Q3 2019 Earnings Call
Instructions will be given that that time. Please note that this call is being recorded today November 7th 2019 at nine o'clock Am Mountain time, I would now like to turn the meeting over to your hosts for today's call Cory Bieber Executive adviser. Please go ahead Mr. Beaver.
Thank you operator, good morning, everyone.
Third quarter conference call with me this <unk>.
Device German who'll briefly discuss or strategic focus on creating shareholder value and highlights some of the factors that set us apart from their peers.
Evil also provide an update on Canadian natural in our industries efforts on the environmental front, where significant performance in game changing achievements are not well understood. Jim Mckay, our president will provide a more detailed update on a quarter as well as discuss or ongoing projects and operations and Mark Stainthorpe or Chief Financial Officer will provide an update on our robust financial.
Position.
Before we begin I would refer you to the special note regarding non-GAAP measures contained in our press release. These measures used to evaluate the company's performance should not be considered to be more meaningful than those determined in accordance with I have for us.
Also like through free to the comments regarding forward looking statements contained in our press release and also note that all amounts are in Canadian dollars in production reserves are expressed as before royalties unless otherwise stated.
With that on now pass it over to Steve.
[noise], Thank you Cory and good morning, everyone.
As you seen cutting natural third quarter, what's very strong.
Delivering strong sustainable free cash flow.
Very few companies can deliver this level sustainable free cash flow at a safe secure and provide substantial upside going forward.
Natural maximize evaluate our free cash flow for shareholders by optimizing our casual location between our four pillars and leveraging our competitive advantages.
Are competitive advantages include effective and efficient operations.
A diverse and balanced asset base with significant development potential.
The advantage of owned and controlled infrastructure.
I'm, just scale, which we can leverage with our size.
And our culture that is entrepreneurial accountable and leverage our operational technical and financial expertise to execute at high levels.
Our ability to leverage our competitor vantages is reflected in our third quarter, where we delivered strong and increasing free cash flow.
Significantly lower operating costs and production <unk> production growth Pershare up an impressive 14%.
All in a <unk> production environment.
Combining our competitive advantages with our optimized cashwell location drives top tier value creation from both an economic and environmental perspective, strengthening our four pillars are.
Or balance sheet.
Our target a year in debt Diva dog at or below 1.9.
Returns to shareholders.
With 2.1 billion returned to shareholders in the first nine months 1.3 billion through dividends and point 8 billion to share buybacks.
Opportunistic acquisitions and with the Devin assets being the latest example of our ability to leverage our competitor vantages to grow value and production in a constraint market access environment.
And resource development, where we've taken the opportunity in the current market to progress engineering and value engineering on our projects <unk> Grady create even greater value by leveraging technology optimizing design configuration strategies and execution plans.
And importantly focus on driving enhance margin growth on our existing and future production.
That's clearly reflected in our Q3 all costs.
Yeah.
But the last number of conference calls I have spent some time talking about the environment I'm not going to go through all the details as I have in the past, but summarize the key points of what I considered to be a very impressive Canadian success story.
Story, we have been telling to a broader Canadian audience.
It's a success story that all Canadians can be proud of.
Because when it comes to environmental performance can you natural M.D., the Canadian oil and gas sector entire cutting on gas sector has delivered game changing environmental performance.
Okay natural encounters on gas sector recognized the need to reduce greenhouse gas emissions and we've been able to leverage technology and Canadian ingenuity delivering impressive results.
Essentially <unk> on gas sector as take it what was branded as a high intensity oil in 2009, and I made it what I would call the premium oil on the global stage all in 10 years and the key on gas sector is committed to do even better in the future.
[noise] contain natural as already used or overall corporate emissions intensity by 29% since 2012.
At arise in our intensity is down 37%.
Our primary heavy all intensities down 78% and we are the fifth largest capture and sequester of C.O. two in the oil and gas sector worldwide.
And just see three areas.
Natural is taken the equivalent of over 2 million cars off the road.
Equivalent to 5% of the entire vehicles in Canada.
And this is just what K. natural has done.
The entire industry is chief similar equally impressive results.
And for the record 100%, Okay Natural's Albert oil sands in sit you and mining emissions, our third party verified.
Canadian ingenuity, and our ability to innovate and leverage technology has taken what was very high intensity oil on a wealth combustion basis in 2009 to below the global average.
And the success story is just getting started we can with new projects leverage technology and Canadians unity to do even better.
<unk> asked racial goal, reaching net zero emissions.
Net zero emissions is a lofty goal and we plan to get there not by buying carbon offsets by leveraging technology and Canadian Judy.
It's not 2009 anymore.
Oil and gas is now the premium product something all Canadians should be proud of.
If you view climate change it from a global perspective as climate change is a global issue no International issue then it makes sense that having more can hang on gas on the global markets will reduce greenhouse gas emissions.
And if you believe action needs to be taken on climate change then you should you must advocate for greater market access pertain oil natural gas.
It's very clear that delivering caswell natural gas to global markets should be a climate change and economic priority for Canada.
Which brings me to the E.S.G. criteria that most institutional investors have developed or developing.
When you look at their environment. The E.N.E.S.G. totally candidate is doing very well if not better than any other jurisdiction, especially when you take into account Canada's environmental performance on greenhouse gas intensity.
And when it comes to the social and governments, the S. and G.E.S.G.
Candidate clearly performs at the very top of the list.
We've leave of tennis game changing environmental performance on our well established position at the top list on E.S. and Gee that Canada is clearly top tier when it comes D.S.G.
As a result, when investors look into Canada from a global perspective than cats should screen end.
When it comes to U.S.T. criteria, and can or should actually be an E.S.G. investment property.
Yeah.
Thank you Steve the morning, everyone unnatural had a very strong third quarter talk to your operational results production from our assets were strong as we executed our curtailment optimization strategy and over and above that we continue to reduce or operating costs.
Been under curtailment, Alberta.
This is a reflection of our operational X., one of our people the strength and Bath asset.
And our ability to execute effectively under the curtailment optimization strategy to maximize pre cash bowl for shareholders.
Well now do a brief overview of our assets.
Starting with natural gas overall third quarter production of 1.469 gets yep was down from acute to production at 1.53 to D.C. up as expected and exceeded the two or three guidance, primarily as a result of phasing of turnaround activities and strong operational performance in all areas.
North American natural gas was 1.4 to five P.C.S. with operating costs of a dollar seven per M.C. up which went down compared to Q2 2019 of a Buck 15, and Q3 of 2018 of a Buck 33, perhaps yeah.
Result of our continued focus of operational excellence and our operating costs at <unk>, the company's high value liquids Rich mountain area additional natural gas wells came on production and late Q. too as we talked about last quarter as a result, except in us at top tier operating costs and Q3 26 cents per himself he.
Down from Q2, 33 cents per M.'s, yet are effective and efficient operations, except Mr supports this high value liquid rich development.
Creek or liquor rich natural gas development, which are not subject to curtailment <unk> well came on production, averaging approximately 660 barrels per day.
Liquids and 4 million.
Well.
Feeding spec patients approximately 110 barrels per day per well.
The third quarter contain natural realized natural gas price of a buck 64 per Mcf their natural has a diverse natural gas sales portfolio of which 44% is used within our operations, 32%. It's export it and only 24% is exposed heiko pricey based on Q3 production.
Two 320, 19, or North American light oil and N.G.L. production decreased as per or curtailment optimization strategy to approximately 96001 her barrels down 6% from cute too and his up 3% when compared to two or 320 18 with third quarter operating costs, and 14 96 per barrel as compared to cute.
To 14 67 per barrel as a result at the impact of the <unk>, we drilled eight gross wells insist catch one insults continue to be strong and approximately 100, <unk> <unk> barrels per well.
With in the greater Wembley era results from the 27 that wells drilled in 2018, and the three net wells drilled and 2019 continue to be strong with production, averaging approximately 10400 barrels a day of liquids 68 million cubic feet of death exceeding expectations from approximately 40%.
We continue top demise or like oil cap capital, while under Curtailment, then, Alberta, which demonstrates the strength of our asset and the ability companies ability to maximize long term value for shareholders.
Overall or international assets had another strong quarter exceeding our guidance at 48861 barrels per day, and generating significant free cash flow and value for the company.
Two three operating.
Offshore Africa production was approximately 21200 barrels a day down when compared to Q2 2019.
23650 barrels a day as expected due to natural feel declines.
Operating costs and Q3 were strong at 11 O. six per barrel <unk> 840 per Q2 2019. This variation is primarily a result of timing of liftings from the fields.
In the northeast production averaged approximate 27500 barrels a day and Q3 comparable to to to have 27600 barrels a day as a result of our successful drilling program offset by turnaround activity company completed its 2019 drilling program in Q3 drilling three high net producer well.
Production from the toll program, consisting of 4.9 wealth and exceed expectations by approximate 1300 barrels per day net for well.
Or the quarter.
Operating costs for 30 711 per barrel, which is down from Q2 2019 of 30 731 per barrel in South Africa. The operator is now targeting to proceed with the second or expiration, well and 2020 and had secured a rig contingent on results an additional exploration well could be drilled on the block and 2020.
Have you all production was approximately 88000 barrels a day up from two 220 19 77700 barrels a day as we have a full quarter, Devon and reflects the impact of our curtailment optimization strategy and the third quarter operating costs were strong and a quarter at 17, o. eight per barrel as compared to cute.
220, 19 operating costs of 17 52 federal.
Updating on the Devon acquisition, both have you all and thermal we continue execute a plan to achieve the identified annual savings of $135 million.
As previously announce approximately 25 million initial synergies identified are being realized more than one you're ahead of the initial plan.
Over and above the estimate we have identified incremental annual savings approximate 10 million per year, and approximately 50 million one time capitals savings in the short time, we have operated these assets great results fire teams [noise].
He component of our long life slow decline transition is a world class Pelican like pool, where our leading edge of Palmer flud his driving significant reserves and value grow.
Two 320 19 production was 60146 barrels a day up from the cute to average of approximately 55000 barrels a day, which was impacted by the temporary shut in due to the wildfire.
Team did a great job execute we have very strong operating costs of 610 per barrel, primarily a result, you all <unk> consolidations that we talked about last quarter.
And are cute too operating costs down from acute to operate it costs that 672 per barrel.
Pelican, our team continues to drive operational accent and has been able to impact.
Impact of decline overproduction over the last four years holding operating costs at approximately 650 per barrel an excellent accomplish by them.
With our low decline and very little operating costs Pelican Lake continues to have excellent netbacks and recycling ratio.
And thermal or third quarter production was.
<unk> 206004 barrels a day exceeding our guidance as we optimized production in the corridor and immediately began capturing operational synergies <unk> in the Kirby project area could be north is running very well exceeding are targeted pace ramp up as we targeted ramp up to 40000 barrels a day and 2021.
Combined production that Kirby, including Kirby, North and South and the third quarter was approximately 31300 barrels a day with excellent operating costs of 869 per barrel, including fuel, reflecting both lower energy costs and operating efficiency.
Jack Fish, we had a strong quarter with operating costs at 944 per barrel as we continue to execute on our operating plan for those assets production was wrapped up for September and October to approximate 110000 barrels a day as part of our curtailment optimization strategy as well, we're proceeding with a pad Thai enough well we're not.
Tied in as a result to the Alberta curtailment, just pad is targeted peak production capacity of approximately 21000 barrels a day for $8 million and will be available to the company as part of our curtailment optimization strategy for 2020.
Hi, Primrose third quarter production was optimized to approximately 73006 our barrels a day.
The 71900 <unk> two two operations.
We continue to be effective and efficient with third quarter operating costs at 991 per barrel down from Q2 2019 of 12 39 per barrel, primarily result of lower fuel costs and higher operating volumes.
Primrose facility constructions at are highly profitable pads came on production ahead of schedule and on costs.
Production from these pads was approximately 13006, our barrels a day for September which part of our curtailment optimization strategy.
Decades someone the impact of the plan turn around that horizon.
[noise] at our oil Sands mining operations, we were top tier and third quarter as we produced at the top end to the guidance at 432203 barrels per day with industry, leading operating costs of $20.05 per barrel very close to our record low 1997 Q4 2080.
Or teams continued to capture synergies between the two sites leveraging technical expertise services and operating efficiency driving our costs down with consistency you're over your heart dollar cost excluding fuel is down by approximate 150 million in the first nine month on the unadjusted basement compared to 2018.
As our teams are very focused on driving operational excellence.
Completing his soapy acquisition and 2017, we ever successfully improved our margins from initial mid point of 2017 guidance of $32 a barrel to roughly $22 per barrel today, so down about $10 per barrel quibbling to approximately $800 million.
Savings annual savings compared to 2017 levels. A clear example, Canadian natural grows a margin and does not include the impact disynergies capture that right.
As our team or continue to do a great job improving our margins.
Part of our curtailment optimization strategy during the horizon turn around we're able to ramp up production adult with September and October record months, approximately 318000 barrels a day or becoming 100 gross basis up from the 27th capacity at that time of 280000 barrels a day. Both these items are great.
Cheapness fire team.
At Horizon turnaround was completed on time and under budget.
During the post turnaround start up as part of the company's practice inspection at horizon. The team identified it need to repair piping on one of the head hi during manufacturing units.
As a result horizon is currently running at restricted rates of approximately 155000 barrels a day and is targeted to return to pull rates in early December .
Squalid horizon.
Nutrient bounce engineering discipline matter as we looked optimized costs preserve our growth opportunities 75 to 95000 barrels a day as we wait for clarity on market access.
Work on the ice half pilot continues to look very positive and we continue or making enhancements to improve its appointment.
And and prove up this technology and we were now continue piloting it into 2020.
As we talked about last few quarters 10 natural continues to strongly support government decision to curtail production differentials for both WCS and synthetic oils and 2019 have stabilized more normal level Yoakum of this decision has been very positive for L. Burton, Alberta cruises and the benefits are widely distributed across.
To Alberta through jobs taxes, royalties equalization payments and without curtailments that would've been significant.
<unk>.
In the short term, we expect Keystone based system will be back on and the next few weeks and as we move to December and bridge will start to take an additional 85000 barrels a day, we see improved tigress into 2020, both express pipeline and Keystone base, each adding 50000 barrels a day. Additionally, the northwest upgrade.
<unk>, it's targeted take incremental heavy all that 40000 barrels a day, so coal or 225000 barrels a day of additional capacity.
<unk> and as well crewed by rail is steady at over 300000 barrels a day all positive and then that can for can you didn't producers [laughter]. We will continue to focus on safe reliable operations and enhancing our top tier operation.
We are very strong position and being nimble.
Which enhances our bazzi to create value for shareholders continue to high great opportunities in the company or curtailment opt raised Asian strategy is reflection of our ability to be nimble and operate with excellent.
As well, okay unnaturally valid advantage is their ability to effectively allocate cashflow four pillars in light of market conditions and 2019, we will continue to balance and optimize our capital allocation delivering free cash flow strengthen our balance sheet Mark high like further in the front actually do.
<unk>.
Things to him Canadian natural had a strong financial quarter with net earnings of over 1 billion. Adjusted net earnings of over 1.2 billion cash flow from operations of over two and a half billion and adjusted funds flow of approximately 2.9 billion.
As Tim disgust effective and efficient operations in the quarter, including a continued focus on cost control and our ability to effectively execute <unk> optimization strategy has again led to the solid financial results.
Canadian Natural's unique long life Lady quite asset base continues to generate significant free cash flow.
<unk> three free cash flow was approximately one and a half billion after net capital expenditures of 963 million and dividends a 447 million.
We continue to execute on our discipline free casual allocation policy as gross debt was reduced by over a billion in the quarter and approximately 800 million on a net cash basis.
This included the permanent retirement of bank facility debt of 800 million and a quarter.
Subsequent to the quarter in an additional 500 million a bank facility debt was permanent retired in October .
These repayments of meaningfully reduced our debt levels from Q2 19.
Share buybacks or the first nine months of 2019 have totaling approximately 22 million shares for over 800 million, including 169 million and Q3 19 and dividends of totaled 1.3 billion for an impressive total <unk> return to shareholders of over 2.1 billion. So far in 2019.
Our balance sheet metrics remains strong and our target to get even stronger throughout 2019.
Current strip pricing and based on our corporate guidance, we target to exit 2019, with a debt to adjusted EBITDA debt to cash flow and debt to book capital at levels below those existing at December 31st 2018.
This is significant as it includes the completion of the Devin Canada acquisition, along with very significant return to shareholders by way of dividends and share purchases throughout the year.
Finally available liquidity represented by bank facilities and cash a quarter end was approximately 4.7 billion an increase of 120 million over Q. do 19 levels, providing flexibility to managed wrote the business cycle and drive increasing shareholder value.
Canadian naturally balanced diverse asset base in mind, with our effective and efficient operations and disciplined casual allegation between our four pillars and strengthen the company's balance sheet.
Balance sheet that is set to get even stronger as we move forward.
What's that will turn it back to Utah and Clark.
Summary, we're delivering robust and sustainable top tier free cash flow Canadian natural has many advantages are balance sheet is strong and will continue to strengthen we have well balanced diverse and large asset base.
Sniffing portion of our asset base is long life low decline assets, which requires less capital to maintain volumes, we have a balance in our commodities with approximately 48% of or be a ways light crude oil and then <unk>, 31% heavy at 21% natural gas and Q3, which lessons or exposure.
Volatility to one commodity.
Yeah natural continue to allocate cashel, two or four pillars in a display manner to maximize value for shareholders, which all driven by effective capital allocation effective and efficient operations by our teams who delivered top tier results.
We have a robust sustainable free cash flow are dividend was increased approximately 12% earlier this year and we have 19 consecutive years of dividend increases, which which has a keg of 21%.
Share purchases year to date, where approximately 23, and a half million shares or $846 million and when combined with 2018 shares of about 30.
A million 900 chairs.
Equals to accumulate 54.4 million shares or approximately $2.1 million <unk> through share purchases alone.
<unk>.
<unk> <unk> tier free cash flow generation.
Stay animal and robust with that we will open up the call for question [noise].
Thank you at this time, if you'd like to ask a question even need depressed star one on your telephone to his to I. or question press, the pound or hash key please stand by well we compiled the CUNY roster.
[noise] and your first question here comes from the line of Greg Party was RBC. Please go ahead of your line is not well then yeah. Thanks. Good morning in in Great results to say the least you've identified a number of areas, where you were going to be boosting production, you know primrose jackfish curbing or just to to to mention a few and then you've observed.
The optimization on the pipes question for me is can you.
Move all of those barrels by pipe.
Or do you kind of ambition grew by real playing a bigger role and they any <unk>.
Yeah.
<unk> it stayed here.
<unk>, what we see here with the 225000 barrels a day that's coming into next year is that we should be able to move majority of our production or all of our production by by pipe, but at present you know the company has approximately 30 to 50000 barrels a day of production that we can produce for short period.
As per our curtailment optimization strategy, but this volume is not on a sustained basis, but it can be done in short term communicate bull planned and unplanned production outages that we would have the across the company.
Okay, and I know you were running about 14000 barrels a day of crude by rail I mean, do you have appetite for more onto it right terms.
Well I can't actually in the process with the Alberta government and with respect to crewed by rail.
Contractual terms are very complex has only a portion of it full costs to move crewed by rail.
To their delivery points is covered so.
As a result process is taking some time for the parties to understand the complexity and how to bridge the mix the missing a contractual pieces. So.
It's hard to say <unk> had but again as you know the importance of crew by well is decreasing and pipelines are still preferred to be the safest most.
He S.G. friendly option and you know, we see it becoming less important going into 2020 with that 225000 barrels a day of incremental he grass happening.
Okay, Thanks to him and and just one more for me just you know you touched on the Keystone outage in an expectation you expected to come back here in the next few weeks and so on <unk> is it having a material impact <unk> and should we be thinking about you know inventory builds with you guys in in you know in the fourth quarter.
No it's had a very little impact on us out here today.
Okay. Thanks very much.
Thank you Greg.
Yeah next question, some align or Bunny one with Morgan Stanley . Please go ahead.
[noise] I. Good morning, Thanks for taking my question. My first one is really around your your debt reduction a notice you you paid off quite a bit of dead, while you kind of moderate your buyback a little bit which I think most people are appreciated hoping he gives them call around a rationale behind us is it more of a strategic shift or.
Were more of us opportunistic situation and how do you think will balancing between to buy back in debt reduction for the rest of the year and and into next year.
[noise] things spending it's mark.
Just to remind everybody we have learned free cash location policy, where we we take our adjusted funds flow less our capital expenditures nicer dividend.
The free cash from that remains is allocated 50 per cent 50 per cent it yet and that allocation policies really man, who rural longer term period. So we continue to monitor that if the targets continue to be that allegation Benecio 50, 50 on a longer term basis. When you look from quarter to quarter, you will see a a changes as we've.
I'd quarters with higher sure sure by docks and debt repayment in this quarter, we had a significant debt repayment. So no. There's no change in the strategy games.
Okay. Appreciate that and my next question is on A.O.S.P. seems like you had a very strong robust production. This quarter can you tell us what you're doing differently. There is that level of <unk> project can operate that run rate on a sustainable basis. If there was no curtailments going for.
Yes, good question pen Yeah, well first of all we're really not doing anything different than what we normally do our teams are very focused on looking for opportunities to find incremental capacity, whether it's at horizon, Jack fish or so p.. So that part I think our teams.
We focused on doing the right word to increase their reliability and increase our production as well as reduce our costs. So that part is really no different than what we do across the company as far as the Runrate I would say it probably won't be at 318000 barrels a day I mean this is our first 10.
Obviously under curtailment. It is very difficult to to you know have anything sustained you know 'cause <unk> it impacts a other areas of the company. So you know while horizons down it's it's a nice to have to be able to crank up our production whether it's out here so p.
Jackfish Primrose so to me I look at as one of believers, we can use to manage our overall production and but I would think that and we'll see over the coming months. If that 318 is get closer to 318 or something a little less.
Great. Thank you very much.
[noise]. Yeah next question comes from the Lions sound crash with J.P. Morgan. Please go ahead. Your line is now up then.
Oh, yes, I can morning [noise].
<unk> Oh question would just be whether you have any thoughts around 2020 capital spending at this point based on some of the comments you made about the uncertainties and take away and things like that it sounds like you're probably going to be closer than fly, they're still not but any color you might be able to share.
Sure tilt. Thank you for the question <unk> I present were working through the the 2020 budget to.
Currently and I would say this year.
Which is a little different than pastures, there's an additional complexities and uncertainties around curtailment crewed by where L.S.P.A.S. So normally you know for our budget weird habit Ah ready for the open house I don't know if they'll we'll be or not be the case this year.
But there are many complex complexities you know in in regards to finalizing our budget.
[noise], Okay, no I understood. Yeah last year. When are you guys are doing his job of just gets giving scenarios a rabbit.
All apart from a ballpark you know wait a view it I mean, I don't see it it really much different than it was this year. You know who are you know you had in a little bit of devins to sit in capital and you're you're pretty well that kind of that ground that 4 billion Mark.
Yeah, Okay, that's what I figured okay.
Second question I guess is for Mark on the working capital. Your last year was a big source. This year's been a big use I feel like maybe earlier. This year you thought perhaps some of this would turn around in the second half, but then this quarter was I had when so is there any thought as to whether you get some.
Tell him working capital as any of that contemplated in the end of year leverage target you guys.
Yeah, you know fill it's really it really comes down to how the revenue gets paid and received right. So the way. It works of course is that we get paid the following month for.
Kashmola in in amount. So if we if you're looking at a September production you actually get paid for that in October . So it depends on the pricing and receivables that you go through in a quarter that blow into the cash in the next quarter. So it's hard to predict quarter to quarter, but overtime. It does.
Kind of unwind itself.
And what you saw that Philip Yeah me too I can for for Q4 was the big adjustment because of course December pricing is way yeah.
Sure.
1.9 times leverage targeted fairly neutral assumption I guess versus the another quarter.
Yes, it's neutral.
Right.
Okay.
And then I guess last one would just be a long term you have I believe from Los Angeles day.
Habit targeted in mind, I think of something closer to 15 billion that debt.
At some stage I guess can you confirm if that's still the right way to think about it and.
With respect to an earlier question about 50, 50 split and whatnot is there any idea maybe accelerating that a bit signal to the 15 faster.
So I mean the strategy around the 50 50 remain so that over a period of time is is what is currently in place and we plan to continue to execute over a period of time.
So the 15 billion in one and a half times dead to Eva done remain the targets.
Now of course that will the the pace of those of getting to those will depend on you know pricing and casual and and those sorts of things. So we continue to manage out on go forward in an ongoing basis.
Okay. Thank you.
Yeah 'cause question comes from the line as <unk>. Please go hide your line is now then.
Good morning, teaming congrats here on on really strong results. That's the first question I had was just on Keith done I think you alluded to your expectation thing I think he'll be back in the next couple of weeks can you provide any more color around what you're seeing there.
I I really can't give you any more color on it I all I can say is that if you look back at the.
The 2017 incident that took about I think it was 10 to 15 days for it to come back in San Francisco I'm, you know actually just you know looking at it and say if it's on the similar path. That's what it was back and 2017 it should be on in the next couple of weeks.
That's that's helpful. And then just thoughts on the on the costs side would be helpful. I, one part of part of the the beep for through our expectation least was a year operating costs came in lower than our expectations, where are we in terms of being able to drive cost of the business, especially in an environment.
<unk> production is still being held back.
Yeah see you know it's a a very good question and you know I think if you look at the company's history, we've always been able to find opportunities to reduce our our costs and probably the easiest one is to look at is something like a pelican you know where you know it was.
You know a year ago, you know was 63000 barrels a day today you know maybe how would you around 59000 on a yearly basis you had our operating costs are standing flat. So production has declined 6% and we're able to take roughly 6% of our costs on a view a basis out of it.
You know horizon and.
He has hope he you know you've seen a constant March down I bet, not as fast, but you know what through his opportunities to mitigate or any inflation in terms of labor costs or anything else by doing things more efficiently and effective so I just look at our teams.
They're very focused at trying to mitigate any cost increases as well as a work to be more efficient effective across the the whole business and they've been able to do a great job you know there's not one item that doesn't the teams don't look at in terms of trying to do it better and more in fact.
<unk> more efficiently.
Thanks.
Thank you know.
Your next question comes from the line of Mike done with T.M.P. first energy. Please go ahead. Your line is now all of them.
Hi, everyone. Good morning, a couple of questions because first one probably for mark.
Are you guys expecting any big changes either next year. The you're after you know like assuming capital levels are similar to 2019 and.
To your your cash taxability in North America or is that.
Sort of a fairly steady thing I guess, you know relative to pretax cash flow and I have a follow up on greenhouse gas. Thanks, I don't I don't expect any big changes like so I would.
Look at it as as.
Basis Yeah.
Great and then a assumption you're all where Gilbert government has recently come up with a new greenhouse gas tax structure I forget exactly what it's.
<unk>, but I believe the the old one on the C.C.R.R. has been suspended at some point here 2019. So.
Can you guys sure in terms of total corporate costs you know.
How much you think it's gonna be down in 2019 versus 2018 and then.
What 2020 might look like in terms of relative changes I would presume that overall.
The 2020, ghd taxes, you'd be paying in Alberta would be less than what they would've otherwise and.
The C.C.I.R.
I know that Obama government things slip the total taxes taken then would be less from industry, but any thoughts on that would be helpful.
Yeah, Mike Yeah. The tears the government announced I believe was really really weaker the tear system. There technology innovation the emissions reduction program and yeah. It is a positive step forward obviously.
The come it still has to go through to get it equivalency on a federal basis.
From an overall perspective, you're correct, we do see a reduction compared to the C.C.R.R. right now we're or teams. It just working through it obviously, there's two parts to it the large emitters and then of course, the small or sites, which.
Cannot and so you know, we're just going through it to you know in detail now, but it does look to be a pretty good you know a decrease as compared to the federal program.
Okay. Thanks to him and then maybe if you could just clarify for me.
Under the CCR believe your smaller sites like primary heavy oil would've been subject to some some ghq tax would you be anticipating that.
Still be the case in 2020 I guess.
Yeah, Yeah, if if we can get the equivalency of the tears system approved.
Those sites would actually fall under this the small emitters under the cheer program into your point, yes, they would save us.
Money in terms of tax so.
That's what we're working on right now is is to go through that process, but yes under C.I.C.C.I.R. It is a a more cost on a small have you all well since touch.
Okay and then.
Oh, so sorry, just to clarify too I believe for 2019 all of these toxins have been suspended so overall 2020 over 2019, you'd probably expect overalls to pay more.
Yeah, little that but I I wouldn't know what that differences I'm sorry, okay.
Okay. Thanks for filled in my questions. It's all from me <unk>.
<unk> Thanks, Mike.
Yeah next question comes from a line of mine off that far with credit Suisse. Please go ahead. Your line is now often.
Hey, guys. Congrats on a good resolved I was actually surprised to see the jackfish costs down 944.
<unk> reduction sounds fine you acquired the asset I'm, just trying to understand what was it a lot of low hanging fruit is this what you'll find how did you manage to hit synergies or nor cost like 25, plus and and just <unk>.
Yeah. The so it's combination of lower fuel costs and as far as the operational efficiency is the team or.
You mean, he jumped on <unk>.
Back in time when asked about the Devin acquisition, there were a lotta synergies between our Kirby operations and to the Jackfish operations. So you know those those opportunities in exercise by the I can say that it close.
The ground or in the field going through how are they could execute tar high level plan of of how to reduce costs and in crap capture the synergies between the two sites.
And click on the L.P. enemies canyons and remind us how much how your volumes <unk> and then go to be not then Primrose I'm trained on this time, yes, <unk> He's approved and you do and real capacity what could the production levels look like as you would exceeding 2020, if if there's a state excused.
Maintained.
Yeah, So what I talked about earlier is like got at the present time, we have approximately 30 to 50000 barrels a day of production that can be produced for short periods as per R. <unk> optimization strategies. So you know this point isn't a sustainable on a stained basis. We can use it to <unk>. These are leavers that we are.
As a company that we're able to use in the short term to mitigate both planned and unplanned production. So you know we're working through our 2020 budget as we talked about earlier. So you know I I can't speculate on you know what the that number would be into 2020.
<unk> is that any update on the N.W. on and find when you start up.
There was an update by N.W.R. think a couple of days ago, but I would just adjust to go to their website to get all the exact details.
Thank you so much.
Thank you.
And I'm showing no further questions that are in the queue. At this time I will now tend to call back over to Mr. Quite a beeper for any closing on I.
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Oh.