The Premium Value, Dened Growth, Independent.

Annual Report 2006

Discipline
Opportunity
Strategy
COMPANY DEFINITION
Throughout the annual report, Canadian Natural Resources Limited
is referred to as us, we, our,Canadian Natural, or the
Company.
CURRENCY
All amounts are reported in Canadian currency unless otherwise
stated.
ABBREVIATIONS
ACC Anadarko Canada Corporation
AECO Alberta natural gas reference location
AIF Annual Information Form
bbl barrel
bbl/d barrels per day
bcf billion cubic feet
bcf/d billion cubic feet per day
boe barrels of oil equivalent
boe/d barrels of oil equivalent per day
C$ Canadian dollars
CBM Coal Bed Methane
CNUG Canadian Natural Upgrader
CO
2
Carbon Dioxide
CO
2
E Carbon Dioxide Equivalents
CSS Cyclic Steam Stimulation
EOR Enhanced Oil Recovery
E&P Exploration and Production
FPSO Floating Production, Storage and Offtake Vessel
GHG Greenhouse Gas
Horizon Project Horizon Oil Sands Project
mbbl thousand barrels
mbbl/d thousand barrels per day
mboe thousand barrels of oil equivalent
mboe/d thousand barrels of oil equivalent per day
mcf thousand cubic feet
mcf/d thousand cubic feet per day
mmbbl million barrels
mmboe million barrels of oil equivalent
mmbtu million British thermal units
mmcf/d million cubic feet per day
NGLs Natural gas liquids
NYMEX New York Mercantile Exchange
NYSE New York Stock Exchange
OGIP Original Gas In Place
OOIP Original Oil In Place
SAGD Steam Assisted Gravity Drainage
SCO Synthetic light crude oil
SEC Securities and Exchange Commission
tcf trillion cubic feet
TSX Toronto Stock Exchange
UK United Kingdom
US United States
US$ United States dollars
WCS Western Canadian Select crude oil blend
WCSB Western Canadian Sedimentary Basin
WTI West Texas Intermediate
CAUTIONARY STATEMENTS
Certain information regarding the Company contained herein may
constitute forward-looking statements under applicable securities
laws. Such statements are subject to known or unknown risks and
uncertainties that may cause actual results to differ materially from
those anticipated or implied in the forward-looking statements.
Please refer to page 42 for the complete special note regarding
forward-looking statements.
All production and sales statistics represent Canadian Naturals
working interest amounts before deduction of royalties unless
stated otherwise. Where volumes are reported in barrels of oil
equivalent (boe), natural gas is converted to oil at six thousand
cubic feet per barrel. This conversion may be misleading, particularly
when used in isolation, since the 6 mcf:1 bbl ratio is based on an
energy equivalency at the burner tip and does not represent the
value equivalency at the well head. Methodologies for determining
annual reserves are described on pages 37 to 41.
This report also includes references to nancial measures commonly
used in the oil and gas industry that are not dened by Generally
Accepted Accounting Principles (GAAP). The Company uses these
measures to evaluate its performance, however they should not be
considered an alternative to or more meaningful than net earnings.
COMMON SHARE DIVIDEND
The Company paid its rst dividend on its common shares on
April 1, 2001. Since then, dividends have been paid on the rst day
of every January, April, July and October.
The following table, restated for the two-for-one subdivisions of the
common shares that occurred in May 2004 and May 2005, shows the
aggregate amount of the cash dividends declared per common share
in each of its last three years ended December 31.
2006 2005 2004
Cash dividends declared
per common share $ 0.300 $ 0.236 $ 0.200
NOTICE OF ANNUAL MEETING
Canadian Naturals Annual and Special Meeting of the Shareholders
will be held on Thursday, May 3, 2007 at 3:00 p.m. Mountain Daylight
Time in the Ballroom of the Metropolitan Centre, Calgary, Alberta.
METRIC CONVERSION CHART
To convert To Multiply by
barrels cubic metres 0.159
thousand cubic feet cubic metres 28.174
feet metres 0.305
miles kilometres 1.609
acres hectares 0.405
tonnes tons 1.102
General Information
Maintain Discipline
Embrace Opportunities
Operate Strategically
Our business strategy is solid and proven. Our teams continue to
demonstrate discipline in a challenging environment, capitalizing on
opportunities as they arise.
2 Highlights
4 Letter to Shareholders
8 Our World-Class Team
10 Review of Operations
14 Marketing
17 Health & Safety, Environment & Community
20 The Assets
37 Year-End Reserves
42 Managements Discussion and Analysis
72 Managements Report
73 Managements Assessment of Internal
Control over Financial Reporting
74 Independent Auditors Report
75 Consolidated Financial Statements
78 Notes to the Consolidated Financial Statements
99 Supplementary Oil & Gas Information
104 Ten-Year Review
106 Corporate Information
Canadian Natural AR2006
Page 2 of 107
Highlights
2006 2005 2004
FINANCIAL ($ millions, except per share data)
Revenue, before royalties $ 11,643 $ 11,130 $ 8,269
Net earnings $ 2,524 $ 1,050 $ 1,405
Per common share basic
(1)
$ 4.70 $ 1.96 $ 2.62
diluted
(1)
$ 4.70 $ 1.95 $ 2.60
Adjusted net earnings from operations
(2)
$ 1,664 $ 2,034 $ 1,405
Per common share basic
(1)
$ 3.10 $ 3.79 $ 2.62
diluted
(1)
$ 3.10 $ 3.78 $ 2.60
Cash flow from operations
(2)
$ 4,932 $ 5,021 $ 3,769
Per common share basic
(1)
$ 9.18 $ 9.36 $ 7.03
diluted
(1)
$ 9.18 $ 9.33 $ 6.98
Capital expenditures, net of dispositions $ 12,025 $ 4,932 $ 4,633
Long-term debt $ 11,043 $ 3,321 $ 3,538
Shareholders equity $ 10,690 $ 8,237 $ 7,324
OPERATING
Daily production, before royalties
Crude oil and NGLs (mbbl/d)
North America 235 222 206
North Sea 60 68 65
Offshore West Africa 37 23 12
332 313 283
Natural gas (mmcf/d)
North America 1,468 1,416 1,330
North Sea 15 19 50
Offshore West Africa 9 4 8
1,492 1,439 1,388
Barrels of oil equivalent (mboe/d) 581 553 514
(1) Restated to reect two-for-one share splits in May 2004 and May 2005.
(2) Adjusted net earnings from operations and cash ow from operations are non-GAAP terms that represent net earnings adjusted for certain items of a non-
operational and non-cash nature. The Company evaluates its performance based on these measures. Adjusted net earnings from operations and cash ow from
operations may not be comparable to similar measures presented by other companies.
06
05
04
03
02
4,932
5,021
3,769
3,160
2,254
Cash flow from operations (C$ millions)
06
05
04
03
02
581
553
514
459
421
Total production, before royalties (mboe/d)
06
05
04
03
02
62.15
57.63
25.63
16.34
11.70
Closing TSX share price
(C$/share, adjusted for 2004 and 2005 share splits)
06
05
04
03
02
2,256
1,804
1,674
1,526
1,497
Company gross conventional proved reserves (mmboe)
Drilling activity (net wells, excluding stratigraphic test/service wells) 2006 2005 2004
North America 1,351 1,617 1,099
North Sea 8 13 11
Offshore West Africa 4 4 3
1,363 1,634 1,113
Core undeveloped landholdings (thousands of net acres)
North America 12,785 10,947 11,523
North Sea 299 352 565
Offshore West Africa 207 426 886
Company gross proved reserves (before royalties)
Conventional crude oil and NGLs (mmbbl)
North America 1,043 785 695
North Sea 299 290 303
Offshore West Africa 145 148 125
1,487 1,223 1,123
Conventional natural gas (bcf)
North America 4,507 3,378 3,202
North Sea 37 29 27
Offshore West Africa 69 83 81
4,613 3,490 3,310
Barrels of oil equivalent (mmboe) 2,256 1,804 1,674
Net proved reserves (after royalties)
Conventional crude oil and NGLs (mmbbl)
North America 887 694 648
North Sea 299 290 303
Offshore West Africa 130 134 115
1,316 1,118 1,066
Conventional natural gas (bcf)
North America 3,705 2,741 2,591
North Sea 37 29 27
Offshore West Africa 56 72 72
3,798 2,842 2,690
Barrels of oil equivalent (mmboe) 1,949 1,592 1,514
Net oil sands proved mineable reserves (after royalties)
Bitumen (mmbbl) 1,853 1,848
Synthetic crude oil* (mmbbl) 1,596 1,626
* SCO reserves are based upon upgrading of the bitumen reserves.
The reserves shown for bitumen and SCO are not additive.
Highlights
Page 3 of 107
Canadian Natural AR2006
Page 4 of 107
STRATEGIES AND THE BUSINESS ENVIRONMENT
Commodity prices remained strong, but volatile, during 2006
with both natural gas and crude oil pricing dropping during the
second half of the year due to a combination of buildup of product
inventories and reduced political and weather risk.
However, the robust price environment of the past two years has
resulted in signicant cost ination throughout all of our basins.
In particular, for our Western Canadian natural gas business, the
cost increases have been excessive. High demand has resulted in
increased pricing but this was coupled with inefciencies to create
a very unfavorable cost environment for organic growth. Efciency of
many service crews were low due to a lack of trained personnel. This
was combined with an unusually warm start to the 2005/6 winter
drilling season and the resultant aggressive attempts by industry to
complete drilling programs prior to the end of the winter operating
season. The result was some of the highest nding and development
costs in history for the natural gas industry in Canada.
We responded by optimizing our capital allocation to only the
highest return on capital projects. We signicantly cut natural gas
spending and shifted capital into heavy crude oil drilling.
While we control an extensive asset base of heavy crude oil
properties, available markets have historically precluded a large
ramp up production. Our heavy crude oil marketing plan has sought
to expand available markets through a combination of product
blending, expansion of pipeline systems to new geographic regions
and the encouragement of new conversion capacity. During 2006,
Canadian Natural and industry had major success in this regard
through two pipeline reversals expanding capacity into the Cushing
hub and, importantly for Canadian Natural, to the US Gulf Coast
as we have committed capacity on this line for a period of 5 years.
As a result of these developments the market for Canadian heavy
crude oil greatly expanded. As a consequence, our heavy crude
oil discount to light crude oil migrated towards the higher priced
Mayan heavy benchmark crude.
While we experienced heavy crude oil differentials of 41% of the
WTI benchmark price entering 2006, by April 2006 it had reduced
to 28% and averaged 29% over the last nine months of the year.
These reduced differentials coupled with a more controllable cost
environment in heavy oil development results in exceptionally
strong economics and a re-emphasis on this type of activity in 2006
and 2007.
Canadian Naturals strategy allows us to allocate capital to maximize
returns and remains predicated on:
Maintaining a large project portfolio in every basin we operate
to enable us to continually high-grade current developments.
Maintaining balance in our product mix, project time horizons
and nancing strategies.
Continually balancing between acquisitions and exploration,
but remain focused on low cost exploitation.
Identifying and completing opportunistic major acquisitions.
Controlling costs through area knowledge and domination of
core focus regions.
NORTH AMERICAN NATURAL GAS MAINTAINING
DISCIPLINE / CAPTURING OPPORTUNITY
We remain a signicant producer of natural gas in Canada,
representing approximately 10% of western Canadian output.
Further, our undeveloped land base represents the largest portfolio
in the industry - meaning that we have exposure to virtually every
play type found in the basin. Natural gas remains our largest single
product sold at about 42% of our production mix in 2006, similar
to the 43% recorded in 2005.
The challenges for organic growth of natural gas were articulated
earlier. In our view, the cost structure erodes gas economics
considerably when compared to that achieved for heavy oil.
We were one of the rst in the industry to address the effects of this
ination through reallocation of capital from natural gas into heavy
N. MURRAY EDWARDS,
VICE- CHAIRMAN OF THE BOARD
ALLAN P. MARKIN,
CHAIRMAN OF THE BOARD
Letter to Shareholders
For Canadian Natural, 2006 was a year of both challenges and tremendous opportunities. Higher commodity prices were
accompanied by signicant cost ination throughout each of our basins, meaning that we had to be even more vigilant
ensuring full cycle economics were maintained. Challenge, however, often leads to opportunities as well and 2006 presented
a compelling opportunity to acquire Anadarko Canada Corporation (ACC). We were well positioned to seize upon this
opportunity, in the process adding tremendous upside potential into our natural gas project portfolio.
STEVE W. LAUT,
PRESIDENT &
CHIEF OPERATING OFFICER
JOHN G. LANGILLE,
VICE- CHAIRMAN OF THE BOARD
oil during the second quarter of last year. This activity reduction was
expanded throughout 2006 and carries into 2007. For example,
while we drilled 975 natural gas wells in 2005, we had reduced
that to 732 in 2006 with a further reduction to 423 planned
for 2007.
Challenges to industry often create opportunity and during the
second half of 2006 we were able to seize upon the ability to
acquire ACC. It was our condence in our ability to deliver the
Horizon Project coupled with our strong balance sheet that enabled
us to complete this transaction.
We consider the ACC assets to be high quality, long life properties
with signicant upside beyond the proved reserves in fact, it
may prove to be the most signicant natural gas acquisition in
our history. The assets provide exposure to a variety of play types
and greatly complement our existing asset base. In addition to
signicant production and undeveloped land, a vast infrastructure
and processing capacity will benet both our heritage properties
and new developments. We believe ACCs proved reserves
were acquired at an attractive price, particularly given the costs
of organic growth in the basin; and, in the process we have
signicantly increased our project portfolio available to drive future
organic growth.
Integration of people and assets is now complete and we are
looking forward to developing our expanded and exceptional
portfolio of natural gas opportunities. The majority of the ACC
team has been retained, further bolstering our own depth. We look
forward to working together with each of these team members
over the coming years as we maximize the value of the expanded
asset base. Already, our ve and ten year drilling programs are
reecting alternatives to maximizing the development plan of our
expanded project portfolio.
NORTH AMERICAN CRUDE OIL DISCIPLINED USE OF
TECHNOLOGY TO CREATE VALUE
Success in our Canadian crude oil operations continued with
production increasing 6% over 2005 levels and heavy crude oil
pricing reaching record levels during the year. We remain the leading
producer of heavy crude oil in Canada and with large amounts of
original oil in place identied on our lands, we are in position to
continue to grow this production.
At Pelican Lake our waterood and polymer ood enhanced oil
recovery (EOR) schemes are adding signicant reserves at low
cost following a disciplined approach to optimizing results. We
evaluated and tested alternative processes over the past three years
and are now in the process of fully implementing our ndings with
the result that proved and probable net reserves at Pelican Lake
increased by 97 million barrels of oil equivalent during 2006. We
believe that our approach of piloting technologies in small areas
of the pool afforded us the greatest exibility to try different
approaches without risking damage to the reservoir. We now
believe that the waterood / polymer ood EOR is the optimal
solution for the majority of the reservoir. Further, we are actively
looking for other pools in which we can leverage this knowledge.
On our conventional heavy crude oil properties we have procured
the services of two fully dedicated slant drilling rigs to complete our
programs over the next 3.5 years. By committing to this service for
an extended term we can better control efciencies and ensure that
well trained crews are available to us.
At our thermal in-situ projects, Primrose North continues to
outperform our expectations with production having increased by
19% in 2006 over 2005. Future developments are also underway
with the 40,000 barrel per day Primrose East targeted for rst
oil in 2009 and plans for the 30,000 barrel per day Kirby in-situ
development with rst oil forecast in the rst half of the next
decade. Resource delineation drilling continues on each of these
properties along with Birch Mountain and Gregoire Lake.
Here again, we continue to evaluate technologies to maximize
resource potential. For example, use of geo-steering technologies
for drilling of horizontal thermal wells allows us to better control
and place the drill bit. This in turn expands an economically drillable
resource. Examination of producing reservoirs has also expanded
our knowledge of reservoir management. For example, we now
believe that we can improve recovery factors on our Primrose
property through narrowed well spacing and use of various follow
up processes.
In all, we have identied ten separate increments of in-situ
developments which will seek to access our vast heavy oil resource
potential over the next several years.
Letter to Shareholders
Page 5 of 107
Canadian Natural AR2006
Page 6 of 107
PROGRESS ON OUR FOUR PERFORMANCE INDICATORS
To this end we continue to pursue our three pronged marketing
strategy such that market price risk does not impair our ability
to develop this portfolio. The rst two elements of this strategy
were previously discussed and have shown remarkable success.
The third element of this strategy is the continued development of
conversion capacity for heavy crude oil. To this end we reviewed the
merits of building an additional upgrader outside of the Horizon
Project to eliminate market risks on the majority of our planned
in-situ developments. While such a plan would over time maximize
the value of our heavy crude oil properties for shareholders, there
is growing uncertainty relating to increased environmental costs for
upgraders located in Canada and inationary capital cost pressures.
Based upon the results of the Scoping Study, which identied
growing concerns relating to increased environmental costs for
upgraders located in Canada, inationary capital cost pressures and
narrowing heavy oil differentials in North America, the Company
has, at this point in time, deferred the DBM and EDS pending
clarication on the cost of future environmental legislation and a
more stable cost environment.
INTERNATIONAL OPERATIONS DISCIPLINED
MANAGEMENT OF COSTS TO DRIVE CASH FLOW
Our International operations represented a signicant portion of
2006 growth with increases in Offshore West Africa being partially
offset by lower volumes in the North Sea. In 2007 the emphasis
on our international assets is focused on cost control in order to
maximize cash ows. However, selective growth initiatives are
underway in both basins.
Average light crude oil production in the North Sea decreased
by about 8,500 barrels per day or 12% from the previous year,
primarily the result of expanded maintenance activities. We continue
to execute our strategy in the North Sea through exploitation
beyond the optimization of existing facilities and wateroods
into more near pool developments and exploration such as the
ongoing development at the Columba Terraces and the Lyell Field.
This maximizes utilization of the common facilities and ultimately
extends all elds economic lives.
Our Offshore West Africa crude oil production volumes from Cte
dIvoire increased by 60% to about 36,700 barrels per day. This
improvement reected better than planned production from the
East Espoir development as well as a full year of production from the
deep water Baobab Field and the commencement of production
from the West Espoir satellite development late in the year.
The year was not without its challenges, however, as sanding issues
experienced at the Baobab eld expanded - with the result that
5 of 10 producer wells were shut in by the end of 2006, leaving
approximately 15,500 barrels per day of production off-line. While
mitigation plans have been identied they are reliant upon the
procurement of a deep water rig. To date we have not been able to
secure these services due to high industry demand.
We expect continued growth in Offshore West Africa where the
Olowi Field located offshore Gabon received local government
approvals in 2006 and Board of Director sanction for development in
November 2006. Development plans include a oating production,
storage and offtake vessel (FPSO), handling production from four
shallow water wellhead towers. First oil is currently targeted for late
2008, with an anticipated plateau of 20,000 barrels per day.
HORIZON OIL SANDS PROJECT DISCIPLINED
EXECUTION OF OUR PROJECT STRATEGY
Phase 1 of this bitumen mining and integrated upgrader project
made signicant progress during the year, entering 2006 at 19%
complete and exiting 57% complete. The Horizon Oil Sands Project
(Horizon Project) beneted from a disciplined process in which
signicant front end engineering efforts afforded us the ability to
obtain the majority of the Phase 1 construction costs under lump
sum bids. This high degree of cost certainty was augmented by
an expanded hedging program which ensured that adequate free
cash ow to complete the four year construction effort would
be available. While there was a cost associated with the hedging
program, it was the combination of these two elements which
enabled Canadian Natural to retain a 100% working interest in
the Horizon Project without having to compromise on any of our
conventional developments.
Our emphasis on front end planning has provided Canadian Natural
with a strong understanding of both what we are building and,
just as importantly, how we are going to build it. We have forged
relationships with a variety of contractors from around the world
and together have provided a strong denition of the construction
execution plan. Further, this high project denition reduces the
risks associated with late engineering or scope changes which
have historically resulted in signicant cost revisions for oil sands
builders. Finally, we have developed a unique and creative labour
strategy that has enabled workers of all labour afliations from
across Canada to participate in the construction effort as equals.
This strategy is facilitated through our y in/y out capability from
our on-site air strip. Today, workers from all across Canada regularly
y on one of 55 ights per week, direct to our site and home again,
on various shifts which accommodate their lifestyles.
06
05
04
03
02
9.18
9.36
7.03
5.88
4.41
Cash flow from operations per share (C$/share)
06
05
04
03
02
10.8
10.3
9.6
8.5
8.2
Daily production, before royalties,
per ten thousand shares (boe/d)
PROGRESS ON OUR FOUR PERFORMANCE INDICATORS
With the Horizon Project 57% complete at the end of 2006 and
targeted to achieve approximately 90% completion at the end
of 2007, at this time we continue to expect nal costs not materially
different than our original $6.8 billion target cost with an on-
schedule commissioning in the third quarter of 2008. While there
are still numerous challenges and inationary pressures, our teams
have performed very well, again highlighting a cultural focus on
project execution.
We are targeting to have revised cost estimates for Phases 2 and 3
development in mid 2008. By that time we will better understand
the impacts of cost and service ination as well as the prospects
for higher than planned commodity pricing. We are driven to
ensure that full cycle economics of the prospect are not impaired
and as such will consider various alternatives to the development,
nancing and timing of the project. Beyond this, future phases
of development are realistic extensions of the plan, ultimately
targeting for daily production of approximately 500,000 barrels per
day of light synthetic crude oil from the leases. In total, we estimate
resource potential of 6 billion barrels of mineable bitumen at the
Horizon Project.
FINANCIAL STRENGTH A CORE ELEMENT OF OUR
BUSINESS STRATEGY
We continue to believe in strong scal management. In particular,
we have a very strong hedge program underpinning our 2007 cash
ows and this, combined with better than expected heavy crude
oil differentials and continued operating and capital discipline,
is expected to help facilitate our return to the mid-range of our
targeted debt levels in 2008.
DEFINED PLAN
The Canadian Natural team is proud to be able to provide a
transparent strategy and growth prole to its investors. We still
target to grow, over an extended period, each of our four per-share
metrics by an average of 10% per annum and believe that we have
the assets to deliver on it.
In addition to the production growth aspect of the plan, the
migration of the production mix from one dominated by natural gas
and heavy crude oil to one dominated by light crude oil and natural
gas means that the economic sustainability of the organization is
enhanced throughout the business cycle. Reducing overall exposure
to heavy crude oil differentials and avoiding reliance on third parties
to develop the markets for our products was a key consideration
in our plans.
The Dened Plan, however, is not a static entity. We continually
adjust and rene this Plan to ensure it optimizes returns. For example,
our reaction to inationary pressures has altered the timing of
organic natural gas expansion, while the acquisition of ACC lands
has increased short term production and greatly expanded the long
term development potential of the organization.
Similarly with respect to heavy crude oil developments and
future phases of the Horizon Project we will continue to steward
capital in the optimal fashion. While we have the assets and
drive to signicantly grow the business, this will not occur at all
costs. Project timing will be accelerated or deferred to optimize
development economics. While we are currently beneting from
high commodity prices we believe it to be imprudent to assume
this continues for planning purposes and so we insist on more
conservative price assumptions in our long-term planning models.
Over that long-term we still target 10% growth but the current
cost environment means that we must be even more diligent in
optimizing that Plan.
Management would like to again thank our entire team for
continuing to deliver the Plan. We believe that Canadian Natural
has the people, assets and plan to continue to deliver shareholder
value for years to come. As a team, we remain committed to
developing people to work together to create shareholder value
by doing it right with fun and integrity.
06
05
04
03
02
6.4
4.8
4.3
4.0
3.3
Conventional proved and probable reserves
per share, before royalties (boe)
06
05
04
03
02
56.41
60.44
33.13
23.35
19.57
Conventional net asset value per share
(C$/share, adjusted for 2004 and 2005 share splits)
SEE NOTE 5 ON
PAGE 102 FOR CALCULATION
Letter to Shareholders
Page 7 of 107
ALLAN P. MARKIN
Chairman of the Board
N. MURRAY EDWARDS
Vice-Chairman of the Board
JOHN G. LANGILLE
Vice-Chairman of the Board
STEVE W. LAUT
President &
Chief Operating Ofcer
PROGRESS ON OUR FOUR PERFORMANCE INDICATORS (CONTINUED)
Canadian Natural AR2006
Page 8 of 107
Lonnie Abadier, Walday Abeda, Hazel Aberdein-Quirie, Mona Abravesh, Libby Ackerley, Trevor Ackerman, Janine Adams, Mike
Adams, Debra Addinall, Kike Aderibigbe, James Agate, Jennifer Ahern, Sarshar Ahmad, Sarah Aho, Garrisen Ailsby, Fiona Aitken,
Adebayo Akinpelu, Sina Akinsanya, Joseph Albano, Chris P. Alderson, Bruce Alexander, Gregory Alexander, Elena Algazina, Mohi
Alghazali, John Allan, Selena Allan, Jill Allen, John Allen, Simon Allerton, Devin Allibone, Karen Almadi, Michael Almasi, Gordon
Almond, Robert Almond, Jocelyn Alonso, Nelson Alook, Cindy Alpaugh, Laurel Alston, Susan Alwood, Ulises Amador, Gregory
Amalia, Joann Aman, Traore Amara, Clark Ambler, Jonah Amedu, Jonah Amedu, Donald Ames, Roxanne Amrolia, Sylvia Anaka,
Eric Andersen, Jan Andersen, Troy Andersen, Allan Anderson, Barry Anderson, Bruce Anderson, Findlay Anderson, Georgina
Anderson, Jeremy Anderson, Kelvin Anderson, Leonard Anderson, Linsey Anderson, Murray Anderson, Perri Anderson, Richard
Anderson, Steve Anderson, Tony Anderson, Peter Andrekson, Janet Andrew, Bob Andrews, Todd Andrews, Erica Andrusiak, Sherley
Angers, Carolyn Angus, Shehzad Anjum, Kathryn Anthony, Helen Antle, Kathy Antonishyn, Shelley Antonuk, John Argan, Humberto
Arias, Roxcie Arkinstall, James Arkley, Anthony Armstrong, Darryl Armstrong, Randall Armstrong, Rob Armstrong, Neil Arsenault,
Paul Arsenault, Bala Arunachalam, Anthony Ash, Jim Asmus,
Jacqueline Asso, Sialla Assohou, Francklin Assoko-Mve, Andrew
Astalos, Maguy Atheba, John Atkinson, Kyle Atkinson, Nicole
Atkinson, Gordon Au, Maurice Aubin, Jason Auch, Bernard Auger,
Richard Augustyn, Maria Avila, Kevin Babuik, Michael Baddeley,
MaryAnn Baes, Brian Bahlieda, Dave Baier, Janice Baik, Michael
Baik, Dwayne Bailer, Rod Bailer, Judy Bailey, Robert Bain, Leon
Bakaas, Chris Baker, Shane Baker, Sharon Baker, Reginald
Baldock, Christopher Baldwin, Mark Baldwin, Robert Baldwin,
Vaughn Baldwin, Joel Balkam, Gary Ballas, Ronnie Ballas, Sheldon
Ballas, Brenda Balog, Corrie Balogh, Ladji Bamba, Mamadou
Bamba, Neville Banak, Darwin Banash, Junet Banawa, Rechelle
Baniqued, Bob Banks, Teresa Banny, Chris Bantli, Inge Bantli,
Lawrence Baraniuk, Garry Bardoel, Larry Bardoel, Pamala Bare,
Sharon Barker, Steve Barker, Michael Barnes, Michael Barnes,
Beata Barnett, Javier Baroja, Deborah Barr, Kenneth Barrett, Phrona Lisa Barrett, Barry Barrs, Darcy Barry, Carol Barss, Carrie
Barter, Marty Bartman, Julius Bascon, Calvin Bast, Michael Batac, Cheryl Bateman, Lisa Bateman, Daphne Bates, Selena Bath,
Mark Batovanja, Brenda Battyanie, Jeremy Battyanie, Jackie Bauer, Lydell Bauer, Ronnie Bauer, Kevin Bauman, Breanne Bawol,
Veronica Bayley, Raymond Bazan, Denise Beairsto, Colin Beaman, Harold Beamish, Chad Beaton, Aura Beattie, Laurier
Beaunoyer, David Bechtel, Brent Beck, Chris Becker, Elke Becker, Holly Becker, William Bedford, Gurpreet Bedi, Kevin Beebe,
Ewan Beenham, Loren Behrens, Nawar Belah, Jeremy Belair, Guy Belanger, Kelly Belanger, Lesley Belcourt, Betty Belenky, Calvin
Bell, David Bell, David Bell, Faye Bell, Jon Bell, Larry Bell, Reg Bellanger, Lorne Bellows, Remie Belmonte, Leah Belsher, Ahmed
Bendahmane, Khalida Bendahmane, Brad Bendick, David Bendrey, Robert Benko, Lene Benner, Erick Bennett, Jennifer Bennett,
Brad Benoit, Brad Bensmiller, Shelly Bensmiller, Chad Benson, James Bentley, Robert Bercha, Ken Berenguer, Linda Beresh,
Debbie Berg, Jaimie Berg, William Berg, Jeffrey Bergeson, Becky Bergley, David Berlinguette, Henry Berlinguette, Daniel
Bernardo, Joanne Berrade, Murray Bertsch, Jonathon Best, Rodney Best, Jack Besuijen, Stewart Bettinson, Ashley Bexson, Marc
Bickham, Jennifer Bidlake Schroeder, Corey Bieber, Beata Biel, Douglas Bielech, Rachelle Bien-Barnard, Inge A. Biener, Monica
Billings, Roger Bintz, Warren Birch, Tim Bird, Jane Birkett-Hodson, Shane Bischoff, Gillian Bishop, Hope Bishop, Jeff Bishop,
Kathy Bishop, Travis Bishop, Paula Bissell, Ron Bisset, Darwin Bittner, Kevin Bjornstad, Adam Black, Chad Black, Craig Black,
David Black, Kenneth Blackhall, Kerri Blackmore, Olivera Blagojevic, Michael Blair, Deana Blais, David Blake, Evan Blake,
Alvaro Blanco, Chris Blatchly, Shawn Blaydes, Parrish Blizard, Judith Blomdal, Allissa Blondin, Ellen Bloomeld, Gregory
Blundon, Robin Bly, Kathryn Bobye, Allan Boddy, Brad Bodnar, Dennis Boehmer, Michael Boer, Kent Boerrichter, Kyle Boerrichter,
Darcy Boettger, Warren Bogelund, Marty Boggust, Gordon Bohrson, Claude Boily, Peter Boisvert, Michael Bolianatz, Greg Bolin,
Marguerite Bonnet, Patricia Booklall, Jayne Booth, Charlene Boraas, Barry Borbely, Adriana Borbon, Albert Bordeleau, Michael
Born, Jon Borstel, Blair Bosch, Dave Bosch, Dave Bosek, Greg Boshaw, Enrica Bosoni, Keith Bottriell, Suzanne Boudignon, Rick
Bourassa, Sheldon Bourassa, Delwood Bourke, Daryl Bourque, Daniel Boutin, Mark Bowden, Jim Bowers, Slade Bowers, Clinton
Bowles, Gordon Bowzaylo, Dale Boychuk, Doug Boyd, Patrick Boyd, Charline Boyer, Lorraine Boyle, Neil Bozak, John Brabec, Dave
Bracey, Bryan Bradley, Hugh Bradley, Jason Bradley, Peggy Bradner, Jan Bradshaw, Marianne Brady, Mary Jane Brady, Linda
Bragg, Jo-Ann Brake, Jessica Braley, Myron Brataschuk, Brad Braun, Colin Brausen, Tara Brechin, Sharon Breitkreuz, Joseph
Breland, Paul Breland, Shawn Brennan, Barry Brenton, Roxane Bretzlaff, Olaf Breukel, Butch Briggs, Denis Brisebois, Robert
Brisson, Donald Britton, Frances Broadfoot, Shawn Brockhoff, Kelly Broda, Brian Brodbin, Dwayne Brodziak, John Brogly, Bill
Bromling, Murray Brooker, Andrew Brooks, Dennis Brooks, Tanya Brooks, Jeremy Brown, Julie Brown, Ronald Brown, Steve Brown,
Tracy Brown, Tyler Brown, Leo Browne, Cathy Brownell, Robert Brownless, Christopher Bruce, Shelly Bruce, Fred Brugger, John
Brule, Jason Bryant, Peter Bryenton, Sean Bryson, David Buchan, Stewart Buchan, Joseph Buchanan, Danny Buchinski, Natasha
Buckland, Gordon Buckshaw, Linda Buczkowski, Bill Budd, Raymon Bueckert, Ian Bulloch, Don Bumstead, Douglas Bumstead,
Alan Bunyan, Clarence Bur, Rick Burchby, Trevor Burchenski, Ian Burchette, Jeffrey Burdett, David Burdziuk, Brent Bureau, Keith
Bureau, Grant Burgess, Alastair Burke, Crystal Burke, Lyle Burke, Gayle Burnett, Ken Burnham, J. Rick Burns, Sharon L. Burns,
Barry Burt, Gerald Burtch, Corinne Burton, Lisa Bush, Rosemary Bussi, Terry Butchart, Bob Butterworth, Ronald Butts, Leanne
Butz, Tricia Butz, Arnie Bye, Mike Byrtus, Irina Byvald, Joe Cabay, Moraima Caceres, Glennie Cadieux, Mark Cadman, James
Cadrain, Simon Cains, Laura Calder, Leslie Calder, Byron Caldwell, Patrick Caldwell, Tom Callaghan, Darren Calliou, Richard E.
Calliou, Dean Cameron, Mike Cameron, Brian Campbell, Catherine Campbell, Clayton Campbell, Dean Campbell, Doug
Campbell, Earl Campbell, Nancy Campbell, Robert J. Campbell, Shawn Campbell, Valerie Campbell, Andre Campeau, Wayne
Campeau, Gregory Cane, Brad Canning, James M. Capjack, Barry Carabin, Kathleen Carbury, Fred Cardinal, Lee Cardinal, Myles
Cardinal, Sharon Cardinal, Wayne Cardinal, Suzie Careless, Jim Carey, Joey Carifelle, Ian Carleton, Stephanie Carlson, Wes
Carlson, Albert Caron, Rochelle Caron, Michael Carr, Diego Carrera, Kim Carrol, Ian Carroll, Shayne Carroll, Robert Carson,
Eduardo Cartaya, Marilyn Carter, Gary Case, Mary-Jo Case, Trevor Cassidy, Lance Casson, Mike Catley, Steve Caven, Richard
Cawaling, Chris Cawley, Ciara Celis, Marco Celis, Samuel Cervantes, Andrew Chaisson, Sachi Chakravarty, Erin Chamberlain,
Lise Champagne, Alan Chan, Anly Chan, Jack Chan, Jik Chan, Sarah Chan, Tim Chan, Wayne Chandler, Koh Chang, Calvin
Chapman, Melody Chapman, Todd Chapman, Deon Chappell, Harry Chappell, Darryl Charabin, Cynthia Chartrand, Roger
Chartrand, Susan Y. Chase, Leon Chateauneuf, Arundhati Chatterjee, Sumit Chatterjee, Teecy Chau, Siddique Chaudhry, Dawn
Chau-Lam, Gary Chaulk, Jackson Chaves, Rinet Maria Chaves-Thissen, Carl Cheeseman, Brian Chen, Mike Chernichen, Bill
Chernish, James Cheung, Ricardo Chiang, Gloria Chick, Patricia Childs, Al Chin, Melaine Chin, Sharon Chin, Jamie Chisholm,
William Chiverton, Randall Chodzicki, Jessica Choi, Raymond Chong, Brett Chorney, Wayne Chorney, Lynn Chotowetz, Sherry
Chow, Shayela Chowdhury, Alphonse Chretien, Mark Christensen, Ruth Christensen, Heidi Christensen Brown, Marianne
Christianson, David Christie, Shawn Christie, Steven Christie, Rob Christopher, Andy Chu, Ken Chudleigh, John Chuiko, Sharon
Chung, Heather Church, Ronni Church, Kadidiatou Cisse, Magda-Christina Ciulavu, Michael Clapham, Bryan Clapperton,
William Clapperton, Amanda Clark, Andrea M. Clark, Brent Clark, Evan Clark, Janice Clark, John Clark, Ken Clarke, Martha
Clarke, Olivia Clarke, Sanja Clarke, Shandon Clarke, William J. Clarke, Walter Clarkson, Greg Clegg, Cory Clement, Leah Clewes,
Brooke Coburn, Dale Coburn, Judith Cochran, John Coers, Charles Coffey, Rob Coles, Marc Collie, Grant Collier, Curtis S. Collins,
Richard Collins, Robert Collins, Rod Collins, Roy Collison, Adam Collyer, John Coloso, George Coman, Ron Compton, Rebecca
Conacher, Mark Connellan, David Conybeare, Brad Cook, Chris Cook, Anna Cooke, Lori Cookson, Rob Coolen, Gary Coombe, Kent
Cooper, Jason Copeland, David Coppard, Robert Coppard, Jean Corbiere, Mark Corell, Elaine Coreman, Rosetta Cormier, Rosario
Corral, Luis Correal, Jim Corson, Lorenzo Cortes, Neil Cortmann, Harry Costello, Neil Costeloe, Brent Cote, Sanga Coulibaly,
Dougie Coull, Kim Coulter, Jack Courchene, Robert Courchesne, Kathryn Courtney, Dave A. Cousins, James Coutts, Gordon
Coveney, Terry Cowan, Richard Coward, Keith Cowger, Cath Cowie, Jonathan Cox, Randy Cox, Wade R. Cox, Nigel Crabb, Harry
Crabtree, Layne Craig, Bruce Crain, Allen Crawford, Marina Crawford, Michael Crawford, Paul Crawford, Beverley Creed, Donald
Cretney, Roger Crichton, Terri Crockett, Shane Croft, Stefan Croft-Bednarski, Christopher Cross, Lloyd Cross, Teresa Cross,
Camille Croteau, Phil Cruickshank, Linda Cruttenden, Anthony Csabay, Will Csanyi, Jeff Cullen, Corinna Culler, Darrel
Cunningham, Davis Cunningham, Tara Cunningham-Caneld, Arley Currie, David Currie, Brent Curtis, Paul Curtis, Troy Curzon,
Dale S. Cusack, Kenneth Cusack, Pat Cusack, Ral Cusson, Midge Cuthill, Don Cutting, Chris Cyr, Les Czernicki, Kevin dAbadie,
Victor Daboin, Greg Dacyk, Fakhry Dadashev, Gary Dahl, Hamid Dahmani, Eliane Dakaud, Brittany Dalby, Patrick Dale, Joey
Daley, Layne Dalgetty-Rouse, Gary Daly, Loren Damer, Walter M. Danchak, Beth Daniel, Mike Danis, Gene Danyluk, Peter
Danyluk, Alan Dar, Eric Dargis, Mark Darling, Lynne Darlington, Merl Darragh, Wigo Dascalescu, Bruce Davidson, Graham
Davidson, Louise Davidson, Scott Davidson, Todd Davidson, Brian Davies, Lynne Davies, Frank Davis, Graham Davis, Greg
Davis, Kenneth Davis, Randall Davis, Robert Davis, Sarah Davis, Jeffrey Davison, Peter Davison, Leonard Dawe, David Day,
Robert Day, David Dean, Harry Dean, Martha Dean, Douglas DeAvila, Trevor Debler, Ryan DeBruyne, Derek Dechaine, James
Dechaine, Raymond Dechaine, Roland Dechesne, Sheldon DeFord, Phil DeGagne, Mervin J. Degenstien, Barbara Deglow, Bonnie
Deis, Eric deKock, Ryan DeLeeuw, Natalie Delfs, Franco DellOvo, Benita DeLorenzo, Benito DeLorenzo, Brent Delorme, Michael
Delorme, Minette DelosReyes, Liana Delpinto, Tom DeMaid, Charlene DeMone, Antonia Deniega, Susan Dennis, Lee Denny,
Shirley Denny, Colin Derby, Edward Deren, Tom Dereniwski, Shane Derlukewich, Robbert deRuiter, Semir Dervovic, Eugenie Dery,
Ajit Desai, Laurie A. Devey, Fraser Dewar, Todd Dewhurst, Debbie Dewis, Robert Dewis, Karen Deyaegher, Maldip Dhaliwal, Vikas
Dhawan, Keith Diakiw, Karim Diallo, Harry Diamantopoulos, Sumara Diaz, Bob Dicken, Garry Dickie, Blair Dickson, Cameron
Dickson, Stu Didyk, Sue Didyk, Aldo DiFlumeri, Irene Dikau, Anne Dillon, Mike Dingley, Greg Dingwell, Ronald Dinkel, Hubert
Dinn, Issiaka Diomande, Gayle Dionne, Mamadou Diouf, Tim Ditchburn, Al Dixon, Kathleen Dixon, Robin Dixon, Trent Dixon,
Angela Dobb, Derrick Dobrowski, Leanne Dobson, Linnae Dobson, Edward Dochuk, John Dodman, Erin Doepker, Kelly Doepker,
Kim Doepker, Ritchie Doering, Jordy Doerksen, Patrick Dolan, Amy Dolomount, Conrad Dombowsky, Kelly Dombrosky, Brenda
Dombrova, Dan Domke, Kyle Donald, Scott Donaldson, Claire Dong, Tim Donkersloot, Veronica Dooling, Tim Dootka, Allen M.
Dorey, Olga Dost, Ral Doucet, Eddie Douglas, Dahl Dow, Angela Dowd, Jeff Dowd, Phil Downes, Todd Draper, Wayne Draper,
Kenton Dreger, Brian Drew, Lorna Drilon, Don Drindak, Colleen Drury, John Drury, Calvin Duane, Rafael Duarte, Sean Dubelt,
Jeramie Ducharme, Rick Ducharme, Ryan Duckworth, Albert Duczek, Jon Dudley, Rhonda Dudley, Alan Duffy, Morley Dufour,
Simon Dugdale, Douglas Duguid, Albert Duhaime, Doug Duke, Barry Duncan, Lois Duncan, Sean Duncan, Ashley Duniece, Dale
Duniece, Graham Dunlop, Jill Dunlop, Robert Dunn, Keith Dunnett, Judy Dunsmuir, Lyle Dupuis, Dariela Duran, Harvey Dutchak,
Faron Duthie, Terry Dyer, Eugene A. Dyjur, Krzysztof Dzwonek, Julina Eagleson, Gary Earl, Kevin Earle, Julie Easthope, Suzanne
Eaton, Sean Ebert, Jim Eby, Greg Ecker, James Edens, Robert Edgar, Josephine Edoukou, Gordon Edward, Dave Edwards, Sue
Edwards, Fred Eefting, Cindy Egden, Christopher Ehresman, Brian Eitzen, Nicole Eitzen, Devin Ekdahl, Wassim ElChayati,
Douglas Elder, David Eley, Craig Elies, Carole Eliuk, Anthony M. Ell, Robert Elliott, Karen Ellis, Mohamed El-Naas, Tina Emery,
Jerry Enders, Rommel Engler, Joanne English, Kenny Ergang, Terry Erickson, Kresten Eriksen, Polina Ersh, Rick Estrada, Andrew
Etele, Samantha Etherington, Kim Evanoff, Lee Evans, Randy Evans, Tim Evans, Leila Eveleigh, Maureen Evers-Dakers, Clayton
Eves, Doug Eves, Frederick Ewen, Laura Ewen, Douglas Eynon, Kris Eyolfson, Leonard Fabes, Lawrence Facchina, Denis Fagnan,
Heather Fahey, Andy Fankhauser, Chelsea Farrell-Dreger, Randy Farrer, Travis Farrer, Krista Farris, Stefa Fassina, Jayme Faszer,
Arthur Faucher, Everette Fauth, Jamal Fayad, Karman Fayant, Renee Fayant, Tanya Fayant, Tyson Feairs, Brian Fehr, Darwin Feil,
Ira C. Feland, Warren Feland, Andre Yves Felix Tchicaya, Kurt Fenrich, Ken Ference, Brad Ferguson, Helen Ferguson, Mark
Ferguson, Neil Ferguson, Roy Ferguson, Scott Ferguson, Mario Feria-Estrada, Cory Fernets, Ron Fewer, Darren Fichter, Tiziana
Ficocelli, Alan Fiddes, Jane Fielding, Sherman Field, Chris Filgate, Michael Filipchuk, Neil A. Findlay, Kelly Finigan, Bob
Finlayson, James Finlayson, Chad Finnebraaten, Timothy Finnigan, Kristin Finot, Tanya Fir, John Fisera, Calvin Fisher, Darya
Fitsko, David Fittkau, Bill Fitzgerald, John Fitzgerald, Sandra Fitzpatrick, Daniel Fitzsimmons, Colleen Flamont, Ken Fleck, Sean
Fleming, Rodney Flett, Trevor Flood, Mark Flynn, Edmond Foisy, Justin Foisy, Ryan Folkerts, Gregory Fontaine, Leo Fontaine,
Robert Fontaine, Roger Fontaine, Lynn Foo, Harris Foote, Adele Forcade, David Foret, Curtis Formanek, Randy Formanek, Devon
N. Fornwald, Leslie Forrester, Alastair Forsyth, Chantal Fortin, Donald Foster, Dwayne Fotty, Kevin Foulds, Scott Fouracres, Jim
Fowler, Donald Fox, Donna Frame, Roger France, Vicky France, Ron Frank, Richard Franken, Allan Frankiw, Blaine Franklyn,
Shelley Franssen, Leonard Fraser, William Fraser, Barry Frazer, Ken Frazer, Ted Frederickson, Michael Freeman, Stacey Freidin,
Peter French, Roger Frere, Jared Frese, Kurt A. Freyman, Brad Friesen, David Friesen, Kenneth Friesen, Monte Friesen, Kevin Frith,
Tracy Frith, David Fritz, Andrei Frizorguer, Frank Frosini, Colin Frost, Scott Froude, Karen Fujimoto, Doug Fukushima, Jim Fung,
Sarina Fung, Leonard Furlong, Ted Furuya, Josephine Gaddi, Mamta Gadhiya, Leonard Gadowski, Sharon Gaehring, Kelly Gagne,
Scott Gair, Larry Galea, Jaylyne Galey, Ron Gall, Bob Gallant, Michael Gallon, AWilliam Galloway, Yoko Galvin, Andreas Gamp,
Bob Gandhi, Vovel Gapaz, Isabel P. Garbin, Carlos Garcia, Daina Gardiner, Doug Gardner, Lynette Gardner, Jon Gareau, Tim
Gareau, Glen Garton, Stan Garwon, Carlos Garzon, Mark Gaspich, Vanessa Gaudreau, Joseph Gaugler, Maurice Gauthier, Neil
Gauthier, Klaus Gautschi, Steve Gavronsky, Melanie Gaw, David Geleta, Lesley Ann Gemmell, Neil Genge, Patricia Gentles, Devin
George, William George, James Georget, Kimberley Gereluk, Jim Gergely, Matthew Gering, Grant Gerla, Michel Germain, Raymond
Germain, Robert Germain, Colin Germaniuk, Albert Gervais, Karlene Gervais, Marc Gervais, Paul Gervais, Bob Gerwing, Sheldon
Getson, Beryl Gettings, Clark Getz, Glen Getz, Stanley Getz, Ken Getzinger, Zoheir Ghaddar, Chad Gibson, Douglas Gibson,
Charles Giddings, Shaun Giefer, Jean Giesbrecht, Todd Giesbrecht, Dwayne Giggs, Garth Gilbert, Elias Gildeh, Tamara Giles,
Gladwin Gill, Ian Gill, Ralph Gill, Perry Gillam, John Gillatt, John Gillespie, Ron Gillespie, Sharen Gillett, Erin Gillis, Sandra Gillis,
Vicki Gillis, Martin B. Gillund, Justin Gilmour, Scott Gilmour, Douglas Ginn, Stewart Girbav, Ben Gisby, Eugenio Giuliani, Marvin
Gladue, Russell Gleed, John Glennon, Jason Glubish, Duane Goetz, Peter Goetz, David Golden, Cody Gomuwka, Elaine Gong,
Brian Gonsalves, Jose Gonzalez, Yvonne Gonzalez, Ian Gordon, James Gordon, Winston Goretsky, Jennifer Gorman, Rhonda
Gosse, Yvon Gosselin, Allan Gould, Todd Gould, Antonella Goulet, Sandra Goundrey, Trevor Gowman, John Graca, Tara Grace,
Marah Graham, Trevor Graham, Austin Grant, Harry Grant, Ronald Gray, Sheila Gray, John Greaves, Linda Green, Shilo Green,
Wayne Green, Marc Greenan, Cory Greenawalt, Shannon Greene, Theresa Greene, Richard Grieve, Edmond Grifths, Sherisse
Grillone, Robert Groenen, Leo Groenewoud, Robert Grover, Daryl Grundner, Neil Guay, Trevor Guay, Don Guglielmin, Gilbert
Guigon, Aliya Gulamhusein, Karim Gulamhusein, Robert Gullion, Shane Gullion, Swarna Gunaratne, Carolyn Gunderson, Alan
Gunst, Ashok Gupta, Rustam Guseynov, Edward Gushnowski, Terry Gusnowski, Graham Gustafson, Harold Gutek, Fabio
Gutierrez, Bartley Haahr, Alain Habel, Rodney Haberlack, Hamid Habibi, Violet Haddad, Leisa Haddleton, Resad Hadzismajlovic,
Keri Hagemann, Chad Hagstrom, Keith Hague, Wondafrash Hailu, Sam Hajar, Shemin Haji, Zohreh Hajibeygi, Dan Halaburda,
Jeremy Hale, Montie Hale, Dean Halewich, Rick Halkow, Barry Hall, Charles Hall, Donald Hall, Kathy Hall, Michael Hall, Shane J.
Hall, Todd Halladay, Patricia Halldorson, James Hallett, Robert D. Hallett, Charlene Halter, Larry Hamende, Darcy Hamilton,
Jeremy Hamilton, Tim Hamilton, Kevin Hamm, Michael Hammel, Larry Hammell, Rick Hammond, Chrystal Hamori, Bryan
Hamula, Mei Han, Zonghai Han, Brad Hancock, Anne Hand, Carol Handley, Warren Handley, Tracy Hanline, Karl Hann, James
Hansen, Todd Hansen, Cheryl Hanson, Judy Hanson, Leland Hanson, Brent Harbin, Leon Harder, Carson Harding, Kent Hardisty,
Ken Harke, Julia Harker, Brent Harle, Les Harley, Angela Harlos, Erik Haroldson, Ray Harper, Chad Harris, Coby Harris, Jody L.
Harris, Murray Harris, Roger Harris, Ron Harris, Stephen Harris, Clayton Harrison, Dylan Harrison, Patrick Harrison, Randy
Harsany, Brent Hartley, Bud Hartley, James Harty, Lorne Harty, Mike Harty, Amie Harvey, Greg Harvey, Janet Harvey, Jerry Harvey,
Julie Harvey, Michael Harvey, Cory Harvie, Cheryl Hasenclever, Colin Hastings, Iain Haston, Ewen Hatchwell, Bryan Hattebuhr,
Christine Hattebuhr, Dale Hattebuhr, Barret Hatton, Wayne Hatton, Dave Haub, Willow Hauber, Ross Hauger, Wayne Hausch,
Betty Hayden, Cameron Hayden, Nancy Hayes, RJoey Hayward, David Haywood, Sean Head, Jay Heagy, Brad Hearn, Larry Heath,
April Hecht, Terry Heck, Ken Hedstrom, Christopher Heffner, Della Hefford, Robin Hein, Mahmud Hejni, Tim Helle, Carey Hellman,
Barton Henderson, Steven Hennessey, John Hennessy, Anita Hennig, Leona Hennig, David Henry, Reid Henry, Jackueline Herauf,
Kim K. Herbst, Brad Herman, James Herman, Justin Herman, Judith Hermann, German Hernandez, Luis Herrera, Edwin
Herrenschmidt, Coreen Herring, Michele Herron, Keith Heslop, Brian Hess, Cara Hess, Dorain Hessel, Tyson Hessler, Brenda
Hetman, Tia Hickie, Kim Hicks, Rodney Higa, Andrew Higgins, Rachelle Higgins, Charlene Hill, Gordon Hill, Steve Hill, Ernie
Hilland, Jesse Hillebrand, Jeff Hillier, Christie Hillis, Arnold Himschoot, Ken Hingley, Katarzyna Hinks, Jim Hlewka, Margaret Ho,
Lee Hoang, Donald Hoar, Karyn Hobbs, Lee Hodder, Barry Hodgan, Gary Hodge, Barbara Hofer, Miles Hogaboam, Joanne Hogg,
Kevin Hogg, Krista Hogg, Alan Hoiland, Kevin Hoium, David Hollett, Donald Holley, Doug Holman, Richard Holman, Donald
Holmen, Cliff Holmerson, Chris Holmes, Ian Holmes, David Holt, Brett Holthe, Clayton Holthe, Dennis O. Holthe, Shannon Hood,
Hans Hoogendam, Graham Hook, Keith Hornseth, Kimberley Horvath, Richard Horvath, Jon Horyn, Renita Hoskins, Lance Hoskyn,
Tony Hou, Jeff Houck, Helena Houghton, Sherri Houle, John Howard, Trapper Howard, Kristy Howe, Shelagh Howell, Angela Hoza,
Curtis Hrdlicka, Jianxin Huang, Ti Huang, Kyle Huculak, Helen Hudson, Paul Hudson, Sandy Huebner, David Huff, Jeremy Hughes,
Mark Hughes, Eun Ju Huh, Bryan Huk, Riley Hull, Wendy Hum, Terry Humbke, Darren Humphries, Manpreet Hundal, Ian Hundeby,
Jennifer Hunt, Kevin Hunter, Robert A. Hunter, Tom Hunter, Vivian Hunter, James Hurdal, Bradley Hurtubise, Chad Huseby, Taira
Hutchings, Daniel Hutchinson, Dennis Hutchinson, Ray Hutscal, Bruce J. Hutt, Ewart Hutton, Greg Huva, Stephen Hygard,
Nathan Hylton, Bonnie Hynes, David Hynes, Scott Hyrcha, Sarah Hyslop, Gerard Iannattone, Pina Iannattone, Sherry-Lynn Ibey,
Matthew Ilchuk, Detlev Imorde, Dominic Ing, Alexander Inglis, Jennifer Inglis, Max Inglis, Brad Inman, Rebecca Innes, Matt
Inscho, Scotty Iron, Jamie Irons, Jeff Irons, Dora Irsa, Ted Irwin, Darren Isele, Floyd Isley, Peter Iuni, Karen Ivan, Arlette Ivany, Jeff
Iwanaka, Wallace Jack, Daniel Jackson, Judy Jackson, Niki Jackson, Ronald Jackson, Russel Jackson, Victoria Jackson, Ken
Jacobson, Albert Jacula, Curtis Jacula, Marci Jacula, Todd Jacula, Hamid Jafari, Charu Jain, Vivek Jain, Michael Jaindl, Boris
Jakulj, Annie Jalotjot, Stephen Jamam, Chris James, Jeff James, Bob Jamieson, Nigel Jamieson, Maria Jancewicz, Marc Janke,
Dale Jans, Steve Jansky, Peter Janson, Kelly Janus, Leonard Janzen, Crystal Jardine, Nancy Jarman, Calvin Jarratt, Dave Jarrell,
Jim Jarvis, Joanie Jarvis, Mark Jean, Wendal M. Jellison, Leslie Jenkins, Jason Jenner, Lindsay Jenner, Michael Jennings, Brent
Jensen, Justin Jensen, Kevin Jensen, Parry Jensen, Mark Jespersen, Iain Jessiman, Qi Jiang, Ramon Jimeno, Terry Jocksch, Juan
Joffre, Brent Johns, David Johnson, Evan Johnson, Jeffrey Johnson, Marlene Johnson, Mitzi Johnson, Neville Johnson, Stacy
Johnson, Theresa Johnson, Holly Johnston, Joe Johnston, Michelle Johnston, Neil Johnston, Chris Johnstone, Janet Johnstone, Dan
Johnston-Watson, Victoria Jolliffe, Brent Jones, Delbert Jones, Ed Jones, Gareth Jones, Harley Jones, Lori Jones, Mark Jones,
Pamela Jones, Tammy Jones, Wayne Jones, Martyne Jongerius, Paul Joo, Damian Jordan, Jaime Juan, Albert Junco, James Jung,
Sandy Jung, Chris Jungen, Miriam Juniper, James Jurome, Melanie Juurlink, Paul Kabatek, Asif Kachra, Mary Kadri, Carol
Kadutski, Jonathan Kadutski, Raymond Kahanyshyn, Krista Kaiser, Myra Kalakailo, Dustin Kalinsky, Sheron Kalirai, Derek
Kalynchuk, Elizabeth Kaminski, Ari Kandasamy, Larry Kane, Shari Kane, Dwayne Kaprowski, Tom Karpa, Doug Kary, Lynn Kasper,
Shelina Kassam, Amy Kastelic, Beverley Katay, Myles Kathan, Deanne Katnick, Hassan Katrip, Travis Kavalec, Olga Kay,
Christopher Kean, Gregory H. Keats, Philip Keele, Christopher Keim, John Keith, Joe Kelenc, Marina Keller, Rayelene Kellock,
Alphonsus Kelly, Christine Kelly, David Kelly, Eileen Kelly, Jeff Kelly, Ken Kelly, Tim Kelly, Simon Kelsey, Greg Kemp, Stephen
Kempton, Denise Kennedy, Wayne Kennedy, Val Kenyon, Rob Kerr, Ryan Kerr, Blair Kessler, Lori Ketchuk, Greg Ketter, Minh Kha,
Our World-Class Team
We strive to achieve a balance of technical skills, leadership, and a strong organizational
culture. These are the people that make our team. As a team, we remain committed to
developing people to work together to create shareholder value by doing it right with
fun and integrity. The growth of our business has resulted in our team growing by 620
employees during the year, ending 2006 with 3,700 employees.
Ajmal Khan, Amjad Khan, Shehnaz Khan, Shaalini Khanna, Tatiana Kharitonova, Kimberly Kielt, Leonard Kiez, Todd Kilback, Iain
Kilpatrick, Heather Kim, Curtis Kimler, Douglas King, Richard King, Tasha Kingsbury, Peter Kinnear, Cam Kinniburgh, Marvin
Kinsman, Sebastian Kirstine, Tony Kirtley, Cryssy Kish, Marlene Kissel, Robyn Kissel, Shane Kissel, Marlene Kissoon, Bob Kitsch,
Myles Kitt, Curtis Kiyawasew, Jody Kiziak, Jim Klaf, Cody Klatt, George Klemak, Douglas Klug, Jeff Knibbs, Allen Knight, Anita
Knipe, Darcey Knoblich, Olga Knopov, William Knouse, Ernie Knowles, Tamara Knox, Dwayne Kobes, Russ Kobi, Corey Koble,
Barney Kobzey, Bill Koch, Kouakou Kof, Sylvain Kof, Shaju Koickel, Blair Koizumi, Lutz Kolberg, Eva Komers, Cameron Komm,
Hadizata Konate-Rassi, Martin Kondor, Brent Kondratowicz, Ibrahim Kone, Lacina Kone, Sergey Korchagin, Brent Korolischuk,
Rick Koshman, Jennifer Koslowski, Brent Kosowan, Doug Kosowan, Vladimir Kostic, Diane Kostiuk, Kevin Kostrub, Ann Kostyshyn,
Stacey Kotelniski, David Kotsibie, Marcelin Koua, Philippe Kouadio, Hermann Kouame, Randall Kovalenko, Joanne Kowalewski,
Richard Kowalski, Kevin Kowbel, Trevor Kowk, Adam Kownatka, Magdalene Kownatka, Dennis Kozak, Teresa Kozina, Russell
Kraeleman, Cameron Kramer, Andrew Krancz, Lyndon Krankowsky, Trevor Kratz, Bryan Krause, Gary Krause, Trevor Krause, Todd
M. Kreics, Jeffrey Kreiser, Murray Kreiser, Patti Krekoski, Daniel Krentz, Blayne Kress, Connie Kriaski, Michael Krips, Udaya Kumar
Krishnan, Heather Krislock, Linda Kroeker, Peter Krol, Vanja Krtolica, Gabriel Krywolt, Harriet Kubi, Chris Kubisch, George Kucy,
Warren Kueer, Wayne Kullman, Vikas Kumar, Jeff Kuntz, Tanya Kuntz, Frank Kurucz, Brian Kutash, Steve Kuzmak, Keith Kwan,
Russ Kwan, Kelly Kwiatkowski, Angele Kwon, Karen Kyfn, Bob Kyllo, Robert Laboucane, Stanley LaBrash, Marc Lachambre,
Gernot Lackner, Jocelan Ladner, Phillip Laair, Philip Lafond, Anny Lafontaine, Levi Lafrance, Ronald LaFrance, Cassandra Lai,
Philip Lai, Theresa Lai, Ronald Laing, David Lake, Edward G. Lalande, Munira Lalji, Elaine Lam, Sam Lam, Kurtis Lamb, Terri
Lamb, Dee Lambert, Dino Lambert, Richard Lameman, Sharon Lamontagne, Dave Landers, Marc Landry, Marcel Landry, Michel
Landry, Stephen Lane, Raul Lanfranchi, Marc Langford, John Langille, Carolyn Langpap, Amanda Lapointe, Krista Lapointe,
Michelle Lapointe, Pamela Lapp, Melvin Lapratt, Gianni Larice, Corey Larocque, Leon LaRose, Katherine Larsen, Dave Larsh,
Penni Larson, Rob Larson, Robert Larson, Bengt Larsson, Ronald Lasek, Reno Laseur, John Lasocki, Barry Lassiter, Daniel
Lastiwka, William Latchuk, Joan Latter, Krista Latunski, Peter Latus, Bob Lauder, Karen Laurin, Steve Laut, Michal Lavi, Bernard
Lavoie, Iris Law, Oliver Law, Ken Lawless, Darron D. Lawrence, Ewen J. Lawrence, Fred Lawrence, Lindsey Lawrence, Shareen
Lawrence, Brian W. Lawson, Gordon Lawson, Martin Lawson, Dave Laycock, Chelsea Layden, Paul Layland, Sharon Layton, Greg
Lazaruk, Brian Leach, Doug Leach, Trevor Leach, Albin Leaf, Rodney Leblanc, Kristopher Lechelt, Susan Leckie, Amanda Lee,
Carmen Lee, Colleen Lee, Connie Lee, Fred Lee, Howard Lee, Jane Lee, John Lee, Swee Lee, Tim Lee, David Leeper, Caroline
Lefebvre, Kevin Legault, Heather Leggett, Derrick LeGrow, Kris Lehocky, Thomas Lemon, Gustavo Leon, Heather Leonard, Joseph
Leonard, Gary Leong, Hin Leong, Stephen Lepp, Paul Lepper, David Lesko, Gerry L. Leslie, Richard Leslie, Shane Lester, Lonnie
Letawsky, Marcus Lethaby, Phil Letkeman, Don Leung, Katie Leung, Preeminence Leung, Wing-Ming Leung, Maurice Levac, Tracy
Levasseur, Jean Levesque, Shelly Lewchuk, Gerald Lewis, Ryan Lewis, Katherine Leys, Larry LHirondelle, Guoping Li, Jun Li,
Craig Liba, John Lieverse, Lori Light, Hout (Richard) Lim, Bonnie Lind, Jessica Lind, Penny Linden, Katherine Linder, Ewen
Lindsay, Shari Lindsay, Trina Lineger, Janice Linehan, Yuri Lipkov, Tracy Little, Tony Littlefair, Dennis Liu, James Livingston,
Michael Livingstone, Cam Lizee, Dale Lloyd, Debby Lo, Sharon Lo, Conrad Loch, Richard Lock, Fred Locke, Fred Locke, Kendall
Locke, Darren Loder, Rod Loewen, Joy Lofendale, Ian Lofthouse, Charlene Logan, Randal Logelin, Rodney Logozar, Jorge
Lombardi, Craig Long, Wade Longmore, Dallas Longshore, Sheldon Longson, Herb Longworth, Kai Loo, Roger Lopez, Nelson Lord,
Catlin Lorenson, Darin Lorenson, Matthew Lorincz, Bob Lorinczy, Jose Lotito, Michelle Lou, Andrew Lough, Allan Loughran,
Christopher Love, Larry Love, Mellodie Love, Lloyd Lovelace, Carrie Low, Dan Lowe, Darryl Lowe, Devin Lowe, Brad Lowell, Joe
Lowen, Leah Loyola, Dave Lucas, Gerd Lucas, Serena Lucci, Crystal Lucier, Charlene Luk, Dana Lund, Wes Lundell, Clarence
Lunzmann, Susie Luomala, Jason Lush, Rees Lusk, Kristin Lussier, Jim Lutyck, Wendy Lutzen-Askew, Brent Lydiatt, Ken Lynam,
Wayne Lynch, John Lynn, Jim Lyons, Hong Ma, Michelle Ma, Nicky Maawia, Patricia MacCrimmon, Lindsey Macdearmid, Jason
MacDonald, Mark MacDonald, Ray MacDonald, Raymond G. MacDonald, Anne-Marie MacDonell, Stephen MacDougall, Dorothy
MacIntyre, Shawn Mack, Steve MacKay, Graeme P. MacKenzie, Ken MacKenzie, Kenneth Mackenzie, Ryan MacKenzie, Shawn
MacKenzie, Allan MacKinnon, James William MacKinnon, Graham Mackintosh, Richard MacKnight, Mark MacLean, Susan
MacLean, Callum MacLeod, Douglas MacLeod, Jamie MacLeod, Norma MacNaughton, E. Anne MacNeil, Bradley MacNeill,
Angela MacNiven, Fred MacPhee, Heidi MacRae, Ronald MacSween, Bruce Maddex, Morgan Maddison, Hazel Madore, Ashley
Madrusan, Gary D. Madsen, Markus Maennchen, Cathy Mageau, Mike Magnusson, Bill Mah, Curtis Mah, Jennifer Mah, Tony
Mah, Cheryl Mahoney, Darren Mahony, Martin Mailhot, Al Majdzadeh, Ali Majid, Derek Major, Michelle Major, Anita Mak, Eduardo
Malabad, John P. Malachowski, Ronald Malboeuf, Lanre Maliki, Gilbert Malo, Linda Maloney, Mike Manchen, Leonard
Mandrusiak, Darcy Mandziak, Avy Mann, Darcy Mann, Don Mann, Jan Manoharan, Rachelle Mantei, Roy Marceniuk, Michael
Marchi, Rodney Marcichiw, Ronald Marcichiw, Nick Margiotta, Shane Marion, David Mark, Luis Marquez, Aaron Marshall, Lynn
Marshall, Stephen Marshall, Cesar Martin, Karen Martin, Leonie Martin, Lindsay Martin, Dave Marttila, John Maruszeczka, Allan
Masliuk, Chad Mason, Kevin Mason, Mike Masse, Mandy Massiah, Al Massicotte, Neal Mathieson, Richard Mathieson, Davinder
Mathur, Scott Matieshin, David Matthews, Demetri Mavridis, Tim Maxwell, Richard May, Lyle Mayer, Scott Mayer, Warren
McAllister, Donald McAmmond, Les McAuly-Brand, Robin McBrien, Lisa McCarthy, Bruce McChesney, Lana McClenaghan, Nancy
McCormick, John McCoshen, Clete McCoy, Erin McCoy-Lunn, Peter McDade, Ken McDavid, Shauna McDiarmid, Cheryl McDonald,
Cynthia McDonald, Kevin McDonald, Mark McDonald, Steve McDonald, Rod McDougall, Mary McElroy, Laurie McEwen, K. Tracy
McFadyen, Jason McFarlane, Mark McFarlane, Bruce McFaul, Allan McGann, Frances McGlynn, Terry McGovern, Grant McGowan,
Robert McGowan, Brandy McGrath, Bruce E. McGrath, Paije McGrath, Stephen McGregor, Steve McGregor, Dwain McGuire, Tom
McHale, Gordon McHattie, Marianne McInnis, Alan McIntosh, Eric McIntosh, Sandra McIntosh, Kelvin McKay, KimI McKay,
Lindsey McKay, Robert McKay, Roxana McKay, Tim McKay, Dennis McKee, Robert McKendry, Tammy McKenney, Keith McKenzie,
Mike McKenzie, Sheena McKinnon, Dawson McLachlan, Douglas McLachlan, Bonnie-Lynn McLaren, David McLaughlin, Keith
McLaughlin, Reginald McLaughlin, John McLean, Marla McLean, Michelle McLean, Ross McLean, Joan McLellan, Ian McLeod,
Eamonn McMahon, Blake McManus, Sandra McMichael, Jeff McMillan, Rod McNair, Bryan McNamara, David McNamara, Kendal
McNeil, Lynn McNeil, Bill McNeill, Stephanie McNeill, Jaime McNichol, Robert McNinch, Reid McPhail, Elaine M. McPherson,
Jacqueline McTamney, Maggie McTurk, Manfred Meakes, Tatrina Medvescek, Karyn Meehan-Coles, Stephen Meerman, Jai Mehta,
Corrine Mei, Barry Meier, Daniel Meier, Belinda Meller, Glen Mellom, Richard Mellor, Darrell Mellott, Jean Melnychuk, Marvin
Melnyk, Paul Mendes, Leila Meneses, Jiamei Meng, Jennifer Mercer, Mark Mercer, Grazyna Mercik, Nicole Mercredi, Ambereen
Merk, Timothy Merk, Greg Merkel, Danny Merkley, Nathaniel Merritt, Udell Meservy, Ryan Metz, Steve Meunier, Rick Meyers,
Michael Meynberg, Igor Meynin, Cindy Michalko, Gail Michaud, Barry Michelson, Murray Michie, Ian Middler, Dale Midgley, Jacek
Mielczarek, Michael Mihaichuk, Marc Miiller, Jane Mikalsky, Andrei Mikhailov, Jacqueline Miko, Jeffrey Miller, Laurel Miller,
Sherrie Miller, Wendy Miller, William Miller, Claire Mills, H. John Mills, Jeff Mills, Rob Mills, Ronald Mills, Colin Milne, June Milne,
Nicholas Milne, Stephen Milne, Terence Milne, Mira Minakova, Shikha Minhas, Michelle Minick, Wyman Minni, Denis Mino,
Mason Mintenko, Kerry Minter, Alan Minty, Maria-Celeste Miranda, Daleep Misri, Anice Mitangou, Allan Mitchell, Brent Mitchell,
Dwight Mitchell, Yvonne Mitchell, Neven Mitchell-Banks, Anar Mitha, Chris Mittertreiner, Leon Miura, Lindsey Moen, Tom Moen,
Roman Mognin, Kim Mohler, Bill Moir, Lydia Mok, Mimi Mok, Joshua Molcak, Jeff Molde, Dwayne Molle, Jelena Molnar, Lisa
Molson-Linton, Mike Monias, Rosa Monna, Rick Monteith, Ana Montenegro Bolano, Carmen Moodley, Ken Moon, Alfred Moon Jr.,
Dave Moore, Judy Moore, Kevin Moore, Norma Moore, Melinda Morante, Jason Moravec, Orlando Morean, German Moreno,
Christopher Morgan, David Morgan, Jonathan Morgan, Karen Morgan, Marcia Morgan, Michael Moriarty, Shaun Moroziuk, Karen
Morrice, Gary Morris, Janette Morris, Scott Morris, Tyler W. Morris, Jennifer Morrison, Louise A. Morrison, Wesley N. Morrow,
Shannon Moseng, Paul Mossey, Glen Mott, Bruce Mottle, Mahmood Mousavi, Michael Mousseau, Cheryl Mouta, Gary Mowat,
Wayne B. Mudryk, Lee Mugford, Colin Muir, Yasmira Muir, Peter Mulcahy, Lee-Ann Mules, Lucy Mulgrew, Wanda Mulkay, Noella
Mulvena, Blair Munro, Ryan Munro, Melonie Murchison, Cora Murphy, Carrie Murray, Cliff Murray, Dale Murray, Dean Murray,
Deirdre Murray, William K. Muss, Blythe Mutch, Kevin D.J. Mutch, Anthony Myles, Eva Myles, David Myshak, Melonie Myszczyszyn,
Richard Nachtegaele, Sarah Nadeem, Kuljeet Nagra, Ashley Nagy, Jeannine Nagy, Vilas Naikade, John Naismith, Bill Nalder, Elly
Nance, Rick Napier, Kuralenthi Narayanan, Bill Nash, Darren Naugler, Bill Navratil, John Nayowski, Henriette Ndjoteme-Nendjot,
Marian Neagu, Randy Necember, Michelle Needham, John E. Neff, Fikerte Neguisse, Donald Neigum, Allen Neilson, Aaron Nelson,
Donna Nelson, Douglas Nelson, Gilbert Nelson, Peter Nelson, Vincent Nelson, Cheryl Nepinak, Brad Nessman, Monty Neudorf,
Caleb Neufeld, Darrell Nevil, John Newman, Luke Newport, Kevin Newton, Rae Newton, Alice Ng, Hannah Ng, Tchimou NGbesso,
Andy Ngo, Eileen Ngo, Ngoc Ngo, Melissa Nguyen, Tai Nguyen, Thu-Van Nguyen, Muhammad Niaz, Matteo Niccoli, Aaron Nicdao,
Fawn L. Nichol, Gary Nichols, James Nichols, James Nicholson, Doris Nickel, Matthew Nicol, Simon Nicol, William Nicol, Josie
Nicolajsen, Brian Nicoll, Ian Nieboer, Paul Nielsen, Wayne Nielsen, Wesley Nikiforuk, Steven Niu, Bill Noble, R. Scott Noble, Roger
Nolan, Greg Nolin, Bill Norberg, Robert Norman, Troy Normand, David Noseworthy, Kerry Novinger, Daniel Nugent, Eden Nunes-
Vaz, Kelvin Nurkowski, Robert Nuytten, Genia Nyenhuis, Tim Nyitrai, Steve O Reardon, Donald Oaks, Cam Oberg, John OBrien,
Pamela OBrien, Jeffery Obrigewitsch, Tim OConnor, Richard Odlin, Martin ODonnell, Robert Ogilvie, Anne Marie OGorman,
Mike Ogston, Kevin OHearn, Greg Oilund, Alvin Olchowy, Delvin Olesen, Scott Oliphant, Dianne Oliveira, Cathy Oliver, Filomena
Olivito, Perry Ollenberger, Jason G. Ollikka, Ghasem Oloumi, Kevin Olsen, Richard Olsen, DeanT Olson, Gary Olson, Stephen
Olson, Warren Olson, Bunmi Oluwole, Kevin Ondic, Dave ONeil, Tim ONeill, Jeff Onyskevitch, Margaret Oporska, Kelly Oram,
Anna Oreshkova, Doug Orlecki, Alison Orr, Colette Orr, Neil Orr, Colin Orton, Perry Osgood, Maria Otalora, Deanna Ott, Wayne
Otteson, Mike Ouellet, Denis Ouellette, Jolanta Ouellette, Jean-Francois Ousset, Mark Overwater, Mark Owen, Marilyn Owens,
Michael Owens, Gervais Owonon, Dennis Ozaruk, Fabio Pacheco, Ron Pacholuk, Jared Paddock, Larry Padley, Doug R. Page,
Patricia Page, Elgin Paglinawan, Marcus Pagnucco, Robert Painchaud, Randall Paine, Elizabeth Palmer, Lee Palmer, Rick
Palmer, Kevin Palsat, Glenn Paluck, Miodrag Pancic, Garry Pangracs, Brian Pankiw, William Papineau, Bruce Paquette, Pat
Paradis, Antony Paradoski, Blair Parent, Bernard Parenteau, Clement Parenteau, Joanna Parenteau, Sachin Parikh, Blaine
Parker, Darby Parker, Steve Parker, Barry Parkin, Shelley Parks, Randy Parkyn, John Parr, Jennifer Parrill, John Parry, Jordy
Partington, Ken Partsch, Lawrence Paslawski, Joey Pasos, Michael Pasveer, Andy Paterson, Helen Paterson, Judy Paterson,
Adriana Patino, Brian Patterson, Carolyn Pattinson, Donna Patton, Geoffrey Paul, Wilma Pauls-Atas, Brent Paulson, John
Paulson, Brian Paulssen, Daniel Pavelick, Lance Pawlik, Richard Pawlyn, Linda Pawson, Rick Pay, David Payne, Dean Payne,
Ron Pearce, Brodie Peariso, Gerald Pearson, Pam Pearson, Robert Pearson, Angela Peden, Philip Pedersen, Serene Pedersen,
Shawn Pedersen, Brian Pederson, Lance Pederson, Dianne Peel, Cam Peifer, Sandra Pelkey, Sean Pell, Deborah Pemberton,
Roberto Pena, Peter Peng, Janet Penkar, Joanne Penner, Robin Penner, Kevin Pennington, Subodh Peramanu, John Perepelecta,
Nihal Perera, Don Perry, Gladys Perry, Tarla Persaud, Dmitriy Pershin, Bernie Persson, Carol Pert, Linda Peters, Shelley Peters,
Bernard Peterson, Bill Peterson, Douglas Peterson, William S. Petlyk, Dino Petrakos, Rick Petrick, Henry Petrie, Rodney Petrie,
Nicolas Petrola, Lucyna Pettigrew, John Pettit, Lien Pham, Marie (Huong) Phan, Sherry Phan, Bryanne Philibert, Doug Pierce,
Frank Pike, Ron Pilisko, Jillian Pimblott, Kathy Pinco, Dale Pinder, Alonso Pineda, Dan Pingitore, Barry Pitchford, Edward
Pittman, Aaron Plaksey, Lorrie Player, Ted Plouffe, Erwin Po, Imhotep Pocaterra, Donna Poitras, Wade W. Poitras, David Pole,
Marlene Pollock, Eleanor Polson, Seward Pon, Robert Pool, Chris Poole, James Pope, Colleen Popko, Jason Popko, Carol Porter,
Patti Postlewaite, Jeffrey Poth, Terry Potter, Randy Pottle, Ryan Potts, Bruce Powell, Susan Powell, Laurie Power, Lisa Power,
Melissa Power, Noleen Pratap, Timothy Pratt, Mike Preece, Alanna Price, Nicole Price, Travis Prins, Melodi Pritchard, Lesley
Proctor, Doug Proll, Mangoueu Prosper, Sarah Proudlock, Richard Proulx, Kayla Prowse, Tammy Prudhomme, Ed Pruss, Elizabeth
Pryce, Steve Pshyk, John Puckering, Yesid Edgar Puerto, Justyna Puhl, Nam Pui, Lance Pulak, Suniel Puri, Trent Pylypow, Lu Qing,
Anthony Quach, Munawar Quadri, Laura Quinn, Ron Quiring, Robert Quist, Samir Qureshi, Brad Raaaub, Mandi Rabeau, Delee
Racz, Warren Raczynski, Levente Rado, Gil Radtke, Chandra Raghavan, Michael Rainey, Yina Raisbeck, Karim Rajan, Christina
Ramirez, Maritess Ramirez, Ruth Ramonas, Bill Ramsay, Matthew Ramsay, Kerri Ramsbottom, Dorotea Ranola, Gregory
Ransom, Jeremy Ransom, Chris Rasko, Shauna Rasmussen, Soukseum Rathamone, Stojan Ratkovic, Murray Rattray, Jason
Rayner, Robert Rayner, Blair Read, Ted Reay, Deston Reber, Bernie Redlich, Donald Reed, Keith Reed, Loreena Reed, Scott Reed,
Tim Reed, Michael Rees, Duncan Rehm, Carmon Reich, Alan Reid, Christopher Reid, Kerry Reid, Lilian Reid, Mark Reid, Tyler
Reid, Angela Reimer, John Reiniger, Glenn A. Reiter, Wendy Reitmeier, Anil Relan, Jody Remezoff, Kelly Rempel, George Renfrew,
Scott Rennie, Dustin Ressler, Russell Retzlaff, James Reynolds, Pat Reynolds, Naseem Rhemtulla, Keith Rhodes, Lisa Rich,
Carolyn Richards, Charles Richards, Rob Richardson, Sandie Richardson, Wesley Richardson, William Richardson, Rick
Richelhoff, Lori Richmond, William Richmond, Jeff Riddell, Robert Riddell, Bonnie Ries, Darren Riley, Dominic Riley, Dale E.
Rinas, Carl Ringdahl, Gordon Ringheim, Serge Rioux, Michelle Rivard, Carlos Rivera, Daniel Rivera, Tracey Roasting, Jo-Anne
Robak, Jimmie Roberts, Brian Robertson, Dale Robertson, Nancy Robertson, Stephen Robertson, Heather Robillard, Aaron
Robinson, Amber Robinson, David Robinson, Donna Robinson, Gene Robinson, Julian Robinson, Scott Robson, Jaime Roche,
Neal Roculan, Sheila Rodberg, Roger Rodermond, Humberto Rodriguez, Olga Rodriguez, Roberto Rodriguez, Paul Roett, Dean
Rogal, Martin Rogers, Neil Rogerson, Victor Rogerson, Henry Rojo, Neil Rokos, Paul Rokosh, Louis L. Romanchuk, Dwayne
Romanovich, William Rombough, Eduardo Romeo, Joy Romero, Claude Rondeau, Harvey Rosenkranz, Dennis Ross, Indra Ross,
Robert Ross, Ron Ross, Graham Rosso, Worley Rosson, Barry Rosychuk, Cheryl Rosychuk, Rick Rosychuk, Roy Roth, Tom Roth,
Katarina Rothe, Judy Rotzoll, David Rouleau, Gordon Rourke, Richie Rovere, Natasha Rowden, Scott Rowein, Andrea Roy, Beverly
Roy, Jeff Roy, Zenita Ruda, Colleen Rudolph, Colleen Ruggles, Nigel Rusk, Denise Russell, Matthew Russett, Jeff Rutherford,
John Rutherford, Brian Rutledge, Doug L. Rutley, Daniel Ruttan, Mark Rutter, Hal Rutz, David Ruud, Dan Ryan, Rick Rybchinsky,
Craig Ryder, Jessica Rylaarsdam, Jeff Ryll, Mikael Sabo, Adam Saby, Gurdip Sahota, Poonam Saini, Darlene G. Sakires, Dwight
Salahub, Mourad Salameh, Alba Salazar, Shahid Saleem, Peter Salomon, Gord Salt, Jennifer Sampson, Geoffrey Samuel, Juan
Jose Sanchez, Andrea Sanden, David Sanderson, Michael Sanderson, Sandy Sandhar, Darryl Sandquist, Tom Sanelli, Juan Pablo
Santini, Megan Santucci, Andrea SanVicente-Kraus, David Sargent, John C. Sargent, Carlos Sarmiento, Anita Sartori, Greg
Sauer, Lisa Saumier, Jesse Savard, Christine Savary, Brian Saville, Codey Saville, Luc Savoie, Rajan Sawhney, William Sawyers,
Chris Sayer, Richard Sayer, Amber Sayers, Kimberley Scagliarini, Christine Scammell, Ryan Scammell, Brian Scarth, Robert
Schaap, Trevor Schable, Bruce Schade, Judy Schafer, Derek Schaffer, Paul Schaub, Lorne Schaufert, Perry Scheffelmaier, Barry
Schellenberg, Mike Schellenberg, Lance Schelske, Curtis Scherger, Sally Schick, Larry Schielke, Mike Schiller, Ronald Schlachter,
Marcus Schlegel, Helen Schlenker, Tracy Schmaltz, Beat Schmid, Jeannette Schmidt, Kimberly Schmidt, Raquel Schmidt, Joseph
Schmitz, Melissa Schmitz, Christopher Schneider, Craig Schneider, Darryl Schneider, David Schneider, Debbie Schneider, Joseph
Schneider, Luanne Schneider, Paul Schneider, Blaine Schnell, Craig Schnepf, Aaron Schnick, Jack Schnieder, Ronald Schnieder,
C. Brian Schnurer, Rene Schoch, Stephen Schoeld, Norm Schonhoffer, Tracy Schooler, Elka Schrijver, Jennifer Schroeder,
Sheldon Schroeder, Michael Schubert, Tricia Schuh, Stephen Schultheiss, Randy Schultz, Kevin Schumacher, Lorraine Schwetz,
Tony Sciarrabba, Leslie Scory, Curtis Scott, Drew Scott, James Scott, John Scott, Murray Scott, Ronalda Scott, Rodney Scoville,
Ashley Scriba, Neil Scully, Gordon Seabrook, Geordie Seaton, Adam Seber, Don Sedor, Brian Segouin, Morley Seguin, Stephen
Seguin, Linda Sehn, Clayton Seifridt, Paul Seipp, Fraser Selfridge, Mike Sell, Kenneth Selman, Leslie Semeniuk, Roland Senecal,
Debbie Sereda, Edward Serniak, Cindy Severite, Jeremy Seward, Gianni Sgambaro, Mohsen Shazadeh, Sanjay Shah, Aqeel
Shakir, Philip Shankowski, Gilbert Shantz, Raj Sharma, Brigitte Shaw, Lisette Shaw, Marilyn Shaw, Dorothy Shea, David
Sheaves, Wayne Sheaves, Ben Shenton, Glenn Sheppard, Robert Sheppard, Judi Shermerhorn, Jason Sherstabetoff, Kyla
Shideler, Annette Shillam, Bill Shmoury, Leonard Shostak, Robert Shumay, Trent Shwaluk, Morgan Sibley, Melanie Siddon, Steve
Siemens, Travis Siemens, Andrew Sikomas, Wayne Sikorski, Lorraine Silas, Beh Silue, Armindo Silva, Cam Simard, Kevin
Simard, Francesca Simms, Bradley Simonar, Barbara Simpson, Brad Simpson, Gordon Simpson, Pat Simpson, Elisha Sinclair,
Garry Sinclair, Robert Sinclair, Jerret Singer, Mackenzie Singer, Darcy Singleton, Paul Siree, Richard Sisson, Matt Skanderup,
Kelly Skarra, Ashley Skiba, Geoffrey Skinner, Michael Skipper, Max Skliarov, Grace Skoczek, Shirley Skulmoski, Martin Skulski,
Michael Skyrpan, Michelle Slater, Michael Slavin, Edward Sleet, Delwin M. Slemp, Darrell Sleno, Kevin Slotwinski, Doreen Smale,
Lyle Small, David Smart, Bill Smith, Blair Smith, Bonnie Smith, Carl Smith, Catriona Smith, David L.M. Smith, Jessica Smith,
Maurice Smith, Michael Smith, Nancy Smith, Robert Smith, Ryan Smith, Sandra Smith, Scott Smith, Tim K. Smith, Tina Smith,
Todd Smith, V. Todd Smith, Allen Smyl, Brad Smylie, Jeffrey Snide, Robert Snihur, Kurt Snow, William Snow, Douglas Snyder,
Kristine Snyder, Catherine Sobieski, Kristi Soderman, Angelina Solis, Ray Soon, Laurie Sopkow, Hans Sorensen, Curtis Sorochan,
Daryl Soroko, Dallas Spagrud, Paul Spavor, Eddie Spearman, Jason Spears, Robert Spears, Gail Spence, Kevin W. Spencer, Darcy
Spenst, David Spetz, David Spooner, John Springer, Mike Sprinkle, Ellis Spurrell, Lawson Squire, Murugan Srinivasan, Robert
St.Amant, Richard St.Martin, Robert St.Martin, Mario St.Pierre, Megan Stables, Carrie Stacey, Ian Stacey-Salmon, Randy
Stadnyk, Stacey Stadnyk, Tyson Stafford, Kendall Stagg, Rodney Stahn, Mark Stainthorpe, Karen Stairs, Ernesto Stamile, Randy
Stamp, Nick Stanford, Michael Stang, Jason L. Starchuk, Lezlie Stark, Christie Starnes, Vicki Starr, Justin Stastook, Scott
Stauffer, Scott Stauth, Achilles Stavropoulos, Craig Steel, Mark Steenbergen, Leanne Steeves, Gary Stefan, Jerry Stefanyshyn,
Wayne Steffen, Robert Steinborn, Carolyn Steinson, Peter Stephen, Taryn Stephenson, G. Austin Stevens, Lyle Stevens, Robert
Stevenson, Carol Stewart, Don Stewart, Douglas Stewart, Lorie Stewart, Rory Stewart, Wendy Stewart, Kevin Stilwell, Stewart
Stirling, Melissa Stockes, Lindsey Stockley, Mark Stockton, Eric StPierre, Suzanne Strachan, Wade Strand, Robert Strang, Linda
Strangway, Tanner Strangway, George Stratford, Brenda Stratichuk, Michael Street, William Stretch, Matthew Stroh, Michael
Stroh, Brianna Stromberg, Sherry Struck, Robert Struski, Cory Struth, Dwayne Strynadka, Linda Stuart, Allan Stubel, Paul
Stuckey, Mike Sturkenboom, David Sturrock, Ravi Subramaniam, Stephen Suche, Justin Sullivan, Mark Sullivan, Shelley
Sullivan, Shiraz Sumar, Efe Summers, Daniel Sutherland, Laura Sutherland, Scott Sverdahl, Rade Svorcan, Michael Swain,
Adam Swallow, Christine Swan, Rick Swanson, Nathan Swennumson, Halina Swierz, Don Sylvestre, Catherine Szmata, Vicky Ta,
Darren Taciuk, Marlin Taillefer, Dave Talbot, Miguel Tamayo, Kevin Tanas, J. Nick Tannahill, Aaron Tannas, Krystalle Tanner,
Michael Tanouye, Kari Tansowny, Dan Tarasoff, Kourosh Tarighi, Bill Tarkowski, Ron Taron, Ross Tarrant, Joanne Taubert, Nader
Tavassoli, Ray Taviner, Brad Taylor, Brian Taylor, Carla Taylor, Cathy Taylor, Colin Taylor, Dana Taylor, Dawn Taylor, George Taylor,
James Taylor, James R. Taylor, Jennie Taylor, Ken Taylor, Ken W. Taylor, Joseph Taza, Chin Seng Teh, Berhanu Temesgen, Robert
Templeton, Derek Tempro, V. Leighton Tenn, Kurt Tenney, Marilyn R. Tenold, Stephen Terry, Gus Teske, Jason Tessier, Terence
Tham, Michelle Thares, Richard Theberge, Jean-Paul Theriault, Marc Theroux, Laureen Thiele, Chad Thiessen, Chris Thiessen,
Karen Thistleton, Laurie Thomas, Angela Thompson, Arthur Scott Thompson, Ben Thompson, Chris Thompson, Gerald Thompson,
Herb Thompson, Ian Thompson, Mark Thompson, Mindy Thompson, Ryan Thompson, Peter Thomsen, Adele Thomson, Julie
Thomson, Todd Thomson, Bruce Thornton, Keith Thornton, Jason Thurlow, Andrea Thurmeier, Margaret Thurmeier, Daniel
Tillapaugh, Joseph Tiller, Sandra Tillier, Terry Tillotson, Colin Tiltman, Brian Timmerman, David Timms, Simon Timothy, Bruce E.
Tipton, Dharmendra Tiwary, Eric To, Carol Tobin, Ron Tochor, James Todd, Akindele Tododo, Mervin Todoschuk, Al Tokarchik, Alfred
Tokpa, Chris Tomlinson, Dale R. Tomlinson, David Tonner, Domenic Torriero, Chyndelle Toth, David Toth, Paige Tracey, Sabrina D.
Traak, Maurice Tremblay, Catherine Trenouth, Brian E. Trimble, Ray Trombley, Len Trotzuk, Sherry Truman, Michael Truong,
Ruari Truter, Lisa Tsimaras, David Tuite, Sunny Tulan, Brent Tulloch, Neil Tulloch, Bruce Tumbach, George Tunnicliffe, Art Tupper,
Terry Turgeon, Trent Turgeon, David Turk, Dick Turnbull, Barb Turner, Stanley Turner, Darren Turpin, Veronika Turska, William
Tustian, Irene Tutto, Cary Twardy, Dave Tweddell, Kelly Tweten, Oleg Tyan, Wayne Tymchuk, Shaun Tymchyshyn, Kathleen Tynan,
Kenechukwu Ufondu, Eric Ulrich, Gregory A. Ulrich, Janis Underdahl, Nathan Underwood, Karl Unger, Jackeline Urdaneta, Roger
Vachon, Anand Vaidyanath, Allan Valentine, Darrel Valin, Gary L. Valiquette, Louis Vallee, Michael Vallee, Helene Vallieres,
Vyvette Vanderputt, Christina VanderPyl, Timothy vanGoudoever, Bryant VanIderstine, Hennie vanNiekerk, Salomon VanRensburg,
Collin Vare, Daniel Vasseur, Nicolette Vaughan, Laureen Vaughan-Kirk, Sheila Verigin, Natalia Verkhogliad, Dan Verleyen, Nancy
Tay Vetrici, Cesar Viana, Dale Vickery, Wilf Vielguth, Marvin (Joe) Viola, Tony Vitkunas, Demetry (Jim) Vlahos, James W. Vollman,
Mel Vollman, Leo Vollmin, Luke Vondermuhll, Kyle Waddy, Todd Waggoner, Trevor Wagil, Joy Wagner, Juon Wah, Lee Wahl, Robert
N. Waites, Donald Wakaruk, Michael Lane Wakeeld, Kevin Wakulchyk, Ken Walchuck, Jeff Walden, Dave Waldner, Darcy Waldo,
Sara Waldo, Carolyn Walker, David Walker, David Walker, Martin Walker, Erin Wallace, Greg Wallace, Kevin Wallace, Marie
Wallace, Vince Wallwork, Lorie Walter, Michelle Walton, Roger Walton, Alfred Wandler, John A. Wandler, Blaise Wangler, Tim
Wanner, Kathy Ward, Kirk Ward, Terry Ware, Wayne M.J. Warholik, Chris Wark, Wanda Warman, John Warrell, Colin Warren,
Michael Warrick, Ajit Warrier, Faye Warrington, Paul T. Wassell, Godfried Wasser, James Watereld, Frank Watkin, Julie Watkins,
Kay Watson, Ken Watson, Graham Watt, John Watts, Trish Wear, Alan Webb, Byron Webb, Larry Webb, Kent Weber, Keith Webster,
Gail Wee, Eric Weening, Carlee Wehrhahn, Jeff Weibrecht, Lionel Weinrauch, Randy Weir, Brock Weisgerber, Adrian Weleschuk,
Guy Welwood, Mark S. Wenner, Dwayne Werle, Craig Werstiuk, Matthew Werstiuk, Ted Wesley, Darrin West, Jacqueline West,
Michael Westad, Terry Wetzstein, Nina Whalen, John Wham, Terence Whang, Loyd Wheating, Joshua Wheaton, Andrew Wheeler,
Charmaigne Whelan, Chris Whelan, Rosemarie Whelan, Daniel White, Debbie White, Francis W. White, Howard White, Julie
White, Ken White, Ralph White, Sarah White, David Whitehouse, Audrey Whitlock, Michael Whittingham, Heather Whynot, Blaine
Wicentovich, David Wiebe, Debbie Wiens, Cameron Wietzel, Cheryl Wiggett, Zandra Wigglesworth, Shandi Wigley, Bob Wilbern,
Brandon Wild, Darrell Wilde, John Wilding, Daryl Wiles, Troy Wilk, Melanie Wilkie, Amy Wilkinson, Derek Wilkinson, Pauline Will,
Elmer Willard, Bill Williams, Grant Williams, Greg Williams, Julian Williams, Kelvin Williamson, Monty Williamson, Jeff Willick,
Robin Willis, Christian Willson, Curtis Wilson, Don Wilson, Edward Wilson, Ian Wilson, Jeff Wilson, Jim Wilson, Marty Wilson,
Patrick Wilson, Tammy Wilson, Tyler Wilson, Woodrow Wilson, Joan Wilton, Bob Wing, Jodie Winquist, Ken Winsborrow, Noel
Winter, Greg Winters, Garrett Wirachowsky, Barry Wiseman, Jeff Wiseman, Morris Wiseman, Paul Wiseman, Zachary Witmer, Dale
Wittman, Cameron Wlad, Kelly Woidak, Colin Woloshyn, C. K. Bill Wong, Jason Wong, Jennifer Wong, Linda Wong, Lisa Wong, Julie
Woo, E. Bette Wood, Leonard Wood, Philip Wood, Roxanne Wood, Laura Wooding, Travis Woods, Marilyn Woodske, Wayne
Woodward, Robin Woolner, Sidney Wosnack, Raymond Wourms, Mark Woynarowich, Chris Wright, Daniel Wright, Richard Wright,
Stephen Wright, Bin Wu, Christine Wutzke, Brent Wychopen, Guy Wylie, George Wyndham, Brent Wyness, Barry Wynne, Valerie
Wyonzek, Canghu Yang, Zhen Lin Yang, Andrew Yaremko, Rick Yarmuch, Teddy Yarmuch, James Yaroslawsky, Jeff Yates, Noah
Yates, Basile Yeboue, Betty Yee, Davin Yee, Michael Yee, Claire Yeoman, Michael Yeoman, Jeffrey Yip, Kitty Yip, Tony Yip, Mark
Yobb, Amber Yoingco, Darrell York, Rachelle Yorke, Daryl Youck, Chalene Young, Clayton Young, Lynn Young, Michael Young, Ray
Yowney, Eugene Yu, Jian-Yang Yuan, Clement Yuen, Dustin Yuill, Jeff Yuill, William Yuill, Brian Yurchyshyn, Robin Zabek, Robert
Zabot, Gabriel Zachoda, Tyler Zachoda, Cam Zackowski, Attila Zahorszky, Devin Zaichkowsky, Domingo Zambrano, Mark Zan,
Kendall Zarowny, Glenn Zeebregts, Lynn Zeidler, Diane Zeilznik, Tony Zeiser, Aleksandra Zelic, Darcy Zelman, Denis Zentner,
Kathy Zerr, Michelle Zerr, Jessica Zhang, Xu (Frank) Zhang, Susan Zheng, Wanli Zhu, Evgeny Zhuromsky, Brenda Ziegler, Dwayne
Zilinski, Megan Zilkey, Hernando Zorrilla, Aaron Zubot, Ana Zulueta
Our World-Class Team
Page 9 of 107
Canadian Natural AR2006
Page 10 of 107
Production Strategy and Results
In 2006, Canadian Naturals dened strategy continued to deliver;
our production and reserves grew signicantly as they have each
and every year since 1989. Through the last 18 years, we have
adhered to the same dened business strategy of maintaining large
project inventories in every product and basin in which we operate.
Large project inventories enable the Company to continually high-
grade the capital allocation process and balance production mix
among each of the commodities we produce; namely natural gas,
light/medium crude oil, Pelican Lake crude oil, primary heavy crude
oil and thermal heavy crude oil.
In 2006 we again achieved record levels of production on a barrels
of oil equivalent basis. Production before royalties was 581 mboe/d
during 2006, up 5% from 2005 levels and was achieved through a
combination of exploration, asset development, and the acquisition
of ACC. Natural gas production before royalties increased by 4%
and continues to represent our largest product offering. Total crude
oil and NGLs production before royalties increased by 6%, with the
primary drivers being a full years benet of production from the
Baobab Field located offshore Cte dIvoire, the commencement
of production from the Primrose North expansion project and the
continued improvements to Pelican Lake EOR performance.
Strategic Land Base
Canadian Natural has the largest undeveloped land inventory in the
Western Canadian Sedimentary Basin (WCSB), with undeveloped
net acreage totaling 12.8 million net acres. Total WCSB landholdings
were 19.2 million net acres at the end of 2006, up signicantly,
16%, from 2005, as a result of continued land purchases and the
acquisition of ACC. This strong concentrated land base affords
signicant opportunities to control our operating costs, and nding
and onstream costs. The vast majority of our land base is positioned
to utilize existing owned and operated infrastructure and it also
strategically positions us to maximize the benet of new play types
MARY- JO E. CASE,
VICE- PRESIDENT, LAND
TIM S. McKAY,
SENIOR VICE- PRESIDENT,
OPERATIONS
06
05
04
03
02
1,492
1,439
1,388
1,299
1,232
Daily natural gas production, before royalties (mmcf/d)
06
05
04
03
02
332
313
283
242
215
Daily crude oil and NGLs production, before royalties
(mbbl/d)
Review of Operations
2006 2005
Production Mix Production Mix
(before royalties) mboe/d % mboe/d %
Natural gas 249 42 240 43
North America light/medium crude oil and NGLs 51 9 52 10
Pelican Lake crude oil 29 5 23 4
Primary heavy crude oil 91 16 93 17
Thermal heavy crude oil 64 11 53 10
North Sea light/medium crude oil 60 10 69 12
Offshore West Africa light/medium crude oil 37 7 23 4
Total 581 100 553 100
developed by ourselves and industry.
The infrastructure associated with this vast, concentrated land
base also provides a competitive advantage in terms of lower
marginal operating and development costs for newly drilled
or acquired properties. This dominance can create acquisition
opportunities, as we maintain a low-cost regime and access to
strategic infrastructure.
Geo-Science Strategy
We believe that a multi-disciplined focus on geology, geophysics
and reservoir engineering reduces exploration risk and ultimately
results in better full cycle economics. Integrating the seismic
interpretation with geology and innovative engineering results in
our successful annual drilling program and adds new high quality
locations to our conventional and unconventional inventory. In
Canada, we invested $74 million during 2006 to acquire new
seismic and to purchase and reprocess existing seismic data. In
total, 3,667 kilometers of conventional 2D seismic data and
228 square kilometers of 3D seismic data were acquired.
Additionally, 9,469 kilometers of conventional 2D seismic data
and 437 square kilometers of 3D seismic data were purchased.
We continue to acquire this data under stringent environmental
controls and in a cost effective manner. The ACC acquisition
resulted in adding 394 kilometers of 2D seismic data and 23,000
square kilometers of 3D seismic data to our database.
In the North Sea, we purchased 739 square kilometers of 3D
seismic and reprocessed a further 1,210 square kilometers of
3D seismic data. This data allows us to continue aggressive in-eld
and near-eld development and exploration. In Offshore West
Africa we purchased 3,796 kilometers of 2D seismic data and
acquired 168 kilometers of electromagnetic seabed data to help
conrm seismic prospects.
06
05
04
03
02
74
96
61
48
40
Seismic expenditures in Canada ($ millions)
6,366 12,785
5,699 10,947
4,889 11,523
4,036 9,811
3,832 10,213
Total North America landholdings (thousands of net acres)
06
05
04
03
02
Review of Operations
Page 11 of 107
CORE LANDHOLDINGS
2006 2005
(thousands of acres) Gross Net % Gross Net %
North America
Developed 8,062 6,366 79 7,184 5,699 79
Undeveloped 15,848 12,785 81 13,163 10,947 83
23,910 19,151 80 20,347 16,646 82
North Sea
Developed 138 93 67 138 93 67
Undeveloped 367 299 81 457 352 77
Offshore West Africa
Developed 7 4 57 7 4 58
Undeveloped 247 207 84 521 426 82
Total
Developed 8,207 6,463 79 7,329 5,796 79
Undeveloped 16,462 13,291 81 14,141 11,725 83
24,669 19,754 80 21,470 17,521 82
Canadian Natural AR2006
Page 12 of 107
ACTIVITY BY CORE REGION
Net Undeveloped Land Drilling Activity
(thousands of net acres) (net wells)
2006 2005 2006 2005
Canadian conventional
Northeast British Columbia 2,721 2,027 196 241
Northwest Alberta 1,750 1,507 194 183
Northern Plains 6,804 6,238 728 711
Southern Plains 870 621 120 354
Southeast Saskatchewan 117 82 75 52
In-situ Oil Sands 407 356 247 196
12,669 10,831 1,560 1,737
Horizon Oil Sands Project 116 116 163 126
United Kingdom North Sea 299 352 9 14
Offshore West Africa 207 426 6 5
13,291 11,725 1,738 1,882
Drilling Activity and Strategy
In 2006, high demand resulted in increased costs for drilling
and related activities; coupling this with the inefciencies of
an overheated service sector created a very unfavorable cost
environment for organic growth. Strong demand resulted in low
service crew efciencies partially due to utilizing less experienced
personnel. This was combined with an unusually warm start to
the winter drilling season and the resultant aggressive attempts to
complete the program before the onset of spring breakup.
By May 2006, we made the strategic decision to reduce capital
spending on natural gas drilling activities due to exceedingly
high service costs in Western Canada. The result was a
17% reduction in total drilling activity, excluding service and
stratigraphic test wells. We still maintained a drilling success rate of
91% reecting the low-risk exploitation approach that we take to
the business.
For 2007 we plan to further reduce drilling activity by 19%, in
response to continued cost pressures in the basin and to balance
capital spending in light of the 2006 acquisition of ACC.
06
05
04
03
02
1,738
1,882
1,449
1,793
900
Total net wells drilled
06
05
04
03
02
91
93
91
91
94
Drilling success rate,
excluding stratigraphic test/service wells (%)
Review of Operations (continued)
RANDALL S. DAVIS,
VICE- PRESIDENT,
FINANCE & ACCOUNTING
DOUGLAS A. PROLL,
CHIEF FINANCIAL OFFICER,
SENIOR VICE- PRESIDENT, FINANCE
WELLS DRILLED
Year Ended December 31 2006 2005
Gross Net Success Net Success
Crude oil North America
Light crude oil 140 113 92% 81 92%
Pelican Lake crude oil 144 144 100% 83 99%
Primary heavy crude oil 301 274 94% 341 94%
Thermal heavy crude oil 66 60 98% 107 98%
North Sea light crude oil 8 8 100% 12 87%
Offshore West Africa light crude oil 7 4 100% 3 85%
666 603 95% 627 95%
Natural gas North America
Northeast British Columbia 185 163 90% 201 88%
Northwest Alberta 192 155 88% 152 92%
Northern Plains 286 219 84% 199 84%
Southern Plains 192 104 93% 338 99%
855 641 88% 890 91%
Dry 133 119 117
Subtotal 1,654 1,363 91% 1,634 93%
Stratigraphic test / service wells 376 375 248
Total 2,030 1,738 1,882
Review of Operations
Page 13 of 107
North American crude oil drilling remained strong with over 600
wells drilled, essentially at with 2005 levels. This reected the
superior recycle ratios experienced on heavy crude oil during 2006
as well as better cost control capability for this activity. These heavy
crude oil drilling activities benet from lands which are generally
accessible year-round, larger scale programs which generate
efciencies and the requirement for fewer ancillary services than
natural gas drilling.
During 2006, 163 net stratigraphic wells were drilled on our oil
sands mining leases and 181 were drilled on our thermal in-situ
oil sands leases to delineate resource potential and better dene
the Companys growth opportunities. Additionally a total of 31 net
stratigraphic and service wells were drilled, including 27 wells in
Canada and 4 internationally.
Canadian Natural AR2006
Page 14 of 107
Natural Gas
Canadian Naturals gas marketing objective is to maximize the
realized price for its overall portfolio. Our strategy is predicated
on the development of solid business relationships based on
demonstrated performance and integrity, and working together
with our customers to meet their needs. We market primarily to
large, credit worthy utilities, industrial and commercial customers
across North America. The current portfolio includes 19% of direct
sales to various American customers, 71% sold directly into our
domestic markets with the remaining 10% going to the Alberta
based gas supply and market aggregators. Canadian Naturals
portfolio is essentially driven by current market prices with over
99% of all sales uctuating with the pricing index prevailing at the
points of physical delivery of the gas. The marketing team monitors
regulatory applications by the pipeline companies and participates
as necessary to ensure an optimal outcome is achieved for all
concerned parties.
Canadian Naturals realized wellhead price in 2006 was 22% lower
than in 2005 at $6.77/mcf primarily due to very warm winter
weather across North America which resulted in strong natural gas
inventories all year. The natural gas storage positions are expected
to close the withdrawal season at the end of March 2007 at levels
close to those seen in 2006. Drilling activity in the US was very
strong in 2006 with a record number of completions at 29,356
whereas in Western Canada, we experienced the rst yearly
reduction in completions since 2002 at 15,362. However, the North
American overall demand was essentially at year over year with
the increase in the electrical generation offset by the losses from
the industrial sector.
We expect the North American supplies to be challenged in the
near term as the industry needs to become more efcient to contain
its costs. The reduction in gas directed drilling activities started in
late 2006 and is continuing in the rst quarter of 2007, which
should result in signicantly lower yearly production volumes for
the industry in 2007. The longer term prospects look very positive
for the gas business as it is increasingly challenging to bring large
incremental quantities to markets. The large number of proposals
to import liqueed natural gas in the North American grid has yet
to translate into incremental quantities available to the end
users with the 2006 import volumes remaining at at 1.8 bcf/d.
The forecast is for a modest increase of these volumes in 2007
as the competition for supplies intensies with European and
Asian markets.
Canadian Naturals natural gas production for 2007 is forecast
to average between 1,594 - 1,664 mmcf/d and with the current
2007 pricing strips for NYMEX at US$7.60/mmbtu and AECO at
C$7.57/GJ, this would yield an overall wellhead price of C$7.90/mcf
for our sales portfolio, using a US$0.86/C$1.00 exchange rate.
06
05
04
03
02
66.25
56.61
41.43
31.02
26.11
WTI crude oil reference pricing (US$/bbl)
06
05
04
03
02
7.26
8.56
6.09
5.44
3.25
NYMEX natural gas reference pricing (US$/mmbtu)
RAL M. CUSSON,
SENIOR VICE- PRESIDENT,
MARKETING
Marketing
Crude Oil
Canadian Naturals crude oil marketing strategy is designed to
unlock the value of our vast heavy oil reserves. The three major
components of our strategy consist of blending various crude
oil streams and diluents to better serve the needs of our rening
customers, support and participate in the expansion of pipeline
export capacity and to support and participate in projects adding
incremental conversion capacity for bitumen and SCO.
Canadian Naturals realized wellhead price increased by more
than 15% in 2006 to $53.65/bbl mainly based on the strong
worldwide demand for hydrocarbons and a constrained supply
environment with practically no spare capacity from the producers
and full utilization of worldwide rening assets. The benchmark
price for WTI crude oil was up 17% in 2006 to US$66.25/bbl
and hit an all time high of US$78.40/bbl on July 14 primarily in
response to the political turmoil in the Middle East. Brent crude
oil was also higher than in 2005 by 20% to US$65.18/bbl
based on strong European and Asian demands. The price
differential for the Lloyd Blend heavy crude oil improved by
4% over 2005 at 33% of the WTI benchmark. The stronger
commodity prices were somewhat offset by a Canadian currency
that was 6% stronger in 2006.
Canadian Natural continued to successfully implement its blending
strategy in 2006 and contributed 53% of the total 257 mbbl/d of
WCS stream in the fourth quarter. The second phase of the marketing
strategy entails geographic expansion of pipeline systems to open
new markets for heavy crude oil. The logistical challenges are being
addressed by industry and signicant progress was achieved in 2006
with the new service on the Spearhead and Pegasus pipelines to
reach the Southern PADD II rening markets. These expansions had
a very positive impact on heavy crude oil differentials over the last
nine months of 2006.
In the future, several pipeline projects are being developed to
transport crude oil from the WCSB to the West Coast, Eastern PADD
II and Southern PADD II with access to the US Gulf Coast reneries.
In particular, the Enbridge Southern Access Pipeline expansion is
scheduled to add 394,000 bbl/d to the greater Chicago market area
by 2009 and the Terasen TMX 1 project to add a total of 75,000
bbl/d to the West Coast by 2008. The TCPL Keystone project, which
could add 435,000 bbl/d to the Woodriver and Patoka market area,
has received the approval from the National Energy Board to transfer
a gas pipeline to the oil service. Keystone has led its application to
build the facilities and is currently conducting an open season on its
option to extend its proposed pipeline to Cushing with an ultimate
capacity of 590,000 bbl/d. We are condent that the industry will
proceed with the necessary incremental pipeline export capacity on
a timely basis to support the expected incremental production out
of the WCSB and specically from the oil sands projects.
Canadian Natural continues to work with North American reners
to encourage the addition of conversion capacity to their facilities
and has committed a volume of 25,000 bbl/d for 5 years to a
proposed upgrading facility to be built in Sturgeon County, Alberta
by 2010. With respect to efforts to build an upgrader for our in-
situ operations, engineering studies completed in early 2007
identied growing concerns relating to increased environmental
06
05
04
03
02
33
37
32
28
25
LLB price differential to WTI (%)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Mayan - LLB spread (US$/bbl)
(5)
0
5
10
15
20
Review of Operations: Marketing
Page 15 of 107
Canadian Natural AR2006
Page 16 of 107
06
05
04
03
02
6.72
8.57
6.50
6.21
3.77
Company average natural gas selling price (C$/mcf)
06
05
04
03
02
53.65
46.86
37.99
32.66
31.22
Company average crude oil and NGLs selling price (C$/bbl)
06
05
04
03
02
1.13
1.21
1.30
1.40
1.57
Canada/US average exchange rate (US$ in equivalent C$)
costs for upgraders built in Canada, inationary capital cost
pressures and narrowing heavy oil differentials in North America,
and as a result deferred ongoing design work pending clarication
on the cost of future environmental legislation and a more stable
cost environment.
Canadian Naturals portfolio for 2007 is targeted to average
between 315,000 bbl/d and 360,000 bbl/d and based on the
current 2007 pricing strips for WTI at US$60.38/bbl would yield an
overall wellhead price of C$50.67/bbl.
Price Risk Management
Canadian Natural utilizes hedging techniques to provide some
assurance on price realizations and to protect cash ow generation
capability in order to fund ongoing development programs.
Generally, the downside pricing risks associated with various
commodities are determined and, if deemed appropriate, nancial
derivatives are used to limit risk. Currency exposures are also
monitored and may be hedged in conjunction with commodities.
In conjunction with approval of the Horizon Project, our Board of
Directors granted management the authority to hedge up to 75%
of any commoditys expected production volumes for a forward
12-month period, up to 50% of the second 12-month period
and up to 25% for the following 24-month period. For further
information on the particulars of this hedge program please refer
to Managements Discussion and Analysis and the Consolidated
Financial Statements.
Midstream
Our midstream assets consist of the 100% owned and operated
ECHO Pipeline, the 15% interest in the Cold Lake Pipeline system,
the 62% interest in the operated Pelican Lake Pipeline and the
50% interest in the 84 megawatt co-generation unit located at
our Primrose facility. The midstream assets allow us to control and
optimize transportation costs for about 80% of our heavy crude
oil production and generate additional revenues from third party
volumes and the sale of surplus electricity. Echo is the only pipeline
delivering undiluted raw bitumen to the Hardisty terminals and plays
an important role in our heavy crude oil blending and marketing
strategy for WCS and other diluted bitumen blends. In 2006, we
completed the Morgan lateral at a cost of $6 million which helped
in achieving 89% utilization rate on our ECHO Pipeline.
Marketing (continued)
At Canadian Natural, our people and our contractors have a
vision for health and safety, environment and community. We
are committed to responsible operations, and to doing it right.
We have systems in place and have set targets for continuous
improvement and measure our performance on an ongoing basis.
As we enhance our health and safety, environment and community
programs, we also work to meet the expectations our stakeholders
and communities have around corporate citizenship.
Health and Safety: working for
continuous improvement
We conduct our operations in a manner that protects the health and
safety of employees, contractors, the public and the environment.
Our ongoing focus on safety programs and processes, enhanced
safety awareness throughout our operations, and the high degree of
co-operation with our contractors is essential to achieve continuous
improvement.
In 2005 we obtained our Certicate of Recognition (COR)
through Enform which is a certifying partner of Alberta Workplace
Health and Safety and the Workers Compensation Board of British
Columbia. As part of our COR maintenance program in 2006,
we continued our internal audit program, conducting more than
500 facility, drilling and service rig, pipeline and construction
project audits.
In 2006 our conventional operations team updated its Comprehensive
Safety Manual and Employee Guide to Accident Prevention, and
re-emphasized the role each person plays in ensuring a safe work
environment. In our North American conventional operations, total
lost time accident frequency and total recordable injury frequency
declined in 2006, continuing a downward trend over the past
four years.
As part of a pilot program conducted by the Alberta Energy
and Utilities Board (EUB), Canadian Natural was selected to
undergo a comprehensive assessment of our emergency response
capabilities in 2006. A rigorous process was used by the EUB to test
our emergency response plans and our ability to activate our plans.
The results of the assessment identied no major deciencies and
demonstrated our strong response capability.
Internationally, we continued to develop and implement our
enhanced Safety Health Environment Management System
(SHEMS). Lost time injuries dropped by more than 20% from
2005. The total recordable injury frequency rates also improved by
18% compared to 2005 results.
As activities accelerate at our Horizon Project, overall safety
performance, as measured by our total recordable injury frequency
has improved throughout 2006, building on excellent performance
in 2005. Incident exposure hours increased in 2006 to 5.8 million
as compared to 3 million in 2005. Our new near-miss incident
campaign has contributed to continuous improvement. The Horizon
Project also conducted construction safety eld audits for major
contractors on-site, developed plans for 2007 audits, and launched
a fully functional Emergency Operations Centre. As we progress
towards commissioning in 2008, work continues on our safety
training programs and processes for employees and contractors,
and the integration of our emergency response plans with those of
the local municipal district.
Health and Safety,
Environment and Community
Review of Operations: Health and Safety, Environment and Community
Page 17 of 107
A commitment to doing it right
Canadian Natural AR2006
Page 18 of 107
2000 2001 2002 2003 2004 2005 2006
Solution gas conservation rate (%)
60
70
80
90
Integrity: working together
for best practices
In 2006, each of our divisions worked together to identify common
key performance indicators and best management practices that
solidify our commitment to integrity. All three divisions have
developed strong integrity groups and have brought together
standard benchmarks used to track quality.
Environment: focus on stewardship
Canadian Naturals environment group continues to work
together with management and operating personnel to ensure
that environmental stewardship is factored into all aspects of our
operations. Training and due diligence are key to our environmental
management programs, and we continue to increase our investment
into environmental management strategies such as air emission
management, reduction of fresh water use and minimization of
our landscape footprint.
In our conventional operations and at our Horizon Project site,
initial development of our enhanced Environmental Management
System (EMS) was undertaken in 2006. The primary focus of the
EMS is to ensure our eld operations minimize their environmental
impact and meet all regulatory requirements and corporate
standards. EMS awareness training was developed and delivered
to employees. Training will continue into 2007 to ensure our high
level of environmental, stakeholder and sustainability performance
is maintained.
With plans for operational start-up only two years away, the
Horizon Project implemented several programs in 2006, including:
environmental monitoring programs for soils, sheries and water
quality; a weekly environmental inspection program of construction
sites; and, a wildlife management procedure. Development of
other programs continue, including an environmental records
management system, as well as commissioning and start-up
monitoring programs.
Work is ongoing to continue to reduce our long-term fresh water
use, including increasing use of brackish saline water for our in-
situ operations, and recycling a high percentage of produced
water. In Canadian Naturals thermal operations, our water recycle
rate is greater than 95%. Increased brackish saline water use at
our Primrose and Wolf Lake operations over the past two years
has enabled increased bitumen production without an equivalent
increase in fresh water use.
Canadian Natural is committed to managing air emissions through
an integrated corporate approach which considers opportunities to
reduce both air pollutants and greenhouse gas (GHG) emissions.
Air quality programs continue to be an essential part of our
environmental work plan and are operated within all regulatory
standards and guidelines. Our strategy for managing GHG
emissions is based on four core principles: energy conservation and
efciency; reduced intensity; innovative technology and associated
research and development; and, emissions trading capacity; both
domestically and globally.
We continue to implement aring, venting and fuel and solution
gas conservation programs. In 2006 we completed approximately
122 gas conservation projects, resulting in the reduction of
1.24 million tonnes/year of carbon dioxide equivalents (CO
2
E).
Over the past ve years we have spent over $100 million to conserve
the equivalent of over 5 million tonnes of CO
2
E. In our heavy crude
oil production areas we are evaluating tank heater efciencies in
an effort to conserve fuel gas at facilities with eld tanks. We also
Health and Safety,
Environment and Community
(continued)
monitor the performance of our compressor eet and it is continually
modied and optimized for maximum efciency. Another project of
note is the trial of no-emissions chemical injection pumps which
will eliminate fuel gas venting.
These aggressive programs also inuence and direct our plans for
new projects and facilities. The Horizon Project will incorporate
numerous advancements in technology which will result in
the reduction of GHG emissions. The key to GHG reductions at
Horizon is a focus on maximizing heat integration, the use of
cogeneration to meet steam and electricity demands and the
design of the hydrogen production facility to enable carbon dioxide
(CO
2
) capture.
At our North Sea operations, we are operating below our CO
2
allocation, and we continue to implement an improvement program
based on efciency audits of our major facilities. We also began a
Produced Water Re-Injection trial on one of our offshore platforms,
successfully re-injecting about 30,000 barrels of produced water
each day.
Community: developing people
to work together
Canadian Natural is committed to a long-term presence in the
communities where we operate. We are proud to work with
our communities to provide nancial and volunteer support
for hundreds of projects that meet their vision for the future,
contribute to the development of people, and to the building of
strong communities.
In 2006, we met with stakeholders on a regular basis to update
them on our operations and our commitments, to build trust
and mutual respect, and to incorporate feedback into operations
developments. In North America, we work closely with over
50 Mtis and First Nations communities near our operations to
strengthen mutual understanding and co-operation and enhance
the opportunities for economic participation in our developments.
To help fulll our mission statement to develop people and
build capacity in communities where we operate, we launched our
Building Futures Scholarship Program in 2002 to encourage training
in our industry. To further expand the pool of skilled workers within
Canada, we are developing an on-site apprenticeship training
centre at our Horizon Project and have actively participated in many
career fairs and contractor meetings throughout North America.
A range of multi-stakeholder groups are working to proactively
address the needs and interests of the communities we operate
in, and to ensure a sustainable energy industry. Recognizing the
importance of these groups in achieving collaborative goals identied
among industry, governments and communities, Canadian Natural
continues to play an active role in many such initiatives where we
do business.
Highlights of our community investments in 2006 involved a wide
range of projects such as the new community arena in Cold Lake,
Lakeland Colleges Heavy crude oil Operations Technician academic
wing in Lloydminster, new medical equipment for the Grande Prairie
hospital, a new training centre in northeastern BC, and support for
the Northern Lights Regional Health Foundation in Fort McMurray.
In our International operations, we continued funding for a variety
of community initiatives such as the Aberdeen Football Youth
Academy, Childline Scotland and the Castle Hill Oncology Heath
Centre. Canadian Naturals community sponsorship and donations
funding support totaled more than $4.4 million in 2006.
Review of Operations: Health and Safety, Environment and Community
Page 19 of 107
Canadian Natural AR2006
Page 20 of 107
Dened Strategy to Exploit a
World-Class Asset Portfolio
Low risk exploitation drives the development of our vast resource
base. It has proven to be successful through the business cycle as
a result of minimizing exploration risks, maintaining low operating
costs and reducing capital costs. This disciplined approach is applied
rigorously throughout our worldwide operations, and features:
Maintaining a large inventory of undeveloped land in each core
region facilitating the continual high-grading of prospects and
optimizing drilling programs;
Dominating the land base and controlling the infrastructure
in regions wherever we operate. Maintaining high working
interests and operating the vast majority of the assets allows us
to steward to our development plans and control costs;
Progressively developing lands as extensions to existing
infrastructure, thereby minimizing infrastructure costs and
maximizing existing facility utilization;
Maximizing resource recovery through the application of proper
production practices and tertiary recovery techniques;
Pursuing opportunistic acquisitions that provide future growth
opportunities and complement our expertise and existing assets.
The Assets
LYLE G. STEVENS,
SENIOR VICE- PRESIDENT,
EXPLOITATION
JEFF W. WILSON,
SENIOR VICE- PRESIDENT,
EXPLORATION
Horizon Project Mining
2006 proved reserves
Gross lease Net
(mmbbl) (mmbbl)
Bitumen 2,275 1,853
SCO* 1,866 1,596
* SCO reserves are based upon upgrading of the bitumen reserves.
The reserves shown for bitumen and SCO are not additive.
North America
2006 net results, after royalties
Production Proved reserves
(mboe/d) (mmboe)
Crude oil and NGLs 205 887
Natural gas 198 618
Boe 403 1,505
% of total 80 77
International
2006 net results, after royalties
Production Proved reserves
(mboe/d) (mmboe)
Crude oil and NGLs 95 429
Natural gas 4 15
Boe 99 444
% of total 20 23
Review of Operations: The Assets
Page 21 of 107
Canadian Natural AR2006
Page 22 of 107
06
05
04
03
02
641
890
689
777
162
North American successful natural gas wells drilled
(net wells)
06
05
04
03
02
1,468
1,416
1,330
1,245
1,204
North American natural gas production, before royalties
(mmcf/d)
North American natural gas remained Canadian Naturals single
largest product, representing 42% of our equivalent production
volumes. We are the second largest producer of natural gas in
Canada with production of 1,468 mmcf/d in 2006. During 2006,
average production volumes increased by 52 mmcf/d or 4%,
reecting our measured drilling and development program and the
acquisition of ACC in the fourth quarter.
Production is concentrated in ve North American core regions:
Northeast British Columbia, Northwest Alberta, the Foothills, the
Northern Plains and the Southern Plains. The large inventory of
opportunities that our focused area teams have developed and
dened are expected to deliver 3-5% per annum production
growth. On our existing land base we see the potential for more than
7,000 locations.
Northeast British Columbia
THE ASSET
Northeast British Columbia is one of the most highly prospective
and relatively undeveloped regions in Western Canada. Canadian
Naturals large undeveloped land base, 2.7 million acres, in
conjunction with facility and pipeline infrastructure provides a
signicant competitive advantage. In this region natural gas is
produced from an array of carbonate and sandstone reservoirs
ranging from the shallow Notikewin at 2,000 ft to the deep Slave
Point at 15,000 ft. The region has a mixture of low risk multi-
zone targets, deep higher risk exploration plays and emerging
unconventional natural gas plays including shale gas and Coal Bed
Methane (CBM).
2006 ACTIVITY
The Company drilled 193 net wells with an 90% success rate adding
incremental production of 20 mmcf/d. At Helmet we continued
development of the Jean Marie carbonate formation drilling
21 net horizontal wells and 12 vertical wells. Our larger programs
included drilling 38 shallow Notikewin wells at Ladyfern and drilling
26 wells at Shekelie targeting the Banff formation.
WHAT TO EXPECT IN 2007 AND BEYOND
The drilling program in Northeast British Columbia is reduced in
2007 with only 56 wells planned as a result of an overheated
service industry and a stronger focus on development of our crude
oil assets. Post 2007, should cost pressures reduce, drilling activity
is forecast to increase signicantly to more than 200 wells per year,
as we expand our dened prospect inventory and maximize the
potential on the acquired ACC assets. We will continue to evaluate
the emerging shale gas plays in the Muskwa and Wilrich shales and
we are also looking to extend the promising Doig shale gas play
from Northwest Alberta into Northeast British Columbia.
North American Natural Gas
Review of Operations: North American Natural Gas
Page 23 of 107
Northwest Alberta
THE ASSET
Northwest Alberta is a rich multi-zone crude oil and natural gas
producing region. There are extensive exploitation opportunities as
well as signicant growth potential in unconventional natural gas
from shale and tight sand. Canadian Naturals large undeveloped
land base of 1.8 million net acres in conjunction with 26 operated
facilities and an extensive pipeline network provides a signicant
competitive advantage.
2006 ACTIVITY
The Company drilled a total of 175 net natural gas wells, a 9 net
well increase from 2005. We continued our low risk Cardium
sand development, drilling 57 net wells with a 96% success rate.
Canadian Natural has leveraged the Cardium project and our
extensive infrastructure to develop the deeper, tight natural gas
sands that exists in the region. In 2006 we drilled 28 deep wells for
Mannville tight sand targets.
In the Peace River Arch region, the Company drilled 4 initial
wells targeting Doig shale and also incorporated the ACC land
to greatly expand Canadian Naturals exposure on this emerging
unconventional play.
WHAT TO EXPECT IN 2007 AND BEYOND
The 2007 drilling program has been high graded to 118 net
wells that are focused on Cardium, Deep gas, Doig and other
conventional targets. These projects can support the drilling of over
1,100 locations in the next ve years. Signicant unconventional
resource potential can be developed as a result of technology
innovation, cost control, continued downspacing and ACCs
substantial undeveloped land base.
Northern and Southern Plains
THE ASSET
Natural gas in the Northern and Southern Plains core regions
is produced from shallow, low risk, multi-zone conventional
exploitation prospects and in some regions natural gas is produced
from the Horseshoe Canyon coals. This is generally considered a
mature operating region. However, through ongoing focused
exploitation we continue to nd excellent prospects for new pool
development, inll drilling and secondary zone recompletions. The
success of CBM production from the Horseshoe Canyon coals has
created a new economic low risk development opportunity which
Canadian Natural continues to expand and the Mannville coals in
the region represent new potential which we are now evaluating.
This new development augments our signicant shallow gas assets
which contribute approximately 30 mmcf/d of the area production
and provide the majority of the drilling inventory.
Our strategy in this region is to target low risk exploration
and development opportunities on our extensive land base,
examine synergistic property acquisitions opportunities, and
minimize operating costs through high utilization of facilities and
operations discipline.
Canadian Natural AR2006
Page 24 of 107
North American Natural Gas (continued)
2006 ACTIVITY
During 2006, 375 net wells targeting natural gas were drilled in
the region with an 86% success rate. CBM development drilling
continued to grow with the drilling of 48 net wells targeting the
Horseshoe Canyon and we have also initiated a pilot project with
three horizontal wells in Swan Hills to determine the economic
potential of CBM production from the Mannville formation.
A modest shallow gas drilling program was pursued in 2006 with
67 net wells drilled.
WHAT TO EXPECT IN 2007 AND BEYOND
The 2007 drilling program is comprised of more than 240
net wells, targeting low risk, shallow natural gas. CBM and
conventional wells are planned as the Company continues
to expand both its expertise and its commercial CBM
operations. Our ve year drilling inventory totals more than
3,620 net natural gas wells, including over 1,750 shallow locations
and over 575 net CBM wells. With the addition of new shallow gas
prospects through the ACC acquisition and continued Horseshoe
Canyon CBM development we are forecasting modest production
growth in the Northern and Southern Plains over the next
ve years.
Foothills
THE ASSET
Canadian Natural has both developed and signicant undeveloped
assets located in the Southern Foothills of Northeast British Columbia
and in the North Central Foothills of Alberta. Gas production occurs
in thrusted, structurally deformed Mississippian and Triassic aged
reservoirs. Potential for high impact discoveries exists on most of
our extensive land base.
2006 ACTIVITY
Canadian Natural Foothills drilling program had exceptional results
in 2006, drilling 4.7 net wells with a 100% success rate. Three new
pool discoveries were made in the Murray River area and successful
development wells were drilled at Copton, Dinosaur, Ojay and Cabin
Creek. First production came on stream at our Copton and Dinosour
properties from discoveries made in previous years. The ACC
acquisition resulted in a signicant growth of our Foothill assets,
adding production and undeveloped lands in the very prospective
regions of Monkman, Ojay, Sullivan Creek and Voyager.
WHAT TO EXPECT IN 2007 AND BEYOND
The 2007 drilling program includes seven net natural gas wells on
Canadian Naturals core properties at Murray, Copton and Cabin.
Ongoing exploration effort and extensive new 3D seismic combined
with the ACC assets have resulted in a high quality drilling inventory
that will access signicant resource potential on the Companys
366,000 acres of undeveloped lands. Drilling activity levels will
grow to more than 10 wells per year after 2007 and we have an
achievable plan to grow volumes by an average of 11% over the
ve year plan.
Review of Operations: North American Natural Gas
Page 25 of 107
AB BC SK MB
Canadian Natural Land
Acquired Land
PEACE RIVER, AB
Adds to signicant land position
in emerging shale gas play.
Extensive infrastructure and
ownership sour gas plant.
NORTHEAST BC
Extensive holdings at Adsett expands
Slave Point potential. Caribou region
provides multi-zone opportunities and
access to Key river crossing. Ft. St. John
Region expands regional operations and
provides access to gas plant.
TABER, AB
Primarily light oil
with CO
2
ood upside.
TWO HILLS, AB
Primarily royalty interests.
FOOTHILLS, BC-AB
Enhances long-term
growth strategy in
deep part of the basin.
WILD RIVER, AB
One of the most prospective
regions in the WCSB. Multi-zone
plays with high working interest.
RIMBEY, AB
Multi-zone production with low-
risk in-ll drilling potential.
HATTON, AB-SK
Low decline, long-life, low-royalty shallow gas
with signicant down-spacing opportunities.
The acquisition of ACC blended well with existing lands and infrastructure,
providing signicant upside to an already deep portfolio. The upside potential
is signicant both in terms of optimization of existing operations but leveraging
the expertise of both organizations. Adding 1.5 million acres of undeveloped land
provides years of new drilling inventory. The addition of 2,800 miles of pipeline
and access to seven major natural gas facilities greatly enhances value. The synergies
of the two asset bases are expected to create value for shareholders for years
to come.
CASE STUDY
Acquisition of ACC Assets
Canadian Natural AR2006
Page 26 of 107
Natural Gas Resource Potential
CASE STUDY
CONVENTIONAL OPERATIONS
These represent the traditional low-risk exploitation assets
upon which we have built an extensive infrastructure.
They extend across each of our core regions and generate
excellent returns, albeit at a generally shorter reserve life.
RESOURCE PLAYS
These larger scale plays are generally of low to moderate risk
and of a longer resource life. As techniques are optimized
they become very repeatable and can offer excellent returns.
Examples of these types of plays are the Helmet, shallow
gas, Cardium and Horseshoe Canyon CBM.
EXPLORATION
These activities are characterized as high-risk/high-reward.
An extreme example of this was the Ladyfern Slave Point
eld which went on record as one of the most prolic
elds in WCSB history during 2001-2004. In addition to
ongoing Slave Point exploration, we have greatly ramped
our Foothills expertise over the past few years and have
experienced positive results as a result.
UNCONVENTIONAL
Characterized as massive opportunities where technology
and better geological understanding will unlock vast
potential over time. Examples of this include Mannville CBM
and various shale gas opportunities, including the Doig,
Wilrich and Muskwa currently identied by us.
We believe that our natural gas portfolio contains
resource potential well beyond the 5.9 tcf of Company
gross provedandprobablereserves currentlyrecognized
by our independent reserves engineers.
Conventional operations
Exploration
Resource plays
Unconventional
North American Natural Gas (continued)
Natural Gas Resource Potential
CASE STUDY
06
05
04
03
02
591
612
317
446
256
North American successful crude oil wells drilled (net wells)
06
05
04
03
02
235
222
206
175
169
North American crude oil and NGLs production (mbbl/d)
North American Crude Oil and NGLs
Canadian Natural is the largest producer of crude oil and NGLs
in western Canada; our production is a blend of light and heavy
crude oils augmented by NGLs which are produced in conjunction
with natural gas. In 2006 average production volumes increased by
6%, reecting another successful year of drilling and development
programs. The depth of our asset base and the importance of our
balanced product mix were revealed in mid 2006 when we refocused
our drilling and development activity from natural gas to crude oil
as a result of commodity prices. Our crude oil development strategy
is based on low risk exploitation combined with our expertise in
recovery techniques. This allows us to maximize crude oil recovery
from both mature and new crude oil pools.
Light Crude Oil and NGLs
THE ASSET
We produce light crude oil and NGLs in all of the Companys western
Canadian core regions. In North America, our light crude oil assets
are largely developed however we continue to grow light crude
oil production through a strategy of waterood implementation
and optimization, development drilling, new pool discoveries
and acquisitions. The vast majority of the Companys light pools
are produced under waterood resulting in high recovery factors
and low production decline rates. We are also evaluating and eld
testing the application of EOR technologies on several pools to
further improve crude oil recovery.
2006 ACTIVITY
In 2006, Canadian Naturals light crude oil drilling and development
programs pursued four initiatives:
Low risk, inll and step-out drilling in crude oil pools located
in the Northern Plains, Northwest Alberta, Northeast British
Columbia and the Southeast Saskatchewan core regions;
Waterood optimization programs in all our core regions.
Our strong technical team, dedicated solely to waterood
optimization, continues to improve our waterood
performance through detailed reservoir characterization and
analysis of production data;
Continued pilot testing of polymer ooding to improve crude
oil recovery in a mature waterood; and
Continuing pilot testing of a CO
2
ood on the Enchant pool in
the Southern Plains.
WHAT TO EXPECT IN 2007 AND BEYOND
For 2007, Canadian Natural will continue to focus on waterood
and tertiary recovery opportunities. More than 100 net wells are
planned for our 2007 light crude oil drilling program.
Canadian Natural will focus on waterood enhancements to
add incremental light crude oil reserves. We estimate that just a
1% improvement in recovery factor could yield an incremental
42 million barrels of reserves. In addition to the enhanced crude
oil recovery initiatives our dened plan includes over 400 new well
locations to be drilled over the next ve years.
Review of Operations: North American Crude Oil and NGLs
Page 27 of 107
Canadian Natural AR2006
Page 28 of 107
Pelican Lake Crude Oil
THE ASSET
This massive, shallow crude oil pool in our Northern Plains core
region is estimated to contain up to four billion barrels of OOIP and
continues to provide excellent opportunities for production and
reserves growth. The Pelican Lake pool now accounts for 8% of the
Companys total proved reserves. We developed this pool exclusively
with horizontal wells to minimize the environmental impact, reduce
development costs and provide greater well productivity. We
own and operate three centralized treating facilities in the area.
Although priced similarly to heavy crude oil, our Pelican Lake crude
oil production yields netbacks typical of medium crude oil due to
our ability to maintain low operating costs.
2006 ACTIVITY
At Pelican Lake, 2006 proved to be very successful year:
We continued to extend the developable area of the existing
pool and drilled 73 net primary producing horizontal wells;
14 net stratigraphic wells were drilled to identify further pool
extensions and other new pools in the area;
We continued to expand the commercial waterood project
and have now converted 12% of our eld to waterood.
A total of 28.5 sections are under waterood with 87 net
production wells and 82 net injection wells;
The ve well polymer ood pilot test that was initiated in 2005
has responded extremely well with production increasing from
50 bbl/d in May 2005 to over 600 bbl/d by December 2006.
These results have lead to the commercial expansion of this
EOR technology with 36 additional wells undergoing polymer
ood by the end of 2006;
Additional producing and undeveloped assets were
acquired north of Pelican Lake that have promising
growth potential.
Production in 2006 averaged 30,000 bbl/d, a 30% increase from
2005 levels, as a result of waterood and polymer ood success
and the continued drilling of primary wells. By the end of 2006
the Pelican Lake pool had approximately 100 million barrels from
Canadian Natural lands.
WHAT TO EXPECT IN 2007 AND BEYOND
The 2007 program will see Canadian Natural drilling 64 net horizontal
wells for primary production and ve additional net stratigraphic
wells to delineate pool extensions. The continued development
of the Pelican Lake waterood and polymer enhanced waterood
are the priority in 2007 and we plan to convert an additional 17.5
sections to polymer ood and 6.8 sections to waterood. This will
entail drilling 68 net horizontal inll production wells and converting
61 net producing wells into 39 polymer and 22 water injection wells.
Recovery factors under primary production are approximately 5%
of the OOIP and we are conservatively forecasting the recoveries
could reach 17.5% through polymer ooding. The polymer
ooding process is likely suitable for approximately half of the eld
which could yield signicant incremental recovery at Pelican Lake.
Primary Heavy Crude Oil
THE ASSET
Canadian Naturals historic growth in primary heavy oil production
has been achieved through drilling and through opportunistic
acquisitions. Heavy oil is produced from repeatable, shallow, low
risk, multi-zone wells. This leads to low nding and development
costs, exceptional drilling success rates and many secondary zone
recompletion opportunities. The region is also natural gas prone
and development drilling can lead to both natural gas and heavy
oil discoveries. With over 1.6 million acres of undeveloped land
and 200,000 acres of developed land, we dominate production
and operations within the Bonnyville/Lloydminster primary
producing area of our Northern Plains core region. This dominance
allows us to minimize capital by conducting large scale drilling
and development programs. We also minimize and control our
production costs through owning and operating central treating
facilities, maximizing their utilization and using our size to achieve
economies of scale. Ownership of the ECHO crude oil sales pipeline
reduces our transportation costs and allows us to be the only
producer capable of delivering undiluted heavy oil into our blending
facilities at Hardisty, Alberta.
2006 ACTIVITY
During 2006 we drilled 292 heavy oil net wells and recompleted
approximately 500 wells to secondary zones. In 2006 record netbacks
were achieved for our heavy oil production as a result of high prices,
our low operating costs and our low nding and development costs.
North American Crude Oil and NGLs
(continued)
Review of Operations: North American Crude Oil and NGLs
Page 29 of 107
To further improve the recovery factors for crude oil we commenced
planning for a 2007 EOR pilot project that will test the viability of a
recovery process using hydrocarbon vapor.
WHAT TO EXPECT IN 2007 AND BEYOND
For 2007, 369 heavy oil locations are forecast to be drilled and a
further 470 net wells will be recompleted. Our dened growth plan
forecasts that over 1,550 net well locations will be drilled during the
next ve years, keeping production relatively at. We will continue
to pursue the development of applicable technologies to further
improve crude oil recovery and are currently conducting research
both in the eld and in the laboratory. We estimate our developed
primary heavy oil lands to contain 7 billion to 10 billion barrels of
OOIP; a modest 1% increase in recovery would equate to over
70 million barrels of incremental recoverable crude oil.
Thermal (In-Situ) Heavy Crude Oil
THE ASSET
Canadian Natural is the second largest producer of thermal in-situ
heavy crude oil in Canada and we also have has some of the best
undeveloped thermal oil sands leases in Canada. Our thermal oil
production is focused on the Primrose Cyclic Steam Stimulation
(CSS) project in the Cold Lake region and the Tangleags thermal
project in Saskatchewan. We also have further development potential
at Cold Lake with the 40,000 bbl/d Primrose East expansion project
that is currently under development. In all, we have more than
400,000 undeveloped acres of land suitable for thermal recovery
processes. These assets provide the basis for the long-term growth
of thermal oil production for the Company. Our technical expertise,
our asset base and years of experience operating and constructing
thermal projects has placed Canadian Natural as an industry leader
in thermal in-situ oil recovery.
2006 ACTIVITY
In 2006 Canadian Naturals multi-year thermal development
program took its rst signicant step with the rst production from
our Primrose North expansion project. As forecasted, production
from the expansion project reached peak stabilized production
production of 30,000 bbl/d in 2006, only 7 months after start-up
in November, 2006. This project will be rst of many as we are
targeting to bring on a new thermal project every 2-3 years for
the foreseeable future. As a result of the Primrose North expansion
and the continued development and optimization at our Primrose
South project our thermal crude oil production reached a record
64,000 bbl/d, or a 21% increase from 2005.
WHAT TO EXPECT IN 2007 AND BEYOND
In 2007, we plan to drill an additional 58 net horizontal wells at
Primrose as part of the ongoing project. As part of our long-term
thermal project expansion plans we will also drill more than 130
net stratigraphic wells to further dene our leases at Primrose East,
Kirby, Grouse, Birch Mountain and Gregoire Lake. Drilling and
facility construction will start at our Primrose East expansion project
where rst production is targeted for 2009.
Beyond 2009 we see the potential to add signicant incremental
thermal in-situ production from our Oil Sands leases at Kirby,
Grouse, Birch Mountain, and Gregoire Lake. We continue to push
the development of new technologies including geo-steering during
drilling, inll drilling and steam additives to enhance recoveries.
Canadian Natural AR2006
Page 30 of 107
In North America we have a diverse crude oil portfolio with
both light and heavy crude oil production but its heavy crude
oil that will drive our crude oil growth. We have one of the
largest heavy crude oil asset bases in the WCSB with 65
billion barrels of OOIP.
The challenge to nd ways to economically recover as much as
possible and to develop the markets capable of absorbing this
new crude oil. We have addressed this latter issue though our
3-phase marketing plan which has been articulated over the past
three years. From a technical perspective, we believe we have
very signicant resource potential as follows:
Proved and Probable Reserves represent those elds already
in production and those in the planning phase that can be
recognized as reserves
The Dened Plan represents development potential over the
next 10-15 years including additional thermal in-situ projects,
polymer ooding upside at Pelican Lake and elsewhere and
light crude oil EOR. All of these projects are in various stages
of planning and evaluation.
FutureResourcePotential is comprised of less dened thermal
in-situ projects and EOR projects that are in the stages of eld
testing or are currently being researched. These projects target
both our light and our heavy crude oil elds.
Crude Oil Resource Potential
CASE STUDY
In North America we have a diverse crude oil portfolio with
both light and heavy crude oil production. While optimizing
our light crude oil production it is heavy crude oil that will
continue to drive our crude oil growth. We have one of the
largest heavy crude oil overall asset bases in the WCSB with
an estimated 65 billion barrels of OOIP.
Our challenge is to nd ways to economically recover as
much of our resource as possible and develop the markets
capable of absorbing this new crude oil. We have addressed
this latter issue through our 3-phase marketing plan which
has been articulated over the past three years. Our recovery
plans include:
Realizing our probable reserves by optimizing those pools
currently on production.
Executing The Dened Plan of oil development over the
next 10 to 15 years, including additional thermal in-situ
projects, polymer ooding at Pelican Lake and elsewhere
and light crude oil EOR. These projects are currently in
various stages of planning and evaluation.
Delivering our Future Resource Potential comprising
additional thermal in-situ and other EOR projects, which are
in stages of eld testing or are currently being researched.
Light crude oil and NGLs
Pelican Lake crude oil Primary heavy crude oil
Thermal oil sands
North American Crude Oil and NGLs
(continued)
Crude Oil Resource Potential
CASE STUDY
Geo-steering
When drilling horizontal wells, optimal wellbore placement is
near the bottom of the reservoir. Past methods were inefcient,
commonly involved drilling out the bottom of the reservoir
into the underlying shales, then correcting the trajectory of the
wellbore. Today, we have a adapted the technology of geo-
steering used in conventional offshore to drilling oil sands wells.
This methodology detects the presence of the reservoir base
through logging while drilling and allows the wellbore trajectory
to be adjusted to maintain the optimal distance from the base of
the reservoir. This leads to savings in drilling time and could add
millions of resource potential through optimal placement of the
wellbore in even relatively thin reservoir.
Pelican Lake Polymer Flood
At Pelican Lake we have successfully implemented waterooding
in portions of the pool, largely against conventional wisdom which
would not expect success in a thin, heavy crude oil reservoir. We
now believe that waterooding could improve recovery factors
from the base level of 3-5% OOIP up to 10-15% OOIP. To
further enhance the waterooding process we began evaluation
and eld testing polymer ood and have achieved great early
success at a reasonable cost. We estimate recovery factors could
ultimately increase to 15-25% OOIP in the better portions of
the reservoir. Ultimately this EOR technology could add over
250 million barrels of resource potential.
Primrose In-Situ Inll Program
Canadian Natural historically believed that cyclic steaming
of horizontal wells spaced at 120 meters was sufcient to
heat and recover oil in the intervening reservoir. Weve now
proven through extensive engineering studies and inll well
drilling that the optimal spacing is approximately 60 meters.
We believe that this could improve recovery factors at Primrose
from approximately 25% to more than 40% OOIP adding
300 million barrels of resource potential. At this interwell spacing
there is also additional potential to convert to a gravity drainage
process and increase recovery even further.
Geo-steering
When drilling horizontal wells, optimal wellbore placement is
near the bottom of the reservoir. Past methods were inefcient,
commonly involved drilling out the bottom of the reservoir
into the underlying shales, then correcting the trajectory of the
wellbore. Today, we have a adapted the technology of geo-
steering used in conventional offshore to drilling oil sands wells.
This methodology detects the presence of the reservoir base
through logging while drilling and allows the wellbore trajectory
to be adjusted to maintain the optimal distance from the base
of the reservoir. This leads to savings in drilling time and could
add millions of barrels of resource potential through optimal
placement of the wellbore in even relatively thin reservoir.
Pelican Lake Polymer Flood
At Pelican Lake we have successfully implemented waterooding
in portions of the pool, largely against conventional wisdom which
would not expect success in a thin, heavy crude oil reservoir. We
now believe that waterooding could improve recovery factors
from the base level of 3-5% OOIP up to 10-15% OOIP. To
further enhance the waterooding process we began evaluation
and eld testing polymer ood and have achieved great early
success at a reasonable cost. We estimate recovery factors could
ultimately increase to 15-25% OOIP in the better portions of
the reservoir. Ultimately this EOR technology could add over
250 million barrels of resource potential.
Primrose In-Situ Inll Program
Canadian Natural historically believed that cyclic steaming
of horizontal wells spaced at 120 meters was sufcient to
heat and recover oil in the intervening reservoir. Weve now
proven through extensive engineering studies and inll well
drilling that the optimal spacing is approximately 60 meters.
We believe that this could improve recovery factors at Primrose
from approximately 25% to more than 40% OOIP adding
300 million barrels of resource potential. At this interwell spacing
there is also additional potential to convert to a gravity drainage
process and increase recovery even further.
Review of Operations: North American Crude Oil and NGLs
Page 31 of 107
Horizontal wells
CURRENT APPROACH
HISTORIC APPROACH
0 100 m
Distance Celsius
12 40 70 100 130 160 190 250 220 305
Infill well
Initiate Polymer Injection
Crude oil production (bbl/d)
Pilot well pad of 3 producers and 2 injectors
0
100
200
300
400
500
600
O
c
t

0
1
O
c
t

0
2
O
c
t

0
3
O
c
t

0
4
O
c
t

0
5
O
c
t

0
6
P
R
E
G
E
O
-
S
T
E
ERING
Indication of bottom shale
allows driller to re-orient
horizontal drill string.
Geo-steering technology
RESERVOIR GAINED
FROM GEO-STEERING
BOTTOM SHALE
0 200 m
Distance
Technology Highlight
CASE STUDY
Canadian Natural AR2006
Page 32 of 107
Our international operations provide a vehicle for continued light
crude oil production growth. A disciplined and focused approach
is essential to successful value creation in the international arena,
therefore, we limit our exposure to those basins where we see
the greatest opportunities and we can best lever our business
strategies. We capitalize on our core competency of mature basin
exploitation in the North Sea where the business parallels that of the
WCSB in many ways. Offshore West Africa provides development
opportunities and signicant exploration upside, capitalizes on
strong government relationships developed over the past years and
leverages the technical/operational expertise in the North Sea. In
both basins, we operate in areas where we dominate the land base
and have the infrastructure to support our operations.
United Kingdom Portion of the North Sea
THE ASSET
Achievements in the basin are a result of the successful utilization of
our mature basin exploitation expertise. The rst stage is predicated
upon optimizing existing facilities and wateroods. This includes
inll drilling, recompletions, and workover wells and optimizing
wateroods to increase production, lower costs and extend eld
life. The second stage incorporates more near-pool development
and exploration in order to maximize utilization of common facilities
and ultimately extend all elds economic lives. In 2006 and beyond,
increasing emphasis on this type of work will be made.
2006 ACTIVITY
During 2006, 7.4 net crude oil wells were drilled along with 1.8
injection wells, effectively offsetting production declines.
In the Northern North Sea, production at Ninian reached its
highest level since Canadian Natural became operator of the
Field in 2002. Work progressed on the Columba Terrace and
Lyell Field developments with subsea infrastructure being installed
at both locations and drilling operations commencing.
In the Central North Sea, following the consolidation of production
from the Banff/Kyle Hub to a single FPSO, operating costs were
reduced and the economic life of both elds extended. At Banff,
work was completed to upgrade gas compression capacity, resulting
in an immediate uplift in crude oil production from the eld. At the
T-Block Hub, high impact subsea wells were delivered, resulting in
the highest production levels for three years being achieved.
06
05
04
03
02
12
15
11
12
8
International successful crude oil wells drilled (net wells)
06
05
04
03
02
101
95
86
76
50
International total production (mboe/d)
International
ALLEN M. KNIGHT,
SENIOR VICE- PRESIDENT,
INTERNATIONAL &
CORPORATE DEVELOPMENT
WHAT TO EXPECT IN 2007 AND BEYOND
During 2007, 7 net crude oil wells are expected to be drilled, allowing
average daily production to be maintained at 2006 levels. At the
Murchison Hub, a major turnaround will be carried out to upgrade
aging facilities in order to optimize plant efciency and uptime. At
the Ninian Hub, a major turnaround at Ninian Southern, driven by
planned integrity maintenance schedules, will be completed. Major
development projects at Kyle, Lyell and the Columba Terraces will
move into execution phase, both on the drilling and construction
side. At the B-Block Hub, gas compression capacity upgrade work
will be carried out and third party oil will be received at the Balmoral
facility, resulting in a signicant reduction in eld operating costs.
Offshore West Africa
THE ASSET
Canadian Natural has two exploration blocks comprising
approximately 55,000 net developed and undeveloped
acres of land located offshore Cte dIvoire. Currently three
producing properties, East Espoir, West Espoir and Baobab,
are operated.
2006 ACTIVITY
In Cte dIvoire in 2006 4.1 net crude oil wells and 1.7 service
and injection wells were drilled. Also during the year, rst oil at
our West Espoir eld was delivered on schedule during the third
quarter During 2006, problems were encountered with control of
sand and solids production, leading to 5 of the 10 production wells
at Baobab being shut in by the end of the year. The Company plans
to recomplete these wells, but only at such time as a deepwater rig
can be secured on commercially acceptable terms.
In October 2005, we completed the acquisition of the permit to
develop the Olowi Field, offshore Gabon. The permit comprises a
90% interest in the production sharing agreement for the Block
containing the Olowi Field, located 20 kilometers offshore and in
30 meters of water. Olowi has been delineated by the drilling of
15 wells by the previous owner and potentially contains as much
as 215 million barrels of 34 API light crude OOIP. The crude oil
reservoir is overlain by a large gas cap with potentially up to 589
billion cubic feet of Original Gas In Place (OGIP). A development
plan, comprising an FPSO and four drilling towers was led with
the Gabonese Government in late 2005, and approved in February
2006. The development of the crude oil reserves commenced in
late 2006, with rst production targeted for late 2008, with a peak
rate of 20,000 bbl/d net expected in 2009.
WHAT TO EXPECT IN 2007 AND BEYOND
During 2007, a further 3 net crude oil wells will be drilled at West
Espoir, with each well being brought online as it is completed. At East
Espoir, a rigless coiled tubing intervention program will be carried
out to further optimize production, and at Baobab we will remain
focused on securing a deepwater rig to allow the tremendous
potential at Baobab to be delivered, but only on commercially
acceptable terms. In Gabon, the Olowi development project will
be progressed towards rst oil in late 2008, with construction of
the drilling towers being carried out in 2007 and drilling operations
commencing in 2008.
Canadian Natural plans to leverage its reputation and experience
in the region to capture additional exploration and exploitation
opportunities within this core region.
Review of Operations: International
Page 33 of 107
Canadian Natural AR2006
Page 34 of 107
Q1-05 Q2-05 Q3-05 Q4-05 Q4-06 Q1-06 Q2-06 Q3-06
Percentage of work progress (cumulative)
Actual Plan
0
20
40
60
Q1-05 Q2-05 Q3-05 Q4-05 Q4-06 Q1-06 Q2-06 Q3-06
Percentage of capital spending (cumulative)
Actual Plan
0
20
40
60
We hold extensive leases in the Athabasca region north of Fort
McMurray that are estimated to contain approximately 16 billion
barrels of original bitumen in place. The Horizon Oil Sands Project
represents a phased development accessing 6 billion barrels of
mineable bitumen resource potential, depending upon sales price
assumptions. The Horizon Project includes a surface oil sands
mining and bitumen extraction plant coupled with on-site bitumen
upgrading and associated infrastructure to produce synthetic
crude oil. Due to the massive resource base, the mine and plant
facilities are expected to produce for decades to come without the
production declines normally associated with crude oil production.
Today we are well into Phase 1 construction with rst oil targeted
for the second half of 2008 ramping to 110,000 bbl/d by the
end of that year. Subsequent phases are planned with total ultimate
potential production from the leases of approximately 500,000 bbl/d
by 2017. At 34 API gravity, low sulphur and fully sweet, the
project is designed to produce a high quality SCO product reducing
marketing risks.
The technology at the Horizon Project is based on that currently in use
at existing plants, effectively mitigating technology risk in Phase 1.
That being said, our plant has been congured in a manner to
maximize benets from the technologies. For example, the Horizon
Project will have a very high level of heat sharing and integration
between the facilities, reducing both natural gas consumption and
greenhouse gas emission levels.
The geological risk associated with the project is very low. On this
lease, over 16 stratigraphic net wells per section have been drilled to
identify overburden levels, and test the ore composition and quality.
The result is a well designed mine plan that has been optimized to
support the bitumen extraction and processing. To ensure efcient
construction, we have implemented an 80/100 rule, requiring
about 80% of engineering to be complete and 100% of materials
purchased prior to construction of major packages. This has
resulted in minimal rework and very little standby time. In addition
our execution and labour strategy combined with the y-in/y-out
ability of workers and our rst-class camp facilities has positioned
the Horizon Project as the employer of choice in the region.
Finally, this asset has been designed to accommodate future
growth. Our footprint allows for easy access to all parts of the plant
and ensures that future production expansions would not impact
existing operations.
Horizon Oil Sands Project
RAL J. H. DOUCET,
SENIOR VICE- PRESIDENT,
OIL SANDS
2006 ACTIVITY
Signicant progress was achieved during 2006 with overall Phase 1
project progress entering the year at 19% and exiting at 57%,
slightly ahead of our plan.
Overall detailed engineering reached 94% completion and was
substantially completed in most areas. Similarly, procurement exited
at 84% complete with most major equipment purchased and on
site. A total of over $5.1 billion in purchase orders and contracts
were awarded through the end of 2006.
Use of modular construction in remote yards located at larger
metropolitan areas was a strategic decision made early in the project
execution plan. While this greatly reduces requirements for on-site
labour it is only successful if logistics and transportation efforts
are successful. Our program has proven to be successful having
delivered 973 oversized loads, or 59% of Phase 1 requirements,
through the end of 2006.
The construction effort itself has reached 42% complete by year
end, as efforts changed from one of largely civil and underground
work in 2005 and early 2006 to above ground construction and
equipment installation. By the end of the year the following
accomplishments were achieved:
Set 333 main piperack modules, essentially forming the core
infrastructure of the plant.
Delayed cokers were signicantly advanced following
completion of foundations, delivery and erection of four coke
drums and setting of topside drill towers.
Numerous reactors were completed and transported to site
with subsequent placement in early 2007.
Constructed 7 of 14 Inclined Plate Separators units for bitumen
froth cleaning.
Ore Preparation Area completed construction of the
Mechanically Stabilized Earth Shear Wall and transported the
800 tonne module assemblies onto their foundations.
Mine overburden removal has moved 25 million bank cubic
meters, which is approximately 35% complete and 4% ahead
of target.
5 of 6 Modular Substations have been installed with High
Voltage cable terminations ongoing.
Completed and commissioned for use, two additional on-site
worker camps, increasing on-site accommodation capacity
to 5,000.
Completed numerous ancillary buildings and commissioned
various support systems/services, including re and emergency
response.
Review of Operations: Oil Sands Mining
Page 35 of 107
Canadian Natural AR2006
Page 36 of 107
Creative Approach Continues to Create
Value for Shareholders
Inationary pressures have been signicant throughout the industry
for the past few years and are the result of higher steel/commodity
prices and increased demands for contractor expertise and labour/
services. Our team has been able to mitigate the majority of these
pressures. Further, we remain on track for nal commissioning
during the third quarter of 2008.
Some of the elements of this successful execution included:
An upfront emphasis on design and execution strategy. This
facilitated a better denition of both what we were going to
build and how we were going to build it. This greater level of
project denition facilitated the award of approximately 68%
of Phase 1 costs through lump sum arrangements.
A exible contracting strategy, with Canadian Natural as the
general contractor. This afforded us the ability to alter work
packages to t the current market. Additionally, in the case
of the Tar River Diversion project, self perform the work to
drive appropriate pricing and, in effect, build and train our
operations team and core supervision.
Our labour strategy of managed open site combined with
y-in / y-out. Through this we have accessed the labour force
across Canada, bringing workers in from coast to coast. We
currently have up to 55 ights per week into our site from
all across Canada and continue to assess new locations and
available labour forces. Workforce numbers at site have met
the Project labour demand with 4,000 trades persons working
on site in December.
In 2007 we anticipate mechanical completion in several plants within
the project and will continue to recruit and build the operating and
maintenance teams for the new facilities. We have had operations
staff involved in the design, procurement and construction of the
Horizon Project and their input and direction has been invaluable
as we ensure the facilities will operate efciently and be easily
maintained.
Teams responsible for the commissioning and start-up of the
facilities have already prepared a schedule that is directly linked to
the construction schedules. This allows us to identify early pinch
points and ensure that we have adequate contingencies in place
during start-up. Currently we have 134 operations people on
staff developing start up procedures, preparing training programs,
recruiting additional staff, establishing maintenance programs, and
already operating several plant systems.
Our Operations team has the opportunity to test run many of
its programs through the early operation of many plant systems.
Currently operating some of its mine equipment, and operating
several plant facilities such the water treatment system, sewage
treatment plant, natural gas distribution, power distribution,
and communications systems the team has already developed
several early learnings that are incorporated into later facility start
up plans.
The asset is substantial and is anticipated to provide signicant
free cash ow in the future. Our Dened Plan is predicated upon
generating the greatest value for our Shareholders. With respect
to future expansions, we have started consolidating results from
the Phase 2 Engineering Design Specication and have identied
a number of potential options for Phases 2/3 execution within the
current high cost environment. We will fully evaluate these options
and provide further updates as we move through that process.
Horizon Oil Sands Project (continued)
INDEPENDENT EVALUATION
For the year ended December 31, 2006, Canadian Natural retained qualied independent reserve evaluators, Sproule Associates
Limited (Sproule) and Ryder Scott Company (Ryder Scott) to evaluate 100%of the Companys conventional proved and probable
crude oil, natural gas liquids (NGL) and natural gas reserves* and prepare Evaluation Reports on these reserves. Sproule evaluated
the Companys North America conventional assets and Ryder Scott evaluated its international conventional assets. Canadian Natural
has been granted an exemption from National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101),
which prescribes the standards for the preparation and disclosure of reserves and related information for companies listed in Canada.
This exemption allows the Company to substitute United States Securities and Exchange Commission (SEC) requirements for certain
disclosures required under NI 51-101. There are two principal differences between the two standards. The rst is the additional
requirement under NI 51-101 to disclose both proved, and proved and probable reserves, as well as the related net present value of
future net revenues using forecast prices and costs. The second is in the denition of proved reserves; however, as discussed in the
Canadian Oil and Gas Evaluation Handbook (COGEH), the standards that NI 51-101 employs, the difference in estimated proved
reserves based on constant pricing and costs between the two standards is not material.
The Company has disclosed proved conventional reserves and the Standardized Measure of discounted future net cash ows using
yearend constant prices and costs as mandated by the SEC in the supplementary oil and gas information section of this Annual
Report. The Company has elected to provide the net present value
(7)
of these same conventional proved reserves as well as the
conventional proved and probable reserves and the net present value of these reserves under the same parameters as additional
voluntary information.
For the year ended December 31, 2006, the Company retained a qualied independent reserves evaluator, GLJ Petroleum Consultants
(GLJ), to evaluate 100%of Phases 1 through 3 of the Companys Horizon Oil Sands Project and prepare an Evaluation Report on the
Companys proved and probable oil sands mining reserves incorporating both the mining and upgrading projects. These reserves were
evaluated adhering to the requirements of SEC Industry Guide 7 using year-end constant pricing and have been disclosed separately
from the Companys conventional proved and probable crude oil, NGL and natural gas reserves.
The Reserve Committee of the Companys Board of Directors has met with and carried out independent due diligence procedures with
each of Sproule, Ryder Scott and GLJ to reviewthe qualications of and procedures used by each evaluator in determining the estimate
of the Companys quantities and net present value of remaining conventional crude oil, NGL and natural gas reserves as well as the
Companys quantity of oil sands mining reserves.
NORTH AMERICA CONVENTIONAL NET RESERVES
Natural gas proved reserves increased by 35%, replacing 323% of 2006 production. Similarly, crude oil and NGLs proved reserves
increased by 28%, replacing 357%of production. This was accomplished at all-in nding and on-stream cost of $15.86 per barrels of
oil equivalent for proved reserves and $9.53 per barrels of oil equivalent for proved and probable reserves.
INTERNATIONAL CONVENTIONAL NET RESERVES
North Sea proved reserves grew by 10 million barrels of oil equivalent to 305 million barrels of oil equivalent or about 16% of total
proved Company reserves. Reserve additions were primarily achieved through optimization of waterood design, an inll drilling
program and recompletions.
In Offshore West Africa, where the Government share of production is contractually determined as a percentage of production volume
and apportioned between income tax and royalties for reserves and accounting purposes based on the terms of the Production Sharing
Contracts (PSC), proved reserves decreased to 139 million barrels of oil equivalent as a result of a 2006 corporate income tax rate
reduction that effectively increased the allocation to royalty. Generally, the Company receives a greater portion of production until
capital development costs are recouped whereupon government allocation of production substantially increases. With the current
high world crude oil price, these projects generally require fewer of the reserves to cover payout of capital costs, thereby reducing the
reserves ultimately allocated to the Company over the eld life.
CONVENTIONAL PROVED UNDEVELOPED NET RESERVES (PUDS)
In the Evaluation Reports, 47%of crude oil proved reserves were assigned to the proved undeveloped category. This is a 9 percentage
point increase from the 38% recorded in 2005. Of the 2006 crude oil PUD reserves, 57% are associated with our thermal oil sands
projects where extensive pool delineation and geological analysis justies continued development and expansion.
In the Evaluation Reports, 22% of natural gas proved reserves were assigned to the proved undeveloped category reecting the
generally shorter lead times required for natural gas developments in Canada.
Year-End Reserves
Year-End Reserves
Page 37 of 107
Canadian Natural AR2006
Page 38 of 107
CONVENTIONAL PROVED AND PROBABLE NET RESERVES
In the Evaluation Reports, total proved and probable reserves increased by 30%, driven largely by the 42%increase in North America.
OIL SANDS MINING RESERVES
The Horizon Projects gross lease proved bitumen reserves as of December 31, 2006 under constant prices were 2.3 billion barrels. The
gross lease proved and probable bitumen reserves were 3.5 billion barrels.
* Conventional crude oil, NGL and natural gas includes all of the Companys light and medium, heavy and, thermal crude oil, natural gas, coal bed methane and
natural gas liquid activities. It does not include the Companys oil sands mining assets
NET RESERVES OF CONVENTIONAL CRUDE OIL AND NATURAL GAS
(1)(2)
December 31, 2006
Proved Proved Proved Proved and
Developed
(3)
Undeveloped
(3)
Total
(3)
Probable
(4)
Crude oil and NGLs (mmbbl)
North America 420 467 887 1,502
North Sea 214 85 299 422
Offshore West Africa 63 67 130 195
697 619 1,316 2,119
Natural gas (bcf)
North America 2,934 771 3,705 4,857
North Sea 17 20 37 93
Offshore West Africa 12 44 56 99
2,963 835 3,798 5,049
Total reserves (mmboe) 1,191 758 1,949 2,961
Reserve replacement ratio (%)
(5)
295% 472%
Cost to develop ($/boe)
(6)
10% discount 1.33 6.46 3.32 3.08
15% discount 1.12 5.80 2.94 2.66
Present value of conventional reserves ($ millions)
(7)
10% discount 20,028 7,469 27,497 37,291
15% discount 17,296 5,247 22,543 29,350
NET RESERVES OF CONVENTIONAL CRUDE OIL AND NATURAL GAS
(1)(2)
December 31, 2005
Proved Proved Proved Proved and
Developed
(3)
Undeveloped
(3)
Total
(3)
Probable
(4)
Crude oil and NGLs (mmbbl)
North America 402 292 694 1,035
North Sea 214 76 290 417
Offshore West Africa 80 54 134 206
696 422 1,118 1,658
Natural gas (bcf)
North America 2,300 441 2,741 3,548
North Sea 16 13 29 69
Offshore West Africa 10 62 72 110
2,326 516 2,842 3,727
Total reserves (mmboe) 1,083 509 1,592 2,279
Reserve replacement ratio (%)
(5)
145% 195%
Cost to develop ($/boe)
(6)

10% discount 0.79 5.69 2.36 2.55
15% discount 0.67 5.15 2.11 2.25
Present value of conventional reserves ($ millions)
(7)
10% discount 24,275 6,342 30,617 38,682
15% discount 20,939 4,881 25,820 31,642
Year-End Reserves
Page 39 of 107
OIL SANDS MINING RESERVES
(1)(8)
The following table sets out Canadian Naturals reserves of bitumen and synthetic crude oil from the Horizon Oil Sands Project leases.
As at Dec 31, 2006 As at Dec 31, 2005
Proved Proved and Proved Proved and
Total Probable Total Probable
Gross lease reserves, before royalties (mmbbl)
Bitumen 2,275 3,530 2,235 3,430
Synthetic crude oil * 1,866 2,962 1,833 2,878
Net reserves, after royalties (mmbbl)
Bitumen 1,853 2,872 1,848 2,848
Synthetic crude oil * 1,596 2,542 1,626 2,566
* SCO reserves are based upon upgrading of the bitumen reserves. The reserves shown for bitumen and SCO are not additive.
NET CONVENTIONAL CRUDE OIL AND NGLs RESERVES RECONCILIATION
(1)(2)
North North Offshore
America Sea West Africa Total
Proved reserves (mmbbl)
Reserves, December 31, 2004 648 303 115 1,066
Extensions and discoveries 98 98
Infill drilling 3 3 2 8
Improved recovery
Property purchases 15 15
Property disposals (3) (3)
Production (70) (25) (8) (103)
Revisions of prior estimates 18 9 10 37
Reserves, December 31, 2005 694 290 134 1,118
Extensions and discoveries 53 3 56
Infill drilling 190 14 204
Improved recovery 12 12
Property purchases 26 26
Property disposals
Production (75) (22) (13) (110)
Revisions of prior estimates (1) 2 9 10
Reserves, December 31, 2006 887 299 130 1,316
Proved and probable reserves (mmbbl)
Reserves, December 31, 2004 926 415 196 1,537
Extensions and discoveries 200 200
Infill drilling 3 5 6 14
Improved recovery
Property purchases 17 17
Property disposals (4) (4)
Production (70) (25) (8) (103)
Revisions of prior estimates (20) 22 (5) (3)
Reserves, December 31, 2005 1,035 417 206 1,658
Extensions and discoveries 128 3 131
Infill drilling 384 17 401
Improved recovery 12 12
Property purchases 34 34
Property disposals
Production (75) (22) (13) (110)
Revisions of prior estimates (4) (5) 2 (7)
Reserves, December 31, 2006 1,502 422 195 2,119
Canadian Natural AR2006
Page 40 of 107
NET CONVENTIONAL NATURAL GAS RESERVES RECONCILIATION
(1)(2)
North North Offshore
America Sea West Africa Total
Proved reserves (bcf)
Reserves, December 31, 2004 2,591 27 72 2,690
Extensions and discoveries 506 506
Infill drilling 22 22
Improved recovery 8 8
Property purchases 6 6
Property disposals (23) (23)
Production (411) (7) (1) (419)
Revisions of prior estimates 42 9 1 52
Reserves, December 31, 2005 2,741 29 72 2,842
Extensions and discoveries 250 250
Infill drilling 71 71
Improved recovery 3 3
Property purchases 1,111 1,111
Property disposals (1) (1)
Production (433) (5) (3) (441)
Revisions of prior estimates (37) 13 (13) (37)
Reserves, December 31, 2006 3,705 37 56 3,798
Proved and probable reserves (bcf)
Reserves, December 31, 2004 3,319 57 90 3,466
Extensions and discoveries 645 645
Infill drilling 23 1 24
Improved recovery 14 14
Property purchases 8 8
Property disposals (30) (30)
Production (411) (7) (1) (419)
Revisions of prior estimates (20) 19 20 19
Reserves, December 31, 2005 3,548 69 110 3,727
Extensions and discoveries 307 307
Infill drilling 95 95
Improved recovery 4 4
Property purchases 1,466 1,466
Property disposals (1) (1)
Production (433) (5) (3) (441)
Revisions of prior estimates (129) 29 (8) (108)
Reserves, December 31, 2006 4,857 93 99 5,049
NET CONVENTIONAL FINDING AND ONSTREAM COSTS
(1)(2)
Three Year
2006 2005 2004 Total
Net reserve replacement expenditures ($ millions) 8,727 3,361 4,259 16,347
Net reserve additions (mmboe)
(9)
Proved 540 251 354 1,145
Proved and probable 865 337 453 1,655
Finding and on stream costs ($/boe)
(10)
Proved 16.16 13.41 12.03 14.28
Proved and probable 10.09 9.97 9.40 9.88
Year-End Reserves
Page 41 of 107
NET RESERVES CLASSIFICATION BY PRODUCT
(1)(2)
December 31, 2006
Proved Proved Proved Proved and
Reserves Net of Royalties Developed
(3)
Undeveloped
(3)
Total
(3)
Probable
(4)
Light crude oil and NGLs
North America 6% 1% 7% 6%
North Sea 11% 4% 15% 14%
Offshore West Africa 3% 3% 6% 7%
Total 20% 8% 28% 27%
Heavy crude oil
North America - Primary Heavy 5% 1% 6% 4%
North America - Pelican Lake 3% 5% 8% 7%
North America - Thermal 7% 18% 25% 34%
Total 15% 24% 39% 45%
Total crude oil and NGLs
North America 21% 25% 46% 51%
North Sea 11% 4% 15% 14%
Offshore West Africa 3% 4% 7% 7%
Total 35% 33% 68% 72%
Natural gas
North America 25% 7% 32% 27%
North Sea
Offshore West Africa 1%
Total 25% 7% 32% 28%
Total boe 60% 40% 100% 100%
(1) Reserve estimates and net present value calculations are based upon year end constant reference price assumptions as detailed below as well as constant
year-end costs.
Company WTI @ Hardisty North
Average Cushing Heavy Sea
Price Oklahoma 12 API Brent
Crude oil and NGLs (C$/bbl) (US$/bbl) (C$/bbl) (US$/bbl)
2006 51.11 61.05 41.94 58.93
2005 46.12 61.04 32.64 58.21
2004 32.14 44.04 17.45 40.47
Company British Columbia
Average Henry Hub Alberta Huntingdon
Price Louisiana AECO C Sumas
Natural gas (C$/mcf) (US$/mmbtu) (C$/mmbtu) (C$/mmbtu)
2006 6.07 5.52 6.13 6.52
2005 9.45 10.08 9.99 9.53
2004 6.44 6.62 6.78 6.94
A foreign exchange rate of US$0.86/C$1.00 was used in the 2006 and the 2005 evaluations; US$0.83/C$1.00 was used in the 2004 evaluation.
(2) Net reserves mean the Companys working interest share of gross reserves after consideration of royalties.
(3) Proved reserve estimates and values were evaluated in accordance with the Securities and Exchange Commission (SEC) requirements. The stated reserves have a
reasonable certainty of being economically recoverable using year-end prices and costs held constant throughout the productive life of the properties.
(4) Proved and probable reserve estimates and values were evaluated in accordance with the standards of the Canadian Oil and Gas Evaluation Handbook (COGEH)
and as mandated by NI 51-101. The stated reserves have a 50%probability of equaling or exceeding the indicated quantities and were evaluated using year-end
costs and prices held constant throughout the productive life of the properties.
(5) Reserve replacement ratios were calculated using annual net reserve additions comprised of all change categories divided by the net production for that year.
(6) Cost to develop represents total discounted future capital for each reserves category excluding abandonment capital divided by the reserves associated with
that category.
(7) Net present values of reserves are based upon discounted cash ows associated with prices and operating expenses held constant into the future, prior to the
consideration of income taxes and existing asset abandonment liabilities. Future development costs and associated material well abandonment costs have been
applied against future net revenues.
(8) Synthetic crude oil reserves are based on upgrading of the bitumen reserves using technologies implemented at the Horizon Project. The reserve values shown for
bitumen and synthetic crude oil are not additive.
(9) Reserves additions are comprised of all categories of reserves changes, exclusive of production.
(10) Reserves nding and on streamcosts are determined by dividing total capital cash expenditures for each year by net reserves additions for that year. It excludes costs
associated with head ofce, abandonments, midstream and the Horizon Project.
Canadian Natural AR2006
Page 42 of 107
Managements Discussion & Analysis
SPECIAL NOTE REGARDING FORWARD
LOOKING STATEMENTS
Certain statements in this document or documents incorporated
herein by reference for Canadian Natural Resources Limited (the
Company) may constitute forward-looking statements within
the meaning of the United States Private Securities Litigation Reform
Act of 1995. These forward-looking statements can generally
be identied as such because of the context of the statements
including words such as believes, anticipates, expects,
plans, estimates, or words of a similar nature.
The forward-looking statements are based on current expectations
and are subject to known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or
achievements of the Company, or industry results, to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such
factors include, among others: general economic and business
conditions which will, among other things, impact demand for
and market prices of the Companys products; foreign currency
exchange rates; economic conditions in the countries and regions
in which the Company conducts business; political uncertainty,
including actions of or against terrorists or insurgent groups or
other conict including conict between states; industry capacity;
ability of the Company to implement its business strategy, including
exploration and development activities; impact of competition;
the availability and cost of seismic, drilling and other equipment;
ability of the Company to complete its capital programs; ability of
the Company to transport its products to market; potential delays
or changes in plans with respect to exploration or development
projects or capital expenditures; the ability of the Company to
attract the necessary labour required to build its projects; operating
hazards and other difculties inherent in the exploration for and
production and sale of crude oil and natural gas; availability and
cost of nancing; success of exploration and development activities;
timing and success of integrating the business and operations
of acquired companies; production levels; uncertainty of reserve
estimates; actions by governmental authorities; government
regulations and the expenditures required to comply with them
(especially safety and environmental laws and regulations); asset
retirement obligations; and other circumstances affecting revenues
and expenses. The impact of any one factor on a particular
forward-looking statement is not determinable with certainty as
such factors are interdependent, and the Companys course of
action would depend upon its assessment of the future considering
all information then available. For additional information refer to
Risks and Uncertainties on page 64.
Disclosure related to future commodity pricing, production volumes,
royalties, capital expenditures and other 2007 guidance provided
throughout this Managements Discussion and Analysis, including
the information provided in the Outlook section on pages 69 and
70, constitutes forward looking statements as described above.
Statements relating to reserves are deemed to be forward-
looking statements as they involve the implied assessment based
on certain estimates and assumptions that the reserves described
can be protably produced in the future.
Readers are cautioned that the foregoing list of important factors
is not exhaustive. Although the Company believes that the
expectations conveyed by the forward-looking statements are
reasonable based on information available to it on the date such
forward-looking statements were made, no assurances can be
given as to future results, levels of activity and achievements. All
subsequent forward-looking statements, whether written or oral,
attributable to the Company or persons acting on its behalf are
expressly qualied in their entirety by these cautionary statements.
Except as required by law, the Company assumes no obligation to
update forward-looking statements should circumstances or the
Companys estimates or opinions change.
SPECIAL NOTE REGARDING NON-GAAP
FINANCIAL MEASURES
Managements Discussion and Analysis (MD&A) includes
references to nancial measures commonly used in the crude
oil and natural gas industry, such as cash ow from operations,
adjusted net earnings from operations and net asset value. These
nancial measures are not dened by Canadian generally accepted
accounting principles (GAAP) and therefore are referred to
as non-GAAP measures. The non-GAAP measures used by the
Company may not be comparable to similar measures presented by
other companies. The Company uses these non-GAAP measures to
evaluate its performance. The non-GAAP measures should not be
considered an alternative to or more meaningful than net earnings,
as determined in accordance with Canadian GAAP, as an indication
of the Companys performance.
MANAGEMENTS DISCUSSION
AND ANALYSIS
Managements Discussion and Analysis of the nancial condition
and results of operations of the Company should be read in
conjunction with the Companys audited consolidated nancial
statements andrelatednotes for theyear endedDecember 31, 2006.
The consolidated nancial statements have been prepared in
accordance with Canadian GAAP. A reconciliation of Canadian
GAAP to United States GAAP is included in note 16 to the
consolidated nancial statements. All dollar amounts are referenced
in Canadian dollars, except where otherwise noted. Common share
data has been restated to reect the two-for-one share split in
May 2005. The calculation of barrels of oil equivalent (boe) is
based on a conversion ratio of six thousand cubic feet (mcf) of
natural gas to one barrel (bbl) of crude oil to estimate relative
energy content. This conversion may be misleading, particularly
when used in isolation, since the 6 mcf:1 bbl ratio is based on an
energy equivalency at the burner tip and does not represent the
value equivalency at the well head. Production volumes are the
Companys interest before royalties, and realized prices exclude
the effect of risk management activities, except where noted
otherwise. The following discussion and analysis refers primarily to
the Companys 2006 nancial results compared to 2005 and 2004,
unless otherwise indicated. In addition, this discussion details the
Companys capital program and outlook for 2007.
Managements Discussion & Analysis
Page 43 of 107
Certain gures related to the presentation of gross revenues and
gross transportation and blending expense provided for prior years
have been reclassied to conform to the presentation adopted
in 2006.
Additional information relating to the Company, including its quarterly
MD&A for the year and three months ended December 31, 2006
and its Annual Information Form for the year ended December 31,
2006, is available on SEDAR at www.sedar.com.
This MD&A is dated March 15, 2007.
ABBREVIATIONS
ACC Anadarko Canada Corporation
AECO Alberta natural gas reference location
AIF Annual Information Form
API American Petroleum Institute
ARO Asset retirement obligations
bbl barrel
bbl/d barrels per day
boe barrels of oil equivalent
boe/d barrels of oil equivalent per day
Brent Dated Brent
C$ Canadian dollars
FPSO Floating Production, Storage and Offtake Vessel
GAAP Generally accepted accounting principles
GJ gigajoule
Heavy Differential Heavy crude oil differential from WTI
Horizon Project Horizon Oil Sands Project
mcf thousand cubic feet
mmbtu million British thermal units
mmcf/d million cubic feet per day
NGLs Natural gas liquids
NYMEX New York Mercantile Exchange
NYSE New York Stock Exchange
SCO Synthetic light crude oil
SEC Securities and Exchange Commission
TSX Toronto Stock Exchange
UK United Kingdom
US United States
US$ United States dollars
WTI West Texas Intermediate
OBJECTIVE AND STRATEGY
The Companys objective is to increase crude oil and natural gas
production, reserves, cash ow and net asset value
(1)
on a per
common share basis through the development of its existing
crude oil and natural gas properties and through the discovery
and acquisition of new reserves. The Company strives to meet
this objective by having a dened growth and value enhancement
plan for each of its products and segments. The Company takes
a balanced approach to growth and investments and focuses on
creating long-term shareholder wealth. The Company allocates its
capital by maintaining:
Balance among its products, namely natural gas, light/medium
crude oil, Pelican Lake crude oil
(2)
, primary heavy crude oil and
thermal heavy crude oil;
Balance among near-, mid- and long-term projects;
Balance among acquisitions, exploitation and exploration;
and
Balance between sources of debt nancing and maintenance
of a strong balance sheet.
(1) Discounted value of conventional crude oil and natural gas reserves and
undeveloped land, less net debt.
(2) Pelican Lake crude oil is 14-17 API oil, but receives medium quality crude
netbacks due to low production costs and low royalty rates.
The Companys three-phase crude oil marketing strategy includes:
Blending various crude oil streams with diluents to create more
attractive feedstock;
Supporting and participating in pipeline expansions or new
additions; and
Supporting and participating in projects that will increase the
conversion capacity for heavy crude oil.
Operational discipline and cost control are central to the Company.
By controlling costs consistently throughout all cycles of the
industry, the Company believes that it will achieve continued
growth. Cost control is attained by developing area knowledge, by
dominating core areas and by maintaining high working interests
in its properties.
The Company is committed to maintaining its strong nancial
position. The Company believes that it has built the necessary
nancial capacity to complete the Horizon Project while at the same
time not compromising the delivery of its conventional crude oil
and natural gas growth opportunities. Additionally, the Companys
risk management hedge program reduces the risk of volatility in
commodity price markets and supports the Companys cash ow
for its capital expenditures program throughout the construction
period of the Horizon Project.
Strategic accretive acquisitions like the acquisition of ACC are a key
component of the Companys strategy. The Company has used a
combination of internally generated cash ows and debt nancing
to selectively acquire properties generating future cash ows in its
core regions. These targeted acquisitions should provide additional
free cash ow during the construction years of the Horizon Project
while still achieving targeted returns.
Highlights for the year ended December 31, 2006 are as follows:
Achieved record levels of net earnings;
Achieved record crude oil and NGLs and natural gas
production;
Achieved its revised annual production guidance for crude oil
and NGLs and natural gas;
Completed the acquisition of ACC for net cash consideration
of $4,641 million;
Completed 57% of Phase 1 construction of the Horizon
Project;
Completed all major 2006 milestones on the Horizon Project
before winters onset;
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Page 44 of 107
Achieved full recovery of the Companys capital investments in the Primrose North and South Fields;
Received Gabonese Government approval of its development plan for the Olowi PSC offshore Gabon and received Board of Directors
sanction for development in November 2006;
Delivered rst oil from West Espoir and completed a successful inll drilling campaign at East Espoir in the Companys Offshore West
Africa geographic segment; and
Purchased 485,000 common shares for a cost of $28 million under the Companys Normal Course Issuer Bid.
NET EARNING AND CASH FLOW FROM OPERATIONS
FINANCIAL HIGHLIGHTS
($ millions, except per common share amounts) 2006 2005 2004
Revenue, before royalties
(1)
$ 11,643 $ 11,130 $ 8,269
Net earnings $ 2,524 $ 1,050 $ 1,405
Per common share
basic $ 4.70 $ 1.96 $ 2.62
diluted $ 4.70 $ 1.95 $ 2.60
Adjusted net earnings from operations
(2)
$ 1,664 $ 2,034 $ 1,405
Per common share
basic $ 3.10 $ 3.79 $ 2.62
diluted $ 3.10 $ 3.78 $ 2.60
Cash flow from operations
(3)
$ 4,932 $ 5,021 $ 3,769
Per common share
basic $ 9.18 $ 9.36 $ 7.03
diluted $ 9.18 $ 9.33 $ 6.98
Dividends declared per common share $ 0.30 $ 0.236 $ 0.200
Total assets $ 33,160 $ 21,852 $ 18,372
Total long-term liabilities $ 19,399 $ 9,790 $ 9,196
Capital expenditures, net of dispositions $ 12,025 $ 4,932 $ 4,633
(1) Blending costs previously netted against gross revenues in prior years have been reclassied to transportation and blending expense to conformto the presentation
adopted in 2006.
(2) Adjusted net earnings from operations is a non-GAAP term that represents net earnings adjusted for certain items of a non-operational nature. The Company
evaluates its performance based on adjusted net earnings from operations. The following reconciliation lists the after-tax effects of certain items of a non-
operational nature that are included in the Companys nancial results. Adjusted net earnings fromoperations may not be comparable to similar measures presented
by other companies.
($ millions) 2006 2005 2004
Net earnings as reported $ 2,524 $ 1,050 $ 1,405
Stock-based compensation, net of tax (a) 95 481 168
Unrealized risk management (gain) loss, net of tax (b) (674) 607 (27)
Unrealized foreign exchange loss (gain), net of tax (c) 114 (85) (75)
Effect of statutory tax rate changes on future income tax liabilities (d) (395) (19) (66)
Adjusted net earnings from operations $ 1,664 $ 2,034 $ 1,405
(a) The Companys employee stock option plan provides for a cash payment option. Accordingly, the intrinsic value of the outstanding vested options is recorded
as a liability on the Companys balance sheet and periodic changes in the intrinsic value, net of taxes, ow through net earnings, or are capitalized to the
Horizon Project.
(b) Derivative nancial instruments not designated as hedges are recorded at fair value on the balance sheet, with changes in fair value, net of taxes, owing
through net earnings. The amounts ultimately realized may be materially different than reected in the nancial statements due to changes in prices of the
underlying items hedged, primarily crude oil and natural gas.
(c) Unrealized foreign exchange gains and losses result primarily fromthe translation of US dollar denominated long-termdebt to period-end exchange rates and
are immediately recognized in net earnings.
(d) All substantively enacted adjustments in applicable income tax rates are applied to underlying assets and liabilities on the Companys consolidated balance
sheet in determining future income tax assets and liabilities. The impact of these tax rate changes is recorded in net earnings during the period the legislation
is substantively enacted. Income tax rate changes during 2006 resulted in a reduction of future income tax liabilities of approximately $438 million in North
America, an increase of future income tax liabilities of approximately $110 million in the UK North Sea and a reduction of future income tax liabilities of
approximately $67 million in Offshore West Africa. Jurisdictional income tax rate changes in North America in 2005 resulted in a reduction of future income
tax liabilities of $19 million (2004 - $66 million reduction).
Managements Discussion & Analysis
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(3) Cash ow from operations is a non-GAAP term that represents net earnings adjusted for non-cash items. The Company evaluates its performance based on
cash ow from operations. The Company considers cash ow from operations a key measure as it demonstrates the Companys ability to generate the cash ow
necessary to fund future growth through capital investment and to repay debt. Cash ow from operations may not be comparable to similar measures presented
by other companies.
($ millions) 2006 2005 2004
Net earnings $ 2,524 $ 1,050 $ 1,405
Non-cash items:
Depletion, depreciation and amortization 2,391 2,013 1,769
Asset retirement obligation accretion 68 69 51
Stock-based compensation 139 723 249
Unrealized risk management activities (1,013) 925 (40)
Unrealized foreign exchange loss (gain) 134 (103) (94)
Deferred petroleum revenue tax expense (recovery) 37 (9) (45)
Future income tax 652 353 474
Cash flow from operations $ 4,932 $ 5,021 $ 3,769
In 2006, the Company reported record net earnings of $2,524 million compared to net earnings of $1,050 million in 2005
(2004 $1,405 million). Net earnings for the year ended December 31, 2006 included unrealized after-tax income of $860 million related
to the effects of risk management activities, statutory tax rate changes on future income tax liabilities, uctuations in foreign exchange
rates and stock-based compensation expense (2005 unrealized after-tax expenses of $984 million; 2004 $nil). Excluding these items,
adjusted net earnings from operations for the year ended December 31, 2006 decreased to $1,664 million from $2,034 million in 2005
(2004 $1,405 million) primarily due to decreased natural gas pricing, increased realized risk management losses, increased production
expense and increased depletion, depreciation and amortization expense, and the impact of a stronger Canadian dollar relative to the
US dollar. These factors were partially offset by stronger benchmark crude oil pricing and increased crude oil and NGLs and natural gas
sales volumes.
Operating results in 2006 were impacted by the acquisition of ACC completed in November 2006. The Company completed the acquisition
of ACC, a subsidiary of Anadarko Petroleum Corporation, for net cash consideration of $4,641 million including working capital and other
adjustments. Substantially all of ACCs land and production base is located in Western Canada and consists of natural gas weighted assets.
The operating results of ACC have been consolidated with the results of the Company effective November 2006. Total production from the
ACC properties averaged approximately 67,600 boe/d for the two months of November and December, while natural gas production from
the ACC properties averaged approximately 354 mmcf/d.
The Company expects that consolidated net earnings will continue to reect signicant volatility due to the impact of risk management
activities, stock-based compensation expense and uctuations in foreign exchange rates.
The Companys commodity hedging program reduces the risk of volatility in commodity price markets and supports the Companys cash
ow for its capital expenditure program throughout the Horizon Project construction period. This program allows for the hedging of up
to 75%of the near 12 months budgeted production, up to 50%of the following 13 to 24 months expected production and up to 25%
of production expected in months 25 to 48. For the purpose of this program, the purchase of crude oil put options is in addition to the
above parameters. In accordance with the policy, approximately 65% of expected crude oil volumes and approximately 75% of expected
natural gas volumes have been hedged for 2007. In addition, 77,000 bbl/d of crude oil volumes are protected by put options for 2007 at
a strike price of US$60.00 per barrel. The Company is extending its hedge program into 2008 whereby 150,000 bbl/d of crude oil volumes
have been hedged (100,000 bbl/d of price collars with a US$60.00 oor and 50,000 bbl/d of put options with a US$55.00 strike price). In
addition, 900,000 GJ/d of natural gas volumes have been hedged through the use of price collars for the rst quarter of 2008 (400,000 GJ/d
with a oor of $7.00 and 500,000 GJ/d with a oor of $7.50).
As effective as the Companys hedges are against reference commodity prices, a portion of the derivative nancial instruments entered into by
the Company do not meet the requirements for hedge accounting under GAAP due to currency, product quality and location differentials (the
non-designatedhedges). TheCompany is requiredtomark-to-market thesenon-designatedhedges basedonprevailingforwardcommodity
prices in effect at the end of each reporting period. Accordingly, the unrealized risk management asset reects, at December 31, 2006,
the implied price differentials for the non-designated hedges for future periods. The cash settlement amount of the risk management
nancial derivative instruments may vary materially depending upon the underlying crude oil and natural gas prices at the time of nal
settlement of the nancial derivative instruments, as compared to their mark-to-market value at December 31, 2006.
Due to the changes in crude oil and natural gas forward pricing, and the reversal of prior year unrealized losses, the Company
recorded a net unrealized gain of $1,013 million ($674 million after-tax) on its risk management activities for the year ended
December 31, 2006 (2005 - $925 million unrealized loss, $607 million after-tax; 2004 - $40 million unrealized gain, $27 million after-tax).
Mark-to-market unrealized gains and losses do not impact the Companys current cash owor its ability to nance ongoing capital programs.
The Company continues to believe that its risk management programmeets its objective of securing funding for its capital projects and does
not intend to alter its current strategy of obtaining price certainty for its crude oil and natural gas sales.
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The Company also recorded a $139 million ($95 million after-tax) stock-based compensation expense for the year ended December 31, 2006
in connection with the 8% increase in the Companys share price for the year ended December 31, 2006 (Companys share price as at:
December 31, 2006 C$62.15; December 31, 2005 C$57.63; December 31, 2004 C$25.63; December 31, 2003 C$16.34). As
required by GAAP, the Company records a liability for potential cash payments to settle its outstanding employee stock options, based on
the difference between the exercise price of the stock options and the market price of the Companys common shares, pursuant to a graded
vesting schedule. The liability is revalued at each balance sheet date to reect the changes in the market price of the Companys common
shares and the options exercised or surrendered in the year, with the net change recognized in earnings, or capitalized as part of the Horizon
Project during the construction period. The stock-based compensation liability reected the Companys potential cash liability should all the
vested options be surrendered for a cash payout at the market price on December 31, 2006. In years when substantial share price changes
occur, the Companys net earnings are subject to signicant volatility. The Company utilizes its stock-based compensation plan to attract and
retain employees in a competitive environment. All employees participate in this plan.
Cash ow from operations for the year ended December 31, 2006 decreased slightly to $4,932 million ($9.18 per common share) from
$5,021 million ($9.36 per common share) in 2005 (2004 $3,769 million or $7.03 per common share). The decrease was primarily due
to decreased natural gas pricing, increased realized risk management losses, increased production expense and the impact of a stronger
Canadian dollar relative to the US dollar. These factors were partially offset by stronger benchmark crude oil pricing and increased sales
volumes.
In 2006, the Companys average sales price per bbl of crude oil and NGLs increased to $53.65 per bbl from $46.86 per bbl in 2005
(2004 $37.99 per bbl). The Companys average natural gas price decreased to $6.72 per mcf from $8.57 per mcf in 2005
(2004 $6.50 per mcf).
Total production of crude oil and NGLs before royalties increased to a record 331,998 bbl/d from 313,168 bbl/d in 2005
(2004 282,489 bbl/d). The increase in crude oil and NGLs production primarily reected increased production from the Companys
Primrose thermal projects, the positive results from the Pelican Lake waterood project, the acquisition of ACC, development of West and
East Espoir and the full years impact of production from the Baobab Field located offshore Cte dIvoire. Production from the Baobab Field
commenced August 2005.
Total natural gas production before royalties increased to 1,492 mmcf/d from 1,439 mmcf/d in 2005 (2004 1,388 mmcf/d). The increase
in natural gas production primarily reected additional natural gas production fromthe ACC acquisition. The increase was partially offset by
the production decrease due to the effects of the Companys strategic reduction in natural gas drilling activity and increased North America
crude oil drilling, made in response to sustained low natural gas prices and inationary cost pressures.
Total crude oil and NGLs and natural gas production volumes before royalties increased to 580,724 boe/d from 552,960 boe/d in 2005
(2004 513,835 boe/d).
Operating highlights 2006 2005 2004
Crude oil and NGLs ($/bbl)
(1)

Sales price
(2)
$ 53.65 $ 46.86 $ 37.99
Royalties 4.48 3.97 3.16
Production expense 12.29 11.17 10.05
Netback $ 36.88 $ 31.72 $ 24.78
Natural gas ($/mcf)
(1)

Sales price
(2)
$ 6.72 $ 8.57 $ 6.50
Royalties 1.29 1.75 1.35
Production expense 0.82 0.73 0.67
Netback $ 4.61 $ 6.09 $ 4.48
Barrels of oil equivalent ($/boe)
(1)

Sales price
(2)
$ 47.92 $ 48.77 $ 38.45
Royalties 5.89 6.82 5.37
Production expense 9.14 8.21 7.35
Netback $ 32.89 $ 33.74 $ 25.73
(1) Amounts expressed on a per unit basis are based on sales volumes.
(2) Net of transportation and blending costs and excluding risk management activities.
Managements Discussion & Analysis
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SUMMARY OF QUARTERLY RESULTS
The following is a summary of the Companys quarterly results for the most recently completed quarters:
($ millions, except per common share amounts)
2006 Total Dec 31 Sep 30 Jun 30 Mar 31
Revenue, before royalties
(1)
$ 11,643 $ 2,826 $ 3,108 $ 3,041 $ 2,668
Net earnings $ 2,524 $ 313 $ 1,116 $ 1,038 $ 57
Net earnings per common share
basic $ 4.70 $ 0.58 $ 2.08 $ 1.93 $ 0.11
diluted $ 4.70 $ 0.58 $ 2.08 $ 1.93 $ 0.11
2005 Total Dec 31 Sep 30 Jun 30 Mar 31
(2)
Revenue, before royalties
(1)
$ 11,130 $ 3,319 $ 3,163 $ 2,420 $ 2,228
Net earnings (loss) $ 1,050 $ 1,104 $ 151 $ 219 $ (424)
Net earnings (loss) per common share
basic $ 1.96 $ 2.06 $ 0.28 $ 0.41 $ (0.79)
diluted $ 1.95 $ 2.06 $ 0.28 $ 0.41 $ (0.79)
(1) Blending costs previously netted against gross revenues in prior periods have been reclassied to transportation expense to conformto the presentation adopted in
the fourth quarter of 2006.
(2) Restated to reect two-for-one share split in May 2005.
The Companys quarterly consolidated revenues increased 27%to $2,826 million in the fourth quarter of 2006 from $2,228 million in the
rst quarter of 2005. Quarterly revenues during 2006 primarily reected increased world benchmark crude oil prices and increased crude oil
and NGLs and natural gas sales volumes, partially offset by decreased natural gas prices. Quarterly revenues during 2005 primarily reected
increased world benchmark crude oil and natural gas prices and increased crude oil and NGLs and natural gas sales volumes.
Crude oil prices reected demand growth and continuing geopolitical uncertainties. Hurricane activity in the Gulf of Mexico in the third
quarter of 2005 further contributed to increased world benchmark crude oil pricing. As a result, the Companys realized crude oil and
NGLs price increased from C$39.81 per bbl for the rst quarter of 2005 to C$47.27 per bbl for the fourth quarter of 2006. Realized
natural gas prices decreased in 2006 from 2005 primarily due to decreased heating demand during the winter months and decreased
cooling demand during the summer months. The Companys realized natural gas price decreased slightly from C$6.68 per mcf for the
rst quarter of 2005 to C$6.66 per mcf for the fourth quarter of 2006
A stronger Canadian dollar reduced the Canadian dollar sales price the Company received for its crude oil sales, as crude oil prices are
based on US dollar denominated benchmarks. The US / Canadian dollar average exchange rate increased from 0.8152 for the rst
quarter of 2005 to 0.8781 for the fourth quarter of 2006.
Crude oil and NGLs and natural gas sales volumes increased in 2006 over 2005. The increase in crude oil and NGLs production from
2005 primarily reected increased production fromthe Companys Primrose thermal projects, the positive results fromthe Pelican Lake
waterood project, additional production volumes from the ACC acquisition, development of West and East Espoir and the full years
impact of production from the Baobab Field located offshore Cte dIvoire. Production from the Baobab Field commenced August
2005. The increase in natural gas production from2005 primarily reected additional natural gas production fromthe ACC acquisition.
The increase was partially offset by production decreases due to the effects of the Companys strategic reduction in natural gas drilling
activity and increased North America crude oil drilling, made in response to sustained low natural gas prices and inationary cost
pressures. In total, daily production increased from 530,316 boe/d day in the rst quarter of 2005 to 613,764 boe/d for the fourth
quarter of 2006.
In addition to commodity prices and sales volumes, quarterly net earnings were impacted by:
Increased production expense primarily due to the ACC acquisition and industry-wide inationary cost pressures.
Increased depletion, depreciation and amortization expense primarily due to increased nding and development costs associated with
crude oil and natural gas exploration in North America, a higher depletion base due to the acquisition of ACC and increased estimated
future costs to develop the Companys proved undeveloped reserves.
Unrealized expense (recovery) due to the mark-to-market treatment of the Companys stock-based compensation liability.
Unrealized gains and losses from the mark-to-market treatment of the Companys commodity price hedges not designated as hedges
for accounting purposes.
Unrealized foreign exchange gains and losses due to the uctuation of the Canadian dollar in relation to the US dollar with respect to
the US dollar debt and working capital in North America denominated in US dollars, as well as the re-measurement of North Sea future
income tax liabilities denominated in UK pounds sterling.
Jurisdictional corporate tax rate changes substantively enacted in the period.
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BUSINESS ENVIRONMENT
(Yearly average) 2006 2005 2004
WTI benchmark price (US$/bbl)
(1)
$ 66.25 $ 56.61 $ 41.43
Dated Brent benchmark price (US$/bbl) $ 65.18 $ 54.45 $ 38.28
Differential to LLB blend (US$/bbl) $ 21.69 $ 20.83 $ 13.44
Differential to LLB blend as a % of WTI 33% 37% 32%
Condensate benchmark price (US$/bbl) $ 66.24 $ 57.25 $ 41.62
NYMEX benchmark price (US$/mmbtu) $ 7.26 $ 8.56 $ 6.09
AECO benchmark price (C$/GJ) $ 6.62 $ 8.05 $ 6.43
US/Canadian dollar average exchange rate (US$) $ 0.8818 $ 0.8253 $ 0.7683
(1) Refers to West Texas Intermediate crude oil prices per barrel at Cushing, Oklahoma.
COMMODITY PRICES
World benchmark crude oil prices increased during the rst part of 2006 due to ongoing demand growth and geopolitical
uncertainties. However, pricing signicantly declined later in the year, reecting higher crude oil inventories. In December 2006,
WTI averaged US$62.09 per bbl, a decline of 21%fromthe record high of US$78.40 per bbl reached in July 2006. WTI averaged US$66.25
per bbl in 2006, an increase of 17%compared to US$56.61 per bbl in 2005 (2004 US$41.43 per bbl).
The Companys realized crude oil price increased from2005 as a result of the increased WTI price and the narrower Heavy Differential. Heavy
Differentials averaged 33%for 2006 compared to 37%for 2005 (2004 32%). The narrowing of the Heavy Differentials from 2005 was
primarily due to reduced availability of imported grades from Venezuela and Mexico, reduced Canadian production of heavy crude oil and
the removal of logistical constraints in accessing newmarkets in the US Gulf Coast due to the Pegasus and Spearhead pipelines commencing
operations during 2006. The increase in realized crude oil prices from 2005 was partially offset by the negative impact of a strengthening
Canadian dollar relative to the US dollar. A strengthening Canadian dollar reduces the Canadian dollar sales price the Company receives for
its crude oil sales, as crude oil prices are based on US dollar denominated benchmarks.
The Company anticipates continued volatility in the crude oil markets as inventory levels remain high and given the unpredictable nature of
geopolitical events.
Brent averaged US$65.18 per bbl in 2006, an increase of 20%compared to US$54.45 per bbl in 2005 (2004 US$38.28 per bbl). Crude
oil sales contracts for the Companys North Sea and Offshore West Africa segments are typically based on Brent pricing, which has beneted
from strong European and Asian demand in 2006.
NYMEX natural gas prices averaged US$7.26 per mmbtu in 2006, a decrease of 15%from US$8.56 per mmbtu in 2005 (2004 US$6.09
per mmbtu). AECO natural gas pricing in 2006 decreased 18%from 2005 to average C$6.62 per GJ. The decrease in natural gas pricing in
2006 from 2005 reected the impact of exceptionally mild winter weather and reduced heating demand, relatively stable summer weather
and reduced cooling demand, and the continuing impact of high natural gas inventory levels.
The Company anticipates a challenging natural gas pricing environment in the near term given the high storage levels. Longer term natural
gas pricing will continue to be largely weather dependent.
OPERATING AND CAPITAL COSTS
Strong commodity prices in recent years have resulted in increased demand and costs for oileld services worldwide. This has lead to
inationary production and capital cost pressures throughout the North American crude oil and natural gas industry, particularly related to
natural gas drilling activity and oil sands developments. The strong commodity price environment has also impacted costs in international
basins. Specically, the high demand for offshore drilling rigs continues and securing rigs on commercially acceptable terms is an ongoing
challenge.
The oil and gas industry is also experiencing cost pressures related to increasingly stringent environmental regulations, both in North America
and internationally. In addition, environmental regulations in Canada intended to reduce greenhouse gas emissions are pending and the
impact of the legislation is uncertain at this time.
These increased cost pressures and environmental regulations may adversely impact the Companys future net earnings, cash ow and
increase the costs of capital projects.
Managements Discussion & Analysis
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REVENUE, BEFORE ROYALTIES
ANALYSIS OF CHANGES IN REVENUE, BEFORE ROYALTIES
Changes due to Changes due to
($ millions) 2004 Volumes Prices Other 2005 Volumes Prices Other 2006
North America
Crude oil
and NGLs
(1)
$ 3,300 $ 170 $ 847 $ $ 4,317 $ 198 $ 747 $ $ 5,262
Natural gas 3,401 208 1,029 4,638 168 (1,002) 3,804
6,701 378 1,876 8,955 366 (255) 9,066
North Sea
Crude oil and NGLs 1,223 31 382 1,636 (168) 132 1,600
Natural gas 94 (59) (12) 23 (4) (3) 16
1,317 (28) 370 1,659 (172) 129 1,616
Offshore West Africa
Crude oil and NGLs 208 182 86 476 344 111 931
Natural gas 14 (6) 1 9 12 (2) 19
222 176 87 485 356 109 950
Subtotal
Crude oil and NGLs 4,731 383 1,315 6,429 374 990 7,793
Natural gas 3,509 143 1,018 4,670 176 (1,007) 3,839
8,240 526 2,333 11,099 550 (17) 11,632
Midstream 68 9 77 (5) 72
Intersegment eliminations
and other
(2)
(39) (7) (46) (15) (61)
Total $ 8,269 $ 526 $ 2,333 $ 2 $ 11,130 $ 550 $ (17) $ (20) $ 11,643
(1) Blending costs previously netted against gross revenues in prior years have been reclassied to transportation and blending expense to conformto the presentation
adopted in 2006.
(2) Eliminates primarily internal transportation and electricity charges.
Revenue increased 5%to $11,643 million in 2006 from$11,130 million in 2005 (2004 $8,269 million). The increase was primarily due to
increased crude oil and NGLs and natural gas sales volumes in North America and Offshore West Africa and increased realized crude oil and
NGLs prices, partially offset by decreased realized natural gas prices.
In 2006, 22%of the Companys crude oil and natural gas revenue was generated outside of North America (2005 19%; 2004 19%).
North Sea accounted for 14% of crude oil and natural gas revenue in 2006 (2005 15%; 2004 16%), and Offshore West Africa
accounted for 8%of crude oil and natural gas revenue in 2006 (2005 4%; 2004 3%).
ANALYSIS OF PRODUCT PRICES
(1)
2006 2005 2004
Crude oil and NGLs ($/bbl)
(2)
North America $ 46.52 $ 39.62 $ 33.16
North Sea $ 72.62 $ 66.57 $ 51.37
Offshore West Africa $ 67.99 $ 59.91 $ 49.05
Company average $ 53.65 $ 46.86 $ 37.99
Natural gas ($/mcf)
(2)
North America $ 6.77 $ 8.65 $ 6.61
North Sea $ 2.66 $ 3.17 $ 3.73
Offshore West Africa $ 5.37 $ 5.91 $ 5.25
Company average $ 6.72 $ 8.57 $ 6.50
Company average ($/boe)
(2)
$ 47.92 $ 48.77 $ 38.45
Percentage of revenue (excluding midstream revenue)
Crude oil and NGLs 64% 54% 54%
Natural gas 36% 46% 46%
(1) Net of transportation and blending costs and excluding risk management activities.
(2) Amounts expressed on a per unit basis are based on sales volumes.
Realized crude oil and NGLs prices increased 14%to average $53.65 per bbl in 2006 from$46.86 per bbl in 2005 (2004 $37.99 per bbl).
The increase from 2005 was due to increased benchmark crude oil prices and a narrower Heavy Differential, partially offset by the impact
of a stronger Canadian dollar.
The Companys realized natural gas price decreased 22% to average $6.72 per mcf in 2006 from $8.57 per mcf in 2005
(2004 $6.50 per mcf), reecting record levels of natural gas inventory in North America, primarily due to the impact of exceptionally mild
winter weather in 2006 that reduced heating demand and relatively stable summer weather that reduced cooling demand.
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NORTH AMERICA
North America realized crude oil prices increased 17% to average $46.52 per bbl in 2006 from $39.62 per bbl in 2005 (2004 $33.16
per bbl). The increase from 2005 was due to increased benchmark crude oil prices and a narrower Heavy Differential, partially offset by the
impact of a stronger Canadian dollar.
In North America, the Company continues to focus on its crude oil marketing strategy, including the development of a blending strategy
that expands markets within current pipeline infrastructure, supporting pipeline projects that will provide capacity to transport crude oil to
new markets, and working with reners to add incremental heavy crude oil conversion capacity. During 2006, the Company contributed
approximately 136,000 bbl/d of heavy crude oil blends to the Western Canadian Select (WCS) stream. The Company also continues to
work with reners to advance expansion of heavy crude oil conversion capacity, and is working with pipeline companies to develop new
capacity to the Canadian West Coast and the US Gulf Coast where crude oil cargos can be sold on a world-wide basis. With a view to
expanding markets for its heavy crude oil, the Company has committed to 25,000 bbl/d of capacity on the Pegasus Pipeline, which carries
crude oil to the Gulf of Mexico. The Pegasus Pipeline is made up of a series of segments extending from Patoka, Illinois to Nederland,
Texas, near the Gulf Coast. The Companys rst sales from the Pegasus Pipeline occurred in April 2006. The Company also entered into an
agreement to supply 25,000 bbl/d of heavy crude oil production to a new merchant upgrader to be constructed in Alberta. The agreement
is for a period of ve years, with rst deliveries anticipated to occur in 2010 upon completion of construction of the facilities.
North America realized natural gas prices decreased 22%to average $6.77 per mcf in 2006 from $8.65 per mcf in 2005 (2004 $6.61 per
mcf), primarily due to reduced seasonal heating demand and reduced summer cooling demand in 2006.
A comparison of the price received for the Companys North America production by product type is as follows:
2006 2005 2004
Wellhead price
(1) (2)
Light crude oil and NGLs (C$/bbl) $ 63.09 $ 58.41 $ 45.90
Pelican Lake crude oil (C$/bbl) $ 45.02 $ 38.39 $ 32.12
Primary heavy crude oil (C$/bbl) $ 41.35 $ 33.53 $ 28.99
Thermal heavy crude oil (C$/bbl) $ 40.98 $ 32.29 $ 29.00
Natural gas (C$/mcf) $ 6.77 $ 8.65 $ 6.61
(1) Net of transportation and blending costs and excluding risk management activities.
(2) Amounts expressed on a per unit basis are based on sales volumes.
NORTH SEA
North Sea realized crude oil prices increased 9% to average $72.62 per bbl in 2006 from $66.57 per bbl 2005 (2004 $51.37
per bbl). The increase in the realized crude oil price from 2005 was due primarily to the impact of strong European and Asian demand on
Brent pricing, partially offset by the strengthening Canadian dollar in 2006 compared to 2005.
OFFSHORE WEST AFRICA
Offshore West Africa realized crude oil prices increased 13% to average $67.99 per bbl in 2006 from $59.91 per bbl in 2005
(2004 $49.05 per bbl). The increase in the realized crude oil price from2005 was due primarily to the impact of strong European and Asian
demand on Brent pricing, partially offset by the strengthening Canadian dollar in 2006 compared to 2005.
CRUDE OIL INVENTORY VOLUMES
The Company recognizes revenue on its crude oil production when title transfers to the customer and delivery has taken place. The related
cumulative crude oil inventory volumes by segment, which have not been recognized in revenue, were as follows:
(bbl) 2006 2005
North America, related to pipeline fill 1,097,526 484,157
North Sea, related to timing of liftings 910,796 747,141
Offshore West Africa, related to timing of liftings 113,774 412,841
2,122,096 1,644,139
In 2006, approximately 478,000 barrels of crude oil produced in the Companys North America and international operations were added to
inventory and excluded from results of operations, decreasing cash ow from operations for the year by approximately $7 million.
Managements Discussion & Analysis
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ANALYSIS OF DAILY PRODUCTION, BEFORE ROYALTIES
2006 2005 2004
Crude oil and NGLs (bbl/d)
North America 235,253 221,669 206,225
North Sea 60,056 68,593 64,706
Offshore West Africa 36,689 22,906 11,558
331,998 313,168 282,489
Natural gas (mmcf/d)
North America 1,468 1,416 1,330
North Sea 15 19 50
Offshore West Africa 9 4 8
1,492 1,439 1,388
Total barrels of oil equivalent (boe/d) 580,724 552,960 513,835
Product mix
Light crude oil and NGLs 26% 26% 24%
Pelican Lake crude oil 5% 4% 4%
Primary heavy crude oil 16% 17% 19%
Thermal heavy crude oil 11% 10% 8%
Natural gas 42% 43% 45%
DAILY PRODUCTION, NET OF ROYALTIES
2006 2005 2004
Crude oil and NGLs (bbl/d)
North America 205,382 191,751 180,011
North Sea 59,940 68,487 64,598
Offshore West Africa 35,212 22,293 11,221
300,534 282,531 255,830
Natural gas (mmcf/d)
North America 1,185 1,125 1,048
North Sea 15 18 50
Offshore West Africa 9 4 7
1,209 1,147 1,105
Total barrels of oil equivalent (boe/d) 502,024 473,742 440,022
The Companys business approach is to maintain large project inventories and production diversication among each of the commodities it
produces; namely natural gas, light/medium crude oil and NGLs, Pelican Lake crude oil, primary heavy crude oil and thermal heavy crude oil.
Total production of crude oil and NGLs before royalties increased 6%to 331,998 bbl/d from313,168 bbl/d in 2005 (2004 282,489 bbl/d).
The increase in crude oil and NGLs production from2005 reected increased production fromthe Companys Primrose thermal projects, the
positive results from the Pelican Lake waterood project, additional production volumes from the ACC acquisition, development of West
and East Espoir and the full years impact of production from the Baobab Field located offshore Cte dIvoire. Production from the Baobab
Field commenced August 2005. Crude oil and NGLs production for 2006 was in line with the Companys revised guidance of 325,000 to
336,000 bbl/d.
Natural gas production continues to represent the Companys largest product offering. Total natural gas production before royalties increased
4% to 1,492 mmcf/d from 1,439 mmcf/d in 2005 (2004 1,388 mmcf/d). The increase in natural gas production from 2005 primarily
reected additional natural gas production from the ACC acquisition. The increase was partially offset by production decreases due to the
impact of the Companys decision to reduce natural gas drilling activity in 2006, made in response to inationary costs in Western Canada.
Natural gas production for 2006 was at the bottom end of the Companys revised guidance of 1,492 to 1,501 mmcf/d.
In 2007, annual production is forecasted to average between 315,000 and 360,000 bbl/d of crude oil and NGLs and between 1,594 and
1,664 mmcf/d of natural gas.
NORTH AMERICA
North America crude oil and NGLs production in 2006 increased 6%to average 235,253 bbl/d from221,669 bbl/d in 2005 (2004 206,225
bbl/d). The increase in production from 2005 was primarily due to increased production from the Companys Primrose thermal projects, the
positive results from the Pelican Lake waterood project and the ACC acquisition.
North America natural gas production in 2006 increased 4%to average 1,468 mmcf/d from1,416 mmcf/d in 2005 (2004 1,330 mmcf/d).
The increase in natural gas production from2005 reected the ACC acquisition, partially offset by production declines due to the Companys
decision to reduce natural gas drilling activity. The ACC acquisition was completed in November with results included from that date. To
date, the ACC properties are performing as expected.
Canadian Natural AR2006
Page 52 of 107
NORTH SEA
North Sea crude oil production in 2006 was 60,056 bbl/d, a decrease of 12%from68,593 bbl/d in 2005 (2004 64,706 bbl/d). Production
levels in 2006 were in line with expectations, reecting the production effects of planned maintenance shutdowns in the second half of
2006.
OFFSHORE WEST AFRICA
Offshore West Africa crude oil production in 2006 increased 60%to 36,689 bbl/d from 22,906 bbl/d in 2005 (2004 11,558 bbl/d). The
increase from 2005 was primarily due to the impact of a full years production from the Baobab Field, rst crude oil from West Espoir and a
successful inll drilling campaign at East Espoir. The increase was partially offset by continuing challenges with sand and solids production
at the Baobab Field that resulted in the shut in of 5 production wells. The Company does not plan to recomplete these wells until such time
as a deepwater rig can be secured on commercially acceptable terms.
ROYALTIES
2006 2005 2004
Crude oil and NGLs ($/bbl)
(1)
North America $ 5.86 $ 5.37 $ 4.21
North Sea $ 0.13 $ 0.10 $ 0.08
Offshore West Africa $ 2.81 $ 1.62 $ 1.43
Company average $ 4.48 $ 3.97 $ 3.16
Natural gas ($/mcf)
(1)
North America $ 1.31 $ 1.78 $ 1.40
North Sea $ $ $
Offshore West Africa $ 0.22 $ 0.16 $ 0.15
Company average $ 1.29 $ 1.75 $ 1.35
Company average ($/boe)
(1)
$ 5.89 $ 6.82 $ 5.37
Percentage of revenue
(2)

Crude oil and NGLs 8% 8% 8%
Natural gas 19% 20% 21%
Boe 12% 14% 14%
(1) Amounts expressed on a per unit basis are based on sales volumes.
(2) Net of transportation and blending costs and excluding risk management activities.
NORTH AMERICA
Crown Royalties on a signicant portion of North America crude oil and NGLs production falls under the oil sands royalty regime and is
calculated on a project by project basis as a percentage of gross revenue less operating, capital and abandonment costs (net prot).
Royalties are calculated as 1% of gross revenues until the Companys capital investments in the applicable project are fully recovered, at
which time the royalty increases to 25%of net prot.
Crude oil and NGLs royalties increased in 2006 primarily due to increased crude oil prices and the full recovery of the Companys capital
investments in the Primrose North and South Fields in the second half of the year. Upon full recovery, Crown royalty rates on the Primrose
North and South Fields increased from 1%of gross revenue to 25%of net prot. North America crude oil and NGLs royalties per bbl are
anticipated to be 14%to 16%of gross revenue in 2007, an increase from 13%in 2006 (2005 14%; 2004 13%).
Natural gas royalties per mcf decreased from 2005 primarily due to decreased benchmark natural gas prices. Benchmark natural gas prices
decreased primarily in response to reduced demand and increased storage levels. North America natural gas royalties per mcf are anticipated
to be 21%to 23%of gross revenue in 2007, an increase from 19%in 2006 (2005 21%; 2004 21%).
NORTH SEA
North Sea government royalties on crude oil were eliminated effective January 1, 2003. The remaining North Sea royalty represents a gross
overriding royalty on the Ninian Field.
OFFSHORE WEST AFRICA
Offshore West Africa production is governed by the terms of the various Production Sharing Contracts (PSCs). Under the PSCs, revenues
are divided into cost recovery revenue and prot revenue. Cost recovery revenue allows the Company to recover its capital and operating
costs and the costs carried by the Company on behalf of the Government State Oil Company. These revenues are reported as sales revenue.
Prot revenue is allocated to the joint venture partners in accordance with their respective equity interests, after a portion has been allocated
to the Government. The Governments share of prot revenue attributable to the Companys equity interest is allocated to royalty expense
and current income tax expense in accordance with the PSCs. The Companys capital investments in the Espoir Field are expected to be fully
recovered early in 2007, increasing royalty rates and current income taxes in accordance with the PSCs. The Companys capital investments
in the Baobab Field are now not expected to be fully recovered until approximately 2012 due to the ongoing production curtailments
resulting from limitations to sand screen effectiveness.
Managements Discussion & Analysis
Page 53 of 107
In connection with corporate income tax rate reductions enacted by the Government of Cte dIvoire during the year that were effective
January 1, 2006, royalty rates as a percentage of gross revenue increased from approximately 3% in 2005 to approximately 4% in 2006.
As a result, production volumes net of royalties decreased approximately 2% in 2006 from 2005, in accordance with the terms of the
PSCs. Royalty rates in 2007 are anticipated to be 13%to 15%of gross revenue due to the Companys expected full recovery of its capital
investments in the Espoir Field.
PRODUCTION EXPENSE
2006 2005 2004
Crude oil and NGLs ($/bbl)
(1)

North America $ 11.73 $ 10.49 $ 8.94
North Sea $ 17.57 $ 14.94 $ 14.03
Offshore West Africa $ 7.45 $ 6.50 $ 7.59
Company average $ 12.29 $ 11.17 $ 10.05
Natural gas ($/mcf)
(1)
North America $ 0.81 $ 0.71 $ 0.62
North Sea $ 1.40 $ 2.44 $ 2.07
Offshore West Africa $ 1.19 $ 1.05 $ 1.33
Company average $ 0.82 $ 0.73 $ 0.67
Company average ($/boe)
(1)
$ 9.14 $ 8.21 $ 7.35
(1) Amounts expressed on a per unit basis are based on sales volumes.
NORTH AMERICA
North America crude oil and NGLs production expense in 2006 increased 12%to $11.73 per bbl from$10.49 per bbl in 2005 (2004 - $8.94
per bbl). The increase in production expense from 2005 was primarily due to increased industry wide service costs and increased cyclic
steaming costs related to the Companys thermal crude oil projects, due to the timing of secondary steaming cycles.
North America natural gas production expense in 2006 increased 14% to $0.81 per mcf from $0.71 per mcf in 2005 (2004 - $0.62 per
mcf), due to increased cost pressures.
Production expense per boe in 2007 is anticipated to continue to reect industry wide inationary cost pressures.
NORTH SEA
North Sea crude oil production expense increased on a per barrel basis from 2005 due to planned maintenance shutdowns, varying sales
volumes on a relatively xed cost base and the timing of liftings from various elds.
OFFSHORE WEST AFRICA
Offshore West Africa crude oil production expense on a per barrel basis increased from2005 primarily due to continuing operating challenges
with sand and solids resulting in decreased production volumes at Baobab, on a relatively xed operating cost base.
MIDSTREAM
($ millions) 2006 2005 2004
Revenue $ 72 $ 77 $ 68
Production expense 23 24 20
Midstream cash flow 49 53 48
Depreciation 8 8 7
Segment earnings before taxes $ 41 $ 45 $ 41
The Companys midstream assets consist of three crude oil pipeline systems and a 50%working interest in an 84-megawatt cogeneration
plant at Primrose. Approximately 80%of the Companys heavy crude oil production is transported to international mainline liquid pipelines
via the 100% owned and operated ECHO Pipeline, the 62% owned and operated Pelican Lake Pipeline and the 15% owned Cold Lake
Pipeline. The midstreampipeline assets allowthe Company to control the transport of its own production volumes as well as earn third party
revenue. This transportation control enhances the Companys ability to manage the full range of costs associated with the development and
marketing of its heavier crude oil.
Canadian Natural AR2006
Page 54 of 107
DEPLETION, DEPRECIATION AND AMORTIZATION
(1)
($ millions, except per boe amounts)
(2)
2006 2005 2004
North America $ 1,897 $ 1,595 $ 1,444
North Sea 297 306 265
Offshore West Africa 189 104 53
Expense $ 2,383 $ 2,005 $ 1,762
$/boe $ 11.27 $ 10.02 $ 9.37
(1) DD&A excludes depreciation on midstream assets.
(2) Amounts expressed on a per unit basis are based on sales volumes.
Depletion, Depreciation and Amortization (DD&A) expense in 2006 increased 19% to $2,383 million from $2,005 million in 2005
(2004 $1,762 million). The increase in DD&A expense in total and on a boe basis in 2006 from 2005 was primarily as a result of increased
production combined with overall increases in nding and development costs associated with crude oil and natural gas exploration in North
America, a higher depletion base due to the acquisition of ACC, and increased estimated future costs to develop the Companys proved
undeveloped reserves.
ASSET RETIREMENT OBLIGATION ACCRETION
($ millions, except per boe amounts)
(1)
2006 2005 2004
North America $ 35 $ 34 $ 28
North Sea 31 34 22
Offshore West Africa 2 1 1
Expense $ 68 $ 69 $ 51
$/boe $ 0.32 $ 0.34 $ 0.27
(1) Amounts expressed on a per unit basis are based on sales volumes.
Accretion expense is the increase in the carrying amount of the ARO due to the passage of time. ARO accretion expense was comparable
to 2005.
ADMINISTRATION EXPENSE
($ millions, except per boe amounts)
(1)
2006 2005 2004
Net expense $ 180 $ 151 $ 125
$/boe $ 0.85 $ 0.75 $ 0.66
(1) Amounts expressed on a per unit basis are based on sales volumes.
Net administration expense in 2006 increased in total and on a boe basis from 2005 primarily due to increased insurance premiums,
increased stafng and administrative costs, costs associated with the integration of ACC, and overall inationary cost pressures.
STOCK-BASED COMPENSATION
($ millions) 2006 2005 2004
Stock-based compensation expense $ 139 $ 723 $ 249
The Companys Stock Option Plan (the Option Plan) provides current employees (the option holders) with the right to elect to receive
common shares or a direct cash payment in exchange for options surrendered. The design of the Option Plan balances the need for a
long-term compensation program to retain employees with the benets of reducing the impact of dilution on current Shareholders and
the reporting of the obligations associated with stock options. Transparency of the cost of the Option Plan is increased since changes in the
intrinsic value of outstanding stock options are recognized each period. The cash payment feature provides option holders with substantially
the same benets and allows them to realize the value of their options through a simplied administration process.
The Company recorded a $139 million ($95 million after-tax) stock-based compensation expense during 2006 in connection
with the 8% appreciation in the Companys share price (December 31, 2006 C$62.15; December 31, 2005 C$57.63;
December 31, 2004 C$25.63; December 31, 2003 C$16.34). As required by GAAP, the Companys outstanding stock
options are valued based on the difference between the exercise price of the stock options and the market price of the Companys
common shares, pursuant to a graded vesting schedule. The liability is revalued quarterly to reect changes in the market price
of the Companys common shares and the options exercised or surrendered in the period, with the net change recognized in net
earnings, or capitalized during the construction period in the case of the Horizon Project (2006 $79 million; 2005 $101 million;
2004 $21 million). The stock-based compensation liability reected the Companys potential cash liability should all the vested options
be surrendered for a cash payout at the market price on December 31, 2006. In periods when substantial stock price changes occur, the
Company is subject to signicant earnings volatility.
For the year ended December 31, 2006, the Company paid $264 million for stock options surrendered for cash settlement
(December 31, 2005 $227 million; 2004 $80 million).
Managements Discussion & Analysis
Page 55 of 107
INTEREST EXPENSE
($ millions, except per boe amounts and interest rates)
(1)
2006 2005 2004
Interest expense, gross $ 336 $ 221 $ 189
Less: capitalized interest, Horizon Project 196 72
Interest expense, net $ 140 $ 149 $ 189
$/boe $ 0.66 $ 0.74 $ 1.01
Average effective interest rate 5.7% 5.6% 5.2%
(1) Amounts expressed on a per unit basis are based on sales volumes.
Gross interest expense increased from 2005 primarily due to increased debt levels associated with the ACC acquisition and the nancing of
Horizon Project capital expenditures. The increase was partially offset by the impact of the strengthening Canadian dollar, which decreased
interest expense on the Companys US dollar denominated debt securities.
RISK MANAGEMENT ACTIVITIES
The Company utilizes various derivative nancial instruments to manage its commodity price, currency and interest rate exposures. These
derivative nancial instruments are not intended for trading or speculative purposes. Changes in fair value of derivative nancial instruments
formally designated as hedges are not recognized in net earnings until such time as the corresponding gains or losses on the related hedged
items are also recognized. Changes in fair value of derivative nancial instruments not formally designated as hedges are recognized in the
balance sheet each period with the offset reected in risk management activities in the consolidated statements of earnings.
The Company formally documents all derivative nancial instruments designated as hedging transactions at the inception of the hedging
relationship, in accordance with the Companys risk management policies. The effectiveness of the hedging relationship is evaluated, both
at inception of the hedge and on an ongoing basis.
The Company enters into commodity price contracts to manage anticipated sales of crude oil and natural gas production in order to protect
cash owfor capital expenditure programs. Realized gains or losses on these contracts are included in risk management activities. Unrealized
gains or losses on commodity price contracts not formally documented as hedges are also included in risk management activities.
The Company enters into interest rate swap agreements to manage its xed to oating interest rate mix on long-termdebt. The interest rate
swap contracts require the periodic exchange of payments without the exchange of the notional principal amounts on which the payments
are based. Gains or losses on interest rate swap contracts formally designated as hedges are included in interest expense. Gains or losses on
non-designated interest rate swap contracts are included in risk management activities.
The Company enters into cross-currency swap agreements to manage currency exposure on US dollar denominated long-term debt. The
cross-currency swap contracts require the periodic exchange of payments with the exchange at maturity of notional principal amounts on
which the payments are based. Gains or losses on the foreign exchange component of all cross-currency swap contracts are included in risk
management activities. Gains or losses on the interest component of cross-currency swap contracts designated as hedges are included in
interest expense.
Gains or losses on the termination of derivative nancial instruments that have been accounted for as hedges are deferred under other
assets or liabilities on the consolidated balance sheets and amortized into net earnings in the period in which the underlying hedged
transactions are recognized. In the event a designated hedged item is sold, extinguished or matures prior to the termination of the related
derivative instrument, any unrealized derivative gain or loss is recognized immediately in net earnings. Gains or losses on the termination of
derivative nancial instruments that have not been accounted for as hedges are recognized in net earnings immediately.
($ millions) 2006 2005 2004
Realized loss (gain)
Crude oil and NGLs financial instruments $ 1,395 $ 753 $ 501
Natural gas financial instruments (70) 283 5
Interest rate swaps (9) (32)
$ 1,325 $ 1,027 $ 474
Unrealized (gain) loss
Crude oil and NGLs financial instruments $ (736) $ 847 $ (47)
Natural gas financial instruments (260) 77
Interest rate and currency swaps (17) 1 7
$ (1,013) $ 925 $ (40)
Total $ 312 $ 1,952 $ 434
Canadian Natural AR2006
Page 56 of 107
The realized losses (gains) from crude oil and NGLs and natural gas nancial instruments decreased (increased) the Companys average
realized prices as follows:
2006 2005 2004
Crude oil and NGLs ($/bbl)
(1)
$ 11.57 $ 6.68 $ 4.85
Natural gas ($/mcf)
(1)
$ (0.13) $ 0.54 $ 0.01
(1) Amounts expressed on a per unit basis are based on sales volumes.
The realized gain on non-designated interest rate swaps would have decreased the Companys reported interest expense as follows:
($ millions, except interest rates) 2006 2005 2004
Interest expense as reported $ 140 $ 149 $ 189
Less: realized risk management gain (9) (32)
$ 140 $ 140 $ 157
Average effective interest rate 5.7% 5.2% 4.4%
As effective as commodity hedges are against reference commodity prices, a substantial portion of the derivative nancial instruments
entered into by the Company do not meet the requirements for hedge accounting under GAAP due to currency, product quality and
location differentials (the non-designated hedges). The Company is required to mark-to-market these non-designated hedges based
on prevailing forward commodity prices in effect at the end of each reporting period. Accordingly, the unrealized risk management asset
reected at December 31 2006, the implied price differentials for the non-designated hedges for future years. Due to changes in crude
oil and natural gas forward pricing and the reversal of prior year unrealized losses, the Company recorded a net unrealized gain of $1,013
million ($674 million after-tax) on its risk management activities in 2006 (2005 a $925 million unrealized loss, $607 million after-tax; 2004
a $40 million unrealized gain, $27 million after-tax).
The cash settlement amount of the risk management nancial derivative instruments may vary materially depending upon the underlying
crude oil and natural gas prices at the time of nal settlement of the nancial derivative instruments, as compared to their mark-to-market
value at December 31, 2006.
In addition to the net risk management asset recognized on the balance sheet at December 31, 2006, the net unrecognized asset related to
the estimated fair values of derivative nancial instruments designated as hedges was $222 million (December 31, 2005 net unrecognized
liability of $990 million).
Details relating to outstanding derivative nancial instruments at December 31, 2006 are disclosed in note 12 to the Companys audited
annual consolidated nancial statements as at December 31, 2006.
Effective January 1, 2007, the Company will adopt new accounting standards relating to the accounting for and disclosure of nancial
instruments. Accordingly, the Company will record all of its derivative nancial instruments on the balance sheet at fair value, including
those designated as hedges. Designated hedges are currently not recognized on the balance sheet but are disclosed in the notes to the
consolidated nancial statements. The estimated effects on the Companys consolidated balance sheet are discussed in further detail on
page 68 of this MD&A.
FOREIGN EXCHANGE
($ millions) 2006 2005 2004
Realized foreign exchange (gain) loss $ (12) $ (29) $ 3
Unrealized foreign exchange loss (gain) 134 (103) (94)
Total $ 122 $ (132) $ (91)
The Companys operating results are affected by the exchange rates between the Canadian dollar, US dollar, and UK pound sterling. A
majority of the Companys revenue is based on reference to US dollar benchmark prices. An increase in the value of the Canadian dollar in
relation to the US dollar results in decreased revenue from the sale of the Companys production. Conversely a decrease in the value of the
Canadian dollar in relation to the US dollar will result in increased revenue fromthe sale of the Companys production. Production expenses
are subject to uctuations due to changes in the exchange rate of the UK pound sterling to the US dollar related to North Sea operations.
The value of the Companys US dollar denominated debt is also impacted by the value of the Canadian dollar in relation to the US dollar.
The realized foreign exchange loss in 2006 was primarily the result of foreign exchange rate uctuations on working capital items
denominated in US dollars or UK pounds sterling. The unrealized foreign exchange gain in 2006 was primarily related to the uctuation of
the Canadian dollar in relation to the US dollar with respect to the US dollar debt and working capital in North America denominated in US
dollars, as well as the re-measurement of North Sea future income tax liabilities denominated in UK pounds sterling. The Canadian dollar
ended the year at US$0.8581 compared to US$0.8577 at December 31, 2005 (December 31, 2004 US$0.8308).
Managements Discussion & Analysis
Page 57 of 107
In order to mitigate a portion of the volatility associated with uctuations in exchange rates, the Company has designated certain US dollar
denominated debt as a hedge against its net investment in US dollar based self-sustaining foreign operations. Accordingly, translation gains
and losses on this US dollar denominated debt are included in the foreign currency translation adjustment in Shareholders Equity in the
consolidated balance sheets.
TAXES
($ millions, except income tax rates) 2006 2005 2004
Taxes other than income tax
Current $ 219 $ 203 $ 210
Deferred 37 (9) (45)
Total $ 256 $ 194 $ 165
Current income tax
North America $ 143 $ 99 $ 101
North Sea 30 155 2
Offshore West Africa 49 32 13
Total $ 222 $ 286 $ 116
Future income tax $ 652 $ 353 $ 474
Effective income tax rate 25.7%
(1)
37.8%
(2)
29.6%
(3)
(1) Includes the effect of the following:
a charge of $110 million related to the increased supplementary charge on oil and gas prots in the UK North Sea, substantively enacted early in 2006.
a recovery of $438 million due to Canadian Federal, Alberta and Saskatchewan corporate income tax rate reductions enacted in 2006.
a recovery of $67 million due to Offshore West Africa corporate income tax rate reductions enacted late in 2006.
(2) Includes the effect of a $19 million recovery due to a British Columbia corporate tax rate reduction enacted in 2005.
(3) Includes the effect of a $66 million recovery due to an Alberta corporate tax rate reduction enacted in 2004.
Taxes other than income tax includes current and deferred petroleum revenue tax (PRT) and Canadian provincial capital taxes and
surcharges. PRT is charged on certain elds in the North Sea at the rate of 50% of net operating income, after allowing for certain
deductions including abandonment expenditures.
Taxable income from the conventional crude oil and natural gas business in Canada is primarily generated through partnerships, with the
related income taxes payable in a future period. North America current income taxes have been provided on the basis of the corporate
structure and available income tax deductions and will vary depending upon the nature and amount of capital expenditures incurred in
Canada in any particular year.
Income tax rate changes during 2006 resulted in a reduction of future income tax liabilities of approximately $438 million in North America,
an increase of future income tax liabilities of approximately $110 million in the UK North Sea and a reduction of future income tax liabilities
of approximately $67 million in Cte dIvoire.
During 2005, North America income tax rate changes resulted in a reduction of future income tax liabilities of approximately
$19 million.
During 2004, North America income tax rate changes resulted in a reduction of future income tax liabilities of approximately
$66 million.
During 2003, the Canadian Federal Government enacted legislation to change the taxation of resource income. The legislation reduces the
corporate income tax rate on resource income from 28% to 21% over ve years beginning January 1, 2003. Over the same period, the
deduction for resource allowance is being phased out and a deduction for actual crown royalties paid is being phased in. As a result in 2007,
crown royalties will be fully deductible and the Company will no longer be eligible for resource allowance in 2007 and future years.
The following table shows the effect of non-recurring benets on income taxes:
($ millions, except income tax rates) 2006 2005 2004
Income tax as reported
Current income tax $ 222 $ 286 $ 116
Future income tax expense 652 353 474
874 639 590
Provincial corporate tax rate reductions 161 19 66
Canadian Federal and foreign corporate tax rate reductions 234
Total $ 1,269 $ 658 $ 656
Expected effective income tax rate before non-recurring benefits 37.3% 39.0% 32.9%
The effective income tax rate for 2006 decreased slightly from2005 due to the effects of the phased elimination of the resource allowance,
the phased deductibility of crown royalties and foreign jurisdictional corporate tax rate changes substantively enacted during the year.
In 2007, based on budgeted prices and the current availability of tax pools, the Company expects to be cash taxable in Canada in the
amount of $45 million to $75 million.
Canadian Natural AR2006
Page 58 of 107
NET CAPITAL EXPENDITURES
(1)
($ millions) 2006 2005 2004
Expenditures on property, plant and equipment
Net property acquisitions (dispositions)
(2)
$ 4,733 $ (320) $ 1,835
Land acquisition and retention 210 254 120
Seismic evaluations 130 132 89
Well drilling, completion and equipping 2,340 2,000 1,394
Pipeline and production facilities 1,314 1,295 821
Total net reserve replacement expenditures 8,727 3,361 4,259
Horizon Project
Phase 1 construction costs
(3)
2,768 1,249
Phases 2 and 3 costs 79
Capitalized interest, stock-based compensation and other
(3)
338 250 291
Total Horizon Project 3,185 1,499 291
Midstream 12 4 16
Abandonments
(4)
75 46 32
Head office 26 22 35
Total net capital expenditures $ 12,025 $ 4,932 $ 4,633
By segment
North America $ 7,936 $ 2,530 $ 3,355
North Sea 646 387 608
Offshore West Africa 134 439 295
Other 11 5 1
Horizon Project 3,185 1,499 291
Midstream 12 4 16
Abandonments
(4)
75 46 32
Head office 26 22 35
Total $ 12,025 $ 4,932 $ 4,633
(1) Net capital expenditures do not include non-cash property, plant and equipment additions or disposals.
(2) Includes Business Combinations.
(3) Certain prior period amounts have been reclassied with respect to stock-based compensation costs.
(4) Abandonments represent expenditures to settle AROs and have been reected as capital expenditures in this table.
The Companys strategy is focused on building a diversied asset base that is balanced among various products. In order to facilitate efcient
operations, the Company concentrates its activities in core regions where it can dominate the land base and infrastructure. The Company
focuses on maintaining its land inventories to enable the continuous exploitation of play types and geological trends, greatly reducing overall
exploration risk. By dominating infrastructure, the Company is able to maximize utilization of its production facilities, thereby increasing
control over production costs.
Net capital expenditures in 2006 were $12,025 million compared to $4,932 million in 2005 (2004 $4,633 million). The increase primarily
reected the $4,641
(1)
million acquisition of ACC(including working capital and other adjustments) and continued progress on the Companys
larger, futuregrowthprojects, most notably theHorizonProject. ExcludingtheACCacquisitionandtheHorizonProject, net capital expenditures
were $4,085 million in 2006 compared to $3,433 million in 2005, reecting the impact of $320 million in net property dispositions in 2005,
and overall industry-wide inationary pressures in 2006. During 2006, the Company drilled a total of 1,738 net wells consisting of 641 natural
gas wells, 603 crude oil wells, 375 stratigraphic test and service wells, and 119 wells that were dry. The 375 stratigraphic test and service
wells include 163 stratigraphic test wells related to the Horizon Project. This compared to 1,882 net wells drilled in 2005 (2004 1,449 net
wells). The Company achieved an overall success rate of 91%in 2006, excluding the stratigraphic test and service wells (2005 - 93%and
2004 -91%).
(1) The preliminary allocation of the ACC purchase price to assets acquired and liabilities assumed based on their fair values was as follows:
Property, plant and equipment $ 6,249
Less future income taxes (1,438)
asset retirement costs (56)
Consideration for crude oil and natural gas properties 4,755
Non-cash working capital deficit assumed and other (105)
Long-term debt assumed (9)
Net purchase price - cash consideration $ 4,641
Managements Discussion & Analysis
Page 59 of 107
NORTH AMERICA
North America, including the Horizon Project and the ACC acquisition, accounted for approximately 94%of the total capital expenditures
for the year ended December 31, 2006 compared to approximately 83%in 2005 (2004 80%).
During 2006, the Company targeted 732 net natural gas wells, including 181 wells in Northeast British Columbia, 262 wells in the Northern
Plains region, 177 wells in Northwest Alberta, and 112 wells in the Southern Plains region. The Company also targeted 619 net crude oil
wells during the year. The majority of these wells were concentrated in the Companys crude oil Northern Plains region where 292 heavy
crude oil wells, 144 Pelican Lake crude oil wells, and 8 light crude oil wells were drilled. Another 114 wells targeting light crude oil were
drilled outside the Northern Plains as well as 61 thermal crude oil wells in the Companys In-Situ Oil Sands area.
Due to signicant changes in relative commodity prices between crude oil and natural gas, the Company has taken the opportunity to access
its large crude oil drilling inventory to maximize value in both the short and long term. To optimize netbacks in the short term, the Company
will continue to focus on drilling crude oil wells in 2007 and, accordingly, will reduce natural gas drilling activity to manage overall capital
spending. Deferred natural gas wells will be retained in the Companys prospect inventory, and will be drilled as natural gas commodity prices
improve. Drilling on ACC acquired lands will be optimized as part of the overall capital program.
As part of the development of the Companys In-Situ Oil Sands Assets, the Company is continuing to develop its Primrose thermal projects.
At the end of 2006, the Company had drilled 186 stratigraphic test and observation wells and 61 thermal oil wells. With rst steaming
for the Primrose North expansion commencing November 2005, overall Primrose thermal production in 2006 increased to approximately
64,000 bbl/d from 53,000 bbl/d in 2005. Initial steaming of the projects was completed late in 2006.
In November of 2005, the Company announced a phased expansion of its In-Situ Oil Sands assets. The next phase of this development is the
Primrose East expansion, a new facility located 15 kilometers fromthe existing Primrose South steamplant and 25 kilometers fromthe Wolf
Lake central processing facility. This phase of the expansion is anticipated to add an additional 40,000 bbl/d and received Board of Directors
sanction in 2006. Detailed engineering and procurement is currently underway. The Company anticipates receiving regulatory approval for
Primrose East in the rst half of 2007, with drilling and construction planned to begin in the second half of 2007, and production expected
to commence in 2009.
The next phase of the Companys In-Situ Oil Sands assets expansion is the Kirby project located 120 km north of the existing Primrose
facilities. The Kirby project is anticipated to add an additional 30,000 bbl/d of production growth. The Company is targeting to le its formal
regulatory application documents for this project in the second half of 2007. First steaming is anticipated to begin in 2011.
Development of new acreage and secondary recovery conversion projects at Pelican Lake continued as expected through 2006. Drilling
consisted of 144 horizontal wells, with plans to drill 132 additional horizontal wells in 2007. The response from the polymer ood pilot
continues to be positive. Based on the results of the pilot, the Company commenced the installation of 12 additional polymer skids in 2006
as part of the approval of the commercial polymer ood project. Pelican Lake production averaged approximately 30,000 bbl/d in 2006.
Originally announced in the fall of 2005, the scoping study for the proposed Canadian Natural Upgrader, outside of the Horizon Project,
continued during 2006 and into early 2007. The terms of reference for this study involved the evaluation of product alternatives, location,
technology, gasication and integration with existing assets using the same disciplined approach utilized in the Horizon Project. The next
steps in this process would include a Design Basis Memorandum (DBM) and Engineering Design Specication (EDS) which would be
required to be completed prior to construction and sanctioning of the project by the Board of Directors.
Based upon the results of the scoping study, which identied growing concerns relating to increased environmental costs for upgraders
located in Canada, inationary capital cost pressures and a narrowing Heavy Differential in North America, the Company has, at
this point in time, deferred the DBM and EDS pending clarication on the cost of future environmental legislation and a more stable
cost environment.
In 2007, the Companys overall drilling activity in North America is expected to comprise approximately 423 natural gas wells and 813 crude
oil wells excluding stratigraphic and service wells.
HORIZON PROJECT
The Horizon Project is designed as a phased development and includes two components: the mining of bitumen and an onsite upgrader.
Phase 1 production is expected to commence in the second half of 2008 at 110,000 bbl/d of 34 API SCO. The phased approach provides
the Company with improved cost and project controls including labour and materials management, and directionally mitigates the effects
of growth on local infrastructure. Extensive front end design and the high degree of project denition have enabled the Company to obtain
approximately 68%of Phase 1 costs on a xed price basis. The high degree of up front project engineering and pre-planning is expected to
reduce the risks associated with scope changes.
The Horizon Project continued on schedule and on budget with construction 57%complete at year end. The project status as at December
31, 2006 was as follows:
Detailed engineering was 94%complete;
Over $5.1 billion in purchase orders and contracts have been awarded to date;
Canadian Natural AR2006
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Several key mechanical contracts, including general mechanical contracts for the hydrotreater and cogeneration areas, were awarded;
Set 333 pipe rack modules, essentially forming the core infrastructure of the plant;
Mine overburden removal was approximately 35%complete; and
Site preparation and underground infrastructure was completed.
In 2005, the Board of Directors of the Company approved the construction costs for Phase 1 of the Horizon Project, with an approved
budget of $6.8 billion. Cumulative construction spending to December 31, 2006 was approximately $4.0 billion. Final construction costs for
Phase 1 may differ fromthe approved budget due to changes in the nal scope and timing of completion of the project, and/or inationary
cost pressures.
NORTH SEA
In 2006, the Company continued with its planned programof inll drilling, recompletions, workovers and waterood optimizations. During
2006, 9.2 net wells were drilled with an additional 4 net wells drilling at year end.
The development of the Lyell Field progressed during the year with the completion of construction, installation and tie-in of subsea
infrastructure. Tranche 1 of the Lyell Field development comprises the drilling of 4 net wells and the workover of 2 existing wells. Production
from the Lyell Field is expected to be at full capacity in the second half of 2007.
During 2006, construction of the Columba E Raw Water Injection project continued. The project consists of 2 injection wells.
OFFSHORE WEST AFRICA
During 2006, 5.8 net wells were drilled with 1 well drilling at year-end.
First crude oil from West Espoir commenced from 3 wells brought on-line during 2006. Late in the year 2 water injector wells were added.
The West Espoir area development drilling will continue until 2008 with producer and injector wells being brought on-line as they are
completed.
The Company purchased a 90%interest in the Olowi PSCoffshore Gabon in October 2005, received Government approval of its development
plan for this acquisition early in 2006 and received Board sanction for development in November 2006. Development plans include a FPSO
handling input from 4 shallow-water producing platforms. Late in 2006 the Company signed a lease agreement for a FPSO with a primary
term of ten years, commencing 2008.
LIQUIDITY AND CAPITAL RESOURCES
($ millions, except ratios) 2006 2005 2004
Working capital deficit
(1)
$ 832 $ 1,774 $ 652
Long-term debt $ 11,043 $ 3,321 $ 3,538
Shareholders equity
Share capital $ 2,562 $ 2,442 $ 2,408
Retained earnings 8,141 5,804 4,922
Foreign currency translation adjustment (13) (9) (6)
Total $ 10,690 $ 8,237 $ 7,324
Debt to book capitalization
(2)
50.8% 28.7% 33.8%
Debt to market capitalization 24.8% 9.7% 21.4%
After tax return on average common shareholders equity
(3)
26.9% 14.3% 21.4%
After tax return on average capital employed
(4)
17.2% 10.4% 15.3%
(1) Calculated as current assets less current liabilities.
(2) Calculated as current and long-term debt; divided by the book value of common shareholders equity plus current and long-term debt.
(3) Calculated as net earnings for the year as a percentage of average common shareholders equity for the year.
(4) Calculated as net earnings plus after-tax interest expense for the year; as a percentage of average capital employed. Average capital employed is the average
shareholders equity and current and long-term debt for the year.
The Companys capital resources at December 31, 2006 consisted primarily of cash owfromoperations, available credit facilities and access
to debt capital markets. Cash ow from operations is dependent on factors discussed in the Risks and Uncertainties section of this MD&A.
The Companys ability to renew existing credit facilities and raise new debt is also dependent upon these factors, as well as maintaining
an investment grade debt rating and the condition of capital and credit markets. Management believes internally generated cash ows
supported by the implementation of the Companys hedge policy, the exibility of its capital expenditure programs supported by its ve- and
ten-year nancial plans, the Companys existing credit facilities and the Companys ability to raise new debt on commercially acceptable
terms, will be sufcient to sustain its operations and support its growth strategy. The Companys current debt ratings are BBB (high) with a
negative trend by DBRS, Baa2 with a stable outlook by Moodys Investor Services, Inc. and BBB with a stable outlook by Standard and Poors
Corporation.
At December 31, 2006, the Company had undrawn bank lines of credit of $1,115 million. Details related to the Companys credit facilities
outstanding at December 31, 2006 are disclosed in note 5 to the Companys audited annual consolidated nancial statements.
Managements Discussion & Analysis
Page 61 of 107
At December 31, 2006, the Companys working capital decit was $832 million and included the current portion of the stock-based
compensation liability of $611 million and the current portion of the net mark-to-market asset for non-designated risk management
nancial derivative instruments of $88 million. The settlement of the stock-based compensation liability is dependant upon both the
surrender of vested stock options for cash settlement by employees and the value of the Companys share price at the time of surrender.
The cash settlement amount of the risk management nancial derivative instruments may vary materially depending upon the underlying
crude oil and natural gas prices at the time of nal settlement of the nancial derivative instruments, as compared to their mark-to-market
value at December 31, 2006.
The Company believes it has the necessary nancial capacity to complete the Horizon Project, while at the same time not compromising
conventional crude oil and natural gas growth opportunities. The nancing of Phase 1 of the Horizon Project development is guided by the
competing principles of retaining as much direct ownership interest as possible while maintaining a strong balance sheet. Existing proved
development projects, which have largely been funded prior to December 31, 2006, such as Baobab, Primrose and West Espoir, and the
acquisition of ACC, are anticipated to provide identied growth in production volumes in 2007 through 2009, and generate incremental
free cash ows during this period.
Primarily due to the additional debt issued to complete the ACC acquisition, long-term debt increased to $11,043 million at December 31,
2006, resulting in a debt to book capitalization level of 50.8% as at December 31, 2006 (December 31, 2005 - 28.7%). While this ratio
is above the 35% to 45% range targeted by management, the Company remains committed to maintaining a strong balance sheet and
exible capital structure, and expects its debt to book capitalization ratio to be near the midpoint of the range in 2008. While the Company
believes that its balance sheet has the strength and exibility to accommodate the ACC acquisition, to ensure balance sheet strength going
forward, the Company has hedged a signicant portion of its natural gas and crude oil production for 2007 and 2008 at prices that protect
investment returns. In the future, the Company may also consider the divestiture of non-strategic and non-core properties to gain additional
balance sheet exibility.
The Companys commodity hedging programreduces the risk of volatility in commodity price markets and supports the Companys cash ow
for its capital expenditure programthroughout the Horizon Project construction period. This programallows for the hedging of up to 75%of
the near 12 months budgeted production, up to 50%of the following 13 to 24 months expected production and up to 25%of production
expected in months 25 to 48. For the purpose of this program, the purchase of crude oil put options is in addition to the above parameters. In
accordance with the policy, approximately 65%of expected crude oil volumes and approximately 75%of expected natural gas volumes have
beenhedgedfor 2007. Inaddition, 77,000bbl/dof crudeoil volumesareprotectedbyput optionsfor 2007at astrikepriceof US$60.00per barrel.
The Company is extendingits hedge programinto2008whereby 150,000bbl/dof crude oil volumes have beenhedged(100,000bbl/dof price
collars with a US$60.00 oor and 50,000 bbl/d of put options with a US$55.00 strike price). In addition, 900,000 GJ/d of natural gas volumes
have been hedged through the use of price collars for the rst quarter of 2008 (400,000 GJ/d with a oor of $7.00 and 500,000 GJ/d with a
oor of $7.50).
In addition to the strategic location of the assets that ACC brings to the Company, this acquisition allows the Company to further high
grade its project inventory and focus capital expenditures in the current highly inationary service market. As a result of the acquisition, the
Company has reduced its 2007 conventional crude oil and natural gas capital budget by $900 million compared to 2006 capital spending,
while maintaining the capital expenditures to complete Phase I of the Horizon Project.
LONG-TERM DEBT
The Companys long-term debt of $11,043 million at December 31, 2006 was comprised of drawings under its bank credit facilities and
debt issuances under medium and long-term unsecured notes.
BANK CREDIT FACILITIES
As at December 31, 2006 the Company had in place unsecured bank credit facilities of $7,809 million, comprised of:
a $100 million demand credit facility;
a $500 million demand credit facility;
a 3-year non-revolving syndicated credit facility of $3,850 million;
a 5-year revolving syndicated credit facility of $1,825 million;
a 5-year revolving syndicated credit facility of $1,500 million; and
a 15 million demand credit facility related to the Companys North Sea operations.
The revolving syndicated credit facilities are fully revolving for a period of ve years maturing June 2011. Both facilities are extendible
annually for one year periods at the mutual agreement of the Company and the lenders. If the facilities are not extended, the full amount
of the outstanding principal would be repayable on the maturity date.
Canadian Natural AR2006
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In conjunction with the closing of the acquisition of ACC, the Company executed a $3,850 million, three-year non-revolving syndicated
credit facility maturing in October 2009. This facility is subject to certain prepayment requirements up to a maximum of $1,500 million.
During 2006, the Company obtained a $500 million credit facility repayable on demand.
The weighted average interest rate of the bank credit facilities outstanding at December 31, 2006, was 4.8%(2005 4.0%).
In addition to the outstanding debt, letters of credit and nancial guarantees aggregating $338 million, including $300 million related to
the Horizon Project, were outstanding at December 31, 2006.
MEDIUM-TERM NOTES
In January 2006, the Company issued $400 million of debt securities maturing January 2013, bearing interest at 4.50%. Proceeds
from the securities issued were used to repay bankers acceptances under the Companys bank credit facilities. After issuing these
securities, the Company has $1.6 billion remaining on its $2 billion shelf prospectus led in August 2005 that allows for the
issue of medium-term notes in Canada until September 2007. If issued, these securities will bear interest as determined at the date
of issuance.
In May 2005, the Company issued $400 million of debt securities maturing June 2015, bearing interest at 4.95%. Proceeds from the
securities issued were used to repay bankers acceptances under the Companys bank credit facilities.
Subsequent to December 31, 2006, the 7.40%unsecured debentures due March 1, 2007 were repaid.
SENIOR UNSECURED NOTES
The adjustable rate senior unsecured notes bear interest at 6.54%and have annual principal repayments of US$31 million commencing in
May 2007, through May 2009.
In December 2005, the Company repaid the US$125 million 7.69%senior unsecured notes due December 19, 2005.
PREFERRED SECURITIES
In September 2005, the Company redeemed the US$80 million 8.30% preferred securities due May 25, 2011 for cash consideration of
US$91 million, including an early repayment premium of US$11 million as required under the Note Purchase Program.
US DOLLAR DEBT SECURITIES
In August 2006, the Company issued US$250 million of unsecured notes maturing August 2016 and US$450 million of unsecured notes
maturing February 2037, bearing interest at 6.00% and 6.50%, respectively. Concurrently, the Company entered into cross-currency
interest-rate swaps to x the Canadian dollar interest and principal repayment amounts on the US$250 million notes at 5.40% and
C$279 million. Proceeds from the securities issued were used to repay bankers acceptances under the Companys bank credit facilities.
In November 2006, the US shelf prospectus, led in June 2005, was increased from US$2,000 million to US$3,000 million, leaving
US$2,300 million available for issue in the United States until July 2007.
Subsequently, on March 12, 2007, the Company priced, for settlement on March 19, 2007, US$2,200 million of unsecured notes under
the US shelf prospectus, comprised of US$1,100 million of unsecured notes maturing May 2017 and US$1,100 million of unsecured notes
maturing March 2038, bearing interest at 5.70%and 6.25%, respectively. Concurrently, the Company entered into cross-currency interest-
rate swaps to x the Canadian dollar interest and principal repayment amounts on US$1,100 million of unsecured notes due May 2017
at 5.10%and C$1,287 million. The Company also entered into a cross-currency interest-rate swap to x the Canadian dollar interest and
principal repayment amounts on US$550 million of unsecured notes due March 2038 at 5.76% and C$644 million. Net proceeds on the
debt issue will be used to repay outstanding amounts under the Companys bank credit facilities.
SHARE CAPITAL
As at December 31, 2006, there were 537,903,000 common shares outstanding and 34,425,000 stock options outstanding. As at
March 13, 2007, the Company had 538,970,000 common shares outstanding and 31,098,000 stock options outstanding.
During 2006, the Company purchased 485,000 common shares for cancellation (2005 850,000 common shares;
2004 873,400 common shares) at an average price of $57.33 per common share (2005 $53.29 per common share; 2004 - $38.01
per common share), for a total cost of $28 million (2005 $45 million; 2004 - $33 million) pursuant to the Normal Course Issuer Bids
previously led.
In January 2007, the Company renewed its Normal Course Issuer Bid to purchase, through the facilities of the Toronto Stock
Exchange and the New York Stock Exchange, during the 12-month period beginning January 24, 2007 and ending January 23, 2008,
up to 26,941,730 common shares or 5% of the outstanding common shares of the Company then outstanding on the date of the
announcement. As at March 15, 2007, the Company had not purchased any additional shares under the Normal Course Issuer Bid.
In March 2007, the Companys Board of Directors approved an increase in the annual dividend paid by the Company to $0.34 per common
share for 2007. The increase represented a 13% increase from the prior year, recognizes the stability of the Companys cash ow, and
provides a return to Shareholders. This is the seventh consecutive year in which the Company has paid dividends and the sixth consecutive
Managements Discussion & Analysis
Page 63 of 107
year of an increase in the distribution paid to its Shareholders. The dividend policy undergoes a periodic reviewby the Board of Directors and
is subject to change. In February 2006, an increase in the annual dividend paid by the Company was approved to $0.30 per common share
for 2006. The increase represented a 27%increase from the prior year.
COMMITMENTS AND OFF BALANCE SHEET ARRANGEMENTS
In the normal course of business, the Company has entered into various commitments that will have an impact on the Companys future
operations. These commitments primarily relate to debt repayments, operating leases relating to ofce space and offshore FPSOs and drilling
rigs, and rm commitments for gathering, processing and transmission services, as well as expenditures relating to AROs. As at December
31, 2006, no entities have been consolidated under the Canadian Institute of Chartered Accountants Handbook Accounting Guideline 15,
Consolidation of Variable Interest Entities. The following table summarizes the Companys commitments as at December 31, 2006:
($ millions) 2007 2008 2009 2010 2011 Thereafter
Product transportation and pipeline
(1)
$ 213 $ 193 $ 134 $ 123 $ 99 $ 1,042
Offshore equipment operating leases
(2)
$ 77 $ 52 $ 52 $ 52 $ 50 $ 131
Offshore drilling $ 73 $ 83 $ 12 $ 12 $ 4 $ 4
Asset retirement obligations
(3)
$ 3 $ 3 $ 3 $ 4 $ 4 $ 4,480
Long-term debt
(4)
$ 161 $ 45 $ 3,876 $ $ 466 $ 3,713
Office leases $ 26 $ 32 $ 33 $ 34 $ 22 $
Electricity and other $ 51 $ 10 $ 17 $ 18 $ 1 $
(1) The Company entered into a 25 year pipeline transportation agreement commencing in 2008, related to future crude oil production. The agreement is renewable
for successive 10-year periods at the Companys option. During the initial term, annual toll payments before operating costs will be approximately $35 million.
(2) Offshore equipment operating leases are primarily comprised of obligations related to FPSOs. During 2006, the Company entered into an agreement to lease an
additional FPSO commencing in 2008, in connection with the planned offshore development in Gabon, Offshore West Africa. The new FPSO lease agreement
contains cancellation provisions at the option of the Company, subject to escalating termination payments throughout 2007 to a maximum of US$395 million.
(3) Amounts represent managements estimate of the future undiscounted payments to settle AROs related to resource properties, facilities, and production platforms,
based on current legislation and industry operating practices. Amounts disclosed for the period 2007 2011 represent the minimumrequired expenditures to meet
these obligations. Actual expenditures in any particular year may exceed these minimum amounts.
(4) The long-term debt represents principal repayments only. No debt repayments are reected for $2,782 million of revolving bank credit facilities due to the
extendable nature of the facilities.
In 2005, the Board of Directors of the Company approved the construction costs for Phase 1 of the Horizon Project, with an approved
budget of $6.8 billion. Cumulative construction spending to December 31, 2006 was approximately $4.0 billion. Final construction costs for
Phase 1 may differ fromthe approved budget due to changes in the nal scope and timing of completion of the project, and/or inationary
cost pressures.
LEGAL PROCEEDINGS
The Company is defendant and plaintiff in a number of legal actions that arise in the normal course of business. The Company
believes that any liabilities that might arise pertaining to such matters would not have a material effect on its consolidated
nancial position.
RESERVES
For the year ended December 31, 2006, the Company retained qualied independent reserve evaluators, Sproule Associates Limited
(Sproule) and Ryder Scott Company (Ryder Scott) to evaluate 100% of the Companys conventional proved, as well as proved and
probable crude oil, natural gas liquids (NGL) and natural gas reserves
(1)
and prepare Evaluation Reports on these reserves. Sproule evaluated
the Companys North America conventional assets and Ryder Scott evaluated the international conventional assets. The Company has been
granted an exemption fromNational Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101), which prescribes
the standards for the preparation and disclosure of reserves and related information for companies listed in Canada. This exemption allows
the Company to substitute SEC requirements for certain disclosures required under NI 51-101. There are two principal differences between
the two standards. The rst is the additional requirement under NI 51-101 to disclose both proved, and proved and probable reserves, as
well as the related net present value of future net revenues using forecast prices and costs. The second is in the denition of proved reserves;
however, as discussed in the Canadian Oil and Gas Evaluation Handbook (COGEH), the standards that NI 51-101 employs, the difference
in estimated proved reserves based on constant pricing and costs between the two standards is not material.
The Company has disclosed proved conventional reserves and the Standardized Measure of discounted future net cash ows using year-end
constant prices and costs as mandated by the SEC in the supplementary oil and gas information section of this Annual Report. The Company
has elected to provide the net present value
(2)
of these same conventional proved reserves as well as its conventional proved and probable
reserves and the net present value of these reserves under the same parameters as additional voluntary information. The Company has also
elected to provide both proved, and proved and probable conventional reserves and the net present value of these reserves using forecast
prices and costs as voluntary additional information, which is disclosed in the Companys most recent Annual Information Form.
Canadian Natural AR2006
Page 64 of 107
For the year ended December 31, 2006, the Company retained a qualied independent reserves evaluator, GLJ Petroleum Consultants
(GLJ), to evaluate 100% of Phases 1 through 3 of the Companys Horizon Project and prepare an Evaluation Report on the Companys
proved, as well as proved and probable oil sands mining reserves incorporating both the mining and upgrading projects. These reserves were
evaluated adhering to the requirements of SEC Industry Guide 7 using year-end constant pricing and have been disclosed separately from
the Companys conventional proved and probable crude oil, NGL and natural gas reserves.
The Reserves Committee of the Companys Board of Directors has met with and carried out independent due diligence procedures with
each of Sproule, Ryder Scott and GLJ to review the qualications of and procedures used by each evaluator in determining the estimate of
the Companys quantities and net present value of remaining conventional crude oil, NGL and natural gas reserves as well as the Companys
quantity of oil sands mining reserves.
Additional reserves disclosure is contained in the supplementary oil and gas information of this Annual Report and in the Companys most
recent Annual Information Form.
(1) Conventional crude oil, NGLs and natural gas includes all of the Companys light/medium, heavy, and thermal crude oil, natural gas, coal bed methane and natural
gas liquids activities. It does not include the Companys oil sands mining assets.
(2) Net present values of conventional reserves are based upon discounted cash ows prior to the consideration of income taxes and existing asset abandonment
liabilities. Only future development costs and associated material well abandonment liabilities have been applied.
RISKS AND UNCERTAINTIES
The Company is exposed to various operational risks inherent in exploring, developing, producing and marketing crude oil and natural gas
and the mining and upgrading of bitumen. These inherent risks include, but are not limited to, the following items:
Economic risk of nding and producing reserves at a reasonable cost, including the risk of reserve revisions due to economic and
technical factors. Reserve revisions can have a positive or negative impact on asset valuations, AROs and depletion rates;
Pricing risk of marketing reserves at an acceptable price given current market conditions;
Regulatory risk related to approval for exploration and development activities, which can add to costs or cause delays in projects;
Labour risk associated with securing the manpower necessary to complete capital projects in a timely and cost effective manner;
Operating hazards and other difculties inherent in the exploration for and production and sale of crude oil and natural gas;
Success of exploration and development activities;
Timing and success of integrating the business and operations of acquired companies;
Credit risk related to non-payment for sales contracts or non-performance by counterparties to contracts;
Interest rate risk associated with the Companys ability to secure nancing at commercially acceptable terms;
Foreign exchange risk due to uctuating exchange rates, as the majority of sales are based in US dollars;
Environmental impact risk associated with exploration and development activities;
Risk of catastrophic loss due to re, explosion or acts of nature;
Geopolitical risks associated with changing governmental policies, social instability and other political, economic or diplomatic
developments in the Companys international operations; and
Other circumstances affecting revenue and expenses.
The Company uses a variety of means to help minimize these risks. The Company maintains a comprehensive insurance program to reduce
risk to an acceptable level and to protect it against signicant losses. Operational control is enhanced by focusing efforts on large core
regions with high working interests and by assuming operatorship of all key facilities. Product mix is diversied, ranging fromthe production
of natural gas to the production of crude oil of various grades. The Company believes this diversication reduces price risk when compared
with over-leverage to one commodity. Sales of crude oil and natural gas are aimed at various markets to ensure that undue exposure to
any one market does not exist. Financial instruments are utilized to help ensure targets are met and to manage commodity prices, foreign
currency rates and interest rate exposure. The Company minimizes credit risks by only entering into sales contracts and nancial derivatives
with highly rated entities and nancial institutions. The arrangements and policies concerning the Companys nancial instruments are
under constant review and may change depending upon the prevailing market conditions. Refer to the Risk management activities
section of this MD&A. In addition, the Company reviews its exposure to individual companies on a regular basis, and where appropriate
ensures that parental guarantees or letters of credit are in place to minimize the impact in the event of default.
The Companys capital structure mix is also monitored on a continual basis to ensure that it optimizes exibility, minimizes cost and offers
the greatest opportunity for growth. This includes the determination of a reasonable level of debt and any interest rate exposure risk that
may exist.
For additional detail regarding the Companys risks and uncertainties, refer to the Companys most recent Annual Information Form.
Managements Discussion & Analysis
Page 65 of 107
ENVIRONMENT
The crude oil and natural gas industry is experiencing incremental increases in costs related to environmental regulation, particularly in North
America and the North Sea. Existing and expected legislation and regulations will require the Company to address and mitigate the effect
of its activities on the environment. This will include dismantling production facilities and remediating damage caused by the disposal or
release of specied substances. Increasingly stringent laws and regulations may have an adverse effect on the Companys future net earnings
and cash ow from operations.
The Companys associated risk management strategies focus on working with legislators and regulators to ensure that any new or revised
policies, legislation or regulations properly reect a balanced approach to sustainable development. Specic measures in response to existing
or new legislation include a focus on the Companys energy efciency, air emissions management, released water quality, reduced fresh
water use and the minimization of the impact on the landscape. The Companys strategy employs an Environmental Management Plan (the
Plan), a detailed copy of which is presented to, and reviewed by, the Board of Directors annually. The Plan is updated quarterly at the
Directors meetings.
The Companys Plan and operating guidelines focus on minimizing the impact of operations while meeting regulatory requirements and
internal corporate standards. The Company, as part of this Plan, has implemented a proactive program that includes:
An annual internal environmental compliance audit and inspection program of the Companys operating facilities;
A suspended well inspection program to support future development or eventual abandonment;
Appropriate reclamation and decommissioning standards for wells and facilities ready for abandonment;
An effective surface reclamation program;
A due diligence program related to groundwater monitoring;
An active program related to preventing and reclaiming spill sites;
A solution gas reduction and conservation program; and
A program to replace the majority of fresh water for steaming with brackish water.
The Company has also established stringent operating standards in four areas:
1. Using water-based, environmentally friendly drilling muds whenever possible;
2. Implementing cost effective ways of reducing greenhouse gas emissions per unit of production;
3. Exercising care with respect to all waste produced through effective waste management plans; and
4. Minimizing produced water volumes onshore and offshore through cost-effective measures.
In 2006, the Companys capital expenditures included $75 million for abandonment expenditures, an increase from $46 million in 2005
(2004 $32 million).
The Companys estimated undiscounted ARO at December 31, 2006 was as follows:
Estimated ARO, undiscounted ($ millions) 2006 2005
North America $ 2,826 $ 2,050
North Sea 1,543 1,185
Offshore West Africa 128 90
4,497 3,325
North Sea PRT recovery (625) (370)
$ 3,872 $ 2,955
The estimate of the ARO is based on estimates of future costs to abandon and restore the wells, production facilities and offshore
production platforms. Factors that affect costs include number of wells drilled, well depth and the specic environmental legislation. The
estimated costs are based on engineering estimates using current costs in accordance with present legislation and industry operating
practice. The Companys strategy in the North Sea consists of developing commercial hubs around its core operated properties with the
goal of increasing production, lowering costs and extending the economic lives of its production facilities, thereby delaying the eventual
abandonment dates. The future abandonment costs incurred in the North Sea are expected to result in an estimated PRT recovery of
$625 million (2005 $370 million, 2004 $600 million), as abandonment costs are an allowable deduction in determining PRT and may be
carried back to reclaim PRT previously paid. The expected PRT recovery reduces the Companys net abandonment liability to $3,872 million
(2005 $2,955 million).
Canadian Natural AR2006
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GREENHOUSE GAS AND OTHER AIR EMISSIONS
The Company is concurrently working with legislators and regulators on the design of newgreenhouse gas emission laws and regulations and
is pursuing an integrated emissions reduction strategy, to ensure the Company is able to comply with existing and future emission reductions
requirements. The Company continues to develop strategies that will enable it to deal with the risks and opportunities associated with new
climate change policies. In addition, the Company is working with relevant parties to ensure that newpolicies encourage innovation, energy
efciency, targeted research and development while not impacting competitiveness.
The Company continues to work with Canadian Federal and Provincial governments on the regulatory framework for greenhouse gases
for larger emitters. The Company is actively promoting a harmonized regulatory framework between the two levels of government. Both
levels of government have indicated that existing legislation will be amended in 2007 to create further requirements for reporting emissions,
facility-based emission intensity targets and regulatory compliance. Compliance with emission intensity targets is expected for 2008 and
possibly a part of 2007 for larger facilities in Alberta.
Issues to be resolved include, but are not limited to: the outcome of discussions between the Federal and Provincial Governments, the
impact of implementing legislation, the allocations of reduction obligations among industry sectors and international developments.
Any required reductions in the greenhouse gases emitted fromthe Companys operations could increase capital expenditures and operating
expenses, especially those related to the Horizon Project and the Companys other existing and planned large oil sands projects. This may
have an adverse effect on the Companys net earnings and cash ow from operations.
CRITICAL ACCOUNTING ESTIMATES
The preparation of nancial statements requires the Company to make judgements, assumptions and estimates in the application of generally
accepted accounting principles that have a signicant impact on the Companys nancial position and reported results of operations.
Actual results could differ from those estimates, and those differences could be material. Critical accounting estimates are reviewed by
the Companys Audit Committee annually. The Company believes the following are the most critical accounting estimates in preparing its
consolidated nancial statements.
PROPERTY, PLANT AND EQUIPMENT/DEPLETION, DEPRECIATION AND AMORTIZATION
The Company follows the full cost method of accounting for its conventional crude oil and natural gas properties and equipment.
Accordingly, all costs relating to the exploration for and development of conventional crude oil and natural gas reserves, whether successful
or not, are capitalized and accumulated in country-by-country cost centres. Proceeds on disposal of properties are ordinarily deducted from
such costs without recognition of prot or loss except where such disposal constitutes a signicant portion of the Companys reserves
in that country. Under Canadian GAAP, substantially all of the capitalized costs and future capital costs related to each cost centre from
which there is production are depleted on the unit-of-production method based on the estimated proved reserves of that country using
estimated future prices and costs, rather than constant dollar pricing as required by the SEC. The carrying amount of crude oil and natural
gas properties in each cost centre may not exceed their recoverable amount (the ceiling test). The recoverable amount is calculated as
the undiscounted cash ow using proved reserves and estimated future prices and costs. If the carrying amount of a cost centre exceeds its
recoverable amount, an impairment loss equal to the amount by which the carrying amount of the properties exceeds their estimated fair
value is charged against net earnings. Fair value is calculated as the cash ow fromthose properties using proved and probable reserves and
estimated future prices and costs, discounted at a risk-free interest rate.
The alternate acceptable method of accounting for crude oil and natural gas properties and equipment is the successful efforts method.
A major difference in applying the successful efforts method is that exploratory dry holes and geological and geophysical exploration costs
would be charged against net earnings in the year incurred rather than being capitalized to property, plant and equipment. In addition,
under this method cost centres are dened based on reserve pools rather than by country. The use of the full cost method usually results in
higher capitalized costs and increased DD&A rates compared to the successful efforts method.
CRUDE OIL AND NATURAL GAS RESERVES
The Company retains qualied independent reserves evaluators to evaluate the Companys proved, and proved and probable crude oil and
natural gas reserves. In 2006, 100%of the Companys reserves were evaluated by qualied independent reserves evaluators.
The estimation of reserves involves the exercise of judgement. Forecasts are based on engineering data, future prices, expected future rates
of production and the timing of future capital expenditures, all of which are subject to many uncertainties and interpretations. The Company
expects that over time its reserve estimates will be revised upward or downward based on updated information such as the results of future
drilling, testing and production levels. Reserve estimates can have a signicant impact on net earnings, as they are a key component in
the calculation of depletion, depreciation and amortization and for determining potential asset impairment. For example, a revision to the
proved reserve estimates would result in a higher or lower DD&A charge to net earnings. Downward revisions to reserve estimates could also
result in a write-down of crude oil and natural gas property, plant and equipment carrying amounts under the ceiling test.
Managements Discussion & Analysis
Page 67 of 107
ASSET RETIREMENT OBLIGATIONS
Under CICA Handbook Section 3110, Asset Retirement Obligations, the Company is required to recognize a liability for the future retirement
obligations associated with its property, plant and equipment. An ARO is recognized to the extent of a legal obligation associated with the
retirement of a tangible long-lived asset the Company is required to settle as a result of an existing or enacted law, statute, ordinance or
written or oral contract, or by legal construction of a contract under the doctrine of promissory estoppel. The ARO is based on estimated
costs, taking into account the anticipated method and extent of restoration consistent with legal requirements, technological advances and
the possible use of the site. Since these estimates are specic to the sites involved, there are many individual assumptions underlying the
Companys total ARO amount. These individual assumptions can be subject to change based on experience.
The estimated fair values of ARO related to long-termassets are recognized as a liability in the period in which they are incurred. Retirement
costs equal to the estimated fair value of the ARO is capitalized as part of the cost of associated capital assets and are amortized to expense
through depletion over the life of the asset. The fair value of the ARO is estimated by discounting the expected future cash ows to settle the
ARO at the Companys average credit-adjusted risk-free interest rate, which is currently 6.7%. In subsequent periods, the ARO is adjusted
for the passage of time and for any changes in the amount or timing of the underlying future cash ows. The estimates described impact
earnings by way of depletion on the capital cost and accretion on the asset retirement liability. In addition, differences between actual and
estimated costs to settle the ARO, timing of cash ows to settle the obligation and future ination rates could result in gains or losses on
the nal settlement of the ARO.
An ARO is not recognized for assets with an indeterminate useful life (e.g. pipeline assets) because an amount cannot be reasonably
determined. An ARO for these assets will be recorded in the rst period in which the lives of these assets are determinable.
INCOME TAXES
The Company follows the liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are
recognized based on the estimated tax effects of temporary differences in the carrying value of assets and liabilities in the consolidated
nancial statements and their respective tax bases, using income tax rates substantively enacted as of the consolidated balance sheet date.
Accounting for income taxes is an inherently complex process that requires management to interpret frequently changing regulations (e.g.
changing income tax rates) and make certain judgements with respect to the application of tax law. These interpretations and judgements
impact the current and future income tax provisions, future income tax assets and liabilities and net earnings.
RISK MANAGEMENT ACTIVITIES
The Company utilizes various instruments to manage its commodity price, currency and interest rate exposures. These derivative and
nancial instruments are not intended for trading or speculative purposes.
On January 1, 2004, the fair values of all outstanding derivative nancial instruments that were not designated as hedges for accounting
purposes were recorded on the consolidated balance sheet, with an offsetting net deferred revenue amount. Subsequent net changes in
the fair value of non-designated nancial instruments have been recognized on the consolidated balance sheet and in net earnings. The
estimated fair value for all derivative nancial instruments is based on third party indications. The cash settlement amount of the derivative
nancial instruments may vary materially depending upon the underlying crude oil and natural gas prices at the time of nal settlement of
the derivative nancial instruments, as compared to their mark-to-market value at December 31, 2006.
Effective January 1, 2007, the Company will adopt new accounting standards relating to the accounting for and disclosure of nancial
instruments. The estimated effects on the Companys consolidated balance sheet are discussed in further detail on page 68 of this MD&A.
PURCHASE PRICE ALLOCATIONS
The costs of business combinations and asset acquisitions are allocated to the underlying acquired assets and liabilities based on their
estimated fair value at the time of acquisition. The determination of fair value requires the Company to make assumptions and estimates
regarding future events. The allocation process is inherently subjective and impacts the amounts assigned to individually identiable assets
and liabilities. As a result, the purchase price allocation impacts the Companys reported assets and liabilities and future net earnings due to
the impact on future DD&A expense and impairment tests.
The Company has made various assumptions in determining the fair values of the acquired assets and liabilities. The most signicant
assumptions and judgments relate to the estimation of the fair value of the crude oil and natural gas properties. To determine the fair
value of these properties, the Company estimates (a) crude oil and natural gas reserves, and (b) future prices of crude oil and natural gas.
Reserve estimates are based on the work performed by the Companys engineers and outside consultants. The judgments associated with
these estimated reserves are described above in Crude oil and natural gas reserves. Estimates of future prices are based on prices derived
from price forecasts among industry analysts and internal assessments. The Company applies estimated future prices to the estimated
reserves quantities acquired, and estimates future operating and development costs, to arrive at estimated future net revenues for the
properties acquired.
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CONTROL ENVIRONMENT
The Companys management, including the President and Chief Operating Ofcer and the Chief Financial Ofcer and Senior Vice-President,
Finance, evaluated the effectiveness of disclosure controls and procedures as at December 31, 2006, and concluded that disclosure controls
and procedures are effective to ensure that information required to be disclosed by the Company in its annual lings and other reports led
with securities regulatory authorities in Canada and the United States is recorded, processed, summarized and reported within the time
periods specied and such information is accumulated and communicated to allow timely decisions regarding required disclosures.
The President and Chief Operating Ofcer and the Chief Financial Ofcer and Senior Vice-President, Finance also performed an assessment
of internal control over nancial reporting as at December 31, 2006, and concluded that internal control over nancial reporting is effective.
Further, there were no changes in the Companys internal control over nancial reporting during 2006 that have materially affected, or are
reasonably likely to materially affect, internal controls over nancial reporting.
While the Company believes that its disclosure controls and procedures and internal controls over nancial reporting provide a reasonable
level of assurance that they are effective, it recognizes that all internal control systems have inherent limitations. Because of its inherent
limitations, the Companys internal control system may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
NEW ACCOUNTING STANDARDS
Effective January 1, 2007, the Company will adopt the following new accounting standards relating to the accounting for and disclosure
of nancial instruments:
Section 1530 Comprehensive Income introduces the concept of comprehensive income to Canadian GAAP. Comprehensive income
is the change in equity (net assets) of the Company during a reporting period from transactions and other events and circumstances
from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and
distributions to owners.
Foreign currency translation adjustment, which is currently a separate component of shareholders equity, will be recorded as part of
accumulated other comprehensive income.
Section 3251 Equity replaces Section 3250 Surplus and establishes standards for the presentation of equity and changes
in equity during a reporting period. Financial statements of prior periods will be restated only for the foreign currency translation
adjustment.
Section 3855 Financial Instruments Recognition and Measurement prescribes when a nancial asset, nancial liability, or non-
nancial derivative is to be recognized on the balance sheet as well as its measurement amount. This section also species hownancial
instruments gains and losses are to be presented.
The Company will add all transaction costs that are directly attributable to the acquisition or issue of a nancial asset or nancial liability
to the fair value of the nancial asset or nancial liability. These adjustments were previously recorded in deferred charges. Transaction
costs added to the fair value of the nancial asset or nancial liability will be amortized using the effective interest method.
Section 3865 Hedges replaces Accounting Guideline 13 Hedging Relationships and EIC 128 Accounting for Trading,
Speculative or Non-Hedging Derivative Financial Instruments and species howhedge accounting is to be applied and what disclosures
are necessary when hedge accounting is applied.
Adoption of this standard will require the Company to record all of its derivative nancial instruments on the balance sheet at fair
value, including those designated as hedges. Designated hedges are currently not recognized on the balance sheet but are disclosed
in the notes to the nancial statements. The adjustment to recognize the designated hedges on the balance sheet will be recorded as
an adjustment to the opening balance of retained earnings or accumulated other comprehensive income, as appropriate.
Subsequently, if the derivative is designated as a fair value hedge, changes in the fair value of the derivative and changes in the fair
value of the hedged item attributable to the hedged risk are recognized in the consolidated statements of earnings each period. If the
derivative is designated as a cash ow hedge, the effective portions of the changes in fair value of the derivative are initially recorded
in other comprehensive income (OCI) each period and are recognized in the consolidated statements of earnings when the hedged
item is recognized. Therefore, ineffective portions of changes in the fair value of hedging instruments are recognized in net earnings
immediately for both fair value and cash ow hedges.
Adoption of these standards will have the following estimated effects on the Companys consolidated balance sheet as at
January 1, 2007:
($ millions)
Decrease future income tax asset $ (62)
Increase current portion of other long-term assets $ 193
Decrease other long-term assets $ (16)
Decrease long-term debt $ (72)
Increase future income tax liability $ 18
Increase retained earnings $ 10
Increase foreign currency translation adjustment $ 13
Increase accumulated other comprehensive income $ 146
Managements Discussion & Analysis
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OUTLOOK
The Company continues to implement its strategy of maintaining a large portfolio of varied projects, which the Company believes will
enable it, over an extended period of time, to provide consistent growth in production and high shareholder returns. Annual budgets are
developed, scrutinized throughout the year and changed if necessary in the context of project returns, product pricing expectations, and
balance in project risk and time horizons. The Company maintains a high ownership level and operatorship level in all of its properties and
can therefore control the nature, timing and extent of capital expenditures in each of its project areas.
The Company expects production levels in 2007 to average between 315,000 bbl/d and 360,000 bbl/d of crude oil and NGLs and between
1,594 mmcf/d and 1,664 mmcf/d of natural gas.
The forecasted capital expenditures in 2007 are currently expected to be as follows:
($ millions) 2007 Forecast
North America natural gas $ 1,111
North America crude oil and NGLs 1,350
North Sea 521
Offshore West Africa 114
Property acquisitions and midstream 16
3,112
Horizon Project Phase 1 construction
(1)
2,610
Capitalized interest and other items 397
Horizon Project Phases 2/3 engineering 109
Canadian Natural Upgrader engineering 5
Total $ 6,233
(1) Forecast to be in the range of $2,410 million to $2,810 million, the nal level of expenditure will be dependent upon the ability of certain contractors to advance
portions of their efforts from 2008 into 2007 as well as the extent of any realized cost pressures on certain isolated portions of the Horizon Project.
NORTH AMERICA NATURAL GAS
The 2007 North America natural gas drilling program is highlighted by the high-grading of the Companys natural gas asset base, including
the properties acquired through the ACC acquisition, as follows:
(number of wells) 2007 Forecast
Northeast British Columbia 58
Northwest Alberta 123
Northern Plains 172
Southern Plains 70
Total 423
NORTH AMERICA CRUDE OIL AND NGLS
The 2007 North America crude oil drilling program is highlighted by continued development of its Primrose thermal projects, Pelican Lake,
and a strong conventional heavy program, as follows:
(number of wells) 2007 Forecast
Conventional heavy crude oil 369
Thermal heavy crude oil 58
Light crude oil 107
Pelican Lake crude oil 132
Total 666
The Company has reduced forecasted natural gas capital for 2007 by approximately 40% from 2006 levels due to the shift in capital
allocation to higher return crude oil projects in the near term. Allocation of natural gas capital between existing and newly acquired ACC
lands will be the result of a high-grading process focusing on the highest return projects. No changes to the long-term natural gas plans of
the Company are being contemplated.
The Company continues the disciplined development of its heavy crude oil resources. Crude oil capital has been maintained with 2006 levels
as the Company continues to develop long-term production growth projects at Pelican Lake and in-situ oilsands at Primrose and Kirby.
THE HORIZON PROJECT
The nal level of capital expenditure on the Horizon Project will be dependent upon the ability of certain of the contractors to advance
portions of their efforts from 2008 into 2007, as well as the extent of any realized cost pressures on certain isolated portions of the
project.
The 2007 capital forecast for the Horizon Project targets the completion of most major plants with the commissioning process to be
substantially underway. The Ore Preparation Plant and Tailings Systems are targeted to be mechanically complete and ready to commission
Canadian Natural AR2006
Page 70 of 107
with the majority of utilities and offsite systems operational. The Upgrader is targeted to be nearing completion, with half of the related
plants completed. A total of 156 stratigraphic test wells are targeted to be drilled on the Horizon Project leases during 2007.
NORTH SEA
The 2007 capital forecast for the North Sea includes drilling 7.4 producer wells and 7.2 service wells. The development of the Lyell Field is
targeted for completion in late 2007.
OFFSHORE WEST AFRICA
The 2007 capital forecast for Offshore West Africa includes drilling 3.0 producer wells and 1.2 service well at West Espoir.
SENSITIVITY ANALYSIS
(1)
The following table is indicative of the annualized sensitivities of cash ow from operations and net earnings from changes in certain key
variables. The analysis is based on business conditions and sales volumes during the fourth quarter of 2006, and is not necessarily indicative
of future results. Each separate line item in the sensitivity analysis shows the effect of a change in that variable only; all other variables are
held constant.
Cash flow Cash flow
from from Net Net
operations operations earnings earnings
($ millions) ($/share, basic) ($ millions) ($/share, basic)
Price changes
Crude oil WTI US$1.00/bbl
(2)
Excluding financial derivatives $ 116 $ 0.22 $ 81 $ 0.15
Including financial derivatives $ 26-110 $ 0.05-0.21 $ 20-77 $ 0.04-0.14
Natural gas AECO C$0.10/mcf
(2)
Excluding financial derivatives $ 26 $ 0.05 $ 14 $ 0.03
Including financial derivatives $ 1-8 $ 0.00-0.02 $ 2-4 $ 0.00-0.01
Volume changes
Crude oil 10,000 bbl/d $ 98 $ 0.18 $ 44 $ 0.08
Natural gas 10 mmcf/d $ 17 $ 0.03 $ 6 $ 0.01
Foreign currency rate change
$0.01 change in C$ in relation to US$
(2)
Excluding financial derivatives $ 80-82 $ 0.15 $ 23-24 $ 0.04
Interest rate change 1% $ 48 $ 0.09 $ 48 $ 0.09
(1) The sensitivities are calculated based on 2006 fourth quarter results and exclude mark-to-market gains (losses) on risk management activities.
(2) For details of nancial instruments in place, refer to note 12 to the Companys audited annual consolidated nancial statements as at December 31, 2006.
DAILY PRODUCTION BY SEGMENT, BEFORE ROYALTIES
Q1 Q2 Q3 Q4 2006 2005 2004
Crude oil and NGLs (bbl/d)
North America 222,955 234,780 233,440 249,565 235,253 221,669 206,225
North Sea 60,802 63,703 53,988 61,786 60,056 68,593 64,706
Offshore West Africa 39,905 40,369 34,237 32,354 36,689 22,906 11,558
Total 323,662 338,852 321,665 343,705 331,998 313,168 282,489
Natural gas (mmcf/d)
North America 1,411 1,448 1,416 1,594 1,468 1,416 1,330
North Sea 17 17 11 16 15 19 50
Offshore West Africa 8 10 10 10 9 4 8
Total 1,436 1,475 1,437 1,620 1,492 1,439 1,388
Barrels of oil equivalent (boe/d)
North America 458,158 476,143 469,440 515,313 479,891 457,695 427,936
North Sea 63,589 66,426 55,790 64,490 62,558 71,651 73,093
Offshore West Africa 41,280 42,042 35,922 33,961 38,275 23,614 12,806
Total 563,027 584,611 561,152 613,764 580,724 552,960 513,835
Managements Discussion & Analysis
Page 71 of 107
PER UNIT RESULTS
(1)
Q1 Q2 Q3 Q4 2006 2005 2004
Crude oil and NGLs ($/bbl)
Sales price
(2)
$ 43.79 $ 60.05 $ 62.55 $ 47.27 $ 53.65 $ 46.86 $ 37.99
Royalties 3.48 5.14 5.11 4.10 4.48 3.97 3.16
Production expense 11.33 11.92 13.47 12.32 12.29 11.17 10.05
Netback $ 28.98 $ 42.99 $ 43.97 $ 30.85 $ 36.88 $ 31.72 $ 24.78
Natural gas ($/mcf)
Sales price
(2)
$ 8.30 $ 6.16 $ 5.83 $ 6.66 $ 6.72 $ 8.57 $ 6.50
Royalties 1.70 1.11 1.11 1.26 1.29 1.75 1.35
Production expense 0.80 0.80 0.84 0.86 0.82 0.73 0.67
Netback $ 5.80 $ 4.25 $ 3.88 $ 4.54 $ 4.61 $ 6.09 $ 4.48
Barrels of oil equivalent ($/boe)
Sales price
(2)
$ 46.30 $ 50.36 $ 51.21 $ 43.91 $ 47.92 $ 48.77 $ 38.45
Royalties 6.44 5.80 5.75 5.62 5.89 6.82 5.37
Production expense 8.46 8.85 10.01 9.16 9.14 8.21 7.35
Netback $ 31.40 $ 35.71 $ 35.45 $ 29.13 $ 32.89 $ 33.74 $ 25.73
(1) Amounts expressed on a per unit basis are based on sales volumes.
(2) Net of transportation and blending costs and excluding risk management activities.
NETBACK ANALYSIS
($/boe)
(1)
2006 2005 2004
Sales price
(2)
$ 47.92 $ 48.77 $ 38.45
Royalties 5.89 6.82 5.37
Production expense
(3)
9.14 8.21 7.35
Netback 32.89 33.74 25.73
Midstream contribution
(3)
(0.23) (0.26) (0.26)
Administration
(4)
0.85 0.75 0.66
Interest, net 0.66 0.74 1.01
Realized risk management activities 6.27 5.13 2.52
Realized foreign exchange (gain) loss (0.06) (0.15) 0.02
Taxes other than income tax current 1.04 1.01 1.12
Current income tax North America 0.68 0.50 0.53
Current income tax North Sea 0.14 0.77 0.01
Current income tax Offshore West Africa 0.23 0.17 0.07
Cash flow $ 23.31 $ 25.08 $ 20.05
(1) Amounts expressed on a per unit basis are based on sales volumes.
(2) Net of transportation and blending costs and excluding risk management activities.
(3) Excluding inter-segment eliminations.
(4) Restated to conform to current year presentation.
TRADING AND SHARE STATISTICS
Q1 Q2 Q3 Q4 2006 Total 2005 Total
TSX C$
Trading volume (thousands) 134,487 129,036 127,022 118,390 508,935 637,992
Share price ($/share)
High $ 73.91 $ 72.70 $ 63.30 $ 63.50 $ 73.91 $ 62.00
Low $ 57.75 $ 50.78 $ 47.28 $ 45.49 $ 45.49 $ 24.28
Close $ 64.90 $ 61.72 $ 50.94 $ 62.15 $ 62.15 $ 57.63
Market capitalization
at December 31 ($ millions) $ 33,431 $ 30,910
Shares outstanding (thousands) 537,903 536,348
NYSE US$
Trading volume (thousands) 78,836 102,472 101,438 119,163 401,909 251,554
Share price ($/share)
High $ 64.38 $ 63.93 $ 56.68 $ 55.48 $ 64.38 $ 54.05
Low $ 49.62 $ 45.67 $ 42.38 $ 40.29 $ 40.29 $ 19.74
Close $ 55.39 $ 55.38 $ 45.58 $ 53.23 $ 53.23 $ 49.62
Market capitalization at
December 31 ($ millions) $ 28,633 $ 26,614
Shares outstanding (thousands) 537,903 536,348
Canadian Natural AR2006
Page 72 of 107
Managements Report
The accompanying consolidated nancial statements and all other information contained elsewhere in this annual report are the responsibility
of management. The consolidated nancial statements have been prepared by management in accordance with the accounting policies
described in the accompanying notes. Where necessary, management has made informed judgements and estimates in accounting for
transactions that were not complete at the balance sheet date. In the opinion of management, the nancial statements have been prepared
in accordance with Canadian generally accepted accounting principles appropriate in the circumstances. The nancial information presented
elsewhere in the annual report has been reviewed to ensure consistency with that in the consolidated nancial statements.
Management maintains appropriate systems of internal control. Policies and procedures are designed to give reasonable assurance that
transactions are appropriately authorized and recorded, assets are safeguarded from loss or unauthorized use and nancial records are
properly maintained to provide reliable information for preparation of nancial statements.
PricewaterhouseCoopers LLP, an independent rmof Chartered Accountants, has been engaged, as approved by a vote of the shareholders
at the Companys most recent Annual General Meeting, to audit and provide their independent audit opinions on the following:
the Companys consolidated nancial statements as at December 31, 2006;
the effectiveness of the Companys internal control over nancial reporting as at December 31, 2006; and
managements assessment of the Companys internal control over nancial reporting as at December 31, 2006.
Their report is presented with the consolidated nancial statements.
The Board of Directors (the Board) is responsible for ensuring that management fullls its responsibilities for nancial reporting and
internal controls. The Board exercises this responsibility through the Audit Committee of the Board, which is comprised of non-management
directors. The Audit Committee meets with management and the independent auditors to satisfy itself that management responsibilities
are properly discharged and to review the consolidated nancial statements before they are presented to the Board for approval. The
consolidated nancial statements have been approved by the Board on the recommendation of the Audit Committee.
Steve W. Laut Douglas A. Proll, CA Randall S. Davis, CA
President & Chief Operating Ofcer Chief Financial Ofcer & Vice President, Finance & Accounting
Senior Vice-President, Finance
March 15, 2007
Calgary, Alberta, Canada
Management is responsible for establishing and maintaining adequate internal control over nancial reporting for the Company as dened
in Rule 15(d)-15(f) under the United States Securities Exchange Act of 1934, as amended.
Management, together with the Companys President and Chief Operating Ofcer and the Companys Chief Financial Ofcer and Senior
Vice-President, Finance, performed an assessment of the Companys internal control over nancial reporting based on the criteria established
in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on the assessment, management, together with the Companys President and Chief Operating Ofcer and the Companys Chief
Financial Ofcer and Senior Vice-President, Finance, has concluded that the Companys internal control over nancial reporting is effective as
at December 31, 2006. Management recognizes that all internal control systems have inherent limitations. Because of its inherent limitations,
internal control over nancial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Managements assessment of the effectiveness of the Companys internal control over nancial reporting as at December 31, 2006, has
been audited by PricewaterhouseCoopers LLP, independent auditors, as stated in their report presented with the audited consolidated
nancial statements.
Steve W. Laut Douglas A. Proll, CA
President & Chief Operating Ofcer Chief Financial Ofcer &
Senior Vice-President, Finance
March 15, 2007
Calgary, Alberta, Canada
Managements Assessment of Internal
Control Over Financial Reporting
Managements and Auditors Reports
Page 73 of 107
Canadian Natural AR2006
Page 74 of 107
To the Shareholders of Canadian Natural Resources Limited
We have completed an integrated audit of the consolidated nancial statements and internal control over nancial reporting of Canadian
Natural Resources Limited (the Company) as of December 31, 2006 and audits of its December 31, 2005 and December 31, 2004
consolidated nancial statements. Our opinions, based on our audits, are presented below.
CONSOLIDATED FINANCIAL STATEMENTS
We have audited the accompanying consolidated balance sheets of the Company as of December 31, 2006 and December 31, 2005, and the
related consolidated statements of earnings, retained earnings and cash ows for each of the three years in the period ended December 31,
2006. These nancial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these
nancial statements based on our audits.
We conducted our audit of the Companys nancial statements as of December 31, 2006 and for the year then ended in accordance with
Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). We
conducted our audits of the Companys nancial statements as of December 31, 2005 and for each of the two years in the period ended
December 31, 2005 in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform
an audit to obtain reasonable assurance about whether the nancial statements are free of material misstatement. An audit of nancial
statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the nancial statements. A nancial
statement audit also includes assessing the accounting principles used and signicant estimates made by management, and evaluating the
overall nancial statement presentation.
In our opinion, the consolidated nancial statements referred to above present fairly, in all material respects, the nancial position of the
Company as of December 31, 2006 and December 31, 2005 and the results of its operations and its cash ows for each of the three years
in the period ended December 31, 2006 in accordance with Canadian generally accepted accounting principles.
INTERNAL CONTROL OVER FINANCIAL REPORTING
We have also audited managements assessment, included in the accompanying managements assessment of internal control over nancial
reporting, that the Company maintained effective internal control over nancial reporting as of December 31, 2006, based on criteria
established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Companys management is responsible for maintaining effective internal control over nancial reporting and for its assessment
of the effectiveness of internal control over nancial reporting. Our responsibility is to express opinions on managements assessment and
on the effectiveness of the Companys internal control over nancial reporting based on our audit.
We conducted our audit of internal control over nancial reporting in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over nancial reporting was maintained in all material respects. An audit of internal control over nancial
reporting includes obtaining an understanding of internal control over nancial reporting, evaluating managements assessment, testing
and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
A companys internal control over nancial reporting is a process designed to provide reasonable assurance regarding the reliability of
nancial reporting and the preparation of nancial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over nancial reporting includes those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of nancial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the nancial statements.
Because of its inherent limitations, internal control over nancial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, managements assessment that the Company maintained effective internal control over nancial reporting as of December
31, 2006 is fairly stated, in all material respects, based on criteria established in Internal Control Integrated Framework issued by the
COSO. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over nancial reporting as
of December 31, 2006 based on criteria established in Internal Control Integrated Framework issued by the COSO.
Chartered Accountants
Calgary, Alberta, Canada
March 15, 2007
Independent Auditors Report
As at December 31
(millions of Canadian dollars) 2006 2005
ASSETS
Current assets
Cash and cash equivalents $ 23 $ 18
Accounts receivable and other 1,947 1,546
Future income tax (note 8) 163 487
Current portion of other long-term assets (note 3) 106
2,239 2,051
Property, plant and equipment (note 4) 30,767 19,694
Other long-term assets (note 3) 154 107
$ 33,160 $ 21,852
LIABILITIES
Current liabilities
Accounts payable $ 842 $ 573
Accrued liabilities 1,618 1,781
Current portion of other long-term liabilities (note 6) 611 1,471
3,071 3,825
Long-term debt (note 5) 11,043 3,321
Other long-term liabilities (note 6) 1,393 1,434
Future income tax (note 8) 6,963 5,035
22,470 13,615
SHAREHOLDERS EQUITY
Share capital (note 9) 2,562 2,442
Retained earnings 8,141 5,804
Foreign currency translation adjustment (note 10) (13) (9)
10,690 8,237
$ 33,160 $ 21,852
Commitments and contingencies (note 13)
Approved by the Board of Directors:
Catherine M. Best N. Murray Edwards
Chair of the Audit Committee Vice-Chairman of the Board of Directors
and Director and Director
Consolidated Financial Statements
Page 75 of 107
Consolidated Balance Sheets
Canadian Natural AR2006
Page 76 of 107
For the years ended December 31
(millions of Canadian dollars, except per common share amounts) 2006 2005 2004
Revenue $ 11,643 $ 11,130 $ 8,269
Less: royalties (1,245) (1,366) (1,011)
Revenue, net of royalties 10,398 9,764 7,258
Expenses
Production 1,949 1,663 1,400
Transportation and blending 1,443 1,293 972
Depletion, depreciation and amortization 2,391 2,013 1,769
Asset retirement obligation accretion (note 6) 68 69 51
Administration 180 151 125
Stock-based compensation (note 6) 139 723 249
Interest, net 140 149 189
Risk management activities (note 12) 312 1,952 434
Foreign exchange loss (gain) 122 (132) (91)
6,744 7,881 5,098
Earnings before taxes 3,654 1,883 2,160
Taxes other than income tax (note 8) 256 194 165
Current income tax (note 8) 222 286 116
Future income tax (note 8) 652 353 474
Net earnings $ 2,524 $ 1,050 $ 1,405
Net earnings per common share (note 11)
Basic $ 4.70 $ 1.96 $ 2.62
Diluted $ 4.70 $ 1.95 $ 2.60
Consolidated Statements
of Retained Earnings
For the years ended December 31
(millions of Canadian dollars) 2006 2005 2004
Balance beginning of year $ 5,804 $ 4,922 $ 3,650
Net earnings 2,524 1,050 1,405
Dividends on common shares (note 9) (161) (127) (107)
Purchase of common shares under Normal Course Issuer Bid (note 9) (26) (41) (26)
Balance end of year $ 8,141 $ 5,804 $ 4,922
Consolidated Statements of Earnings
For the years ended December 31
(millions of Canadian dollars) 2006 2005 2004
Operating activities
Net earnings $ 2,524 $ 1,050 $ 1,405
Non-cash items
Depletion, depreciation and amortization 2,391 2,013 1,769
Asset retirement obligation accretion 68 69 51
Stock-based compensation 139 723 249
Unrealized risk management activities (1,013) 925 (40)
Unrealized foreign exchange loss (gain) 134 (103) (94)
Deferred petroleum revenue tax expense (recovery) 37 (9) (45)
Future income tax 652 353 474
Deferred charges (2) (31) (33)
Abandonment expenditures (75) (46) (32)
Net change in non-cash working capital (note 14) (679) (147) (14)
4,176 4,797 3,690
Financing activities
Issue (repayment) of bank credit facilities 6,499 (435) 357
Issue (repayment) of medium-term notes 400 400 (125)
Repayment of senior unsecured notes (194) (54)
Issue of US dollar debt securities 788 830
Repayment of preferred securities (107)
Repayment of obligations under capital leases (7)
Issue of common shares on exercise of stock options 21 9 24
Dividends on common shares (153) (121) (101)
Purchase of common shares (28) (45) (33)
Net change in non-cash working capital (note 14) 37 19 6
7,564 (474) 897
Investing activities
Expenditures on property, plant and equipment (7,266) (5,340) (4,582)
Net proceeds on sale of property, plant and equipment 71 454 7
Net expenditures on property, plant and equipment (7,195) (4,886) (4,575)
Acquisition of Anadarko Canada Corporation (note 2) (4,641)
Net proceeds on sale of other assets 11
Net change in non-cash working capital (note 14) 101 542 (88)
(11,735) (4,333) (4,663)
Increase (decrease) in cash and cash equivalents 5 (10) (76)
Cash and cash equivalents beginning of year 18 28 104
Cash and cash equivalents end of year $ 23 $ 18 $ 28
Supplemental disclosure of cash ow information (note 14)
Consolidated Financial Statements
Page 77 of 107
Consolidated Statements of Cash Flows
Canadian Natural AR2006
Page 78 of 107
(tabular amounts in millions of Canadian dollars, unless otherwise stated)
1. ACCOUNTING POLICIES
Canadian Natural Resources Limited (the Company) is a senior independent crude oil and natural gas exploration, development and
production company head-quartered in Calgary, Alberta, Canada. The Companys operations are focused in North America, largely in
Western Canada, the United Kingdom portion of the North Sea and Offshore West Africa. Within Western Canada, the Company is
developing its Horizon Oil Sands Project (the Horizon Project) and maintains its midstream activities. The Horizon Project involves a plan
to produce synthetic crude oil through mining and upgrading operations, while the midstream activities include the Companys pipeline
operations and an electricity co-generation system.
The consolidated nancial statements of the Company have been prepared in accordance with accounting principles generally accepted
in Canada (Canadian GAAP). A summary of differences between accounting principles in Canada and those generally accepted in the
United States (US GAAP) is contained in note 16.
Signicant accounting policies are summarized as follows:
(A) PRINCIPLES OF CONSOLIDATION
The consolidated nancial statements include the accounts of the Company and all of its subsidiary companies and partnerships. Asignicant
portion of the Companys activities are conducted jointly with others and the consolidated nancial statements reect only the Companys
proportionate interest in such activities.
(B) MEASUREMENT UNCERTAINTY
Management has made estimates and assumptions regarding certain assets, liabilities, revenues and expenses in the preparation of the
consolidated nancial statements. Such estimates primarily relate to unsettled transactions and events as of the date of the consolidated
nancial statements. Accordingly, actual results may differ from estimated amounts.
Purchase price allocations, depletion, depreciation and amortization, and amounts used for ceiling test calculations are based on estimates
of crude oil and natural gas reserves and commodity prices, production expenses and capital costs required to develop and produce those
reserves. Substantially all of the Companys reserve estimates are evaluated annually by independent engineering rms. By their nature,
estimates of reserves and the related future cash ows are subject to measurement uncertainty, and the impact of differences between
actual and estimated amounts on the consolidated nancial statements of future periods could be material.
The calculation of asset retirement obligations includes estimates of the future costs to settle the asset retirement obligation, the timing of
the cash ows to settle the obligation, and the future ination rates. The impact of differences between actual and estimated costs, timing
and ination on the consolidated nancial statements of future periods could be material.
The measurement of petroleumrevenue tax expense in the United Kingdomand the related provision in the consolidated nancial statements
are subject to uncertainty associated with future recoverability of crude oil and natural gas reserves, commodity prices and the timing of
future events, which could result in material changes to deferred amounts.
(C) CASH AND CASH EQUIVALENTS
Cash comprises cash on hand and demand deposits. Other investments (term deposits and certicates of deposit) with an original term to
maturity at purchase of three months or less are reported as cash equivalents on the balance sheet.
(D) PROPERTY, PLANT AND EQUIPMENT
The Company follows the full cost method of accounting for its conventional crude oil and natural gas properties and equipment as
prescribed by Accounting Guideline 16 (AcG 16) by the Canadian Institute of Chartered Accountants (CICA). Accordingly, all costs
relating to the exploration for and development of crude oil and natural gas reserves are capitalized and accumulated in country-by-country
cost centres. Administrative overhead incurred during the development phase of large capital projects is capitalized until the projects are
available for their intended use. Proceeds on disposal of properties are ordinarily deducted from such costs without recognition of prot or
loss except where such disposal constitutes a signicant portion of the Companys reserves in that country.
Contractual arrangements that meet the denition of a lease are accounted for as capital leases or operating leases as appropriate.
Property acquisition, construction and development costs related to the Companys Horizon Project are not accounted for under the full cost
method of accounting and accordingly, are excluded fromthe Companys Canadian conventional oil and gas cost centre. Construction costs
are capitalized separately to each phase of the Horizon Project. The Company will review the recoverability of the carrying amount of the
Horizon Project costs if events or circumstances indicate that the carrying amount may not be recoverable.
Notes to the Consolidated
Financial Statements
Notes to the Consolidated Financial Statements
Page 79 of 107
(E) DEPLETION, DEPRECIATION AND AMORTIZATION
Substantially all costs related to each country-by-country cost centre are depleted on the unit-of-production method based on the estimated
proved reserves of that country. Volumes of net production and net reserves before royalties are converted to equivalent units on the basis
of estimated relative energy content. In determining its depletion base, the Company includes estimated future costs to be incurred in
developing proved reserves and excludes the cost of unproved properties and major development projects. Unproved properties are assessed
periodically to determine whether impairment has occurred. When proved reserves are assigned or the value of unproved property is
considered to be impaired, the cost of the unproved property or the amount of the impairment is added to costs subject to depletion. Costs
for major development projects, as identied by management, are not subject to depletion until the projects are available for their intended
uses. Processing and production facilities are depreciated on a straight-line basis over their estimated lives.
The Company reviews the carrying amount of its crude oil and natural gas properties (the properties) relative to their recoverable
amount (the ceiling test) for each cost centre at each annual balance sheet date, or more frequently if circumstances or events indicate
impairment may have occurred. The recoverable amount is calculated as the undiscounted cash ow from the properties using proved
reserves and expected future prices and costs. If the carrying amount of the properties exceeds their recoverable amount, an impairment
loss is recognized in depletion equal to the amount by which the carrying amount of the properties exceeds their fair value. Fair value is
calculated as the cash ow from those properties using proved and probable reserves and expected future prices and costs, discounted at
a risk-free interest rate.
Midstream assets are depreciated on a straight-line basis over their estimated lives. The Company reviews the recoverability of the carrying
amount of the midstream assets when events or circumstances indicate that the carrying amount might not be recoverable. If the carrying
amount of the midstream assets exceeds their recoverable amount, an impairment loss equal to the amount by which the carrying amount
of the midstream assets exceeds their fair value is recognized in depreciation.
Head ofce capital assets are amortized on a declining balance basis over their estimated useful lives.
(F) CAPITALIZED INTEREST
Following the Board of Directors approval of Phase 1 of the Horizon Project in 2005, the Company commenced capitalization of construction
period interest based on costs incurred and the Companys cost of borrowing. Interest capitalization on Phase 1 will cease once construction
is substantially complete and this phase of the Horizon Project is available for its intended use. The Company will continue to capitalize a
portion of interest costs related to subsequent phases of the Horizon Project.
(G) DEFERRED CHARGES
Deferred charges primarily include deferred nancing costs associated with the issuance of long-term debt and settlement costs of long-
term natural gas contracts. Deferred charges are amortized over the original term of the related instrument. Refer to policy note (R) for the
effect of new nancial instrument policies on deferred charges.
(H) ASSET RETIREMENT OBLIGATIONS
The Company provides for future asset retirement obligations on its resource properties, facilities, production platforms and gathering
systems based on current legislation and industry operating practices. The fair values of asset retirement obligations related to property,
plant and equipment are recognized as a liability in the period in which they are incurred. Retirement costs equal to the fair value of the
asset retirement obligations are capitalized as part of the cost of the associated property, plant and equipment and are amortized to expense
through depletion and depreciation over the lives of the respective assets. The fair value of an asset retirement obligation is estimated by
discounting the expected future cash ows to settle the asset retirement obligation at the Companys average credit-adjusted risk-free
interest rate. In subsequent periods, the asset retirement obligation is adjusted for the passage of time and for changes in the amount
or timing of the underlying future cash ows. Actual expenditures are charged against the accumulated asset retirement obligation as
incurred.
The Companys pipelines have an indeterminate life and therefore the fair values of the related asset retirement obligations cannot be
reasonably determined. The asset retirement obligations for these assets will be recorded in the year in which the lives of the assets are
determinable.
(I) FOREIGN CURRENCY TRANSLATION
Foreign operations that are self-sustaining are translated using the current rate method. Under this method, assets and liabilities are
translated to Canadian dollars from their functional currency using the exchange rate in effect at the consolidated balance sheet date.
Revenues and expenses are translated to Canadian dollars at the monthly average exchange rates. Gains or losses on translation are included
in the foreign currency translation adjustment in shareholders equity in the consolidated balance sheets.
Foreign operations that are integrated are translated using the temporal method. For foreign currency balances and integrated subsidiaries,
monetary assets and liabilities are translated to Canadian dollars at the exchange rate in effect at the consolidated balance sheet date.
Non-monetary assets and liabilities are translated at the exchange rate in effect when the assets were acquired or obligations incurred.
Revenues and expenses are translated to Canadian dollars at the monthly average exchange rates. Provisions for depletion, depreciation and
amortization are translated at the same rate as the related assets.
Canadian Natural AR2006
Page 80 of 107
Gains or losses on translation of integrated foreign operations are included in the consolidated statement of earnings. Gains or losses on the
translation of foreign currency balances are either recognized in net earnings immediately, or in the foreign currency translation adjustment
(note 10) for translation gains or losses for that portion of the US dollar denominated debt designated as a hedge of the net investment in
self-sustaining foreign operations.
(J) REVENUE RECOGNITION
Revenue from the production of crude oil and natural gas is recognized when title passes to the customer, delivery has taken place and
collection is reasonably assured. The Company assesses customer creditworthiness, both before entering into contracts and throughout the
revenue recognition process.
Revenue as reported represents the Companys share and is presented before royalty payments to governments and other mineral interest
owners. Revenue, net of royalties represents the Companys share after royalty payments to governments and other mineral interest
owners.
(K) TRANSPORTATION AND BLENDING
Transportation and blending costs incurred to transport crude oil and natural gas to customers are recorded as a separate cost in the
consolidated statement of earnings.
(L) PRODUCTION SHARING CONTRACTS
Production generated from Offshore West Africa is currently shared under the terms of various Production Sharing Contracts (PSCs).
Revenues are divided into cost recovery revenues and prot revenues. Cost recovery revenues allow the Company to recover its share and
the governments share of capital and operating costs carried by the Company. Prot revenues are allocated to the Company in accordance
with its respective equity interest, after a portion has been allocated to the government. Cost recovery and prot revenues are reported as
sales revenues. The governments share of revenues attributable to the Companys equity interest, except for income tax, is reported as a
royalty expense in accordance with the PSCs.
(M) PETROLEUM REVENUE TAX
The Company accounts for the United Kingdom petroleum revenue tax (PRT) by the life-of-the-eld method. The total future liability or
recovery of PRT is estimated using current reserves and anticipated sales prices and costs. The estimated future PRT is then apportioned to
accounting periods on the basis of total estimated future operating income. Changes in the estimated total future PRT are accounted for
prospectively.
(N) INCOME TAX
The Company follows the liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are
recognized based on the estimated tax effects of temporary differences in the carrying value of assets and liabilities in the consolidated
nancial statements and their respective tax bases, using income tax rates substantively enacted as of the consolidated balance sheet date.
The effect of a change in income tax rates on the future income tax assets and liabilities is recognized in net earnings in the period of the
change.
Taxable income from the conventional crude oil and natural gas business in Canada is primarily generated through partnerships, with the
related income taxes payable in a future period. North America current income taxes have been provided on the basis of the corporate
structure and available income tax deductions and will vary depending upon the nature and amount of capital expenditures incurred in
Canada in any particular year.
(O) STOCK-BASED COMPENSATION PLANS
The Company accounts for stock-based compensation using the intrinsic value method as the Companys Stock Option Plan (the Option
Plan) provides current employees with the right to elect to receive common shares or direct cash payment in exchange for options
surrendered. A liability for potential cash settlements under the Option Plan is accrued over the vesting period of the stock options based
on the difference between the exercise price of the stock options and the market price of the Companys common shares and an estimated
forfeiture rate. This liability is revalued at each reporting date to reect changes in the market price of the Companys common shares and
actual forfeitures, with the net change recognized in net earnings, or adjusted to capitalized costs during the construction period in the case
of the Horizon Project. When stock options are surrendered for cash, the cash settlement paid reduces the outstanding liability. When stock
options are exercised for common shares under the Option Plan, consideration paid by employees and any previously recognized liability
associated with the stock options are recorded as share capital.
The Company has an employee stock savings plan and a stock bonus plan. Contributions to the employee stock savings plan are recorded
as compensation expense at the time of the contribution. Contributions to the stock bonus plan are recognized as compensation expense
over the related vesting period.
(P) RISK MANAGEMENT ACTIVITIES
The Company utilizes various derivative nancial instruments to manage its commodity price, currency and interest rate exposures. These
derivative nancial instruments are not intended for trading or speculative purposes. Changes in fair value of derivative nancial instruments
formally designated as hedges are not recognized in net earnings until such time as the corresponding gains or losses on the related hedged
Notes to the Consolidated Financial Statements
Page 81 of 107
items are also recognized. Changes in fair value of derivative nancial instruments not formally designated as hedges are recognized in the
balance sheet each period with the offset reected in risk management activities in the consolidated statements of earnings.
The Company formally documents all derivative nancial instruments designated as hedging transactions at the inception of the hedging
relationship, in accordance with the Companys risk management policies. The effectiveness of the hedging relationship is evaluated, both
at inception of the hedge and on an ongoing basis.
The Company enters into commodity price contracts to manage anticipated sales of crude oil and natural gas production in order to protect
cash ow for capital expenditure programs. All realized and unrealized gains or losses on these contracts are included in risk management
activities, regardless of whether or not these contracts have been formally designated as hedges.
The Company enters into interest rate swap agreements to manage its xed to oating interest rate mix on long-termdebt. The interest rate
swap contracts require the periodic exchange of payments without the exchange of the notional principal amounts on which the payments
are based. Gains or losses on interest rate swap contracts formally designated as hedges are included in interest expense. Gains or losses on
non-designated interest rate contracts are included in risk management activities.
The Company enters into cross-currency swap agreements to manage currency exposure on US dollar denominated long-term debt. The
cross-currency swap contracts require the periodic exchange of payments with the exchange at maturity of notional principal amounts on
which the payments are based. Gains or losses on the foreign exchange component of all cross-currency swap contracts are included in risk
management activities. Gains or losses on the interest component of cross-currency swap contracts designated as hedges are included in
interest expense.
Gains or losses on the termination of derivative nancial instruments that have been accounted for as hedges are deferred under other
assets or liabilities on the consolidated balance sheets and amortized into net earnings in the period in which the underlying hedged
transaction is recognized. In the event a designated hedged item is sold, extinguished or matures prior to the termination of the related
derivative instrument, any unrealized derivative gain or loss is recognized immediately in net earnings. Gains or losses on the termination of
nancial instruments that have not been accounted for as hedges are recognized in net earnings immediately.
Risk management activities are included in operating activities in the consolidated statements of cash ows.
Refer to policy note (R) for the effect of new accounting standards related to the accounting for risk management activities.
(Q) PER COMMON SHARE AMOUNTS
The Company uses the treasury stock method to determine the dilutive effect of stock options and other dilutive instruments.
This method assumes that proceeds received from the exercise of in-the-money stock options not accounted for as a liability are
used to purchase common shares at the average market price during the year. The Companys Option Plan described in note
9 results in a liability and expense for all outstanding stock options. As such, the potential common shares associated with the stock
options are not included in diluted earnings per share. The dilutive effect of other convertible securities is calculated by applying
the if-converted method, which assumes that the securities are converted at the beginning of the period and that income items are
adjusted to net earnings.
(R) RECENTLY ISSUED ACCOUNTING STANDARDS UNDER CANADIAN GAAP
FINANCIAL INSTRUMENTS
Effective January 1, 2007, the Company will adopt the following new accounting standards issued by the CICA relating to the accounting
for and disclosure of nancial instruments:
Section 1530 Comprehensive Income introduces the concept of comprehensive income to Canadian GAAP. Comprehensive income
is the change in equity (net assets) of the Company during a reporting period from transactions and other events and circumstances
from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and
distributions to owners.
Foreign currency translation adjustment, which is currently a separate component of shareholders equity, will be recorded as part of
accumulated other comprehensive income.
Section 3251 Equity replaces Section 3250 Surplus and establishes standards for the presentation of equity and changes
in equity during a reporting period. Financial statements of prior periods will be restated only for the foreign currency translation
adjustment.
Section 3855 Financial Instruments Recognition and Measurement prescribes when a nancial asset, nancial liability, or non-
nancial derivative is to be recognized on the balance sheet as well as its measurement amount. This section also species hownancial
instruments gains and losses are to be presented.
The Company will include all transaction costs that are directly attributable to the acquisition or issue of a nancial asset or nancial liability
with the fair value of the nancial asset or nancial liability. These adjustments were previously recorded in deferred charges. Transaction
costs included with the fair value of the nancial asset or nancial liability will be amortized using the effective interest method.
Canadian Natural AR2006
Page 82 of 107
Section 3865 Hedges replaces Accounting Guideline 13 Hedging Relationships and EIC 128 Accounting for Trading,
Speculative or Non-Hedging Derivative Financial Instruments and species howhedge accounting is to be applied and what disclosures
are necessary when hedge accounting is applied.
Adoption of this standard will require the Company to record all of its derivative nancial instruments on the balance sheet at fair
value, including those designated as hedges. Designated hedges are currently not recognized on the balance sheet but are disclosed
in the notes to the nancial statements. The adjustment to recognize the designated hedges on the balance sheet will be recorded as
an adjustment to the opening balance of retained earnings or accumulated other comprehensive income, as appropriate.
Subsequently, if the derivative is designated as a fair value hedge, changes in the fair value of the derivative and changes in the fair
value of the hedged item attributable to the hedged risk are recognized in the consolidated statements of earnings each period.
If the derivative is designated as a cash ow hedge, the effective portions of the changes in fair value of the derivative are initially
recorded in comprehensive income each period and are recognized in the consolidated statements of earnings when the hedged item
is recognized. Ineffective portions of changes in the fair value of hedging instruments are recognized in net earnings immediately for
both fair value and cash ow hedges.
Adoption of these standards will have the following estimated effects on the Companys consolidated balance sheet as at
January 1, 2007:
Decrease future income tax asset $ (62)
Increase current portion of other long-term assets $ 193
Decrease other long-term assets $ (16)
Decrease long-term debt $ (72)
Increase future income tax liability $ 18
Increase retained earnings $ 10
Increase foreign currency translation adjustment $ 13
Increase accumulated other comprehensive income $ 146
(S) COMPARATIVE FIGURES
Certain gures related to the presentation of gross revenues and gross transportation and blending provided for prior years have been
reclassied to conform to the presentation adopted in 2006.
Common share data has been restated to reect the two-for-one share split in May 2005.
2. BUSINESS COMBINATIONS
ANADARKO CANADA CORPORATION
In November 2006, the Company completed the acquisition of all of the issued and outstanding common shares of Anadarko Canada
Corporation (ACC), a subsidiary of Anadarko Petroleum Corporation, for net cash consideration of $4,641 million including working
capital and other adjustments. Substantially all of ACCs land and production base are located in Western Canada.
The acquisition was accounted for using the purchase method. Operating results from ACC have been consolidated with the results of
the Company effective from November 2, 2006, the date of acquisition, and are reported in the North America segment. The preliminary
allocation of the net purchase price is subject to change as actual amounts are determined. The preliminary allocation of the net purchase
price to assets acquired and liabilities assumed based on their fair values was as follows:
Net purchase price:
Net cash consideration
(1)
$ 4,641
Net purchase price allocated as follows:
Non-cash working capital deficit assumed and other $ (105)
Property, plant and equipment 6,249
Long-term debt (9)
Asset retirement obligation (56)
Future income tax (1,438)
$ 4,641
(1) Net cash consideration was reduced by $88 million to reect the settlement of US dollar currency forward contracts designated as hedges of the ACC share
purchase price.
Notes to the Consolidated Financial Statements
Page 83 of 107
3. OTHER LONG-TERM ASSETS
2006 2005
Deferred charges $ 109 $ 107
Risk management (note 12) 128
Other 23
260 107
Less: current portion 106
$ 154 $ 107
4. PROPERTY, PLANT AND EQUIPMENT
2006 2005
Accumulated Accumulated
depletion and depletion and
Cost depreciation Net Cost depreciation Net
Crude oil and natural gas
North America $ 31,715 $ 9,836 $ 21,879 $ 22,258 $ 7,948 $ 14,310
North Sea 3,370 1,341 2,029 2,703 1,022 1,681
Offshore West Africa 1,685 481 1,204 1,547 294 1,253
Other 38 14 24 27 14 13
Horizon Project 5,350 5,350 2,169 2,169
Midstream 263 56 207 251 48 203
Head office 150 76 74 124 59 65
$ 42,571 $ 11,804 $ 30,767 $ 29,079 $ 9,385 $ 19,694
During the year ended December 31, 2006, the Company capitalized administrative overhead of $41 million (2005 $41 million,
2004 $49 million) relating to exploration and development in the North Sea and Offshore West Africa and $456 million
(2005 $236 million, 2004 $35 million) relating primarily to the Horizon Project in North America.
During the year ended December 31, 2006, the Company capitalized $196 million (2005 - $72 million, 2004 - $nil) in construction period
interest costs related to the Horizon Project.
Included in property, plant and equipment are unproved land and major development projects that are not currently subject to depletion
or depreciation:
2006 2005
Crude oil and natural gas
North America $ 2,244 $ 1,372
North Sea 24 28
Offshore West Africa 84 182
Other 24 13
Horizon Project 5,350 2,169
$ 7,726 $ 3,764
The Company has used the following estimated benchmark future prices (escalated pricing) in its ceiling test prepared in accordance with
Canadian GAAP, as at December 31, 2006:
Average
annual
increase
2007 2008 2009 2010 2011 thereafter
Crude oil and NGLs
North America
WTI at Cushing (US$/bbl) $ 65.73 $ 68.82 $ 62.42 $ 58.37 $ 55.20 2.0%
Hardisty Heavy 12 API (C$/bbl) $ 42.98 $ 45.02 $ 40.74 $ 38.03 $ 35.90 2.0%
Edmonton Par (C$/bbl) $ 74.10 $ 77.62 $ 70.25 $ 65.56 $ 61.90 2.0%
North Sea and Offshore West Africa
North Sea Brent (US$/bbl) $ 63.73 $ 66.78 $ 60.34 $ 56.24 $ 53.04 2.0%
Natural gas
North America
Henry Hub Louisiana (US$/mmbtu) $ 7.85 $ 8.39 $ 7.65 $ 7.48 $ 7.63 2.0%
AECO (C$/mmbtu) $ 7.72 $ 8.59 $ 7.74 $ 7.55 $ 7.72 2.0%
Huntingdon/Sumas (C$/mmbtu) $ 7.48 $ 8.45 $ 7.60 $ 7.41 $ 7.58 2.0%
Canadian Natural AR2006
Page 84 of 107
5. LONG-TERM DEBT
2006 2005
Bank credit facilities
Bankers acceptances $ 6,621 $ 122
Medium-term notes
7.40% unsecured debentures due March 1, 2007 125 125
4.50% unsecured debentures due January 23, 2013 400
4.95% unsecured debentures due June 1, 2015 400 400
Senior unsecured notes
Adjustable rate due May 27, 2009 (2006 US$93 million, 2005 US$93 million) 108 108
US dollar debt securities
7.80% due July 2, 2008 (2006 US$8 million, 2005 US$nil) 9
6.70% due July 15, 2011 (2006 US$400 million, 2005 US$400 million) 466 467
5.45% due October 1, 2012 (2006 US$350 million , 2005 US$350 million) 408 408
4.90% due December 1, 2014 (2006 US$350 million, 2005 US$350 million) 408 408
6.00% due August 15, 2016 (2006 US$250 million, 2005 US$nil) 291
7.20% due January 15, 2032 (2006 US$400 million, 2005 US$400 million) 466 467
6.45% due June 30, 2033 (2006 US$350 million, 2005 US$350 million) 408 408
5.85% due February 1, 2035 (2006 US$350 million, 2005 US$350 million) 408 408
6.50% due February 15, 2037 (2006 US$450 million, 2005 US$nil) 525
$ 11,043 $ 3,321
BANK CREDIT FACILITIES
As at December 31, 2006, the Company had in place unsecured bank credit facilities of $7,809 million, comprised of:
a $100 million demand credit facility;
a $500 million demand credit facility;
a 3-year non-revolving syndicated credit facility of $3,850 million;
a 5-year revolving syndicated credit facility of $1,825 million;
a 5-year revolving syndicated credit facility of $1,500 million; and
a 15 million demand credit facility related to the Companys North Sea operations.
The revolving syndicated credit facilities are fully revolving for a period of ve years maturing June 2011. Both facilities are extendible
annually for one year periods at the mutual agreement of the Company and the lenders. If the facilities are not extended, the full amount
of the outstanding principal would be repayable on the maturity date.
In conjunction with the closing of the acquisition of ACC (note 2), the Company executed a $3,850 million, three-year non-revolving
syndicated credit facility maturing in October 2009. This facility is subject to certain prepayment requirements up to a maximum of $1,500
million.
During 2006, the Company obtained a $500 million credit facility repayable on demand.
The weighted average interest rate of the bank credit facilities outstanding at December 31, 2006, was 4.8%(2005 4.0%).
In addition to the outstanding debt, letters of credit and nancial guarantees aggregating $338 million, including $300 million related to
the Horizon Project, were outstanding at December 31, 2006.
MEDIUM-TERM NOTES
In January 2006, the Company issued $400 million of debt securities maturing January 2013, bearing interest at 4.50%. Proceeds from
the securities issued were used to repay bankers acceptances under the Companys bank credit facilities. After issuing these securities, the
Company has $1.6 billion remaining on its $2 billion shelf prospectus led in August 2005 that allows for the issue of medium-term notes
in Canada until September 2007. If issued, these securities will bear interest as determined at the date of issuance.
In May 2005, the Company issued $400 million of debt securities maturing June 2015, bearing interest at 4.95%. Proceeds from the
securities issued were used to repay bankers acceptances under the Companys bank credit facilities.
Subsequent to December 31, 2006, the 7.40%unsecured debentures due March 1, 2007 were repaid.
SENIOR UNSECURED NOTES
The adjustable rate senior unsecured notes bear interest at 6.54%and have annual principal repayments of US$31 million commencing in
May 2007, through May 2009.
In December 2005, the Company repaid the US$125 million 7.69%senior unsecured notes due December 19, 2005.
Notes to the Consolidated Financial Statements
Page 85 of 107
PREFERRED SECURITIES
In September 2005, the Company redeemed the US$80 million 8.30% preferred securities due May 25, 2011 for cash consideration of
US$91 million, including an early repayment premium of US$11 million as required under the Note Purchase Program.
US DOLLAR DEBT SECURITIES
In August 2006, the Company issued US$250 million of unsecured notes maturing August 2016 and US$450 million of unsecured
notes maturing February 2037, bearing interest at 6.00% and 6.50%, respectively. Concurrently, the Company entered into
cross-currency interest-rate swaps to x the Canadian dollar interest and principal repayment amounts on the US$250 million notes at
5.40% and C$279 million (note 12). Proceeds from the securities issued were used to repay bankers acceptances under the Companys
bank credit facilities.
In November 2006, the US shelf prospectus, led in June 2005, was increased from US$2,000 million to US$3,000 million, leaving
US$2,300 million available for issue in the United States until July 2007.
Subsequently, on March 12, 2007, the Company priced, for settlement on March 19, 2007, US$2,200 million of unsecured notes under
the US shelf prospectus, comprised of US$1,100 million of unsecured notes maturing May 2017 and US$1,100 million of unsecured notes
maturing March 2038, bearing interest at 5.70%and 6.25%, respectively. Concurrently, the Company entered into cross-currency interest-
rate swaps to x the Canadian dollar interest and principal repayment amounts on US$1,100 million of unsecured notes due May 2017
at 5.10%and C$1,287 million. The Company also entered into a cross-currency interest-rate swap to x the Canadian dollar interest and
principal repayment amounts on US$550 million of unsecured notes due March 2038 at 5.76% and C$644 million. Net proceeds on the
debt issue will be used to repay outstanding amounts under the Companys bank credit facilities.
REQUIRED DEBT REPAYMENTS
Required debt repayments are as follows:
Year Repayment
2007 $ 161
2008 $ 45
2009 $ 3,876
2010 $
2011 $ 466
Thereafter $ 3,713
No debt repayments are reected for $2,782 million of revolving bank credit facilities due to the extendable nature of
the facilities.
6. OTHER LONG-TERM LIABILITIES
2006 2005
Asset retirement obligations $ 1,166 $ 1,112
Stock-based compensation 744 891
Risk management (note 12) 885
Other 94 17
2,004 2,905
Less: current portion 611 1,471
$ 1,393 $ 1,434
ASSET RETIREMENT OBLIGATIONS
At December 31, 2006, the Companys total estimated undiscounted costs to settle its asset retirement obligations with respect to crude oil
and natural gas properties and facilities was approximately $4,497 million (2005 $3,325 million). Payments to settle these asset retirement
obligations will occur on an ongoing basis over a period of approximately 60 years and have been discounted using an average credit-
adjusted risk-free interest rate of 6.7%. A reconciliation of the discounted asset retirement obligations is as follows:
2006 2005 2004
Asset retirement obligations
Balance beginning of year $ 1,112 $ 1,119 $ 897
Liabilities incurred 26 47 53
Liabilities acquired (note 2) 56 286
Liabilities settled (75) (46) (32)
Asset retirement obligation accretion 68 69 51
Revision of estimates (21) (56) (86)
Foreign exchange (21) (50)
Balance end of year $ 1,166 $ 1,112 $ 1,119
Canadian Natural AR2006
Page 86 of 107
STOCK-BASED COMPENSATION
The Company recognizes a liability for the potential cash settlements under its Option Plan. The current portion represents the maximum
amount of the liability payable within the next twelve month period if all vested options are surrendered for cash settlement.
2006 2005 2004
Stock-based compensation
Balance beginning of year $ 891 $ 323 $ 171
Stock-based compensation 139 723 249
Cash payment for options surrendered (264) (227) (80)
Transferred to common shares (101) (29) (38)
Capitalized to Horizon Project 79 101 21
Balance end of year 744 891 323
Less: current portion of stock-based compensation 611 629 243
$ 133 $ 262 $ 80
7. EMPLOYEE FUTURE BENEFITS
In connection with the acquisition of ACC, the Company assumed obligations to provide dened contribution pension benets to certain
ACC employees continuing their employment with the Company, and dened benet pension and other post-retirement benets to former
ACC employees, under registered and unregistered pension plans.
The estimated future cost of providing dened benet pension and other post-retirement benets to former ACC employees is actuarially
determined using managements best estimates of demographic and nancial assumptions. The discount rate of 5% used to determine
accrued benet obligations is based on a year end market rate of interest for high-quality debt instruments with cash ows that match the
timing and amount of expected benet payments. Company contributions to the dened contribution plan are expensed as incurred.
The benet obligation under the registered pension plan at December 31, 2006 was $29 million. As required by government
regulations, the Company has set aside funds with an independent trustee to meet these benet obligations. As at December 31, 2006,
these plan assets had a fair value of $54 million. The unregistered pension plans are unfunded and have a benet obligation of
$15 million at December 31, 2006.
8. TAXES
TAXES OTHER THAN INCOME TAX
2006 2005 2004
Current petroleum revenue tax $ 196 $ 181 $ 190
Deferred petroleum revenue tax 37 (9) (45)
Provincial capital taxes and surcharges 23 22 20
$ 256 $ 194 $ 165
INCOME TAX
The provision for income tax is as follows:
2006 2005 2004
Current income tax
Current income tax North America $ 143 $ 99 $ 101
Current income tax North Sea 30 155 2
Current income tax Offshore West Africa 49 32 13
222 286 116
Future income tax 652 353 474
Income tax $ 874 $ 639 $ 590
Notes to the Consolidated Financial Statements
Page 87 of 107
The provision for income tax is different from the amount computed by applying the combined statutory Canadian federal and provincial
income tax rates to earnings before taxes. The reasons for the difference are as follows:
2006 2005 2004
Canadian statutory income tax rate 34.9% 38.0% 39.3%
Income tax provision at statutory rate $ 1,275 $ 716 $ 849
Effect on income taxes of:
Non-deductible portion of Canadian crown payments 131 309 221
Canadian resource allowance (129) (293) (270)
Large Corporations Tax (16) 16 11
Deductible UK petroleum revenue tax (82) (65) (57)
Foreign tax rate differentials 92 (1) (31)
North America income tax rate changes (438) (19) (66)
UK income tax rate changes 110
Cte dIvoire income tax rate changes (67)
Non-taxable portion of foreign exchange 5 (15) (36)
Attributed Canadian Royalty Income (27) (21) (4)
Other 20 12 (27)
Income tax $ 874 $ 639 $ 590
The following table summarizes the temporary differences that give rise to the net future income tax asset and liability:
2006 2005
Future income tax liabilities
Property, plant and equipment $ 6,088 $ 3,960
Timing of partnership items 1,394 1,646
Unrealized foreign exchange gain on long-term debt 93 112
Risk management activities 40
Other 13 31
Future income tax assets
Asset retirement obligations (487) (384)
Capital loss carryforwards (85) (79)
Attributed Canadian Royalty Income (75)
Stock-based compensation (232) (300)
Risk management activities (304)
Deferred petroleum revenue tax (24) (59)
Net future income tax liability 6,800 4,548
Less: current portion future income tax asset (163) (487)
Future income tax liability $ 6,963 $ 5,035
During 2006, income tax rate changes resulted in a reduction of future income tax liabilities of approximately $438 million in North America,
an increase of future income tax liabilities of approximately $110 million in the UK North Sea and a reduction of future income tax liabilities
of approximately $67 million in Cte dIvoire.
During 2005, North America income tax rate changes resulted in a reduction of future income tax liabilities of approximately
$19 million.
During 2004, North America income tax rate changes resulted in a reduction of future income tax liabilities of approximately
$66 million.
During 2003, the Canadian Federal Government enacted legislation to change the taxation of resource income. The legislation reduces the
corporate income tax rate on resource income from 28% to 21% over ve years beginning January 1, 2003. Over the same period, the
deduction for resource allowance is being phased out and a deduction for actual crown royalties paid is being phased in.
Canadian Natural AR2006
Page 88 of 107
9. SHARE CAPITAL
AUTHORIZED
200,000 Class 1 preferred shares with a stated value of $10.00 each.
Unlimited number of common shares without par value.
ISSUED
2006 2005
Number of Number of
shares shares
Common shares (thousands) Amount (thousands) Amount
Balance beginning of year 536,348 $ 2,442 536,361 $ 2,408
Issued upon exercise of stock options 2,040 21 837 9
Previously recognized liability on stock options
exercised for common shares 101 29
Purchase of common shares under Normal Course Issuer Bid (485) (2) (850) (4)
Balance end of year 537,903 $ 2,562 536,348 $ 2,442
NORMAL COURSE ISSUER BID
During 2006, the Company purchased 485,000 common shares for cancellation (2005 850,000 common shares, 2004 1,746,800
common shares) at an average price of $57.33 per common share (2005 $53.29 per common share, 2004 - $19.00 per common
share), for a total cost of $28 million (2005 $45 million, 2004 - $33 million). Retained earnings was reduced by $26 million
(2005 $41 million, 2004 - $26 million), representing the excess of the purchase price of the common shares over their average carrying
value.
In January 2007, the Company renewed its Normal Course Issuer Bid to purchase, through the facilities of the Toronto Stock
Exchange and the New York Stock Exchange, during the 12-month period beginning January 24, 2007 and ending January 23, 2008,
up to 26,941,730 common shares or 5% of the outstanding common shares of the Company then outstanding on the date of the
announcement. As at March 15, 2007, the Company had not purchased any additional shares under the Normal Course Issuer Bid.
DIVIDEND POLICY
The Company has paid regular quarterly dividends in January, April, July and October of each year since 2001. The dividend policy undergoes
a periodic review by the Board of Directors and is subject to change.
In March 2007, the Board of Directors set the Companys regular quarterly dividend at $0.085 per common share (2006 $0.075 per
common share, 2005 $0.059 per common share).
SHARE SPLIT
The Companys shareholders approved a subdivision or share split of its issued and outstanding common shares on a two-for-one basis at
the Companys Annual and Special Meeting held on May 5, 2005. All common share and per common share amounts were restated to
retroactively reect the share split.
STOCK OPTIONS
The Companys Option Plan provides for granting of stock options to employees. Stock options granted under the Option Plan have terms
ranging fromve to six years to expiry and vest equally over a ve-year period. The exercise price of each stock option granted is determined
at the closing market price of the common shares on the Toronto Stock Exchange on the day prior to the grant. Each stock option granted
provides the holder the choice to purchase one common share of the Company at the stated exercise price or receive a cash payment equal
to the difference between the stated exercise price and the market price of the Companys common shares on the date of surrender.
The following table summarizes information relating to stock options outstanding at December 31, 2006 and 2005:
2006 2005
Weighted Weighted
Stock average Stock average
options exercise options exercise
(thousands) price (thousands) price
Outstanding beginning of year 30,510 $ 17.79 32,522 $ 12.37
Granted 13,084 $ 59.61 7,959 $ 32.51
Exercised for common shares (2,040) $ 10.67 (837) $ 9.81
Surrendered for cash settlement (5,180) $ 12.60 (7,523) $ 10.49
Forfeited (1,949) $ 37.51 (1,611) $ 19.36
Outstanding end of year 34,425 $ 33.77 30,510 $ 17.79
Exercisable end of year 9,177 $ 14.73 8,677 $ 11.21
Notes to the Consolidated Financial Statements
Page 89 of 107
The range of exercise prices of stock options outstanding and exercisable at December 31, 2006 is as follows:
Stock options Stock options
outstanding exercisable
Weighted
Stock average Weighted Stock Weighted
options remaining average options average
outstanding term exercise exercisable exercise
Range of exercise prices (thousands) (years) price (thousands) price
$9.63 $9.99 4,672 0.76 $ 9.71 3,603 $ 9.74
$10.00 $19.99 9,807 2.20 $ 14.68 4,202 $ 13.78
$20.00 $29.99 5,099 3.34 $ 25.41 957 $ 25.00
$30.00 $39.99 1,227 3.79 $ 33.23 175 $ 33.24
$40.00 $49.99 686 5.02 $ 46.50 69 $ 43.84
$50.00 $59.99 7,033 4.81 $ 57.85 166 $ 55.14
$60.00 $69.14 5,901 4.27 $ 61.70 5 $ 61.60
34,425 3.17 $ 33.77 9,177 $ 14.73
10. FOREIGN CURRENCY TRANSLATION ADJUSTMENT
The foreign currency translation adjustment represents the unrealized loss on the Companys net investment in self-sustaining foreign
operations. Commencing July 1, 2002, the Company designated certain US dollar denominated debt as a hedge against its net investment
in US dollar-based self-sustaining foreign operations. Accordingly, translation gains and losses on this US dollar denominated debt are
included in the foreign currency translation adjustment.
2006 2005
Balance beginning of year $ (9) $ (6)
Unrealized loss on translation of net investment (4) (12)
Hedge of net investment with US dollar denominated debt, net of tax 9
Balance end of year $ (13) $ (9)
11. NET EARNINGS PER COMMON SHARE
The following table provides a reconciliation between basic and diluted amounts per common share:
(thousands of shares) 2006 2005 2004
(1)
Weighted average common shares outstanding basic 537,339 536,650 536,223
Assumed settlement of preferred securities with common shares
(2)
1,775 4,461
Weighted average common shares outstanding diluted 537,339 538,425 540,684
Net earnings $ 2,524 $ 1,050 $ 1,405
Interest on preferred securities, net of tax
(2)
4 5
Revaluation of preferred securities, net of tax
(2)
(2) (4)
Diluted net earnings $ 2,524 $ 1,052 $ 1,406
Net earnings per common share
Basic $ 4.70 $ 1.96 $ 2.62
Diluted $ 4.70 $ 1.95 $ 2.60
(1) Restated to reect two-for-one share split in May 2005.
(2) The preferred securities were redeemed in September 2005.
Canadian Natural AR2006
Page 90 of 107
12. FINANCIAL INSTRUMENTS
RISK MANAGEMENT
On January 1, 2004, the fair values of all outstanding derivative nancial instruments that were not designated as hedges for accounting
purposes were recorded on the consolidated balance sheet, with an offsetting net deferred revenue amount. Subsequent net changes in
the fair value of non-designated nancial instruments have been recognized on the consolidated balance sheet and in net earnings. The
estimated fair value for all derivative nancial instruments is based on third party indications.
As at December 31, 2006 and 2005, the estimated fair values of non-designated nancial derivatives were comprised as follows:
2006 2005
Risk Risk
management management
mark-to- Deferred mark-to- Deferred
Asset (liability) market revenue market revenue
Balance beginning of year $ (877) $ (8) $ 66 $ (26)
Net cost of outstanding put options 455 190
Net change in fair value of outstanding
derivative financial instruments 1,005 (943)
Amortization of deferred revenue 8 18
583 (687) (8)
Add: put premium financing obligations
(1)
(455) (190)
Balance end of year 128 (877) (8)
Less: current portion 88 (834) (8)
$ 40 $ $ (43) $
(1) The Company has negotiated payment of put option premiums with various counter-parties at the time of actual settlement of the respective options. These
obligations have been reected in the net risk management asset (liability).
Net losses (gains) from risk management activities for the years ended December 31 were as follows:
2006 2005 2004
Net realized risk management loss $ 1,325 $ 1,027 $ 474
Net unrealized risk management (gain) loss (1,013) 925 (40)
$ 312 $ 1,952 $ 434
As at December 31, 2006, the net unrecognized asset related to the estimated fair values of derivative nancial instruments designated as
hedges was $222 million (December 31, 2005 net unrecognized liability of $990 million).
FINANCIAL CONTRACTS
The Companys nancial instruments recognized in the consolidated balance sheets consist of cash and cash equivalents, accounts receivable,
accounts payable, accrued liabilities, risk management activities, stock-based compensation, and long-term debt.
The estimated fair values of nancial instruments have been determined based on the Companys assessment of available market information,
appropriate valuation methodologies and third party indications. However, these estimates may not necessarily be indicative of the amounts
that could be realized or settled in a current market transaction and the differences may be material.
The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, stock-based compensation, and
long-term debt with variable interest rates approximate their fair value.
The estimated fair values of other nancial instruments were as follows:
2006 2005
Asset (liability) Carrying value Fair value Carrying value Fair value
Derivative financial instruments $ 583 $ 805 $ (687) $ (1,700)
Fixed rate notes $ (4,410) $ (4,434) $ (3,199) $ (3,367)
Notes to the Consolidated Financial Statements
Page 91 of 107
COMMODITY PRICE RISK MANAGEMENT
The Company uses certain derivative nancial instruments to manage its commodity price exposures. These nancial instruments are entered
into solely for hedging purposes and are not intended for trading or other speculative purposes. The following summarizes instruments
outstanding as at December 31, 2006:
Remaining term Volume Average price Index
Crude oil
Crude oil price collars Jan 2007 Dec 2007 15,000 bbl/d US$50.00 US$66.25 Mayan Heavy
Jan 2007 Dec 2007 50,000 bbl/d US$60.00 US$71.49 WTI
Jan 2007 Dec 2007 100,000 bbl/d US$60.00 US$78.11 WTI
Jan 2007 Dec 2007 50,000 bbl/d US$65.00 US$84.52 WTI
Jan 2008 Dec 2008 50,000 bbl/d US$60.00 US$76.05 WTI
Jan 2008 Dec 2008 50,000 bbl/d US$60.00 US$76.98 WTI
Crude oil puts
(1)
Jan 2007 Dec 2007 100,000 bbl/d US$45.00 WTI
Jan 2007 Dec 2007 100,000 bbl/d US$60.00 WTI
Jan 2008 Dec 2008 50,000 bbl/d US$55.00 WTI
Brent differential swaps Jan 2007 Dec 2007 50,000 bbl/d US$1.34 WTI/Dated Brent
The cost of outstanding put options and their respective years of settlement are as follows:
2007 2008
Cost
(1)
($ millions) US$ 331 US$ 59
(1) Subsequent to December 31, 2006, the Company unwound 23,000 bbl/d of US$60.00 WTI put options for the period February 2007 to December 2007, for cash
consideration of US$40 million.
Remaining term Volume Average price Index
Natural gas
AECO collars Jan 2007 Mar 2007 100,000 GJ/d C$7.00 C$11.63 AECO
Jan 2007 Mar 2007 200,000 GJ/d C$7.25 C$8.38 AECO
Jan 2007 Mar 2007 162,500 GJ/d C$7.25 C$9.48 AECO
Jan 2007 Mar 2007 162,500 GJ/d C$7.50 C$8.94 AECO
Jan 2007 Mar 2007 300,000 GJ/d C$7.50 C$18.77 AECO
Jan 2007 Mar 2007 400,000 GJ/d C$8.50 C$11.22 AECO
Jan 2007 Dec 2007 60,000 GJ/d C$8.00 C$8.79 AECO
Apr 2007 Oct 2007 500,000 GJ/d C$6.00 C$10.13 AECO
Apr 2007 Oct 2007 500,000 GJ/d C$7.00 C$8.24 AECO
Nov 2007 Mar 2008 400,000 GJ/d C$7.00 C$14.08 AECO
Nov 2007 Mar 2008 500,000 GJ/d C$7.50 C$10.81 AECO
Commodity related derivative nancial instruments designated as hedges at December 31, 2006, were all classied as cash
ow hedges.
The Companys outstanding derivatives will be settled monthly based on the applicable index pricing for the respective contract month.
In addition to the nancial derivatives noted above, the Company also entered into natural gas physical sales contracts for
325,000 GJ/d at an average xed price of C$9.17 per GJ at AECO for the period January to March 2007 and 300,000 GJ/d at an average
xed price of C$7.33 per GJ at AECO for the period April 2007 to October 2007.
As at December 31, 2006, the net unrealized loss related to the de-designation of commodity cash ow hedges was $41 million. This
unrealized loss will be recognized in earnings in 2007.
INTEREST RATE RISK MANAGEMENT
The Company is exposed to interest rate price risk on its xed rate long-termdebt and to interest rate cash ow-risk on its oating rate long-
term debt. The Company enters into interest rate swap agreements to manage its xed to oating interest rate mix on long-term debt. The
interest rate swap contracts require the periodic exchange of payments without the exchange of the notional principal amounts on which
the payments are based. At December 31, 2006, the Company had the following interest rate swap contracts outstanding:
Amount
Remaining term ($ millions) Fixed rate Floating rate
Interest rate
Swaps fixed to floating Jan 2007 Oct 2012 US$350 5.45% LIBOR
(1)
+ 0.81%
Jan 2007 Dec 2014 US$350 4.90% LIBOR
(1)
+ 0.38%
Swaps floating to fixed Jan 2007 Mar 2007 C$2 7.36% CDOR
(2)
(1) London Interbank Offered Rate
(2) Canadian Deposit Overnight Rate
Canadian Natural AR2006
Page 92 of 107
Interest rate related derivative nancial instruments designated as hedges at December 31, 2006, were all classied as fair
value hedges.
FOREIGN CURRENCY EXCHANGE RATE RISK MANAGEMENT
The Company is exposed to foreign exchange rate risk in Canada on its US dollar denominated debt and on product sales based on US
dollar denominated benchmarks. The Company is also exposed to foreign exchange rate risk on transactions conducted in foreign currencies
in its foreign subsidiaries and in the carrying value of its self-sustaining foreign subsidiaries. The Company enters into cross-currency swap
agreements to manage currency exposure on US dollar denominated long-termdebt. The cross-currency swap contracts require the periodic
exchange of payments with the exchange at maturity of notional principal amounts on which the payments are based. The Company may
also enter into foreign currency denominated nancial contracts to manage future US dollar denominated crude oil and natural gas sales.
The Company has designated certain US dollar denominated debt as a hedge against its net investment in US dollar-based self-sustaining
foreign operations (note 10). At December 31, 2006, the Company had the following cross-currency swap contracts outstanding:
Amount Exchange Interest Interest
Remaining term ($ millions) rate (US$/C$) rate (US$) rate (C$)
Currency
Swaps Jan 2007 Aug 2016 US$250 1.116 6.00% 5.40%
Cross-currency related derivative nancial instruments designated as hedges at December 31, 2006, were all classied as cash
ow hedges.
COUNTERPARTY CREDIT RISK MANAGEMENT
Accounts receivable are mainly with customers in the crude oil and natural gas industry and are subject to normal industry credit risks. The
Company manages this risk by only entering into sales contracts with highly rated entities. In addition, the Company reviews its exposure to
individual companies on a regular basis and where appropriate, ensures that parental guarantees or letters of credit are in place to minimize
the impact in the event of default.
The Company is also exposed to possible losses in the event of nonperformance by counterparties to derivative nancial instruments;
however, the Company manages this credit risk by only entering into agreements with highly rated nancial institutions and other entities.
At December 31, 2006, the Company had net risk management assets of $161 million with specic counterparties related to derivative
nancial instruments.
13. COMMITMENTS AND CONTINGENCIES
The Company has committed to certain payments as follows:
2007 2008 2009 2010 2011 Thereafter
Product transportation and pipeline
(1)
$ 213 $ 193 $ 134 $ 123 $ 99 $ 1,042
Offshore equipment operating leases
(2)
$ 77 $ 52 $ 52 $ 52 $ 50 $ 131
Offshore drilling $ 73 $ 83 $ 12 $ 12 $ 4 $ 4
Asset retirement obligations
(3)
$ 3 $ 3 $ 3 $ 4 $ 4 $ 4,480
Office leases $ 26 $ 32 $ 33 $ 34 $ 22 $
Electricity and other $ 51 $ 10 $ 17 $ 18 $ 1 $
(1) The Company has entered into a 25 year pipeline transportation agreement commencing in 2008, related to future crude oil production. The agreement is
renewable for successive 10-year periods at the Companys option. During the initial term, the annual toll payments before operating costs will be approximately
$35 million.
(2) Offshore equipment operating leases are primarily comprised of obligations related to oating production, storage and offtake vessels (FPSO). During 2006, the
Company entered into an agreement to lease an additional FPSO commencing in 2008, in connection with the planned offshore development in Gabon, Offshore
West Africa. The new FPSO lease agreement contains cancellation provisions at the option of the Company, subject to escalating termination payments throughout
2007 to a maximum of US$395 million.
(3) Amounts represent managements estimate of the future undiscounted payments to settle asset retirement obligations related to resource properties, facilities, and
production platforms, based on current legislation and industry operating practices. Amounts disclosed for the period 2007 2011 represent the minimumrequired
expenditures to meet these obligations. Actual expenditures in any particular year may exceed these minimum amounts.
In 2005, the Board of Directors approved the construction costs for Phase 1 of the Horizon Project, with an approved budget of
$6.8 billion. Cumulative construction spending to December 31, 2006 was approximately $4.0 billion. Final construction costs for Phase 1
may differ from the approved budget due to changes in the nal scope and timing of completion of the project, and/or inationary cost
pressures.
The Company is defendant and plaintiff in a number of legal actions that arise in the normal course of business. The Company
believes that any liabilities that might arise pertaining to such matters would not have a material effect on its consolidated
nancial position.
Notes to the Consolidated Financial Statements
Page 93 of 107
14. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Changes in non-cash working capital were as follows:
2006 2005 2004
(Increase) decrease in non-cash working capital
Accounts receivable and other $ (116) $ (498) $ (329)
Accounts payable 157 196 39
Accrued liabilities (582) 716 194
Net change in non-cash working capital $ (541) $ 414 $ (96)
Relating to:
Operating activities $ (679) $ (147) $ (14)
Financing activities 37 19 6
Investing activities 101 542 (88)
$ (541) $ 414 $ (96)
Other cash flow information: 2006 2005 2004
Interest paid $ 262 $ 200 $ 192
Taxes paid $ 703 $ 430 $ 218
15. SEGMENTED INFORMATION
The Companys crude oil and natural gas activities are conducted in three geographic segments: North America, North Sea and Offshore
West Africa. These activities relate to the exploration, development, production and marketing of crude oil, natural gas liquids and natural
gas.
The Companys Horizon Project has been classied as a separate segment. As the bitumen will be recovered through mining operations, this
project constitutes a distinct segment fromcrude oil and natural gas activities. There are currently no revenues for this project and all directly
related expenditures have been capitalized.
Midstream activities include the Companys pipeline operations and an electricity co-generation system.
Activities that are not included in the above segments are included in the segmented information as other.
Inter-segment eliminations include internal transportation and electricity charges.
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Crude Oil and Natural Gas
North America North Sea Offshore West Africa
2006 2005 2004 2006 2005 2004 2006 2005 2004
Segmented revenue $ 9,066 $ 8,955 $ 6,701 $ 1,616 $ 1,659 $ 1,317 $ 950 $ 485 $ 222
Less: royalties (1,203) (1,350) (1,003) (3) (3) (2) (39) (13) (6)
Revenue,
net of royalties 7,863 7,605 5,698 1,613 1,656 1,315 911 472 216
Segmented expenses
Production 1,436 1,211 976 390 379 370 106 53 36
Transportation
and blending 1,465 1,310 978 15 20 32 1
Depletion, depreciation
and amortization 1,897 1,595 1,444 297 306 265 189 104 53
Asset retirement
obligation accretion 35 34 28 31 34 22 2 1 1
Realized risk
management activities 1,022 870 362 303 157 112
Total segmented
expenses 5,855 5,020 3,788 1,036 896 801 298 158 90
Segmented earnings
before the following $ 2,008 $ 2,585 $ 1,910 $ 577 $ 760 $ 514 $ 613 $ 314 $ 126
Non-segmented expenses
Administration
Stock-based compensation
Interest, net
Unrealized risk management activities
Foreign exchange loss (gain)
Total non-segmented expenses
Earnings before taxes
Taxes other than income tax
Current income tax
Future income tax
Net earnings
Notes to the Consolidated Financial Statements
Page 95 of 107
CAPITAL EXPENDITURES
2006 2005
Non-cash Non-cash
and and
Cash fair value Capitalized Cash fair value Capitalized
expenditures adjustments
(1)
costs expenditures adjustments
(1)
costs
Crude oil and natural gas
North America $ 7,936 $ 1,521 $ 9,457 $ 2,530 $ (22) $ 2,508
North Sea 646 (14) 632 387 (136) 251
Offshore West Africa 134 1 135 439 27 466
Other 11 11 5 5
8,727 1,508 10,235 3,361 (131) 3,230
Horizon Project
(2)
3,185 3,185 1,499 1,499
Midstream 12 12 4 4
Head office 26 26 22 22
$ 11,950 $ 1,508 $ 13,458 $ 4,886 $ (131) $ 4,755
(1) Asset retirement obligations, future income tax adjustments on non-tax base assets, and other fair value adjustments.
(2) Cash expenditures for the Horizon Project also include capitalized interest and stock-based compensation.
Midstream Inter-segment elimination and other Total
2006 2005 2004 2006 2005 2004 2006 2005 2004
$ 72 $ 77 $ 68 $ (61) $ (46) $ (39) $ 11,643 $ 11,130 $ 8,269
(1,245) (1,366) (1,011)
72 77 68 (61) (46) (39) 10,398 9,764 7,258
23 24 20 (6) (4) (2) 1,949 1,663 1,400
(38) (37) (38) 1,443 1,293 972
8 8 7 2,391 2,013 1,769
68 69 51
1,325 1,027 474
31 32 27 (44) (41) (40) 7,176 6,065 4,666
$ 41 $ 45 $ 41 $ (17) $ (5) $ 1 3,222 3,699 2,592
180 151 125
139 723 249
140 149 189
(1,013) 925 (40)
122 (132) (91)
(432) 1,816 432
3,654 1,883 2,160
256 194 165
222 286 116
652 353 474
$ 2,524 $ 1,050 $ 1,405
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Segmented property, plant and equipment, net 2006 2005
Crude oil and natural gas
North America $ 21,879 $ 14,310
North Sea 2,029 1,681
Offshore West Africa 1,204 1,253
Other 24 13
Horizon Project 5,350 2,169
Midstream 207 203
Head office 74 65
$ 30,767 $ 19,694
Segmented assets 2006 2005
Crude oil and natural gas
North America $ 23,670 $ 15,939
North Sea 2,248 1,950
Offshore West Africa 1,323 1,371
Other 46 30
Horizon Project 5,444 2,239
Midstream 355 258
Head office 74 65
$ 33,160 $ 21,852
16. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The Companys consolidated nancial statements have been prepared in accordance with Canadian GAAP. These principles conform in all
material respects with US GAAP except for those noted below. Certain differences arising from US GAAP disclosure requirements are not
addressed.
The application of US GAAP would have the following effects on consolidated net earnings as reported:
(millions of Canadian dollars, except per common share amounts) Notes 2006 2005 2004
Net earnings Canadian GAAP $ 2,524 $ 1,050 $ 1,405
Adjustments
Depletion, net of tax of $1 million
(2005 - $3 million, 2004 - $2 million) (A,C) 2 4 4
Stock-based compensation, net of tax
of $18 million (2005 - $nil, 2004 - $nil) (B) (40)
Derivative financial instruments and hedging activities,
net of tax of $15 million (2005 - $11 million, 2004 - $7 million) (C) 117 (19) (9)
Capitalized interest, net of tax of $nil (2005 - $nil, 2004 - $11 million) (D) 16
Net earnings before cumulative effect of
change in accounting policy US GAAP 2,603 1,035 1,416
Cumulative effect of change in accounting policy,
net of tax of $3 million (2005 - $nil, 2004 - $nil) (B) (8)
Net earnings US GAAP $ 2,595 $ 1,035 $ 1,416
Net earnings before cumulative effect of change in accounting
policy US GAAP per common share
Basic $ 4.84 $ 1.93 $ 2.64
Diluted (F) $ 4.77 $ 1.88 $ 2.57
Net earnings US GAAP per common share
Basic $ 4.83 $ 1.93 $ 2.64
Diluted (F) $ 4.75 $ 1.88 $ 2.57
Comprehensive income under US GAAP would be as follows:
(millions of Canadian dollars) Notes 2006 2005 2004
Net earnings US GAAP $ 2,595 $ 1,035 $ 1,416
Derivative financial instruments and hedging activities,
net of tax of $394 million (2005 - $312 million; 2004 - $3 million) (C) 805 (635) 8
Foreign currency translation adjustment,
net of tax of $nil (2005 - $2 million, 2004 - $4 million) (E) (4) (3) (9)
Comprehensive income $ 3,396 $ 397 $ 1,415
Notes to the Consolidated Financial Statements
Page 97 of 107
The application of US GAAP would have the following effects on the consolidated balance sheets as reported:
2006
Canadian Increase
(millions of Canadian dollars) Notes GAAP (Decrease) US GAAP
Current assets (C) $ 2,239 $ 131 $ 2,370
Property, plant and equipment (A,B,C,D) 30,767 89 30,856
Other long-term assets (C) 154 29 183
$ 33,160 $ 249 $ 33,409
Current liabilities (B) $ 3,071 $ 30 $ 3,101
Long-term debt (C) 11,043 (26) 11,017
Other long-term liabilities (B) 1,393 20 1,413
Future income tax (A,B,C,D) 6,963 21 6,984
Share capital 2,562 2,562
Retained earnings 8,141 45 8,186
Foreign currency translation adjustment (E) (13) 13
Accumulated other comprehensive income (C,E) 146 146
$ 33,160 $ 249 $ 33,409
2005
Canadian Increase
(millions of Canadian dollars) Notes GAAP (Decrease) US GAAP
Current assets (C) $ 2,051 $ 338 $ 2,389
Property, plant and equipment (A,D) 19,694 (20) 19,674
Other long-term assets 107 107
$ 21,852 $ 318 $ 22,170
Current liabilities (C) $ 3,825 $ 1,005 $ 4,830
Long-term debt (C) 3,321 (18) 3,303
Other long-term liabilities (C) 1,434 8 1,442
Future income tax (A,C,D) 5,035 (5) 5,030
Share capital 2,442 2,442
Retained earnings 5,804 (26) 5,778
Foreign currency translation adjustment (E) (9) 9
Accumulated other comprehensive income (C,E) (655) (655)
$ 21,852 $ 318 $ 22,170
NOTES:
(A) Under Canadian full cost accounting rules, costs capitalized in each cost centre are limited to an amount equal to the undiscounted,
future net revenues from proved reserves using estimated future prices and costs, plus the carrying amount of unproved properties
and major development projects (the ceiling test). Under the full cost method of accounting as set forth by the US Securities and
Exchange Commission, the ceiling test differs from Canadian GAAP in that future net revenues from proved reserves are based on
prices and costs as at the balance sheet date (constant dollar pricing) and are discounted at 10%. Capitalized costs and future net
revenues are determined on a net of tax basis. These differences in applying the ceiling test to prior years resulted in the recognition of
a ceiling test impairment under US GAAP, decreasing property, plant and equipment.
For the year ended December 31, 2006, US GAAP net earnings would have increased by $3 million (2005 $4 million,
2004 $4 million), net of income taxes of $2 million (2005 $3 million, 2004 $2 million) to reect the impact of lower depletion
charges.
(B) The Company accounts for its stock-based compensation liability under Canadian GAAP using the intrinsic value method, as described
in note 1(O). Under US GAAP, effective January 1, 2006, the Company would have adopted Financial Accounting Standards Board
Statement (FAS) 123(R), which requires companies to account for all stock-based compensation liabilities using the fair value
method, where fair value is measured using an option pricing model. The Company uses the Black Scholes option pricing model to
determine the fair value of its stock-based compensation liability for US GAAP purposes. The previous US GAAP standard, FAS 123,
required companies to account for cash settled stock-based compensation liabilities using the intrinsic value method. For the year
ended December 31, 2006 US GAAP net earnings would have decreased by $48 million, net of income taxes of $21 million, including
the cumulative effect of the change in accounting policy of $8 million, net of income taxes of $3 million. There was no difference from
Canadian GAAP prior to 2006.
(C) The Company accounts for its derivative nancial instruments under Canadian GAAP as described in note 1(P). For US GAAP purposes,
FAS 133, Accounting for Derivative Financial Instruments and Hedging Activities, as amended by FAS 138 and FAS 149, establishes
US GAAP accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. Generally, all derivatives, whether designated in hedging relationships or not, and excluding
Canadian Natural AR2006
Page 98 of 107
normal purchases and normal sales, are required to be recorded on the balance sheet at fair value. If the derivative is designated as a
fair value hedge, changes in the fair value of the derivative and changes in the fair value of the hedged itemattributable to the hedged
risk are recognized in the consolidated statements of earnings each period. If the derivative is designated as a cash ow hedge, the
effective portions of the changes in fair value of the derivative are initially recorded in comprehensive income each period and are
recognized in the consolidated statements of earnings when the hedged itemis recognized. Therefore, ineffective portions of changes
in the fair value of hedging instruments are recognized in net earnings immediately for both fair value and cash ow hedges.
The determination of hedge effectiveness and the measurement of hedge ineffectiveness of cash ow hedges are based on a
combination of third party valuations and internally derived valuations. The Company uses these valuations to estimate the fair values
of the underlying physical commodity contracts.
For the year ended December 31, 2006, assets would have increased by $160 million (2005 - $338 million), liabilities would have
decreased by $9 million (2005 increased by $997 million), and accumulated other comprehensive income would have increased by
$159 million (2005 decreased by $646 million) as a result of recording all derivative nancial instruments at fair value in accordance
with US GAAP.
The net earnings associated with realized and unrealized hedge ineffectiveness on derivative contracts designated as cash
ow hedges during the year would have been $29 million, net of income taxes of $15 million (2005 loss of $19 million,
net of income taxes of $11 million; 2004 loss of $9 million, net of income taxes of $7 million). The company estimates that
$122 million of after-tax hedging gains will be reclassied from accumulated other comprehensive income to current period earnings
within the next twelve month period as a result of forecasted sales occurring.
Under Canadian GAAP, the Company hedged the foreign currency component of the US dollar purchase price of ACC using derivative
nancial instruments formally designated as cash ow hedges. Under US GAAP, the foreign currency component of a business
combination is not eligible for cash ow hedging, and therefore, the $88 million after-tax gain on the derivative nancial instruments
and related depletion expense of $1 million, net of income taxes of $1 million, would have been included in net earnings.
Accordingly, for the year ended December 31, 2006 US GAAP net earnings would have increased in total by $117 million, net of
income taxes of $15 million (2005 decreased net earnings of $19 million, net of income taxes of $11 million; 2004 decreased net
earnings of $9 million, net of income taxes of $7 million) to reect the impact of derivative nancial instruments.
(D) Under Canadian GAAP, the Company began capitalizing interest on the Horizon Project when the Board of Directors approval was
received in 2005. For US GAAP, capitalization of interest on projects constructed over time is mandatory and interest would have been
capitalized to the costs of construction beginning in 2004. For the year ended December 31, 2004, $27 million would have been
capitalized to property, plant and equipment for US GAAP.
(E) Under US GAAP, exchange losses of $4 million, net of income taxes of $nil (2005 - $3 million, net of income taxes of $2 million;
2004 - $9 million, net of income taxes of $4 million) arising fromthe translation of self-sustaining foreign operations would have been
included in comprehensive income.
(F) Under Canadian GAAP, the Company is not required to include potential common shares related to stock options in the calculation
of diluted earnings per share since the Company has recorded the potential settlement of the stock options as a liability. Under
US GAAP FAS 128 Earnings per Share, the Company would have included potential common shares related to stock options
in the calculation of diluted earnings per share. For the year ended December 31, 2006, an additional 8,762,000 shares would
have been included in the calculation of diluted earnings per share for US GAAP (2005 13,593,000 additional shares,
2004 10,111,000 additional shares).
(G) Recently issued accounting standards under US GAAP:
UNCERTAIN TAX POSITIONS
In July 2006, the FASB issued Interpretation (FIN) No. 48 Accounting for Uncertainty in Tax Positions an Interpretation of FASB
Statement No. 109, effective for scal years beginning after December 15, 2006. FIN 48 prescribes thresholds for recognizing the
benets of uncertain tax positions in the nancial statements. It also provides guidance on derecognition, classication, interest and
penalties, disclosure and transition. The Company is currently assessing the impact of FIN 48 on its consolidated nancial statements.
This supplementary crude oil and natural gas information is provided in accordance with the United States FAS 69, Disclosures about Oil
and Gas Producing Activities, and where applicable is reconciled to the US GAAP nancial information.
NET PROVED CRUDE OIL AND NATURAL GAS RESERVES
The Company retains qualied independent reserves evaluators to evaluate the Companys proved crude oil and natural gas reserves.
For the years ended December 31, 2006, 2005, and 2004 the reports by Sproule Associates Limited (Sproule) and Ryder Scott
Company covered 100%of the Companys conventional reserves;
For the year ended December 31, 2003, the reports by Sproule covered 100%of the Companys conventional reserves.
Proved crude oil and natural gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids that geological and
engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic
and operating conditions. Proved developed reserves are reserves that can be expected to be recovered from existing wells with existing
equipment and operating methods.
Estimates of crude oil and natural gas reserves are subject to uncertainty and will change as additional information regarding producing
elds and technology becomes available and as future economic and operating conditions change.
The following table summarizes the Companys proved and proved developed conventional crude oil and natural gas reserves, net of
royalties, as at December 31, 2006, 2005, 2004 and 2003:
North North Offshore
Crude oil and NGLs (mmbbl) America Sea West Africa Total
Net proved reserves
Reserves, December 31, 2003 588 222 85 895
Extensions and discoveries 17 17
Improved recovery 25 45 70
Purchases of reserves in place 36 38 74
Sales of reserves in place
Production (66) (24) (4) (94)
Revisions of previous estimates 48 22 34 104
Reserves, December 31, 2004 648 303 115 1,066
Extensions and discoveries 98 98
Improved recovery 3 3 2 8
Purchases of reserves in place 15 15
Sales of reserves in place (3) (3)
Production (70) (25) (8) (103)
Revisions of previous estimates 18 9 10 37
Reserves, December 31, 2005 694 290 134 1,118
Extensions and discoveries 53 3 56
Improved recovery 190 26 216
Purchases of reserves in place 26 26
Sales of reserves in place
Production (75) (22) (13) (110)
Revisions of previous estimates (1) 2 9 10
Reserves, December 31, 2006 887 299 130 1,316
Net proved developed reserves:
December 31, 2003 348 138 23 509
December 31, 2004 367 218 20 605
December 31, 2005 402 214 80 696
December 31, 2006 420 214 63 697
Supplementary Oil & Gas Information
Page 99 of 107
Supplementary Oil & Gas Information
(unaudited)
Canadian Natural AR2006
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North North Offshore
Natural gas (bcf) America Sea West Africa Total
Net proved reserves
Reserves, December 31, 2003 2,426 62 64 2,552
Extensions and discoveries 334 334
Improved recovery 80 80
Purchases of reserves in place 182 10 192
Sales of reserves in place (8) (8)
Production (383) (18) (3) (404)
Revisions of previous estimates (40) (27) 11 (56)
Reserves, December 31, 2004 2,591 27 72 2,690
Extensions and discoveries 506 506
Improved recovery 30 30
Purchases of reserves in place 6 6
Sales of reserves in place (23) (23)
Production (411) (7) (1) (419)
Revisions of previous estimates 42 9 1 52
Reserves, December 31, 2005 2,741 29 72 2,842
Extensions and discoveries 250 250
Improved recovery 74 74
Purchases of reserves in place 1,111 1,111
Sales of reserves in place (1) (1)
Production (433) (5) (3) (441)
Revisions of previous estimates (37) 13 (13) (37)
Reserves, December 31, 2006 3,705 37 56 3,798
Net proved developed reserves:
December 31, 2003 2,140 46 12 2,198
December 31, 2004 2,213 12 5 2,230
December 31, 2005 2,300 16 10 2,326
December 31, 2006 2,934 17 12 2,963
CAPITALIZED COSTS RELATED TO CRUDE OIL AND NATURAL GAS ACTIVITIES
2006
North North Offshore
(millions of Canadian dollars) America Sea West Africa Other Total
Proved properties $ 29,596 $ 3,346 $ 1,601 $ 14 $ 34,557
Unproved properties 2,244 24 84 24 2,376
31,840 3,370 1,685 38 36,933
Less: accumulated depletion and depreciation (9,878) (1,341) (481) (14) (11,714)
Net capitalized costs $ 21,962 $ 2,029 $ 1,204 $ 24 $ 25,219
2005
North North Offshore
(millions of Canadian dollars) America Sea West Africa Other Total
Proved properties $ 20,886 $ 2,675 $ 1,365 $ 14 $ 24,940
Unproved properties 1,372 28 182 13 1,595
22,258 2,703 1,547 27 26,535
Less: accumulated depletion and depreciation (7,993) (1,022) (294) (14) (9,323)
Net capitalized costs $ 14,265 $ 1,681 $ 1,253 $ 13 $ 17,212
2004
North North Offshore
(millions of Canadian dollars) America Sea West Africa Other Total
Proved properties $ 18,722 $ 2,506 $ 563 $ 14 $ 21,805
Unproved properties 1,028 44 528 8 1,608
19,750 2,550 1,091 22 23,413
Less: accumulated depletion and depreciation (6,410) (727) (190) (14) (7,341)
Net capitalized costs $ 13,340 $ 1,823 $ 901 $ 8 $ 16,072
COSTS INCURRED IN CRUDE OIL AND NATURAL GAS ACTIVITIES
2006
North North Offshore
(millions of Canadian dollars) America Sea West Africa Other Total
Property acquisitions
Proved $ 5,627 $ $ 1 $ $ 5,628
Unproved 910 910
Exploration 238 4 1 11 254
Development 2,807 628 133 3,568
Costs incurred $ 9,582 $ 632 $ 135 $ 11 $ 10,360
2005
North North Offshore
(millions of Canadian dollars) America Sea West Africa Other Total
Property acquisitions
Proved $ (448) $ (3) $ 63 $ $ (388)
Unproved 210 (52) 158
Exploration 360 22 16 5 403
Development 2,386 232 439 3,057
Costs incurred $ 2,508 $ 251 $ 466 $ 5 $ 3,230
2004
North North Offshore
(millions of Canadian dollars) America Sea West Africa Other Total
Property acquisitions
Proved $ 1,806 $ 530 $ $ $ 2,336
Unproved 298 4 302
Exploration 290 11 36 1 338
Development 1,443 235 259 1,937
Costs incurred $ 3,837 $ 780 $ 295 $ 1 $ 4,913
RESULTS OF OPERATIONS FROM CRUDE OIL AND NATURAL GAS PRODUCING
ACTIVITIES
The Companys results of operations from crude oil and natural gas producing activities for the years ended December 31, 2006, 2005 and
2004 are summarized in the following tables:
2006
North North Offshore
(millions of Canadian dollars) America Sea West Africa Total
Crude oil and natural gas revenue, net of royalties and blending costs $ 5,707 $ 1,310 $ 911 $ 7,928
Production (1,436) (390) (106) (1,932)
Transportation (326) (15) (1) (342)
Depletion, depreciation and amortization (1,894) (297) (189) (2,380)
Asset retirement obligation accretion (35) (31) (2) (68)
Petroleum revenue tax (234) (234)
Income tax (706) (172) (172) (1,050)
Results of operations $ 1,310 $ 171 $ 441 $ 1,922
2005
North North Offshore
(millions of Canadian dollars) America Sea West Africa Total
Crude oil and natural gas revenue, net of royalties and blending costs $ 5,727 $ 1,499 $ 472 $ 7,698
Production (1,211) (379) (53) (1,643)
Transportation (287) (20) (307)
Depletion, depreciation and amortization (1,588) (306) (104) (1,998)
Asset retirement obligation accretion (34) (34) (1) (69)
Petroleum revenue tax (172) (172)
Income tax (1,007) (235) (110) (1,352)
Results of operations $ 1,600 $ 353 $ 204 $ 2,157
Supplementary Oil & Gas Information
Page 101 of 107
Canadian Natural AR2006
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2004
North North Offshore
(millions of Canadian dollars) America Sea West Africa Total
Crude oil and natural gas revenue, net of royalties and blending costs $ 4,579 $ 1,203 $ 216 $ 5,998
Production (976) (370) (36) (1,382)
Transportation (256) (32) (288)
Depletion, depreciation and amortization (1,438) (265) (53) (1,756)
Asset retirement obligation accretion (28) (22) (1) (51)
Petroleum revenue tax (145) (145)
Income tax (690) (148) (44) (882)
Results of operations $ 1,191 $ 221 $ 82 $ 1,494
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS FROM
PROVED CRUDE OIL AND NATURAL GAS RESERVES AND CHANGES THEREIN
The following standardized measure of discounted future net cash ows fromproved crude oil and natural gas reserves has been computed
using year-end sales prices and costs and year-end statutory income tax rates. A discount factor of 10% has been applied in determining
the standardized measure of discounted future net cash ows. The Company does not believe that the standardized measure of discounted
future net cash ows will be representative of actual future net cash ows and should not be considered to represent the fair value of the
crude oil and natural gas properties. Actual net cash ows will differ from the presented estimated future net cash ows due to several
factors including:
Future production will include production not only from proved properties, but may also include production from probable and
potential reserves;
Future production of crude oil and natural gas from proved properties will differ from reserves estimated;
Future production rates will vary from those estimated;
Future rather than year-end sales prices and costs will apply;
Economic factors such as interest rates, income tax rates, regulatory and scal environments and operating conditions will change;
Future estimated income taxes do not take into account the effects of future exploration expenditures; and
Future development and asset retirement obligations will differ from those estimated.
Future net revenues, development, production and restoration costs have been based upon the estimates referred to above. The following
tables summarize the Companys future net cash ows relating to proved crude oil and natural gas reserves based on the standardized
measure as prescribed in FAS 69:
2006
North North Offshore
(millions of Canadian dollars) America Sea West Africa Total
Future cash inflows $ 63,368 $ 20,815 $ 7,779 $ 91,962
Future production costs (21,634) (8,077) (2,517) (32,228)
Future development and asset retirement obligations (7,029) (4,348) (824) (12,201)
Future income taxes (9,118) (5,623) (1,372) (16,113)
Future net cash flows 25,587 2,767 3,066 31,420
10% annual discount for timing of future cash flows (11,214) (956) (1,258) (13,428)
Standardized measure of future net cash flows $ 14,373 $ 1,811 $ 1,808 $ 17,992
2005
North North Offshore
(millions of Canadian dollars) America Sea West Africa Total
Future cash inflows $ 52,266 $ 19,961 $ 8,515 $ 80,742
Future production costs (17,310) (6,130) (1,803) (25,243)
Future development and asset retirement obligations (3,916) (3,099) (1,032) (8,047)
Future income taxes (10,272) (6,631) (2,092) (18,995)
Future net cash flows 20,768 4,101 3,588 28,457
10% annual discount for timing of future cash flows (7,793) (1,144) (1,068) (10,005)
Standardized measure of future net cash flows $ 12,975 $ 2,957 $ 2,520 $ 18,452
2004
North North Offshore
(millions of Canadian dollars) America Sea West Africa Total
Future cash inflows $ 31,727 $ 15,526 $ 5,249 $ 52,502
Future production costs (10,995) (6,302) (1,137) (18,434)
Future development and asset retirement obligations (2,944) (2,832) (631) (6,407)
Future income taxes (6,438) (3,783) (1,242) (11,463)
Future net cash flows 11,350 2,609 2,239 16,198
10% annual discount for timing of future cash flows (4,385) (691) (634) (5,710)
Standardized measure of future net cash flows $ 6,965 $ 1,918 $ 1,605 $ 10,488
The principal sources of change in the standardized measure of discounted future net cash ows are summarized in the
following table:
(millions of Canadian dollars) 2006 2005 2004
Sales of crude oil and natural gas produced, net of production costs $ (5,635) $ (5,785) $ (4,331)
Net changes in sales prices and production costs (2,420) 11,056 (553)
Extensions, discoveries and improved recovery 4,769 3,596 2,120
Changes in estimated future development costs (1,885) (971) (894)
Purchases of proved reserves in place 2,406 469 1,386
Sales of proved reserves in place (2) (130) (20)
Revisions of previous reserve estimates 81 961 1,431
Accretion of discount 3,112 1,812 1,558
Changes in production timing and other (2,156) 1,414 1,357
Net change in income taxes 1,270 (4,458) (997)
Net change (460) 7,964 1,057
Balance beginning of year 18,452 10,488 9,431
Balance end of year $ 17,992 $ 18,452 $ 10,488
Supplementary Oil & Gas Information
Page 103 of 107
Canadian Natural AR2006
Page 104 of 107
Years ended December 31 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997
FINANCIAL INFORMATION
(Cdn $ millions, except per share amounts)
Net earnings 2,524 1,050 1,405 1,403 539 639 758 213 31 104
Per share - basic
(1)
$ 4.70 $ 1.96 $ 2.62 $ 2.62 $ 1.06 $ 1.32 $ 1.62 $ 0.51 $ 0.08 $ 0.26
Cash flow from operations
(2)
4,932 5,021 3,769 3,160 2,254 1,920 1,884 724 444 503
Per share - basic
(1)
$ 9.18 $ 9.36 $ 7.03 $ 5.88 $ 4.41 $ 3.96 $ 4.04 $ 1.74 $ 1.12 $ 1.28
Capital expenditures, net of dispositions
(including business combinations) 12,025 4,932 4,633 2,506 4,069 1,885 2,823 1,901 610 1,119
Balance Sheet information
Working capital (deficiency) surplus (832) (1,774) (652) (505) (14) (6) (77) 36 58 (19)
Property, plant and equipment, net 30,767 19,694 17,064 13,714 12,934 8,766 7,439 4,679 3,135 2,831
Total assets 33,160 21,852 18,372 14,643 13,793 9,290 8,051 4,976 3,329 3,016
Long-term debt 11,043 3,321 3,538 2,748 4,200 2,788 2,573 2,157 1,426 1,136
Shareholders equity 10,690 8,237 7,324 6,006 4,754 3,928 3,297 1,962 1,317 1,250
SHARE INFORMATION
Common shares outstanding
(thousands) 537,903 536,348 536,361 534,926 535,104 484,804 489,116 445,816 399,236 395,276
Weighted average shares
outstanding (thousands) 537,339 536,650 536,223 536,940 511,532 485,200 466,804 415,624 397,324 392,168
Dividends declared
per common share $ 0.30 $ 0.24 $ 0.20 $ 0.15 $ 0.13 $ 0.10 $ $ $ $
Trading statistics
(1)
TSX - C$
Trading volume (thousands) 508,935 637,992 606,024 590,702 619,316 534,976 567,412 430,460 410,440 402,152
Share Price ($/share)
High $ 73.91 $ 62.00 $ 27.58 $ 16.81 $ 13.64 $ 13.09 $ 14.05 $ 9.65 $ 7.88 $ 11.06
Low $ 45.49 $ 24.28 $ 15.96 $ 11.30 $ 9.40 $ 8.98 $ 7.45 $ 4.95 $ 4.56 $ 7.23
Close $ 62.15 $ 57.63 $ 25.63 $ 16.34 $ 11.70 $ 9.58 $ 10.38 $ 8.81 $ 5.75 $ 7.65
NYSE - US$
Trading volume (thousands) 401,909 251,554 125,468 46,916 31,864 20,764 3,172
Share Price ($/share)
High $ 64.38 $ 54.05 $ 22.37 $ 12.85 $ 8.72 $ 8.63 $ 9.46 $ $ $
Low $ 40.29 $ 19.74 $ 11.94 $ 7.32 $ 5.89 $ 5.70 $ 6.19 $ $ $
Close $ 53.23 $ 49.62 $ 21.39 $ 12.61 $ 7.42 $ 6.10 $ 6.88 $ $ $
RATIOS
Debt to book capitalization
(3)
50.8% 28.7% 33.8% 32.8% 47.1% 41.7% 44.0% 52.4% 52.0% 47.6%
Return on average common
shareholders equity, after tax
(3)
26.9% 14.3% 21.4% 25.6% 13.0% 17.7% 28.8% 13.0% 2.4% 8.8%
Daily production before royalties per
thousand common shares (boe/d)
(1)
10.8 10.3 9.6 8.5 8.2 7.4 6.6 5.0 4.7 4.5
Conventional proved and probable
reserves per common share (boe)
(1)(4)
6.4 4.8 4.3 4.0 3.3 3.1 2.9 2.4 1.9 1.7
Net asset value per common share
(1)(5)
$ 56.41 $ 60.44 $ 33.13 $ 23.35 $ 19.57 $ 16.88 $ 20.54 $ 12.33 $ 8.08 $ 6.80
(1) Restated to reect two-for-one share splits in May 2004 and May 2005.
(2) Cash ow from operations is a non-GAAP term that represents net earnings adjusted for non-cash items. The Company evaluates its performance based on net
earnings and cash ow. Cash ow from operations may not be comparable to similar measures used by other companies.
(3) Refer to the MD&A, page 60, Liquidity and Capital Resources, for the denitions of these items.
(4) Based upon constant dollar Company gross reserves (before royalties), using year-end common shares outstanding.
(5) Based upon 10% discounted, forecast price pre-tax proved and probable net present values as reported in the Companys AIF for conventional reserves, with
$250/acre added for core undeveloped land in 2005 and 2006, $75/acre for all years prior, less long-termdebt and existing asset liabilities and adjusted for working
capital. See reserves disclosures on pages 37 to 41.
Ten-Year Review
Years ended December 31 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997
OPERATING INFORMATION
Conventional crude oil and NGLs (mmbbl)
Company gross proved reserves
(before royalties)
North America 1,043 785 695 672 665 644 643 554 284 257
North Sea 299 290 303 222 203 83 102
Offshore West Africa 145 148 125 106 94 61 36
1,487 1,223 1,123 1,000 962 788 781 554 284 257
Company gross proved and
probable reserves (before royalties)
North America 1,753 1,154 992 977 742 740 731 640 380 329
North Sea 421 417 415 317 277 106 134
Offshore West Africa 223 230 214 187 162 111 46
2,397 1,801 1,621 1,481 1,181 957 911 640 380 329
Conventional Natural gas (bcf)
Company gross proved reserves
(before royalties)
North America 4,507 3,378 3,202 3,006 3,048 2,566 2,360 2,183 1,901 1,716
North Sea 37 29 27 62 71 94 91
Offshore West Africa 69 83 81 86 90 69 65
4,613 3,490 3,310 3,154 3,209 2,729 2,516 2,183 1,901 1,716
Company gross proved and
probable reserves (before royalties)
North America 5,898 4,372 4,100 3,611 3,450 2,915 2,762 2,547 2,211 2,078
North Sea 93 69 57 101 89 118 114
Offshore West Africa 121 127 102 111 120 96 84
6,112 4,568 4,259 3,823 3,659 3,129 2,960 2,547 2,211 2,078
Total proved reserves
(before royalties) (mmboe) 2,256 1,804 1,674 1,526 1,497 1,243 1,200 918 601 543
Total proved and probable reserves
(before royalties) (mmboe) 3,416 2,562 2,330 2,118 1,791 1,479 1,404 1,065 749 675
Oil Sands, mining (mmbbl)
Gross proved and probable reserves
(before royalties)
Bitumen 3,530 3,430
Synthetic crude oil
(1)
2,962 2,878
Daily production (before royalties)
Crude oil and NGLs (mbbl/d)
North America 235 222 206 175 169 167 155 87 76 71
North Sea 60 68 65 57 39 36 17
Offshore West Africa 37 23 12 10 7 3 2
332 313 283 242 215 206 174 87 76 71
Natural gas (mmcf/d)
North America 1,468 1,416 1,330 1,245 1,204 906 793 721 673 626
North Sea 15 19 50 46 27 12 1
Offshore West Africa 9 4 8 8 1
1,492 1,439 1,388 1,299 1,232 918 794 721 673 626
Total production
(before royalties) (mboe/d) 581 553 514 459 421 359 306 207 188 175
Product Pricing
Average crude oil
and NGLs price ($/bbl) 53.65 46.86 37.99 32.66 31.22 23.45 31.89 22.26 11.98 18.99
Average natural gas price ($/mcf) 6.72 8.57 6.50 6.21 3.77 5.45 4.92 2.52 2.11 1.97
(1) SCO reserves are based upon upgrading of the bitumen reserves. The reserves shown for bitumen and SCO are not additive.
Ten-Year Review
Page 105 of 107
Canadian Natural AR2006
Page 106 of 107
Corporate Information
Board of Directors
*Catherine M. Best
(1 Chair) (2)
Executive Vice-President, Risk Management & Chief Financial Ofcer,
Calgary Health Region Calgary, Alberta
N. Murray Edwards
(4)
President, Edco Financial Holdings Ltd.
Calgary, Alberta
*Honourable Gary A. Filmon, P.C., O.M.
(1) (3)
Consultant, Exchange Group
Winnipeg, Manitoba
*Ambassador Gordon D. Gifn
(1) (3 Chair)
Senior Partner, McKenna Long & Aldridge LLP
Atlanta, Georgia
John G. Langille
Vice-Chairman of the Board
Canadian Natural Resources Limited
Calgary, Alberta
Steve W. Laut
President & Chief Operating Ofcer,
Canadian Natural Resources Limited
Calgary, Alberta
Keith A. J. MacPhail
(4) (5)
Chairman, President & Chief Executive Ofcer,
Bonavista Energy Trust
Calgary, Alberta
Allan P. Markin
(5)
Chairman of the Board,
Canadian Natural Resources Limited
Calgary, Alberta
*Norman F. McIntyre
(2) (4) (5)
Independent Businessman
Calgary, Alberta
*Honourable Frank J. McKenna, P.C., O.N.B., Q.C.
(2) (3)
Deputy Chair, TD Bank Financial Group
Cap Pel, New Brunswick
*James S. Palmer, C.M., A.O.E., Q.C.
(2 Chair) (4) (5)
Chairman and Partner,
Burnet, Duckworth & Palmer LLP
Calgary, Alberta
*Eldon R. Smith, OC, M.D.
(2) (5 Chair)
Emeritus Professor and Former Dean,
Faculty of Medicine, University of Calgary
Calgary, Alberta
*David A. Tuer
(1) (3) (4 Chair)
Executive Vice-Chairman, BA Energy Inc.
Calgary, Alberta
(1) Audit Committee member
(2) Compensation Committee member
(3) Nominating and Corporate Governance Committee member
(4) Reserves Committee member
(5) Health, Safety and Environmental Committee member
*Determined to be independent by the Nominating and Corporate Governance
Committee and the Board of Directors and pursuant to the independent
standards established under National Instrument 58-101 and the New York
Stock Exchange Corporate Governance Listing Standards.
Management Committee
Allan P. Markin
Chairman of the Board
N. Murray Edwards
Vice-Chairman of the Board
John G. Langille
Vice-Chairman of the Board
Steve W. Laut
President & Chief Operating Ofcer
Ral M. Cusson
Senior Vice-President, Marketing
Ral J.H. Doucet
Senior Vice-President, Oil Sands
Allen M. Knight
Senior Vice-President, International & Corporate Development
TimS. McKay
Senior Vice-President, Operations
Douglas A. Proll
Chief Financial Ofcer & Senior Vice-President, Finance
Lyle G. Stevens
Senior Vice-President, Exploitation
Jeff W. Wilson
Senior Vice-President, Exploration
Mary-Jo E. Case
Vice-President, Land
Randall S. Davis
Vice-President, Finance & Accounting
Corporate Information
Page 107 of 107
Corporate Ofces
HEAD OFFICE
Canadian Natural Resources Limited
2500, 855 - 2 Street S.W.
Calgary, AB T2P 4J8
Telephone: (403) 517-6700
Facsimile: (403) 517-7350
Website: www.cnrl.com
INVESTOR RELATIONS
Telephone: (403) 514-7777
Facsimile: (403) 514-7888
Email: [email protected]
INTERNATIONAL OFFICE
CNR International (U.K.) Limited
St. Magnus House, Guild Street
Aberdeen AB11 6NJ Scotland
Registrar and Transfer Agent
Computershare Trust Company of Canada
Calgary, Alberta
Toronto, Ontario
Computershare Investor Services LLC
New York, New York
Auditors
PricewaterhouseCoopers LLP
Calgary, Alberta
Independent Qualied
Reserves Evaluators
GLJ PetroleumConsultants
Calgary, Alberta
Ryder Scott Company
Calgary, Alberta
Sproule Associates Limited
Calgary, Alberta
Stock Listing
CNQ
The Toronto Stock Exchange
The New York Stock Exchange
Printed in Canada by Sundog Printing.
Management photography by Gary Campbell.
Additional photography by Christine Flatt,
Edwin Herrenschmidt and
Canadian Natural team members.
Corporate Governance
Canadian Naturals corporate governance practices and
disclosure of those practices are in compliance with National
Policy 58-201 Corporate Governance Guidelines and National
Instrument 58-101 Disclosure of Corporate Governance
Practices. Canadian Natural, as a foreign private issuer in the
United States, may rely on home jurisdiction listing standards
for compliance with most of the New York Stock Exchange
(NYSE) Corporate Governance Listing Standards but must
disclose any signicant differences between its corporate
governance practices and those required for U.S. companies
listed on the NYSE.
Toronto Stock Exchange (TSX) rules provide that only the
creation of or material amendments to equity compensation
plans which provide for new issuance of securities are
subject to shareholder approval. However, the NYSE requires
shareholder approval of all equity compensation plans and
material revisions to such plans. Canadian Natural follows
TSX rules with respect to shareholder approval of equity
compensation plans.
Canadian Natural has included as exhibits to its Annual Report
on Form 40-F for the 2006 scal year led with the United
States Securities and Exchange Commission certicates of the
Chief Executive Ofcer and Chief Financial Ofcer certifying
the quality of its public disclosure.
Discipline
Opportunity
Strategy
Canadian Natural Resources Limited
2500, 855 - 2 Street SW
Calgary, Alberta
Canada T2P 4J8
Phone: 403.517.6700
Fax: 403.517.7350
www.cnrl.com