Press Release

DBRS Morningstar Upgrades Issuer and Unsecured Long-Term Debt Ratings on Canadian Natural Resources Limited to A (low) and Commercial Paper Rating to R-1 (low), All Trends Remain Stable

June 03, 2022

DBRS Limited (DBRS Morningstar) has upgraded Canadian Natural Resources Limited's (CNRL or the Company) Issuer Rating and Unsecured Long-Term Debt rating to A (low) from BBB (high) and upgraded the Company's Commercial Paper rating to R-1 (low) from R-2 (high). All trends remain Stable. The rating upgrades are primarily due to the material improvement and expected continued improvement in the Company's key credit metrics, which supports an A (low) rating. The Commercial Paper upgrade aligns with an upgrade to an A (low) Issuer Rating. The improvement in credit metrics is a result of the significant rebound in crude oil prices and correspondingly the Company's cash flow, as the negative impact on oil and natural gas markets resulting from the Coronavirus Disease (COVID-19) pandemic has abated, coupled with the Company's efforts to rapidly deleverage its balance sheet.

The ratings are underpinned by the Company's (1) significant production base of net 1.1 million barrels of oil equivalent/day (boe/d) production in Q1 2022; (2) long-life, low-decline oil reserves, which requires less capital to sustain production levels; (3) efficient and low-cost oil sands, heavy oil, and conventional oil and gas (O&G) operations; (4) capital and operating flexibility; and (5) well-diversified production mix. Factors that temper the ratings include the Company's exposure to the more volatile Western Canadian light-heavy oil price differential, high concentration of assets in Western Canada, and increasing environmental cost pressures.

The Company's cash flow rose almost threefold in 2021. Over the year, the Company produced a free cash flow (FCF; cash flow after capex and dividends) surplus of $6.85 billion before changes in working capital and $7.92 billion when including working capital changes. In addition to using the FCF surplus to return capital to shareholders, the Company reduced the level of indebtedness by 30%. As a result, the Company's key lease-adjusted debt-to cash flow ratio improved to 1.20 times (x) in 2021 (within the “A” range) from 4.74x in 2020.

The Company's estimated West Texas Intermediate oil price per barrel (/bbl) cash flow breakeven in U.S. dollars, after base maintenance capex and dividends, is estimated to be in the mid-thirties, among the lowest within its peer group. Based on DBRS Morningstar's average WTI oil price forecast of USD $74/bbl in 2022 and USD 60/bbl in 2023 (which is at the top end of DBRS Morningstar's long term midcycle pricing band) combined with the Company's modest capex plans ($4.35 billion budgeted for 2022) meaningful FCF surpluses are projected over the next two years. It is important to note that the current prices for WTI oil and Western Canadian spot gas are well in excess of DBRS Morningstar's forecasts and the Company has minimal production hedged. The Company plans to allocate 50% of FCF surpluses to share repurchases and the other 50% to strengthen the balance sheet and strategic acquisitions. DBRS Morningstar anticipates the Company's key lease adjusted debt-to-cash flow ratio will remain below 1.5x over the next two years even under DBRS Morningstar's base-case commodity price assumptions. Last year, DBRS Morningstar noted if this ratio stayed consistently below 1.5x, it would consider a positive rating action.

A further upgrade over the medium term is unlikely. However, should oil prices weaken materially (below USD $40/bbl) and stay weak for an extended period, DBRS Morningstar may take a negative rating action. CNRL has sufficient liquidity with $5.59 billion undrawn on its revolving credit facilities at March 31, 2022, and a reasonably spread out debt maturity schedule.


Environmental Factors
DBRS Morningstar considered carbon and GHG costs as a relevant environmental factor for CNRL. This factor is relevant because ever-increasing environmental regulations in Canada targeting the reduction of GHG emissions will likely limit the growth potential and add costs for all O&G companies in Canada and in particular for CNRL, which has greater exposure to more carbon intensive oil sands developments. Mitigating the impact on CNRL is the Company's investment in three CCS facilities in Alberta. DBRS Morningstar also notes that CNRL is in a much better position today to face the challenges associated with reducing GHG emissions than it was two years ago. CNRL has deleveraged materially and built up the balance sheet strength to give it the necessary financial flexibility to navigate the energy transition.

There were no Social/Governance factors that had a significant or relevant effect on the credit analysis.

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 16, 2021; and DBRS Morningstar Criteria: Commercial Paper Liquidity Support for Nonbank Issuers (March 1, 2022;, 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 (May 17, 2022;

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

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.

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