Douglas Proll - Chief Financial Officer and Senior Vice President of Finance Réal Doucet - Senior Vice President of Horizon Projects Allan Markin - Chairman and Member of Safety, Health & Environmental Committee Peter Janson - Senior Vice President of Horizon Operations Steve Laut - Principal Executive Officer, President and Director John Langille - Vice Chairman

Alex Gheorghe George Toriola - UBS Investment Bank John Herrlin - Societe Generale Cross Asset Research Menno Hulshof - TD Newcrest Capital Inc. Joe Citarrella - Goldman Sachs Group Inc.

Good morning, ladies and gentlemen. Welcome to the Canadian Natural Resources 2011 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, operator, and good morning, everyone. Thank you for attending this conference call, where we will discuss our second quarter 2011 results and also update our plans for the second half of 2011 and beyond, as we continue to develop our strong focus asset base. Participating with me today are Allan Markin, our Chairman; Steve Laut, our President; Réal Doucet and Peter Janson, our Senior Vice Presidents at our Horizon Oil Sands mining operations; and Doug Proll, our Chief Financial Officer. Before we start, I would refer you to the comments regarding forward-looking information contained in our press release and also note that all dollar amounts are in Canadian dollars and production reserves are both expressed as before royalties, unless otherwise stated. I'll make some initial comments before I turn the call over to the other participants. Our exploration and production asset base continued to provide excellent operating and financial results during the second quarter. Our production of natural gas and all elements of our crude oil portfolio, whether it be light oil and NGLs, cold heavy oil or hot heavy oil, achieved significant and strong levels of production, despite the challenges Mother Nature threw at us during the second quarter. Steve will give more details of each of these areas in his review of operations. The level of cash flow reached in the second quarter exceeded our CapEx and, of course, was negatively affected by the suspension of production at our mining project. As Steve, Réal and Peter will detail, we are in the final stages of recommencing production from this world-class project. We have had the opportunity to participate in some additional tuck-in acquisitions, and as a result, have increased our 2011 acquisition expenditure budget to a total of $950 million. These acquisitions will provide additional production and cash flow through the latter quarter of 2011 and into 2012 and give us more opportunities to create further values, as we synergize operations with our operations in the areas that the acquisitions cover. Our longer-term growth projects in our thermal and mining oil projects continue to be developed in our focused cost control manner. Our production and cash flows are strong enough that we are able to spend a significant amount of our yearly CapEx on projects which do not result in same-year production growth, but provide a stable, longer-life production base for many future years. Before we turn the call -- the meeting over to Steve, Allan, do you want to make some initial comments?

Yes. Thank you, John. Good morning. The first half of 2011 demonstrated the benefits of a diverse asset base. Despite challenging conditions throughout Western Canada with forest fires and floods, we were able to meet guidance and generate solid cash flow results. In Q2, our high-return crude oil projects generated outstanding results. Our primary heavy oil operations achieved record average quarterly production of over 101,000 barrels per day, while thermal crude oil production averaged 127,000 barrels per day in June, in part, due to pad additions and excellent overall performance. In the North Sea production -- In the North Sea, production exceeded expectations as a result of strong performance from our Ninian field, and we continued to deliver solid results from our liquids-rich Septimus Montney shale gas play in Northeast British Columbia and continue to optimize operations across our vast natural gas asset base. Production at our Horizon Oil Sands mining and upgrading is scheduled to recommence in 2 to 3 weeks. The breadth of our capital allocation choices continue to put Canadian Natural in a strong position to create significant value for shareholders. Over to you, Steve.

Thanks, Al, and good morning, everyone. As both John and Al have said, the second quarter was strong, especially considering we were down at Horizon, and were somewhat impacted by the forest fires and the flooding during the quarter. It's not surprising that Canadian Natural can withstand these events, as we are in a great position few in our peer group can claim, can't complain. We are financially strong. We have a strong management team that is very return-on-capital-focused and have a well-balanced and diversified asset base. Most importantly, we have strong operational, tactical and financial teams, with high levels of expertise and ability to execute our well-defined yet flexible plan to concurrently deliver production and value growth in the near-, mid- and long-term; transition our production mix to a longer life and more sustainable production and cash flow mix, all while generating significant free cash flow throughout. Our ability to grow production and value and still generate free cash flow is what sets us apart from our peers. Our ability to generate significant free cash flow on an ever-increasing sustainable basis where all Canadian Natural's [indiscernible] track record of increasing dividends on a yearly basis, and if available, make opportunistic acquisitions if they make sense and add value. Canadian Natural's assets are well-balanced. When Horizon comes back on within weeks, we'll be roughly 35% light and synthetic oil, 35% heavy and 30% gas. Our assets are vast, and we have deep inventories in each component of our business. This provides us not only with the opportunity to effectively allocate capital to maximize value and returns on capital, but the ability to significantly leverage technology to generate even greater value going forward. Canadian Natural's primary heavy oil assets generate the highest return on capital in our portfolio, a direct result of our dominant land and infrastructure position with 8,500 wells in inventory and our very effective operations. In 2011, we'll grow our primary heavy oil production 13% to roughly 104,000 barrels a day and have the ability to grow production by 10% for the next 3 years or more at 10% or more, generating significant free cash flow and value for shareholders. On top of this value growth, we have significant potential on our lands to leverage technology to generate even greater value. As you know, oil recovery factors are between 10% and 15% in primary heavy oil production, which means we have 8.5 billion barrels of heavy oil on our lands that we've already developed. If we can develop technology that can increase recovery another 12%, this equates to an additional 1 billion barrels of recovered oil to Canadian Natural. Clearly, there's a huge technology upside in primary heavy oil, and we are working on a number of technologies to create or capture this upside. We are in the very early stages of technology development, and it will likely take some time before technology can be applied commercially. Light oil and liquids production in Canada is targeted to grow 15% in 2011 to 55,000 barrels a day, and we have the ability to grow production another 15% in 2012, with slightly lower growth rates in 2013 and beyond, as our EOR projects take some time to kick in. Canadian Natural has a large light oil land holdings in Canada. And as you know, the light oil basin in Canada is a mature basin. However, with the advancement in technology and higher oil prices, we're able to implement this technology, increase recovery and production over the mid- and long-term, creating significant value for shareholders. In 2011, we'll target the drilling of 146 light oil wells, are implementing several EOR projects and optimizations that include CO2 flooding, alkaline surfactant polymer flooding, water flooding and the utilization of multiple-frac horizontal wells in 15 different pools across Western Canada. At Pelican Lake, our world-class oil pool with 4.1 billion barrels of oil in place and 550 million barrels recoverable with our highly successful leading-edge polymer flood, in the polymer-flooded areas, we expect 25% recovery and overall for the pool, about 17% recovery. As we continue to roll out the polymer flood, we expect to ultimately take production to the 70,000 to 80,000 barrel a day level. As we discussed in previous conference calls, we are seeing slow response in the Southern portion of the pool, which is a bad news/good news story. The bad news is that production will not ramp up at the same rate as previously expected. The good news is that, that slow response is a result of greater polymer sweet conformance [ph], which ultimately lead to higher oil recoveries, potentially in some areas in the South to recoveries approaching 35%. Production is expected to exit 2011 at about 47,000 barrels a day or 16% over 2010 exit rates. We are experiencing some regulatory delays at Pelican, and at this point, we do expect the delays will impact our 2011 forecast, but may impact joint plans in 2012. All information required by the regulators should be available in September for the regulators to address potential caprock concerns that they have. We've had great success at Pelican Lake. However, we're still in the steep part of the learning curve, and we believe that there's significant room to optimize performance and costs. Our plan is to convert Pelican over to polymer flood in a staged manner, with 54% of the pool converted by the end of 2011 and reaching 71% by 2013. We're also expanding the facility in stages. Capacity was increased to 52,000 barrels in 2010, and we'll go to 68,000 in 2011, and then 106,000 by 2012, as we prepare for that wall of polymer-driven production in the next few years. Turning to our international operations. Our strategy is to maintain our existing operations and convert our undeveloped resources as slots become available on the platforms. We'll also progress Espoir development in Côte d’Ivoire and progress our Big E exploration prospect in South Africa. It's important to point out that our international operations are a major driver of free cash flow generation for Canadian Natural. Our International operations generate significant free cash flow. Although International only accounts for 10% of our production, it generates 25% of the company's free cash flow, however this was severely eroded with the tax change in the U.K. As you all know, the U.K. government increased the taxation rate by 24%. As a result, the economics of doing business in the U.K. North Sea has been significantly eroded. This tax increase has caused Canadian Natural to allocate capital elsewhere in our portfolio. As a result, production will decline in North Sea in 2011 and 2012. Previously, we had expected to develop production in 2012. If and when the fiscal regime is modified in the U.K. North Sea, Canadian Natural has the ability to allocate capital to value-adding activities. In Côte d'Ivoire, the Abidjan production continues to be on track to forecast, and will continue to decline somewhat as the water form matures and until infill drilling begins in 2013. At our Olowi field in Gabon, we've been able to repair the mid-water arch to support for the pipeline risers. Platform C is on production, and we expect Platform A and B to commence production this fall. We have previously expected production to be shut in until year end. It's important to note that with the exception of Olowi, Offshore West Africa had some highest returns on our capital projects in our portfolio and generates significant free cash flow for Canadian Natural. Turning to Gas in Canada. As you know, our outlook for natural gas in North America has been very bearish, and we believe the market will be oversupplied for 2 to 7 years. Therefore, in this environment, it is paramount to be the most effective and efficient gas producer, and Canadian Natural is an effective producer. Our overall strategy for gas is to leverage our dominant infrastructure and land base, maintain our position as the most effective producer and continue to strengthen our unconventional light and tight gas asset base. By delineating new and emerging plays and leveraging new technology to open up additional resources, lower costs and ultimately position ourselves for strengthening gas prices when they arrive. We have, over time, quietly acquired 650,000 acres of Montney lands at low cost, giving Canadian Natural one of the largest Montney land bases in Canada. Septimus is our first Montney development. Production is at 60 million a day and 1,800 barrels a day of liquids, well above the 50 million a day design capacity of the plant. Reserves are tracking at 6 Bcf per well, up from expected 4 Bcf a well. And Septimus is a liquid-rich at 30 barrels a million, and with the completion of our pipeline to deep-cut facilities, should reach 50 barrels a million of liquids by November. We're currently drilling 8 more wells this year, which will come on at the end of the year to keep the plant full. Septimus production performance has been very strong, and we'll be able to expand the plant to 200 million cubic feet a day and 10,000 barrels a day of liquids, if we choose to allocate capital to Septimus. A decision to expand the Septimus plant in 2012 will be made towards the end of 2011. With the excellent results from Septimus and the strong cost control, Septimus development now competes with our oil projects at $3.50 AECO gas price. As always is the case, we remain very selective on the acquisition front. However, if opportunistic acquisitions are available and we can see that they can add value, we will, as we have in 2010, capture these opportunities. As you'll see from our guidance, we have increased the acquisition capital to $950 million for 2011. We have today acquired roughly 142 million cubic feet a day of gas and about 3,000 barrels a day of liquid or 26,800 BOEs a day at an average cost of around $35,000 a flowing barrel. The vast majority of these acquisitions are expected to close in later in Q3. All these acquisitions are within our core area, and we're able to quickly capture synergies to drive the value. Now turning to the final 2 cornerstone assets in our portfolio. They'll contribute to the most to the long-term sustainable production and create significant value for Canadian Natural shareholders, thermal or in-situ heavy oil and Horizon. Starting with our thermal heavy oil, Canadian Natural has a vast and superior thermal heavy oil asset base, where we have up to -- dominant land position with over 1.1 million acres of high-quality undeveloped land. Canadian Natural's thermal heavy oil assets contain over 70 billion barrels of bitumen in place and over 8.5 billion barrels recoverable. It's important to point out that thermal recovery mechanisms are still on a very steep part of the technology curve, and are expected over time, we will not only be able to increase recoverable reserves past 8.5 billion barrels, but improve cost efficiencies going forward. Our thermal assets have huge value and huge technology upside value. Canadian Natural is taking a very disciplined step-wise and cost-effective plan to develop these resources, with production steps of between 30,000 and 60,000 barrels a day every 2 to 3 years, ultimately taking production capacity to over 480,000 barrels a day. Production in 2011 will average 100,000 barrels a day, with expected peaks and troughs in the cyclic process, and we're just coming off a record 127,000-barrel a day production month in June. We continue to drill additional production pads in Primrose to further development of Primrose South and Primrose East. These developments are highly economic, as we add production capacity at 13,000 per flowing barrel. At Primrose East, we're drilling 6 pads, which will deliver cyclic production of roughly 20,000 barrels a day in 2012 and ramp up to a peak in the cycle in 2013 at 30,000 barrels a day. At Primrose South, we're developing 3 pads that will see cyclic production at 15,000 barrels a day in 2012 and ramp up to 18,000 in 2013. As with all large and centralized thermal developments, the incremental cost to add production is very low, and we we're able to leverage the Primrose fluid treatment and steam generations facilities previously built . We've also begun to start up of additional McMurray SAGD pad at Wolf Lake, which is also connected to the Primrose infrastructure and will deliver production to ramp up to about 5,000 barrels a day by 2013. McMurray and Wolf Lake is a poor-quality reservoir compared to what we're developing at Kirby, and will present many challenges which will allow us to test and optimize start-up procedures at Kirby. And at Kirby, which is the next major step in Canadian Natural's defined plan to develop 480,000 barrels a day of thermal production capacity, we'll develop Kirby in 3 phases, as well as debottleneck opportunities for the South down the road. We have over 1.5 billion barrels in place and 500 million barrels to recover in the Kirby development. Kirby South is expected to peak at 40,000 barrels a day, Kirby South Phase 1. In the overall, Kirby South, North and debottlenecking expansions is expected to result in 140,000 barrels a day of production capacity. The Kirby South Phase 1 plan is to build a processing plant capable of processing 118,000 barrels a day of water, generating 118,000 barrels a day of steam and treat 40,000 barrels a day of oil. The additional development would include 47 SAGD well pairs, 16 of which we'll drill this year, 7 service pads and 5.2 kilometers of pipe. The capital costs will be $1.2 billion or $31,250 per barrel, flowing barrel day. We anticipate we'll be able to leverage this initial infrastructure for further phases -- future phases, bringing down the capital costs per flowing barrel, assuming, of course, cost inflation remains in check. We're on track at Kirby South Phase 1. All major equipment has been ordered. Overall, the project is 19% complete. Engineering construction are on schedule and costs are tracking to our estimates. Mechanical completion of the plant and pad facilities is targeted for August 2013, with first steam in December 2013 and first oil out at February 2014. Our well-defined plan to take thermal production capacity to 480,000 barrels a day continues to fold on track. At Kirby North Phase 1, the public disclosure document has been submitted, and we expect the regulatory application to be filed by year end. The DBM engineering kicked off in July, and we target first steam in for 2016 and Kirby North production to be about 40,000 barrels a day. At grouse [ph], the public disclosure document has been submitted, with the regulatory application to be submitted in Q1 of 2012. The DBM engineering is expected to be completed by mid-2012, and we target first steam in Q4 2017 and expect gross production to be 40,000 barrels a day. At Birch Mountain Phase 1, we will submit the public disclosure document by year end and submit the regulatory application by mid-2012. DBM engineering is scheduled to commence mid-2012. Birch Mountain Phase 1 will target production capacity of 60,000 barrels a day. Our thermal heavy oil assets are very strong, as you can see, and will deliver value growth for many decades to come. Canadian Natural's program targets production growth of 5% in 2011. For 2012, production is targeted to be in the 105,000 to 115,000 barrels a day range, up about 10%. And in 2013, we target production to increase 15% to 125,000 to 130,000 barrel a day range. And in 2014, with Kirby coming onstream, we target production over 20% growth to 150,000 to 160,000 barrels a day range. Solid production growth from thermal assets, which are the key drivers of a more sustainable, long-life production profile going forward for Canadian Natural. Turning to Horizon. So I'm going to summarize here where we are today on the start up and in general terms, but both Peter and Réal are here to provide a bit more detail. As we stated in the last press release, we expect to be mechanically complete and turn over the plant's commissioning during the first week of August. I'm happy to report we are complete, and the turnover to commissioning has begun. We expect about 2 to 3 weeks commissioning time before we turn over to the full operations mode, and thereafter, it will take us a few days to ramp up to the 110,000 barrels a day design rates. The cost for rebuild and to repair collateral damage is tracking to our estimate, and we believe the final cost will be roughly $425 million. Canadian Natural carries insurance to cover the costs of these repairs, as well as business interruption insurance after 90 days to covering operating costs up to $30 a barrel. And to give you more detail, I'll turn it over to Réal, who will give you a brief summary of what was completed on the rebuild and expansion projects underway. And Peter will update you on the completion of the collateral damage, our accelerated turnarounds, and importantly, where we are in commissioning today and what commissioning is required to achieve stable operations. Réal? Réal Doucet: Thank you, Steve. Good morning, ladies and gentlemen. So first of all, I will talk about the coker rebuilt, and then we'll give you an update on Phase 2, 3 updates. On the coker rebuild, several things happened here since January 6 until now. And I will start to explain to you a lot of the challenge we've been through. First of all, the cold weather. As you know, in January, February and March, we were extremely cold weather in the Fort McMurray area, ranging several days over minus 30 and beyond. Behind that, we had also the heavy rain and the thunderstorm in April and July, which didn't help. We had several times we had to evacuate the area because we had some lightning risk in the area. Combined with this, we had also high winds, which made us, for 16 days, not being able to do high lift in the derrick area. Now to top it all off, from May 15 to June 7, we had a forest fire that was surrounding the plant. None of that created any damage on the plant core, per se, however, with heavy smoke and risk of fire around, we had to evacuate the people there for that period of time, which, of course, provided no progress on the fieldwork. However, at that time, we also focused on expediting the procurement. And then talking about procurement, all the decoking mechanism were fabricated in Germany, so we had to charter three times a heavy load plane to deliver the material directly to site. So you can imagine we had some of those challenges. But despite all this, talking about the costs right now, our forecast in February was $190 million for the rebuild component of the fire. And I'm pleased to say today that we would complete all the jobs under budget. On the schedule side, the Train 2A and B, the cokers are divided in 2 train, Train 1 and Train 2, and each train has 2 coker. So train #2A and B, the actual turnover was accomplished on July 27 to operation. We have all the planning and the bending repair, all that and all the 16 systems that are included in 2A and B were repaired, and they're functional and they have been turned over to operation control and custody. On the Train 1A and B, the last system turnover for startup of operation, which is the decoking system, will be turned over tomorrow as scheduled, which will complete a 15-systems turnover to operation out of 17. The 2 remaining, which are not necessary for operation at this time of year is the flooding and the heat raising in some area, and the heat ventilations and the air conditioning. So we're in a good position right now for starting up the plan. Now talking about the Phase 2, 3 update. As you know, we have divided the plant update into 5 major components, and I will talk to each one of them to give you a bit of an update on them. The one that we talked, we call reliability, which includes Oil Preparation Plan #3, which is, by the way, right now over 95% complete and it's in the process of being turned over to operation, and the official turnover date for that one is September 22. The hydro transport, which is also essentially complete, and we are in the commissioning mode right now. And one of the major final product tank, which has been completed already and is fully operational. All 3, by the way, have been completed within budget. And as a matter of fact, right now, out of those 3, we have been able to come up at $47 million under budget. The 3 remaining one are the reliability, the gas recovery unit, the butane treating unit and the sulfer recovery plant are well -- are well under way. The engineering is 96% complete, the procurement, 72% complete, and the construction is on its way right now. The padding has been completed, and we are into foundation right now. Again, all those 3 are on schedule and within budget estimate at this time. Under Directive 74, we have also made some progress there. We're talking here about tailing works and mature fine tailings we're handling. These projects also are in progress right now and on schedule. We have our tailings plants that have been approved by the regulators also earlier on here this summer, and we're starting the fieldwork in August. On the Phase 2, which we've divided in Phase 2a and 2b, Phase 2a include the delayed coker expansion, which is right now on the engineering side, 50% complete. The procurement is 20% complete, both of them as planned, and the construction is scheduled to start next spring. The upgrading, debottlenecking and each to a stripper [ph], the engineering has been started, and we've also procured mining equipment, shovels, trucks and auxiliary equipment that are on order and will be delivered in later part of this year and first part of next year. On Phase 2b, we have an Ore Preparation Plan #4 in the hydro transport associated with it. We have [indiscernible] treatment Train #2, the gas, oil hydro treater, the vacuum distillations and diluent recovery unit, the hydrogen plant and all the associated building and utilities. All of these plants, by the way, the engineering design specification has been completed. We are out for bid at this time, and the majority should be awarded here before year end. Now the last phase, which is Phase 3, we still also have some of these project underway. The extraction Train 3 and #4, the pickners [ph], the Cyclone, the dealing transfer and their associated utilities, the engineering and procurement awards should be done also in September, October of this year. We have also, and I'm pleased to say this, completed the tie-ins and the early work that was associated with these projects here during the shutdown. So there was a great opportunity for us to do this, and all of them were done on or ahead of schedule and under budget. So that gives you a bit of an update on Phase 2, 3 where we are right now. We're well on our way right now to be successful there as well. Peter?

Thanks, Réal. I'll cover off a little bit of where we are and speak more specifically around the start-up preparations. The significant amount of work in the collateral damage repairs, opportune maintenance and turnaround work has all come to a completion. Horizon has completed all of its regulatory pressure equipment inspections that are due prior to 2013. And this, of course, supports our deferral of the remainder of turnarounds scoped to 2013. All the process equipment and systems have been walked down with operations and maintenance personnel to prepare for commissioning and start-up. And these walk-downs will continue through this weekend. We are currently focused on correcting and finishing final punch list deficiency items and finishing final lube checks on the instrument and control systems. In preparation for startup, there remain a couple of essential requirements that must be met before we complete the commission sequence and feed in. Firstly, procedures review and operations recertification training to ensure that we have elevated the focus on operating discipline for our facility. Independent field verification of critical start-up and emergency procedures are all on target to be 100% complete this weekend. All operations supervisors to complete the supervisory training program by August 10, and the refresher training for operators and their recertification will also be completed by August 10. The second significant requirement is adherence to and completion of the pre-start-up safety review and checklists. These checklists ensure that we have properly incorporated any changes to the operating plant configuration, that we also ensure a proper quality assurance check has been completed of any rebuilt and maintained equipment, that our emergency response plans and safety systems are all good to go, ensuring that all field-level hazards are removed prior to startup. These are things like scaffolding removed or piping systems that still require insulation. And then finally, ensuring that all the supporting business systems are ready to go. And I can assure you, as of yesterday, when we reviewed the pre-start-up safety reviews, all areas reported no material deficiencies in the checklists that would prevent startup. Some areas will be required to perform their last field-level checks as we bring feed in. Now I'd like to spend a moment just talking a little bit about where we are on status regarding commissioning and the remaining steps to go. As of this morning, water systems are circulating throughout the entire plant. In mining, the shovels and support equipment and staffing are all set to go. In operations and extraction, we're running on water. Froth treatment is also circulating on water, and we were currently de-blinding the cycle plaques. The data recovery unit is being inventoried with this lift [ph], and we will go on circulation in the DRU today. We're starting with one gas compressor this morning. The hydrogen unit is expected to be making processed gas later today. Looking at tomorrow, we'll be filling the froth tank, and essentially, this is a milestone marker for us as it represents a startup for the mining and extraction operations activities. Then the weekend on through to early next week, the delayed coker unit will go on to circulation and the coke cutting of the existing coke drums will begin this weekend. We will take time at this stage to ensure we have adequately removed any residual coke particles from the piping systems and ensure the integrity of the unit. Hydro treaters, our final aspect of the startup, should complete commissioning activities following this and be ready to go into circulation. We're giving ourselves, as you sense, a bit of time to complete the commissioning and start-up activities to allow for some final unit integrity checks and to ensure that the product quality requirements will be met. We expect to take 2 to 3 weeks before we are in production. Back to you, Steve.

Thanks, Peter and Réal. As you can see, we're well on our way to stable operations again at Horizon. And I'm very confident that we have effectively utilized this period of downtime during rebuild to complete all opportune maintenance and to increase our levels of operating discipline in the coking units to the same high levels of operating discipline we maintain in our operations across the company. As a result, I believe when we do get to 110,000 barrels a day here in 2 to 3 weeks, we'll have a more stable and reliable operations going forward. Consistent with other E&P company, we have not lost the focus on value creation of future expansions. We continue to progress the expansion of Horizon from 110,000 to 250,000 barrels a day. Engineering and procurement has been proceeding, allowing Canadian Natural to effectively implement the disciplined execution strategy we have developed for the Horizon expansion. This strategy gives Canadian Natural the ability to achieve high levels of cost synergy, while still maintaining capital flexibility, providing us the ability to stop or start construction if the market becomes overheated. As part of the unfolding of the strategy, the company has approved $2 billion of capital expenditure in 2012 to progress the expansion of Horizon as part of an overall capital budget for the company of between $7 billion and $8 billion expected in 2012. This 2012 budget will allow for the progression of some additional E&P work, as Réal has explained, as well as some construction kicking off. As we've stated in previous conference calls, we expect to have about 5,000 barrels a day coming from reliability projects, 10,000 barrels a day production from the debottlenecking and coke expansion projects, and 45,000 barrels a day from the addition of the fourth OPP, additional froth treatment back in distillation and a gas-oil hydro treater, and 80,000 barrels a day from the addition of a fifth OPP, a third and fourth extraction trains and a combined hydro treater and additional software recovery. The 2012 capital expenditure will progress activities in all of these areas. Horizon is a world-class asset, and we have over 16 billion barrels on our lease with 6 billion barrels recoverable. Our design capacity is currently 110,000 barrels a day. And our effective strategy to take a staged approach to expand to the first 250,000 barrels a day and then ultimately to just under 500,000 barrels a day or 0.5 million barrels a day of light, sweet 34-degree API crude for 40 years with no declines. It's clear Horizon is a world-class asset and will continue to generate significant free cash flow for decades to come. Canadian Natural is in a very strong position, with well-balanced, diversified assets that we can -- are set to unlock significant value for shareholders going forward. Canadian Natural can unlock this value and at the same time generate significant free cash flow throughout the future capital programs required to unlock that potential for a vast asset base, also ensuring we maintain a very strong balance sheet. This allows us to effectively transition the company to a more longer-life production mix, provides us the ability to increase dividends on a sustainable basis and, if available, capture opportunistic acquisitions if they add value. With that, I'll turn of it over to Doug, who will highlight the financial strength of the company.

Thank you, Steve, and good morning. I would like to briefly summarize several financial highlights for Canadian Natural in the first half of 2011. We generated cash flow from operations of $2.6 billion or $2.37 a share on a fully diluted basis, with no revenue contribution from Horizon as a result of the suspension of production in early January. In the same period, we incurred capital expenditures of $3.1 billion. This resulted in reported debt outstanding at June 30 of $8.6 billion, including the current portion of long-term debt of USD $400 million, which was retired in July. The $8.6 billion compares to $8.5 billion at the end of 2010 and represents the focus of Canadian Natural to maintaining our balance sheet's strength. These results -- the result was the maintenance of our debt-to-book capitalization metric at 29% and debt to EBITDA at 1.2x. I would also like to mention the repayment in July of the 6.7% USD $400 million debt securities represented the retirement of our inaugural U.S. dollar debt offering into the United States debt markets in 2001. We also focused our attention on our long-term financial stability and liquid resources. In June, we negotiated an increase to our $2.2 billion revolving bank credit facility at $3 billion and extended the facility to 2015. Today, our aggregate bank credit facilities are approximately $4.7 billion, of which $2.8 billion were undrawn at June 30, providing us with adequate liquid resources and flexibility as we navigate through the current economic stress events impacting North America and European economies. Additionally, we made good progress on our insurance claim for the Horizon fire incident. Our team and the insurers worked together to review the claim. And in the second quarter, we received the first interim payment under the business interruption portion of the policy following the period of self-insurance. For the second quarter, we recognized $136 million, partially offsetting our fixed operating cost obligations. Additional business interruption recoveries related to the second and third quarters will be recognized, as payments are processed and the terms of the insurance settlement are determined. Our commodity hedging program continues to be actively managed. No new positions were added in the second quarter. However, it is our intention to actively pursue this as a means of underpinning our cash flow from operations, in order to ensure the completion of our future capital spending plans, while also ensuring the fulfillment of our other commitments including our dividend policy and the management of our balance sheet's strength. Details of the hedged positions are available in note 15 of the financial statements and are also available on our website. In conclusion, I believe we are very well-positioned financially to continue to develop our diverse asset base, including the improved strategic expansion capital expenditures for Horizon, utilizing our strong cash flow generation capabilities, the strength of our balance sheet and providing adequate liquid resources to ensure the completion of our plans. This financial strength complements our management strategies and the company's disciplined approach to project execution. Thank you, and I will return you to John for some closing comments.

Thanks, everyone, for your reviews and updates. As you can see, we remain very focused with very definitive economic plans to develop our assets, with the view always to creating value for our shareholders. With that, operator, I would open up the call to questions that participants may have.

[Operator Instructions] The first question is from Joe Citarrella with Goldman Sachs. Joe Citarrella - Goldman Sachs Group Inc.: I'm curious to get your latest thoughts with regard to price realizations in your crude oil marketing strategy. Near term, you're clearly restarting Horizon here as well as ramping up heavy oil production into a market that's already well-supplied and lacking sufficient takeaway capacity to the Gulf Coast. Longer term, you've highlighted your committed volumes on Keystone XL was opening up a new market for you. So my questions are, first, do you foresee any stress on the market near term as you're ramping back up? And second, are there any other medium- to longer-term options outside of Keystone that you'd consider for managing your exposure to the WCS and WTI differentials? Has your willingness to consider refining investments, for instance, changed at all? Or is that out of the picture? It would be great to get any high-level thoughts from you.

Joe, Steve Laut here, and that's a great question. So I'll talk about, first bringing on Horizon. As you know, right now, synthetic crude oil is getting about a $14 premium to WTI. And when we bring Horizon on, I would expect that premium to shrink. And we normally get about $1 discounts, but when we bring on -- part for that premium is probably because Horizon is off. So when we come on, I would expect that will shrink a bit, but we'll still not have not have any issues moving Horizon oil and getting a good price for. As far as heavy oil and the other oil in our portfolio, and as you pointed out the differentials on Canadian heavy crude or WCS, it's quite a bit wider than Mayan crude. And that's lot to do with the logistics at Cushing. We are a strong supporter, as you pointed, out of Keystone. We believe that Keystone ultimately will be approved probably by the end of the year. However, if it's not approved, probably you will see a greater push from Canadian pushers to get a pipeline built off the West Coast, and then we'll access Asian markets. As far as has it caused us to rethink our refining investment, as you probably realized, we are a 50% owner in the construction of the Redwater upgrader that will be constructed in Edmonton. And we are progressing engineering right now, and we expect to sanction that project near the end of this year or early next year 2012. That will process 70,000 barrels a day of heavy oil blend, which will give us additional upgrading capacity or market for heavy oil. Again, we do believe Keystone will be built and we're a large, strong supporter of that. Joe Citarrella - Goldman Sachs Group Inc.: Thanks. And just to clarify, in the absence of Keystone, would any medium-term options be on the table for you in terms of additional upgrading or downstream pressure or is it really Redwater, and that's basically the extent of what we should be thinking about?

I think that's what you should be thinking about, Joe. I don't think we're looking at anything else right now.

The next question is from George Toriola of UBS. George Toriola - UBS Investment Bank: A couple of questions, first on Horizon expansion. Could you just provide some clarity as to what capital you've invested to date on the expansion side of things? And what you estimate the total CapEx would be? And this is probably taking you to 250,000 barrels a day. Are you able to provide that clarity?

So, George, I can give you some clarity. And as you've probably heard us, we're not too keen on giving the full discount on what we think the costs would be going forward, because we're going to do this on a stepwise project-by-project basis, and we'll disclose it -- our capital budget as we go. So right now on reliability and Directive 74 work and some Phase 2a work that we've done, we spent about -- by the end of year, we'll spend about $1.4 billion. Going forward, I think you can say that we're not going to do any expansions. We said that very clearly, unless we know we can get a return on capital, that it's economic. And to just give you a trademark or sort of a marker, we believe that you need to be $100,000 per flowing barrel or less to be economic in about an $80 world. So you can say that we're targeting to be less than that as we go forward. But again, depending what the market is, we will proceed in an orderly fashion to engineering construct. But mostly on the construction, if we see an overheating in the market or a shortage in labor, we will take a timeout and stop construction, so we can control costs. George Toriola - UBS Investment Bank: Okay, that's helpful. I guess that then fits into my second question here, which has to do with your total capital spend. For next year, you're guiding to $7 billion to $8 billion. I guess if we look out, depending on what commodity prices do here, but if we look out next year and the years beyond that, that type of capital spend would see you with a significant free cash flow. So what would be your thoughts around that free cash flow in that environment?

So you're correct. We have the ability here to generate free cash flow throughout the whole Horizon construction and our significant thermal expansion plans, as well as maintain our business and grow the other parts of the business. So our priorities for free cash flow, obviously, we are focused on increasing dividends, but they have to be sustainable. We're also -- we'll take advantage of any opportunistic acquisition opportunities we see out there. And you can see, we did about $2 billion worth of property acquisitions in 2010. We're tracking to about just under $1 billion this year, and the deal flow slowed up. So we'll see what that is in 2012. But if there's opportunities and we can see we can add value, we'll take advantage of that. George Toriola - UBS Investment Bank: Okay, thanks and just 2 more quick questions. When you say opportunistic acquisitions, that suggests that natural gas type acquisitions. Would that be the way you will look at it as to -- that would be where opportunity would be regardless of the fact that your variation on natural gas here?

No. I think that's what happened here likely in the past. We're probably about 70% gas this year. But it's all about where we can add value. So mostly we do it in our core areas, and we do it where we have an advantage or we can lower costs and see reserves value. So you're seeing us in, actually 2010, we bought additional properties around Kirby, which is heavy oil. And again, and this year, we bought significant chunks of undeveloped land in our primary heavy oil area, which is very opportunistic. We can leverage our infrastructure to do that. So it just turns out that it's been more gas-weighted, but it's all opportunistic where we can add value. George Toriola - UBS Investment Bank: And the final question, this is on Pelican. When you talk about the southern portion on the field and the response taking longer than anticipated, can you, is this -- does have to do with the injectivity? Does this -- what exactly do you think is driving this lower-than-expected response?

George, I thank you for the question because obviously there's been a lot of attention paid to this. We don't have any issues with injectivity. We're getting the polymer away with no problem and at reasonable pressure. And what we're seeing here is, in the southern portion of the pool, the rock is somewhat different than in the northern portion. The water saturations in the rock are a little bit higher, and in some places, we have a little bit of a gas cap. So it looks like what we're doing is we're getting, for some reason, we're getting a better sweep conformance. So the flood front or the polymer front is more uniform, and we're sweeping in more consistent bank of oil towards the producers. So we know from pressure responses and we know that we're putting a barrel in, we're going to get a barrel out. So it looks like we keep coming or heading for very, very recoveries here in the south. The unfortunate part about it is because we're getting such a good sweep, that sort of flood bank of oil in front of the polymer front is taking longer to get to producing wells. So that's in a very simplistic term, what's really going on. George Toriola - UBS Investment Bank: And you don't see any risk to reserve bookings or things like that based on this?

No. If anything, it will have a positive impact on reserve bookings, I would think.

The next question is from Alex Gheorghe with Scotia Capital.

A quick question on Pelican Lake as well. I was wondering if you can provide any color into the regulatory concerns about the caprock?

The concerns here are, Alex, is that one of the offsetting operators in the pool was drilling a well into the polymer flood and experienced higher pressure with the regulators, I believe, and not the operators, not us in the rock above the zone. So their concern is if there's a potential for breakthrough into the caprock, and at those pressures, they need to have conformance. So what they want and what they need, of course, is to show us and demonstrate that the caprock has integrity to withhold the pressure that we flood with at polymer. The polymer floods were flooding at a higher a than you do under normal water flood. And so there's some concern because it's a new process. Although, you see the regulators are very familiar with water flooding. Polymer flooding, it's a little bit higher pressure, so there's concern, they're being more cautious. And while that data is being collected now, caprock data, and from all our studies we see, I don't think it will be a concern. But we just need to prove it, and that's what's happening. So I expect all the data will be there by September. All the analysis and working with the regulator will be completely shortly after. That will impact probably our drilling plans in 2012, if it impacts us at all.

Great, so is that a term that we might hear an update on that in Q3?

Yes, we will give you an update on the next conference call.

[Operator Instructions] The next question is from John Herrlin of Societe Generale. John Herrlin - Societe Generale Cross Asset Research: Just one quick one with me with respect to free cash flow. You mentioned in acquisitions, you mentioned other users in terms of projects acceleration, why not a normal course-issuer bid?

I would say that is on our list of priorities, but our first priority would probably be either dividend increase or acquisitions. And obviously, we do share buybacks, especially something we should probably be looking as the share price drops off here in this market, but we believe that we have a huge asset inventory, and that we can add value by increasing or by allocating our capital to our assets and progressing. There's lot of areas we can add value through technology development as well. John Herrlin - Societe Generale Cross Asset Research: Okay, that's fair. With the acquisition markets, Steve, how active is it right now? Are you seeing large properties, small properties, public, private? How big is it?

It is not -- it's probably 1/3 to 1/2 of what it was in 2010. And I'd say through the course of the year here, it's been drying up. So I think the deal flow continues to dwindle. So I'm not sure how big it will be in 2012.

The next question is from Menno Hulshof with TD Securities. Menno Hulshof - TD Newcrest Capital Inc.: I have yet another follow-up question on that $7 billion to $8 billion CapEx estimate. It looks to be down from roughly $9 billion as per your May Investor Day presentation. So I'm just wondering if there's any color that you can provide in this regard? And then second, is there anything that is not included into that, not included in that $7 billion to $8 billion estimate?

No, there's nothing. That includes all plans to fully develop our thermal plants, so executing oil plants or strat wells for the future, our light oil plants, primary heavy oil, international, and of course, Horizon and gas. So at the $9.5 billion, actually it was kind of a roundup. It was closer to $8.5 billion, $9 billion. And so, really, that was sort of the outside estimate at the time. We wanted to make sure we had the biggest number we could put in there. So nothing's really changed. We're just been very conservative in the open house. Menno Hulshof - TD Newcrest Capital Inc.: Okay, perfect. And then 2013 forward, you were guiding to something in the range of $7 billion to $8 billion. Does that still sound to be about right?

I would think for the next 4 to 5 years, we'll be in that range, and that would assume, of course, that we proceed fully on track with Horizon expansions and don't have to take a break because of inflation.

Thank you. There are no further questions registered at this time. I would now like to turn the meeting over to Mr. Langille.

Thank you, operator, and thank you, everyone, for attending our conference call. As usual, if you do have any additional questions, do not hesitate to get a hold of us. And have a very good day. Thank you.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.