DBRS Confirms Ratings of Canadian Natural Resources Limited at BBB (high) with Stable Trends

DBRS has today confirmed the Issuer Rating and Unsecured Long-Term Debt rating of Canadian Natural Resources Limited (CNRL) at BBB (high) and the Commercial Paper rating at R-2 (high) and has removed the Under Review with Developing Implications status. All trends are Stable. This rating action reflects DBRS’s review of the Company’s credit quality following the completion of CNRL’s $3.125 billion debt-funded acquisition, which included most of Devon Energy Corporation’s Canadian conventional assets (Transaction).

Following the acquisition, CNRL’s business risk profile remained largely neutral and continued to remain strong for its current rating. The Transaction modestly diversifies CNRL’s current production mix from 71% liquids; 29% natural gas by adding slightly higher proportion of natural gas (considered to be mostly liquids-rich) to 66% liquids; 34% natural gas. DBRS also acknowledges that the acquired conventional assets are all located in areas adjacent to CNRL’s current operations which would lead to a smoother integration and the opportunity for the Company to achieve cost synergies. Whereas some of the acquired assets are mature with limited upside potential, DBRS notes the opportunity for CNRL to combine the included associated royalty revenue stream with its own royalty revenue portfolio for potential monetization.

CNRL’s financial risk profile pro forma the acquisition continues to support CNRL’s current ratings with the Company’s key credit metrics pro forma as at December 31, 2013, remaining well within the criteria for its current ratings; (1) Total debt-to-capitalization rises from 27% to 33% (35% to 45% required for the BBB range); (2) Total debt-to-cash flow rises from 1.36 times (x) to a DBRS estimate of approximately 1.7x (1.5x to 2.0x required); and (3) EBIT-to-interest coverage falls from 7.26x to mid-6.0x (5.0x to 10.0x required). DBRS notes that CNRL’s financial risk profile restricts the ratings from further improvement.

Overall, following the completion of the Transaction, CNRL’s credit quality remained strong and well within the requirements for a BBB (high) ýrating category.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating Companies in the Oil and Gas Industry (July 2013), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.