EX-99.3 4 a06302020q2fs.htm EX-99.3 Document




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Canadian Natural Resources Limited
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019



















INTERIM CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS

As atNoteJun 30
2020		Dec 31
2019
(millions of Canadian dollars, unaudited)
ASSETS   
Current assets   
Cash and cash equivalents $233  $139  
Accounts receivable 1,851  2,465  
Current income taxes receivable 306  13  
Inventory1,095  1,152  
Prepaids and other 214  174  
Investments7275  490  
Current portion of other long-term assets893  54  
  4,067  4,487  
Exploration and evaluation assets42,525  2,579  
Property, plant and equipment565,277  68,043  
Lease assets61,654  1,789  
Other long-term assets81,222  1,223  
  $74,745  $78,121  
LIABILITIES   
Current liabilities   
Accounts payable $606  $816  
Accrued liabilities 2,007  2,611  
Current portion of long-term debt91,843  2,391  
Current portion of other long-term liabilities6,10461  819  
  4,917  6,637  
Long-term debt921,177  18,591  
Other long-term liabilities6,105,999  7,363  
Deferred income taxes10,319  10,539  
  42,412  43,130  
SHAREHOLDERS’ EQUITY   
Share capital129,521  9,533  
Retained earnings22,614  25,424  
Accumulated other comprehensive income13198  34  
  32,333  34,991  
  $74,745  $78,121  
Commitments and contingencies (note 17).

Approved by the Board of Directors on August 5, 2020.

Canadian Natural Resources Limited
1
Six months ended June 30, 2020

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
Three Months EndedSix Months Ended
(millions of Canadian dollars, except per
 common share amounts, unaudited)		NoteJun 30
2020		Jun 30
2019		Jun 30
2020		Jun 30
2019
Product sales18$2,944  $5,931  $7,596  $11,472  
Less: royalties(73) (369) (225) (662) 
Revenue2,871  5,562  7,371  10,810  
Expenses
Production1,409  1,533  3,093  3,063  
Transportation, blending and feedstock759  996  2,191  2,035  
Depletion, depreciation and amortization5,61,403  1,307  2,967  2,570  
Administration88  84  196  154  
Share-based compensation1023  (7) (200) 55  
Asset retirement obligation accretion1051  46  103  90  
Interest and other financing expense199  197  405  388  
Risk management activities1632  11  (32) 52  
Foreign exchange (gain) loss(430) (217) 492  (456) 
(Gain) loss from investments7,8(55) 62  205  89  
  3,479  4,012  9,420  8,040  
Earnings (loss) before taxes (608) 1,550  (2,049) 2,770  
Current income tax (recovery) expense 11(31) 77  (210) 242  
Deferred income tax recovery11(267) (1,358) (247) (1,264) 
Net earnings (loss)  $(310) $2,831  $(1,592) $3,792  
Net earnings (loss) per common share   
Basic15$(0.26) $2.37  $(1.35) $3.17  
Diluted15$(0.26) $2.36  $(1.35) $3.16  

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Three Months EndedSix Months Ended
(millions of Canadian dollars, unaudited)Jun 30
2020		Jun 30
2019		Jun 30
2020		Jun 30
2019
Net earnings (loss)$(310) $2,831  $(1,592) $3,792  
Items that may be reclassified subsequently to net earnings (loss)
Net change in derivative financial instruments
designated as cash flow hedges
  
Unrealized income (loss) during the period, net of taxes of
$2 million (2019 – $1 million) – three months ended;
$3 million (2019 – $6 million) – six months ended
(13) 20  26  49  
Reclassification to net earnings (loss), net of taxes of
$nil (2019 – $2 million) – three months ended;
$1 million (2019 – $3 million) – six months ended
(2) 10  (9) (23) 
 (15) 30  17  26  
Foreign currency translation adjustment  
Translation of net investment
(107) (61) 147  (121) 
Other comprehensive income (loss), net of taxes(122) (31) 164  (95) 
Comprehensive income (loss)$(432) $2,800  $(1,428) $3,697  
Canadian Natural Resources Limited
2
Six months ended June 30, 2020

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Six Months Ended

(millions of Canadian dollars, unaudited)		NoteJun 30
2020		Jun 30
2019
Share capital12  
Balance – beginning of period $9,533  $9,323  
Issued upon exercise of stock options 35  118  
Previously recognized liability on stock options exercised for common shares
 9  13  
Purchase of common shares under Normal Course Issuer Bid(56) (134) 
Balance – end of period 9,521  9,320  
Retained earnings   
Balance – beginning of period 25,424  22,529  
Net earnings (loss)  (1,592) 3,792  
Dividends on common shares12(1,003) (896) 
Purchase of common shares under Normal Course Issuer Bid12(215) (498) 
Balance – end of period 22,614  24,927  
Accumulated other comprehensive income13  
Balance – beginning of period 34  122  
Other comprehensive income (loss), net of taxes 164  (95) 
Balance – end of period 198  27  
Shareholders’ equity $32,333  $34,274  

Canadian Natural Resources Limited
3
Six months ended June 30, 2020

CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months EndedSix Months Ended
(millions of Canadian dollars, unaudited)NoteJun 30
2020		Jun 30
2019		Jun 30
2020		Jun 30
2019
Operating activities   
Net earnings (loss) $(310) $2,831  $(1,592) $3,792  
Non-cash items  
Depletion, depreciation and amortization 1,403  1,307  2,967  2,570  
Share-based compensation 23  (7) (200) 55  
Asset retirement obligation accretion 51  46  103  90  
Unrealized risk management loss (gain) 1  (16) (16) (2) 
Unrealized foreign exchange (gain) loss  (433) (219) 688  (452) 
Realized foreign exchange gain on settlement of cross currency swaps
—  —  (166) —  
(Gain) loss from investments7,8(53) 68  215  103  
Deferred income tax recovery  (267) (1,358) (247) (1,264) 
Other 13  20  (105) (100) 
Abandonment expenditures (40) (41) (129) (149) 
Net change in non-cash working capital(739) 230  (144) (786) 
Cash flows (used in) from operating activities (351) 2,861  1,374  3,857  
Financing activities   
Issue of bank credit facilities and commercial paper, net
9184  3,273  833  3,908  
Repayment of medium-term notes9(900) (500) (900) (500) 
Issue of US dollar debt securities
91,481  —  1,481  —  
Proceeds on settlement of cross currency swaps16—  —  166  —  
Payment of lease liabilities
6,10(61) (57) (126) (109) 
Issue of common shares on exercise of stock options
 4  35  35  118  
Dividends on common shares
(502) (449) (946) (852) 
Purchase of common shares under Normal Course Issuer Bid
12—  (391) (271) (632) 
Cash flows from financing activities206  1,911  272  1,933  
Investing activities   
Net expenditures on exploration and evaluation assets
(1) (37) (8) (70) 
Net expenditures on property, plant and equipment
(380) (830) (1,122) (1,666) 
Acquisition of Devon assets
—  (3,412) —  (3,412) 
Net change in non-cash working capital(312) (185) (422) (345) 
Cash flows used in investing activities (693) (4,464) (1,552) (5,493) 
(Decrease) increase in cash and cash equivalents
 (838) 308  94  297  
Cash and cash equivalents – beginning of period
 1,071  90  139  101  
Cash and cash equivalents – end of period $233  $398  $233  $398  
Interest paid on long-term debt, net $174  $183  $387  $411  
Income taxes paid  $31  $60  $72  $286  


Canadian Natural Resources Limited
4
Six months ended June 30, 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions of Canadian dollars, unless otherwise stated, unaudited)
1. ACCOUNTING POLICIES
Canadian Natural Resources Limited (the "Company") is a senior independent crude oil and natural gas exploration, development and production company. The Company’s exploration and production operations are focused in North America, largely in Western Canada; the United Kingdom ("UK") portion of the North Sea; and Côte d’Ivoire and South Africa in Offshore Africa.
The "Oil Sands Mining and Upgrading" segment produces synthetic crude oil through bitumen mining and upgrading operations at Horizon Oil Sands ("Horizon") and through the Company's direct and indirect interest in the Athabasca Oil Sands Project ("AOSP").
Within Western Canada in the "Midstream and Refining" segment, the Company maintains certain activities that include pipeline operations, an electricity co-generation system and an investment in the North West Redwater Partnership ("NWRP"), a general partnership formed to upgrade and refine bitumen in the Province of Alberta.
The Company was incorporated in Alberta, Canada. The address of its registered office is 2100, 855 - 2 Street S.W., Calgary, Alberta, Canada.
These interim consolidated financial statements and the related notes have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"), applicable to the preparation of interim financial statements, including International Accounting Standard ("IAS") 34 "Interim Financial Reporting", following the same accounting policies as the audited consolidated financial statements of the Company as at December 31, 2019, except as disclosed in note 2. These interim consolidated financial statements contain disclosures that are supplemental to the Company’s annual audited consolidated financial statements. Certain disclosures that are normally required to be included in the notes to the annual audited consolidated financial statements have been condensed. These interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2019.
Critical Accounting Estimates and Judgements
For the three and six months ended June 30, 2020, the novel coronavirus (“COVID-19”) had an impact on the global economy, including the oil and gas industry. In the latter half of the second quarter of 2020, business conditions and commodity prices began to improve. The Company has taken into account the impacts of COVID-19 and the unique circumstances it has created in making estimates, assumptions and judgements in the preparation of the unaudited interim consolidated financial statements, and continues to monitor the developments in the business environment and commodity market. Actual results may differ from estimated amounts, and those differences may be material.
Government Grants
The Company has received or is eligible for government grants in response to the impact of COVID-19. These government grants are recognized when there is reasonable assurance that the Company will comply with the conditions attached to the grant and the grant will be received. Grants that are intended to compensate for expenses incurred are classified as other income.
2. CHANGES IN ACCOUNTING POLICIES
In October 2018, the IASB issued amendments to IFRS 3 "Definition of a Business" that narrowed and clarified the definition of a business. The amendments permit a simplified assessment of whether an acquired set of activities and assets is a group of assets rather than a business. The amendments apply to business combinations after the date of adoption. The Company prospectively adopted the amendments on January 1, 2020.
In October 2018, the IASB issued amendments to IAS 1 "Presentation of Financial Statements" and IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors". The amendments make minor changes to the definition of the term "material" and align the definition across all IFRS Standards. Materiality is used in making judgements related to the preparation of financial statements. The Company prospectively adopted the amendments on January 1, 2020.




Canadian Natural Resources Limited
5
Six months ended June 30, 2020

3. ACCOUNTING STANDARDS ISSUED BUT NOT YET APPLIED
In January 2020, the IASB issued amendments to IAS 1 "Presentation of Financial Statements" to clarify that liabilities are classified as either current or non-current, depending on the existence of the substantive right at the end of the reporting period for an entity to defer settlement of the liability for at least twelve months after the reporting period. The amendments are effective January 1, 2023 with early adoption permitted. The amendments are required to be adopted retrospectively. The Company is assessing the impact of these amendments on its consolidated financial statements.
In May 2020, the IASB issued amendments to IAS 16 “Property, Plant and Equipment” to require proceeds received from selling items produced while the entity is preparing the asset for its intended use to be recognized in net earnings, rather than as a reduction in the cost of the asset. The amendments are effective January 1, 2022 with early adoption permitted. The Company is assessing the impact of these amendments on its consolidated financial statements.
4. EXPLORATION AND EVALUATION ASSETS
 Exploration and ProductionOil Sands
Mining and
Upgrading		Total
 North
America		North
Sea		Offshore
Africa		  
Cost     
At December 31, 2019$2,258  $—  $69  $252  $2,579  
Additions25  —  1  —  26  
Transfers to property, plant and equipment
(79) —  —  —  (79) 
Disposals/derecognitions (3) —  —  —  (3) 
Foreign exchange adjustments—  —  2  —  2  
At June 30, 2020$2,201  $—  $72  $252  $2,525  

Canadian Natural Resources Limited
6
Six months ended June 30, 2020

5. PROPERTY, PLANT AND EQUIPMENT
 Exploration and ProductionOil Sands
Mining
and
Upgrading		Midstream
and
Refining		Head
Office		Total
 North
America		North
Sea		Offshore
Africa		    
Cost       
At December 31, 2019$72,627  $7,296  $3,933  $45,016  $451  $466  $129,789  
Additions479  43  41  539  3  13  1,118  
Transfers from E&E assets79  —  —  —  —  —  79  
Change in asset retirement
obligation estimates		(794) (114) (29) (332) (1) —  (1,270) 
Disposals/derecognitions
(269) —  —  (150) —  —  (419) 
Foreign exchange adjustments and other
—  374  198  —  —  —  572  
At June 30, 2020$72,122  $7,599  $4,143  $45,073  $453  $479  $129,869  
Accumulated depletion and depreciation     
At December 31, 2019$46,577  $5,712  $2,712  $6,247  $153  $345  $61,746  
Expense1,769  150  58  839  7  13  2,836  
Disposals/derecognitions
(269) —  —  (150) —  —  (419) 
Foreign exchange adjustments and other
(31) 284  156  20  —  —  429  
At June 30, 2020$48,046  $6,146  $2,926  $6,956  $160  $358  $64,592  
Net book value
- at June 30, 2020$24,076  $1,453  $1,217  $38,117  $293  $121  $65,277  
- at December 31, 2019$26,050  $1,584  $1,221  $38,769  $298  $121  $68,043  
The Company regularly reviews the business environment and commodity markets to assess the recoverability of the carrying value of its cash generating units ("CGUs"). As at June 30, 2020, the Company determined the carrying value of all of its CGUs to be recoverable.
The Company capitalizes construction period interest for qualifying assets based on costs incurred and the Company’s cost of borrowing. Interest capitalization to a qualifying asset ceases once the asset is substantially available for its intended use. For the six months ended June 30, 2020, pre-tax interest of $15 million (June 30, 2019 – $37 million) was capitalized to property, plant and equipment using a weighted average capitalization rate of 3.7% (June 30, 2019 – 4.1%).

Canadian Natural Resources Limited
7
Six months ended June 30, 2020

6. LEASES
Lease assets
Product
transportation
and storage		Field
equipment and
power		Offshore
vessels and
equipment		Office leases
and other		Total
At December 31, 2019$1,166  $317  $182  $124  $1,789  
Additions1  21  5  1  28  
Depreciation(61) (27) (29) (14) (131) 
Derecognitions(21) (2) (11) —  (34) 
Foreign exchange adjustments and other
(2) (2) 5  1  2  
At June 30, 2020$1,083  $307  $152  $112  $1,654  
Lease liabilities
The Company measures its lease liabilities at the discounted value of its lease payments during the lease term. Lease liabilities at June 30, 2020 were as follows:
 Jun 30
2020		Dec 31
2019
Lease liabilities $1,687  $1,809  
Less: current portion202  233  
 $1,485  $1,576  
Total cash outflows for leases for the three months ended June 30, 2020, including payments related to short-term leases not reported as lease assets, were $230 million (three months ended June 30, 2019 – $284 million; six months ended June 30, 2020 – $549 million; six months ended June 30, 2019 – $580 million). Interest expense on leases for the three months ended June 30, 2020 was $17 million (three months ended June 30, 2019 – $19 million; six months ended June 30, 2020 – $34 million; six months ended June 30, 2019 – $34 million).

7. INVESTMENTS
As at June 30, 2020, the Company had the following investments:
Jun 30
2020		Dec 31
2019
Investment in PrairieSky Royalty Ltd.$194  $345  
Investment in Inter Pipeline Ltd.81  145  
$275  $490  

The (gain) loss from the investments was comprised as follows:
Three Months EndedSix Months Ended
Jun 30
2020		Jun 30
2019		Jun 30
2020		Jun 30
2019
Fair value (gain) loss from investments$(53) $2  $215  $(23) 
Dividend income from investments(2) (6) (10) (14) 
$(55) $(4) $205  $(37) 
The Company’s investments in PrairieSky Royalty Ltd. ("PrairieSky") and Inter Pipeline Ltd. ("Inter Pipeline") do not constitute significant influence, and are accounted for at fair value through profit or loss, measured at each reporting date. As at June 30, 2020, the Company’s investments in PrairieSky and Inter Pipeline were classified as current assets.
Canadian Natural Resources Limited
8
Six months ended June 30, 2020

8. OTHER LONG-TERM ASSETS
 Jun 30
2020		Dec 31
2019
North West Redwater Partnership $683  $652  
Risk management (note 16)222  290  
Prepaid cost of service toll167  130  
Long-term inventory122  121  
Other121  84  
 1,315  1,277  
Less: current portion93  54  
 $1,222  $1,223  

The Company has a 50% equity investment in and has made subordinated debt advances of $683 million to NWRP, including accrued interest, subject to final adjustments. The subordinated debt bears interest at prime plus 6%, repayable over 10 years commencing July 2021. NWRP operates a 50,000 barrels per day bitumen upgrader and refinery that targets to process 12,500 barrels per day of bitumen feedstock for the Company and 37,500 barrels per day of bitumen feedstock for the Alberta Petroleum Marketing Commission, an agent of the Government of Alberta, under a 30-year fee-for-service tolling agreement.
The unrecognized share of equity losses from NWRP for the three months ended June 30, 2020 was $23 million (six months ended June 30, 2020 – unrecognized equity loss of $116 million). As at June 30, 2020, the cumulative unrecognized share of losses from NWRP was $175 million (December 31, 2019 – $59 million).
On June 1, 2020 the refinery achieved the Commercial Operation Date ("COD"), pursuant to terms of the tolling agreement. Following COD, the Company is unconditionally obligated to pay its 25% pro rata share of the debt tolls over the 30-year tolling period (note 17). Subsequent to COD, sales of diesel and refined products and associated refining tolls are recognized in the Midstream and Refining segment.



Canadian Natural Resources Limited
9
Six months ended June 30, 2020

9. LONG-TERM DEBT
 Jun 30
2020		Dec 31
2019
Canadian dollar denominated debt, unsecured  
Bank credit facilities$1,923  $1,688  
Medium-term notes3,400  4,300  
 5,323  5,988  
US dollar denominated debt, unsecured  
Bank credit facilities (June 30, 2020 – US$3,829 million;
     December 31, 2019 – US$3,745 million)
5,213  4,855  
Commercial paper (June 30, 2020 – US$500 million;
     December 31,2019 – US$254 million)
681  329  
US dollar debt securities (June 30, 2020 – US$8,750 million;
     December 31, 2019 – US$7,650 million)
11,914  9,918  
 17,808  15,102  
Long-term debt before transaction costs and original issue discounts, net23,131  21,090  
Less: original issue discounts, net (1)
19  17  
transaction costs (1) (2)
92  91  
 23,020  20,982  
Less: current portion of commercial paper681  329  
current portion of other long-term debt (1) (2)
1,162  2,062  
 $21,177  $18,591  
(1)The Company has included unamortized original issue discounts and premiums, and directly attributable transaction costs in the carrying amount of the outstanding debt.
(2)Transaction costs primarily represent underwriting commissions charged as a percentage of the related debt offerings, as well as legal, rating agency and other professional fees.
For the six months ended June 30, 2020, the Company reported an unrealized foreign exchange loss of $610 million (June 30, 2019 – gain of $511 million) on its US dollar denominated debt, excluding the impact of hedging.
Bank Credit Facilities and Commercial Paper
As at June 30, 2020, the Company had in place revolving bank credit facilities of $4,958 million, of which $3,879 million was available. Additionally, the Company had in place fully drawn term credit facilities of $6,738 million. Details of these facilities are described below. This excludes certain other dedicated credit facilities supporting letters of credit.
•a $100 million demand credit facility;
•a $1,000 million non-revolving term credit facility maturing February 2022;
•a $2,425 million revolving syndicated credit facility maturing June 2022;
•a $3,088 million non-revolving term credit facility maturing June 2022;
•a $2,650 million non-revolving term credit facility maturing February 2023;
•a $2,425 million revolving syndicated credit facility maturing June 2023; and
•a £5 million demand credit facility related to the Company’s North Sea operations.
During the second quarter of 2020, the $750 million non-revolving term credit facility, originally due February 2021, was extended to February 2022 and increased to $1,000 million.
Borrowings under the Company's non-revolving term credit facilities may be made by way of pricing referenced to Canadian dollar bankers' acceptances, US dollar bankers’ acceptances, LIBOR, US base rate or Canadian prime rate. As at June 30, 2020, the non-revolving term credit facilities were fully drawn.
The revolving syndicated credit facilities are extendible annually at the mutual agreement of the Company and the lenders. If the facilities are not extended, the full amount of the outstanding principal would be repayable on the maturity date.
Borrowings under the Company's revolving term credit facilities may be made by way of pricing referenced to Canadian dollar bankers' acceptances, US dollar bankers' acceptances, LIBOR, US base rate or Canadian prime rate.
Canadian Natural Resources Limited
10
Six months ended June 30, 2020

The Company’s borrowings under its US commercial paper program are authorized up to a maximum US$2,500 million. The Company reserves capacity under its revolving bank credit facilities for amounts outstanding under this program.
The Company’s weighted average interest rate on bank credit facilities and commercial paper outstanding as at June 30, 2020 was 1.4% (June 30, 2019 – 2.6%), and on total long-term debt outstanding for the six months ended June 30, 2020 was 3.7% (June 30, 2019 – 4.1%).
As at June 30, 2020, letters of credit and guarantees aggregating to $465 million were outstanding.
Medium-Term Notes
During the second quarter of 2020, the Company repaid $900 million of 2.05% medium-term notes.
In July 2019, the Company filed a base shelf prospectus that allows for the offer for sale from time to time of up to $3,000 million of medium-term notes in Canada, which expires in August 2021. If issued, these securities may be offered in amounts and at prices, including interest rates, to be determined based on market conditions at the time of issuance.
US Dollar Debt Securities
During the second quarter of 2020, the Company issued US$600 million of 2.05% notes due July 2025 and US$500 million of 2.95% notes due July 2030.
After issuing these securities, the Company had US$1,900 million remaining on its base shelf prospectus that allows for the offer for sale from time to time of up to US$3,000 million of debt securities in the United States, which expires in August 2021. If issued, these securities may be offered in amounts and at prices, including interest rates, to be determined based on market conditions at the time of issuance.
10. OTHER LONG-TERM LIABILITIES
 Jun 30
2020		Dec 31
2019
Asset retirement obligations$4,532  $5,771  
Lease liabilities (note 6)1,687  1,809  
Share-based compensation54  297  
Deferred purchase consideration (1)
71  95  
Risk management (note 16)12  112  
Other104  98  
 6,460  8,182  
Less: current portion461  819  
 $5,999  $7,363  
(1) Relates to the acquisition of the Joslyn oil sands project in 2018, payable in annual installments of $25 million over the next three years.
Canadian Natural Resources Limited
11
Six months ended June 30, 2020

Asset Retirement Obligations
The Company’s asset retirement obligations are expected to be settled on an ongoing basis over a period of approximately 60 years and discounted using a weighted average discount rate of 4.8% (December 31, 2019 – 3.8%) and inflation rates of up to 2% (December 31, 2019 – up to 2%). Reconciliations of the discounted asset retirement obligations were as follows:
 Jun 30
2020		Dec 31
2019
Balance – beginning of period$5,771  $3,886  
Liabilities incurred2  15  
Liabilities (disposed) acquired, net(1) 198  
Liabilities settled(129) (296) 
Asset retirement obligation accretion103  190  
Change in discount rates(1,270) 1,412  
Foreign exchange adjustments56  (46) 
Revision of cost, inflation rates and timing estimates—  412  
Balance – end of period4,532  5,771  
Less: current portion154  208  
 $4,378  $5,563  

Share-Based Compensation
The liability for share-based compensation includes costs incurred under the Company’s Stock Option Plan and Performance Share Unit ("PSU") plans. The Company’s Stock Option Plan provides current employees with the right to elect to receive common shares or a cash payment in exchange for stock options surrendered. The PSU plan provides certain executive employees of the Company with the right to receive a cash payment, the amount of which is determined by individual employee performance and the extent to which certain other performance measures are met.
The Company recognizes a liability for potential cash settlements under these plans. The current portion of the liability represents the maximum amount of the liability payable within the next twelve month period if all vested stock options and PSUs are settled in cash.
 Jun 30
2020		Dec 31
2019
Balance – beginning of period$297  $124  
Share-based compensation (recovery) expense (200) 223  
Cash payment for stock options surrendered and PSUs vested(37) (2) 
Transferred to common shares(9) (53) 
   Charged to Oil Sands Mining and Upgrading, net3  5  
Balance – end of period54  297  
Less: current portion39  227  
 $15  $70  
Included within share-based compensation liability as at June 30, 2020 was $22 million related to PSUs granted to certain executive employees (December 31, 2019 – $62 million).
Canadian Natural Resources Limited
12
Six months ended June 30, 2020

11. INCOME TAXES
The provision for income tax was as follows:
Three Months EndedSix Months Ended
Expense (recovery)Jun 30
2020		Jun 30
2019		Jun 30
2020		Jun 30
2019
Current corporate income tax – North America
$(34) $78  $(228) $241  
Current corporate income tax – North Sea1  28  10  57  
Current corporate income tax – Offshore Africa
2  11  6  23  
Current PRT (1) – North Sea
—  (43) —  (85) 
Other taxes—  3  2  6  
Current income tax(31) 77  (210) 242  
Deferred corporate income tax(267) (1,359) (247) (1,265) 
Deferred PRT (1) – North Sea
—  1  —  1  
Deferred income tax(267) (1,358) (247) (1,264) 
Income tax$(298) $(1,281) $(457) $(1,022) 
(1) Petroleum Revenue Tax
In the second quarter of 2019, the Government of Alberta enacted legislation that decreased the provincial corporate income tax rate from 12% to 11% effective July 2019, with a further 1% rate reduction every year on January 1 until the provincial corporate income tax rate is 8% on January 1, 2022.

































Canadian Natural Resources Limited
13
Six months ended June 30, 2020

12. SHARE CAPITAL
Authorized
Preferred shares issuable in a series.
Unlimited number of common shares without par value.
 Six Months Ended Jun 30, 2020
Issued common shares
Number of shares
(thousands)
Amount
Balance – beginning of period1,186,857  $9,533  
Issued upon exercise of stock options1,151  35  
Previously recognized liability on stock options exercised for common shares
—  9  
Purchase of common shares under Normal Course Issuer Bid(6,970) (56) 
Balance – end of period1,181,038  $9,521  
Dividend Policy
The Company has paid regular quarterly dividends in each year since 2001. The dividend policy undergoes periodic review by the Board of Directors and is subject to change.
On March 4, 2020, the Board of Directors declared a quarterly dividend of $0.425 per common share, an increase from the previous quarterly dividend of $0.375 per common share.
Normal Course Issuer Bid
On May 21, 2019, the Company's application was approved for a Normal Course Issuer Bid to purchase through the facilities of the Toronto Stock Exchange, alternative Canadian trading platforms, and the New York Stock Exchange, up to 59,729,706 common shares, over a 12-month period commencing May 23, 2019 and ending May 22, 2020.
During the first quarter of 2020, the Company purchased 6,970,000 common shares at a weighted average price of $38.84 per common share for a total cost of $271 million. Retained earnings were reduced by $215 million, representing the excess of the purchase price of common shares over their average carrying value.
During the second quarter of 2020, no common shares were purchased under the Normal Course Issuer Bid, and the Company did not renew its Normal Course Issuer Bid.
Share-Based Compensation – Stock Options
The following table summarizes information relating to stock options outstanding at June 30, 2020:
 Six Months Ended Jun 30, 2020
 
Stock options
(thousands)
Weighted
 average
 exercise price
Outstanding – beginning of period47,646  $38.04  
Granted11,390  $33.18  
Exercised for common shares(1,151) $30.96  
Surrendered for cash settlement(315) $34.04  
Forfeited(4,447) $39.86  
Outstanding – end of period53,123  $37.01  
Exercisable – end of period15,910  $38.62  
The Option Plan is a "rolling 7%" plan, whereby the aggregate number of common shares that may be reserved for issuance under the plan shall not exceed 7% of the common shares outstanding from time to time.

Canadian Natural Resources Limited
14
Six months ended June 30, 2020

13. ACCUMULATED OTHER COMPREHENSIVE INCOME
The components of accumulated other comprehensive income, net of taxes, were as follows:
 Jun 30
2020		Jun 30
2019
Derivative financial instruments designated as cash flow hedges$88  $39  
Foreign currency translation adjustment110  (12) 
 $198  $27  

14. CAPITAL DISCLOSURES
The Company has defined its capital to mean its long-term debt and consolidated shareholders’ equity, as determined at each reporting date.
The Company’s objectives when managing its capital structure are to maintain financial flexibility and balance to enable the Company to access capital markets to sustain its on-going operations and to support its growth strategies. The Company primarily monitors capital on the basis of an internally derived financial measure referred to as its "debt to book capitalization ratio", which is the arithmetic ratio of net current and long-term debt divided by the sum of the carrying value of shareholders’ equity plus net current and long-term debt. The Company’s internal targeted range for its debt to book capitalization ratio is 25% to 45%. This range may be exceeded in periods when a combination of capital projects, acquisitions, or lower commodity prices occurs. The Company may be below the low end of the targeted range when cash flow from operating activities is greater than current investment activities. At June 30, 2020, the ratio was within the target range at 41.3%.
Readers are cautioned that the debt to book capitalization ratio is not defined by IFRS and this financial measure may not be comparable to similar measures presented by other companies. Further, there are no assurances that the Company will continue to use this measure to monitor capital or will not alter the method of calculation of this measure in the future.
 Jun 30
2020		Dec 31
2019
Long-term debt, net (1)
$22,787  $20,843  
Total shareholders’ equity$32,333  $34,991  
Debt to book capitalization41.3%37.3%
(1)Includes the current portion of long-term debt, net of cash and cash equivalents.
The Company is subject to a financial covenant that requires debt to book capitalization as defined in its credit facility agreements to not exceed 65%. At June 30, 2020, the Company was in compliance with this covenant.

15. NET EARNINGS (LOSS) PER COMMON SHARE
Three Months EndedSix Months Ended
  Jun 30
2020		Jun 30
2019		Jun 30
2020		Jun 30
2019
Weighted average common shares outstanding
– basic (thousands of shares)		1,180,925  1,193,185  1,182,031  1,197,045  
Effect of dilutive stock options (thousands of shares)—  2,690  —  2,503  
Weighted average common shares outstanding
– diluted (thousands of shares)		1,180,925  1,195,875  1,182,031  1,199,548  
Net earnings (loss)$(310) $2,831  $(1,592) $3,792  
Net earnings (loss) per common share– basic$(0.26) $2.37  $(1.35) $3.17  
 – diluted$(0.26) $2.36  $(1.35) $3.16  
Canadian Natural Resources Limited
15
Six months ended June 30, 2020

16. FINANCIAL INSTRUMENTS
The carrying amounts of the Company’s financial instruments by category were as follows:
 Jun 30, 2020
Asset (liability)Financial
 assets
at amortized
 cost		Fair value
 through
profit or loss		Derivatives
 used for
 hedging		Financial
 liabilities at
 amortized
cost		Total
Accounts receivable$1,851  $—  $—  $—  $1,851  
Investments—  275  —  —  275  
Other long-term assets683  —  222  —  905  
Accounts payable—  —  —  (606) (606) 
Accrued liabilities—  —  —  (2,007) (2,007) 
Other long-term liabilities (1)
—  (5) (7) (1,758) (1,770) 
Long-term debt (2)
—  —  —  (23,020) (23,020) 
 $2,534  $270  $215  $(27,391) $(24,372) 
 Dec 31, 2019
Asset (liability)Financial
 assets
at amortized
 cost		Fair value
 through
profit or loss		Derivatives
 used for
 hedging		Financial
 liabilities at
 amortized
cost		Total
Accounts receivable$2,465  $—  $—  $—  $2,465  
Investments—  490  —  —  490  
Other long-term assets652  —  290  —  942  
Accounts payable—  —  —  (816) (816) 
Accrued liabilities—  —  —  (2,611) (2,611) 
Other long-term liabilities (1)
—  (21) (91) (1,904) (2,016) 
Long-term debt (2)
—  —  —  (20,982) (20,982) 
 $3,117  $469  $199  $(26,313) $(22,528) 
(1)Includes $1,687 million of lease liabilities (December 31, 2019 – $1,809 million) and $71 million of deferred purchase consideration payable over the next three years (December 31, 2019 – $95 million).
(2)Includes the current portion of long-term debt.

The carrying amounts of the Company’s financial instruments approximated their fair value, except for fixed rate long-term debt. The fair values of the Company’s investments, recurring other long-term assets (liabilities) and fixed rate long-term debt are outlined below:
 Jun 30, 2020
 Carrying amount Fair value
Asset (liability) (1) (2)
 Level 1Level 2
Level 3 (4) (5)
Investments (3)
$275  $275  $—  $—  
Other long-term assets$905  $—  $222  $683  
Other long-term liabilities$(83) $—  $(12) $(71) 
Fixed rate long-term debt (6) (7)
$(15,203) $(16,606) $—  $—  
Canadian Natural Resources Limited
16
Six months ended June 30, 2020

 Dec 31, 2019
 Carrying amountFair value
Asset (liability) (1) (2)
 Level 1Level 2
Level 3 (4) (5)
Investments (3)
$490  $490  $—  $—  
Other long-term assets$942  $—  $290  $652  
Other long-term liabilities$(207) $—  $(112) $(95) 
Fixed rate long-term debt (6) (7)
$(14,110) $(15,938) $—  $—  
(1)Excludes financial assets and liabilities where the carrying amount approximates fair value due to the short-term nature of the asset or liability (cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities).
(2)There were no transfers between Level 1, 2 and 3 financial instruments.
(3)The fair values of the investments are based on quoted market prices.
(4)The fair value of the deferred purchase consideration included in other long-term liabilities is based on the present value of future cash payments.
(5)The fair value of NWRP subordinated debt is based on the present value of future cash receipts.
(6)The fair value of fixed rate long-term debt has been determined based on quoted market prices.
(7)Includes the current portion of fixed rate long-term debt.
Risk Management
The Company periodically uses derivative financial instruments to manage its commodity price, interest rate and foreign currency exposures. These financial instruments are entered into solely for hedging purposes and are not used for speculative purposes.
The following provides a summary of the carrying amounts of derivative financial instruments held and a reconciliation to the Company’s consolidated balance sheets.
Asset (liability)Jun 30
2020		Dec 31
2019
Derivatives held for trading  
Natural gas AECO fixed price swaps$(4) $(3) 
Foreign currency forward contracts(1) (10) 
Natural gas AECO basis swaps—  (8) 
Cash flow hedges  
Foreign currency forward contracts9  (91) 
Cross currency swaps206  290  
 $210  $178  
Included within:  
Current portion of other long-term assets$21  $8  
Current portion of other long-term liabilities(12) (112) 
Other long-term assets 201  282  
 $210  $178  
For the six months ended June 30, 2020, the ineffectiveness arising from cash flow hedges was $nil (year ended December 31, 2019 – gain of $3 million).
The estimated fair values of derivative financial instruments in Level 2 at each measurement date have been determined based on appropriate internal valuation methodologies and/or third party indications. Level 2 fair values determined using valuation models require the use of assumptions concerning the amount and timing of future cash flows and discount rates. In determining these assumptions, the Company primarily relied on external, readily-observable quoted market inputs as applicable, including crude oil and natural gas forward benchmark commodity prices and volatility, Canadian and United States interest rate yield curves, and Canadian and United States forward foreign exchange rates, discounted to present value as appropriate. The resulting fair value estimates may not necessarily be indicative of the amounts that could be realized or settled in a current market transaction and these differences may be material.
Canadian Natural Resources Limited
17
Six months ended June 30, 2020

The changes in estimated fair values of derivative financial instruments included in the risk management asset (liability) were recognized in the financial statements as follows:
Asset (liability)Jun 30
2020		Dec 31
2019
Balance – beginning of period$178  $356  
Net change in fair value of outstanding derivative financial instruments
recognized in:
  
Risk management activities16  (13) 
Foreign exchange(3) (231) 
Other comprehensive income19  66  
Balance – end of period210  178  
Less: current portion9  (104) 
 $201  $282  
Net loss (gain) from risk management activities were as follows:
Three Months EndedSix Months Ended
 Jun 30
2020		Jun 30
2019		Jun 30
2020		Jun 30
2019
Net realized risk management loss (gain)$31  $27  $(16) $54  
Net unrealized risk management loss (gain)1  (16) (16) (2) 
 $32  $11  $(32) $52  
Financial Risk Factors
a)  Market risk 
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Company’s market risk is comprised of commodity price risk, interest rate risk, and foreign currency exchange risk.
Commodity price risk management
The Company periodically uses commodity derivative financial instruments to manage its exposure to commodity price risk associated with the sale of its future crude oil and natural gas production and with natural gas purchases.
At June 30, 2020, the Company had the following derivative financial instruments outstanding to manage its commodity price risk:
Remaining termVolumeWeighted average priceIndex
Natural Gas
AECO fixed price swapsJul 2020–Oct 2020102,500 GJ/d$1.51AECO
The Company's outstanding commodity derivative financial instruments are expected to be settled monthly based on the applicable index pricing for the respective contract month.
Interest rate risk management
The Company is exposed to interest rate price risk on its fixed rate long-term debt and to interest rate cash flow risk on its floating rate long-term debt. The Company periodically enters into interest rate swap contracts to manage its fixed to floating interest rate mix on long-term debt. Interest rate swap contracts require the periodic exchange of payments without the exchange of the notional principal amounts on which the payments are based. At June 30, 2020, the Company had no interest rate swap contracts outstanding.
Foreign currency exchange rate risk management
The Company is exposed to foreign currency exchange rate risk in Canada primarily related to its US dollar denominated long-term debt, commercial paper and working capital. The Company is also exposed to foreign currency exchange rate risk on transactions conducted in other currencies and in the carrying value of its foreign subsidiaries. The Company periodically enters into cross currency swap contracts and foreign currency forward contracts to manage known currency exposure on US dollar denominated long-term debt, commercial paper and
Canadian Natural Resources Limited
18
Six months ended June 30, 2020

working capital. The cross currency swap contract requires the periodic exchange of payments with the exchange at maturity of notional principal amounts on which the payments are based.
At June 30, 2020, the Company had the following cross currency swap contract outstanding:
 Remaining termAmountExchange rate
(US$/C$)		Interest rate
(US$)		Interest rate
(C$)
Cross currency       
SwapJul 2020–Mar 2038US$5501.170  6.25 %5.76 %
The cross currency swap derivative financial instrument was designated as a hedge at June 30, 2020 and was classified as a cash flow hedge.
In addition to the cross currency swap contract noted above, at June 30, 2020, the Company had US$5,314 million of foreign currency forward contracts outstanding, with original terms of up to 90 days, including US$4,329 million designated as cash flow hedges.
During the first quarter of 2020, the Company settled the US$500 million cross currency swaps designated as cash flow hedges of the US$500 million 3.45% US dollar debt securities due November 2021. The Company realized cash proceeds of $166 million on settlement.
b) Credit risk
Credit risk is the risk that a party to a financial instrument will cause a financial loss to the Company by failing to discharge an obligation.
Counterparty credit risk management
The Company’s accounts receivable are mainly with customers in the crude oil and natural gas industry and are subject to normal industry credit risks. The Company manages these risks by reviewing its exposure to individual companies on a regular basis and where appropriate, ensures that parental guarantees or letters of credit are in place to minimize the impact in the event of default. At June 30, 2020, substantially all of the Company’s accounts receivable were due within normal trade terms.
The Company is also exposed to possible losses in the event of nonperformance by counterparties to derivative financial instruments; however, the Company manages this credit risk by entering into agreements with counterparties that are substantially all investment grade financial institutions. At June 30, 2020, the Company had net risk management assets of $216 million with specific counterparties related to derivative financial instruments (December 31, 2019 – $265 million).
The carrying amount of financial assets approximates the maximum credit exposure.
c) Liquidity risk 
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
Management of liquidity risk requires the Company to maintain sufficient cash and cash equivalents, along with other sources of capital, consisting primarily of cash flow from operating activities, available credit facilities, commercial paper and access to debt capital markets, to meet obligations as they become due. The Company believes it has adequate bank credit facilities to provide liquidity to manage fluctuations in the timing of the receipt and/or disbursement of operating cash flows.
The maturity dates of the Company’s financial liabilities were as follows:
 Less than
1 year		1 to less than
2 years		2 to less than
5 years		Thereafter
Accounts payable$606  $—  $—  $—  
Accrued liabilities$2,007  $—  $—  $—  
Long-term debt (1)
$1,843  $5,621  $6,393  $9,274  
Other long-term liabilities (2)
$239  $183  $410  $938  
Interest and other financing expense (3)
$825  $770  $1,821  $4,929  
(1)Long-term debt represents principal repayments only and does not reflect interest, original issue discounts and premiums or transaction costs.
(2)Lease payments included within other long-term liabilities reflect principal payments only and are as follows; less than one year, $202 million; one to less than two years, $158 million; two to less than five years, $389 million; and thereafter $938 million.
(3)Includes interest and other financing expense on long-term debt and other long-term liabilities. Payments were estimated based upon applicable interest and foreign exchange rates at June 30, 2020.
Canadian Natural Resources Limited
19
Six months ended June 30, 2020

17. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company has committed to certain payments. The following table summarizes the Company’s commitments as at June 30, 2020:
 Remaining20202021202220232024Thereafter
Product transportation (1)
$371  $744  $652  $737  $711  $7,959  
North West Redwater Partnership service toll (2)
$84  $164  $161  $161  $157  $2,851  
Offshore vessels and equipment
$32  $68  $9  $—  $—  $—  
Field equipment and power$18  $21  $20  $21  $20  $249  
Other$14  $21  $17  $17  $17  $29  
(1)Includes commitments pertaining to a 20 year product transportation agreement on the Trans Mountain Pipeline Expansion. In addition, the Company has entered into certain product transportation agreements on pipelines that have not yet received regulatory and other approvals. The Company may be required to reimburse certain construction costs to the service provider under certain conditions.
(2)Pursuant to the processing agreements, on June 1, 2018 the Company began paying its 25% pro rata share of the debt portion of the monthly cost of service tolls. Included in the cost of service tolls is $1,222 million of interest payable over the 30-year tolling period (note 8).
In addition to the commitments disclosed above, the Company has entered into various agreements related to the engineering, procurement and construction of its various development projects. These contracts can be cancelled by the Company upon notice without penalty, subject to the costs incurred up to and in respect of the cancellation.
The Company is defendant and plaintiff in a number of legal actions arising in the normal course of business. In addition, the Company is subject to certain contractor construction claims. The Company believes that any liabilities that might arise pertaining to any such matters would not have a material effect on its consolidated financial position.

Canadian Natural Resources Limited
20
Six months ended June 30, 2020

18. SEGMENTED INFORMATION
 North America
North SeaOffshore AfricaTotal Exploration and Production
Three Months EndedSix Months EndedThree Months EndedSix Months EndedThree Months EndedSix Months EndedThree Months EndedSix Months Ended
Jun 30Jun 30Jun 30Jun 30Jun 30Jun 30Jun 30Jun 30
(millions of Canadian dollars,
unaudited)
2020201920202019202020192020201920202019202020192020201920202019
Segmented product sales
Crude oil and NGLs974  2,297  2,824  4,136  99  211  232  345  22  203  106  312  1,095  2,711  3,162  4,793  
Natural gas256  249  531  624  2  11  10  36  12  18  20  36  270  278  561  696  
Other income and revenue (1)
21  3  11  5  2  2  3  2  1  2  3  3  24  7  17  10  
Total segmented product sales1,251  2,549  3,366  4,765  103  224  245  383  35  223  129  351  1,389  2,996  3,740  5,499  
Less: royalties(65) (231) (179) (424) (1) (1) (1) (1) (1) (10) (5) (21) (67) (242) (185) (446) 
Segmented revenue1,186  2,318  3,187  4,341  102  223  244  382  34  213  124  330  1,322  2,754  3,555  5,053  
Segmented expenses      
Production585  571  1,294  1,173  67  100  161  167  13  24  35  42  665  695  1,490  1,382  
Transportation, blending and feedstock
546  576  1,616  1,100  4  4  11  10  —  —  —  1  550  580  1,627  1,111  
Depletion, depreciation and amortization
871  790  1,826  1,533  76  73  175  127  27  66  68  112  974  929  2,069  1,772  
Asset retirement obligation accretion
23  21  50  41  8  8  15  15  2  2  3  3  33  31  68  59  
Risk management activities (commodity derivatives)
4  (3) 6  29  —  —  —  —  —  —  —  —  4  (3) 6  29  
Equity loss from investments—  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  
Total segmented expenses2,029  1,955  4,792  3,876  155  185  362  319  42  92  106  158  2,226  2,232  5,260  4,353  
Segmented earnings (loss) before the following
(843) 363  (1,605) 465  (53) 38  (118) 63  (8) 121  18  172  (904) 522  (1,705) 700  
Non–segmented expenses
Administration      
Share-based compensation      
Interest and other financing expense
      
Risk management activities (other)      
Foreign exchange (gain) loss      
(Gain) loss from investments
Total non–segmented expenses      
Earnings (loss) before taxes      
Current income tax (recovery) expense       
Deferred income tax recovery      
Net earnings (loss)       
Canadian Natural Resources Limited
21
Six months ended June 30, 2020

 Oil Sands Mining and UpgradingMidstream and Refining
 Inter–segment
elimination and other
 
Total
Three Months EndedSix Months EndedThree Months EndedSix Months EndedThree Months EndedSix Months EndedThree Months EndedSix Months Ended
Jun 30Jun 30Jun 30Jun 30Jun 30Jun 30Jun 30Jun 30
(millions of Canadian dollars,
unaudited)
2020201920202019202020192020201920202019202020192020201920202019
Segmented product sales
Crude oil and NGLs (2)
1,343  2,736  3,547  5,590  20  20  41  41  4  130  35  255  2,462  5,597  6,785  10,679  
Natural gas—  —  —  —  —  —  —  —  37  46  83  84  307  324  644  780  
Other income and revenue (1)
103  3  100  3  25  —  25  —  23  —  25  —  175  10  167  13  
Total segmented product sales1,446  2,739  3,647  5,593  45  20  66  41  64  176  143  339  2,944  5,931  7,596  11,472  
Less: royalties(6) (127) (40) (216) —  —  —  —  —  —  —  —  (73) (369) (225) (662) 
Segmented revenue1,440  2,612  3,607  5,377  45  20  66  41  64  176  143  339  2,871  5,562  7,371  10,810  
Segmented expenses
Production730  814  1,539  1,636  29  5  35  11  (15) 19  29  34  1,409  1,533  3,093  3,063  
Transportation, blending and (2)
  feedstock
183  259  453  619  22  —  22  —  4  157  89  305  759  996  2,191  2,035  
Depletion, depreciation and amortization
451  374  891  791  3  4  7  7  (25) —  —  —  1,403  1,307  2,967  2,570  
Asset retirement obligation accretion
18  15  35  31  —  —  —  —  —  —  —  —  51  46  103  90  
Risk management activities (commodity derivatives)
—  —  —  —  —  —  —  —  —  —  —  —  4  (3) 6  29  
Equity loss from investments—  —  —  —  —  66  —  126  —  —  —  —  —  66  —  126  
Total segmented expenses1,382  1,462  2,918  3,077  54  75  64  144  (36) 176  118  339  3,626  3,945  8,360  7,913  
Segmented earnings (loss) before the following
58  1,150  689  2,300  (9) (55) 2  (103) 100  —  25  —  (755) 1,617  (989) 2,897  
Non–segmented expenses
Administration      88  84  196  154  
Share-based compensation      23  (7) (200) 55  
Interest and other financing expense
      199  197  405  388  
Risk management activities (other)      28  14  (38) 23  
Foreign exchange (gain) loss      (430) (217) 492  (456) 
(Gain) loss from investments(55) (4) 205  (37) 
Total non–segmented expenses      (147) 67  1,060  127  
Earnings (loss) before taxes      (608) 1,550  (2,049) 2,770  
Current income tax (recovery) expense       (31) 77  (210) 242  
Deferred income tax recovery      (267) (1,358) (247) (1,264) 
Net earnings (loss)       (310) 2,831  (1,592) 3,792  
(1) Includes other income, the sale of diesel and other refined products, and recoveries associated with the joint operation partners' share of the costs of lease contracts.
(2) Includes blending and feedstock costs associated with the processing of third party bitumen and other purchased feedstock in the Oil Sands Mining and Upgrading segment.
Canadian Natural Resources Limited
22
Six months ended June 30, 2020

Capital Expenditures (1)
Six Months Ended
 Jun 30, 2020Jun 30, 2019
 
Net
 expenditures
Non-cash
and fair value changes (2)
Capitalized
 costs
Net expenditures
Non-cash
and fair value changes (2)
Capitalized
 costs
Exploration and
   evaluation assets		      
Exploration and
   Production		      
North America (3)
$7  $(64) $(57) $126  $(149) $(23) 
Offshore Africa 1  —  1  35  —  35  
 $8  $(64) $(56) $161  $(149) $12  
Property, plant and
   equipment		      
Exploration and
   Production		      
North America (3)
$483  $(988) $(505) $4,010  $1,025  $5,035  
North Sea43  (114) (71) 78  105  183  
Offshore Africa (4)
41  (29) 12  105  (1,490) (1,385) 
 567  (1,131) (564) 4,193  (360) 3,833  
Oil Sands Mining and
   Upgrading (5)
539  (482) 57  576  169  745  
Midstream and Refining 3  (1) 2  5  —  5  
Head office13  —  13  18  (3) 15  
 $1,122  $(1,614) $(492) $4,792  $(194) $4,598  
(1)This table provides a reconciliation of capitalized costs, reported in note 4 and note 5, to net expenditures reported in the investing activities section of the statements of cash flows. The reconciliation excludes the impact of foreign exchange adjustments.
(2)Derecognitions, asset retirement obligations, transfer of exploration and evaluation assets, and other fair value adjustments.
(3)Includes cash consideration paid of $91 million for exploration and evaluation assets and $3,126 million for property, plant and equipment acquired from Devon in the second quarter of 2019.
(4)Includes a derecognition of property, plant and equipment of $1,515 million following the FPSO demobilization at the Olowi field, Gabon in the first quarter of 2019.
(5)Net expenditures include capitalized interest and share-based compensation.
Segmented Assets
 Jun 30
2020		Dec 31
2019
Exploration and Production  
North America$28,749  $30,963  
North Sea1,605  1,948  
Offshore Africa1,529  1,529  
Other65  30  
Oil Sands Mining and Upgrading41,197  42,006  
Midstream and Refining1,375  1,418  
Head office225  227  
 $74,745  $78,121  

Canadian Natural Resources Limited
23
Six months ended June 30, 2020

SUPPLEMENTARY INFORMATION
INTEREST COVERAGE RATIOS
The following financial ratios are provided in connection with the Company’s continuous offering of medium-term notes pursuant to the short form prospectus dated July 2019. These ratios are based on the Company’s interim consolidated financial statements that are prepared in accordance with accounting principles generally accepted in Canada.
Interest coverage ratios for the twelve month period ended June 30, 2020:
Interest coverage (times)
   Net earnings (1)
1.1x
   Adjusted funds flow (2)
9.0x
(1)Net earnings plus income taxes and interest expense; divided by the sum of interest expense and capitalized interest.
(2)Adjusted funds flow plus current income taxes and interest expense; divided by the sum of interest expense and capitalized interest.



































Canadian Natural Resources Limited
24
Six months ended June 30, 2020