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Canadian Natural Resources Limited Management Discusses Q1 2012 Results - Earnings Call Transcript

Natural gas economics have been under pressure for a number of years, as less and less natural gas projects have been able to achieve a recycle ratio of greater than 2. Reacting to this, our drilling operations and natural gas projects have been reduced in each year for the past 6 years, and this year will be no different. We continue to monitor our producing areas, and we'll take any necessary steps, including shutting in production, to ensure we are making positive cash flows from these areas, and in very limited situations, carrying out activities that will provide adequate returns.

On the other hand, E&P activities on oil prospects continue to be robust. Over 90% of our revenue now comes from sales of oil. We are reaching new levels of production and cash flow achievements. Our light medium oil production in Canada is now averaging over 40,000 barrels per day, as new plays and EOR opportunities are pursued. In addition, production of NGLs climbed to over 25,000 barrels. Strong drilling results in our primary heavy oil areas has resulted in first quarter production of 120,000 barrels per day. One year ago, we were only producing 97,000 barrels.

Our international operations continue to contribute free cash flow, with $180 million of free cash flow in excess of the capital requirements of our international operations in the first quarter. And as expected, now that the scheming cycle is ending at Primrose, our thermal in situ property, production is starting to ramp up again and is together targeted to increase daily production to over 100,000 barrels from this quarter's 80,000 barrels.

Our mining asset incurred some unplanned maintenance time in the first quarter, as repairs had to be carried out on the fractionator tower. These repairs were completed in a timely fashion and the production recommenced in mid-March, with April's production reaching almost 112,000 barrels per day.

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