Canadian Natural Resources Q1 2026 Earnings Report

Canadian Natural Resources EPS Results

• Actual EPS: $0.85
• Consensus EPS: $0.74
• Beat/Miss: Beat by +$0.11
• One Year Ago EPS: $1.16

Canadian Natural Resources Revenue Results

• Actual Revenue: $7.72 billion
• Expected Revenue: $7.57 billion
• Beat/Miss: Beat by +$150.46 million
• YoY Revenue Growth: N/A

Canadian Natural Resources Announcement Details

• Quarter: Q1 2026
• Date: 5/7/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, May 7, 2026
• Conference Call Time: 9:00AM ET

Canadian Natural Resources (NYSE:CNQ) (NYSE: CNQ) is a Calgary-based independent oil and natural gas exploration and production company. Established in the early 1970s and publicly listed in Canada and the United States, the company is principally engaged in the exploration, development, production, and marketing of crude oil, natural gas and natural gas liquids. Its asset base spans conventional and unconventional reservoirs and includes oil sands mining and in-situ thermal projects, midstream processing and upgrading capacity, and related field operations.

The company’s operations are concentrated in Western Canada, where it develops heavy crude, bitumen from oil sands and conventional light crude and natural gas resources. Canadian Natural is known for large-scale oil sands mining and bitumen upgrading projects as well as steam-assisted gravity drainage (SAGD) in-situ developments. In addition to its Canadian portfolio, the company maintains international producing and exploration interests, supporting a diversified operational footprint and a range of production types across multiple basins.

Canadian Natural’s business model covers the full upstream cycle from exploration and reservoir development to production, processing and sales, supported by technical and operations teams focused on cost control and long-life inventory. The company is publicly traded and reports under Canadian regulatory standards; corporate governance and executive leadership are disclosed in its annual and regulatory filings. Its combination of oil sands assets, conventional production and international interests positions it as one of Canada’s larger independent energy producers.

Canadian Natural Resources Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record Q1 production and a sustained SCO premium drove very strong netbacks and free cash flow — Q1 production averaged ~1,643,000 BOE/d with liquids ~1,198,000 bpd and SCO forward premium ~US$5.70/bbl for the remainder of 2026.
• Positive Sentiment: Robust financial results and shareholder returns — adjusted net earnings of CAD 2.4B and adjusted funds flow of CAD 4.4B; net debt fell below CAD 16B, the board set a 75% of FCF payout target, and CAD 360M of buybacks were completed since March 31 (annualized dividend CAD 2.50).
• Positive Sentiment: Execution on growth projects — Jackfish exceeded nameplate (averaged ~134,000 bpd) with Pike One pads producing ~41,000 bpd and management advancing FEED/long‑lead procurement for a 30kbd Jackfish expansion and 70kbd Pike 2.
• Negative Sentiment: Larger oil‑sands mining expansion remains contingent on long‑term egress, regulatory and fiscal frameworks (MoU) and pipeline capacity; management says resolving these constraints is required before committing to major mining growth.

Presentation

[Operator]

Good morning. We would like to welcome everyone to Canadian Natural's 2026 First Quarter Earnings Conference Call and Webcast. After the presentation, we will conduct a question-and-answer session. Instructions will be given at that time. Please note that this call is being recorded today, May 7, 2026, at 7:00 A.M. Mountain Time. I would now like to turn the meeting over to your host for today's call, Lance Casson, Manager of Investor Relations. Please go ahead.

[Lance Casson, Manager of Investor Relations at Canadian Natural Resources]

Good morning, everyone, and thank you for joining Canadian Natural's 2026 first quarter results conference call. Before we begin, I'd like to remind of our forward-looking statements, and it should be noted that in our reporting disclosures, everything is in Canadian dollars unless otherwise stated, and we report our reserves and production before royalties. I'd suggest you review the advisory section in our financial statements that include comments on non-GAAP disclosures. Speaking on today's call will be Scott Stauth, our President, and Victor Darel, our Chief Financial Officer. In the room with us this morning is Robin Zabek, COO of E&P, and Jay Froc, COO of Oil Sands. Scott will first run through our operational highlights that once again includes production records in the quarter.

[Lance Casson, Manager of Investor Relations at Canadian Natural Resources]

Victor will then summarize our strong financial results and our significant returns to shareholders year to date that includes an increased pace to our share buybacks. To close, Scott will summarize prior to opening up the line for questions. Over to you, Scott.

[Scott Stauth, President at Canadian Natural Resources]

Thank you, Lance. Good morning, everyone. We have a long track record of being an effective and efficient operator while consistently delivering top-tier operational and financial performance through a relentless focus on continuous improvement. Quarterly production averaged approximately 1,643,000 BOEs in Q1 2026, which included total quarterly liquids production of approximately 1,198,000 barrels per day, 66% of which was SCO, Light Crude Oil, and NGLs. Production in Q1 delivered year-over-year growth of approximately 64% or 61,000 BOEs per day from Q1 2025 levels, whereas quarterly liquids production of approximately 1,198,000 barrels per day was an increase of 24,000 barrels per day or 2% from Q1 2025 levels. Quarterly production levels in Q1 2026 included the following production records.

[Scott Stauth, President at Canadian Natural Resources]

Record quarterly North American E&P liquids production of approximately 773,000 BOEs per day, which includes record liquids production of 329,000 barrels per day and record natural gas production of 2.668 Bcf per day. Record quarterly production at Jackfish of approximately 134,000 barrels per day. As a result of strong production volumes combined with robust netbacks, we have reduced our net debt below CAD 16 billion as of the end of April 2026, which resulted in targeted shareholder returns increasing to 75% of free cash flow on a forward-looking basis, as evidenced by a robust share repurchases of approximately CAD 360 million since March 31st.

[Scott Stauth, President at Canadian Natural Resources]

In April, at our world-class oil sands mining upgrading assets, we achieved strong monthly production of approximately 630,000 barrels per day, or approximately 52% of Q1 2026 liquids production, resulting in upgraded utilization of 106%. These strong production volumes are high value with strong SCO prices at a premium to WTI, averaging approximately US$5.70 per barrel on the forward strip for the remainder of 2026, generating significant free cash flow. As a result of industry-leading operating costs, increased commodity prices, combined with the SCO premium, our net backs are very strong. Put simply, the cash flow generation from oil sands mining and upgrading assets is significant and best in class.

[Scott Stauth, President at Canadian Natural Resources]

As mentioned, Jackfish production has been strong as a result of new Pike pad at Pike 1 which came on in late Q4 2025. The second new pad at Pike 1 came on production in late March 2026 and continues to ramp up. Current combined production from the two new pads at Pike 1 is approximately 41,000 barrels per day and continues to exceed expectations with an SOR approximately 1.8. As a result of strong performance from these Pike 1 pads and through facility optimizations, including pipeline interconnectivity and debottlenecking, Jackfish exceeded its facility nameplate capacity of 120,000 barrels per day by approximately 14,000 barrels per day on the average in Q1. Another example of Canadian Natural's continued and consistent focus on delivering results through strong execution.

[Scott Stauth, President at Canadian Natural Resources]

Additionally, as part of our defined medium growth strategy in thermal in-situ, we are progressing front-end engineering in 2026, including the balancing long lead equipment items on the 30,000-barrel-per-day Jackfish expansion project and the 70,000-barrel-per-day Pike 2 growth project. We remain focused on executing our prudent and efficient 2026 capital program as outlined in our updated 2026 guidance previously released in March. We continue our short and medium-term growth plans across our top-tier asset base. Our ability to effectively allocate capital across our strong asset base provides us with a unique competitive advantage, and when combined with accretive acquisitions, creates significant long-term value for our shareholders. Now I will turn it over to Victor for our first quarter financial review.

[Victor Darel, Chief Financial Officer at Canadian Natural Resources]

Thanks, Scott. Good morning, everyone. The first quarter of 2026 delivered strong financial results reflecting consistent execution in our operations, our high-quality diverse asset base, and disciplined capital allocation framework. These were further supported by strengthening prices for our products during the quarter. In Q1, we generated adjusted net earnings of CAD 2.4 billion or CAD 1.17 per share and adjusted funds flow of CAD 4.4 billion or CAD 2.10 per share. These results demonstrate the significant cash generating capability of our diverse, long life, low decline asset base supported by industry-leading cost performance across our operations. Net earnings for the quarter were approximately CAD 1.3 billion, reflecting strong operational earnings and certain non-cash items, including impacts related to long-term LNG agreement, translation of US dollar debt, and higher share-based compensation expense driven by appreciation of the company's share price in the quarter.

[Victor Darel, Chief Financial Officer at Canadian Natural Resources]

Our free cash flow generation in the quarter allowed us to continue delivering meaningful shareholder returns, during which we returned approximately CAD 1.5 billion directly to shareholders in the quarter, including CAD 1.2 billion in dividends and CAD 300 million through share repurchases, which we manage prudently on a forward-looking annual basis. As announced previously in March, the board increased our quarterly dividend, bringing the annualized dividend to CAD 2.50 per common share and marking 26 consecutive years of dividend increases with a compound annual growth rate of 20%. This dividend track record reflects the sustainability of our business model, the strength of our balance sheet, and the durability of our assets.

[Victor Darel, Chief Financial Officer at Canadian Natural Resources]

With these results, the board has approved a quarterly dividend of CAD 0.625 per common share, payable on July 7, 2026 to shareholders of record at the close of business on June 19, 2026. Subsequent to quarter end, strong operating performance combined with robust netbacks allowed us to continue to accelerate debt reduction and share buybacks. As a result, buybacks from April 1 to May 5 increased, as Scott mentioned, to approximately CAD 360 million, with direct returns to shareholders in the form of dividends and share buybacks for the year to date of approximately CAD 3.2 billion. Looking forward, we remain focused on disciplined execution of our capital program while continuing to prioritize balance sheet strength and shareholder returns.

[Victor Darel, Chief Financial Officer at Canadian Natural Resources]

With our high-quality production mix, strong cost structure, and substantial free cash flow at current strip pricing, our next targeted debt level of CAD 13 billion is approaching, at which time we increase shareholder returns to 100% of free cash flow. Our balance sheet is strong, liquidity equally so, supported by internally generated cash flow and undrawn credit facilities, providing us with ongoing financial flexibility to deliver shareholder returns, drive resource value growth, and deliver on strategic growth opportunities, as demonstrated by the accretive acquisition we did here early in Q1 of this year. Overall, our first quarter results reinforce the competitive advantages of Canadian Natural: scale, asset base, cost leadership, and a clear framework for capital allocation that supports long-term value creation for shareholders, all of which look to be strengthening into the second quarter of 2026. Thank you.

[Victor Darel, Chief Financial Officer at Canadian Natural Resources]

With that, I'll turn it back to you, Scott.

[Scott Stauth, President at Canadian Natural Resources]

Thanks, Victor. In summary, our relentless focus on continuous improvement, combined with effective and efficient operations, has driven strong performance so far in 2026. Our ability to effectively allocate capital across our strong asset base provides us with a competitive advantage. This ability, combined with accretive acquisitions, creates significant long-term value for our shareholders. Our culture of accountability through strong shareholder alignment as everyone at Canadian Natural is an owner, combined with our portfolio of world-class assets, creates a unique advantages that result in lower operating costs, which maximizes our netbacks and free cash flow generation. Before I turn it over for questions, I wanted to note that the recent press release provided by the Oil Sands Alliance regarding competitiveness.

[Scott Stauth, President at Canadian Natural Resources]

We are committed to work together with the provincial and federal governments with the goal of achieving a fiscal competitive MoU framework that will attract capital investment to grow the Oil Sands. At Canadian Natural, we are prepared to do our part and grow production, create more high-paying jobs, and help this country achieve its potential for economic prosperity. We have a good chance of achieving this if we are competitive, which means investment dollars must return value that is better than investment alternatives in other countries. As noted in the Oil Sands Alliance press release, we stand ready to roll up our sleeves and work with Canada and Alberta to make this happen. With that, I'll turn it over to questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from the line of Doug Leggate from Wolfe Research. Please go ahead.

[Doug Leggate, Managing Director and Senior Research Analyst at Wolfe Research]

Thanks. Good morning. Scott, thanks for your comments, especially that last comment. I wonder if I could just pick up on that and go back to your, excuse me, your strategy presentation from last year. You laid out that you've got a couple of, you know, large growth opportunities that are still currently on hold. The macro environment has changed materially since then, obviously. You also have this, to your, to your point over carbon pricing, I guess with, really more about the Oil Sands Alliance position as opposed to your position.

[Doug Leggate, Managing Director and Senior Research Analyst at Wolfe Research]

I guess my question is, what would it take, given the combination of, you know, changes, especially around the macro, to get you to basically give the green light to some of those growth developments?

[Scott Stauth, President at Canadian Natural Resources]

Yeah. Doug, I think it's continued with the messaging that we have been talking about for some time now. In order to expand the growth and have growth in Oil Sands operations, we need to be able to have the egress capacity long-term to do so. As you know, Doug, there's significant upside for volume development in Oil Sands, we need a regulatory framework and a fiscal framework that will allow us to enact on that capacity to grow those volumes. Over a very long period of time of a decade or so in Canada, we have not had the environment regulatory-wise to be able to do so.

[Scott Stauth, President at Canadian Natural Resources]

We're hopeful that through the MoU and working together with the rest of the oil sands members and both levels of government, that we can come to terms on an agreement that will work and bring those investment dollars towards those long-term projects. We're hopeful that we'll be able to do that in short order here, Doug.

[Doug Leggate, Managing Director and Senior Research Analyst at Wolfe Research]

Very clear, and I hope folks are listening. My follow-up very quickly is on the dividend. I guess the cash return strategy generally. There's always a risk or perception in this business of pro-cyclical buybacks, especially when you're about to breach your debt thresholds to give 100% back to shareholders. You also have the lowest dividend break even, not just in Canada, but in the industry. What would it take for you to pivot more towards more meaningful and more frequent dividend bumps as opposed to focusing on what might be perceived as pro-cyclical buybacks? I'll leave it there. Thank you.

[Scott Stauth, President at Canadian Natural Resources]

Thanks, Doug. You know what? I think it's important to ensure that we have the capacity to be able to do both buybacks and also continue on with our 26th year of growth of our annual dividends. Both of those are meaningful to our investors, and so we're trying to find a balance that works for all of our shareholders and one that aligns with our capacity to be able to grow our company, grow our production, and increase our free cash flow, which in turn increases more returns to shareholders. It's a little bit about doing all of it, Doug, as to proceed to try to choosing one or the other.

[Doug Leggate, Managing Director and Senior Research Analyst at Wolfe Research]

We will continue to press on the point. Thanks so much, guys.

[Operator]

Thank you. Your next question comes from the line of Manav Gupta from UBS. Please go ahead.

[Manav Gupta, Executive Director and Senior Equity Research Analyst at UBS]

Good morning. I want to congratulate you on the very strong performance on Pike 1. I'm just trying to understand, can you help us understand a little bit better how can you take the learnings of Pike 1 as you move ahead with your front-end in, you know, design engineering on Pike 2 project?

[Scott Stauth, President at Canadian Natural Resources]

Yeah. I think it's more about from a reservoir perspective, Pike 1 would be very similar to the Pike 2 reservoir. In terms of learnings for building a facility at Pike 2, I think we'd look at the assets that we've collected at Jackfish and then at our Kirby assets as well, and take the best of both those worlds and apply our learnings into the development of facilities for Pike 2. As I mentioned from a reservoir perspective, both reservoirs are very similar. We would take our learnings from how we drill the wells at Pike 1 and apply that with some continuous improvement methodologies to drilling the wells in Pike 2.

[Manav Gupta, Executive Director and Senior Equity Research Analyst at UBS]

Thank you very much. I wanted to ask you about the differentials. I think Syncrude is trading almost CAD 5 over WTI. If you could help us understand what's driving this premium, and if this premium sustains itself for the next nine or 12 months, how does CNQ benefit from it? Thank you.

[Scott Stauth, President at Canadian Natural Resources]

You know, obviously the continuance of premium over WTI for SCO is very beneficial to Canadian Natural with our significant SCO volumes. What we're seeing right now in the market is that the SCO barrels come at a high demand. They're, the, from cracking perspective, significant distillate cuts. With everything that's going on worldwide. There's just a greater demand out there for that light crude to create that diesel production. That would be the, that would be where the demand is coming from on that perspective.

[Manav Gupta, Executive Director and Senior Equity Research Analyst at UBS]

Thank you so much.

[Scott Stauth, President at Canadian Natural Resources]

Thank you.

[Operator]

Thank you. Your next question comes from the line of Dennis Fong from CIBC Capital Markets. Please go ahead.

[Dennis Fong, Equity Research Analyst at CIBC Capital Markets]

Hi, good morning. Thanks for taking my question. My first one focuses on Oil Sands mining. I was actually hoping to understand, like, you showed this incredibly strong recent production there at the Oil Sands mining and operation situation. When you think about now owning 100% of the mine, can you talk towards any of the incremental learnings that you found, any of the optimization techniques that you're kind of applying across both of the assets? Also understand that you've been operating it for a period of time as well prior to, as well as how does that maybe change the interrelationship between Albian and Horizon and your go-forward plans with both assets?

[Scott Stauth, President at Canadian Natural Resources]

Yeah. Dennis, you know, I think what's important to remember from a overall perspective for Canadian Natural, with our oil sands mining and upgrading assets, we are best in class operating cost. Anything that we've done, say, post the swap is just on the edges in terms of incremental continuous improvement opportunities. We've laid that out in terms of what they look like for savings for warehousing costs, reductions in savings, and that we said, you know, in the range of about CAD 30 million. Utilization of equipment is probably in the range of about CAD 40 million a year. Those are significant in themselves.

[Scott Stauth, President at Canadian Natural Resources]

If you look at the overall development of both of those, Horizon and the Albian, they both present significant upside given the vast reserves that we have. There's projects that we've also outlined in back in the fall with our investor open house of 150,000 barrels a day at growth opportunity at Jackfish expansion and 90,000 barrels a day at Horizon. Really that sort of lays out the upside. It shows you the robustness of the reserve capacity in both of those areas. I think, you know, owning and operating those assets with the same mindset which we have worked on doing since 2017, we created significant value since 2017.

[Scott Stauth, President at Canadian Natural Resources]

We reduced our operating cost from CAD 42 a barrel at Albian down to CAD 25 or less. We have increased the production by 50,000 barrels a day for extremely low capital cost in the range of about CAD 300 million. We have been able over time, Dennis, to extract a lot of value out of the AOSP asset. We'll continue to work on the fringes to find continuous opportunities, but it's all in the backs of having the lowest operating cost in the industry.

[Dennis Fong, Equity Research Analyst at CIBC Capital Markets]

Great, Scott. I really appreciate that context. Switching maybe to a follow on to Manav's question on Pike, obviously really strong initial productivity from the first two pads there. Can you talk towards if the strength in well pad or the well productivity is making any, we'll call it adjustments to the way that you guys think about the Jackfish expansion scope as well as that for Pike 2? Is that changing the way that you're thinking about, say, oil treatment or any of the scope of those two expansion projects? Thank you.

[Scott Stauth, President at Canadian Natural Resources]

Dennis, it really isn't changing our perspective of how we construct the facilities. The strong performance from the reservoir is very encouraging. Again, we expect Pike 2 to present similar results in itself. Again, if we look at the expansion that we're doing at Jackfish and the relative volumes that we have in the Pike area there, what I'm most excited about is, yes, we're going to add additional steam capacity to continue to increase the barrels of production that go through the facilities there. I'm also impressed and looking forward to what the teams are going to be able to execute in terms of exceeding the facility capacities.

[Scott Stauth, President at Canadian Natural Resources]

You know, we're starting to see an example of that right now where those facilities of Jackfish were designed for 120,000. You know, in the quarter we saw 134,000. It's very, very significant. I do believe there is more to come from that perspective, and we're gonna realize that value and continue to bolster that strong acquisition that we did back in 2019 and the strategic position that it was and execute on joining up those assets.

[Dennis Fong, Equity Research Analyst at CIBC Capital Markets]

Great. Thanks for that color, Scott. I'll turn it back.

[Operator]

Thank you. Once again, should you have a question, please press star followed by the one on your telephone keypad. Your next question comes from the line of Greg Pardy from RBC Capital Markets. Please go ahead.

[Greg Pardy, Managing Director and Head of Global Energy Research at RBC Capital Markets]

Yeah, thanks. Good morning. Maybe just to start with a question for Victor. You had a pretty big working capital deficiency or a meaningful one in the first quarter. Do you expect any of that to reverse into 2Q? Then with respect to the CAD 13 billion net debt target, I mean, I know everything's kind of moving around, but just given the commodity price strength juxtaposed against increased buybacks, is CAD 13 billion conceivable like that you would hit that this year, do you think?

[Victor Darel, Chief Financial Officer at Canadian Natural Resources]

Yeah. Good morning, Greg. For sure, when I said it's in view, definitely when we look at forward strip pricing, we see a path to get there this year. I mean, as you point out, it depends on what the premiums look like for SCO, etc., over the course of the year. Definitely we're optimistic that with good operating performance, it's possible. I'm not going to commit to you yet. We'll see how the next couple quarters here play out. On the working capital front, to your point, pretty regular course tax items in the quarter. Otherwise, I think for the rest of the year, fairly regular working capital impacts in Q2 and Q3. Nothing out of the ordinary.

[Greg Pardy, Managing Director and Head of Global Energy Research at RBC Capital Markets]

Okay. Okay. Understood. Thanks for that. Then, Scott, maybe, it's kind of related to the regulatory framework and so on, but I'm more interested in how you're thinking about egress and market diversification. Right? There's a lot of proposals now that are cost-efficient to move barrels into the U.S. There's an open season with respect to Trans Mountain. Then there's this looming, you know, big million-barrel-a-day pipeline kind of off in the future. How do you see the egress landscape shaping up? Is it better than maybe what it was a year ago? Then what about market diversification, you know, for CNQ, just given your size?

[Scott Stauth, President at Canadian Natural Resources]

Yeah. Greg, I think if you look at the short and medium term and you compare where we're at now, compared to a couple of years ago, it looks very good. With the expansions, through the Mainline, through the Prairie Connector opportunity and through TMX, all of them are positive for this medium-term growth that will help the industry here grow. It's very positive. I think if you looked at the expansion to the West Coast for, you know, a 1 million barrel-a-day pipeline, I think that's very important to ensure that when you look beyond the short and sort of midterm growth platforms, we need that pipeline to be able to grow Oil Sands in a significant way. I would say it's all good, Greg.

[Scott Stauth, President at Canadian Natural Resources]

All of those point towards a very robust, Western Canadian, sedimentary basin development opportunity. In terms of our positioning at Canadian Natural, we'll continue to take and look at those diversification opportunities to ensure that we achieve the best netbacks possible for all of our oil production, and that it comes through a combination of going both south and to the West Coast.

[Greg Pardy, Managing Director and Head of Global Energy Research at RBC Capital Markets]

Very clear. Thanks very much to both of you.

[Scott Stauth, President at Canadian Natural Resources]

Thank you, Greg.

[Operator]

Thank you. Your next question comes from the line of Patrick O'Rourke from ATB Cormark Please go ahead.

[Patrick O'Rourke, Managing Director of Institutional Equity Research at ATB Cormark]

Hey, good morning, guys, thanks for taking my question. I was just thinking about the Duvernay asset, and now that you've had it for a period of time here, we've seen very strong IPs. Maybe perhaps an update on how the wells are performing, and where you sort of sit in terms of capital costs and improvements there and what's left?

[Scott Stauth, President at Canadian Natural Resources]

Yeah, Patrick. The Duvernay's turned out very well for us. We are meeting the expectations from a production growth perspective there. The capital cost, we have brought down significantly over time here, since the acquisition. We've also had a significant reduction in the operating cost, you know, in the range of plus a couple CAD a barrel drop in operating cost. That's very significant from a netback perspective. We've applied our learnings from the Montney, brought them into the Duvernay, with some adjustments, things have been looking very well. To the east side, there's a window of more significant liquids production as well as you move east.

[Scott Stauth, President at Canadian Natural Resources]

We're just at the front-end stage of, you know, looking to understand the results from that part of it. It's all very good, Patrick. We like to play a lot. There's significant, obviously, netbacks in there and high liquids production. It's a very good part of our portfolio.

[Patrick O'Rourke, Managing Director of Institutional Equity Research at ATB Cormark]

Okay, great. Maybe this ties back a little bit to Duvernay and some of the short cycle targets that you have. I think at the Investor Day, you did a very good job of sort of laying out short cycle, mid cycle, long cycle capital projects or targets that you have in the portfolio. You're obviously a very regimented company, but we're in a very volatile commodity environment. I'm wondering if you could maybe walk us through a little bit of the process and how you're thinking about capital allocation, particularly in the shorter cycle end of the portfolio to ensure that you're maximizing value here. I think maybe shifting to oilier, more liquids-rich targets.

[Patrick O'Rourke, Managing Director of Institutional Equity Research at ATB Cormark]

You know, with the ebbs and flows of the oil price, how you manage that on a daily basis looking forward here in 2026.

[Scott Stauth, President at Canadian Natural Resources]

Yeah, Patrick, I think patience is a really important factor. You know, when we look at how we've laid out our plans for the capital program, which we made some adjustments back in March, and we talked about that. You know, the short-term development opportunities in our multilaterals, liquid rich plays, we are putting significant efforts towards capitalizing on that, and we're getting good results, good productivity from the wells, low operating costs, lower capital costs. Our drill times continue to improve.

[Scott Stauth, President at Canadian Natural Resources]

Not only are we maximizing our ability to be able to develop these resources, we're doing it in such a manner on the short-term projects that, you know, we're doing it in such a manner that we're able to improve our net backs, not just on because prices are higher today, but because if prices had remained flat, we would have had stronger net backs with our cost reductions and stronger returns just with our activities through continuous improvement. We'll continue on with that, and we're monitoring that. We've got, you know, as I mentioned, significant drilling rigs out there working, you know, in about 20, 21 rigs working. If you look at our medium-term plans, I think we've laid that out, as you mentioned, fairly detailed for our thermal in-situ projects.

[Scott Stauth, President at Canadian Natural Resources]

I've talked about it again today. We're continuing with the engineering for Pike and for Jackfish expansion. We're looking to proceed with long lead items there to advance those projects. Lots of confidence there. Again, you know, the longer term projects in oil sands mining, we need to see, we're looking for positive outcomes on the MoU for development of those areas.

[Patrick O'Rourke, Managing Director of Institutional Equity Research at ATB Cormark]

Okay. Thank you very much.

[Scott Stauth, President at Canadian Natural Resources]

Thank you.

[Operator]

Thank you. Your next question comes from the line of Neil Mehta from Goldman Sachs. Please go ahead.

[Neil Mehta, Managing Director and Head of North American Natural Resources Equity Research at Goldman Sachs]

Yeah, thanks so much. First question is just on natural gas. You talked about your marketing strategy around oil, but there's obviously been a lot of volatility around natural gas. Maybe your perspective on how that changes your activity plans in gas, Western Canada, how you're thinking about marketing it. Can you talk a little bit about the global gas picture? You've got this interesting agreement in 2030 with Cheniere. Is there an opportunity to layer more of that in?

[Scott Stauth, President at Canadian Natural Resources]

Yeah, Neil, if you looked at, the opportunity to expand on that, to capture, you know, strong global pricing, we continue to talk to folks. We'll look at those opportunities as they present themselves. You know, more to come on that. We are certainly thinking about diversification. It is part of our strategy. In terms of the development on the gas side, for some time now, we've been messaging that our focus has been on the liquids rich production. We're really not drilling any dry gas in the basin. We're looking at where the strongest returns are. That's how we manage our capital portfolio. We're focused on that.

[Scott Stauth, President at Canadian Natural Resources]

Yes, we do have significant Montney dry gas opportunities as well, but we'll keep those in the bank for the future, and we'll capitalize in those areas that have the significant liquids production for now. It's really a focus on liquids production, high returns, and not any significant focus on drilling any dry gas wells.

[Neil Mehta, Managing Director and Head of North American Natural Resources Equity Research at Goldman Sachs]

Yeah, that makes sense in this macro. In the release, I thought this was interesting, the comments about piloting solvent enhanced oil recovery in some of your in-situ assets. You know, it's certainly something that we've been talking a lot about, solvent recovery and the potential upside from production that could generate. You're such an interesting engineering organization. I'd be curious, how big do you think this could be as it relates to your E&P assets?

[Scott Stauth, President at Canadian Natural Resources]

Yeah. You know, if you look at the SAGD assets, we've and our cyclic steam at Primrose, in both cases, we have deployed, we've deployed a bit of butane to reduce the steam and reduce the overall emissions through a couple of pilot projects. We had the commercial pad at Canaught in Kirby North. You know, again, what we saw out of all of these aspects of what we tested so far is that we're able to See, you know, particularly on that Kirby pad, strong recoveries of the butane.

[Scott Stauth, President at Canadian Natural Resources]

Butane is a significant cost driver or any solvent that you're injecting would be the significant cost driver and really where you need to focus on in terms of ensuring that you're gonna get strong returns for that type of investment. That's where the key is on that cost side of it. You know, we're telling the teams, let's ensure that we can go out and find the lowest cost alternative to capture that upside of reduced steam requirements and still have strong solvent recoveries. We're taking the path of ensuring that we really focus on getting the cost right before we deploy it in any kind of significant scale.

[Scott Stauth, President at Canadian Natural Resources]

If you look, Neil, at the future and what it does capture for, or what it can capture is helping bring reserves forward for development in our thermal in situ assets with lower capital, overall capital deployment. The upside is certainly there. It's just really important to ensure that you got the lowest cost alternative, from a solvent perspective and designing your recovery facilities. We wanna ensure we get that right because we can get the best of both worlds with that, Neil. We can look at that long-term opportunity, and in the interim, we can continue to develop and add pad adds at low capital efficiency costs.

[Neil Mehta, Managing Director and Head of North American Natural Resources Equity Research at Goldman Sachs]

That's great. Thanks, guys.

[Operator]

Thank you once again. That is star and one to ask a question. Your next question comes from the line of Menno Hulshof from TD Cowen. Please go ahead.

[Menno Hulshof, Managing Director and Senior Research Analyst at TD Cowen]

Thanks, and good morning, everyone. I'll start by circling back on return of capital and the 75% return of free cash track that you're currently on. You talked about being very active on the buyback in April and even through the beginning of May, would you consider leaning into the balance sheet more aggressively over the near term to take advantage of higher spot prices?

[Scott Stauth, President at Canadian Natural Resources]

You know, it's not something that. The way the free cash flow allocation policy is laid out, I think we intend to adhere to that as it's currently laid out. As you know, there's going to be lots of free cash flow generation here in the second quarter at current strip pricing, and I don't think leaning into the balance sheet will be required. I think we'll have lots of cash flow to have a very robust program, and I think the target as laid out by the Board here is to maintain that 75% level. That's the plan for now.

[Menno Hulshof, Managing Director and Senior Research Analyst at TD Cowen]

Okay. Thanks, Scott. The second question is on sulfur, which is this commodity that comes up, you know, once every 10 years or so, but clearly prices are a lot higher. Can you just refresh us on your exposure to that market, how much you're currently selling into the market today and what that could amount to in terms of quarterly revenue if you're prepared to share that?

[Scott Stauth, President at Canadian Natural Resources]

You know, Menno, thanks. You know, we won't get into the exact details of the revenue from it, but I can tell you we're a significant producer of sulfur at our oil sands mining operations at the upgraders, both Horizon, Scotford, also in our conventional operations in the western part of the province and in B.C. Certainly, as you mentioned and indicated, sulfur has been cyclic in nature. We're certainly seeing a turn towards the upside at this point in time, and it's a good position to be in, where we're able to realize strong value from the sale of those sulfur values.

[Scott Stauth, President at Canadian Natural Resources]

You know, we're gonna continue to monitor that and take advantage of it, as the cycle rides higher.

[Menno Hulshof, Managing Director and Senior Research Analyst at TD Cowen]

Okay. Thanks, Scott. I'll turn it back.

[Operator]

Thank you. There are no further questions at this time. I will now hand the call back to Lance Casson for any closing remarks.

[Lance Casson, Manager of Investor Relations at Canadian Natural Resources]

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

[Operator]

This concludes today's call. Thank you for participating. You may all disconnect.

Participants

Executives

• Lance Casson, Manager of Investor Relations
• Scott Stauth, President
• Victor Darel, Chief Financial Officer

Analysts

• Dennis Fong, Equity Research Analyst at CIBC Capital Markets
• Doug Leggate, Managing Director and Senior Research Analyst at Wolfe Research
• Greg Pardy, Managing Director and Head of Global Energy Research at RBC Capital Markets
• Manav Gupta, Executive Director and Senior Equity Research Analyst at UBS
• Menno Hulshof, Managing Director and Senior Research Analyst at TD Cowen
• Neil Mehta, Managing Director and Head of North American Natural Resources Equity Research at Goldman Sachs
• Patrick O'Rourke, Managing Director of Institutional Equity Research at ATB Cormark