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Canadian Natural Resources Limited Announces 2018 Budget


Commenting on the Company's 2018 budget, Steve Laut, President of Canadian Natural (TSX:CNQ)(NYSE:CNQ), stated, "Canadian Natural's transition to a long life low decline asset base is complete, as the Horizon Phase 3 expansion has been successfully executed. The strength of the Company is reflected in the 2018 budget as we target overall production between 1,090,000 and 1,170,000 BOE/d. This represents a 17% increase over 2017 production levels with a capital program targeted at $4.3 billion, $0.5 billion less than 2017, excluding the Athabasca Oil Sands Project acquisition capital. This allows the Company significant capital flexibility to allocate capital to the highest return projects and to maximize shareholder value. Free cash flow is targeted to be in the $2.3 billion to $2.7 billion range, after the Company's current dividend."

Canadian Natural's Chief Operating Officer, Tim McKay, continued, "The Company will focus on reliability across our diverse asset base and continue to integrate and optimize the assets acquired in 2017. Modest drilling programs will ensure cost control, which is essential in this commodity price environment. Project development at our Steam Assisted Gravity Drainage project, Kirby North will continue in 2018 as we advance the project for ultimate completion in Q4/19."

Canadian Natural's Chief Financial Officer, Corey Bieber, continued, "In 2018, the Company targets to continue to strengthen our balance sheet metrics with increasing free cash flow. Ample liquidity and significant capital flexibility in 2018 will allow the Company to effectively manage our financial position in a volatile commodity price environment."

HIGHLIGHTS OF THE 2018 BUDGET

- Canadian Natural's 2018 capital budget is targeted at approximately $4.3 billion, $0.5 billion less than 2017, excluding the Athabasca Oil Sands Project ("AOSP") acquisition capital. The Company targets to deliver 2018 production growth of approximately 17% at the midpoint of 2018 budget guidance with targeted maintenance capital at approximately $3.0 billion, demonstrating the benefit of a long life low decline asset base.

- The Company's 2018 funds flow from operations is targeted to be approximately $7.9 billion to $8.3 billion. Free cash flow is targeted to be approximately $2.3 billion to $2.7 billion, after budgeted capital and the current dividend, based upon average annual WTI strip pricing of US$52.03/bbl and AECO strip pricing of C$2.11/GJ.

- Overall crude oil and NGL production is targeted to increase from 2017 levels by 23%, ranging from 815,000 bbl/d to 885,000 bbl/d in 2018. The increase represents approximately 160,000 bbl/d of production growth and is largely as a result of the completion of the Phase 3 expansion at Horizon Oil Sands Mining & Upgrading ("Horizon") and a full year of production at the AOSP.

- Overall production in 2018 is targeted to be between 1,090,000 BOE/d and 1,170,000 BOE/d, with a product mix of approximately 75% crude oil and NGLs and 25% natural gas. In 2018 approximately 55% of the Company's production is targeted to come from long life low decline assets.

North America - Exploration & Production

- North America crude oil and NGL production provides significant capital flexibility as the Company's large asset base encompasses light crude oil, primary heavy crude oil and Pelican Lake heavy crude oil. The Company's strong asset base is complemented by an extensive network of owned infrastructure and is supported by a deep inventory of low capital exposure, high return on capital projects that deliver significant production and value growth opportunities.

-- The Company is targeting a capital program of $1,555 million for North American E&P in 2018. Plans for 2018 are summarized as follows:

--- North American crude oil and NGL production is targeted to range from 253,000 bbl/d to 263,000 bbl/d, representing a 7% increase from 2017 production levels. The Company's 2018 drilling program is focused on value growth over the near, mid and long term.

--- Canadian Natural targets to drill approximately 67 net producing wells in its North America light crude oil operations, a significant part of the Company's balanced portfolio. This represents an increase of 28 net producing wells from 2017 targeted levels.

--- The Company targets continued strong capital efficiencies and high returns with a right-sized primary heavy crude oil drilling program of 377 net producing wells, a 6% decrease compared to 2017 targeted levels.

--- The Company targets a drilling program of 22 net producing wells in 2018 at Pelican Lake, its industry leading polymer flood asset. This represents an increase of 5 net producing wells from 2017 targeted levels. In 2018, Canadian Natural will integrate and optimize operations at its recently acquired Pelican Lake lands to maximize shareholder value.

--- Corporate natural gas production is targeted to range from 1,650 MMcf/d to 1,710 MMcf/d, in-line with 2017 levels, as natural gas prices are expected to continue to be challenged in 2018.

--- The Company targets a modest natural gas drilling program of 17 net producing wells representing a decrease of 3 net producing wells compared to 2017 targeted levels. The Company targets to continue its focused drill to fill strategy in its liquid rich assets in the Montney and the Deep Basin, where the Company owns and operates significant infrastructure.

North America - Thermal in Situ Oil Sands

- Thermal in situ oil sands assets provide a substantial, low risk production profile that can generate significant sustainable free cash flow.

-- Thermal in situ production is targeted to be in line with 2017 levels in the range of 107,000 bbl/d to 127,000 bbl/d in 2018.

-- Total thermal in situ capital in 2018 is targeted to be $960 million, as the Company targets to drill 119 net producing thermal wells. In 2018, the Company will initiate high value pad additions at Primrose, which will add long life low decline production commencing in Q4 of 2019. Additionally, drilling at the Company's 40,000 bbl/d Kirby North Steam Assisted Gravity Drainage ("SAGD") project will begin in 2018.

--- Primrose drilling activity is targeted to be 64 net producing wells in 2018. First production from this drilling program is targeted in Q4 of 2019 with exit 2019 production of 25,000 bbl/d.

--- Canadian Natural will advance its development of the Kirby North SAGD project in 2018. In the year, the Company targets project capital of approximately $465 million to complete 49 net producing wells, 44 injector wells and facility construction. First steam injection is targeted for late 2019 and first production is targeted in Q1 of 2020. Overall targeted productive capacity at Kirby North is 40,000 bbl/d.

--- Drilling activity at Kirby South will be minimal with 6 net producing wells targeted.

North America - Oil Sands Mining and Upgrading

- Canadian Natural's transition to a long life low decline asset base is complete. Oil Sands Mining & Upgrading production is targeted to increase significantly in 2018 due to the successful completion of the Phase 3 expansion at Horizon and a full year of production at the AOSP.

-- Oil Sands Mining and Upgrading production is targeted to increase by greater than 50% in 2018 from 2017 levels. The 2018 production guidance range for Oil Sands Mining and Upgrading is 415,000 bbl/d to 450,000 bbl/d of synthetic crude oil.

-- The 2018 targeted production range includes a 21 day planned turnaround at the Horizon operations and includes planned pit stops at the AOSP in the spring and fall of 2018.

-- 2018 Oil Sands Mining and Upgrading targeted capital includes approximately $500 million for completion of environmental work related to the Phase 3 expansion, technology and project development.

-- Sustaining capital is targeted to be $660 million, while $220 million is targeted for turnarounds and reclamation activities.

International - Exploration & Production

- International light crude oil production is targeted to range from 40,000 bbl/d to 45,000 bbl/d, a decrease of approximately 8% from 2017 production levels, reflecting natural production declines.

- 2018 capital at the Company's International assets is targeted to be in-line with 2017 levels at approximately $410 million, which includes approximately $70 million for decommissioning activities.

- The Company targets to drill 4.6 net producing wells in the North Sea and 1.7 net producing wells at the Baobab field in Cote d'Ivoire.

PRODUCTION AND CAPITAL GUIDANCE

Canadian Natural continues its strategy of maintaining a large diverse portfolio of assets. This enables the Company to provide consistent growth in production and to maximize shareholder returns through flexible capital allocation. Annual budgets are developed and scrutinized throughout the year and changed if necessary in the context of project returns, product pricing expectations, and the balancing of project risks and time horizons. Canadian Natural maintains a high ownership level and operatorship in its properties and can therefore control the nature, timing and extent of expenditures in each of its project areas.

   
Daily production volumes (before royalties)2017 Forecast2018 Budget
Natural gas (MMcf/d)1,655 - 1,7051,650 - 1,710
   
Crude oil and NGLs (Mbbl/d)  
 North America - Exploration and Production236 - 246253 - 263
 North America - Thermal In Situ112 - 122107 - 127
 North America - Oil Sands Mining and Upgrading272 - 300415 - 450
 International43 - 4940 - 45
 Total crude oil and NGLs663 - 717815 - 885
Total BOE/d939 - 1,0011,090 - 1,170

The forecast capital expenditures for 2017 and the 2018 Budget guidance are as follows:

     
Capital Expenditures (C$ millions) 2017 Forecast 2018 Budget
North America natural gas and NGLs$460$440
North America crude oil 920 1,115
International crude oil 420 410
Total Exploration and Production$1,800$1,965
     
Total Thermal In Situ Oil Sands$380$960
Oil Sands Mining and Upgrading    
 Environment, technology and project development$925$500
 Sustaining capital 555 660
 Turnarounds, reclamation and other 225 220
Total Oil Sands Mining and Upgrading$1,705$1,380
Net acquisitions, midstream and other (1)$970$30
Total Capital Expenditures$4,855$4,335

2017 Forecast excludes acquisition costs of AOSP transaction.

The above capital expenditures for the 2017 forecast and the 2018 budget incorporate the following levels of drilling activity:

   
Drilling activity (number of net producing wells)2017 Forecast2018 Budget
Targeting natural gas2017
Targeting crude oil459472
Targeting thermal in situ27119
Total506608

Note: 2017F and 2018B excludes stratagraphic and service wells.


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