Canadian Natural Resources Limited Announces 2005 Budget.CALGARY, Alberta -- 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 :CNQ CNQ Cost of Non Quality CNQ Canadian Trading & Quotation System Inc. CNQ Club Neon Quebec (Quebec Neon Club) )(TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :CNQ) - In commenting on the Company's 2005 budget, 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's 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 "Next year looks like another strong one for Canadian Natural. We expect to grow production volumes by about 10% and set a new cash flow record, estimated to be in excess of $4.3 billion. Additionally, you will see us continue to exploit assets we acquired during 2004. Heavy oil drilling is up reflecting the early 2004 acquisition of Petrovera and deep natural gas drilling in the Foothills has similarly increased to reflect new opportunities created by an asset acquisition completed during the first half of 2004. Internationally, new production is coming on line at 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 in mid- mid- pref. Middle: midbrain. 2005 and we will commence exploitation work on the Central North Sea assets acquired in mid-2004. I am convinced that Canadian Natural has the people, assets and resolve to continue to deliver superior returns to our shareholders on our conventional oil and natural gas assets as well as on the Horizon project over the longer term." HIGHLIGHTS OF THE 2005 BUDGET - Crude oil and NGLs production target of 307 - 335 thousand bbl/d before royalties (283 - 309 thousand bbl/d net of royalties) representing a midpoint mid·point n. 1. Mathematics The point of a line segment or curvilinear arc that divides it into two parts of the same length. 2. A position midway between two extremes. increase of 13% from the midpoint of 2004 annual guidance. - Natural gas production target of 1,448 - 1,510 mmcf/d before royalties (1,134 - 1,182 mmcf/d net of royalties) representing a midpoint increase of 7% from the midpoint of 2004 annual guidance. - Equivalent production target of 548 - 586 thousand boe/d before royalties (469 - 503 thousand boe/d net of royalties) representing a midpoint increase of 10% from the midpoint of 2004 annual guidance. - Cash flow estimate of $4.3 billion - $4.5 billion ($16.00 - $16.80 per common share) based upon a forecast average West Texas Intermediate oil price of US$42.50/bbl, a NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). natural gas price of US$6.60/mmbtu and an exchange rate of C$1.00 = US$0.79. - Earnings estimate of $1.7 billion - $1.9 billion ($6.35 - $7.10 per common share) based upon the same assumptions listed above. - Conventional oil and natural gas capital expenditures of $3.1 billion, reflecting an approximate 1,900 well drilling Well drilling is the process of drilling a hole in the ground for the extraction of a natural resource such as ground water, natural gas, or petroleum. Drilling for the exploration of the nature of the material underground (for instance in search of metallic ore) is best described program. Capital expenditures on the Horizon Oil Sands Project are budgeted at $220 million for winter work and long lead items. Should full project sanction sanction, in law and ethics, any inducement to individuals or groups to follow or refrain from following a particular course of conduct. All societies impose sanctions on their members in order to encourage approved behavior. be achieved, the expenditures will increase to $1.4 billion. - Continued strong balance sheet management with targeted 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. at the end of 2005 of approximately 31% and debt/EBITDA of 0.8 times (assuming full sanction of the Horizon Oil Sands Project). Production and Financial Guidance Canadian Natural continues its strategy of maintaining a large portfolio of varied projects, which enables the Company over an extended period of time to provide consistent growth in production and high shareholder returns. Annual budgets are developed, scrutinized throughout the year and changed if necessary in the context of project returns, product pricing expectations, and balance in project risks and time horizons. Canadian Natural maintains a high ownership level and operatorship level in all of its properties and can therefore control the nature, timing and extent of expenditures in each of its project areas. Canadian Natural is presently budgeting 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 in 2005 of $4.3 billion to $4.5 billion. This cash flow is derived from production of 1,448 to 1,510 mmcf/d of natural gas and 307,000 to 335,000 bbl/d of crude oil and NGLs and applying pricing parameters of an average 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) price of US$42.50/bbl, a Lloyd Blend heavy oil differential of US$14.45/bbl, NYMEX natural gas price of US$6.60/mmbtu and a Canada/United States exchange rate of $0.79.
The budgeted capital expenditures in 2004 are currently expected to
be as follows:
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($ millions) 2004 Forecast 2005 Budget
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Conventional Oil and Gas
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North America natural gas $ 1,090 $ 1,350
North America crude oil and NGLs 665 910
North Sea 295 420
Offshore West Africa 310 400
Property acquisitions and midstream 1,788 50
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$ 4,148 $ 3,130
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Horizon Oil Sands Project
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Base budget - winter work $ 400 $ 220
Additional, assuming full
project sanction - 1,152
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$ 400 $ 1,372
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The above capital expenditure budget incorporates the following
levels of drilling activity:
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Drilling Activity
(number of net wells) 2004 Forecast 2005 Budget
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Targeting natural gas 803 1,033
Targeting crude oil 339 690
Stratigraphic test / service wells 338 199
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Total 1,480 1,922
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North American Natural Gas
The 2005 natural gas program will be highlighted by expanded
drilling programs in the Northwest Alberta and Northeast British
Columbia core regions as shown below.
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(number of net wells) 2004 Forecast 2005 Budget
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Northeast British Columbia 202 240
Northwest Alberta 175 194
North Alberta 164 205
South Alberta 262 394
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Total 803 1,033
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Drilling in 2005 reflect higher activity levels targeting the shallow Notikewin zone in Northeast 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 as well as increased Cardium drilling in Northwest Alberta. Both shallow and coal bed methane methane (mĕth`ān), CH4, colorless, odorless, gaseous saturated hydrocarbon; the simplest alkane. It is less dense than air, melts at −184°C;, and boils at −161.4°C;. drilling will increase in the South Alberta core region. Conventional drilling is also targeted to increase in North Alberta. During 2005 approximately 90 wells targeting deep gas are budgeted, including 9 in the Foothills region. The Foothills region drilling increases reflect both increased focus on the area as well as new drilling targets identified on assets acquired during the first half of 2004. For the fourth quarter of 2004, Canadian Natural has increased capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. levels directed toward natural gas drilling in an effort to reduce pressures of a tight 2005 winter drilling season by starting earlier.This effort includes a detailed and sequential drilling program that will enhance the procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. of better drilling rigs and crews for the winter season, both of which are an integral part of cost control in an inflationary in·fla·tion·ar·y adj. Of, associated with, or tending to cause inflation: inflationary prices; inflationary policies. Adj. 1. environment.Through this process, Canadian Natural will actually use about 10 less drill rigs this year while drilling a similar number of wells during the winter season. North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. midpoint average natural gas production is expected to increase by approximately 9% from midpoint 2004 guidance levels.Organic growth will account for approximately half of this growth with the remainder reflecting the full year impact of 2004 acquisitions.The 2005 capital budget for North American natural gas is $1,350 million.
North American Crude Oil and NGLs
The 2005 drilling program consists of:
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(number of net wells) 2004 Forecast 2005 Budget
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Conventional heavy crude oil 187 398
Thermal heavy crude oil 64 105
Light crude oil 43 101
Pelican Lake crude oil 36 67
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Total 330 671
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The ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale in conventional heavy oil drilling activity reflects favourable crude oil prices as well as new opportunities identified through property acquisitions made during 2004. Due to the nature of heavy oil production patterns in which volumes ramp during the first months of production, much of the production resulting from this expanded drill program will not be realized until late 2005. In 2005, Canadian Natural expects to continue its 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. thermal crude oil expansion plans. At Primrose South, production from two new phases commenced in mid-2004 at 19,000 bbl/d, which was higher than the budgeted 13,000 bbl/d. This increased production significantly enhances the economics of these pads and is a positive indicator for future pads to be drilled. Production from these pads is subject to the cycling of steam injection and crude oil production; therefore, due to such normal cycling activities, average production levels similar to 2004 will result in 2005. The project remains on track to add 30,000 bbl/d of average production in 2006. At Pelican Lake, the promising waterflooding test program continues and will be expanded to additional lands in the area.In addition, the Company will be pilot testing the use of a polymer flood on a portion of the field in an effort to further enhance field recoveries. As a result of the above activities and factors affecting production average North American crude oil and NGLs production for 2005 is expected to modestly increase from 2004 levels with a 2005 capital budget of $910 million.Entry to exit volumes, however, are forecast to increase by approximately 12%. Horizon Oil Sands Project The 2005 base capital budget of $220 million for the Horizon Oil Sands Project will be comprised of winter site preparation activities in order to keep existing construction schedules. Upon sanction of the full project the full 2005 Horizon capital budget would be increased by an additional $1,152 million. North Sea In 2005, Canadian Natural anticipates drilling approximately 12 net platform wells while continuing its successful workover and recompletion program. The Company will also conduct a mobile drilling program in which 4 subsea Subsea is a general term frequently used to refer to equipment, technology, and methods employed to explore, drill, and develop oil and gas fields that exist below the ocean floors. This may be in "shallow" or "deepwater". wells will be drilled at Nadia, Thelma (2) and Columba E. With the exception of Nadia, all of these wells are stepout development wells on existing proved properties. Nadia represents exploration of new terraces in the Ninian/Columba area. Average 2005 midpoint crude oil production guidance is expected to increase by 19% from midpoint 2004 guidance, however natural gas volumes will be lower as natural gas sales at Banff are diverted di·vert v. di·vert·ed, di·vert·ing, di·verts v.tr. 1. To turn aside from a course or direction: Traffic was diverted around the scene of the accident. 2. to reinjection. The 2005 capital budget for the North Sea is $420 million. 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. In 2005, the capital budget for Offshore West Africa is set at $400 million. Canadian Natural anticipates $210 million to be spent on finalizing the development of the Baobab Field in Cote d'Ivoire with approximately $100 million to be spent on the West Espoir Field development. Additional geological ge·ol·o·gy n. pl. ge·ol·o·gies 1. The scientific study of the origin, history, and structure of the earth. 2. The structure of a specific region of the earth's crust. 3. A book on geology. reviews on other Canadian Natural lands are yielding exploration targets, at least one of which, Zaizou, will be drilled during 2005. Average production from this region is expected to increase by 144-213% from 2004 midpoint guidance levels. This reflects the mid 2005 commissioning of production from the Baobab field as well as the drilling of additional producer wells at the East Espoir Field. FINANCIAL REVIEW Canadian Natural is committed to maintaining its strong financial position so as to allow it to withstand volatile crude oil and natural gas commodity prices and the operational risks inherent in the crude oil and natural gas business environment. The Company continues to build the necessary financial capacity to complete the Horizon Oil Sands Project. Based upon the previously referenced price deck, capital expenditure and production levels, Canadian Natural expects to exit 2005 with debt to book capitalization of approximately 31% and with a debt/EBITDA of 0.8 times. The Company also utilizes risk management instruments on a portion of its production in an effort to reduce volatility and provide greater certainty that operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. are available to fund capital expenditures. To this end, the Company has recently completed the procurement of additional financial instruments with total current hedge positions in place as follows:
Q1/05 Q2/05 2H/05 2005
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Crude Oil - WTI (mbbl/d)
Puts 119 143 62 97
Collars 81 61 31 50
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Total volumes hedged 200 204 93 147
Puts (US$/bbl) $30.73 $30.57 $31.54 $31.10
Collars floor (US$/bbl) $32.87 $35.81 $42.50 $38.42
Collars ceiling (US$/bbl) $41.41 $47.39 $52.98 $46.70
Natural Gas - AECO (mGJ/d)
Collars 540 340 227 333
Floor (C$/GJ) $ 6.37 $ 6.00 $ 6.00 $ 6.09
Ceiling (C$/GJ) $12.22 $ 8.08 $ 8.08 $ 9.11
SPECIAL NOTE REGARDING 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. Certain statements in this document or incorporated herein by reference may constitute "forward-looking statements" within the meaning of 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. Private Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Reform Act of 1995. These forward-looking statements can generally be identified as such because of the context of the statements including words such as the Company "believes", "anticipates", "expects", "plans", "estimates" or words of a similar nature. The forward-looking statements are based on current expectations and are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.Such factors include, among others: the general economic and business conditions which will, among other things, impact demand for and market prices of the Company's products; the foreign currency exchange rates; the economic conditions in the countries and regions in which the Company conducts business; the political uncertainty, including actions of or against terrorists, insurgent INSURGENT. One who is concerned in an insurrection. He differs from a rebel in this, that rebel is always understood in a bad sense, or one who unjustly opposes the constituted authorities; insurgent may be one who justly opposes the tyranny of constituted authorities. groups or other conflict including conflict between states; the industry capacity; the ability of the Company to implement its business strategy, including exploration and development activities; the ability of the Company to complete its capital programs; the ability of the Company to transport its products to market; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; the availability and cost of financing; the success of exploration and development activities; the production levels; the uncertainty of reserve estimates; the actions by governmental authorities; the government regulations and the expenditures required to comply with them (especially safety and environmental laws and regulations); the site restoration costs; and other circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or affecting revenues and expenses. The impact of any one factor on a particular forward-looking statement is not determinable Liable to come to an end upon the happening of a certain contingency. Susceptible of being determined, found out, definitely decided upon, or settled. determinable adj. with certainty as such factors are interdependent in·ter·de·pen·dent adj. Mutually dependent: "Today, the mission of one institution can be accomplished only by recognizing that it lives in an interdependent world with conflicts and overlapping interests" upon other factors, and management's course of action would depend upon its assessment of the future considering all information then available. Statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc "reserves" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the future. Special Note Regarding Currency, Production and Reserves In this document, all references to dollars refer to 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 unless otherwise stated. Reserves and production data is presented on a before royalties basis unless otherwise stated. In addition, reference is made to oil and gas in common units called 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"). A boe is derived by converting six thousand cubic feet of natural gas to one barrel of crude oil (6mcf:1bbl). This conversion may be misleading, particularly if used in isolation, since the 6mcf:1bbl ratio is based on an energy equivalency equivalency the combining power of an electrolyte. See also equivalent. at the burner A drive that writes write-once optical discs such as CD-Rs and DVD-Rs. A "burner" implies a one-time recording, but the term is erroneously used to refer to drives that "write" to re-recordable CD-RW and DVD-RW/+RW media as well. See burn, CD-R and DVD-R. tip and does not represent the value equivalency at the well head. Readers are cautioned that the foregoing list of important factors is not exhaustive. Although the Company believes that the expectations conveyed by the forward-looking statements are reasonable based on information available to it on the date such forward-looking statements are made, no assurances can be given as to future results, levels of activity and achievements. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety The whole, in contradistinction to a moiety or part only. When land is conveyed to Husband and Wife, they do not take by moieties, but both are seised of the entirety. by these cautionary statements. The Company assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change. |
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