April 21, 2004
IPAA 10th Annual
Oil and Gas Investment Symposium
The Premium Value,
Defined Growth Independent
Agenda
• Who is Canadian Natural?
• Why own Canadian Natural?
• Company overview
• Strategy
• Operations
• North America
• North Sea
• Offshore West Africa
• Financials
• Investment recap
CNQ
TSX/NYSE
The Premium Value,
Defined Growth Independent
Who is
Canadian Natural?
CNQ
TSX/NYSE
The Premium Value,
Defined Growth Independent
Who is Canadian Natural?
• Canadian based E&P company
with international exposure
• Canada
• North Sea
• Offshore West Africa
• Significant exposure to North
American natural gas
• Measured approach to growth
and investments
Production mix (2004E)
North Sea
13%
• Focused on creating long-term
shareholder wealth
Canada
84%
• US $9.4 billion enterprise value
Source: Corporate reports
CNQ
TSX/NYSE
The Premium Value,
Defined Growth Independent
Offshore West Africa
3%
Who is Canadian Natural?
500
459
450
421
400
350
359
306
300
250
175 188
200
150
100
50
20
36
53
68
TSX/NYSE
Consistent History of Value Creation
2004B
2003
2002
2001
2000
1999
1998
1997
1996
1995
0
Source: Corporate reports
CNQ
207
120
1994
• Canadian Natural has delivered a
decade of production growth
(mboe/d - gross, 6:1)
1993
• Exploitation
• Canadian heavy oil
• UK North Sea
• Exploration
• Ladyfern
• Baobab
• Opportunistic acquisitions
• Rio Alto (2002)
• Ranger Oil (2000)
• BP assets (1999)
• Sceptre (1996)
Production History
1992
• Consistent value creation through
successful
Who is Canadian Natural?
• Consistent growth in
reserves over the last
decade through
Reserve History
(mmboe gross proved, 6:1)
1,800
• Exploitation
1,600
• Exploration
1,400
• Acquisitions
1,200
• 100% of reserves
subject to independent
evaluation (Sproule)
1,496 1,526
1,201
1,000
1,245
918
800
559
600
605
409
400
200
140
192 207
Source: Corporate reports
CNQ
TSX/NYSE
Solid, Credible Reserves
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
-
Why Own
Canadian Natural?
CNQ
TSX/NYSE
The Premium Value,
Defined Growth Independent
Why Own Canadian Natural?
• Balanced product mix
• Large independent producer
• Significant exposure to North American natural gas
• Low cost competitive advantage
• Track record of value creation
• Proven/committed management
• Winning strategy - defined plan
CNQ
TSX/NYSE
The Premium Value,
Defined Growth Independent
Balanced Product Mix
• Lower risk approach through
product diversification
Net Production Mix
Q4/03
• Significant exposure to North
American natural gas market
40%
60%
Peer Group Comparison
Net production mix
Net Production Mix (Q4/03)
72%
64%
63%
63%
55%
36%
37%
37%
45%
28%
EOG
BR
ECA
DVN
APC
North American
natural
gas
Other
Prod'n
CNQ
TSX/NYSE
Low Risk, Balanced Product Mix
38%
32%
26%
23%
40%
62%
68%
74%
77%
60%
CNQ
APA
TLM
UCL
NXY
Liquids
Nor
Am and
GasInternational natural gas
Large Independent Producer
• Canadian Natural
ranks as the 7th
largest independent
E&P company based
on total current
production
Net Production – Q4/03
(mmboe/d)
800
714
700
624
600
536
500
454
449
420
400
397
353
264
300
200
178
193
NXY
EOG
100
0
ECA
CNQ
TSX/NYSE
DVN
Large Scale Operations
that Drive Economies of Scale
APC
BR
APA
UCL
CNQ
TLM
KMG
Significant Exposure to NA Natural Gas
•
•
•
•
Second largest producer in Canada
Sixth largest independent producer in North America
High leverage per dollar invested due to low multiple
5% per annum targeted future growth
CNQ
TSX/NYSE
Significant Leverage to
North American Natural Gas
Low-cost Competitive Advantage
• Canadian Natural’s
operating and
administrative costs
rank among the
lowest of its peers
• Low cost production
is a key competitive
advantage
• Winning strategy
in a commodities
business
2002 Total Cost Peer Comparison
(C$/boe - net)
30
25
20
15
10
5
0
KMG
OEI
APC
Source: FirstEnergy Capital Corp.
CNQ
TSX/NYSE
Low Cost Advantage
Drives Long-term Performance
DVN
NXY
Op Costs/G&A
BR
APA
F&D
TLM
Interest
CNQ
ECA
EOG
Track Record of Value Creation
• Share price CAGR of 20%
from 1992 to Dec 2003
• Current annual dividend of
C$0.80
• Listed on the NYSE and
the TSX
(C$)
$80
$70
CNQ share price (C$)
• Market cap. increased
from C$1.6 billion in 1992
to >C$10 billion in 2004
Monthly Closing Share Price
$60
$50
$40
$30
$20
$10
Source: Bloomberg
CNQ
TSX/NYSE
Compelling Long-term
Returns to our Shareholders
J-04
J-03
J-02
J-01
J-00
J-99
J-98
J-97
J-96
J-95
J-94
Prices adjusted to reflect June 1993 stock split.
J-93
Note:
J-92
$0
Shareholder Return
• TSR equals
capital gain and
dividend return
on investment.
Total Shareholder Return Dec. 31, 2002 to Dec. 31, 2003
Total Shareholder Return (US$) - 2003
100%
80%
CNQ
NXY
60%
40%
TLM
APA
BR
PXD
20%
Note:
Dividends paid are assumed to be
reinvested in shares of the company at the
price on the ex-dividend date.
CNQ
TSX/NYSE
0%
Compelling Returns to our Shareholders
ECA
DVN
UCL
KMG
APC
Committed Management
• Substantial
management and
director wealth at
stake
• Strong motivation for
management to
perform
• Delivers alignment
with shareholder
interests
Note:
Based on share ownership data and priced at
March 31, 2004.
Source:
Computershare Analytics for US issuers.
SEDI.ca for Canadian Issuers.
CNQ
TSX/NYSE
Management and Directors Stock Ownership
(US$ millions)
400
$352
350
300
250
200
150
$101 $99 $98
100
$79
$27 $22 $16
50
$7
$6
0
CNQ DVN APA APC ECA UCL EOG BR TLM NXY
Clear Alignment
with Shareholder Interests
Company Overview:
Strategy
CNQ
TSX/NYSE
The Premium Value,
Defined Growth Independent
Objectives Defined
• Value creation on “per share” basis
• Production
• Reserves
• Cash flow
• Net asset value
• Returns on employed capital
• Before future tax
• EBITDA
CNQ
TSX/NYSE
Our Goal is 10% p.a.
Rolling Average Value Growth
Our Strategy
• Capital allocation to maximize value
• Defined growth/value enhancement plans by product/basin
• Balance
• Products
• Project time horizons
• Acquisitions/exploration with exploitation focus
• Financial
• Opportunistic acquisitions
• Control costs through area knowledge and domination of core
focus areas
CNQ
TSX/NYSE
A Proven, Effective Strategy
Company Overview:
Operations Defined Plan
CNQ
TSX/NYSE
The Premium Value,
Defined Growth Independent
Overview of Global Operations
Canada
Liquids
Gas
2004E Production (mboe/d) 196-208 215-225
2003 Proved Reserves (mmboe) 672
501
BOE % of Total
411-433
84%
1,173
77%
North Sea
Liquids
2004E Production (mboe/d)
55-60
2003 Proved Reserves (mmboe) 222
Offshore West Africa
Liquids Gas
2004E Production (mboe/d)
12-15 1-2
2003 Proved Reserves (mmboe) 106
14
CNQ
TSX/NYSE
BOE % of Total
13-17
3%
120
8%
Canadian Asset Base
with Selected International Exposure
Gas
4-6
11
BOE % of Total
59-66
13%
233
15%
All amounts before royalties
North American Overview
• One of North America’s largest
natural gas producers
•
•
•
•
BC
>3 Tcf of proved natural gas reserves
~1.3 bcf/d of production
5% growth p.a.
2 highly prospective regions
N.A. Production History
(mboe/d, 6:1)
400
370
287
300
175
20
0
36
53
188
TSX/NYSE
N AB
456 mmcf/d
162.0 mbbl/d
SE SK
3 mmcf/d
9.5 mbbl/d
318
• Strong position in oil & liquids
207
• >670 mmbbl of proved reserves
• ~200 mbbl/d of production
68
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
CNQ
NW AB
249 mmcf/d
10.2 mbbl/d
SK
382
120
100
AB
S AB
146 mmcf/d
10.7 mbbl/d
500
200
NE BC
365 mmcf/d
7.4 mbbl/d
2004B
Significant North American Natural Gas Exposure
North American Natural Gas Future Plan
• Near-Term
• Drill approximately 700-900 natural gas wells p.a. in four core areas
• ~6% average or ~8% entry to exit growth in 2004
• Mid-Term
• Growth from two highly prospective areas
• Northeast B.C.
• Northwest Alberta
• Long-Term
• Deep exploration - Northeast B.C., Northwest Alberta
CNQ
TSX/NYSE
5% Growth in
North American Natural Gas after 2003
Natural Gas Growth Prospects
Northwest Alberta
BC
AB
• 1.8 million acres of net undeveloped
land
• 26 facilities/1,800 mi pipe
• Average decline 26%
• 800-900 expected future locations
• New reserve potential, next 5 years
• Cardium targets
• > 0.5 Tcf potential
• Deep and conventional targets
• 0.8 – 1.0 Tcf potential
CNQ
TSX/NYSE
Targets are Becoming More Defined and
Costs are Dropping
SK
Natural Gas Growth Prospects
Northeast B.C.
BC
AB
• 1.5 million acres of net undeveloped
land
• 72 facilities/2,000 mi pipe
• Average decline 21%
• 700 – 1,000 expected locations
• New reserve potential, next 5 years
• Helmet ~ 0.75 Tcf potential
• Fort St. John ~0.4 Tcf potential
• Foothills - deep potential
CNQ
TSX/NYSE
Resource Potential has Increased Over Prior Year
SK
North American Liquids Future Plan
• Near-Term
• Primary heavy oil drilling
• Pelican Lake emulsion / waterflood
• High pressure steam at Primrose
• Work to expand heavy oil markets
• Mid/Long-Term
• Approximately 3 billion barrels of recoverable resource potential
• Primrose, Gregoire Lake, and Horizon in-situ projects
• Pelican Lake enhanced oil recovery scheme
• Conventional heavy oil
CNQ
TSX/NYSE
Decades of Production Inventory in N.A. Liquids
Acquisition of North Alberta Properties
Edmonton
Calgary
Regina
• Land base integrates well with
existing Canadian Natural land
• Acquisition fits with operating and
marketing strategy
• Daily production
• 27,500 bbl/d heavy oil
• 9 mmcf/d natural gas
• Royalty interests – 1,500 boe/d
• C$467 million
CNQ
TSX/NYSE
204 Miles
CNQ Land
A Complementary Asset Base, Easily Integrated
Petrovera Land
Three Pronged Crude Oil Marketing Strategy
• Support / participate pipeline additions
• Support / participate in projects to add conversion capacity
• Displace medium sour crude from PADD II
• Blend crudes to yield similar product slate
• Compete for ~1 mmbbl/d refinery demand
• No Significant capital outlay required by buyer or seller
CNQ
TSX/NYSE
A Multi-faceted, Simple Strategy will Help Unlock
Heavy Oil Value
Customer Focus Strategy
Synthetic
Light Ends
Naphtha
Distillate
VGO
Resid
Synthetic – Bitumen Synergy
3%
26%
38%
2%
33%
24%
Athabasca
Bitumen
3%
13%
23%
38%
25%
17%
32%
23%
VS.
12%
40%
48%
CNQ
TSX/NYSE
50% Synthetic
50% Bitumen
USGC Medium
Sour Crude
A New Blend to Challenge Existing Products
Chicago Synbit Value (US $/bbl)
Historic Strategy – Heavy Oil Domination of PADD II
LLB
(Dil/Bit)
COND
+
$ 26.70
25%
COND
Bitumen
75%
Bitumen
$ 14.70
$ 17.70
Maya
$ 19.50
$1.80 discount
Future Strategy – Synbit Market Development
Syn/Bit
SCO
$ 23.78
+
Bitumen
$ 14.70
Note: Based on US$23 WTI, transportation adjusted to Chicago
CNQ
TSX/NYSE
50%
SCO
USGC
Medium
Sour
50%
Bitumen
$ 19.24
$ 20.95
$1.71 discount
Replicate Strategy Used to Capture Heavy Oil
Markets
Horizon Oil Sands Project Overview
• Resources
• 6 billion bbl recoverable oil
(unbooked)
• Production
• 2008
113,400 bbl/d SCO
• 2010
154,800 bbl/d SCO
• 2012
232,200 bbl/d SCO
• Project IRR 15.1%
(after tax/royalty)
SHELL
CNQ
HORIZON
SYNCRUDE
AURORA
SHELL MUSKEG
SUNCOR
FIREBAG
SYNCRUDE
AURORA
SYNCRUDE
MILDRED LAKE
• 100% owned and operated
MILLENNIUM
SUNCOR
CNQ
TSX/NYSE
Vast, Long-Term Growth Opportunity
Project Economics
Before Tax
IRR
NPV 8 (millions)
NPV 10 (millions)
After Tax
IRR
NPV 8 (millions)
NPV 10 (millions)
16.1%
$ 8,348
$ 4,755
15.1%
$ 5,328
$ 2,917
Sensitivity to WTI pricing (US $)
Project breakeven (capital paid back)
Project 8% return (after tax)
Project 10% return (after tax)
Based upon:
US$23.00
WTI forecast
US$0.92
SCO penetration discount (from WTI)
C$4.66
per GJ
Natural gas ($ 4.00 NYMEX)
C$42.90 per MW
Power (for imported amounts)
0.735
Currency exchange (US$ : C$)
2.5 %
Escalation per year
CNQ
TSX/NYSE
Robust Economics
$
$
$
13.30
16.10
17.50
Sensitivity Analysis On Project Economics
US$26
WTI
US$20
Capital
Increase $ 1 billion
Prod
@ 209/d
C$
C$ = 0.765 US$
Decrease $ 1 billion
@ 255/d
C$ = 0.705 US$
$ 11.36 per bbl SCO
Op Costs $ 13.36 per bbl SCO
Nat Gas
$ 3.66 per GJ
$ 5.66 per GJ
12.0%
13.0%
14.0%
15.0%
16.0%
Internal Rate of Return
CNQ
TSX/NYSE
17.0%
18.0%
Execution Strategy – Construction Plan
• Front end engineering & design (complete before proceeding)
• Benchmarking (and lessons learned)
• Labour strategy
• Managed Open Site (maximize access to key resources)
• Manageable pieces (accountability)
• Canadian Natural managing contractor
• Do not contract out commercial decisions
• Selective application of standardization
• Project integration and coordination of interfaces
CNQ
TSX/NYSE
Prudent, Disciplined Approach
Execution Strategy – Financing Plan
• Phase I financing requirements of C$4.9 billion
• Principles
• Maximize ownership while maintaining credit ratings
• No equity dilution
• Financing tools
• Cash flow with hedge protection
• Business partners
• Debt capital markets and bank financing
• Project equity partner, if required
• Phase I will generate sufficient cash flow to finance
Phases II and III
CNQ
TSX/NYSE
A Prudent Approach
Financing Phase I of Horizon
2004 - 2008
Cash flow in excess of conventional capital
requirements ($0.2 to $0.5 billion annually)
Financial hedge program
Bank financing - Horizon credit facility
Balance sheet growth capacity
Business partners
Total source of funds
CNQ
TSX/NYSE
Over $6.5 Billion of Financing Sources
Identified for $4.9 Billion Requirement
$ 1.0 - 2.5
TBD
1.5
1.5
2.4
$ 6.4 – 7.9
International Plan Defined
• Near/Mid/Long-term - North Sea
• Exploitation opportunities
• Control core assets
• Add value via cost reduction
• Acquisition opportunities
• Near/Mid/Long-term - Offshore West Africa
• Continue Espoir development
• Develop Baobab for 2005 production
• Explore satellites
• High impact light oil exploration in Angola
CNQ
TSX/NYSE
Targeting >100,000
Barrels per Day by End of 2005
North Sea
• ~60,000 boe/d
Murchison Hub
• Exploitation base similar to WCSB
• Operate ~99% and own ~80% of
production
Northern
North Sea
Ninian Hub
• 2004 Plans
• Drill 13 wells
• Banff gas reinjection
• Kyle tie back to Banff
Banff /Kyle
Central
North Sea
CNQ
TSX/NYSE
Deliver Value Creation through Cost Control
Côte d’Ivoire
• Area of light oil growth
• Espoir development upside
Côte d’Ivoire
• Acajou delineation
• West Espoir development
CI-26
CI-27
• Baobab development
• First oil mid-2005
• Net production of ~24,000
bbl/d ramping to ~35,000 bbl/d
• Development drilling underway
• FPSO and infrastructure under
construction
FPSO Ivorien
PANTHERE
FOXTROT
West Espoir
East Espoir
LION
Acajou
MANTRA
CI-103
Baobab
Atlantic Ocean
TSX/NYSE
Kossipo
CI- 40
CI-400
CNQ
Abidjan
A Decade of Growth Prospects
Oil Field
Gas Field
Prospect
CNR Lands
Angola
• High risk / high
impact addition to
our portfolio
14
• One prospect
drilled in 2003
• A second prospect
to be drilled early
2005
Kizomba
Pluto 15
Northern
ultra-deep
West
BLOCK 16
31
Angola
1
2
16
16
Rosa Lirio
32
3
Girassol/
Dalia
4
17
Omba
18
33
5
34
• Excellent
relationships with
government
agencies
19
Zenza
20
7
WI 50%
21
22
CNQ
TSX/NYSE
6
High Impact / High Risk Exploration
8
Company Overview:
Financials
CNQ
TSX/NYSE
The Premium Value,
Defined Growth Independent
A History of Value Creation
Daily Production Before Royalties Per 1,000 Shares
Proved and Probable Reserves per Share, Before
Royalties
Daily Production per 1,000 shares
Reserves per share
(boe)
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
BOED
BOED
(boe/d)
1995 1996 1997 1998 1999 2000 2001 2002 2003
Cash Flow
Per Share
Gas
Oil
Cash Flow per share
$25
18
16
14
12
10
8
6
4
2
0
1995 1996 1997 1998 1999 2000 2001 2002 2003
Pre-Tax Net Asset
Value
per Share
Gas
Oil
Gas
Oil
Pretax Net Asset Value per share
$120
$100
$80
$60
$40
$20
$0
$20
$15
$10
$5
$0
1995 1996 1997 1998 1999 2000 2001 2002 2003
Actual
34% CAGR
CNQ
TSX/NYSE
Consistent Growth
1995 1996 1997 1998 1999 2000 2001 2002 2003
Actual
23% CAGR
Future Growth – Current Dev’t Projects
(mboe/d)
800
700
600
500
400
300
200
100
0
2002
Base
NA Heavy
CNQ
TSX/NYSE
2003
2004
NA Gas Growth
Primrose
2007
Baobab
Horizon
2008
W Espoir
A Well Defined, Controlled Path to Future Growth
Guidance
2004E
2003
Production
Natural gas (mmcf/d) 1,320 – 1,395
Oil and liquids (mbbl/d)
263 - 283
1,299
242.4
Financial ($ millions)
Cash flow(1)
(1) 2004 based upon the following
price assumptions:
Earnings(1)
WTI (US$/bbl)
26.00
Capital expenditures
NYMEX (US$/mcf)
5.00
Heavy oil diff (US$/bbl)
C$/US$
2,600 – 2,750
780 - 825
2,750 – 2,950
8.50
0.75
For further guidance please see
Canadian Natural’s website.
CNQ
TSX/NYSE
Current Strip Pricing Yields 3.0 - 3.2 billion
of Cash Flow
3,160
1,407
2,506
Financial Strength
• Strong debt ratings (Baa1, BBB+, BBB(high))
• History of balance sheet management
• Ratio objectives
• Debt to EBITDA (1.5-2.0x)
• Debt to Capitalization (40-45%)
• Return on Capital Employed (10%+)
• Exploitation of recent acquisitions will lift returns
• Cash Flow on Capital Employed (20%+)
• Conservative accounting and reserves policies
CNQ
TSX/NYSE
Capability to Support Future Growth
Wrap Up – The Canadian Natural Story
• Attractive stock price based upon base E&P metrics
• Debt-adjusted cash flow per share multiple
• Enterprise value per flowing barrel
• Strong growth profile
• History of growth
• Strong inventory supporting future growth
• Strong and clean balance sheet
CNQ
TSX/NYSE
Wrap Up – The Canadian Natural Story
• NA natural gas asset base is strong and delivering
• NW AB and NE BC drive the growth
• NA conventional oil asset base is vast
• 3 billion bbl to develop
• Defined marketing strategy
• North Sea is performing as we utilize mature basin expertise
• Anticipate future acquisition opportunities
• Offshore West Africa provides larger, high ROCE projects
• Strategically positioned for additional opportunities
CNQ
TSX/NYSE
A Recipe for Success
Wrap Up – The Canadian Natural Story (cont’d)
• Horizon, a world class project adds significant value
•
•
•
•
•
Financial plan identified
High degree of project definition
High degree of definition in execution strategy
High caliber, experienced team
Overall execution risk minimized
• Strong balance sheet, with access to capital markets
• Management philosophy / structure equipped to handle
Horizon, Canada and International without losing focus
• Cost control culture – a low cost and focused producer
• Proven, committed management team
CNQ
TSX/NYSE
A Recipe for Success
Forward-Looking Statements
Certain statements in this document or incorporated herein by reference may constitute “forward-looking statements” within the meaning of the United
States Private 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 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 affecting revenues and expenses. The
impact of any one factor on a particular forward-looking statement is not determinable with certainty as such factors are interdependent 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 “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.
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 by these cautionary statements. The Company
assumes no obligation to update forward-looking statements should circumstances or management’s estimates or opinions change.
CNQ
TSX/NYSE