John Langille - Vice Chairman Allan Markin - Chairman Steve Laut - President and COO Real Doucet - SVP of Oil Sands Doug Proll - SVP of Finance

Benjamin Dell - Sanford Bernstein Gil Yang - Citigroup Brian Dutton - Credit Suisse Greg Pardy - Scotia Capital Steven Calderwood - Raymond James Barbara Betanski - UBS Global Asset Management Martin Molyneaux - Firstenergy Capital Ted Izatt - Bear Stearns Dave Lyons - Prudential Andrew Potter - UBS Securities Brian - Goldman Sachs John Herrlin - Merrill Lynch Robert Plexman - CIBC World Markets David Hall - Fairholme Capital Management

Good morning, ladies and gentlemen. Welcome to the Canadian Natural Resources Second Quarter Conference Call. I would now like to turn the meeting over to Mr. John Langille, Vice Chairman of Canadian Natural Resources. Please go ahead, Mr. Langille.

Thank you very much, operator and good morning, ladies and gentlemen. Thank you for attending this conference call and giving us the opportunity again to review our second quarter results for 2007 as we go forward. With me today are Allan Markin, our Chairman; Steve Laut, our President and Chief Operating Officer; Doug Proll, our Senior Vice President of Finance; and Real Doucet, our Senior Vice President of Oil Sands. Before we start, I would like to refer you to the forward-looking statements contained in our press release. And also please note that all dollar amounts will be in Canadian dollars, and production and reserves are quoted before royalties unless otherwise stated. Before I turn the call over to Allan, Steve, Doug and Real, I'd like to make a couple of quick comments on the first quarter. Our cash flow continues to be strong with first half results coming in at over C$3.1 billion. Our hedging program will help to underpin this cash flow for the balance of '07 and into '08 and this is particularly important when one reflects on the current downward spiral on natural gas sales prices. Although heavy oil differentials widened in the second quarter, due to refining outages in the U.S. and Midwest, some of which has not been planned, the differential remained at a level that is very favorable to achieve high returns for Canadian Natural. This reiterates the importance of pipeline connections to other markets which began to come in to the service in the second quarter of 2006. Our realized sales prices are ultimately affected by the exchange rate between U.S. dollars and Canadian dollars and our cash flow is of course adversely affected as the Canadian dollar continues to strengthen. However, taking into account all of the ebbs and flows that affect an E&P company's cash-flow, we are in an excellent position to continue achieving strong cash flows which will enable us to pursue delivery of our defined plan. As we discuss our results and operations, the importance of Canadian Natural’s balanced portfolio will be illustrated by our ability to efficiently reallocate capital for its higher return projects. We are able to demonstrate the focus on generating returns for our shareholders and the prudent stewardship of our strong asset-base. We are very pleased with the result of our efforts during the second quarter of 2007 and we are confident in our operations as we go forward throughout this year and years to come. Allan is there anything that you would like to add?

Yes, John thanks. Good morning, everyone. As we exit the first half of the year, we continue with our plan to control cost while maximizing value. On the conventional side, the strength of our natural gas program and the quality of our assets was demonstrated to a very productive winter drilling program and successes from a variety of wealth that have performed well above expectations. Our crude oil program continues to deliver with solid results in North America. Looking to Horizon, our three quarter compete, we remain on-track and maintain our focus on execution. As we enter the deconstruction period with over 7,000 people now on-site, it’s one of the more challenging periods to ensure effect of execution. We have been successful in the past using our strategy of proactively managing the site. Managing productivity of the workers and controlling cost and we are confident that by continuing with this strategy we will overcome the challenges we face today. The strong results from conventional operations and the major milestones being reached at Horizon are the true reflection of the strength of our team and the execution of our strategy. Now, Steve Laut will go into more detail on our activities during the first quarter.

Thanks Al, and good morning everyone. As both John and Al pointed out, the second quarter was another solid quarter for Canadian Natural. Our operational performance has been strong in gas, oil and at Horizon. As you can see our capital allocation strategy has been very effective; ability to reallocate capital effectively is clearly one of Canadian Natural's strengths. With reduced activity, we are seeing some capital cost reductions on the GAAP side of the business. Costs are down somewhat -- rate that is, but importantly productivity has increased markedly. Our hedging strategy has improved and showing we have a cash flow required to fund our capital programs that are adding significant value for shareholders. At Horizon, we are making great progress and we are roughly one year away from start-up. It's clear that Canadian Natural has the assets, a proven strategy, a well-defined plan and most important people to execute the plan; it's now really all about execution and in the second quarter we effectively executed our programs. We will be updating each of the areas and starting with gas in Canada. Gas production in the second quarter exceeded our production guidance at 1696 million cubic feet a day, we drilled only six gas wells in Q2 versus 201 in Q1, maintaining production levels quarter-over-quarter, which is impressive. Gas production of course will decline for the remainder of the year as we plan to drill only 275 wells in the second half and currently are producing 1640 million cubic feet a day. Achieving 35 wells plan for the second half includes about 125 additional shallow and coalbed methane gas wells that were not in a plan at the end of the first quarter. We have seen cost reductions for gas in Southern Alberta. The rate has decreased and productivity has increased and as a result completing well cost for shallow gas are down about 20% per well. These are low-rate wells and low-cost wells. Our overall capital budget or expenditures for 2007 remain unchanged. The results on our gas program, as Al pointed out has exceeded expectations in the first half. The result of the success for our high-graded program, [no meter] gas left behind and better efficiency in a field. As a result we have increased the midpoint of our guidance by 35 million cubic feet a day from 1,630 to 1,660 million cubic feet a day is the guidance. A reflection of the strength of Canadian Natural gas assets is the increasing guidance. We have now over 5 Tcf on our books and over 5 Tcf to develop on our land base, the second largest land base in Canada, 12 million undeveloped acres. Our gas assets are strong and our gas production performance is strong. Turning to oil, our performance was also strong, 240,420 barrels a day. We completed the steaming cycle near the end of the Q2 at Primrose and are now in the production dominate portion of the cycle. As a result oil production in Q3 should jump up in the mid-250s range, 250,000 barrels a day. At Primrose East, our second phase of the overall plant at 300,000 barrels a day are bringing only heavy oil production is on-track. The same work and module fabrication is well underway. Some of these will take Primrose processing capacity from 80,000 barrels a day to 120,000 barrels a day. Our third phase Kirby is plan to bring on 30,000 barrels a day and we are now building the regulatory application, which will be submitted by year-end. At Pelican Lake our polymer flood expansion continues on track and is delivering as expected. In the second quarter we had more positive results as the polymer broke to on original high lopes that came later than expected and furnace using polymer with oil. Now this is a very positive result as one of the risks we had in the polymer flood was that the polymer would actually break in a reservoir and make negatively impact recovery. In a recent pilot that hasn't happened, and it's increased our confidence on the overall success rates of the polymer flood. This is a reminder the Pelican have 2.8 billion barrels in place, primary recoveries in a 5% range and polymer recovery could take it to the 25% recovery range, 480 million barrels of the low cost incremental barrels. The Pelican Lake polymer flood will add significant value for all Canadian Natural shareholders. On the primary side on heavy oil, we drilled 22 wells in Q2 and expect to drill another 170 wells in Q3 and Q4. All the differentials as you know widened in Q2 for 27% in Q1 to 30% in Q2, as roughly 150,000 barrels a days, heavy oil conversion capacity in Phase II or in the Midwest was down for maintenance or other issues. On a positive side we are selling about 25000 barrels a day of crude in the Gulf Coast and receiving a differential of 19% of WTI or about $7.45 a barrels better than our volumes going into Midwest. As you know, and most of you know, there has been significant interest from Gulf Coast refiners to increase pipeline capacity to the Gulf for Canadian crude. This is driven largely by declining Mexican volumes and the uncertainties surrounding Venezuelan heavy supply. Clearly additional pipeline capacity in Gulf is in the best interest of Canadian producers and Gulf Coast refiners, and I say this alignment of interest has not been seen in the past and bodes very well for Canadian heavy oil producers. As Canada is a largest heavy oil producer, our vast resources 3 billion barrels on a define plan and another additional 8 billion barrels recoverable through our future projects. Adding additional pipeline capacity will add another incremental value to the tremendous value these resources hold Canadian Natural. In the North Sea, production was 57,286 barrels a day down somewhat from Q1. We continue to execute our mature base and strategy in the North Sea and make good progress at Lyell and Columba near pool developments. At Lyell, the first production well was on in Q2 and has stabilized about 1000 barrels a day. The second well will come on-stream mid August. At Columba, our raw water injection is up and running and injecting in two Columba wells. As you know, we are leveraging our expertise in the offshore business and from the North Sea and a government relations expertise in top of West Africa. And in crude oil, production was 29,788 barrels a day, up from Q1, reflecting the strong performance at Espoir and stable production at Baobab. Espoir continues to exceed expectations and is currently producing above 18,000 barrels a day In Q2, we also initiated plans to expand the processing capacity on the Espoir FPSO to accommodate future volumes from Espoir and the actual area near Espoir. The deepwater rig contracted to repair the shut-in Baobab wells is expected in Q4 2007. However, I think there is a real potential for that day to slip into 2008. We anticipate that this rig -- we'll be able to repair at least three out of five wells shut-in during the first year of the contract and currently we have about 15,000 barrels a day shut-in at Baobab. At Olowi and Gabon, our shallow water development is on schedule with all major contract awarded, and first crude oil at Olowi is expected late 2008 with production ramping up to about 20,000 barrels a day of light, sweet crude. Overall, we are very happy with our Offshore West Africa and international operations and we are on track developing the higher petroleum product capital projects in the company's portfolio. Of course, we are all here to give you an update on Horizon, a world-class Horizon's project. I'll make a few general comments. As you know Horizon has government approval for the first three phases to take up to 232,000 barrels a day of light, sweet crude, these royalty agreements were in place for all three phases. In addition, we have future plans for Phases IV and V to take production to just under 500,000 barrels a day or 0.5 million barrels a day of light, sweet 34 degree API crude with no declines for 40 years. The first phase at 110,000 barrels a day is on schedule for Q3 '08 commissioning. And our costs remain unchanged from the Q1 report. We are now offsetting 5% complete having progressed 9% in Q2. We now have four quarters left to go and 25% left to finish. We are in good shape. That being said, we have faced many challenges in the past and to this point, and I don't expect it to get any easier from here on in. We have over 7,000 people onsite and one of the challenges that we are facing and have overcome obviously is that we were be unable to get the people. Clearly, we have been able to get the people and we are making this progress. As you know we completed a significant amount of work in on Phase I for Phases II and III. Significant infrastructure has been completed for Phases II and III as well as all the major long-lead vessels high pressure and low pressure have been ordered. This gives Canadian Natural a distinct and strategic advantage as we build out the remaining phases of our Horizon Project. We are right now -- we are validating various options on how best to construct Phase II and III and maximize cost control in this environment. We don't need to make a decision on the best method until mid 2008 and we'll take that time to ensure we have the greatest degree of cost control. With that I will turn it over to Real to give you a more detailed update. Real?

Thank you, Steve. That's indeed -- it's been a very productive quarter. We are right now shifting from civil structure as you know, to mechanical welding and electrical, so we have a lot of staff holding but we want to focus is now is staff holding piping weld out, heat tracing and insulation and also we have started to focus quite heavily on commissioning and start off So, in a detail in generating we are essentially all complete. We are focusing right now on how the bill drawing, filing equipment and vendor drawings and so on and closing out on all the documentation that we need to operate this lab. On a procurement side, the overall procurement progress is over 95% complete now, we have awarded over $5.4 billion in purchase orders and contractible time. And so far we have delivered over -- well over 30,000 standard load to our pipe and the hope we were working right now also on the operations and the maintenance services and the supply agreement for the operation in other word the maintenance contract and supply contract and so on for the operation. We have right now also 300 operation employees and our site also working out the start-up procedures and other things like this. The modularization program has been the real success for us. We have delivered another 172 oversized loads during the second quarter. So far, we have over 1,425 loads that have been delivered that way under modularization, which represent over 86% of our total requirements. So the vast majority of our modular on site now, they have been installed well, and a few they were going to be coming over the third quarter, which will complete our modularization program. On the construction side, we have the great progress also in our overburden removal with our contractors, we have over 37 million bank cubic meters removed so far, which represents about 54% of the total to be removed before start-up and we are 1% ahead of schedule. On the mine itself, we were constructing cofferdam for the Tar River Diversion, which we were doing with our own mining equipment and our own mining operators; that has been a very good learning for our operators. So, in terms of purposes the mining people are fairly well going steady now, we are expecting our first truck, in our first schedule I mean production schedule for the mine sometimes of fall here and it’s all on schedule as well. So, we will be quite ready actually to run the mining side of the operations was going forward start-up in the next spring summer time. On the ore preparation plant for example, we have the Crushing Plants, the Surge Facility and the Conveyor Structure, all of those have been 100% fabricated. They are being installed right now and as a matter of fact we're going to be able to do the start-up in the commissioning of that plant before December of this year. So the plant will be quite well already, fine tune and everything for the operations in the next summer. On the hot water tank also in extraction, that's completed. We've hydrotest already primary separation cell I mean vessel there in the hot water tanks. So, we have done quite a few hydrotesting in the extraction plant, which is also in our plan that we right now plant to have completed and ready to go before year-end of '07, so by then we will fine tune and few little thing here and learned from there until next summer. We have also completed the construction and the hydrotesting of inclined plate settlers which is the froth treatment, which is in the third stage of recovery in the extraction plant and that's also on schedule right now. Well to be ready in the spring of '08. In the upgrading area, the flare stacks have been installed. We have the all the chimneys and everything and have been installed as well. We are very heavy right now in to piping. The module has been installed. There only two areas left right now for modernization to be complete in the hydrotreating area. We have completed inhibited water and the cooling water pumphouse building. We have also now our 35 kV substations, all installed, as a matter of fact we will in August, September here, we expect to do the commissioning of the permanent power distribution for the whole site. The water pipeline also has been completed, as a matter of fact the water pumphouse is commissioned now. And we are pumping, water pumps or river into our intermediate water pond, the compressor has been received and installed those who are as remembered long critical items for us, so that also has been installed. So we have of course the coker, the derivative the dilute recovery unit for infrastructures and so on those are all installed and we are completing now the interconnecting welding between cokers, the pipe rack and few other modules that we have installed. So all in all right now we are quite online with the installation of all our piping, our electrical, our heat tracing and all the other supported equipment that we need in that area, pretty well all the major equipments are on site, the marginal offset were on site and we have we are well right now to do our start up and commissioning. We have in site our start up and commissioning plan very detailed linked into our profession, so that's -- we are monitoring every single system for start up and all those kinds of things. So all in all we have made great progress and we are anticipating also quite good progress for the remainder of this year, and we are still very comfortable right now and being able to start this plan in the third quarter of 2008. So, with this, I want to return it to you Steve.

Great thanks, Real. As you can see, we're making very good progress on our world-class Horizon Project which will add significant value to shareholders. And our share to add even more value with our future phases at Horizon. On the conventional business it's very strong. On the gas side, we have 10 Tcf of gas on a vast land base to develop. Our oil assets are even stronger in Canada with up to 11 billion barrels to develop. In the North Sea we continue to utilize our mature base and expertise and leverage our offshore expertise as well as our government relations expertise into Offshore West Africa which has the highest return on capital projects in the company's portfolio. And at the current strip, our hedging programmers and our cash flow will be in excess with $6 billion with several go into. Our conventional assets require about half of that cash flow, a frequent one $1 billion of capital to deliver 597 to 603,000 BOE per day of production. But not only that, on a conventional business we're also funding long-term projects at Pelican, Primrose and the North Sea. The remaining cash flow is funding Horizon construction, which went on-stream 2/3/'08 will began to generate significant cash flow. Canadian Natural is in a very strong and enviable position. We have the assets, we have well-defined plans, we have the discipline both financially and operationally, most important of all the people there keep the plans and generate significant value for shareholders. I'll turn it over to Doug to give you an update on our financials. Doug?

Thank you Steve, and good morning. Canadian Natural had another very strong quarter generating cash flow of $1.5 billion and $3.1 billion or $5.82 per share in the first half of 2007. Through the strength of our production base current strip pricing with support of our commodity hedge program, particularly natural gas, we were on track to exceed $6 billion of cash flow as Steve just pointed out. This is very close to matching our targeted capital expenditure program of $6.3 billion and again including $3.2 billion of spending targeted to Horizon construction cost Phase II and III planning and capitalized interest. We continue to implement our commodity hedge programs to support the cash flow required for our capital expenditures, approximately 60% of expected oil volumes and 70% of expected natural gas volumes are hedged for the remainder of 2007. In addition, 77,000 barrels per day of crude oil volumes are price-protected by put options for the remainder of this year at a strike price of US$60 per barrel. We also have physical natural gas contracts for 300,000 GJs per day with the fixed AECO price of $7.33 through October of this year. For 2008, we have hedged 220,000 barrels per day of crude oil volumes for the first quarter and 170,000 barrels per day for the remainder of the year. As well, 900,000 GJs of natural gas volumes have been price protected for the first quarter. Our liquidity is solid. At June 30th, the company had undrawn bank lines of credit of $1.4 billion. This combined with our diverse assets base and disciplined approach to capital spending, to provide us with the necessary financial capacity and a strong balance sheet. I would also like to mention that in the second quarter our revolving credit facilities were extended for a one-year period, and now mature in June 2012. As we move into the second half of 2007 and 2008 budget season, our financial resources are strong and our asset base is strong. Thank you. And I will return you to Allan.

Thank you, Doug. We have the financial ability to finance our future development; as Doug quite nicely pointed out we have one of the strongest growth profiles of our peers. Lastly but not least, we have a high quality people and management team to develop and grow our strong asset base, creating value for shareholders. I know I can once again affirm that we are the premium value-defined growth independent. Thanks.

Thanks very much Allan, Steve, Real and Doug. I think that gives an excellent overview of our company's position today, and as we go forward. And at this point operator, I would like to open the meeting for questions that anyone may have.

Thank you. We will now take questions from the telephone lines. (Operator Instructions). The first question will be from Benjamin Dell of Sanford Bernstein. Please go ahead. Benjamin Dell - Sanford Bernstein: Hi, guys. I guess my first question and you sort of discuss to look forward. How do you look at your international business going forward versus your North America? Savings on the international side, you somewhat slowed in terms of the growth program with cost coming down domestically. Does that make the return to the domestic business, and more interesting plays that focus your capital going forward?

Hi Ben, we our capital obviously has to compete on a return basis worldwide and we look at all the projects and rank them against each other and we see project on the North Sea, if slight light oil gets a premium brand price, and with projects there we see we can still add volumes. To get the big group profile in the North Sea I think would be a little bit harder to do, especially when we compete against with the heavy oil business here in Canada. Offshore West Africa clearly with great returns there, and we are utilizing our expertise so that the North Sea to do the North Sea to West Africa. Benjamin Dell - Sanford Bernstein: Okay. So, when you look at the sort of assets out, it starting to get some of the major down in the North Sea, those things that you would be interest in drilling or that's not your plan?

Ben we always look at the acquisitions in our area, drilling our area we always look at them. I don't think its something that we need to do, but I won't say that we won't do them. Benjamin Dell - Sanford Bernstein: Okay. Just one follow-up question, when you look at the potential building and upgrade are in Phases II and III and so on, on Horizon. Can you give us an indication of what you consider the normalized margin environment, obviously it depending on the way you look at refining margin and with these and there is a huge volatility at the moment. Can you give us some indication of how you model it or what you consider normal?

You talking about the crack spreads the banner you are talking about. Benjamin Dell - Sanford Bernstein: Yeah.

Well, I think that the crack spreads looks like it's been turning up here for sometime. I think we are slight rate now here in recent times and we asking that quite before, but the crack spreads, when we look at the whole value gain on the business from upgrading heavy oil or in case of Horizon it's really bitumen and that bitumen is very, very low value. The value is really in the upgrading, you get the biggest piece of the value captured and crack spread historically its been a very small percentage of the value gain. So that's where we are, we believe particularly with Horizon, building an upgrader is clearly right thing to do and we capturing the significant value of the value chain now. Benjamin Dell - Sanford Bernstein: Okay. And one just last final quick question, if I can. On the natural gas business you have been reported in the cost reduction, it seems the Canada is held up better than people would expect and now the US seems to be getting volume growth. Do you believe this sort of cost replace in your table late better than expected to drive natural gas in North America?

Well, we are still seeing gas markup particularly in Canada. I don't think I would see that, I don't qualify to really see for what's going on supply side in US. But in Canada, we see supply come often, I think are up to 400 million from this time last year. And I think the way things are going, with the drilling that's happening right now, empirically the soft gas prices you will probably see Canadian impression would be down close to Bcf a day by the end of the year. Benjamin Dell - Sanford Bernstein: Okay, great. Thanks very much.

Thank you. The next question will be from Gil Yang of Citigroup. Please go ahead. Gil Yang - Citigroup: Hi, couple of questions about Horizon. I heard some rumors about some strike activity, potential strike activity. Could you comment on what's going on with respect to that labor? And I've got another question about the second serve base.

Sure. I'll give you a brief overview of the strike potential. Right now the BTUs are in negotiation and some of them have received a strike mandate. There is 25 unions that make up the building trade unions, 15 of the 25 have agreed the terms. At our site, we have 40% of the workforce with public trades. Of that 40% obviously, 15 and 25 have affiliate have already signed up. We have on the site 70% of that BTU labor is from outside of Alberta in Canada. And importantly we have a division 8 at our site, which makes it illegal for us to lock workers for contractor notice and illegal for leading to viewing. So have a division 8, so we feel we're mitigated. We've also obviously set our mitigation plan there. As far as what we think will happen, it's very difficult to say if the contractors negotiate with unions and obviously we watch with interest. Gil Yang - Citigroup: If there any new terms that you obviously sustained, how was the cost or would you agree with those the new terms?

No, we don't have any influence so much as agreed. The contractors agree with unions as to what the growing rates and all the benefits will be going forward and that will flow through obviously to the owners, but that are more competitive with a non-BTU contractors, so they have to be careful. Gil Yang - Citigroup: Secondly, on Phase II, Phase II you said that the large capital business have been brought, could you comment on the concentration on those items?

I think… Gil Yang - Citigroup: I think you maybe comment that the large reactors have been brought and some of the long need item have bee purchased for Phase II, Phase III, can you comment on the price inflation of those items versus the straight line?

Although, that was ordered quite sometime ago and I think on the coppers we have seen a 30% to 35% increase in cost from the first phase coppers, I think if we actually order those coppers today you probably see a further price increase. I don't know if that's help you or not. Gil Yang - Citigroup: Okay, what's the percentage of total cost?

Well, cost about $39 million. Gil Yang - Citigroup: Alright, thank you.

Thank you. The next question will be from Brian Dutton of Credit Suisse. Please go ahead. Brian Dutton - Credit Suisse: Yes, good morning. I was wondering, if you give us an idea on the duration of the steam cycle and I guess the duration some of the purchase cycle before your thermal production?

I know what happens here, its almost like in a quarterly basis, we steam most of the second quarter and part of the first quarter, so a major steam, that's one of the reason why operating costs little higher in the second quarter, because the product obviously is down in the steam cycle and obviously steam cost were up. We are now going back and we are going back at previous rate, also at higher rate pretty much for the full third quarter will be higher in a fourth quarter as well, but part of that would tell us and we will start steam again… Brian Dutton - Credit Suisse: So the cycle is roughly a little longer than quarter?

That's right. Also as you admired cycles here, but the general trend is a little longer than quarter, four to five months. Brian Dutton - Credit Suisse: Second question is on your recycle ratio. Can you give us an indication of your recycle ratio on your gas program now versus your recycle ratio on your thermal program in your conventional heavy oil?

Recycle ratio on the gas projects that we have right now is slightly greater than two. Recycle ratio on heavy oil, primary heavy oil is probably in the four to five range and thermal is probably close to that. So, obviously is much more attractive in the near-term particularly to heavy oil and thermal oil. We would do more heavy oil, but there is so much you can do without losing capital efficiency and obviously, we are very, very focused on cost. Brian Dutton - Credit Suisse: And with your increased drilling program for the second half of the year, what do you now looking at in terms of existing 2007 for production on the natural gas side?

Well, the increase in drilling, Ryan is on the shallow gas CBM wells and those wells 50 to 100 Mcf a day, so that's probably 6 or 7 million a day extra gas, so it really a, I think that's not a big jump in extra volumes. Brian Dutton - Credit Suisse: Toward the improved efficiencies that you've seen so far this year known to have impact as well on the universal rate from much are originally anticipated?

I think it's more affect on the cost and probably the timing of when that gas gets on, so the exist rate would be about the same, well we may get to your rate sooner because of the well move faster. Brian Dutton - Credit Suisse: I guess and lastly, should we be thinking an interpretation here of your increased drilling on gas that you unlike the economic now on the natural gas that you are willing in fact to take free cash and redeployed fact into the natural gas business?

On a very limited basis. On a case-by-case basis. We see the cost have dropped a pretty good in Southern Alberta. Probably the best on the gas side in Western Canada. They have not dropped as much in probably the deeper portion per basin. So, we are not assuming more cost reductions and better productivity before we can get in there. So, as I said, (inaudible) is still don't compare favorably. Brian Dutton - Credit Suisse: As that because you have been very adamant in the past that you would not take any free cash in generated from the natural gas business and redeployed if you think on that.

Right. As in order we didn't change our capital budget there. Brian Dutton - Credit Suisse: Right.

So basically the efficiencies we were gaining in a program allowed us really to drill more wells for the same dollars. Brian Dutton - Credit Suisse: Okay. Thank you very much.

Thank you. The next question will be from Greg Pardy with Scotia Capital. Please go ahead. Greg Pardy - Scotia Capital: Hi, good morning. May be just following on the little Steve, what's your appetite for natural gas, I guess the further natural gas acquisitions in this kind of a market. And then secondly I have a question for a while but, did acquisitions play much of the role in your volumes in the second quarter?

No acquisitions really had no impact on the volumes and our appetite for acquisition, I guess we look at acquisitions in our area as I said before this when tenth question, its something we always look at in our careers, I don't think its something that we need to do and but we are not at first doing at if it make sense, obviously we have got balance all our capital program with the major capital targets we have here and share balance sheet is very strong. So that's one of our prime consideration. Greg Pardy - Scotia Capital: Thanks.

Thank you. The next question will be from Steven Calderwood of Raymond JamesPlease go ahead. Steven Calderwood - Raymond James: Yeah one question on the gas and one question on the Oil Sands cost. First of all the recent performances in gas have obviously been really consistently better than your guidance but your guidance now indicates sequential quarterly drop-off of about 4% sequential quarter. Is that indicate decline rate as well and how difficult do you think it will be to grow your gas production in 2008 if you do decide to increase your capital?

I think Steve in a way it isn't to keep of our decline rate on our gas side of the business we do define a pretty good rates so much in Canada here as you know. Obviously we're doing some drilling and work over completion activity to add more volumes but it won't be able to keep up with the declines. So, those it doesn't reflect the declines. Going forward in 2008, pending how much capital we allocate to gas that will effect the gas growth. We believe we have the assets and the infrastructure to grow gas in that 3 to 5% range If we so choose to allocate the capital gas. And that will be a decision to make commence like. Steven Calderwood - Raymond James: Okay. And on the Oil Sands, you've maintained your cost overall guidance between 5 and 12%. Is there any reason why you can't tighten that up from previous estimates?

I think Steve, what we're doing right now is obviously we're into the summer period is very labor intensive, a lot of work here, Danish you heard Real talk about all about the piping work. And we are going to feel a lot more confident when we get into the fall and get as the labor strike come off a bit. And we'll see what kind of productivity we achieve, by the contractors achieve and where we'll be with costs. So we're pretty confident in our range right now but it doesn't make any sense at this point in time to change it, we don't see anything that -- which will cause a change at this point. Steven Calderwood - Raymond James: Do you think you're close to the middle?

I think we're within a range, yeah. Steven Calderwood - Raymond James: Okay, thanks.

Thank you. The next question will be from Barbara Betanski of UBS Global Asset Management. Please go ahead. Barbara Betanski - UBS Global Asset Management: Hi thanks. Just some further questions on Horizon and related to your press release from Tuesday, just a comment here related to some of the delays you are facing. And I am just going to read it here today, I was hoping to get a bit of elaboration this comment related to a realignment of certain contract packages to match scope to the market with contractor supply. Can you sort of explain that in a little more detail?

Sure. And I'll get Real to give you a lot more on that part. Really what we are trying to do here is because we have float in the bunch of our plants and our projects here. We can, and we have all along through this project realigned our scope and our packages, do get better bids and get better cost control. And Real do you want to talk a little bit more in detail about what everything means and how we do that

Yes, Steve, one of the thing, we are trying to do right now, we have several as you can imagine, we have in fact over 650 contractors on site right now. One of the advantage we have with that is we have signed only the contracts or some of them two to three years ago and it will be, it is lot easier or us right now to go onto some change orders to some of those contractors and getting them to do some new scope of work under the old terms and conditions the different part of the outside that Europe's will grow. Quite a few of them actually are willing to do this and the main reason is because they have already been deployed their liberal for sometime. They already know the name of the game of us, and they don't have to more than we know for another expansion if you want. So, this has been the big advantage for us. So over the past quarter, and we are going to continue to do so here over the next half a year, as to save our, a lot of this approach right now or so as to save a lot of this approach right now where we do have some new scope addition or something like this. So, it is an advantage for us right now to do it that way. Barbara Betanski - UBS Global Asset Management: Okay. So, you are suggesting well, that some of those changing those orders have been delayed a little bit?

What makes sense, and what Real is saying is that we have a package that needs to be done. It's not on the critical path. We have contractors on despite there are good trends, they have already mobilized, so their mobilization costs are there. So, what makes advantageous for us is we can delayed the award of some of these non-critical packages, so that we can wait for the contractor to finish up resuming on existing stuff, and take that package which is states same mobilization cost. That's really a cost control strategy and mechanism that we are executing on. That's been very effective for us as Real said, because we don't have to mobilize the cost. They know how to work on our site. There is no learning curve. They've got the people. They've got the foreman already mobilized. They've got to shift that up. There are seven or eight to go. So, it just makes sense rather and becoming new contractor because these guy is still doing his work. So, let him finish his work and delay that package, the second package and get him after that. Barbara Betanski - UBS Global Asset Management: Okay, thanks. And just one more you have mentioned that there are some issues with labor productivity. Could you provide a specific there as well?

Well, we always have and I'll get Real to give you a more color on it. But obviously we've ramped up to the 7,000 workers on site and we're always going to have some initial productivity learning curve as you bring out many people on, and that new people. And so, we have had some of that productivity and we continue to work with the contractors to enhance that productivity. And in some cases, we've actually send some people home because they have too many people on site in our rate work but it's all about managing productivity and that's why we have such a large team working with the contractors to do that. Real, do you want to add anything to that?

Nothing as John said, well, we do have some contractor and I guess so we will shift from civil structural to mechanical and piping and welding. So, we are setting up in some cases new contractors for piping. Pipe fitters are coming on site. They need some training. They need some learning as well and so on. So there is a little bit of productivity, challenge when a new trade comes on site and the immediate trend right now is definitely the pipe welding and so on. So we're looking at this and as Steve said some other contractor did not meet our standard and we let them go and we've changed them around and brought some other contractor. All in all, there has been a slight issue on below target productivity for a couple of months, which we are capturing now. Barbara Betanski - UBS Global Asset Management: Thank you.

Thank you. The next question will be from Martin Molyneaux of Firstenergy Capital. Please go ahead. Martin Molyneaux - Firstenergy Capital: Gentlemen, just continuing barbs kind of the thought there, can these mechanisms that you're talking about in terms of shifting the construction groups around help you out with the Phase II, Phase III or all these guys go home before that work starts to get underway.

I think its different work with Phase II and III, as Real said we're going from Civil to Mechanical to Electrical. Those we starting Phase II you will have different type of work, there will be some, but I don't see a big advantage of that. Martin Molyneaux - Firstenergy Capital: Okay. And second question, there is issues with the [tank harm] in the second quarter, where are you out with that and what is the go forward exercise there?

Is underway and Real, do you want to give us a more detail.

Yes, Steve. We have of course, if you remember we had a couple of quarter from the government and regulators on other things fine, which we lift actually about two weeks or later. We are in full production right now, actually on full construction on the Banff forma. Obviously, we have dealt with one of the major obvious cause of the accident. We have done remedy. We have, if you want to remove all of the field structure that we had in the middle of the things, but we're focusing right now on the place itself welding the place and so on. So different factors we're seeing for productivity right now. We're completing the investigation and the investigation should be Federal all are wrapped up here I think this fall. Martin Molyneaux - Firstenergy Capital: Well, does it make any difference timing wise, you're still on half or?

No. The main reason for this is because do you think almost not on the critical path. So we were able to allow time to do proper investigation, take the time to do proper analysis on the equipments and the other failures we have there. Martin Molyneaux - Firstenergy Capital: One follow-up question too, some other questions I got answer. With bail Bob you're only going to go in and remediate three of the five locations is there reason why you don't do other two or will you just drill, potentially just drill fresh wells for those?

What we are doing Martin, we only have one year contract for that rig, and so we could do all five, if we have very good success in find fix reserve are simple and see to do. We're also going to spend sometime investigating with the rig before we actually do fair work, depending on what we find and how long it takes to adjust that, we may be conservative, but we expect we will get three of five done. If we get all five done we will, but we'll be think prudent same we only get three of the five done. Martin Molyneaux - Firstenergy Capital: Great, thank you.

Thank you. The next question will be from Ted Izatt of Bear Stearns. Please go ahead. Ted Izatt - Bear Stearns: Hi. Good morning, everybody. Congratulations on you earnings. I am having a couple of questions. First of all could you comment on what do you think about the recent marathon deal? And then, I guess in contract supporting Cannon, Chronicle, Philips business to whether or not for this future days as you might want to do to eventually somebody are do something further downstream there? And then second of all regarding debt issuance plans over the next six or so? Thanks

Sure. Ted, we obviously with Horizon, we got the expertise and we have ability to build the operating port of it and as you hear me talk while little early with Ken most of the value captures in the operating on value-added from heavy oil enrichment and we have the reserves and we have the ability to capture that value so difficult for us to say that we should give up reserves for that value and we have the ability to do that ourselves, we can build reserve in ground, but we can't build operators. On a debt side Doug, if you want to give more detail?

Yes, Todd we are very happy with our March entry into the US debt markets as you know and very favorable result I wouldn't anticipate that we will be doing much in the debt markets given the volatility that's going on right now for the remainder of 2007 we have stated before and we will continue to monitor the Canadian markets to see how they settle out later this fall, but certainly I don't think that we will do much in the US. Thank you. Ted Izatt - Bear Stearns: Okay. Thanks, thanks Doug.

Thank you. The next question will from [Dave Lyons] of Prudential. Please go ahead. Dave Lyons - Prudential: Hi, gentlemen, you guys mention do you had a 1.4 billion available on your credit facilities. How much do you have drawn, you have a couple of revolvers out there?

The drawn portion would be 3.6 billion. The total revolver is 6.4. Dave Lyons - Prudential: Thanks very much.

Thank you. The next question will be from Andrew Potter of UBS Securities. Please go ahead. Andrew Potter - UBS Securities: Hi guys, you have talked a lot about labor productivity at Horizon. I was wondering, if you could had a guess of what the impact would be on Horizon costs or start-up date, if the productivity did not improve. So, that they would kind of how it's been in the last couple of months? And after you done that all, the question on the polymer?

I would say Andrew with what we see right now today and I think, you have probably heard throughout the call, we are very confident in getting our start-up date, commissioning date, as Real start [work]. There is a lot of float on the non-critical path. We are already in the commissioning of some of these plants, while that will be done here later this year and early next year. So, at this point in time, we see no threat to start-up date. Hopefully that answered your question. Andrew Potter - UBS Securities: Well not really. I was actually looking more kind about the costs side. I mean, if the labor productivity doesn't actually improve presumably that would mean a little bit higher costs?

Yeah. I think you could see little higher costs and bringing more people longer. And I think it's pretty hard to anticipate what that would be. I don't think it's going to be a real big number, if there was any change. Andrew Potter - UBS Securities: Okay.

It's too early to say right now. Andrew Potter - UBS Securities: Okay. And then just on the polymer, maybe you can just talk for a second about the economics there. Remind us again, kind of what the actual kind of offering costs will be, and what the Op will look like on that?

We are running injected polymer, the polymer itself is very low cost it doesn't cost us much. The real cost is in the handling of the water, and the powering of the fluids. So, our pricing Pelican Lake can get about $45 barrel, and then you have the offering costs and they are around that, I would say $7 range right now with all the power we are using. F&D costs are probably in that $5 range as well. Andrew Potter - UBS Securities: And forward I look like in terms of rate of return 20% per head?

It's pretty hard. Andrew Potter - UBS Securities: Yes. It's straight up you with the actual class system. Andrew Potter - UBS Securities: Okay that's great. Thanks

Thank you the next question will be from Brian from Goldman Sachs. Please go ahead. Brian - Goldman Sachs: Thanks. Following up on some earlier comments on the natural gas business at that time acquired Anadarko's Canada assets hold back a bit on activity you indicated that it was very likely you would resume much higher activity levels at '08. What's your basic case thinking on '08 gas drilling and what would you need to see to ramp up spending at current levels?

I think obviously you are watching gas prices very carefully here. And I think we need to see some kind of increase in gas pricing before we ramp up John. So we are not in a hurry now and I would think if you see return to levels that buy if we had strong gas pricing you could see return to levels of gas drilling that may be consistent with '07 or slightly higher probably 10 to 20% more depending on gas prices all gas prices to driven. Brian - Goldman Sachs: I guess what I have to think recently that the ECHO strip that you took you out what you prefer to say?

If you see ECHO strip you look at and it all depends as we are kind causing its not moving parts here. So we have to see cost reductions more on a gas side than we have seen yet particularly in more as in the last. We expect we'll see that we are seeing productivity increases. And so we need to see gas I would think in that 8 to $9 range before we are going to start to seriously considering ramping up our gas drum. But again if I ask people capital and it will play always right now its still probably makes more sense to allocate more capital to oil and gas. Brian - Goldman Sachs: Great. Thank you.

Thank you. The next question will be from John Herrlin of Merrill Lynch. Please go ahead. John Herrlin - Merrill Lynch: Yeah couple of quick once. How where they world grade differentiates for now Steve versus the second quarter?

Right now they are about the same. John Herrlin - Merrill Lynch: With the 10% range? And falling up on the prior question since you are getting 20% more productivity this is me we are going to see some more gas wells relative to your budget for the second half. I couldn't hear you completely?

We did increase we added about 125 solid post well type gas wells inside in Alberta make sense the cost were down quite a bit doesn't we had a lot of employments not lot of big capital cost. So our capital budget does not change and our exaggerates will be up may be 6 million per day. John Herrlin - Merrill Lynch: Okay. And then my last one I guess is for Al, John and you. When you look at evaluations for Oil Sands companies when you benchmark them earnings cash flow they are about twice what you are down a line when Horizon's running would you ever considered splitting the company I'm anticipating Real.

John, its John here, taking a step of that out. I don't think we certainly have put them big box to that at this point in time. Our focus is executing on Horizon Phase I. And I don't forget that even when we completed Phase I, there is still going to be a tremendous amount of values, still together about assets by doing subsequent phases and ultimately getting that lease up there producing around 1000 million barrels a day. So that's a lot of execution we get from where we are today to 0.5 million barrels and I think that we are the best ones to get that full value out of doing that execution. So I think you probably looking quite a ways down the road.. John Herrlin - Merrill Lynch: Okay, that's fine. Thanks very much.

(Operator Instruction). The next question will be from Robert Plexman of CIBC World Markets. Please go ahead. Robert Plexman - CIBC World Markets: Hi, good morning. I have two questions. The first is a follow up regarding Pelican Lake, I was wondering if your most recent success of he polymer flooding, if that that's going to have an impact on the recovery factor applied to Pelican Lake. And the second question relates to it's a marketing question for heavy oil because the NEB is worrying that we could be facing approachment in the oil pipelines this fall. I was just wondering Steve, if you share that concern and if you see approachment given the distance your oils going would be more or less impacted than say the average?

Well, first on the Pelican Lake. We haven't really changed our expectation for recovery. But we do just have more confidence based on the results you have today, so just to make sure feel about it. As far as marketing, it's getting tight on pipeline space, we see that it could be some issues, but at this point in time, we don't see that it's going to have much of an impact overall. Robert Plexman - CIBC World Markets: Thanks, Steve.

Thank you. The next question will be from [David Hall] of Fairholme Capital Management. Please go ahead. David Hall - Fairholme Capital Management: Good morning, Steve. Just two questions one for Allan, one for you. On the shallow gas CBM wells, you saying the x-rate will be 50 Mcf a day is that the full production or will production continue to build. And for Real after Horizon tour in June there were some discussion at the labor force could peak as high as 9,000 this September. What do you now see the peak point to be?

I will answer the first question. Those are low reap gas wells and pre-state studies. So, I don’t expect to see some drop off. That's 50 Mcf per wells somewhat be little higher, but they pretty flat. As far as man power I don't think will go that height, but Real do you want to add.

Yeah I think we done our latest forecast right now, we don't think we are going to big and where any adopt kind of number right now, we are looking at both then where from 7500 to may be 8000 at the most. David Hall - Fairholme Capital Management: And that would have the impact where it would fall in the over one I take it

Right now and we are looking at is, its already part of our forecast now. David Hall - Fairholme Capital Management: Thank you very much

Thank you the next question will be from (inaudible) of Equinox Partners, please go ahead.

Good morning gentlemen, I wanted to ask you in a normalize gas environment let say $8 to $9 you said, you can anticipate growing your gas production 3% per annum, in the heavy oil plus international is can grow may be 10% per annum is that what's you can make comment, there what you give the emission?

I think good look each upon its own we think we can grow gas in the normalized environment, 3 to 5% and oil is, everything is concern to capital allocation. I think we, stay we are grow 10% internationally I think is, requiring, it's going to be lumpy with the Baobab come during the full production and then lyell coming on. So, you see a lump more, is going to be a the more maintenance mode. Heavy oil we can grow in thermal production and that again is lumpy, with Primrose east coming on and then (inaudible) they all be sort of big 30 to 40,000 we already jumped. So, overall yes that's probably not a bad number but heavy oil is little bit different.

Okay and just in terms of business environment what is the viability of that you see 8 to $9 gas may be next year, year after with the prospect of LNG coming in much cheaper may be 6,$7?

I think if LNG come in, you won't see gas prices go up and so be less gas turning and supply will respond appropriately, I think that's one of the strength of the company and on earlier questions also regarding we lease without Horizon. I think that's one of the strength to companies, we do have gas, the shallow we have deep and have sweet entire gas. We have light and heavy oil in Canada. We have thermal, (inaudible). We have Horizon. We have international projects in the North Sea and offshore West Africa. It gives us a balance portfolio to balance capital allocation and maximize returns for shareholders. And that's what we will do.

Okay Thank you gentlemen.

Thank you there are no further question registered at this time. So, I would like to turn the meeting back over to Mr. Langille.

Thank you very much operator I think Doug Proll has one additional comment that you like to make Doug here.

Yeah. Sorry, Dave Lyons, you asked a question about our revolving facilities, I have inertly gave you the total we have outstanding including our non-revolving line. Our revolving facilities were $3.7 billion, should $2.3 million are drawn. And leaving the $1.4 million undrawn at the end of June. My apologies, back to you John.

Okay next for that clarification and Thank you again ladies and gentlemen for listening in our conference call and of course is always if do after the question you can contact us on investor relations department and we will get back to you with some answers. That the end of the conference call, I Thank you for you attendance and have a very good day, Thank you.

Thank you the conference call has now concluded, you may disconnect your telephone at this time, we Thank you for your participation and have a nice day.