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April 21, 2004 The Premium Value, Defined Growth Independent IPAA 10th Annual Oil and Gas Investment Symposium.

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Presentation on theme: "April 21, 2004 The Premium Value, Defined Growth Independent IPAA 10th Annual Oil and Gas Investment Symposium."— Presentation transcript:

1 April 21, 2004 The Premium Value, Defined Growth Independent IPAA 10th Annual Oil and Gas Investment Symposium

2 CNQ TSX/NYSE Agenda Who is Canadian Natural? Why own Canadian Natural? Company overview Strategy Operations North America North Sea Offshore West Africa Financials Investment recap The Premium Value, Defined Growth Independent

3 CNQ TSX/NYSE Who is Canadian Natural? The Premium Value, Defined Growth Independent

4 CNQ TSX/NYSE Who is Canadian Natural? Canadian based E&P company with international exposure Canada North Sea Offshore West Africa Significant exposure to North American natural gas Measured approach to growth and investments Focused on creating long-term shareholder wealth US $9.4 billion enterprise value North SeaOffshore West Africa Production mix (2004E) Canada 84% 13% 3% Source: Corporate reports The Premium Value, Defined Growth Independent

5 CNQ TSX/NYSE Who is Canadian Natural? Consistent value creation through successful Exploitation Canadian heavy oil UK North Sea Exploration Ladyfern Baobab Opportunistic acquisitions Rio Alto (2002) Ranger Oil (2000) BP assets (1999) Sceptre (1996) Canadian Natural has delivered a decade of production growth Consistent History of Value Creation Production History (mboe/d - gross, 6:1) Source: Corporate reports

6 CNQ TSX/NYSE Who is Canadian Natural? Consistent growth in reserves over the last decade through Exploitation Exploration Acquisitions 100% of reserves subject to independent evaluation (Sproule) Solid, Credible Reserves Source: Corporate reports Reserve History (mmboe gross proved, 6:1)

7 CNQ TSX/NYSE Why Own Canadian Natural? The Premium Value, Defined Growth Independent

8 CNQ TSX/NYSE Why Own Canadian Natural? Balanced product mix Large independent producer Significant exposure to North American natural gas Low cost competitive advantage Track record of value creation Proven/committed management Winning strategy - defined plan The Premium Value, Defined Growth Independent

9 CNQ TSX/NYSE Balanced Product Mix Low Risk, Balanced Product Mix Net Production Mix Q4/03 Lower risk approach through product diversification Significant exposure to North American natural gas market Peer Group Comparison Net Production Mix (Q4/03) North American natural gas Liquids and International natural gas

10 CNQ TSX/NYSE Large Independent Producer Large Scale Operations that Drive Economies of Scale Canadian Natural ranks as the 7th largest independent E&P company based on total current production Net Production – Q4/03 (mmboe/d)

11 CNQ TSX/NYSE Significant Exposure to NA Natural Gas Second largest producer in Canada Sixth largest independent producer in North America High leverage per dollar invested due to low multiple 5% per annum targeted future growth Significant Leverage to North American Natural Gas

12 CNQ TSX/NYSE Low-cost Competitive Advantage Low Cost Advantage Drives Long-term Performance Canadian Natural’s operating and administrative costs rank among the lowest of its peers Low cost production is a key competitive advantage Winning strategy in a commodities business Source: FirstEnergy Capital Corp. 2002 Total Cost Peer Comparison (C$/boe - net)

13 CNQ TSX/NYSE Track Record of Value Creation Compelling Long-term Returns to our Shareholders Monthly Closing Share Price (C$) Note: Prices adjusted to reflect June 1993 stock split. Source: Bloomberg Share price CAGR of 20% from 1992 to Dec 2003 Market cap. increased from C$1.6 billion in 1992 to >C$10 billion in 2004 Current annual dividend of C$0.80 Listed on the NYSE and the TSX 22% CAGR

14 CNQ TSX/NYSE Shareholder Return Total Shareholder Return (US$) - 2003 Note: Dividends paid are assumed to be reinvested in shares of the company at the price on the ex-dividend date. TSR equals capital gain and dividend return on investment. Compelling Returns to our Shareholders

15 CNQ TSX/NYSE Committed Management Substantial management and director wealth at stake Strong motivation for management to perform Delivers alignment with shareholder interests Clear Alignment with Shareholder Interests Note: Based on share ownership data and priced at March 31, 2004. Source: Computershare Analytics for US issuers. for Canadian Issuers. Management and Directors Stock Ownership (US$ millions)

16 CNQ TSX/NYSE Company Overview: Strategy The Premium Value, Defined Growth Independent

17 CNQ TSX/NYSE Objectives Defined Value creation on “per share” basis Production Reserves Cash flow Net asset value Returns on employed capital Before future tax EBITDA Our Goal is 10% p.a. Rolling Average Value Growth

18 CNQ TSX/NYSE Capital allocation to maximize value Defined growth/value enhancement plans by product/basin Balance Products Project time horizons Acquisitions/exploration with exploitation focus Financial Opportunistic acquisitions Control costs through area knowledge and domination of core focus areas Our Strategy A Proven, Effective Strategy

19 CNQ TSX/NYSE Company Overview: Operations Defined Plan The Premium Value, Defined Growth Independent

20 CNQ TSX/NYSE Overview of Global Operations Canadian Asset Base with Selected International Exposure CanadaLiquidsGasBOE% of Total 2004E Production (mboe/d)196-208215-225411-43384% 2003 Proved Reserves (mmboe)6725011,17377% Offshore West AfricaLiquidsGasBOE% of Total 2004E Production (mboe/d)12-151-213-173% 2003 Proved Reserves (mmboe)106141208% North SeaLiquidsGasBOE% of Total 2004E Production (mboe/d) 55-604-659-6613% 2003 Proved Reserves (mmboe)2221123315% All amounts before royalties

21 CNQ TSX/NYSE North American Overview One of North America’s largest natural gas producers >3 Tcf of proved natural gas reserves ~1.3 bcf/d of production 5% growth p.a. 2 highly prospective regions Significant North American Natural Gas Exposure N AB 456 mmcf/d 162.0 mbbl/d S AB 146 mmcf/d 10.7 mbbl/d SE SK 3 mmcf/d 9.5 mbbl/d AB SK BC NW AB 249 mmcf/d 10.2 mbbl/d Strong position in oil & liquids >670 mmbbl of proved reserves ~200 mbbl/d of production NE BC 365 mmcf/d 7.4 mbbl/d N.A. Production History (mboe/d, 6:1)

22 CNQ TSX/NYSE North American Natural Gas Future Plan Near-Term Drill approximately 700-900 natural gas wells p.a. in four core areas ~6% average or ~8% entry to exit growth in 2004 Mid-Term Growth from two highly prospective areas Northeast B.C. Northwest Alberta Long-Term Deep exploration - Northeast B.C., Northwest Alberta 5% Growth in North American Natural Gas after 2003

23 CNQ TSX/NYSE Northwest Alberta Targets are Becoming More Defined and Costs are Dropping Natural Gas Growth Prospects 1.8 million acres of net undeveloped land 26 facilities/1,800 mi pipe Average decline 26% 800-900 expected future locations New reserve potential, next 5 years Cardium targets > 0.5 Tcf potential Deep and conventional targets 0.8 – 1.0 Tcf potential AB SK BC

24 CNQ TSX/NYSE Northeast B.C. Resource Potential has Increased Over Prior Year Natural Gas Growth Prospects 1.5 million acres of net undeveloped land 72 facilities/2,000 mi pipe Average decline 21% 700 – 1,000 expected locations New reserve potential, next 5 years Helmet ~ 0.75 Tcf potential Fort St. John ~0.4 Tcf potential Foothills - deep potential AB SK BC

25 CNQ TSX/NYSE North American Liquids Future Plan Near-Term Primary heavy oil drilling Pelican Lake emulsion / waterflood High pressure steam at Primrose Work to expand heavy oil markets Mid/Long-Term Approximately 3 billion barrels of recoverable resource potential Primrose, Gregoire Lake, and Horizon in-situ projects Pelican Lake enhanced oil recovery scheme Conventional heavy oil Decades of Production Inventory in N.A. Liquids

26 CNQ TSX/NYSE Acquisition of North Alberta Properties Land base integrates well with existing Canadian Natural land Acquisition fits with operating and marketing strategy Daily production 27,500 bbl/d heavy oil 9 mmcf/d natural gas Royalty interests – 1,500 boe/d C$467 million 204 Miles CNQ LandPetrovera Land A Complementary Asset Base, Easily Integrated Calgary Edmonton Regina

27 CNQ TSX/NYSE Three Pronged Crude Oil Marketing Strategy Support / participate pipeline additions Support / participate in projects to add conversion capacity Displace medium sour crude from PADD II Blend crudes to yield similar product slate Compete for ~1 mmbbl/d refinery demand No Significant capital outlay required by buyer or seller A Multi-faceted, Simple Strategy will Help Unlock Heavy Oil Value

28 CNQ TSX/NYSE Customer Focus Strategy Resid VGO Distillate Naphtha Light Ends Synthetic 38% 26% 33% Athabasca Bitumen 48% 12% 40% 50% Synthetic 50% Bitumen 38% 24% 13% 23% USGC Medium Sour Crude 32% 25% 17% 23% VS. 3% 2% 3% Synthetic – Bitumen Synergy A New Blend to Challenge Existing Products

29 CNQ TSX/NYSE Chicago Synbit Value (US $/bbl) Replicate Strategy Used to Capture Heavy Oil Markets Bitumen Syn/Bit + $ 23.78 $ 14.70 $ 19.24$ 20.95 SCO 50% Bitumen 50% SCO USGC Medium Sour $1.71 discount $ 26.70 $ 14.70$ 17.70 Bitumen LLB (Dil/Bit) + $ 19.50 COND 75% Bitumen Maya 25% COND $1.80 discount Historic Strategy – Heavy Oil Domination of PADD II Future Strategy – Synbit Market Development Note: Based on US$23 WTI, transportation adjusted to Chicago

30 CNQ TSX/NYSE Horizon Oil Sands Project Overview Resources 6 billion bbl recoverable oil (unbooked) Production 2008 113,400 bbl/d SCO 2010 154,800 bbl/d SCO 2012 232,200 bbl/d SCO Project IRR 15.1% (after tax/royalty) 100% owned and operated Vast, Long-Term Growth Opportunity SHELL SUNCOR FIREBAG SHELL MUSKEG CNQ HORIZON SYNCRUDE AURORA SYNCRUDE MILDRED LAKE SYNCRUDE AURORA MILLENNIUM SUNCOR

31 CNQ TSX/NYSE Project Economics Before Tax IRR 16.1% NPV 8 (millions)8,348$ NPV 10 (millions)4,755$ After Tax IRR 15.1% NPV 8 (millions)5,328$ NPV 10 (millions)2,917$ Sensitivity to WTI pricing (US $) Project breakeven (capital paid back)13.30$ Project 8% return (after tax)16.10$ Project 10% return (after tax)17.50$ Robust Economics Based upon: WTI forecast SCO penetration discount (from WTI) Natural gas ($ 4.00 NYMEX) Power (for imported amounts) Currency exchange (US$ : C$) Escalation per year US$23.00 US$0.92 C$4.66 per GJ C$42.90 per MW 0.735 2.5 %

32 CNQ TSX/NYSE Sensitivity Analysis On Project Economics WTI Capital Prod C$ Op Costs Nat Gas 12.0% 13.0%14.0%15.0%16.0%17.0%18.0% Internal Rate of Return US$20 Increase $ 1 billion @ 209/d C$ = 0.765 US$ $ 13.36 per bbl SCO $ 5.66 per GJ US$26 Decrease $ 1 billion @ 255/d C$ = 0.705 US$ $ 11.36 per bbl SCO $ 3.66 per GJ

33 CNQ TSX/NYSE Execution Strategy – Construction Plan Front end engineering & design (complete before proceeding) Benchmarking (and lessons learned) Labour strategy Managed Open Site (maximize access to key resources) Manageable pieces (accountability) Canadian Natural managing contractor Do not contract out commercial decisions Selective application of standardization Project integration and coordination of interfaces Prudent, Disciplined Approach

34 CNQ TSX/NYSE Execution Strategy – Financing Plan Phase I financing requirements of C$4.9 billion Principles Maximize ownership while maintaining credit ratings No equity dilution Financing tools Cash flow with hedge protection Business partners Debt capital markets and bank financing Project equity partner, if required Phase I will generate sufficient cash flow to finance Phases II and III A Prudent Approach

35 CNQ TSX/NYSE Financing Phase I of Horizon Cash flow in excess of conventional capital requirements ($0.2 to $0.5 billion annually) Financial hedge program Bank financing - Horizon credit facility Balance sheet growth capacity Business partners Total source of funds 2004 - 2008 $ 1.0 - 2.5 TBD 1.5 2.4 $ 6.4 – 7.9 Over $6.5 Billion of Financing Sources Identified for $4.9 Billion Requirement

36 CNQ TSX/NYSE Near/Mid/Long-term - North Sea Exploitation opportunities Control core assets Add value via cost reduction Acquisition opportunities Near/Mid/Long-term - Offshore West Africa Continue Espoir development Develop Baobab for 2005 production Explore satellites High impact light oil exploration in Angola International Plan Defined Targeting >100,000 Barrels per Day by End of 2005

37 CNQ TSX/NYSE North Sea Deliver Value Creation through Cost Control Northern North Sea Central North Sea Banff /Kyle Ninian Hub Murchison Hub ~60,000 boe/d Exploitation base similar to WCSB Operate ~99% and own ~80% of production 2004 Plans Drill 13 wells Banff gas reinjection Kyle tie back to Banff

38 CNQ TSX/NYSE Côte d’Ivoire Area of light oil growth Espoir development upside Acajou delineation West Espoir development Baobab development First oil mid-2005 Net production of ~24,000 bbl/d ramping to ~35,000 bbl/d Development drilling underway FPSO and infrastructure under construction A Decade of Growth Prospects Oil Field Gas Field Prospect CNR Lands Côte d’Ivoire Atlantic Ocean 2000 1000 500 100 CI-400 CI-103 CI-26 CI-27 LION PANTHERE FOXTROT MANTRA FPSO Ivorien Acajou West Espoir East Espoir Baobab CI- 40 Abidjan Kossipo Natural Gas Pipeline to Siru

39 CNQ TSX/NYSE Angola High risk / high impact addition to our portfolio One prospect drilled in 2003 A second prospect to be drilled early 2005 Excellent relationships with government agencies High Impact / High Risk Exploration 22 Northern ultra-deep West 8 21 20 7 6 19 5 4 18 34 33 17 32 31 15 16 3 2 1 14 Kizomba Girassol/ Pluto Rosa Lirio Dalia Angola 16 BLOCK 16 Omba Zenza WI 50%

40 CNQ TSX/NYSE Company Overview: Financials The Premium Value, Defined Growth Independent

41 CNQ TSX/NYSE Consistent Growth A History of Value Creation 34% CAGR Cash Flow per share Actual23% CAGR Actual34% CAGR Reserves per share (boe) Daily Production per 1,000 shares (boe/d) Gas Oil 20% CAGR 17% CAGR 23% CAGR Pretax Net Asset Value per share

42 CNQ TSX/NYSE Future Growth – Current Dev’t Projects 10% CAGR (mboe/d) A Well Defined, Controlled Path to Future Growth

43 CNQ TSX/NYSE Production Natural gas (mmcf/d)1,320 – 1,3951,299 Oil and liquids (mbbl/d)263 - 283242.4 Financial ($ millions) Cash flow (1) 2,600 – 2,7503,160 Earnings (1) 780 - 8251,407 Capital expenditures2,750 – 2,9502,506 Guidance Current Strip Pricing Yields 3.0 - 3.2 billion of Cash Flow 2004E2003 (1) 2004 based upon the following price assumptions: WTI (US$/bbl)26.00 NYMEX (US$/mcf)5.00 Heavy oil diff (US$/bbl)8.50 C$/US$0.75 For further guidance please see Canadian Natural’s website.

44 CNQ TSX/NYSE Financial Strength Strong debt ratings (Baa1, BBB+, BBB(high)) History of balance sheet management Ratio objectives Debt to EBITDA (1.5-2.0x) Debt to Capitalization (40-45%) Return on Capital Employed (10%+) Exploitation of recent acquisitions will lift returns Cash Flow on Capital Employed (20%+) Conservative accounting and reserves policies Capability to Support Future Growth

45 CNQ TSX/NYSE Wrap Up – The Canadian Natural Story Attractive stock price based upon base E&P metrics Debt-adjusted cash flow per share multiple Enterprise value per flowing barrel Strong growth profile History of growth Strong inventory supporting future growth Strong and clean balance sheet

46 CNQ TSX/NYSE Wrap Up – The Canadian Natural Story NA natural gas asset base is strong and delivering NW AB and NE BC drive the growth NA conventional oil asset base is vast 3 billion bbl to develop Defined marketing strategy North Sea is performing as we utilize mature basin expertise Anticipate future acquisition opportunities Offshore West Africa provides larger, high ROCE projects Strategically positioned for additional opportunities A Recipe for Success

47 CNQ TSX/NYSE Wrap Up – The Canadian Natural Story (cont’d) Horizon, a world class project adds significant value Financial plan identified High degree of project definition High degree of definition in execution strategy High caliber, experienced team Overall execution risk minimized Strong balance sheet, with access to capital markets Management philosophy / structure equipped to handle Horizon, Canada and International without losing focus Cost control culture – a low cost and focused producer Proven, committed management team A Recipe for Success

48 CNQ TSX/NYSE Forward-Looking Statements Certain statements in this document or incorporated herein by reference may constitute “forward-looking statements” within the meaning of the United States Private Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because of the context of the statements including words such as the Company “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 which 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: the general economic and business conditions which will, among other things, impact demand for and market prices of the Company’s products; the foreign currency exchange rates; the economic conditions in the countries and regions in which the Company conducts business; the political uncertainty, including actions of or against terrorists, insurgent groups or other conflict including conflict between states; the industry capacity; the ability of the Company to implement its business strategy, including exploration and development activities; the ability of the Company to complete its capital programs; the 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 availability and cost of financing; the success of exploration and development activities; the production levels; the uncertainty of reserve estimates; the actions by governmental authorities; the government regulations and the expenditures required to comply with them (especially safety and environmental laws and regulations); the site restoration costs; 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 upon other factors, and management’s course of action would depend upon its assessment of the future considering all information then available. 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 profitably 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 are 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 qualified in their entirety by these cautionary statements. The Company assumes no obligation to update forward-looking statements should circumstances or management’s estimates or opinions change.

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