payable in January, April, July and October of each year. The initial payment was made on April 1, 2001 with the fourth payment made on January 1, 2002 to shareholders of record on December 14, 2001. 6. FINANCIAL INSTRUMENTS The Company uses certain derivative financial instruments to manage its commodity prices, foreign currency and interest rate exposures. These financial instruments are entered into solely for hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. purposes and are not used for trading or other speculative Speculative Securities that involve a high level of risk. speculative Of or relating to an asset or a group of assets with uncertain returns. The greater the degree of uncertainty the more speculative the asset. purposes. The Company has the following financial derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. outstanding as at the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" :
----------------------------------------------------------------------
Term Volume Price Index
----------------------------------------------------------------------
Oil
Oil price collars
Jan. 2002-Mar. 2002 65,000 bbls/day US $19.10-US $22.28 WTI
Apr. 2002-Jun. 2002 31,000 bbls/day US $19.52-US $23.37 WTI
Apr. 2002-Jun. 2002 18,500 bbls/day US $20.00-US $23.33 WTI(1)
Apr. 2002-Dec. 2002 15,000 bbls/day US $19.00-US $21.77 WTI
Jan. 2002-Dec. 2002 35,500 bbls/day US $20.55-US $26.00 WTI
Brent differential swaps
Jan. 2002-Dec. 2002 15,000 bbls/day US $1.38 Dated Brent/WTI
Natural Gas
Sumas fixed
Jan. 2002-Oct. 2003 20,000 mmbtu/day Cdn $2.85 Sumas
Empress - NYMEX differential swap
Jan. 2002-Oct. 2006 5,500 mmbtu/day US $0.73 Empress/NYMEX
NYMEX swaps
Jan. 2002-Oct. 2006 10,000 mmbtu/day Cdn $2.66 NYMEX
AECO collars
Jan. 2002-Mar. 2002 190,000 GJ/day Cdn $3.67-Cdn $4.58 AECO
Apr. 2002-Jun. 2002 130,000 GJ/day Cdn $3.69-Cdn $4.48 AECO
Jan. 2002-Jun. 2002 100,000 GJ/day Cdn $3.23-Cdn $4.00 AECO
----------------------------------------------------------------------
Average
Term Amount Exchange Rate
($ millions) (US $/Cdn $)
----------------------------------------------------------------------
Foreign Currency
Currency fixed Jan. 2002 - Oct. 2002 US $0.4/month 1.37
Currency collars Jan. 2002 - May 2003 US $4.2/month 1.43 - 1.53
Jan. 2002 - Aug. 2004 US $25.0/month 1.51 - 1.59
----------------------------------------------------------------------
Term Amount Fixed Floating
($ millions) Rate Rate
----------------------------------------------------------------------
Interest Rate
Swaps - fixed to
floating Jan. 2002 - Jul. 2004 US $200 6.70% Libor + 2.09%
Jan. 2002 - Jul. 2006 US $200 6.70% Libor + 1.58%
Jan. 2002 - Jan. 2005 US $100 7.20% Libor+3.04%(1)
Jan. 2002 - Jan. 2007 US $100 7.20% Libor+2.23%(1)
Feb. 2002 - Jan. 2007 US $100 7.20% Libor+2.22%(1)
----------------------------------------------------------------------
(1) Financial derivative was entered into subsequent to December 31,
2001.
7. SEGMENTED INFORMATION
----------------------------------------------------------------------
THREE MONTHS ENDED DEC 31 YEAR ENDED DEC 31
2001 2000 2001 2000
----------------------------------------------------------------------
Gross Revenue
North America $ 540.5 $ 889.4 $ 2,996.8 $ 2,905.1
North Sea 115.2 125.1 523.0 282.8
Offshore West Africa 5.8 16.4 41.6 34.6
----------------------------------------------------------------------
$ 661.5 $ 1,030.9 $ 3,561.4 $ 3,222.5
----------------------------------------------------------------------
Net Earnings
North America $ 42.4 $ 190.5 $ 596.3 $ 675.4
North Sea 15.6 28.4 116.9 95.6
Offshore West Africa (4.4) 5.7 (9.1) 14.0
----------------------------------------------------------------------
53.6 224.6 704.1 785.0
Dividend on preferred
securities, net of tax (1.6) (1.4) (5.9) (2.8)
----------------------------------------------------------------------
Net Earnings Attributable to
Common Shareholders $ 52.0 $ 223.2 $ 698.2 $ 782.2
----------------------------------------------------------------------
----------------------------------------------------------------------
Additions to Property, Plant
and Equipment
North America $ 556.6 $ 68.0 $ 1,773.2 $ 965.2
North Sea 34.3 29.6 97.8 54.9
Offshore West Africa 43.1 21.2 203.9 39.3
----------------------------------------------------------------------
$ 634.0 $ 118.8 $ 2,074.9 $ 1,059.4
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Property, plant and equipment and future income taxes payable have been increased by $190.4 million to provide for the tax effect of the acquisition of assets Acquisition of assets A merger or consolidation in which an acquirer purchases the selling firm's assets. with a tax basis that differs from the purchase and sale price. INTEREST COVERAGE RATIOS The following financial ratios are provided in connection with the Company's continuous offering of medium term notes pursuant to the short form prospectus A document, notice, circular, advertisement, letter, or communication in written form or by radio or television that offers any security for sale, or confirms the sale of any security. dated July 24, 2001. These ratios are based on the Company's consolidated financial statements that are prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with accounting principles generally accepted in Canada. Interest coverage ratios for the 12-month period ended December 31, 2001. Interest coverage (times) Net earnings 8.7 (1) Cash flow 15.6 (2) (1) Net earnings plus income taxes and interest expense; divided by interest expense. (2) Cash flow plus current income taxes and interest expense; divided by interest expense. The interest coverage ratios have been calculated without including the annual carrying charges Payments made to satisfy expenses incurred as a result of ownership of property, such as land taxes and mortgage payments. Disbursements paid to creditors, in addition to interest, for extending credit. Consumer Protection laws require full disclosure of all carrying charges. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the principal amount of $118.3 million of outstanding preferred securities of the Company. If the preferred securities were classified as long-term debt, these annual carrying charges would be included in interest. If these annual carrying charges had been included in the calculations, the earnings coverage ratio for the 12-month period ended December 31, 2001, would be 8.1 and the cash flow coverage ratio Cash flow coverage ratio The number of times that financial obligations (for interest, principal payments, preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental payments, and depreciation. for the 12-month period ended December 31, 2001 would be 14.5. CONFERENCE CALL A conference call will be held at 9:00 a.m. Mountain Standard Time, 11:00 a.m. Eastern Standard Time, on Wednesday Wednesday: see week. , February 27, 2002. The North American conference call number is 1-888-433-1680 and the outside North America conference call number is 1-212-993-0211. Please call in about 10 minutes before the starting time Noun 1. starting time - the time at which something is supposed to begin; "they got an early start"; "she knew from the get-go that he was the man for her" commencement, get-go, offset, outset, showtime, start, kickoff, beginning, first in order to be patched patch 1 n. 1. a. A small piece of material affixed to another, larger piece to conceal, reinforce, or repair a worn area, hole, or tear. b. A small piece of cloth used for patchwork. 2. into the call. Should you experience difficulty in connecting to the call, those in North America please call 1-800-473-0602 and for those outside North America call 1-905-502-3723. Media are invited to participate in listen-only mode. Replay: A taped rebroadcast will be available until March 6, 2002, inclusive (theory) inclusive - In domain theory, a predicate P : D -> Bool is inclusive iff For any chain C, a subset of D, and for all c in C, P(c) => P(lub C) In other words, if the predicate holds for all elements of an increasing sequence then it holds for their least upper . To access postview in North America, dial 1-800-558-5253 and enter the passcode 20339219. Those outside of North America dial 1-416-626-4100 and enter the reservation A clause in a deed of real property whereby the grantor, one who transfers property, creates and retains for the grantor some right or interest in the estate granted, such as rent or an Easement ,a right of use over the land of another. number 20339133. FIRST QUARTER 2002 RESULTS AND ANNUAL MEETING First quarter 2002 results are scheduled for release Wednesday, May 8, 2002. A conference call will be held on that date at 9:00 a.m. Mountain Daylight For other uses, see Daylight (disambiguation). Daylight or the light of day is the combination of all direct and indirect sunlight outdoors during the daytime (and perhaps twilight). Time, 11:00 a.m. Eastern Daylight Time. Canadian Natural Resources Limited's Annual Meeting will be held on Thursday Thursday: see week. , May 9, 2002 at 3:00 p.m. Mountain Daylight Time in the Ballroom
A ballroom is a large room inside a building, the designated purpose of which is holding formal dances called balls. of the Metropolitan Centre 333 - 4 Avenue S.W., Calgary, Alberta. Certain information regarding the Company contained herein may constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. under applicable securities laws. Such statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. in the forward-looking statements. |
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