Canadian Natural expects reduced capital spending but production volume to remain steady
Canadian Natural Resources Limited is providing a corporate update on its capital flexibility and its continued focus on effective and efficient operations.
Canadian Natural is well positioned through the current global COVID-19 challenges, due to our significant long life low decline asset base that has 27.8 years of reserve life based on proved reserves and 36.0 years of reserve life based on proved plus probable reserves. Of the proved reserves, 83% is derived from long life low decline assets and 77% of budgeted 2020 liquids production is from the same type of long life low decline assets. Importantly, Canadian Natural's Oil Sands Mining and Upgrading assets have a reserve life in excess of 43 years. These Oil Sands Mining and Upgrading assets have a production capability in the range of 430,000 - 475,000 bbl/d of Synthetic Crude Oil ("SCO"), with operating costs of approximately US$13/bbl. These assets currently make up approximately 45% of our liquids production and continue to generate substantial free cash flow at current commodity price levels.
Canadian Natural's asset base has low sustaining capital and low reservoir risk which allows it to effectively manage through commodity price cycles, with little impact on our near term production levels and net asset value, thereby preserving long term value for our shareholders and creditors. The Company maintains a flexible and disciplined capital allocation strategy, with a focus on maintaining a strong financial position throughout the commodity price cycle.
With the continued volatility in commodity pricing, the Company has identified and implemented further opportunities to reduce its 2020 capital spending budget to approximately $2,960 million, a $1,090 million reduction from its original 2020 budget. Notwithstanding this spending reduction, there is no change to our 2020 corporate production guidance volumes of 1,137,000 - 1,207,000 BOE/d; originally issued on December 4, 2019. Canadian Natural's long life low decline asset base and its associated low annual sustaining capital of approximately $3 billion, coupled with the ramp up of production volumes at Kirby North, Primrose and Jackfish production, all where capital for these projects was largely incurred in 2019 and before, results in similar targeted production levels in 2021 and 2022.
Canadian Natural's ability to maintain our original 2020 corporate production guidance volumes is a reflection of the strength of our long life low decline production base, our low maintenance capital costs and our effective and efficient operations which drive low operating costs. Further, the ability of the Company to generate free cash flow is enhanced by our production mix, where approximately 60% of liquids production is light oil and SCO, subject to light oil pricing, driving significant positive netbacks, even in the current price environment. This is supported by effective and efficient operations across the entire asset base where the Company continues to be focused on margin growth and its industry leading operating and sustaining capital costs.
The revised capital budget, with no change to our 2020 corporate production guidance volumes, ensures strong adjusted funds flow in the current challenging environment to cover the current dividend and maintain balance sheet strength. As part of this balance sheet strength, the Company has suspended share purchases under its issuer bid as at March 11, 2020. In addition, Canadian Natural's current liquidity is approximately $5 billion consisting of cash, including approximately $1 billion in estimated cash reserves as at March 31, 2020, and availability under committed credit facilities, which is more than sufficient to retire, when due, any current debt retirement obligations.
As part of the continued focus on effective and efficient operations, the Company has reviewed its compensation program in light of the current commodity volatility. Effective April 2020 the President's annual salary has been reduced 20%, while other members of the Management Committee will have annual salaries reduced by 15% and Vice-President positions will have annual salaries reduced by 12%. Concurrently, the Board of Directors has also agreed to reduce their annual Board cash retainer by 10%.
The Company is continuing to monitor the rapidly changing COVID-19 situation, following provincial and federal health guidelines to ensure the wellbeing of our employees and is taking the necessary precautions to ensure the safety of our office and field operations staff. Canadian Natural is confident that it can maintain effective operations with our current procedures and protocols.