(1) West Texas Intermediate ("WTI").
(2) Western Canadian Select ("WCS").
(3) Average crude oil and NGLs pricing excludes SCO. Pricing is net of transportation and blending costs, excluding risk management activities.
- The WCS heavy crude oil differential ("WCS differential") as a percent of WTI averaged 22% during 2012 compared with 18% in 2011. During Q4/12 the WCS differential averaged 21%, in line with the Company's long term expectations. The Company anticipates continued volatility in the differential for the first half of 2013 and narrowing of the differential thereafter as additional heavy oil conversion and pipeline capacity come on stream.
- During October and November 2012, the WCS differential averaged 11% and 16% respectively, widening out to 34% in December 2012 as a result of unplanned pipeline capacity limitations and refinery-planned lower crude oil inventories at year-end. During January and February 2013, the WCS differential widened to average 37% but was partially offset by higher overall WTI pricing. For March 2013, the WCS differential has narrowed to average 29%.
- Canadian Natural contributed 157,000 bbl/d of its heavy crude oil stream to the WCS blend in 2012. The Company remains the largest contributor to the WCS blend, accounting for 53%.
- During 2012, Canadian natural gas production declined in response to lower pricing while US natural gas production remained steady throughout the year. Natural gas pricing recovered to AECO $2.89 in Q4/12 but benchmark pricing will continue to remain volatile until the demand from the power generation sector increases enough to offset strong North American supply.
NORTH WEST REDWATER UPGRADING AND REFINING
During Q4/12, the Redwater Partnership 50,000 bbl/d bitumen refinery (78,000 bbl/d of bitumen blend) was sanctioned by its owners (50% Canadian Natural). Work continues on the North West Redwater refinery and completion is targeted for mid-2016. The Company will also provide 12,500 bbl/d of bitumen feedstock to the refinery as a toll payer. There is potential to further expand the downstream capacity of the North West Redwater refinery from its 50,000 bbl/d of bitumen facility capacity in Phase 1 to 150,000 bbl/d of bitumen facility capacity.
The North West Redwater refinery asset strengthens the Company's position by providing a competitive return on investment and by adding 50,000 bbl/d of bitumen conversion capacity in Alberta which will help reduce volatility in pricing all Western Canadian heavy crude oil.
The Company continues to implement proven strategies and focuses on disciplined capital allocation. As a result, the financial position of Canadian Natural remains strong. Canadian Natural's cash flow generation, credit facilities, diverse asset base and related capital expenditure programs, and commodity hedging policy all support a flexible financial position and provide the right financial resources for the near, mid and long term.
- The Company's strategy is to maintain a diverse portfolio balanced across various commodity types. The Company achieved production of 658,973 BOE/d for Q4/12 with over 97% of production located in G8 countries.
- Canadian Natural has a strong balance sheet with debt to book capitalization of 26.0% and debt to EBITDA of 1.2x. At December 31, 2012, long-term debt amounted to $8.7 billion compared with $8.6 billion at December 31, 2011.
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