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Secondly, we have continued strong production from our primary heavy oil areas, which averaged over 122,000 barrels per day. And thirdly, production response of our thermal in situ project at Primrose returned to a production cycle from a steaming cycle. Daily average production from this project grew to 94,000 barrels from the first quarter average of 80,000 barrels.This strong production together with emphasis on cost control and reduction of cost contributed to the growth in our quarterly earnings and cash flow. Cash flow amounted to $1.75 billion, up from $1.28 billion in the first quarter of this year. The cash flow gave us significant room to complete our second quarter capital program of $1.3 billion, payout dividends that have increased by 17% over last year and to buy back 6.2 million common shares under our Normal Course Issuer Bid. Commodity prices continue to be volatile with a mixed outlook. Natural gas supply demand is out of balance. However, the recent record high temperatures in eastern North America have provided some additional market for natural gas usage, and it does appear that recently there has been a pull-back on development of new production, which may help to stabilize the supply of natural gas. However, having said that, our average price received for natural gas in the second quarter of this year decreased by 54% from the price received in the second quarter of 2011. Clearly the economics of natural gas development has been further compromised and we have curtailed our capital exposure accordingly. Planned and unplanned maintenance activities at refineries and unplanned pipeline restrictions continue to affect the differential charge against heavy oil. The WCS differential averaged 24% of West Texas price in the second quarter of the year, somewhat higher than the 17% differential in the second quarter of 2011. We are able to positively manage our business over these cycles, and as additional refining capacity and new pipelines are put into service, we will be in a very good position to benefit from these additional markets for heavy oil.
We continue to ensure our business remains balanced and our financial position remains strong by reallocating capital expenditures. We have adjusted our targeted capital expenditures for the year downward by almost $700 million. This reduction in CapEx, however, does not adversely affect our oil production guidance for the 2012 year. As Steve will show you, our balance asset base is very strong. We have tremendous opportunities to increase our reserves and production and most importantly we have a very defined plan to accomplish that. With that, I will hand the meeting over to Steve and then to Doug to discuss our financial position. Steve?Steve Laut Thanks, John and good morning, everyone. As you can see in the second quarter our balanced and diverse assets, proven and effective strategy, executed by our strong teams delivered a very strong quarter. Production was up and operating costs were down across the board in North America. In addition, we’ve been nimble, effectively optimizing our capital allocation in the quarter in response to market conditions. We’ve reduced our capital spending in 2012 by roughly $700 million, a 10% reduction, and at the same time slightly increased our overall production guidance for 2012. Canadian Natural’s ability to quickly and effectively reallocate capital and at the same time increase production, confirms the strength of Canadian Natural’s assets, our capital flexibility, the effectiveness of our strategies and the ability of our teams to effectively execute. Few, if any, companies in our peer group can effectively reduce capital spending and deliver a production increase. I’ll briefly comment on each of our areas, starting with gas. As you know, we’ve been bearish on gas prices and that’s not changed. In Q2, we proactively reduced our gas drilling program for the year by half, from 71 wells to 35 wells. As well, we deferred the well completions on our Septimus program and as a result we’ve deferred $110 million of gas capital out of the 2012 plan. This deferral of capital impacts gas and NGL production exit rates, since all these wells, especially at Septimus, were liquids-rich wells. We’ve also proactively shut in 20 million cubic feet of gas in 2012. Read the rest of this transcript for free on seekingalpha.com