Canadian Natural Resources Limited Price & Performance (CNQ)

Thank you, and good morning, everyone. Thank you this morning for joining Canadian Natural's twenty twenty four fourth quarter and year end earnings call call. As always, before we begin, like to remind of our forward looking statements and it should be noted that in our reporting disclosures, everything is in Canadian dollars Canadian otherwise stated, and we report our reserves and production [indiscernible] Also, I would suggest to review our advisory section in our financial statements that includes comments on non GAAP disclosures. Speaking on today's call will be Scott Seltzer, our President Robin Zabek, our Chief Operating Officer, V and P and Mark Zainthorpe, our Chief Financial Officer. Additionally in the room with us this morning is Jay Frock, CEO of Oil Sands and Victor Dorel, Senior Vice President, Finance and Principal Accounting Officer. Scott will first provide some examples of our top tier performance and strong execution over recent years getting into the numerous operational records achieved in 2024. Next, Robin will provide highlights of our growing high value reserves that compete on a global scale. Mark will then summarize our financial results includes robust adjusted funds flow, earnings and returns to shareholders. To close, Scott will summarize prior to opening up the call for questions.

With that, over to you, Scott. Thank you, Lance, and good morning, everyone. I get into our 2024 results, I'd like to run through some key factors that highlight our top tier performance over the past three years in execution, effective and efficient operations, returns to shareholders, resource value growth and resource value growth and opportunistic acquisitions. Our unique and diverse asset base provides us with a competitive advantage as we have ample organic growth opportunities and can allocate capital to the highest return projects, without being reliant on any one commodity. Our strong culture of continuous improvement is about doing it right and it is driven by teams in the organization that believe ownership and accountability deliver consistently strong results. All employees are shareholders and we firmly see the value in having our employees as owners.

And importantly, we've been able to keep the team together, which is important for a long Over the past three years, we have achieved the following successes. Absolute production growth of approximately 82,100 BOEs per day the vast majority of which liquids growth. We have delivered annual production per share CAGR of 7%. We improved liquids margin significantly by reducing operating costs by more than $3 per barrel or 15%. Equating to an incremental margin of approximately $1,200,000,000 based on 2024 production. We returned over $11 per share to shareholders through dividends, and share repurchases. We increased our annualized quarterly dividend by 59% to $2.25 per share from $1.42 per share and the Board has subsequently increased the dividend by another 4%. Our share count reduced by approximately two forty thirty four thousand shares or 11% inclusive of shares issued upon exercise of stock options. Adding more value at AOSP is the acquisition that closed in Q4 of 'twenty four and the swap transaction targeted to close by the end of Q2 this year, in the Albion Mines to 100%. In the NLBN Mines, these transactions will add approximately 93,500 barrels per day of long life zero decline production to our world class oil sands mining and upgrading assets.

Additionally, we acquired Chevron 70% Operator working interest of the light crude oil and liquid rich assets in the Duvernay.

These assets are targeted to average approximately 60,000 BOEs per day in '25 and provide the opportunity for meaningful near term growth while contributing additional free cash flow.

Expanding even further on AOS P and going back to 2017, we unlocked significant long term value since we first acquired an interest in this world class asset. We've increased production and reduced operating cost through process improvements and optimization projects that improved reliability and increased utilization. Since 2017, we've increased gross production at Albion Mines by by 30%, or over 70,000 barrels per day.

Upgraded capacity was also increased to match the increased production from the mines. We decreased AOSP per unit operating cost by more than 30 approximately $10 per barrel. This equates to an incremental margin of approximately $800,000,000 based on 2024 production. With 100% working interest in the mines, once the swap transaction closes, we are targeted to unlock further value with our effective and efficient operations and relentless continuous improvement culture. Adding even more value to our world class oil sands mining up When you combine that increased ownership interest with the recently completed debottlenecking and reliability projects our total oil sands mining production capacity and 92,000 barrels per day. And further to that, when you combine our top tier conventional crude oil and liquid rich natural gas assets, with our leading oil sands mining and upgrading assets, you get a significant and sustainable free cash flow and the ability to organically grow production if it makes sense to do so.

Will now run through our strong 2024 operational results and highlights. We hit several new records across our assets in 2024. [indiscernible] record annual total production of approximately 1,360,000 BOEs per day, including record liquids production over 1,000,000 barrels per day.

Record annual oil sands mining and upgrading production of 472,245 barrels per day and record quarterly production of 1,165,000 barrels per day.

These record production rates resulted in higher upgrader utilization of 99% in 2024 including planned turnarounds and 105% utilization in the fourth quarter. Our lower oil sands mining and upgraded operating costs are industry leading. Averaging $22.88 per barrel in 2024.

And $20.97 per barrel the fourth quarter. Our oil sands mining and upgrading assets continue to achieve strong production and high utilization in January of twenty twenty five and February 2025, averaging on a gross basis approximately six thirty four thousand barrels per day over the two months. February 25 was the highest monthly gross production in our history at approximately 640,000 barrels per day we focus on continuous improvement initiatives combined with the strong performance from the reliability enhancement project at Horizon and the debottleneck project, at Scottsford. Additionally, further value has been unlocked from piping modifications completed during the recent debottleneck project at Scottford Upgrader.

These modifications unlock approximately 5,000 barrel [indiscernible] resulting in higher utilization during planned or greater turnarounds. This increased zero decline production will continue to benefit Canadian natural for decades [indiscernible] our increased ownership in the Canadian Mines. In our Thermal In Situ operations, We've achieved record production in 2024 averaging just over 271,000 barrels per day a 3% increase over 2023 which was driven by our capital efficient thermal pad development program. 2024 thermal in situ operating costs were strong averaging $11.00 $4 per barrel which is down 16% compared to 2023 primarily reflecting lower energy cost and higher production volumes. We have significant available processing capacity of approximately in our thermal operations. We continue to utilize this available capacity through our strong execution on our drill to fill pad additions have been able to bring these pads on production ahead of schedule. For example, at Wolf Lake, we brought a safety pad on production ahead of schedule in Q4 of twenty twenty four, which was originally targeted for Q1 of 'twenty five. At Primrose, we brought a CSS pad on production ahead of schedule in Q4 of twenty twenty four originally targeted for Q2 of 'twenty five. A second CSS pad had been drilled and is targeted to come on production ahead of schedule in late Q1 'twenty five, originally budgeted for the second quarter of twenty twenty five.

At Jackfish, we drilled a Seggie pad in 'twenty four with production targeted to come on in Q3 of twenty twenty five. At Pike, we are drilling two SAG D pads in the first half of twenty twenty five tied into existing jackfish facilities these two pads are targeted to come on production in 2026 and keep the jackfish plants at full capacity. At Kirby, we are currently drilling a Seag deep path targeted to come on production in Q4 of twenty twenty five. With the second seg deep pad targeted to be drilled in Q4 twenty twenty five and Kamal production in Q4 of twenty twenty six. On the conventional side of the business, primary heavy oil production averaged approximately 79,100 barrels per day, a 2% increase over 2023, reflecting strong results from multilateral wells on our extensive heavy oil land base. We drilled 121 net horizontal multiple horizontal, multilateral primary heavy oil wells in 2024. Compared to 104 in 2023. Multilateral wells combined increased reservoir capture and higher production with reduced servicing requirements which lowers operating cost. As we shift more of our primary heavy oil assets to multilateral development, we are seeing overall operating costs coming down as these wells are more efficient and require less servicing activity.

In 2024, primarily heavy oil operating cost averaged $18.11 per barrel down 9% from 2023. We continue to optimize well design and lengths in our highly successful multilateral program achieving top tier average initial peak rates of approximately 50 barrels per day per well which is 43% higher than the budget initial peak rate 175 barrels per day per well. And a further 9% higher than our previously [indiscernible] North American light crude oil and NGL production averaged approximately 14,400 barrels per day in 2024, an increase of 5% compared to 2023.

Half of this increase is driven by strong organic growth in Liquoridge Natural Gas with the remainder related to recently acquired Duvernay assets. We achieved a 17% reduction in operating costs on light crude oil and NGLs averaging $13.55 per barrel in $24 compared to 2023. North American natural gas production averaged 2.14 Bcf in 2024 which is comparable to 2023.

In 2024, we remain focused on liquid rich natural gas activity in the Montney and Deep Basin while certain dry natural gas activity in 2024 was deferred due to lower natural gas prices. Operating costs in our North American natural gas averaged $1.19 per Mcf in 2024 or 6% lower than 2023. Complementing the opportunistic acquisitions completed in 2024, as well as those announced but not yet closed in 2025. We have plenty of organic growth opportunities within our large diverse asset base. We will leverage this expanded portfolio of organic growth opportunities to continue creating long term shareholder value the future, maintaining the flexibility manage the pace of these development opportunities to deliver strong returns. We have a long track record of consistently delivering strong industry leading results driven by our safe, reliable operations and relentless focus on continuous improvement which maximizes long term shareholder value. Now, I will turn it over to Robin to speak to our twenty twenty four year end reserves.

Thank you, Scott, and good morning, everyone. I'll start by pointing out that as in previous years, 100% of Canadian Natural's reserves are externally evaluated and reviewed by independent qualified reserve evaluators. Our 2024 reserves disclosure is presented accordance with Canadian reporting requirements using forecast prices and escalated costs, on a company working interest before royalties basis. As you just heard from Scott, Canadian Natural had a very strong year one of the many places in which that is evident. Are the company's reserves. For 12/31/2024, total proved reserves are 15,200,000,000.0 BOE. And total proved plus probable reserves are $20,100,000,000 BOE. This is a 9% increase in both proved and proved plus probable reserves compared to December 2023. Canadian Natural replaced 2024 production by 365% on a total proved basis and 422% on a total proved plus probable basis. The accretive acquisition of Chevron's Alberta assets into December 2024 added material reserves and NPD growth. And as you've heard from Scott, these assets will continue to drive value for decades It is also notable that even excluding the the company's organic reserves replacement would still have been about 118% of production in total proved and about 128% of production. In total proved less probable.

Highlighting one of the key attributes that differentiate Canadian Natural's assets, approximately 74% of total proved reserves are from long life low decline or zero decline assets. Resulting in a total proved reserve life index of thirty three years. And a total proved plus probable reserve life index of forty four years, Notably, at year end 2024, approximately 50% of the company's total proved reserves are high value SCO with zero decline and a total proved reserve life index of forty three years, In 2024, the strength of Canadian Natural's assets and results also continue to be reflected in our strong finding and development costs.

The corporate finding, development and acquisition costs excluding changes in future development costs, our $7.82 per BOE per total proved reserves and $6.76 per BOE for total proved plus probable reserves.

Including changes in future development costs, corporate FD and A is $13.56 per Boe per total crude and $12.6 per BOE per total proved plus probable. [indiscernible] The net present value of future net revenue before income tax full company ARO, is approximately $170,000,000,000 for total proved reserves and approximately $2.00 $6,000,000,000 for total proved plus probable reserves This equates to net asset values of $74.83 per share for total proved and $91.72 per share for total proved plus probable. In summary, our 2024 reserves reflect the strength and depth of Canadian Natural's asset base the predictability of the company's long life low decline reserves the value of accretive acquisitions completed in 2024 and our proven ability to deliver organic reserves and value growth. I will hand over to Mark now for financial highlights. Thanks, Robin, and good morning, everyone.

In 2024, we delivered strong financial results on the back of the solid operational performance Scott discussed which are highlighted by annual adjusted funds flow of $14,900,000,000 including Q4 'twenty four adjusted funds flow of $4,200,000,000 Our capital program for 2024 was approximately $100,000,000 under budget of $5,300,000,000 resulting in significant free cash flow in the year where we returned approximately $7,100,000,000 to shareholders in 2024, inclusive of our sustainable and growing dividend and share repurchases.

We increased our quarterly dividend twice in 2024 and subsequent to year end given our strong financial position, and significant and sustainable free cash flow generation, our Board of Directors approved a further 4% increase to our quarterly dividend to $0.58 per common share or $2.35 per common share with 2025 being the twenty fifth consecutive year of dividend increases by Canadian Natural, with a compound annual growth rate of 21%. Over that time. After the recent acquisitions, our financial position remains strong and with the additional free cash flow generation, our U. S. Dollar WTI breakeven remains top tier. The low to mid-forty WTI per barrel. With strong balance sheet metrics including debt to EBITDA at 1.1 times and debt to book capital at 32% at the end of 2024. Liquidity remains strong and including undrawn revolving bank facilities and cash, liquidity at the end of the quarter was approximately $4,700,000,000 Our industry leading cost structure predictable long life, low decline assets and reserve base combined with our relentless commitment to continuous improvement, continues to drive significant value at Canadian Natural. This is all a result of our focused and dedicated teams across our business who are aligned with shareholders and have the drive to do things right every day.

This is a unique competitive advantage and facilitates driving strong long term returns on capital.

With that, I'll turn it back to you, Scott, for some final comments.

Thank you, Mark. In summary, our consistent and reliable results are underpinned by safe and reliable operations. Our commitment to continuous improvement is driven by a strong team culture in all areas to focus on improving our cost strong execution of organic growth opportunities and increasing value to shareholders. We consistently delivered top tier operational financial results, which is unique and sustainable. Clearly demonstrating our ability to both economically grow and deliver returns to our shareholders by balancing across our four pillars of capital allocation. So I'd like to take this opportunity to thank Mark for all of his service as our CFO and contributions to the management committee also like to congratulate Victor in his new role new position as our CFO. And with that, I will turn it over for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. The first question comes from Greg Pardy at RBC Capital Please go ahead. Yes. Thanks. Good morning. Thanks for the rundown Canadian indeed, Mark, congrats on your new role. It's been great to work with you. You'll probably get more sleep now on weekends and welcome, Victor.

Couple of questions on my end. I guess Scott, you talked about the Shell swap and then the Chevron deal and so forth.

What do those two transactions mean on a combined basis for your shareholder returns, but also conceivably organic growth at AOSP down the road?

Thanks, Greg. So yes, those two acquisitions, I talked about adding 93,000 barrels a day of production through those acquisitions. And obviously, that will be a significant contribution to our overall free cash flow, which will formulate itself into our shareholder payment programs proportionally. So there's significant value. Those are high dollar value barrels as Well, if you look at organic growth opportunities, Greg, I would point out that there is already existing approvals in place for our Jack Pine Mine expansion in the order of 100,000 barrels a day And I'd also point out that we have licensed capacity availability in the existing JPM and MRM licenses as well. So So we have the opportunity for Good strong growth opportunities in the Albion mines. And I think it will take a lot to work on egress opportunities. In order to ensure that those barrels can move to market. And but certainly the opportunities there and various very well laid out in terms of the reserve life that we can get out of that project with no decline. So there's a lot of overall value wrapped up in that. Okay.

Thanks for that. And maybe I'll just switch gears. I mean, in your opening remarks, you talked about a number of the thermal developments where you're ahead of schedule. So is this intentional? Is there something kind of bigger going on with the Series of projects you're laying out?

Yes. I think, Greg, what's happened over time and And folks shouldn't be overly surprised at times when we do when we're able to exceed our expectations when we sanction a project to get it on production such as these SAG D and CSS pads. And that's because we employ our continuous improvement So every time we build that, we take the learnings from that things that we could do better and we apply it to the next pad. So So arguably, we're getting caught up on some of that here. But certainly, it's nothing ordinary from what we normally do. It's just part of continuous improvement. Okay, got it. Thanks very much. Thanks, Greg. Thank you. The next question comes from Dennis Fong at CIBC. My first question maybe follows along the line of Greg's question there just around your oil and refining operations. [indiscernible] I mean you guys have shown obviously a track record of really off kind of throwing in little kind of small, we'll call it debottlenecking or just even driving better kind of throughput frankly, since you started owning this asset and operating it as well.

Eventually in a situation where say you are able to optimize the asset in such a way that exceeds Scottsford upgraded capacity? What are maybe some of your options that you can look at doing And what are the synergies in that like nearby asset structure that you can maybe lean on to to kind of gain incremental margin?

Yes. Good question, Dennis. In terms of the AOSP mines, And relative to the Scottsford production The next step to get higher volumes would most likely [indiscernible] something similar to what we've talked about before over at Horizon, which is a paraffinic fraud treatment opportunities. So So that's where you would get bitumen barrels, you would move to market call it around the East Crawford Upgrader. But obviously, number one, ensure the upgrader is full, kept full at all times. And secondly, it'd be providing an expansion opportunity to bring on additional bitumen barrels and move those to market.

Great. Appreciate that incremental color. And then maybe shifting gears [indiscernible] the thermal side. In your press release, you've talked about 70,000 barrels of [indiscernible] Unused capacity, which really helps that drill to fill program. Can you talk towards what you'd look to be able to what you would need to do to further unlock that 70,000 potential barrels a day of the oil processing side. Presumably, it's about liberating steam capacity and then using that a little bit more efficiency theoretically, I presume through Wolf Yes.

I think you got it bang on Dennis.

It's primarily in Primrose Wolf Lake area.

The safety assets are primarily full. Certainly jackfishes. And so yes, I think if you just over time, we're seeing capacity availability We'll continue to do our pad adds and we're also working and continue to work on implementation of solvents in those areas. And so think I talked about this on the last call, Dennis, that primarily we'll be looking to do pad add opportunities in Primrose probably before we would do the solvent injection But they're certainly going hand in hand in the teams are working on both both those opportunities. But to get to your point, the steam availability is the key factor there, but we would plan on having pad as to ensure we're maximizing our capacity available from our steam plants. Great.

Really appreciate that color, Scott. I'll turn it back. Thank you. The next question comes from Manav Gupta at UBS Financial.

Please go ahead. Good morning. You guys have a very informed view of the markets out there. I'm just trying to understand how are we thinking about the Echo prices next eighteen to twenty four months given some of the LNG projects which are expected to ramp up over in Canada?

Yes, it's a good question. I think you see an uptick On the pricing going into 2026, obviously, on the back of getting LNG Canada online. And I think that those opportunities will continue to allow us to move gas out of the basin here. Our focus is going to primarily be on liquids rich gassy areas such as Montney and Duvernay. But certainly looks like to me that the market is somewhat I would say conservative potentially on the pricing. But again, some of that's going to depend on how quickly that LNG capacity can be backfilled. But I think those are some of the driving factors there.

And a quick comment I also wanted over the last week, I think Enbridge talked about increasing mainline capacity by about like 150,000 barrels in the near term and over longer term, I think they allocated $2,000,000,000 in capital. So they're looking to increase it to like hundred thousand barrels. So just trying to understand in your view would this is this incremental capacity needed? Would you think the basin will fill up at some point, if you could comment around that?

Well, it's a good question. And I would say, yes, over the long term, it will. [indiscernible] I'd suggest that the growth opportunities or at least the most significant growth opportunities You would look towards the oil sands to make the biggest contributions. We're certainly well positioned from that. In our mining operations. We've talked about Horizon in the past and also talking about the AOSP mines as well terms of production growth opportunities here. So We have additional capacity in our thermal operations. So other operators do have additional opportunities as well. So I think all combined that capacity will be utilized in the long term.

Thank you so much.

Thank you. The next question comes from Patrick O'Rourke at ATB Capital Markets.

Good morning guys and congratulations to Mark on the new role as well.

I guess just from the perspective of the capital structure here with the net debt where it is, the $15,000,000,000 and $12,000,000,000 target, Just wondering about your thoughts in terms of flexing the balance sheet here in the M and A markets or acquisition market if we do [indiscernible] to get to those enhanced shareholder returns right now? Yes. Good question, Patrick. I think that we're quite happy with our assets. And in terms of M and A, activity, we'll just see how things unfold and [indiscernible] pricing as a result of all these discussions on tariffs and so forth. It's going to take some time to sort some of that out. But we're quite happy. If you look at our reserve base ample opportunity to grow organically always liked acquisitions that bring that additional value and accretive the company So as in the past for the past thirty five years, that's been one of our strengths. Of organic growth and taking advantage of opportunities to acquisitions. And unless there's something that changes significantly in the environment going forward, I don't see our strategy changing.

Okay, great. And then maybe just on the operational side, looking through some of the numbers here, particularly to the commercial solvent project at Kirby North. I noticed that the came down very slightly in the quarter from 85% to 80%. Just wondering how we or how you anticipate this trend through time? Is there any seasonality there?

And then what the view is in terms of potential proliferation of this technology now through the rest of the four Yes, Patrick, I don't think I'd read anything into too much into the change. In terms of the recovery.

It has to do with some of the nuances just with certain wells on stream or certain wells upstream for servicing. Or enhancements that they're working on individual wells with. So the trajectory is what we'd anticipated in terms of recoveries and the SOR reductions We'd expect to see get towards what we would think would be a solid stable state in and around August. And then once we've reached that state, we'll be able to have certainly have access to all the information, all the data that's been gathered over the past [indiscernible] And just determine exactly how we want to move forward from here. I will say that in parallel, our teams are looking at expanding the opportunity further into areas such as Pike as we move forward. Those opportunities would be a few years down the road [indiscernible] Where we would look at doing the next implementation of our projects such as that. [indiscernible] we are seeing good positive results We like the opportunity to be able to bring reserves forward and there's lots of reserves that we have interseg the operations. So it provides us significant opportunity to bring those reserves forward. Based on our capital allocation program.

So it's another good tool in our toolbox. Thank you. The next question comes from Manal Hauschaff at TD Securities.

Please go ahead.

Thanks and good morning everyone.

Can you Can we begin by maybe having you elaborate on the pipeline modification that allowed you to add 5,000 barrels per day of capacity at Albion. Like what exactly got done there? What was the capital efficiency? And then higher level, what other near term debottlenecking opportunities are you seeing at the AOSP or horizon that you're prepared to flag today? Thank you.

Yes, good question. Quite simply, the work that they've done there is just looking at debottlenecking some of the piping that allow the transfer Between the two different upgraders there, there was pumps that the teams had increased the sizing on just modification to certain sizes of piping. So really it was just about ensuring that the teams had the the flows well understood, the engineering part of it understood. Not overly complex, but still step through it very methodically. Making sure that we were making the right moves there. I don't have a capital efficiency number for you. Off the top of my head. But the key to this is they're low capital dollars overall. And you can look at it that 5,000 barrels a day for fifty years. Additional opportunities we'll continue to work on efficiencies and finding tweaks that we can do or creep capacity in both our Horizon and the Albion assets, you saw we had very strong production in the first quarter. Started to ramp up strongly in the fourth quarter as well. I think what you're seeing that is a result of all the good work that our teams have done on implementing the reliability project enhancement and the debottleneck project at Stafford The teams did very good work on that and the results of the work that they did on those projects are turning out to be better than we actually anticipated.

So we're getting strong run rates and we're getting more production through the facility than we originally had the engineering design. For us. So that's a very good positive from a go forward basis here.

Terrific. And then my second question is on the North see We've seen a pretty big shift in focus back to energy security in The U. K. And Europe more generally. And I think there is certainly a growing view that European domestic supply growth becomes a much bigger priority looking forward. You have a very long history in the North Sea. I think everybody understands that. It's a basin with unconstrained market egress. And so my question is, is there any scenario where you would consider building up your position again Or is the most likely scenario still slow wind down of those assets?

Yes, it's a good question. And I think in what we noted and where we're at with the development of the reserves there, we would continue to unwind and abandon the facilities the facilities. That That development in the North Sea has the downward direction in the production has not something new. As you know, there's been significant I would say political regime to move away from oil and gas [indiscernible] probably going to change. I think for our operations in the North Sea, it's probably those decisions were made several years ago potentially have the fiscal regimes been different to five, ten years ago, it might be different for us today. But as we stand today, we're not likely to investing more capital in those areas.

Thanks, Scott. I'll turn it back. Thank you. The next question comes from Roger Read at Wells Fargo.

Yes, thanks. Good morning. Lot of talk on here about incremental investments growth, both things you've done and things you may do just curious how you look at from either a return standpoint or what your breakevens are as you think about these investments Canadian where you've been able to debottleneck, obviously, it's going to be a very low breakeven [indiscernible] actually putting another hole in the ground and looking to produce how does that compare as you look across the various ops?

So Roger, if you're into like a larger project, is that what you mean by your commentary?

No, I would actually keep it within the things you've discussed so far. So not trying to go do something significant, but for the smaller things you've been doing, how should we think about that from call it a $60 $65 oil world, however you want What it's really delivering in terms of bottom line impacts.

Okay. I got you. So really those types of projects like the ones we've done in the past where we get these incremental barrels on a year over year basis. Those are the first projects that you want to look to and because they're going to have the best capital and you already have the infrastructure essentially in place. So you don't change anything from an operating cost perspective in terms of adding cost.

Actually helps your operating costs because most of your costs there are already on a fixed basis, Roger. So all these areas where we're especially in the mines where we're adding incremental barrels or in fact any area in the company where we're adding incremental barrels through facilities It's they're great projects with the best returns because the infrastructure is mostly built.

Yes. Well, I guess, I was just curious, I mean, how do you look at them from a I'm just trying to think about what makes sense here in terms of investment in a, call it a flattish oil outlook it seems like you've got these opportunities. I mean, are they the equivalent to $30 breakevens or $40 or $50 I mean just how do you kind of scale that up?

Yes.

They would make sense at low dollar breakeven like low dollar cost, Roger, think I follow what you're getting at. But But again, because they're they have the best some of the best capital efficiencies you would always want to do those first, Roger.

All right. I'll leave it there. Thanks.

Basically, any investment environment Thank you.

Thank you. The next question comes from John Moio at JPMorgan. Just go ahead.

Hi, good morning. Thanks for taking my question.

So my first one is on the mines, and I think you addressed this a little bit, but They ran a very strong rates in January, February. In context of in the context of your now raised capacity. There's no turnaround in Horizon this year. You do have one at AOS in 2Q, but outside of the scope of turnarounds and of course excluding the impact of the close of the swap, these types of levels be sustained or is there anything seasonal or more non repeatable in those early results?

Yes, they're not seasonal. And I think you just have to look at it. These two months very strong rates, the rates increased from the fourth quarter coming into the first quarter and that is the projects that I talked about at both Scotford and Horizon And so those are definitely strong rates. There was essentially no unplanned downtime to speak of in the past two months. We normally do budget for unplanned downtime on any given month throughout the entire year.

So I would expect that while on the one hand, our teams are going to focus on ensuring they're optimizing the production opportunities as much as they possibly can. We still understand that from time to time, there could be some unplanned downtime due to an unforeseen event. That's budgeted. And so that's likely to happen. I just the good news is I think I look at it as a positive The rates are stronger than we would have anticipated. So even with on time downtime going forward, we're still going to see some very very strong rates coming out of both those mines.

Great.

Thank you. And then my next question is on the Chevron acquisition. With that deal now closed, do you have a better sense or maybe a better sense that you're willing to share of the cash that's available from tax pools and is there a good way for us to think about how that could impact your cash taxes in 2025?

Hi, it's Mark.

We don't guide to sort of tax rules, [indiscernible] the PP and E values of the acquisition. We do generate tax pools And you saw that in Q4 where we're able to climb a full year of tax depreciation in that one quarter. So that'll be go forward, but you'll see it over the full the full year. That's just the difference and that's the the impact to the tax you see in Q4.

Thank you.

You. The next question comes from Neil Mehta at Goldman Sachs. Please go ahead. [indiscernible] Thanks, Tim. So my first question is just on the macro. Obviously, there's a lot of moving pieces around tariffs around WCS. In the '25 presentation, you guys talked about using a $14 planning assumption for WTI WCS which I guess was the strip at the time. And just has anything changed in that world view? How are you thinking about the impacts of tariffs to the extent that there is some durability to them and any perspectives on how much is absorbed by the producer versus the refiners? I just lot of moving pieces around the differential, but you're your perspective on the market would be great. Yes, good question, Neil.

I think what you're seeing in the market today we've seen WCS to Houston change over the past month here. In and around that $4 range. It's narrowed into around 2 to $3 so call it $2.5 It suggests that maybe some of the some of the costs of the tariffs would be passed on through to the consumer in The U. S. On the WCS Hardisty WTI WCS and Hardisty side, We've seen fluctuations. I saw this morning April in and around some sales at 12:50. Over the last couple of days, they're up or what words of $14.50. So there's some fluctuation in Hardisty on that.

So still very fluid in terms of how this is all going to work out.

And it is our view that certainly that The U. S. Consumer is going to end up to absorb the cost of the tariffs, to what degree we're not exactly sure how the market is going to play out. It could be on a shared basis. It could be leaning more towards The U. S. Consumer paying more for it than the producer would.

We'll see how that all balances out. But certainly in our view, we believe it's going to be not all placed back on the Yes. That's helpful. And then then the offset to that could be currency, right, because the CAD is now out to $1.44 So just love your perspective on it. How that can provide an offset? And as you think about as you think about in general, which inning you are in terms of driving your operating cost per barrel lower How much more is there to go as we work our way through the year Yes, another good question. I think we'll see where the dollar goes. It's It's difficult to make a comment at this time. There's There's a lot of political activity driving that. So I think we'll I'll probably just not comment on that. Sorry, the second part of your question was Was just on OpEx per barrel, how much can you drive that lower with and without currency, right?

Yes. Well, I think that one thing you need to remember about Canadian Natural is we already have a very low cost structure. It's one of the key differentiators relative to our peers. We've got a low breakeven low operating costs, low maintenance capital, and significant capital flexibility in our 2025 budget. And so I think that bodes very well. And then you look at say, okay, well half of our production essentially is SCO production. So So it's taking pricing plus or minus WTI. So there's another strength for Canadian Natural. And so if you look at power barrels are marketed and most of our barrels are marketed here in Canada with the exception of 87,500 barrels a day. That's that we carry down Flanagan and Keystone and then of course the $169 barrels per day that we move to the West Coast, which is basically isolated from the tariffs. So most of our barrels of pretty much sold here.

In Alberta as well. So [indiscernible] dependent on WCS pricing certainly. But the underlying or the underpinning factor Canadian Natural is our low cost structure And I just want to make sure that that message is well understood. We've had we get superior netbacks and that low cost structure has helped us through the previous times such as COVID where we're able to work with our vendors when oil pricing dipped weight rate down at into the low single digits. Certainly, the cost of services dropped at that time. And so we were able to work with our vendors for a short period of time to work through that. We came out of that very strong. But again, it's on the back of the fact we have a low cost and very sustainable operating cost platform across all of our assets, both on the Nafigat side and especially on the oil sands mining side. [indiscernible] That's very clear. To Mark and Victor.

Thank you. Thank you.

Thank you. The next question comes from Eric Busslinger at UER.

Hi, gentlemen. Great quarter and results into this first part of the year. Just following up on the Jack Pine mine potential expansion, 100,000 barrels a day.

One is what's the limiting factor in sanctioning that tomorrow? [indiscernible] two, is that included in your base reserves for 2024?

So in terms of the The decision to go ahead with something like that. We've got the great thing about us is we have ample opportunity for for organic growth. The challenging thing in Canada is getting approval for large projects. The Jackfish sorry, the Jack Pine Mine expansion already has that approval in place. So we could build that out over time here. And our capital allocation model. I think it's a great tool to have in our tool chest here, When we do the project, if and when we do the projects, we'll talk more about that over time. But certainly, we're in an advantageous position here to be able to do a project of magnitude of of that size. So So all depends on our outlook for pricing for egress for carbon capture. So there's a number of factors that are going to go into making that decision because they are as you know, you build 100,000 or 150,000 barrel aged project project in the mine and it's going to run for forty to fifty years.

Thank you. We have no further questions. I will turn the call back over to management for closing comments.

Thank you, operator, and thanks everyone for joining us this morning. If you have any questions, please give us a call. Thanks and have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.