PNN MAY 2022 by Pipeline News North

PIPELINE The Pipeline News North

NEWS NORTH

Serving the Oil and Gas Industry in Nor thern B.C. and Alber ta

may 2022

VOL. 14 • ISSUE 05

FREE

A large lease operating just off the Sweetwater road between Dawson Creek and Rolla. BROWN

Imperial talks terms of its substantial issuer bid for up to $2,500,000,000 Imperial Oil Limited (TSE: IMO, NYSE American: IMO) announced today the terms of its substantial issuer bid (the “Offer”) pursuant to which the company will offer to purchase for cancellation up to $2,500,000,000 of its common shares (the “Shares”). Subject to obtaining certain exemptive relief under applicable securities laws in Canada and the United States, the Offer will proceed by way of a modified Dutch auction that includes the

ability for shareholders to participate via a proportionate tender. The modified Dutch auction procedure will have a tender price range from $62.00 per Share to $78.00 per Share. All amounts are in Canadian dollars. The Offer is expected to commence on May 6, 2022 and remain open for acceptance until 5:00 p.m. (Calgary time) on June 10, 2022, unless withdrawn, extended or varied by

GotNewsTips?

Imperial. The Offer will be for up to approximately 6 percent of Imperial’s total number of issued and outstanding Shares (based on a purchase price equal to the minimum purchase price per Share and 669,143,714 Shares issued and outstanding as at the close of business on May 2, 2022).

Give me a call! Rob Brown

250-782-4888 ext 112 editor@dcdn.ca

2 The Pipeline News North, may 19, 2022

PNN MISSION STATEMENT Pipeline News North provides current, interesting, and relevant news and information about the oil and gas industry in Northeast B.C. and Northwest Alberta. Have an interesting story to share or a news lead? Email us at editor@ahnfsj.ca.

WILLIAM JULIAN REGIONAL MANAGER 250-785-5631 wj@ahnfsj.ca

Canadian Natural Resources Limited announces 2022 first quarter results

JANIS KMET ADVERTISING CONSULTANT DAWSON CREEK 250-782-4888 EXT 101 C: 250-219-0369 jkmet@dcdn.ca

RYAN WALLACE ADVERTISING MANAGER FORT ST. JOHN 250-785-5631 C: 250-261-1143 rwallace@ahnfsj.ca

ROB BROWN MANAGING EDITOR DAWSON CREEK 250-782-4888 ext 112 C: 403-501-1492 editor@dcdn.ca

MATT PREPROST MANAGING EDITOR FORT ST JOHN 250-785-5631 C: 250-271-0724 editor@ahnfsj.ca

www.pipelinenewsnorth.ca BILLING: Lisa Smith - Accounting Manager 250-960-2771 Fax: 250-960-2762 accounting@ pipelinenewsnorth.ca

Commenting on the Company’s first quarter 2022 results, Tim McKay, President of Canadian Natural (TSX: CNQ) (NYSE: CNQ), stated, “Our world class asset base is one of our key strengths, which is strategically balanced across commodity types so we can capture opportunities throughout the commodity price cycle. This drove total corporate quarterly production of approximately 1,280 MBOE‍/‍d in Q1/22, including record natural gas production of over 2.0 Bcf/d, an increase of approximately 0.4 Bcf‍/‍d from Q1/21 levels. Financially we delivered strong quarterly free cash flow of approximately $3.4 billion, after dividends of approximately $0.7 billion and net capital expenditures of approximately $0.8 billion, excluding acquisitions and strategic growth capital. “Our unique, diverse, long life low decline asset base with large, low risk, high value reserves is a differentiating factor that makes Canadian Natural a truly unique energy company. We have an industry leading WTI break-even in the mid-US$30s per barrel, which covers base maintenance capital requirements and dividend commitments and when combined with our top tier cost structure and effective and efficient

operations we are resilient through the commodity price cycle while generating substantial returns in today’s environment. “Canadian Natural is a leader on Environmental, Social and Governance (“ESG”) and has made it a priority to work together in collaboration with industry peers, including the Pathways initiative. By working together, we have developed an actionable plan that can help us collectively be more effective and efficient from a time and cost perspective for Carbon Capture, Utilization and Storage (“CCUS”) projects. We are taking positive steps forward in our efforts to help Canada achieve its climate and economic growth objectives.” Canadian Natural’s Chief Financial Officer, Mark Stainthorpe, added, “At Canadian Natural our culture of continuous improvement has created a sense of ownership and enables our teams to create significant value for our shareholders. Our effective and nimble capital allocation to our four pillars; returns to shareholders, balance sheet strength, resource value growth and opportunistic acquisitions continues to deliver robust financial

results. In Q1/22 net earnings and adjusted funds flow were strong at approximately $3.1 billion and approximately $5.0 billion respectively, and our balance sheet continued to strengthen. So far in 2022 up to and including May 4, 2022, returns to shareholders have been significant as we have returned a total of approximately $3.1 billion through dividends and share repurchases. This includes the increase to our sustainable and growing quarterly dividend in March 2022 by 28% to $0.75 per share, up from $0.5875 per share, marking 2022 as the 22nd consecutive year of dividend increases. The increasing dividend demonstrates the confidence that the Board of Directors has in the Company’s world class assets and its ability to generate significant and sustainable free cash flow through the commodity price cycle. “In addition, the Company’s Board of Directors has decided to further enhance the Company’s free cash flow allocation policy by stating that when the Company’s net debt reaches $8 billion, which the Board sees as a base level of corporate debt, the Company will allocate additional free cash flow as incremental returns to shareholders.

Pipeline News North, may 19, 2022

Canadian drilling rigs 101 25% of rig activity, and gas wells 75%.

Canadian drilling rigs meet some of the highest regulatory and safety standards in the world. It’s a dynamic and exciting community to build a career in. Canada’s drilling fleet is always changing to incorporate new technology and meet market demand. Most noticeably, the Canadian drilling fleet is growing in numbers. The fleet has 40% more rigs than it did 15 years ago. Today, the rig fleet offers just over 600 rigs. For the most part, a rig is a rig is a rig. For example, all rigs have a derrick (the mastlike structure that holds the pipe to be lowered into the well bore) a catwalk that holds the drill pipe, a rig floor where floorhands handle the drill pipe, a drawworks which is the machinery that hoists and lowers pipe and a blowout preventor that enables a driller to control well pressure. But different size rigs are used depending on the drilling target formation. Oil formations tend to be deeper than gas formations. When investors are most interested in producing oil, large rigs are in high demand. When the market prefers gas production, small rigs are in demand. Western Canada has plenty of both gas and oil, and activity cycles back and forth between preferences of one over the other.

The drilling industry reacted to this demand by expanding the fleet. In 2007, the rig fleet grew faster than it ever it had before: 49 rigs were added. Most of these new rigs were the smaller ones best suited for gas drilling. Then in 2008, natural gas was on the market in abundance, and the stock market price of natural gas started to fall. Investors pulled back on gas drilling. In 2010, industry was back to an even split between gas wells and oil wells. Drilling rigs come in three sizes: singles, doubles and triples. These categories refer to how many lengths of pipe can stand in the rig’s derrick. On a single, the derrick holds one length of pipe. A double holds two, and a triple holds three. A tall derrick isn’t necessary to drill deeper. If more pipe is needed to drill deeper, a single section of pipe is hoisted to the rig floor and added to the drill string. But sometimes the entire drill string needs to be pulled out of the hole (to change the drill bit, for instance). A derrick that holds multiple lengths of pipe comes in handy and helps the crew to complete this evolution quickly. A crew working on a triple is able to pull three lengths of pipe out of the hole before unscrewing the pipe. The Derrickman, working from the monkeyboard, sets the ‘stand’ of pipe in the derrick. Then the crew pulls up the next three joints of pipe. This evolution is called ‘tripping’. The larger derrick is efficient to drill deep wells but isn’t necessary for shallow wells. Single rigs drill wells that are around 1 to 2 kilometres deep. These wells usually access gas basins. Single rigs and their crews change drilling locations often, sometimes every day or every other day. Doubles and triples are larger rigs with bigger substructures and taller

derricks. These rigs drill between 3 and 6 kilometres into the earth and might be at the same location for several months to complete deep drilling operations. Singles, doubles and triples refer to conventional rig categories. Additional new categories of rigs have introduced different ways of handling pipe. For instance, some companies run coiltubing rigs that stream tubing from a large reel instead of using drill pipe, or automated drilling rigs that are outfitted with a pipe-handling arm

that raises the pipe into the derrick, eliminating the need for a derrickhand to work from the monkeyboard. Through the 1990s, rig activity focused evenly on the two commodities. Then in 1998, there was a shift: gas wells began to make up the bulk of drilling activity. Through the early 2000s, rig activity increased year over year, but gas wells— which are shallower and can be drilled faster—far outstripped the increase in oil wells. Between 2001 and 2006, oil wells made up about

And then the turn-around happened: oil drilling overtook gas drilling in western Canada. In 2011, 61% of the wells drilled were seeking an oil formation, versus the 39% seeking gas. Today’s market continues to favour large rigs that can reach deep oil formations. There also is increased interest in accessing these formations at an angle: rig crews drill a well bore that curves toward a drilling target.

Pipeline News North,, may 19, 2022

Arc Resources’ central compressor station east of Mile Zero. BLAKE BROWN

ARC Resources Ltd. reports strong first 2022 quarter ARC delivered first quarter 2022 production of 344,447 boe(1)(2)per day (62 per cent natural gas and 38 per cent crude oil and liquids). Cash flow from operating activities was $759 million and funds from operations was $744 million(3)($1.08 per share)(4), driven by strong average realized prices across the Company’s assets. ARC’s average realized natural gas price of $5.98 per Mcf(4)was $1.39 per Mcf higher than the average AECO 7A Monthly Index price. ARC’s average realized condensate price was $119.15 per barrel(4). Free funds flow was $410 million(5) ($0.60 per share)(6). ARC distributed 64 per cent or $265 million ($0.39 per share) (4) to shareholders, with the balance allocated to debt reduction. ARC declared dividends of $68 million or $0.10 per share(4)and repurchased 13.1 million common shares for $196 million under its normal course issuer bid (“NCIB”). Since instituting the NCIB in September 2021, ARC has repurchased 44.7 million common shares or approximately six per cent of total common shares outstanding at an average price of $12.38 per share for $553 million. Since acquiring Seven Generations Energy Ltd. (“Seven Generations”) on April 6, 2021, ARC has generated more than $1.6 billion ($2.29 per share) of free funds flow. Over the period, WTI averaged US$77 per barrel and the AECO

From the Pipeline archives

7A Monthly Index price averaged $4.00 per Mcf. ARC’s board of directors (the “Board”) has approved an increase of 20 per cent to ARC’s quarterly dividend, from $0.10 per share to $0.12 per share, beginning with the dividend that is expected to be paid on July 15, 2022, to shareholders of record on June 30, 2022. The revised dividend is sustainable at approximately US$40 per barrel WTI and $2.00 per gigajoule (“GJ”) AECO. As of March 31, 2022, ARC’s long-term debt balance was $1.6 billion and its net debt balance was $1.7 billion(3)or 0.6 times funds from operations(3). Cash flow used in investing activities was $347 million, of which $333 million was invested into capital expenditures(5). During the first quarter of 2022, ARC drilled 31 wells and completed 41 wells across its Alberta and British Columbia (“BC”) operations. As part of its market diversification strategy, ARC has entered into a longterm natural gas supply agreement with Cheniere Energy, Inc. (“Cheniere”). Leveraging its scale, low-emissions profile, and operational excellence, ARC will supply 140,000 million British thermal units (“MMBtu”) per day of natural gas for a term of 15 years commencing with commercial operations of Train 7 of the Corpus Christi Stage III expansion, which is expected to occur in 2027.

Investors waiting to buy oil stocks, Calgary, Alberta, 1914. GLENBOW ARCHIVES