Mark A. Stainthorpe - Canadian Natural Resources Ltd.

Steve W. Laut - Canadian Natural Resources Ltd.

Tim S. McKay - Canadian Natural Resources Ltd.

Corey B. Bieber - Canadian Natural Resources Ltd.

Philip M. Gresh - JPMorgan Securities LLC Greg Pardy - RBC Dominion Securities, Inc.

Neil Mehta - Goldman Sachs & Co. Frank McGann - Bank of America Merrill Lynch Jason Frew - Credit Suisse Securities (Canada), Inc Michael P.

Dunn - GMP FirstEnergy

Thanks, Virgil. Good morning, everyone, and thank you for joining our third quarter 2016 conference call, where we will discuss our operational and financial results and provide an update regarding our ongoing projects and operations.

With me this morning are Steve Laut, our President; Tim McKay, our Chief Operating Officer; and Corey Bieber, our Chief Financial Officer. Before we begin, I would like to refer you to the comments regarding forward-looking information contained in our press release and also note that all amounts are in Canadian dollars, and production and reserves are expressed as before royalties unless otherwise stated.

With that, I'll now pass the call over to Steve Laut. Steve?

Thanks, Mark, and good morning, everyone. Thanks for joining the call this morning.

Canadian Natural strengths and strategy are intact and we're effectively executing. As we come out of the third quarter, we are now even stronger and more robust.

The most difficult portion of our transition to long life, low decline assets is now complete. As a result, the size, sustainability of our cash flow has increased substantially.

Combining our long life, low decline assets with our large, low capital exposure assets allows Canadian Natural to generate significant, sustainable cash flow and a potential to grow production in the 8% CAGR range. And at the same time, enhance the strength of the balance sheet, provide increasing returns to shareholders and capture acquisition opportunities, if they fit, make sense and add value.

Canadian Natural is a unique E&P company. In the third quarter Canadian Natural continue to lower costs.

Our already top-tier operating costs are down an impressive 17% versus Q3 2015 at $12.37 a BOE. Cash flow was solid just over $1 billion or $0.93 a share.

Q3 production was impacted by third-party pipeline outages, the planned turnarounds at Horizon and Primrose as well as being in the low portion of the thermal cycle at Primrose. With these issues behind us, and the thermal cycle at Primrose on the upswing, October production was approximately 825,000 BOEs a day.

A major driver of October production numbers was a very effective start-up and commissioning of Horizon 2B. Horizon Phase 2B began the start up in October.

With October rates at 160,500 barrels a day. And for the last two weeks, we've been running around 176,600 barrel a day mark.

The hydrogen plant, which is the last major Phase 2B component, came on stream November 1. Current rates are 192,000 barrels a day.

However, we do not anticipate running at these rates for the entire month of November. That being said, we target rates for the remainder of the year to be in excess of 182,000 barrels a day, an exceptional performance from our project, commissioning, startup and operations team.

I'm very proud of how everyone has worked together. As you know, working together is a trademark at Canadian Natural.

As a result, our team delivered a top-tier start-up. Capital costs for Phase 2 are right on track and we expect very good operating cost performance in Q4 and into 2017.

Horizon Phase 2B is the most complex and difficult portion of the Horizon expansion. So, we're very happy with how the construction and commissioning has been delivered.

In comparison, Horizon Phase 3 is relatively simple with the major components being an addition of combined hydrotreater now 75% complete and our sulphur plant now 60% complete, as well as an ore prep plant and extraction plants that are essentially mechanically complete today. As a result, we are very confident in our ability to complete the transition to a long-life low decline asset base with a final phase 80,000 a day of Horizon set to come on stream in Q4, 2017.

The impact of long-life low decline assets on our sustainability is important. The larger portion of Canadian Natural's asset base being long-life low decline assets, our average corporate decline rate drops to 11.7% in 2018.

As a result, our maintenance capital to hold production flat is significantly less compared to a typical E&P company, making Canadian Natural more robust and generating more free cash flow. The size, scale and diversity of our assets matters in today's world, allowing Canadian Natural to leverage our infrastructure and economies of scale to drive effective and efficient operations.

Canadian Natural has a unique combination of asset-based strengths, diversity and balance. Combined with our strategy and competitive advantages, effective capital allocation and a management team that is more aligned with shareholders than any of our peers, allows us to deliver the best of all worlds.

And delivering the best of all worlds means delivering sustainable production, a substantial free cash flow from our long life, low decline assets that are very resilient to price volatility. It also means delivering high returns from Canadian Natural's large, high quality inventory of low capital exposure projects, in primary heavy oil, natural gas and light oil in Canada and Côte d'Ivoire.

They provide significant capital flexibility, quick payout and higher return on capital, particularly where we can leverage our infrastructure advantage to keep costs low. Canadian Natural may be the only company in our peer group that has a quality in both these asset types, the technical and operational expertise to execute in both these asset types to deliver effective and efficient operations and, importantly, the discipline to effectively allocate capital to grow production and maximize cash flow.

The strength, size and power of both asset types, combined with effective capital allocation, makes Canadian Natural very robust and maximizes cash flow. A key component of Canadian Natural's strategy is to balance and optimize the allocation of cash flow to maximize value for shareholders.

We strive to balance and optimize what we call the four pillars of cash flow allocation; balance sheet strength, return to shareholders, resource development and opportunistic acquisitions. How we balance the pillars depends on where we are in the commodity price cycle, where we are in our transition to long life assets and other potential opportunities.

At all times, the primary goal of balancing the four pillars is to maximize shareholder value. With free cash flow increasing, you see us balancing the four pillars today.

The balance sheet quickly strengthens. And today, we've increased the annual dividend by $0.08 to $1 per share.

We've also increased our capital spending for the year. The largest portion of that increased spending is in our E&P drilling program, mostly in Q3 and Q4 at roughly $300 million.

The production impact will mostly be seen in Q1 of 2017. This increased capital expenditure is driven by our greater confidence in both oil and gas prices, continued improvement in both capital and operating cost structures and confidence in Horizon production coming on stream, on schedule and on budget, which as we see today, it clearly has.

Capital was also allocated to do extra work in the Horizon turnaround to ensure reliability for Phase 2B at roughly $120 million. Canadian Natural will not compromise on quality or postpone work that will impact reliability.

Although, we took a hit in the quarter, we will more than make up for the lost production in the fourth quarter and into 2017. As you'll have noticed, yearly production guidance for Horizon remains unchanged.

And at Kirby North, we've driven down costs. As a result, we're moving ahead with a 40,000 barrel a day Kirby North SAGD project, with the first steam in Q3 2019 and the first oil in Q1 2020.

In a $45 world, Kirby North creates value for shareholders. We've also added roughly $120 million of additional small tuck-in property acquisitions in our core areas, where we see opportunities to lower the costs, by leveraging our infrastructure and economies of scale, driven in part by our greater confidence in commodity prices and Horizon production.

As you can see, Canadian Natural is in a great position and we are now more robust and sustainable. With that, I'll turn it over to Tim for an update on operations.

Tim?

Thank you, Steve. Good morning, everyone.

I will now do a brief overview of our assets and talk through our third quarter 2016. Starting with natural gas, our Q3 production volumes of 1.645 Bcf was a decrease of approximately 3% from Q2 2016.

It was primarily impacted by the third-party plant and infrastructure issues that I talked to last quarter, which is currently taking restricted volumes. During Q3, we only averaged 37 million a day of the 176 million cubic feet of sales capacity to this facility.

Currently, we're selling proximally 70 million a day so still about 106 million cubic feet shut-in. A third-party operator now targets production to be restated in the month of December.

As a result, our total company natural gas is targeted to exit 2016 at approximately 1.7 Bcf a day. We are currently seeing cost savings in our North American natural gas operating costs and have been able to reduce them 17% compared to Q3 2015.

Our third quarter operating costs are very good at $1.4 per Mcfe, and overall we target our annual natural gas operating cost to come in below our midpoint of guidance for 2016. Our North American light oil and NGL production in Q3 was approximately 90,200 barrels a day, up almost 8% from Q2 2016.

In all areas, we continue to optimize water flood, stimulate wells as well complete minor acquisitions. We have started our small high-graded drilling program of five wells, and subsequent to the quarter end, two wells have come on and we're seeing initial rates of approximately 2,300 BOEs per day and 1,500 BOEs per day, respectively, well above our targeted rate of approximately 800 BOE per day per well.

While results are early, we have at least 14 more sections that can be drilled over time and tied into our operated Gold Creek gas plant. For our North American light oil and NGL, we continue to drive operating costs down 8% when comparing Q3 2016 to Q3 2015 with current operating cost of $13.15 per barrel.

Offshore Africa production was production at 26,171 barrels per day, a decrease from Q2 as well as decline from a very successful drilling program that was completed in Q1 2016. As well, the quarter was also impacted by unplanned downtime at Espoir, which is currently operated with restricted compression availability and is targeted to return in December.

Operating costs continued to decline with year-to-date operating costs of $16.32 per barrel, down from a 2015 annual average operating cost of $33.32 per barrel. In the North Sea, we continue to leverage our ability to deliver effective and efficient operations by improving reliability, optimizing water floods and enhancing production capacity.

When comparing Q3 2016 of 23,450 barrels versus Q2 of approximately 23,360 barrels, we have mitigated decline in the North Sea, which is a great result considering the last wells drilled in the North Sea was about two years ago. Operational improvements have continued to help reduce the operating costs and in the North Sea, we target to be down 32% from 2015 on an annual basis.

In heavy oil, production declined approximately 1% from Q2 2016. In Q3, we averaged approximately 102,500 barrels a day versus a Q2 average of approximately 103,800 barrels a day.

In the third quarter, we drilled 85 net wells from our very large inventory. Results have been good, production is ramping up above budgeted volumes and helped offset our declines.

We have 63 wells on production with total capacity of approximately 3,500 barrels a day. This high-graded program is very robust economically as our drilling completion and facility costs are down almost 25% from our 2015 heavy oil program.

Our heavy oil operating costs continue to be very good as we continue to drive effectiveness and efficiencies in this core area, leveraging our infrastructure with a 5% reduction in operating costs from Q3 2015, a significant achievement considering declining production. Q3 2016 operating costs were $13.12 a barrel.

A key component to our long-life, low decline transition is our world-class Pelican Lake pool, where our leading-edge polymer flood is driving significant reserve and value growth. In Q3, production was 47,608 barrels a day as we continue to complete well-bore clean-outs on injectors and producers in the field.

Results have been encouraging and the program is being expanded across the polymer flood. In some areas completed, we are seeing good response with declines flattening or in some cases, production increasing once again.

At Pelican Lake, we've been able to take our industry-leading operating costs down a further 8%, with third quarter operating costs of $6.09 a barrel when comparing Q3 2015. This results in Pelican Lake have an excellent netbacks and recycle ratios.

In thermal, for Q3 2016, our properties combined produced 103,408,000 (sic) [103,481] barrels a day. Our Kirby South project had a strong production quarter at 38,150 barrels with a very good thermal efficiency SOR of 2.6, with our all-in operating costs including energy for the quarter of $8.86 per barrel, an 18% reduction from Q3 2015, which is an excellent result.

As Steve talked to earlier, we're proceeding with the construction of Kirby North SAGD project of 40,000 barrels a day. Construction was temporarily stopped in 2015 and we're now ready to recommence the construction, which we would target to spend $28 million in 2017.

Preliminary estimates to finish the project are approximately $650 million. Overall, we expect this project to be about $100 million less than originally expected.

We're targeting first steam in Q3 2019 and first oil in 2020. At Primrose, production was strong as we completed maintenance activities in Q2 in the early part of Q3.

Production has ramped up from Q2 by approximately 10,000 barrels a day and is targeted to grow into the fourth quarter with the overall fourth quarter's thermal production guidance targeting 127,000 to 133,000 barrels a day. Overall, our thermal operations continue to be effective and efficient with $11.58 operating costs including energy.

Before moving to Horizon, I'll update you a little bit on our forward plan. In preparation for the 2017 budget, we're forecasting to increase our capital spending.

Our North American rig count is targeted to increase from its current count of five drilling rigs to 16 rigs by January. We are preparing to do this to ensure we can execute our 2017 capital program efficiently and effectively once our 2017 budget has been approved.

We are seeing excellent productivity and cost savings as indicated in heavy oil, which is a 25% reduction from our 2015 costs. As well, we will start drilling in the North Sea again as the tax structure has been reduced and we have made significant progress on reliability as well as reducing our operating and joint costs.

At Horizon, in third quarter of 2016, we produced 67,586 barrels a day. During the turnaround, issues were found, which extended the turnaround as well as additional issues in the coke area, which delayed us to getting to full production.

This extra time was necessary to ensure we could handle Phase 2B and Phase 3 production raise safely and reliably. During the quarter, our normalized operating costs were $27.05 a barrel and we're well on our way to achieving our targeted operating cost of $25 a barrel in Q4 with Phase 2B on production.

Moving to Phase 2B construction, our operating and construction teams have worked tremendously together. In September, we saw roughly 148,000 barrels a day of SCO production with process reliability at 100% and our disciplined approach to commissioning and startup of the (18:16) gas/oil hydrotreater, the DRU/VDU.

Then in October, we continued our disciplined and systematic approach to startup of Phase 2B, which resulted in October production averaging approximately 161,000 barrels a day. To-date, our startup of 2B has been very safe, effective and efficient.

And currently, Horizon 2B is up and running at higher-than-designed targeted rates of 182,000 barrels a day of SCO. Currently, we're at 192,000 barrels a day, which is a great result for Canadian Natural.

Now, our next goal is Horizon Phase 3 execution. It is on track and targeted to complete in Q4 2017.

Finalizing the Horizon expansion to 250,000 barrels a day, which ultimately could have additional capacity beyond its design capacity of 250,000 barrels a day of SCO once we work through and define the potential optimization opportunities or debottlenecking opportunities with the equipment. In summary, Canadian Natural is an effective and efficient operator.

We continue to look for opportunities to realize significant gains in optimizing our production and reducing our costs across the company. We will continue to look for ways to become more effective and efficient and further reduce our costs in 2016 and 2017.

We will continue our focus on safe, reliable operations and enhancing our top-tier operations. I will now turn it over to Corey for our financial review.

Thanks, Tim, and good morning, everyone. The third quarter loss largely reflected the reduced income from Horizon due to the major turnaround during the quarter, partially offset by a modest recovery in natural gas pricing.

The quarter also included $107 million deferred tax benefit related to the UK government reducing the supplement recharge on oil and gas profits from 20% to 10%. Our third quarter cash flows from operations of $1.021 billion represented a 9% increase over second quarter 2016 levels and a 55% increase over the low of Q1 2016, a good achievement given the major turnaround occurring at our most significant cash flowing asset, Horizon.

To put this in perspective, Q3 cash flows increased by $83 million even with field cash netbacks from Horizon decreasing by about $335 million versus Q2 due to the major turnaround. Benefiting cash tax recoveries during the quarter were lower pre-tax cash flow at Horizon due to the impact of the turnaround and associated higher maintenance turnaround costs; recognition of additional R&D qualifying expenditures in Canada and the meaningful progress on the topsides abandonment at Murchison in the North Sea recovering higher PRT and current tax.

I believe this demonstrates how a balanced portfolio of assets delivers complementary and more sustainable financial results. Canadian Natural has reached inflection point with the recent additional production and incremental cash flows associated with the company's completion of Horizon Phase 2B being a major addition to the company's balanced asset portfolio.

Coupled with lower Horizon project capital, our free cash flow profile significantly changes, making it more sustainable through the commodity price cycle. The targeted completion of the Horizon expansion to 250,000 barrels a day of SCO in 2017 will further increase our long life, low decline assets profile.

In addition, we made great strides throughout the entire company in lowering overall costs to reflect the new commodity price paradigm and we continue to target new savings and innovation to augment our sustainability. We realized $450 million of operation savings through the first nine months of 2016 in comparison with a same period of 2015.

During the quarter, our financial position remained solid. Supplementing the company's liquidity, we successfully completed a $1 billion bond issuance in August ending the period with $2.35 billion of liquidity.

The debt-to-EBITDA level of 3.9 times in Q3 2016 is targeted to improve to approximately 3.6 times at year-end based upon last week's strip pricing with further improvement targeted during 2017 given higher production levels post Phase 2B. These assumptions do not include any other financial levers, which the company has at its disposal.

The significance of reaching this inflection point and the confidence that the company has in being able to successfully complete Horizon Phase 3 over the next year has resulted in the board of directors increasing the level of quarterly common shares by about 9%, $0.25 from the previous $0.23 per quarter. A further transformative milestone is targeted at the end of 2017 when the expansion of Horizon to 250,000 barrels a day is completed and major project expansion capital at Horizon is essentially complete.

As we move forward, we'll continue to demonstrate balance and optimize the four pillars of cash flow allocation; balance sheet strength, now targeting improvement in coming quarters; returns to shareholders, as demonstrated by today's 9% dividend increase; resource development, as reflected by our Kirby North sanction and ramp in drilling activity; and opportunistic acquisitions should they become available and make economic sense. In short, our unique asset blend has helped us to weather the volatility of the recent commodity price storm.

Our long life, low decline assets underpin our financial resilience and provide more financial stability to base cash flow. This strong base of cash flow can then be augmented by our more robust portfolio of low capital exposure development opportunity, which typically provide quick payouts and further enhance returns to shareholders in the right price and cost environment.

When we couple this robust and balanced asset base with our operational excellence and strong corporate culture, it gives me confidence that our exceptional track record of value creation for shareholders will continue into the future. Steve, back to you.

Good. Thanks, Corey and Tim, for giving us the highlights of our strong position on operations and our financial strengths.

As you heard this morning, Canadian Natural has the new combination of asset-based strength, diversity and balance, combined with our strategy, competitive advantages, effective capital allocation and a management team that's more aligned with shareholders than any of our peers, allows us to deliver the best of all worlds in long life, low decline assets and low capital exposure assets. Canadian Natural may be the only company in our peer group that has a quality in both asset types, the technical and operational expertise to execute in both asset types, and to deliver effective and efficient operations and, importantly, the discipline to effectively allocate capital to grow production and maximize cash flow.

The strength, size and power of both asset types, combined with the effective capital allocation, make Canadian Natural very robust and maximizes cash flow. We strive to balance and optimize our four pillars of cash flow allocation, as Corey mentioned; balance sheet strength, return to shareholders, resource development and opportunistic acquisitions.

In the fourth quarter and into 2017, we target increasing free cash flow. And with free cash flow increasing, we see the balance sheet quickly strengthening.

And today, we've increased the dividend by $0.08 to $1 a share. In Kirby North, we're now moving ahead with the 40,000 barrel a day SAGD project with first steam then in Q3 2019 and the first oil in Q1 2020.

Canadian Natural is in a great position, and we are now more robust and sustainable. And to be honest with you, the future looks even more sustainable and robust.

With that, we'll open up the call for any questions you might have.

Hey, good morning. First question, just on Kirby North, at the Analyst Day, you talked – you did a great job at the Analyst Day of highlighting all of the assets in the portfolio and the breakevens for 15% IRR.

And it sounded like the focus was going to be more on shorter and medium cycle opportunities in the portfolio, whereas this seems a bit longer cycle, ties up the capital for a bit longer. So, maybe just elaborate on why you decided to move forward with this project, acknowledging that you're obviously moving forward on shorter cycle as well here?

I think that's a really good question, Phil. Thank you for that.

Because we're doing both, obviously we haven't set 2017 budget. But if you look at what Tim pointed out, the capital allocation for Kirby North is $28 million in 2017, it's not that much.

We still have the capital flexibility to pull back if we see commodity prices drop. But Kirby North will not be coming on until – steam-in in Q3 of 2019 and production in Q1 2020.

So that's always out there. We have enough capital flexibility to manage that going forward.

But we will continue and we will see that when we get to 2017 budget. I'm expecting that we'll have a greater focus on the low capital exposure projects to give you a quicker payout and higher return.

Okay. And the second question is just on the capital budget.

Steve, I know you don't want to give a hard number here. Understood.

You did give a wide range at the Analyst Day of kind of a low case of $2.7 billion, high case or $60 case of $4.5 billion. Your sustaining number, I believe, is between $2.4 billion and $2.7 billion.

I think there is $1 billion for Horizon still in there. Is it going to be materially above kind of the sustaining plus Horizon number with the short cycle additions or is that the right way to think about it?

I'm not sure what the right way to think about it is, but the way we think about it is we're looking here to see what happens with commodity prices particularly on the oil side. As you know, there's quite a bit of volatility out there.

I think we'll be, based on what we see right now with commodity prices, somewhere right in that range we talked about. So, you can almost draw a line between the low price forecast we had, which I think was in the $40 range or $38 range.

That would be basically the sustaining capital. And somewhere below, I don't think we're going to see $60 oil.

We don't count on that. So, it will be less than $4.5 billion.

But we haven't finalized 2007 budget yet. We're still looking that.

But I think one thing you will see in 2017 budget is a significant amount of capital flexibility, and our ability to flex-up the capital, if we see greater strength, and the ability to flex down the capital if we see lower strength in commodity prices. So I think we'll be very nimble in 2017.

Okay. And then just the last question is on production.

I mean, obviously you're going to have the big step up here in the fourth quarter, particularly at thermal and obviously with Horizon. But as we look ahead to 2017 production and the run rate you're tracking at in the fourth quarter, is the fourth quarter a reasonable proxy for how to think about 2017?

It's too early for us to say because we don't know what the capital allocation is going to be. We haven't landed on it yet.

But I would think that if you just look at the sort of strip placing we see today and sort of take a reasonable guess, our production will be greater than the fourth quarter on average for the next year.

Okay. Great.

Thanks. I'll turn it over.

Thanks. Good morning.

Steve, with the uptick in spending here in the fourth quarter, and you mentioned going to 16 rigs in January, so is this going to be a significant push then on primary heavy oil? Could you just round out a little bit as to how you're going to spend the dollars?

We're going to take a balanced approach. I'll get maybe Tim just to talk to you about what the drilling program looks like, but we haven't just landed on 2017 yet, Greg.

So, let's maybe talk about the drilling that we're doing here and the rest of 2016, Tim, where that allocation goes, give you a hint of what it will look like in 2017.

Sure, Greg. It's really quite balanced between heavy oil.

We have some light oil drilling, some thermal wells. Strat setting up for Kirby North and at Primrose.

It's really quite balanced between the different areas. What we want to do is we're seeing extremely good cost savings and productivity.

And we want to make sure that if we do have a good budget that we have very efficient and effective program going into 2017.

One thing I'll add Greg...

Okay. Yeah.

...is that we talked about being nimble. I think Tim is going to be very reactive if we see cost increases start to happen out there.

We'll react to that. We're not going to drive costs up by increased activity at any cost.

Okay. Okay.

Perfect. And you mentioned the oil price volatility.

I think most people will probably wait until post OPEC to talk about budgets. But directionally, should we be thinking about a December or January release?

Yes.

Can you give me either month on that one?

Sorry, I couldn't resist, Greg. But I think it's more likely to be in December than January, but we're not fixed in stone yet.

Okay. No problem.

And the last one is just in terms of looking at the updated guidance. So, there is this capitalized interest in other line item here.

That one's up like a over $100 million. Is that where you plug the additional maintenance capital or additional capital requirement?

I'm just trying to understand what's in the number.

Greg, it's Corey. A lot of it is stock-based compensation that gets capitalized under the project itself.

So, that's actually – the stock price has done reasonably well this year and that's a big chunk of it.

Okay. Okay.

Perfect. You know what, I think that's it for me.

Thanks very much, guys, and congrats on getting 2B up.

Thanks.

Hey. Good morning, guys.

Congrats on the dividend increase here. It's something that we haven't seen a lot of among producers.

I wanted to continue on the theme. Can you talk a little bit as you think about 2017, how you think about the dividend – potential dividend growth versus buybacks versus debt reduction?

And where do you prioritize free cash flow to the extent you see it?

I think, Neil, what we try to do and that's why we have this four pillars concept, we try to balance all those pillars; so balance sheet strength, returns to shareholders through dividends or buybacks, resource development and acquisition – opportunistic acquisitions. And we'll try to do that in 2017.

I would think as we go into 2017, you will see that a greater proportion likely is going to go to the balance sheet. We want to make sure that's stronger as we go forward.

Resource development, I think we've got a pretty balanced program. You won't see too much increase there.

Acquisitions, we don't really have any gaps in our portfolio, Neil. So it's not like we need to do anything.

That being said, we're not afraid to do them. We're good at it.

And if it adds value and makes sense, we'd look at that as well. So, that really leaves you what's left as a good (34:42) choice is return to shareholders and we evaluate whether it's better to do dividends or share buybacks.

And that's really a function of where we are in stock price and our cash flow that we have. So, it's a tough call.

Right now, we've chosen to go with dividends first.

Yeah. And then, in terms of where you stand in terms of asset monetization opportunities, can you provide some color there, including how you think about PrairieSky and whether that's a core asset or one that you would consider monetizing?

I think what we said, Neil, is that we will consider monetizing, in one shape or form, PrairieSky. But that being said, we really like PrairieSky's shares.

And as you've seen, the share price has gone up pretty good. We think it's still got room to run.

So, we're happy with our holdings there. It's worked out well for us.

Yeah. Last question for me is that you guys are looking to get a little bit more confidence in the oil macro before you set the 2017 budget.

What are the two or three things that you're looking out for, OPEC, obviously, being one of them as we get closer to the date?

I think OPEC's the biggest wildcard out there we have to watch. We're watching supply and demand.

And you probably have just as good or better view than we do on that. And we see supply and demand going back into balance here, so that will be constructive for pricing.

We'll just see what happens here with OPEC.

Got it. Thanks, guys.

Okay. Thank you very much.

Yeah, just two to quick questions. One, in terms of acquisitions and how you're seeing the environment right now.

Obviously, things have continued to evolve. It sounds like you're, in general, a little bit more confident than you were maybe six months ago, but still with some significant uncertainties.

But how you're seeing the acquisition environment in terms of what types of assets are available and what you're looking for in terms of specific characteristics there. And then secondly, in terms of reserves, I was wondering if one of your competitors has talked about possible significant impairment in the fourth quarter, potentially if oil prices stay low, I was just wondering how you're looking at year-end reserves?

Okay. Thanks, Frank.

And you're right, we are much more confident than we were in the past. And that confidence is driven, for the most part, by our results here at Horizon.

It's been a very good startup. Our productions are – is doing really good.

And we're seeing our costs come down across the board. So, we're doing well on Gary's (37:33) account here.

So, we're much more confident going forward. The acquisition environment, I would say, it's about the same.

We see a lot of properties flow through our core areas. We look at everything that goes through our core areas.

We bid on some and we get very few. And what we're looking for is ability to essentially add value through lowering the cost structure, by leveraging our infrastructure and our economies of scale.

So, those are very tough to find, but we look at everything that comes through our area. So, there seems to be quite a bit of deal flow, a lot of it doesn't make sense for us.

As far as the reserves, we are one of the very low cost operators in our space and we are very confident. All reserves are, as you know, evaluated by external evaluators, engineering evaluators outside of the company and we don't see a write-down happening with the low prices we see today.

Okay. Thank you very much.

Hi, there. Steve, I was wondering if you could characterize sustaining capital in the oil sand, just to what degree that might be coming down and if there is any way to quantify that in your mind?

I think we're seeing costs come down across the board. And we expect to see better effectiveness and efficiency as we go forward.

That being said, the sustained capital, particularly if you're talking about the mining and upgrading business, that's very lumpy. And it depends on where you are in sort of the reliability stage and whether you need to buy trucks or shovels.

Those tend to be lumpy. So, we're going to be in that $6 to $9 a barrel range sustaining capital and we continue to work to drive those costs down.

And part of that, as you've seen here in the turnaround in third quarter, we believe it makes sense to take the extra time and spend the extra money to get that increase in reliability. And I think that's paid off for us.

I think you'll see when you compare our reliability and utilization, our uptime, compared to our peers, we're consistently in the top. And that pays off for us in terms of operating costs and netbacks.

And what about – just on the in situ side, is there a different characterization there at all?

I think we've seen it come down. There's a lot of sustaining capital costs and Tim maybe you can comment on this.

But a lot of sustaining costs or capital costs are actually drilling pads, facilitates and the drilling costs. Tim, I think we've seen significant cost drops there.

Yeah. On the thermal side, Steve, you're right.

It's basically pad drilling. And what we're seeing is very good cost savings, not only on the rates, but the productivity is very, very much improved from what we've seen previously.

So, it's a twofold piece that's helping us there.

Is there any way to think about like per barrel what the cost might have been historically in the in situ business and where they may be going now?

I think we've seen probably – right now, I'd say, probably 20% to 25% reduction in costs.

Okay. Thanks.

Thank you. Steve, you mentioned earlier – or either you or Tim mentioned that Horizon, the hard part is behind you and there is relatively – the scope of what needs to be completed going forward is relatively small.

Just wondering about the Q4 2017 first oil timing, whether that's – is it sort of an October date you have in mind and whether or not there is a chance that it gets pushed into Q3? Thanks.

We'll still stick it to our Q4 2017, Mike. It's a little early.

I would say our project teams and our commissioning and startup teams have done an excellent job here at 2B, but it's too early for us to say that we're going to come in early. We'll just wait and see how the first and second quarter shakes out before we can make any commitment to whether we're going to be early or where we're going to be in Q4.

But we are targeting to be in the first half of Q4 and not the last half. Obviously, we want to start up in the summer – or in the fall, I should say.

Right. Thanks, Steve.

That's all for me.

Thanks, Virgil. Thank you everyone for attending our conference call this morning.

As was discussed today, Canadian Natural strengths lie in our effective strategy, our large well-balanced and diversified asset base, including a combination of long life, low decline assets and high-quality low-capital exposure projects. This, along with a strong financial position and effective capital allocation, makes Canadian Natural very robust, sets us apart from our peer group and ensures we achieve our goal of maximizing shareholder value.

If you have any further questions, please give us a call. Thank you again.

And we look forward to our fourth quarter and year-end conference call in early March. Thank you and goodbye.