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Canadian Natural Resources Ltd (NYSE:CNQ)
Q3 2020 Earnings Call
Nov 6, 2020, 11:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Canadian Natural Resources Earnings Results Conference Call and Webcast.

[Operator Instructions]

I would now like to turn the meeting over to your host for today's call, Corey Bieber, Executive Advisor. Please go ahead, Mr. Bieber.

Corey B. Bieber -- Executive Advisor

Thank you, operator. Good morning everyone and thanks for joining our third quarter 2020 conference call.

With me this morning is our President, Tim McKay and Mark Stainthorpe, our Chief Financial Officer.

Before we begin, I would refer you to the special note regarding non-GAAP measures contained in our press release. These measures used to evaluate the company's performance, should not be considered to be more meaningful than those determined in accordance with IFRS. I would also like to refer you to the comments regarding forward-looking statements contained in our press release and also note that all amounts are in Canadian dollars and production and reserves are expressed as before royalties, unless otherwise stated.

With that, I will now pass the call over to Tim.

Tim S. McKay -- President

Thank you, Corey. Good morning everyone.

Canadian Natural delivered top tier operational results in the third quarter, 79% of our liquids production from our high quality long-life low-decline assets, which were resilient in volatile pricing. And as a result of our operational excellence, ability to enhance margin, and capital discipline, we delivered significant substantial cash flow in the quarter.

The strengths of Canadian Natural business model are also applied to environmental, social, and governance to deliver industry-leading performance across the board. A significant factor in our long-term sustainability. Canadian Natural and the entire Canadian oil and gas sector leads the world and has delivered game-changing environmental performance.

In the third quarter, we published our 2019 Stewardship Report to stakeholders and highlights from the report are, total recordable injury frequency at 0.28, down 51% since 2015. Awarded approximately CAD550 million in contracts to 150 indigenous businesses, three out of eight are female, of our independent directors. Corporate GHG emissions down 16% from 2015. Oil sands mining and in situ GHG intensity down 36% from 2016. At Quest, our 70% owned carbon capture facility reached the milestone in the third quarter with a cumulative 5 million tonnes of CO2 injected, equivalent to taking 1.25 million cars off the road annually. And we are a leading capture and sequester of CO2 in the oil and gas sector worldwide. These are just a few examples of our ESG excellent.

In our oil sands operations, we can develop technologies using Canadian ingenuity to continue to move us closer to Canadian Natural's aspirational goal of reaching net zero emissions. Canadian Natural has multiple pathways to achieve net zero with actions identified in the near, mid and long-term and the strength of Canadian Natural's, Canadian oil sands mining assets is that it's long life, no decline and with this manufacturing like operations, it can have one of the clearest routes, if not the clearest route to net zero of any global asset. Operationally, Canadian Natural's third quarter results are quarterly production of 1.11 million BOEs with natural gas production of 1.36 Bcf and liquids production of approximately 884,000 barrels a day as we maximized production as per our curtailment optimization strategy and effectively and efficiently conducted maintenance.

Starting with natural gas, Q3 overall production was 1.36 Bcf, a decrease from Q2 of 1.46. With North America Q3 natural gas at 1.34, as expected, down from Q2 of 1.43, we continued to focus on operational excellence and our Q3 North American natural gas operating cost was strong at CAD1.14 per Mcf vs. Q2 of CAD1.11. We continued to add low cost natural gas volumes, which has resulted in adding approximately 58 million cubic feet per day for approximately CAD2,000 per BOE/d. Much less than our target of CAD3,000 per BOE/d. We remain on track to add 35 million cubic feet per day of natural gas volumes annually. In the third quarter, Canadian Natural realized the North American natural gas price of CAD2.25 [Phonetic] per Mcf, approximately 49% higher than Q3 2019.

With the strong natural gas pricing, the company has reallocated capital within its existing budget to both Septimus and Townsend areas, with the total program targeting to add approximately 95 million cubic feet of natural gas and 2,900 barrels of NGL for less than CAD5,000 per BOE. Our Q3 in North American light oil and NGL production was 79,600 barrels, down by approximately 3%, primarily result of natural decline and maintenance activities in the quarter. Q3 operating cost decreased to CAD14.13 per barrel versus Q2 of CAD14.41 per barrel.

Overall, our international assets had Q3 production of 38,800 barrels a day as expected. Offshore Africa was 17,500, which is comparable to Q2 at 17,400. Operating costs in Q3 were $12.32 per barrel versus Q2 $7.67 per barrel as a result of lifting schedule. In the North Sea, production averaged approximately 21,200 barrels a day in Q3, down from Q2 of approximately 26,600 primarily due to plant maintenance activities, the cessation at Banff and Kyle field and natural field declines with operating costs of approximately CAD42.10 per barrel. Subsequent to quarter end, we announced the operator of the South African block 11B and 12B, made a second significant gas condensate discovery. Exploration well was drilled, encountered 73 meters of net pay, and it's currently being tested with deliverability results targeted by year-end 2020. Canadian Natural has a 20% working interest and expects the cost of the wells to be fully carried per the Farm-Out Agreements.

Heavy oil production increased in Q3 to approximately 71,000 barrels a day, versus second quarter approximately 62,500, as we reinstated temporary curtailed production related to low pricing. Q3 operating costs decreased to CAD15.96 per barrel from Q2 operating costs of CAD17.97, reflecting our focus on cost control. A key component of our long life, low decline assets is a world-class Pelican Lake pool, where our leading-edge polymer flood continues to deliver significant value. Third quarter production was approximately 56,400 barrels a day, up from the second quarter of 55,700, primarily a result of restating well servicing activities in the quarter, offsetting natural decline. Operating costs continued to be very strong at CAD5.76 per barrel, versus Q2 of CAD6.31 per barrel. At Pelican, our team continues to drive operational excellence and with our low decline and very low operating costs, Pelican Lake continues to have excellent netbacks.

Our thermal team had a great third quarter, with the thermal production record of 287,978 barrels a day, up from Q2 of approximately 213,000 barrels a day. Operating costs in Q3 were near our record low at CAD7.85 per barrel, down 23% versus Q2 operating cost of CAD10.13. Some of the highlights from the third quarter. Kirby North production was very strong at 42,400 barrels, above our nameplate capacity of 40,000. Jackfish was a record for Canadian Natural at 122,346 barrels a day. These are just a couple of examples for the great work done by our team.

At our Oil Sands Mining operations, Q3 was approximately 350,600 barrels as planned maintenance was conducted with strong operating costs of CAD23.81 per barrel of SCO as our teams are very focused on driving operational excellence. As part of the company overall strategy to maximize value and enhance margins work at the Scotford Upgrader was completed and increased to capacity of approximately 320,000 barrels a day. In late October, the Albian mine ran at rates of approximately 345,000 barrels a day of bitumen, and Scotford processed at approximately 323,000 barrels a day. As a result of mandatory curtailments, ASOP targets to resume full expanded capacity in December 2020. This additional capacity at ASOP will allow for increased margin enhancement in our Oil Sands Mining Upgrading segment. As well, subsequent to quarter end planned maintenance was completed at Horizon and it is currently at 260,000 barrels a day.

I will now turn it over to Mark for a financial review.

Mark Stainthorpe -- Chief Financial Officer and Senior Vice-President, Finance

Thanks, Tim.

The third quarter was strong operationally and financially, as we delivered significant free cash flow of approximately CAD1 billion after capital, and approximately CAD470 million after capital and dividends with adjusted funds flow of CAD1.74 billion. These results reflect high planned maintenance and turnaround activity at both Horizon and Scotford in the quarter. Net earnings in the quarter were also strong at CAD408 million. This clearly demonstrates the advantages of having a low cost structure with breakeven prices, including maintenance capital and the dividend at $30 to $31 WTI and a unique portfolio of assets with low decline supported by zero decline production from our mining assets, which provide high quality premium value synthetic crude oil production.

Our balanced and diverse product mix limits our exposure to one product, with fourth quarter production targeting approximately 45% high value light crude oil, synthetic crude oil and NGLs. Approximately a third heavy thermal crude oil and approximately a quarter natural gas on a BOE basis. Importantly, approximately 80% of our liquids production is from a long-life, low-decline assets which require less maintenance capital providing sustainability through volatile prices. In the fourth quarter, we are targeting over 1.6 Bcf a day of natural gas production including our recent acquisition. Based on the current Q4 strip pricing including the value of the liquids, our natural gas assets are forecast to generate approximately CAD1.2 billion in annualized operating cash flow. The operating flexibility of our asset base and the ability of our teams to execute the plans was evident in the quarter as we balanced production within the asset base to increase funds flow and maximize value.

Our flexible capital allocation ensures long-term free cash flow generation and continued balance sheet strength. Net debt decreased by CAD1.1 billion compared to Q2 '20 levels as free cash flow contributed to debt repayment in the quarter. Liquidity remained strong at the end of Q3 with total availability of CAD4.2 billion, including cash and short-term investments and we retired a CAD1 billion bond at maturity in August. Our long-life low-decline assets and effective and efficient operations gives us the ability to sustain returns to shareholders over the long term. This is demonstrated by the 20 consecutive years of dividend increases and reflects our culture of continuous improvement, our ability to be effective and efficient and the relentless focus at Canadian Natural in controlling our costs. This all contribute to significant free cash flow generation and strong financial results in the quarter.

With that, I'll turn it back to you, Tim.

Tim S. McKay -- President

Thank you, Mark.

Canadian Natural's ability to deliver significant and sustainable cash flow is driven by our effective and efficient operations, our drive and continuous improvement. And for 2020, we are on track for targeted savings of approximately CAD745 million. As an example, Q3 2020 North American E&P liquids operating costs down 17% versus Q3 2019. As a result of our effective and efficient operations and the quality of our assets, we have a low free cash breakeven including capital expenditures plus current dividend of approximately $30 to $31 per barrel.

Canadian Natural continues to take a proactive and effective steps to ensure the health and safety of people working for us and we continue to enhance our COVID-19 program across the company. We are on track to achieve our environmental targets and we'll continue to lower intensity as we work toward our aspirational goal of net zero in the oil sands. In Q4, we are targeting over 1.6 Bcf of natural gas productions including our recent acquisition. Based on the current natural gas strip pricing including the value of liquids, our natural gas assets could generate approximately CAD1.2 billion on an annualized basis.

In summary, we continue to focus on safe reliable operations, reducing our GHG intensity, enhancing our top-tier operations. Our high quality diverse assets are delivering top tier cash flow generation. We are unique, sustainable, robust and clearly demonstrate the ability to deliver returns to shareholders by balancing our four pillars.

That concludes our Q3 call. I will now open the line for questions.

Questions and Answers:

Operator

[Operator Instructions]

Your first question comes from Greg Pardy from RBC Capital Markets. Your line is open.

Greg Pardy -- RBC Capital Markets -- Analyst

Thanks, good morning. Couple of questions for you. Tim, maybe just to come back to the capacity growth at Scotford and then lets maybe just weave in Horizon. But do you see further low cost debottlenecking capacity increases that you could do here either in '21 or '22? Is there much -- is there still much low-hanging fruit there for you to go after?

Tim S. McKay -- President

Well, at Scotford, there is still some capacity there. That won't happen until 2022. But that, we're working through with our partner. And then as far as Horizon, yes, there is opportunities to further enhance that. We're proceeding with some into 2021 and again in 2022, but there is some value enhancements there that can happen. As we continue to operate these facilities, we are always looking for opportunities to enhance that production as well as lowering costs.

Greg Pardy -- RBC Capital Markets -- Analyst

Okay, terrific. And just with Scotford, just rough order of magnitude similar to what you've just done at 20,000 or is that, is it too early?

Tim S. McKay -- President

It's too early to say.

Greg Pardy -- RBC Capital Markets -- Analyst

Okay. Second question is -- sorry, sorry, go ahead, Tim.

Tim S. McKay -- President

Yeah. We really didn't get a chance to test Scotford here before curtailments here in November.

Greg Pardy -- RBC Capital Markets -- Analyst

Okay. Okay, understood. Maybe just to come back to the last conference call and this is pre-Painted Pony, but question for Mark. I think your thinking at that time was -- this, look, our net debt should be kind of flat year-over-year. If you exclude Painted Pony and then just look at how things shake out through the balance of the year, would you still come close to that do you think? You've obviously made good progress with this quarter.

Mark Stainthorpe -- Chief Financial Officer and Senior Vice-President, Finance

Yeah. Thanks, Greg. Certainly, the commodity prices are ever changing here and that was an August pricing kind of strip, but yeah, I think if you exclude the acquisition from a capital perspective in Q4, we're going to generate strong free cash flow in the quarter and if you exclude, that will be driving toward those levels. So that free cash flow as you saw in Q3 going to debt repayment and again seeing strong cash flow at current strip pricing in Q4.

Greg Pardy -- RBC Capital Markets -- Analyst

Okay, terrific. Thanks, guys.

Mark Stainthorpe -- Chief Financial Officer and Senior Vice-President, Finance

Thank you.

Operator

Your next question comes from Neil Mehta from Goldman Sachs. Your line is open.

Neil Mehta -- Goldman Sachs & Co. -- Analyst

Hey guys, congrats on a good quarter here. The first question I had was around your natural gas business. Can you talk about how you see this fitting in strategically in the context of CNQ's portfolio, whether you want to grow gas as a percentage of mix over time? And then you talked about the strip being a CAD1.2 billion cash flow business. Can you kind of frame out what do you think the free cash flow is, so help us understand the capex associated to fund that cash flow?

Tim S. McKay -- President

Yeah. So just in the context of our natural gas volumes, obviously what we target to do is add value long term. And so whether it's gas, oil, we really, with our asset base try and maximize value all the time. So if you look at this year, we started off at CAD4.1 billion, we went down to CAD2.7 billion. Obviously, that original budget had more oil weighting as if it was greater pricing and better value for us. As we got into June-July, natural gas prices continued to strengthen and obviously reallocating capital within that context of CAD2.7 billion into natural gas because it's more value-added at Septimus and Townsend. So you know from -- there is no intent to grow one product or another. Every year, we look at it and every -- at all the time, we're modifying our plan to maximize value. In terms of the free cash flow, it's really difficult to say. We have a small program here at Septimus and Townsend here in the fourth quarter, but really big part of that is all that just free cash generation from our operations. So it's really -- that's the only way to look at it in the short term.

Neil Mehta -- Goldman Sachs & Co. -- Analyst

Yeah, very clear. The follow-up is just around capital spending. So couple of questions there. Are you guys still plan on doing an open house later this year, I guess probably virtually? Is that when we will get a sense of 2021 spend? I know you mentioned some release in December. And any early thoughts and flavors just given where the curve is, how it could look relative to the CAD2.7 billion this year?

Mark Stainthorpe -- Chief Financial Officer and Senior Vice-President, Finance

Hey Neil, it's Mark. We're still working through that. Yeah, we do plan to have an announcement or release sometime in December around what the budget is for 2021. We're still working through how that will actually be communicated whether it's more full-blown presentation or not, but we will get there. What we're going through right now is it's too early to really kind of indicate directions. We got to kind of work through the final touches on it.

Neil Mehta -- Goldman Sachs & Co. -- Analyst

Okay, all right. Thanks, guys. Looking forward.

Tim S. McKay -- President

Thank you.

Operator

Your next question comes from Asit Sen from Bank of America. Your line is open.

Asit Sen -- Bank of America Merrill Lynch -- Analyst

Thanks. Good morning. Tim, we finally have started to see some M&A in the space both in the US and Canada. Question for you, what do you think is triggering this mini-wave? You have said no holes in the portfolio, but from a broader industry standpoint in North America, you see more consolidation and what do you see as the main impediments for consolidation?

Tim S. McKay -- President

Yeah, I think we probably are in a time of consolidation. Obviously, there is some very healthy companies and there is some companies that aren't so healthy. Obviously, through the consolidation thing, there are opportunities to improve your operations both on capital and G&A and such. So, I think on a broader basis, yes, there will continue to be some consolidation here over the next year as we've seen. Whether, how it happens, who does it, that's always hard to say. Really, it's just, to me, just a cycle and it's pretty common in these cycles that M&A does happen.

Asit Sen -- Bank of America Merrill Lynch -- Analyst

Okay, great. And Tim, on your international asset portfolio and you have some good cash flow generating assets in North Sea and Offshore Africa. How do you see that portfolio, are there rooms to deepen or rationalize, how do you think about that portfolio?

Tim S. McKay -- President

No, we like our international assets. They are free cash generating. We've made several billions of dollars over the years out of those assets over time, because they are free cash generation. No, we're very happy with them and we'll just continue to invest prudently into those assets to continue to generate free cash flow.

Asit Sen -- Bank of America Merrill Lynch -- Analyst

Thanks.

Operator

Your next question comes from Menno Hulshof from TD Securities. Your line is open.

Menno Hulshof -- TD Securities Inc. -- Analyst

Good morning, everyone. I just have one question on your In Pit Extraction Process given the potential for a pretty significant reduction to the bitumen emissions. Just looking at the press release, you talked about pilot work having slowed down because of COVID, but can you just give us an update on what the data looks like so far, sort of your best guess on where things stand in terms of the timeline to commercialization if everything goes according to plan, and maybe some high-level thoughts on how important this work is in the context of your net zero aspirational target? Thanks.

Tim S. McKay -- President

Yeah. IPEP is a great project. Obviously, we're piloting it. We wanted to pilot it again further this year to refine it. From a sediment stacking perspective, it worked well. We needed to get a higher stackability in the higher fines [Phonetic] areas as well as recoveries on the higher fine material was not as good as we wanted. So, we wanted to do some refinement in the high fines area that was supposed to happen this year. In the meantime, because we can't pilot it and the COVID seems to be dragging on a little longer, we've been doing basically commercial engineering with the people that were involved with IPEP, just to keep that progressing there. In terms of commercial-ability, we are looking to step into it, but it is, as you would step into it over time and I believe it was 2026 kind of time range, that we would start converting over to IPEP. So, it was going to be a very methodical process in terms of converting over to IPEP starting at 2026 around.

Menno Hulshof -- TD Securities Inc. -- Analyst

Okay. So the 2026 timeline still seems achievable?

Tim S. McKay -- President

I think so, yes. We'd like to really get out there and do the final testing on the high fines material, just to ensure that we feel comfortable with where it's -- it's ability. But yes, so far that's still the plan.

Menno Hulshof -- TD Securities Inc. -- Analyst

And then in terms of the conversion, you'd be thinking sort of three to five years, or bit shorter, bit longer?

Tim S. McKay -- President

Yeah, three to five. No, that's about the right time frame.

Menno Hulshof -- TD Securities Inc. -- Analyst

Perfect. Thanks, Tim.

Tim S. McKay -- President

Thank you.

Operator

Your next question comes from Manav Gupta from Credit Suisse. Your line is open.

Manav Gupta -- Credit Suisse Securities Inc. -- Analyst

Hey guys. I think on the last earnings call, Tim, you specifically said that we will flex our thermal muscle in 3Q and I think it was under-appreciated how strong that muscle was because the volumes hit 287,000 and the cost went to CAD7.85. So, congratulations on that. My question here is, is that, sir, as we part of our thermal in situ for 4Q, we were thinking as Horizon goes up, thermal in situ comes down because of the production curtailments. But now that the curtailments are gone, obviously thermal in situ might come down a little, but do you have to take it down to all the way to 230,000 or could you run at a higher rate, now that the production curtailments are gone?

Tim S. McKay -- President

Yes. So, yes. Thank you for the comments on the thermal piece. It's -- yeah so, for the month of November, obviously thermal will be curtailed as well as ASOP and a few other properties. And then when we head into December, we will start to increase production. Obviously, we'll take a look at how much we would want to increase our thermal production based on pricing with the flexibility on the cyclic steam side. We may be better off to delay a cycle and move it into next year. So, we are always looking at that and seeing how we can maximize value, but the production in general for December would go up.

Manav Gupta -- Credit Suisse Securities Inc. -- Analyst

Okay, and one follow-up, sir. Enbridge Line 3, what's the next important milestone or data point we can watch? And in your opinion, could this be a 2021 event, the start-up of Enbridge Line 3?

Tim S. McKay -- President

Yeah. I understand that there is some information that is supposed to come out of the courts potentially next week, which would then kind of given that that kind of stepping stone into finishing Line 3. So, hopefully that all proceeds there kind of in the mid 2021 time frame. So, but I believe it's next week, but really, you'd have to talk to Enbridge.

Manav Gupta -- Credit Suisse Securities Inc. -- Analyst

Thank you for taking my question.

Tim S. McKay -- President

You are welcome.

Operator

Your next question comes from Matt Murphy from Tudor Pickering Holt. Your line is open.

Matt Murphy -- Tudor, Pickering, Holt & Co. -- Analyst

Hi, thanks, good morning. Maybe just a quick follow-up on Manav's question on IPEP and maybe broadly on capital associated with achieving net zero emissions over time. I guess, just curious how you think about investment in emissions reduction technologies. For example, as part of the broader capital allocation process, is it coming down to returns versus returns and you competing for capital, or is some incremental consideration for the environmental side, for example?

Tim S. McKay -- President

Really, we try and balance both. Obviously, returns are extremely important and so, if you look at something like IPEP, what was really so motivating to do that is, one, it reduced our GHG emissions. Secondly, it got rid of our tailings pond. And with that, we had a reduced liability in terms of reclamation. So, what we try and do is find projects which complement our operation, add value long term as well as reduce our environmental footprint. So, we try and balance many different items and our teams are very good at coming up with creative ideas to reduce our environmental footprint and add value. So I think, through our technology and innovation group, under Joy, it is very structured in terms of pushing projects that give us returns rather than just to do a project.

Matt Murphy -- Tudor, Pickering, Holt & Co. -- Analyst

Thanks, Tim. And maybe just a quick follow-up for Mark on the comments on maintaining largely flat net debt year-over-year. I think one of the key moving pieces that we talked about previously was some working capital movements over the course of the second half of the year. I'm just wondering if you could remind us how you're thinking about the progression of cash from that component in the fourth quarter? Thanks.

Mark Stainthorpe -- Chief Financial Officer and Senior Vice-President, Finance

Yeah, sure, Matt. It's always difficult to predict the changes in working cap as we go through. It will depend a little bit on pricing and how December looks as far as receivables as we get paid in the following quarter. So, you did see a pickup from it in Q3 which we kind of expected and contributing to that ability to repay debt along with the free cash flow. So it's difficult to predict, but, outside of that, again with the assets, the ability to generate free cash flow in the fourth quarter will be evident I think even at lower commodity prices given the low break-evens.

Matt Murphy -- Tudor, Pickering, Holt & Co. -- Analyst

Thanks, guys.

Operator

[Operator Instructions]

Your next question comes from Roger Read from Wells Fargo. Your line is open.

Roger Read -- Wells Fargo -- Analyst

Hey, thank you. Good morning. I guess what I'd like to maybe understand going back to, I think it was Manav's question, a little bit on moving crude down and increasing production in December. We've seen fairly tight WCS to WTI differentials. As you think about your $31 breakeven and potentially wider differentials, I think whether or not you increase production, somebody else is, what do you think is kind of your tolerance for a wider WCS differential as you increase production into, I would guess more like early 2021 more so than the end of 2020?

Tim S. McKay -- President

Yeah. If you look at what's going on here in the last year or two, really there hasn't been any significant production adds, not on the heavy oil thermal side. And so what we've seen here basically from March to essentially November, was a decline in oil storage in Alberta. I think it went down to around close to 20 million barrels. Obviously, with curtailment coming up as well as maintenance being completed whether it's Horizon, ASOP, or the other properties in Northern Alberta mining properties, so typically, we do see higher production during the winter months obviously because of the weather and obviously if you're going to run in the winter, you have to be able to run whole winter. So, there could be some pressure but if the storage levels were down at around 22 million barrels, the pipelines essentially -- when storage was going down September and October, ironically apportionment was 12% and 18%, which makes zero sense. So obviously, there is still gamesmanship being done on the apportionment side, but I think rather than just companies running out production there, I don't really see a lot of production adds other than just people trying to run at their maximal capability of their properties.

Roger Read -- Wells Fargo -- Analyst

No, that makes sense. So, should we think about it then more as whatever the market takes is what the market takes, and not worry so much about specific differential? I'm thinking of what ultimately kind of pushed the whole curtailment was obviously quite a collapse in the market. So, do you think, if we were to go above say CAD15, people will be a little more careful or pullback or -- after all, it's the oil market and we'll all just push until we push too far and get pushed back the other way?

Tim S. McKay -- President

Yeah, I just look at it -- nobody really has added any capacity. So other than really running out production, I don't see it being really a long-term thing. Again during the winter months, if you're going to run your operations, you're going to run kind of at a good rate, not necessarily at full, depending on the pricing. But once March hits, the turnaround activities begin again and that pressure comes off. So, I really look at it as a short-term blip, but maybe some gamesmanship in terms of apportionment and the differentials, but really there has not been significant amount of supply add. It's just all going to be how companies run during the winter months. And obviously, what's really important is our pipelines to continue to run safely and reliably over the winter months. In the past couple of years, there were some incidents on the pipeline side right around the November time frame that put the pressure on the differentials.

Roger Read -- Wells Fargo -- Analyst

Okay, appreciate it. Thank you.

Operator

There are no further questions at this time. I'll turn the call back over to the presenters.

Tim S. McKay -- President

Thank you, operator, and thank you, everyone, for attending our conference call this morning.

Canadian Natural's large diverse asset base continues to drive significant shareholder value. The ability of our teams to deliver effective and efficient operations with top-tier performance is contributing to substantial and sustainable free cash flow. This together with effective capital allocation contributes to our overall goal of maximizing shareholder value.

If you have any further questions, please don't hesitate to give us a shout. Thanks and goodbye.

Operator

[Operator Closing Remarks]

Duration: 35 minutes

Call participants:

Corey B. Bieber -- Executive Advisor

Tim S. McKay -- President

Mark Stainthorpe -- Chief Financial Officer and Senior Vice-President, Finance

Greg Pardy -- RBC Capital Markets -- Analyst

Neil Mehta -- Goldman Sachs & Co. -- Analyst

Asit Sen -- Bank of America Merrill Lynch -- Analyst

Menno Hulshof -- TD Securities Inc. -- Analyst

Manav Gupta -- Credit Suisse Securities Inc. -- Analyst

Matt Murphy -- Tudor, Pickering, Holt & Co. -- Analyst

Roger Read -- Wells Fargo -- Analyst

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