Press Release

DBRS Morningstar Changes Trend on Canadian Natural Resources Limited to Stable from Negative, Confirms Rating at BBB (high)

June 04, 2021

DBRS Limited (DBRS Morningstar) changed the trends on all of Canadian Natural Resources Limited's (CNRL or the Company) ratings to Stable from Negative. At the same time, DBRS Morningstar confirmed the Company’s Issuer Rating, Unsecured Long-Term Debt rating, and Commercial Paper rating at BBB (high), BBB (high), and R-2 (high), respectively. The trend changes reflect DBRS Morningstar's expectation that the Company's key credit metrics will improve substantially through 2022 to support the ratings. The expected improvement is tied to a recovery in crude oil prices and the Company's focus on deleveraging the balance sheet.

The ratings are underpinned by the Company's (1) significant production base, which was net 1.16 million barrels of oil equivalent/day in Q1 2021; (2) long-life, low-decline oil reserves; (3) efficient and low-cost oil sands, heavy oil, and conventional oil and gas production; (4) high level of capital and operating flexibility; and (5) well-diversified production mix. Key factors tempering the ratings include exposure to the volatile Western Canadian light-heavy oil price differential, high concentration of assets in Western Canada, and rising environmental cost pressures.

For 2020, the Company's earnings and cash flow contracted materially because of the steep decline in crude oil prices, causing CNRL's key credit metrics to weaken considerably. In response, the Company reduced operating and overhead costs, suspended share buybacks, and cut capital expenditures (capex) with an overall negligible impact on production levels. The Company's long-life, low-decline oil reserves (Company-estimated annual corporate decline rate of 10%) necessitates less capex to sustain production levels. As a consequence, the Company's estimated free cash flow (FCF; cash flow after capex and dividends) breakeven West Texas Intermediate oil price of around USD 35/barrel, is among the lowest within its peer group. Also, CNRL was able to generate a FCF surplus in 2020.

DBRS Morningstar expects the Company to generate significant FCF surpluses in 2021 and 2022 based on DBRS Morningstar's base-case commodity price assumptions (see DBRS Morningstar’s press release “DBRS Morningstar Updates Oil and Natural Gas Price Forecasts: Coronavirus Vaccinations and OPEC+ Production Cuts Underpin Speedy Oil Price Recovery” dated February 23, 2021). CNRL's budgeted capex of $3.2 billion in 2021 is primarily targeted for cost efficiency improvements and sustaining production levels as the Company prioritizes deleveraging. DBRS Morningstar expects the Company’s key credit metrics to improve materially in 2021 and through 2022 with the lease-adjusted debt-to-cash flow and EBIT interest coverage ratios improving to the BBB range. DBRS Morningstar notes that crude oil prices are currently trending well above DBRS Morningstar’s base-case assumptions. If prices remain at current levels, the reduction in debt could exceed DBRS Morningstar’s base-case assumptions. CNRL has sufficient liquidity with $5.55 billion of available liquidity, including $4.96 billion available on its unsecured revolving credit facilities at March 31, 2021.

If the Company's lease-adjusted debt-to-cash flow ratio is consistently below 1.5 times, DBRS Morningstar may consider a positive rating action. Conversely, should oil prices weaken materially and the Company’s key credit metrics drop below DBRS Morningstar’s expectations over an extended period, DBRS Morningstar could take a negative rating action.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at

All figures are in Canadian dollars unless otherwise noted.

The principal methodologies are Rating Companies in the Oil and Gas and Oilfield Services Industries (August 17, 2020; and DBRS Morningstar Criteria: Commercial Paper Liquidity Support for Nonbank Issuers (March 9, 2021;, which can be found on under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021;

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

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 under Related Documents or by contacting us at [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

DBRS Morningstar will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at [email protected].

For more information on this credit or on this industry, visit or contact us at [email protected].

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