Canadian Natural Resources Ltd T.CNQ

TD

[retiredcf]

Have a $56.00 target. GLTA

BUDGET BROADLY IN-LINE; CONTINUES TO EXECUTE ON MODEST, ECONOMIC PROD'N GROWTH

THE TD COWEN INSIGHT

2025 guidance was in-line with recent consensus/TD estimates. This budget underscores why we like CNQ; significant capital flexibility given best-in-class portfolio diversity and infrastructure dominance, with this dominance driving material cost structure advantages. Note, this is Horizon's first non-turnaround year ($75mm capex savings). Its RoC framework is intact (60% of FCF through buybacks).

Event: 2025 capital and operating budget. Impact: NEUTRAL

• 2025 budget set at $6.15bln (excl. cash ARO); lands in-line with recent consensus/TD estimates at $6.1bln/$6.2bln: In contrast to 2024, which saw a back-half weighted drilling program to better align with basin egress, 2025 spending will be level-loaded with TMX having ramped-up. CNQ remains a preferred name partially due to material capital flexibility given best-in-class portfolio diversity. We expect it to remain real-time responsive to changing market conditions. The budget includes $135mm for carbon capture ($90mm, and the first time it has broken it out) and a one-time corporate office move ($45mm).

  •  CNQ's thermal and mining & upgrading assets are attracting ~$2.8bln or 46% of the total budget, with 52% or $3.2bln earmarked for the Conventional E&P segment.

  •  Recall, this is Horizon's first non-turnaround year, which is expected to drive capex savings of $75mm. CNQ is also progressing its NRUTT project, which adds net 6.3mbbl/d of SCO capacity on completion in Q3/27.

• 2025E prod'n of 1,510-1,555mboe/d (1,124mbbl/d liquids or 73% at midpoint) represents 12% y/y growth (midpoint), in-line with recent consensus/TD estimates (1,523mboe/d and 1,516mboe/d, respectively): Recall, this captures a full year of the CVX asset acquisition. Natural gas prod'n is to average 2,425-2,480mmcf/d, 5% ahead of our estimate at 2,332mmcf/d and up 14% y/y.

Within Conventional E&P, CNQ plans to drill 82 (net) light oil wells (Montney, Dunvegan, Mannville), 82 (net) liquids-rich natural gas wells (Kaybob, Duvernay, Montney), and 174 heavy oil wells (incl. 156 multi-laterals, primarily in the Mannville).

At the AOSP, the Scotford Upgrader will undergo a 73-day turnaround in Q2/25, impacting annual prod'n by 31mbbl/d (net), or ~124mbbl/d in Q2/25. Note, CNQ does not provide SCO prod'n guidance.

Across its in-situ portfolio, CNQ will bring online 25 infill wells to maintain prod'n. At Pike, it plans to drill two SAGD pads in H1/25, which will be tied into the Jackfish facilities to keep them full.

This is yet another example of CNQ putting its infrastructure dominance to work and executing on drill-to-fill opportunities.