Canadian Natural’s goal has always been to run our business and run it well, executing on our projects and creating value for our shareholders. That is what we have focused on for the past twenty years, and it is what we continue to focus on. Our asset base is strong and balanced. We have crude oil and natural gas conventional operations in domestic and international basins, along with a world class oil sands mining operation.
In the first half of 2013 we achieved strong production at or above expectations from our balanced and diverse asset base. The second quarter marked our tenth consecutive quarter of record heavy crude oil production of approximately 133,000 barrels of crude oil per day and record liquids production of approximately 489,000 barrels per day, for aggregate total production of approximately 681,000 barrels of oil equivalent per day.
Horizon achieved reliable production volumes in the first half, averaging 88,200 barrels per day of synthetic crude oil as we successfully completed the first major turnaround in May, 2013. Horizon has seen steady production volumes and sustained increases in reliability over the last year as we focus on an enhanced maintenance strategy and operational discipline. Reliability is expected to further increase as we move through the year with a targeted increase in production performance following our first major turnaround.
Kirby South, our in-situ development project, is in the final stages of commissioning with steam injection expected to commence later in the third quarter. Project costs remain within budget and timing is ahead of schedule.
Our balance sheet is strong and we retain access to large liquid resources represented by immediately accessible bank lines.
Canadian Natural increased its quarterly dividend to C$0.125 per share, an increase of 19%, effective April 1, 2013. This was the thirteenth consecutive year that the Company has increased the dividend payable to shareholders representing a compound annual growth rate of 21% over the period.
We have the largest proved plus probable reserve base of our peer group with greater than 7.8 billion barrels of oil equivalent. As we transition to a longer life, low decline asset base, our strong experienced team remains focused on continuing to deliver on our proven and effective strategy. This, combined with our strong balance sheet, will allow us to withstand future commodity price volatility, while we increase our capacity to generate free cash flow and maximize shareholder value.
At the end of 2012 we achieved record yearly crude oil and NGLs production of 326,829 bbl/d in the North America – Exploration and Production segment.
In 2012 our Board of Directors sanctioned the Redwater Upgrader/Refinery project, an exciting new facet in our diverse portfolio. Combining our strengths with the expertise of Northwest Upgrading Inc., we have formed a partnership which targets a competitive return on capital. The project targets to add 50,000 barrels of bitumen conversion capacity to the market, further contributing to improved heavy crude oil pricing.
In 2011 Canadian Natural focused on the continued development of our high quality thermal in situ assets, expanded the Pelican Lake tertiary recovery project and the plans for Horizon oil sands mine expansion – all part of our strategy to transition the Company to a longer-life more sustainable asset mix. In addition, we executed record drilling programs in primary heavy crude oil and North America light crude oil, and generated strong free cash flow from our international operations.
During 2010, the Company received regulatory approval for its Kirby In situ Oil Sands Project and the Board of Directors sanctioned Kirby Phase 1 with construction commencing in the fourth quarter 2010. The peak production for Phase 1 is targeted to be 40,000 bbl/d with an overall cost target of $1.25 Billion.
Canadian Natural realized first synthetic crude oil (SCO) at the Horizon Oil Sands on February 28, 2009. Shortly afterwards on March 18, 2009, Canadian Natural had its first shipment of SCO into the sales pipeline. Today we are marketing our current production of SCO in all traditional SCO markets and refineries. In Q4/09, we are targeting for reliable and consistent production at design capacity of 110,000 bbl/d at Horizon.
Finally, Baobab production in Offshore Côte d’Ivoire has been restored to approximately 11,000 bbl/d net to Canadian Natural after completing a drilling program in Q1/09.
In late October 2008, our Primrose East expansion added 40,000 bbl/d of capacity after achieving first production. We target future development of our thermal crude oil assets to add an additional 30,000 – 60,000 bbl/d every 2-3 years in the next decade. The Kirby In Situ Oil Sands, currently awaiting regulatory approval, is the next project to expand the crude oil portfolio.
Oil sands mining construction of the Horizon Project began in 2005 with the first phase completed in early 2009. We plan to expand production of this world-class asset base with a target synthetic crude oil rate of 500,000 bbl/d.
Deep gas basin of Northwest Alberta was initially acquired as part of a larger acquisition and further augmented by other acquisitions. We leveraged our knowledge and expertise between British Columbia and Northwest Alberta to make both areas stronger. These areas are home to numerous resource plays and shale gas opportunities and are a part of our future growth story.
International offshore properties were first acquired as part of a larger transaction. The acquired package included numerous, fractional interests around the world. We carefully rationalized the assets in accordance with our strategy and expertise. The North Sea represents a mature basin where we look to acquire assets and economically extend field lives – the same approach used in Western Canada. Offshore Africa provides the opportunity for exploration and exploitation growth while leveraging our offshore expertise.
Thermal in situ heavy crude oil properties were purchased by Canadian Natural. As one of the initial entrants in the field we were better able to understand and economically bid on asset packages including the landmark acquisition in 1999 where the majority of our thermal and Horizon Project mining properties were acquired. Today we are a leader in thermal in situ crude oil developments and have a clearly defined plan for future growth.
Heavy crude oil operations were new to Canadian Natural following the acquisition of primary heavy crude oil lands in 1993. We took our time and developed an expertise in these operations. This allowed us to intelligently acquire and expand our holdings. Today, we are a recognized leader leveraging technology to further grow and recover crude oil. Fields such as Pelican Lake will continue to add significant value to shareholders for years to come.
Northeast British Columbia natural gas basin was entered, providing early knowledge and a leading position into this prolific basin. Canadian Natural became a major natural gas producer in British Columbia through acquisition and drilling. Advances in technologies and new resource plays such as Montney Shale gas means that this area will continue to be a major growth driver for the foreseeable future.
Shallow gas basin of Alberta was the modern iteration of the Company’s birthplace and is still a major contributor to our success. Even in today’s world, conventional and shallow natural gas drilling can generate significant returns as we leverage our strong land position with new technology.