Q4 2019 Earnings Call

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Good day, ladies and ladies and gentlemen, thank you for send by welcome to the Imperial oil fourth quarter earnings call.

At this time, all participant lines or are in listen only mode. After the speaker presentation. There will be a question answer session.

I see question during the session you wanted to press star one on your telephone.

If you require any further assistance please press star zero.

I'd now like to have the conference to speak it today, Dave use Vice President Investor Relations. Please go ahead Sir.

Thank you wanting everybody and thanks for joining us on our fourth quarter earnings call.

Just going to start by introducing you to the senior management team in the room, we have Brad Courson, Chairman, President and CEO, John Leyland Senior Vice President of upstream Dan Lions, Senior Vice President Finance and administration, and Teresa Redburn Senior Vice President of commercial and corporate development.

Before we get going I'm going to start by noting that today's comments may contain forward looking information any forward looking information is not a guarantee of future performance and actual future financial and operating results can differ materially depending on a number of factors and assumptions forward looking information in the risk factors and assumptions risks are described in further detail in our fourth.

Quarter earnings press release that we issued this morning as well as our most recent form 10-K and all these documents are available on SEDAR Edgar and on our web site. So would ask that you please refer to them.

We're going to follow the format. We've been following last few quarters, we're going to start out with Brad offering. Some opening remarks, and then down is going to give us an update on our financial or excuse me a financial overview on on the fourth quarter. Then it's going to go back to Brad to provide some more color on the operating performance. Once we're through those remarks, we're going to go to the Q in Asia, So with that I'm pleased to turn it over to Brad.

Alright, well good morning, everyone and welcome to our fourth quarter earnings call. Thank you for joining us today.

I had a chance to introduce myself too few view at the Investor day back in November and certainly I'm looking forward to working with all of you in the future.

For my first call as chairman and CEO I'm very pleased to report that Imperial had a solid fourth quarter, which marked the end of a strong year in 2019.

We completed the year with total earnings of $2.2 billion and cash flow from operations of $4.4 billion, which I'll note is our highest cash flow in the last seven years.

These results highlight the strength and resilience of Imperials integrated business.

Upstream production volumes were strong as well.

Our 2019 production of 398000 barrels oil equivalent per day was the highest in over 25 years.

As was our liquids production of 374000 barrels a day.

In spite of major planned turnaround activity at all three of our core upstream assets.

In addition, we delivered on our commitment with respect to the startup of the supplemental Crusher project at hurdle, which will enable further growth in 2020 and I'll comment on that in more detail in a moment.

And finally in 2019, we continue to deliver on our commitment to shareholder returns by distributing over $2 billion via growing dividends and continued share purchases.

Our integration and balanced portfolio provides resilience and allowed us to achieve this even in the current challenging and volatile market environment, a variety of events affected cruise crude price differentials beginning with curtailment in late 2018.

We then saw ongoing changes to curtailment during 2019.

The Keystone pipeline was shutdown.

Okay.

For about two weeks and then the CN rail strike occurred thereafter, which all drove volatility in differentials.

And as these events drove crude differentials up or down we had offsetting effects in our upstream and downstream businesses.

While narrower differentials negatively impacted refining margins that had a positive impact on realizations in the upstream.

These offsets reduced the volatility of the company's cash flow.

So with those introductory remarks, I'm going to pause here and turn it over Dan to go through our financial performance both for the quarter in the full year. Thanks, Brad.

I'll start with earnings our fourth quarter net income of $271 million was down $582 million from the fourth quarter of 2018, reflecting lower downstream earnings and stronger upstream results driven in large part by substantially lower crude differentials looking sequentially.

The fourth quarter of 19 net income was down 153 million from the third quarter of 19, reflecting lower upstream and chemical earnings.

For the fourth quarter in the upstream earnings of 96 million decreased a $113 million from the third quarter, driven primarily by lower realizations as WCS w. tie differentials widened over the quarter.

Fourth quarter downstream earnings of 225 million.

Were essentially flat with third quarter earnings of 221 million.

Fourth quarter chemical results were a loss of 2 million down 40 million from the third quarter driven by weaker margins linked to significant capacity additions in the us Gulf coast as well as planned turnaround activity in the quarter.

For the full year 2019, net income net income was $2.2 billion down 114 million from the 2.3 billion. We earned in 2018 recall that 2019 earnings include a 662 million dollar favorable impact from the Alberta governments corporate income tax.

Tax rate reduction enacted in June.

Excluding this impact 2019 net income of 1.5 billion was down 776 million from 2018.

Full year upstream earnings excluding the income tax reduction were 659 million an increase of nearly 800 million driven mainly by higher crude oil realizations and higher volumes.

Full year downstream earnings of 961 million decreased 1.4 billion, mainly attributable to lower margins associated with narrower crude differentials reliability events, including the fractionation towered Sarnia and higher net planned turnaround impacts.

Full year chemical earnings of 108 million decreased 167 million from 2018, primarily due to weaker margins driven by overcapacity.

While our chemical assets are competitively positioned they remain subject to global chemical margins, which may be week for some time as the industry works through its excess capacity.

Moving to cash flow.

Cash generated from operating activities and for Q was $1 billion, an increase of about $150 million from the fourth quarter of 18.

Cash generated from operating activities for full year 2019 was $4.4 billion, an increase of about 500 million from 2018.

This increase includes favorable working capital effects of about 900 million.

Effectively reversing the unfavorable working capital effects of.

About 700 million, we saw in 2018 as Brian noted our 2019 cash generated from operating activities is our highest in seven years since since 2012.

Moving on to Capex capital expenditures in the fourth quarter totaled $414 million, bringing the full year 2019, capex to just over $1.8 billion in line with our prior guidance of one eight to one nine.

Upstream expenditures of over $1.2 billion represent about 70% of the total in 2019.

Spending on key projects in the upstream and downstream.

Includes acrylic pressure Aspen, albeit now ramp down a strap Kona cogen and the Alberta products pipeline those totaled about 660 million in the year as we said at our Investor Day. In November you can anticipate 2020 capex to be around 1.6 to 1.7 billion. This.

Divergence excludes Aspen, which which as you know has been put on hold.

Moving onto our dividends and buybacks in the fourth quarter.

We paid 166 million in dividends at 22 cents a share an increase from 150 51 million at 19 cents per share in the fourth quarter of 18.

For 2019 in total dividends paid were 631 million the annual dividend paid per share increased 12 cents from last year, representing 25 years of consecutive dividend growth and our long standing priority to pay a reliable and growing dividend. We also continue.

Ooh share buybacks in the fourth quarter totaling 301 million consistent with our TSX approved NC IB program in 2019.

Overall, the company purchased a total of 38.7 million shares returning nearly $1.4 billion to shareholders.

Overall, our the company return just over $2 billion to shareholders in 2019, our balance sheet remains strong with about $5.2 billion of debt a debt to capital ratio of 18%. We ended the year, where the cash balance of 1.7 billion and I guess.

Finally, I would say earlier today I'm happy to report we declared a first quarter 2020 dividend of 22 cents per share payable on April one to shareholders of record on March Fiveth.

Now I'll turn it back to Brad to go over our operational performance.

Alright, Thanks, Dan so moving on to operating results.

Upstream production averaged 390 398000 oil equivalent barrels a day in the fourth quarter. This is down 33000 barrels a day or about 8% from the fourth quarter of a year ago.

These results reflect the completion of significant planned turnarounds in the fourth quarter at both coral and Syncrude.

Both of which started in the third quarter and continued into the fourth quarter.

The combined impact of this work from an imperial share perspective was an estimated 17000 barrels a day.

9000 barrels a day impact at current 8000 barrels a day at Syncrude on an annual basis.

Now for 2020, we anticipate total production to be around 415000 barrels per day for the year driven by the volume gains at curl associated with the supplemental crushers.

And now I'd like to comment on some of the individual upstream assets at hurdle on a gross basis, we produced 208000 barrels a day in the fourth quarter down from 224000 barrels per day in the third quarter and down 9000 barrels a day versus the fourth quarter of 2018.

This result reflects the planned turnaround at one of our two plants that hurdle, which we outlined in our third quarter earnings call that turnaround was started in the first half of September and successfully completed by mid October.

The turnaround was about 33 days and duration.

With an estimated production impact of around 13000 barrels per day imperial share in the quarter.

I would like to highlight that post turnaround upon completion of all these activities. We ended the year very strong.

In December with Carl producing 216000 barrels per day, gross which is our highest ever for the month of December.

Now full year gross production at hurdle was 205000 barrels a day once again delivering on the commitment we made to produce at least 200000 barrels a day in 2019.

We expect a similar turnaround schedule for 2020.

For the turnaround on one train lasting approximately one month in the second quarter.

And a similar turnaround on the other train straddling the third and fourth quarters.

Now regarding the supplemental crushers project.

I'm very pleased to announce that things have gone well and very consistent with the schedule, we outlined at our Investor day.

The first crusher started up as planned in December and the second Crusher followed shortly thereafter in January.

This is a significant milestone for the curl asset and we look forward to delivering on the 240000 barrels a day annual gross production capability. It brings us going forward.

Now just a reminder, there is seasonality to production at Kearl.

So as we mentioned in November we would expect production to average lower than that 240000 barrels per day in the first quarter due to weather as well as continuing to ramp up this project. The full rates and then the second quarter will be impacted by planned maintenance, but then we would expect to ramp up to.

Peak levels in the third quarter.

I'm very excited about this asset and I know our whole organization is as we move from hurdles current production of over 200000 barrels a day to 240000 barrels a day in 2020 on a gross spaces.

Now just some comments briefly on Cold Lake Cold Lake produced 140000 barrels a day in the quarter, which was similar to the third quarter.

The full year production was also a 140000 barrels per day, which compared to 147000 barrels per day in 2018.

And that Delta was impacted by the challenge is brought on by reservoir performance at Nab BA and consistent with what was communicated at the Investor Day in November.

We expect production in 2020, a cold lake to be similar to 2019.

And in 2020 will have a turnaround at them. He can plant in the second quarter, which will last about a month. This impact is expected to be slightly less than the MCU SUS shutdown in the second quarter of 2019.

Now referring to Syncrude imperial share of production at Syncrude was 66000 barrels per day in the fourth quarter, which was down slightly from 69000 barrels per day in the third quarter, but again consistent with our guidance.

You will recall, we detailed a turnaround at Syncrude, which started.

Middle of the third quarter and it was completed middle of the fourth quarter with an estimated impact in the fourth quarter of around 17000 barrels per day.

Full year production at Syncrude was 73000 barrels per day, our share which represents the highest annual production since 2010.

Which was also 73000 barrels per day at that time.

For Syncrude and 2020, there was a turnaround on one of the Coker scheduled for the second quarter, which will last approximately two months.

And again, we'll provide more detail on all of our turnaround activity as we finalize plans closer to their start dates.

But I would reiterate our 2020 guidance for Syncrude of around 75000 barrels per day.

And now I know, there's always a lot of interest in curtailment in crude by rail so I'd like to offer a few comments on that.

With the government of Alberta as mandated curtailment order crude by rail economics continue to be very volatile.

Crude by rail shipments through our Edmonton rail terminal increased during the quarter from zero in October to 88000 barrels per day in December.

Which is a restart in November in response to the approximate two week Keystone pipeline outage that I mentioned earlier.

Part of this volatility highlights the ongoing negative unintended consequence of their curtailment order, which continues to be a moving target for major producers.

Now provincial inventories were coming down in the third quarter, but in the fourth quarter. We saw some significant builds all told we ended 2019 with Canadian crude storage levels at or near record highs.

Inventory as estimated by Gen scape to have grown to a high of 37 million barrels at the end of December.

So far in January the WCS spreads have remained elevated as the system works to reduce built up inventory.

But the most recent gen scape data from earlier this week those increases in industry rail shipments to 375000 barrels per day, just last week and inventories drawing down quickly to about 32 million barrels demonstrating the market's reaction to wider differentials.

And for January shipments through our Edmonton rail term terminal or just over 100000 barrels a day. So the trend continues.

At the end of October the government announced that effective December onest operators can apply on a monthly basis to increase oil production above their quota if the additional product is moved by rail capacity.

This is the Alberta governments way to provide temporary curtailment relief and address the continued lack of pipeline takeaway capacity that is negatively impacting Alberta is oil and gas sector.

While not the elimination of curtailment that we are seeking this arrangement does provide some flexibility for the industry to increase production.

So with that for the upstream I'd like to now move to some downstream comments in downstream refining we averaged 321000 barrels a day throughout our throughput in the quarter, which was in line with our guidance, but below fourth quarter of 18 of 408000 barrels per day.

Throughput was impacted by the planned turnarounds at both the Sarnia and Nana Coke refineries as well as the completion of the stress Kona refinery expansion.

Nana Coax turnaround began on September nine and lasted about 70 days.

Impacting the fourth quarter throughput by about 60000 barrels per day.

And as we shared in the previous earnings call Nana Coker turnaround was about two weeks longer than originally planned with more.

Discovery work and labor productivity impacts.

The turnaround at Sarnia was started September 29, and lasted about 55 days impacting fourth quarter production by less than 10000 barrels per day as we did work on the cat cracker.

Total cost of these two turnarounds was around $130 million.

There was also a 44 day turnaround at stressed Kona, which started October onest focused on increasing the heavy crude processing capability of the refinery this impacted fourth quarter throughput by 11000 barrels per day.

Now regarding the fractionation tower incident at Sarnia that occurred in April.

The new tower was placed in service in December.

So the fourth quarter impact was around 16000 barrels per day, or so and the full year impact was around 18000 barrels per day.

Finally earnings impacts are around 150 million.

And while we are all very disappointed by that incident. We are also very pleased that we now have that behind us and can look forward to more normal operations as we enter 2020.

For the year refinery throughput averaged 353000 barrels per day in 2019 compared to 392000 barrels per day in 2018.

With overall utilization at 83% compared to 93% in 2018.

Reduced throughput was mainly due to the higher planned turnaround activities and impacts from the Sarnia fractionation tower that I just referred to.

Again with that work behind US we finished the year strong with total throughput in December of 414000 barrels per day.

And now as we look ahead to 2020.

While not as significant as 2019, we do see another year of substantial planned maintenance in the downstream.

These activities will include and approximately 11, we turnaround at Sarnia in the second quarter.

Including the largest turnaround at our Sarnia chemical plant since 2011.

And straddling third quarter and fourth quarter, we have an approximate seven week turnaround at Manucho.

And a turnaround of around eight weeks that stress kono.

And we will provide further details we get closer to each event and refine our plans and estimates.

But at this stage, we see 2020 throughput of approximately 375000 barrels a day was the first quarter coming in at about 400000 barrels per day.

Petroleum products sales were 457000 barrels a day in the fourth quarter.

Down 31000 barrels per day from the third quarter.

The planned maintenance related reduction and refinery throughput.

We had less product to sell during the quarter and of course, therefore reduced our short term sales activities.

Sales volumes in the year averaged 475000 barrels a day compared to 504000 barrels per day in 2018.

With the decrease being due to the Sarnia tower issues and higher than typical planned maintenance again, primarily at Manucho concerning <unk> refineries.

So those comments I'd, just like to wrap up.

So with the with all these recent investments in the business such as curls Crushers. The stage is set for a strong 2020.

There's a lot of excitement in the organization as we move into the new year in 2020 is off to a good start.

We very much look forward to delivering production growth at curl with these new crushers and continuing to drive down the assets all in unit operating costs towards our target of use $20 per barrel.

A big part of that focus our the digital opportunities we highlighted at our Investor day in November which as we mentioned represents value potential of greater than 500 million per year for the company.

In the past year, we've made great progress and bringing our digital initiatives to life, including our recent partnership with the Alberta Machine Intelligence Institute to further enhance our data science capabilities and of course will continue to build on this foundation.

We're also continuing to focus on SG matters, including progressing activities to achieve a 10% or greater reduction in our greenhouse gas emissions intensity at our operated oil sands facilities by 2023.

And of course, this all underpins our ongoing commitment to investment discipline and return of cash to our shareholders.

So all of this has me very excited about the opportunities that exist for imperial.

And I look forward to sharing our progress as we continue to deliver on our commitments.

So with that ill turn it over to Dave to facilitate the Q in a session. Thank you.

Okay. Thanks, Brett.

We did get a number of questions submitted ahead at times. So I think I'll start by going through a couple of them and then we'll switch over to the alive Q any line as usual would appreciate it when you're on the lives you in a few state your name and company. Prior to your question. So I guess the first we had a couple of questions come in around crude by rail sort of Q4.

Our which I think or was it was addressed in the comments, but folks are also interested in what we're thinking Q1 might look like and beyond the crude by rail.

Well as as I said, Dave.

We were very much driven by what are the economics of four for crude to rail shipments to the Gulf coast and as we see with the current.

Differentials and arbitrage it makes good economic sense for us to ship barrels on the rail and so we've continued to ramp up our rail activities at our Edmonton terminal.

As I mentioned.

We started in October as zero, we've ramped up very quickly in November and December finished the year in December at 88000 barrels per day, but now in January I haven't seen the final numbers, yet, but it's something slightly above 100000.

Barrels a day.

And.

I think we're going to see that that trend continue in the near term.

Yeah.

And we see similar actions across industry as as others have ramped up rail activity as well and all that of course also has a.

As a corollary positive benefit to the inventory levels here in share in Alberta.

Okay. The next question comes from Prashant Rao at city with the cross supplemental Crusher now online when can we expect to see impacts to opex per barrel given the potential redundancy yeah. Thanks for that question for shocked.

You know as as you heard we're very excited about the supplemental crushers.

I think.

They will allow us to make a step change improvement in volumes performance driven by improved reliability.

And and as a result.

What a lot more volume through through Carole and as I said, our commitment is 240000 barrels a day gross this year.

As a companion to that so we expect to continue to drive down our unit operating costs, making that facility increasingly profitable to us.

You know why I mean, we're already taken advantage of of the supplemental crusher, that's already helped us reduce downtime in the month of January and so we're going to start seeing those.

Reliability and cost efficiency benefits right away now our objective as.

As we outlined at Investor day.

Is is we would attribute about $4 per barrel us.

Unit operating cost reduction associated with this project so.

This will give us a big step towards achieving that $20 a barrel us that I've mentioned earlier and.

We'll be we'll be watching that very carefully, but I'm I'm really excited about it. Thank you for that question. Okay, we're going to turn it over to the operator now lifeline.

Thank you as a reminder to ask a question you need to press star one on your telephone.

To address your question first accounting.

Hey, send back when we combine attorney Russia.

Our first question will come from the line Manav Gupta from Credit Suisse you may begin.

Thank you guys for this comments on the EBITDA Accordingly situation I'm, just trying to understand him the near term what's your outlook for WCS differential for the first part of 2020 and maybe for even the need to block up 2000, and Wendy given this inventory situation as I lived 70 ramp there do you think WCS differentials shakes out.

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Well thanks for that question Manav.

I don't know that I'm in the best physician to to predict the market fundamentals, there's there's a lot of.

Factors that impact that.

And as I mentioned, we've seen some pretty significant volatility.

You know dating all the way back to 2018.

And then.

When those differentials blew out and then.

What we've seen in in.

In 2019 is probably more stable.

Return with those differentials, but theres a lot of dynamics in play right now with that with the IMO with what we see with.

Global supply and demand.

With the with the Corona virus and so.

I think where the differentials are now is a place that crude by rail makes a lot economic sense for us and so as long as it stays in that neighborhood, we're going to continue to ship by rail.

And a quick follow up you guys, obviously have a lot of marine they have some chatter about their comfort of companies that make filings on dividend recovery units I'm. Just curious on your thoughts on if you would like to partner with somebody or you're looking at it how do you viewed the possibility of investing in something like that being intercompany gimmick.

Yes, I mean, that's that's a good question. Obviously deal you went is an important cost driver in our business and integral to our operations.

Of course, I'm I'm, new to the organization and and I've been asking the team some similar questions, but my understanding is we've we've taken a pretty hard look at that in the past.

And you know the economics, just didn't make sense for us and so we havent pursued a D.R. you project.

I think it's one of those type of opportunities that will continue to evaluate over time, but but for now it doesnt make make sense for us.

Those things May change who knows.

Thank you for taking my questions. Thank you.

Thank you.

And our next question from from line Dennis strong from Canaccord Genuity you may begin.

Hi, good morning, and thanks for taking my question.

Well my questions are focused really around.

We'll hear the first is just with respect to your comments around Q1 traditionally there's some seasonality to production. However, I think in years past you guys have looked to remove incremental overburden.

She essentially provide and prepare for higher levels of production in the summer month have you had looked at doing something similar this year and kind of can you characterize how you guys are thinking about the incremental capacity and making sure you can back fill it in.

In the summer from your supplemental crushing project.

Your question was very soft to me could could you just repeated sorry.

All right so in one month theres seasonality around.

The production level.

Have you guys in looking at further overburden removal in Q1 timeframe do you have done in years past and how you guys, perhaps for the incremental crushing capacity in the summer months.

That could allow you to possibly exceed the 240000 barrels a day for consists in periods of time.

Well I'd certainly like the idea of exceeding the 240000 barrels a day no doubt about that and in John Wayland, who is our senior vice president of the upstream he's certainly.

Drive in his organization to to achieve the maximum volumes we can there.

Mike, let John comment a little bit on the details of how we're how we're approaching the over burden in the recovery.

It's a good good question, Dennis and as we went into last couple of years at just over 200000 barrels a day of course, we knew 2020 at 240000 barrels a day exactly to your point, we needed to ramp up on some equipment and staffing and remove overburden and expose or to be able to have that or available to us at a higher rate than.

We've needed in the past so that is some of the kind of extra cost that we probably incurred last year is that preparation of that to be able to make sure. We could deliver the 240 Kb d. This year. So we have adequate exposed or inventory and you as we talked about at the Investor day, we are going to ramp up we expected to first quarter is around 200000 barrels a day.

To the point that Brad talked about and then getting up into the 240 and above 240 in the third quarter in the fourth quarter to be able to hit the annual average of 240. So so that is been a huge focus for us I won't commit to anything more than 240 at this stage, but we have exposed the or inventory to be able to ramp those rates up and be above that in the second.

For the year.

And then I guess my follow up really is also around Carol.

And from I guess, the accrual mind towards that.

Guys put on last year some of the items in terms of kind of pushing towards to 70 included.

Items around mine plan details as well as.

Just stronger runtime and so forth in.

In terms of being able to kind of push some of the equipment a little bit more where some of the the initial items that you guys are looking at from supplemental crushing all the way through primary SAP and the process as well as what kind of advancements have you been making necessarily on the mine plan and so forth to accommodate even a higher rate.

Throughput on on the growth Toby.

I think.

I'll make a general comment as Brad and then I'll turn it over to John again to give little more details on that.

You know as as you noted at our Investor Day in November.

We laid out a longer term objective to move from 240000 barrels a day gross said curl to 280000 barrels a day.

And we've got a whole suite of projects that were progressing.

There's there's nothing that's probably as significant.

As the supplemental crusher on an individual basis.

But there's many.

Projects that in aggregation, we believe will move us to that one of which you talked about was was mine planning and there we do have some.

Advanced work.

That will allow us to start taken taking credit for that but with that maybe I'll, let let John talked about any other details yes, I mean, we feel very good about the path. We're on there I think it's consistent with what we talked about in the Investor Day I still have the same degree of confidence that I talked about at that time and as Brad mentioned this is a series.

As of different projects, which we anticipate that you'll start to feel start to see the ramp up from 240 to 80, starting in 2020 to 2023 and when you get into 2024, plus we'll be in this to 80 range.

But some of those projects we are doing today primary separation sell upgrades was a big one where we are changing some of the metallurgy and so on and the primary separation sales. So we could go from one turnaround per plant per year to one every second year that was a significant reductions in scheduled downtime. We did a number of those upgrades in the turnaround.

Last year, we got a bit more to go this year and we get into trying to kind of between 22 timeframe. When we see the benefit of actually being able to skip a turnaround. So that's an example of one another one is our frothy recovery. We started the work now on the enhanced bitumen recovery in our flotation cells that project is underway, but it takes a couple of years to get all the work done.

And some of that takes turnarounds that we have been Michigan with their turnaround to deliver but I feel really good we got a great inventory of projects capital efficiency is similar to the Crusher project and we're on track to see that ramp up in the 2024 timeframe.

Great. Thank you.

Okay.

We're going to go to a couple more of the pre submitted questions now so Brad I've got a couple of here from Benny Wong of Morgan Stanley.

Pennies first question is what's your chemical margin outlook over the course of this year is the worst over and if we reached the bottom or could there be some more pressure to work through.

Yes, Thanks for that question, Benny and you know as as you heard from Dan's description of the financial results obviously.

Fourth quarter margins were downs fourth quarter chemical margins were down significantly.

From prior quarters and prior years.

That is reflective of.

You know a cyclical down cycle that that we're experiencing right now in the chemicals business.

No I don't know for at the bottom sure feels like the bottom.

I hope it's the bottom.

But time will tell.

But what I would say is you know despite that we've seen this sort of cyclical.

Market conditions in the past you know and it wont be unusual if it were to last for many months.

But you know we have a facilities that.

No operates to a very high standard very high reliability is very efficient it's in.

It's in a great location.

Relative to the customer demand for our product.

And we also have with the integration with.

The refinery we have we have good access to advantaged.

Fuel and feedstock costs, so when I put all that together.

Now if anybody's going to bank money in this business, it's going to be us at this plant so.

No I feel good about that you heard me comment that.

We do have a very large turnaround plan there this year, which again I think this seems like a good time to have the facility down into be preparing for when the market recovers.

Okay, and Binney had a second question Theres been some exceptionally cold days in Alberta recently can you give us some color around the productivity impact. This has had on your upstream and rail loading operations.

Well, let me first say coming from Houston.

This cold weather certainly impacted me in Alberta, but.

You know.

The good news is you know I think our operations are well suited for these cold weather conditions, there well prepared are used to it.

It it really has not had any major productivity impacts to our operations are interrupted them.

It's hard work for anybody working in those extreme weather conditions, there theres no doubt about it but.

Fortunately the folks are used to it and and again it hasn't adversely impacted us.

Okay, operator, im going to turn it back to you to take the next couple of questions on the line.

All right. Our next question comes from China, Emily Chang from Goldman Sachs You may begin.

Thank you Brad curious as to what your priorities and strategic rationale for the company that now that you've taken a look at the Beacon is for a couple of months now perhaps in particular with respect to carry both organic and any sort of inorganic opportunities that may be out there as long as capital returns.

Well thanks for that question Emily.

As as you would expect I'm spending a lot of time, reflecting on the business and our strategies going forward.

You know I would I would suggest several things that are driving us as an organization and things that that's certainly I'll be.

Continuing to to emphasize and focus on.

First.

We want to continue to achieve our industry, leading performance in safety and operations integrity. That's our license to operate you know that is key for us where wherever we do business, but beyond that you know I want to also.

Ensure that we are achieving industry leading performance in SG.

In operational reliability operational performance and cost efficiency.

And I think this organization has clear line of sight on those objectives, and they're working hard to achieve them.

You know you heard through my comments.

A theme of delivering on commitments and that's very important.

No I want to ensure that we are.

Managing the existing portfolio of opportunities we have to maximize value.

But at the same time, continuing to aggressively evaluate and pursue where it makes strategic sense any new opportunities.

Certainly I want us to be the most trusted and admired companies in our industry and to be the most valued partner with our key stakeholders.

And I commented a little bit on digital we need to fully leverage our research initiatives and our digital applications to continuously improve.

The efficiency of our business, while at the same time, reducing greenhouse gas intensity of our operations and so now you put all that together.

And what I want to do as maximize the value of this company, while delivering significant returns to our shareholders. We have a long history hundred years of a reliable dividend we've been growing that dividend now for 25 years.

And certainly it's in our objective to continue that path.

Now.

That's a long answer.

Let me give you a simple.

Quick answer.

I want to take a great company and make it greater.

So bottom line.

Great. Thanks, Brad I am just one follow up if I might.

I would love to hear your views around.

Canadian crude pricing for 2000, Tony said, both Edmonton make sweeten syncrude barrels have been fairly discounted in a fast part of a month likely to your inventories, but some interesting what your views on how the light Canadian bowel competes condensate barrels and how that all should trade relative to tell you tie.

Trapped deal.

Yes again.

I don't want to put myself in a position of predicting any any pricing or or market drivers there.

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You know, there's something we obviously monitor very closely and we let those differentials drive our decisions around where we dispatch our crude.

How we feel our refinery slates.

But again, there's there's so much volatility in the market right now I don't want to go on record with a forecast.

No problem. Thank you.

Thank you.

And our next question will come from Ryan Mike Dunn from Stifel First energy you may begin.

Thank you.

A couple questions about the downstream if I may Brad.

Just wondering if you could provide some more detail on the stress Kona Asheville project I guess the press release mentioned an expansion of I'm not sure of total crude throughput capacity, but certainly heavy crude.

Processing capacity.

Yes, I believe.

And so just wondering how much has crude processing capacity going up if at all how much is heavy processing capacity going up.

And how much has your asphalt production capabilities gone up.

And.

So that's a multiple but that's the first part and then the second part would be if you if you get folks could provide any more detail.

On the seemingly elevated downstream spending that you're planning for the next few years in terms of.

Specific projects at those really too thank you.

Okay. Yeah. Thanks, Thanks, those questions Mike.

You know in in terms of stress Kona and and the expansion project there.

It is primarily focused on our asphalt.

Production capacity.

You know when.

We have.

Verizon.

Significant market position in asphalt.

And have.

For several years, we continue to see growing demand.

For asphalt and so that has motivated us to look for.

Expansion.

Options and so I'm quite excited about you know the work by the stress Kona team to kind of seize that opportunity.

They just completed that work.

Our our target is to increase that capacity by you know probably 20% to 25%.

It's early days, we've just come out of that.

Out of that project work so.

Early for me to commit more than that but.

We feel very very good about that.

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And again for us its strategic.

And then.

And then on the downstream spending.

You know as as you looked at kind of our guidance from the November Investor Day.

What I think we characterized was total growth capital over the next five years of seven to 800 million per year that excludes Aspen of course.

Historically weve probably spent more.

Our capital in the upstream.

Versus a downstream on growth projects and I would anticipate that's likely going to continue but for the downstream.

Investments that we see looking ahead, our really related to refinery optimization.

Capital efficient projects that allow us to incrementally.

Grow refinery production.

But also some investments potentially in logistics that allow us to take you know.

Better advantage of market situation to to access a premium customers.

I would also include continued to increase our if you will supply chain reliability, we pride ourselves on being.

Very reliable supplier of products to our customers and so we want to make sure that continues even as we grow product outlets.

So that's that's kind of a broad description I think it's probably premature for me for me to detail any individual projects looking out over the next five years, but but as we refine the details on those certainly we'll we'll discuss those.

With you win in future calls.

Thanks, Brett Thats all from me.

Thank you.

We're going to hop back in Tech, we've got a couple of the pre submitted questions left the next one is from Phil Skolnick at eight capital.

Continued uncertainty around the longevity of curtailments, how do you now think of Aspen in a buy versus build scenario.

Well thanks, Thanks for that question Phil.

You know I'll comment that comment that question two ways. One just in terms of Aspen itself is the longevity of curtailments.

Obviously, we continue to be.

Disappointed.

By the ongoing curtailment that exists.

We certainly want to see that.

Eliminated.

And I'm encouraged by the comments.

That's the Alberta government has made where they've.

Indicated that they would expect curtailment to be eliminated by the end of year.

But while curtailment continues you know there continues to be uncertainty around long term.

Investment economics, and the ability to.

To get product out of out of Alberta and to maximize value of of our production. So while curtailment exists you know we've said Aspen is off the table and and I don't see that changing.

I think the second maybe corollary part of your question around buy versus build is really.

Now with Aspen, obviously, they're in a curtailment scenario there is no additional quota that goes with.

A new build.

Whereas if you know market conditions were right. We saw a target acquisition that has existing production.

Production comes with an existing quota.

But I would say again, we are not motivated to pursue even an acquisition in a in a curtailed a world.

One because just the fact that curtailment exists there continues to be long term uncertainty around market.

Dynamics in the province and.

And so so that adds additional risk to any investment you know even even if it can produce today, but may be equally important.

General when you're looking to make an acquisition you're not just looking to buy the existing production flow stream.

The economics generally aren't very good with that you're also looking at.

Acquiring growth opportunities, that's where the real upside is that's where a company like ours can differentiate ourselves, bringing our all of our skills and capabilities to create unique value for our shareholder but again.

If if a key driver for any acquisition is the growth portfolio.

You are going to find yourself for the same situation you are with Aspen.

Okay and the last question I have here is from for shot rapid city full year 2019, Capex came in at the low end to guidance and a step down in Q4 seems to have helped what drove the step down and is there any read through for 2020 Capex.

Well being at the low end of guidance when it comes a capex I think it's a good thing.

Especially in this in this business environment, so actually I'm I'm quite pleased.

That we came in.

At that 1.8 billion, which again was was within the range that we had signaled.

You know the fourth quarter was a little bit lower.

A variety of things you know, we were kind of wrapping up the supplemental crusher project.

And earlier in the year as we suspended Aspen you know, we we had some capital expenditures that were kind of already in progress that we've had to ramp down and so again that brings us at a much lower level in the fourth quarter.

Versus what you might have seen or anticipated.

Year ago at this time.

In terms of 2020, you know what we've indicated is a capital.

Expenditure profile in the one six to one seven range. So actually our plans are to spend a bit less than what we did this year.

And again, we think thats very prudent.

The things, we are pursuing or things that have very robust economics.

But again in this in this market environment I think capital discipline is very important.

And it also positions us in a good place to continue to return cash to our to our shareholders.

Okay, I think operator, I think thats it for the questions if I'm not mistaken.

Yes, I'm not showing any further questions at this time.

Okay, then just before we close I'd like to turn it back to Brad for any closing remarks, alright, well. Thank you David and again just to wrap it up by.

I would like to thank all of you for for your participation in the call today.

For all the view that ask questions I thought those were very good questions and and I enjoyed the opportunity for myself and Dan and John to.

To address those with you in.

My objective continues to be one of transparency with the market.

You know big credit to my predecessor, Rich Krueger, who established this practice of.

Of the management team participating in these earnings calls.

And I fully expect that we will continue that practice.

And so over the coming quarters I look forward to to meeting as many of you as possible and continuing this this rich dialogue about this company that I feel so strongly about and and our organization is so proud of thank you.

Okay, well. Thank you everybody as always if you have any further questions. Please don't hesitate to reach out to the IR team here anytime. Thank you.

Yes.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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Ladies and gentlemen, thank you for standing by welcome to the Imperial oil fourth quarter earnings call.

Oh, sorry, all participant lines are in listen only mode.

Sneaker presentation, there will be a question answer session.

I see question during the session you wanted to press star one on your telephone.

If you require any further assistance please press star zero.

I would now like to have a conference to sneak it today debuts Vice President Investor Relations. Please go ahead Sir.

Thank you warning everybody and thanks for joining us our fourth quarter earnings call I'm, just gonna start by introducing you to the senior management team in the room, we have Brad course, <unk>, Chairman, President and CEO, John Whalen Senior Vice President of upstream Dandelions, Senior Vice President Finance and administration Teresa Redburn Senior Vice President.

Of course on corporate development.

Before we get going I'm going to start by noting that today's comments may contain forward looking information any forward looking information is not a guarantee of future performance in actual future financial and operating results could differ materially depending on a number of factors and assumptions forward looking information on the risk factors and assumptions. Your stock. That's are described in further detail in our fourth.

Quarter earnings press release that we issued this morning as was our most recent form 10-K and all these documents are available on SEDAR Edgar and on our website. So we'd ask that you please refer to them.

We're going to fall the format, we have been for last few quarters, we're going to start out with Brad offering some opening remarks, and then down it's going to give us an update on our financial or excuse me on financial overview on on the fourth quarter. Then it's going to go back to Brad to provide some more color on the operating performance. Once we're through those remarks, we're going to go to the Q a nice so with that I'm pleased to turned over to Brad.

Alright, well good morning, everyone and welcome to our fourth quarter earnings call. Thank you for joining.

Today.

I had a chance to introduce myself to a few of you at the Investor day back in November and certainly I'm looking forward to working with all of you win in the future.

For my first call as chairman and CEO.

I'm very pleased to report that Imperial had a solid fourth quarter, which marks the end of a strong year in 2019.

We completed the year with total earnings of $2.2 billion and cash flow from operations up $4.4 billion, which I'll note is our highest cash flow in the last seven years.

These results highlight the strength and resilience of Imperials integrated business.

Upstream production volumes were strong as well.

Our 2019 production of 398000 barrels oil equivalent per day was the highest in over 25 years.

As was our liquids production of 374000 barrels a day.

In spite of major plant turnaround activity at all three of our core upstream assets.

In addition, we delivered on our commitment with respect to the startup of the supplemental Crusher project that hurdle, which will enable further growth in 2020 and I'll comment on that in more detail in a moment.

And finally in 2019, we continue to deliver on our commitment to shareholder returns by distributing over $2 billion via growing dividends and continued share purchases.

Our integration and balanced portfolio provides resilience and allowed us to achieve this even in the current challenging and volatile market environment, a variety of advance affected cruise crude price differentials beginning with curtailment in late 2018.

We then saw ongoing changes to curtailment during 2019.

The Keystone pipeline was shut down.

Oh.

For about two weeks and then the C. N rail strike occurred thereafter, which all drove volatility in differentials.

And as these events drove crude differentials up or down we had offsetting effects in our upstream and downstream businesses.

While narrower differentials negatively impacted refining margins they had a positive impact on realizations in the upstream.

These offsets reduced the volatility of the company's cash flow.

So with those introductory remarks sums in a pause here and turn it over Dan to go through our financial performance.

For the quarter in the full year. Thanks, Brad.

So I'll start with earnings our fourth quarter net income of $271 million was down 582 million from the fourth quarter of 2018, reflecting lower downstream earnings and stronger upstream results driven in large part by substantially lower crude differentials looking sequentially.

The fourth quarter of 19 net income was down 153 million from the third quarter of 19, reflecting lower upstream and chemical earnings.

For the fourth quarter in the upstream earnings of 96 million decreased 113 million from the third quarter, driven primarily by lower realizations as WCS WT I differentials widened over the quarter.

Fourth quarter downstream earnings of 225 million.

Essentially flat with third quarter earnings of 221 million.

Fourth quarter chemical results were a loss of 2 million down 40 million from the third quarter driven by weaker margins linked to significant capacity additions in the us Gulf coast as well as planned turnaround activity in the quarter.

For the full year 2019, net income net income was $2.2 billion down 114 million from the 2.3 billion. We earned in 2018 recall that 2019 earnings include a 662 million dollar favorable impact from the Alberta governments corporate.

Income takes tax rate reduction enacted in June.

Excluding this impact 2019 net income of 1.5 billion was down 776 million up from 2018.

Full year upstream earnings excluding the income tax reduction were 659 million an increase of nearly 800 million driven mainly by higher crude oil realizations and higher volumes.

Full year downstream earnings of 961 million decreased 1.4 billion, mainly attributable to lower margins associated with narrower crude differentials reliability events, including the fractionation tower at Sarnia and higher net planned turnaround impacts.

Full year chemical earnings of 108 million decreased 167 million from 2018, primarily due to weaker margins driven by overcapacity.

While our chemical assets are competitively positioned they remain subject to global chemical margins, which may be week for some time as the industry works to return excess capacity.

Moving to cash flow.

Cash generated from operating activities and for Q2 billion dollars, an increase of about $150 million from the fourth quarter of 18.

Cash generated from operating activities for full year 2019 was $4.4 billion, an increase of about 500 million from 2018.

This increase includes favorable working capital effects of about 900 million.

Effectively reversing the on favorable working capital effects of.

About 700 million, we saw in 2018.

As Brian noted our 2019 cash generated from operating activities is our highest in seven years since since 2012.

Moving on to Capex capital expenditures in the fourth quarter totaled $414 million, bringing the full year 2019, capex to just over $1.8 billion aligned with our prior guidance of one eight to one nine.

Upstream expenditures of over 1.2 billion represent about 70% of the total in 2019.

Spending on key projects in the upstream and downstream.

Include the curl crusher aspin, albeit now ramp down strapped Kona Cogen and the Alberta products pipeline those totaled about 660 million in the year as we said at our Investor Day. In November you can anticipate 2020 capex to be around 1.6 to 1.7 billion. This guy.

Hi, this excludes aspin, which which as you know has been put on hold.

Moving onto our dividends and buybacks in the fourth quarter.

We paid 166 million in dividends at 22 cents a share an increase from 150 51 million at 19 cents per share in the fourth quarter of 18.

For 2019, and total dividends paid were 631 million the annual dividend paid per share increased 12 cents from last year, representing 25 years of consecutive dividend growth and our long standing priority to pay a reliable and growing dividend. We also continue.

Do you share buybacks in the fourth quarter totaling 301 million consistent with our TSX approved NC IB program in 2019.

Overall, the company purchased a total of 38.7 million shares returning nearly $1.4 billion to shareholders.

Overall, our the company return just over 2 billion to shareholders in 2019, our balance sheet remains strong with about $5.2 billion of debt.

The capital ratio of 18% we ended the year, where the cash balance of 1.7 billion and I guess.

Finally, I would say earlier today I'm happy to report we declared a first quarter 2020 dividend of 22 cents per share payable on April one to shareholders of record on March five.

Now I'll turn it back to Brad to go over our operational performance.

Alright, Thanks stands so moving on to operating results.

Upstream production averaged 390 398000 oil equivalent barrels a day in the fourth quarter. This is down 33000 barrels a day or about 8% from the fourth quarter of a year ago.

These results reflect the completion of significant planned turnarounds in the fourth quarter at both Carl and Syncrude.

Both of which started in the third quarter and continued into the fourth quarter.

The combined impact of this work from an imperial share perspective was an estimated 17000 barrels a day.

9000 barrels a day impact that Carl and 8000 barrels a day at Syncrude on an annual basis.

Now for 2020, we anticipate total production to be around 415000 barrels per day for the year driven by the volume gains that hurdle associated with the supplemental crushers.

And now I'd like to comment on some of the individual upstream assets at hurdle on a gross basis, we produced 208000 barrels a day in the fourth quarter down from 224000 barrels per day in the third quarter and down 9000 barrels a day versus the fourth quarter of 2018.

This result reflects the planned turnaround at one of our two plants that hurdle, which we outlined in our third quarter earnings call that turnaround was started in the first half of September as successfully completed by mid October.

The turnaround was about 33 days in duration.

With an estimated production impact of around 13000 barrels per day imperial share in the quarter.

I would like to highlight that post turnaround upon completion of all these activities. We ended the year very strong.

In December with Carl producing 216000 barrels per day, gross which is our highest ever for the month of December.

Now full year gross production at hurdle was 205000 barrels a day.

Once again delivering on the commitment we made to produce at least 200000 barrels a day in 2019.

We expect a similar turnaround schedule for 2020.

Well the turnaround on one train lasting approximately one month in the second quarter and.

And a similar turnaround on the other train straddling the third and fourth quarters.

Now regarding the supplemental crushers project.

Im very pleased to announce that things have gone well and very consistent with the schedule, we outlined at our Investor day.

The first crusher started up as planned in December and the second Crusher followed shortly thereafter in January.

This is a significant milestone for the curl asset and we look forward to delivering on the 240000 barrels a day annual gross production capability. It brings us going forward.

Now just a reminder, there is seasonality to production occur. So as we mentioned in November we would expect production to average lower than that 240000 barrels per day in the first quarter due to weather as well as continuing to ramp up this project a full rates and then the second quarter.

I will be impacted by planned maintenance, but then we would expect to ramp up to peak levels in the third quarter.

I'm very excited about this asset and I know our whole organization is as we move from curls current production of over 200000 barrels a day to 240000 barrels a day in 2020 on a gross basis.

Now just some comments a briefly on cold Lake Cold Lake produced 140000 barrels a day in the quarter, which was similar to the third quarter.

The full year production was also a 140000 barrels per day, which compared to a 147000 barrels per day in 2018.

And that Delta was impacted by the challenge is brought on by reservoir performance at Nab BA and consistent with what was communicated at the Investor Day in November.

We expect production in 2020, a cold lake to be similar to 2019.

And in 2020 will have a turnaround at them. He can plant in the second quarter, which will last about a month. This impact is expected to be slightly less than the MCU SUS shutdown in the second quarter of 2019.

Now referring to Syncrude imperial share of production at Syncrude was 66000 barrels per day in the fourth quarter, which was down slightly from 69000 barrels per day in the third quarter, but again consistent with our guidance.

You'll recall, we detailed a turnaround at Syncrude, which started.

Middle of the third quarter and it was completed middle of the fourth quarter was an estimated impact in the fourth quarter up around 17000 barrels per day.

Full year production at Syncrude was 73000 barrels per day, our share which represents the highest annual production since 2010.

Which was also 73000 barrels per day at that time.

For Syncrude and 2020, there was a turnaround on one of the Coker scheduled for the second quarter, which will last approximately two months.

And again, we'll provide more detail on all of our turnaround activity as we finalize plans closer to their start dates.

But I would reiterate our 2020 guidance for Syncrude of around 75000 barrels per day.

And now I know, there's always a lot of interest in curtailment in crude by rail so I'd like to offer a few comments on that.

With the government of Alberta as mandated curtailment order crude by rail economics continue to be very volatile.

Crude by rail shipments through our Edmonton rail terminal increase during the quarter from zero in October to 88000 barrels per day in December.

Which is a restart in November in response to the approximate two week Keystone pipeline outage that I mentioned earlier.

Part of this volatility highlights the ongoing negative unintended consequence of the curtailment order, which continues to be a moving target for major producers.

Now provincial inventories were coming down in the third quarter, but in the fourth quarter. We saw some significant builds all told we ended 2019 with Canadian crude storage levels at or near record highs.

Inventory as estimated by Gen scape to have grown to a high of 37 million barrels at the end of December.

So far in January the WCS spreads have remained elevated as the system works to reduce built up inventory.

The most recent gen scape data from earlier this week so those increases in industry rail shipments. So 375000 barrels per day, just last week and inventories drawing down quickly to about 32 million barrels demonstrating the market's reaction to wider differentials.

And for January shipments through our Edmonton rail term terminal or just over 100000 barrels a day. So the trend continues.

At the end of October the government announced that effective December onest operators can apply on a monthly basis to increase oil production above their quota if the additional product is moved by rail capacity.

This is the Alberta governments way to provide temporary curtailment relief and address the continued lack of pipeline takeaway capacity that is negatively impacting alberta as oil and gas sector.

While not the elimination of curtailment that we are seeking this arrangement does provide some flexibility for the industry to increase production.

So with that for the upstream I'd like to now move to some downstream comments in downstream refining we averaged 321000 barrels a day throughout our throughput in the quarter, which was in line with our guidance, but below fourth quarter of 18 of 408000 barrels per day.

Throughput was impacted by the planned turnarounds at both the Sarnia and Nana Coke refineries as well as the completion of the stress Kona refinery expansion.

Nana Coast turnaround began on September nine and lasted about 70 days.

Impacting the fourth quarter throughput by about 60000 barrels per day.

And as we shared in the previous earnings call Nana Coker turnaround was about two weeks longer than originally planned with more.

Discovery work and labor productivity impacts.

The turnaround at Sarnia was started September 29, and lasted about 55 days impacting fourth quarter production by less than 10000 barrels per day as we did work on the cat cracker.

Total cost of these two turnarounds was around $130 million.

There was also a 44 day turnaround at stressed Kona, which started October onest focused on increasing the heavy crude processing capability of the refinery this impacted fourth quarter throughput by 11000 barrels per day.

Now regarding the fractionation tower incident at Sarnia that occurred in April.

The new tower was placed in service in December.

So the fourth quarter impact was around 16000 barrels per day, or so and the full year impact was around 18000 barrels per day.

Finally earnings impacts are around 150 million.

And while we are all very disappointed by that incident. We are also very pleased that we now have that behind us and can look forward to more normal operations as we enter 2020.

For the year refinery throughput averaged 353000 barrels per day in 2019 compared to 392000 barrels per day in 2018.

With overall utilization at 83% compared to 93% in 2018.

Reduced throughput was mainly due to the higher planned turnaround activities and impacts from the Sarnia fractionation tower that I just referred to.

Again with that work behind US we finished the year strong with total throughput in December of 414000 barrels per day.

And now as we look ahead to 2020.

While not as significant as 2019, we do see another year of substantial planned maintenance in the downstream.

These activities will include and approximately 11, we turnaround at Sarnia and the second quarter.

Including the largest turnaround at our Sarnia chemical plant since 2011.

And straddling third quarter in fourth quarter, we have an approximate seven week turnaround at Manucho.

And a turnaround of around eight weeks that stress kono.

And we will provide further details we get closer to each event and refine our plans and estimates.

But at this stage, we see 2020 throughput of approximately 375000 barrels a day, where the first quarter coming in at about 400000 barrels per day.

Petroleum products sales were 457000 barrels a day in the fourth quarter.

Down 31000 barrels per day from the third quarter.

The planned maintenance related reduction in refinery throughput.

We had less product to sell during the quarter and of course, therefore reduced our short term sales activities.

Sales volumes in the year averaged 475000 barrels a day compared to 504000 barrels per day in 2018.

With the decrease being due to the Sarnia tower issues and higher than typical planned maintenance again, primarily at Nana Kokan's Sarnia refineries.

So those comments I'd, just like to wrap up.

So with the with all these recent investments in the business such as curls Crushers. The stage is set for a strong 2020.

There's a lot of excitement in the organization as we move into the new year end 2020 is off to a good start.

We very much look forward to delivering production growth at curl with these new crushers and continuing to drive down the assets all in unit operating costs towards our target of use $20 per barrel.

A big part of that focus our the digital opportunities we highlighted at our Investor day in November which as we mentioned represents value potential of greater than 500 million per year for the company.

In the past year, we've made great progress and bringing our digital initiatives to life, including our recent partnership with the Alberta Machine Intelligence Institute to further enhance our data science capabilities and of course will continue to build on this foundation.

We're also continuing to focus on SG matters, including progressing activities to achieve a 10% or greater reduction in our greenhouse gas emissions intensity at our operated oil sands facilities by 2023.

And of course, this all underpins our ongoing commitment to investment discipline and return of cash to our shareholders.

So all of this has me very excited about the opportunities that exist for imperial.

And I look forward to sharing our progress as we continue to deliver on our commitments.

So with that ill turn it over to Dave to facilitate the Q in a session. Thank you.

Okay. Thanks, Brett.

We did get a number of questions submitted ahead at times. So I think I'll start by going through a couple of them and then we'll switch over to the like Q in a line.

As usual would appreciate it and when you're on the lives today, if youd say your name and company. Prior to your question. So I guess the first we had a couple of questions come in around crude by rail sort of Q4, which I think we're at was addressed in the comments, but books are also interested in what were thinking Q1 might look like and beyond the crude by rail.

Yes.

Well as as I said, Dave.

We were very much driven by what are the economics.

For for crude to rail shipments to the Gulf Coast and as we see with the current.

Differentials and arbitrage it makes good economic sense for us to ship barrels on the rail and so we've continued to ramp up our rail activities that that our Edmonton terminal.

As I mentioned.

We started in October as zero, we've ramped up very quickly in November and December finished the year in December at 88000 barrels per day, but now in January I haven't seen the final numbers, yet, but it's something slightly above 100000.

Barrels a day.

And.

I think we're going to see that that trend continue in the near term.

And we see similar actions across industry as as others have ramped up rail activity as well and all that of course also has a.

As a corollary positive benefit to the inventory levels here in share in Alberta.

The next question comes from Prashant Rao at city with the Carl supplemental Crusher now online when can we expect to see impacts to opex per barrel given the potential redundancy, yes. Thanks for that question for shocked.

As as you heard we're very excited about the supplemental crushers.

I think.

They will allow us to make a step change improvement in volumes performance driven by improved reliability.

And and as a result.

What a lot more volume through through parole and as I said, our commitment is 240000 barrels a day gross this year.

As a companion to that.

We expect to continue to drive down our unit operating costs, making that facility increasingly profitable to us.

You know why I mean, we're already taken advantage of of the supplemental crusher, that's already helped us reduce downtime in the month of January and so we're going to start seeing those.

Reliability and cost efficiency benefits right away now our objective as.

As we outlined at Investor day.

Is is we would attribute about.

$4 per barrel us.

Unit operating cost reduction associated with this project so.

This will give us a big step towards achieving that $20 a barrel us that I've mentioned earlier and.

I will be we'll be watching that very carefully, but I'm I'm really excited about it.

Thank you for that question, Okay, we're going to turn it over to the operator now the lifeline.

Thank you as a reminder to ask a question you need to press star one under telephone to withdraw your question first account.

Thanks, Sam Bally combined attorney roster.

Our first question will come from the line Manav Gupta from Credit Suisse you may begin.

Thank you guys for this comments on the Korean when can you situation I'm just trying to understand in the near term what's your outlook for WCS differential flawed close block up 2020, and maybe for even the need to block up 2000, and Wendy given this inventory situation as I looked at many of them. They do you think WCS differential shakes out.

Well, thanks for that question Manav I.

I don't know that I'm in the best position to to predict the market fundamentals there there's a lot of.

Factors that impact that.

And as I mentioned, we've seen some pretty significant volatility.

You know dating all the way back to 2018.

And then.

When those differentials blew out and then what we've seen and in.

In 2019 is probably more stable.

Return with those differentials, but theres a lot of dynamics in play right now was that with IMO with what we see with.

Global supply and demand.

With the with the Corona virus and so.

I think where the differentials are now is a place that crude by rail makes a lot economic sense for us and so as long as it stays in that neighborhood, we're going to continue to ship by rail.

And the quick follow up you guys, obviously have a lot of rain. There's some catch up there a couple of companies have made filings on demand recovery units I'm. Just curious on your thoughts if you will like to partner with somebody or you're looking at it how do you use the possibility of investing in something like that being intercompany gimmick.

Yes, I mean, that's that's a good question. Obviously, Joe you went is an important cost driver in our business and integral to our operations.

Of course, I'm, new to the organization and and I've been asking the team some similar questions, but my understanding is we've we've taken a pretty hard look at that in the past.

And.

Economics, just didn't make sense for us and so we havent pursued a DDR you project.

I think it's one of those type of opportunities that will continue to evaluate overtime, but but for now it doesnt make it makes sense for us.

Those things May change who knows.

Thank you for taking my questions. Thank you.

Thank you.

And our next question will come from the line Dennis strong from Canaccord Genuity you may begin.

Good morning, and thanks for taking my question.

Both my questions are focused really around.

We'll hear the first is just with respect to your comments around Q1 traditionally there's some seasonality to production. However, I think in years past you guys have look to remove incremental over burden.

She essentially provide and prepare for higher levels of production in the summer months have you guys look at doing something similar this year and kind of can you characterize how you guys are thinking about the incremental capacity and making sure you can back fill it in.

In the summer from your supplemental crushing project.

Your question was very soft to make.

Could you just repeat it sorry.

All right so in one month theres seasonality around.

The production level have you guys been looking at further overburden removal in the Q1 timeframe you have done in years past and how have you guys, perhaps for the incremental crushing capacity in the summer months.

That could allow you to possibly the the 240000 barrels a day for consists in periods of time.

Well I'd certainly like the idea of exceeding the 240000 barrels a day no doubt about that and John Wayland Who's our senior Vice President of the upstream do certainly.

Drive in his organization to to achieve the maximum volumes we can there.

Let John comment a little bit on the details of how we're how we're approaching the over burned in the recovery.

It's a good question Dennis and as we went into last couple of years that just over 200000 barrels a day of course, we knew.

2020 at 240000 barrels a day exactly to your point, we needed to ramp up on some equipment and staffing and remove overburden and expose or to be able to have that or available to us at a higher rate than we've needed in the past. So that is some of the kind of extra costs that we probably incurred last year is that preparation of that.

To be able to make sure we could deliver the 240 Kb d. This year. So we have adequate exposed or inventory and you as we talked about at the Investor day, we are going to ramp up we expect the first quarter is around 200000 barrels a day to the points that Brad talked about and then getting up into the 240 and above 240 in the third quarter in the fourth.

Quarter to be able to hit the annual average of 240. So so that it's been a huge focus for us I won't commit to anything more than 240 at this stage, but we have expose the or inventory to be able to ramp those rates up and be above that in the second half of the year.

And then I guess my follow up really is off around Carol.

And from I guess, the accrual mind tour that.

You guys put on last year some of the items in terms of kind of pushing towards to 70 included.

Items around mine plan details as well as.

Just a stronger runtime and so forth in.

In terms of being able to kind of push some of the equipment a little bit more where some of the initial items that you guys are looking at from the supplemental crushing all the way through primary SAP and the if you process as well as what kind of advancements have you been making necessarily on the mine plan and so forth to accommodate even a higher rate.

Of throughput on on the growth Toby and I'll leave it at that thanks.

I'll make a general comment this is Brad then I'll turn it over to John again to give little more details on that.

You know as as you noted at our Investor Day in November.

We laid out a longer term objective to move from 240000 barrels a day gross said Carl to 280000 barrels a day.

And we've got a whole suite of projects that were progressing.

Theres Theres, nothing thats, probably as significant.

As the supplemental crusher on an individual basis.

But there's many.

Projects that in aggregation, we believe will move us to that one of which you talked about was was mine planning and there we do have some.

Advance to work.

That will allow us to start taken taking credit for that.

With that maybe I'll, let John talk about any other details.

We feel very good about the path. We're on there I think it's consistent with what we talked about in the Investor Day I still have the same degree of confidence that.

Talked about at that time and as Brad mentioned this is a series of different projects, which we anticipate that you'll start to feel start to see the ramp up from 240 to 80, starting in 2020 to 2023 and when you get into 2024, plus we'll be in this to 80 range.

But some of those projects we are doing today primary separation sell upgrades was a big one where we are changing some of the metallurgy and so on and the primary separation sales. So we could go from one turnaround per plant per year to one every second year that was a significant reductions in scheduled downtime. We did a number of those upgrades in the turnaround.

And last year, we got a bit more to go this year and we get into trying to kind of between 22 timeframe. When we see the benefit of actually being able to skip a turnaround. So that's an example of on another one is our frost recovery. We started the work now on the enhanced pitchman recovery in our flotation cells that project is underway, but it takes a couple of years to get all the work done.

And some of it takes turnaround so we have been Michigan with our turnarounds to deliver but I feel really good we got a great inventory of projects capital efficiency is similar to the Crusher project and we're on track to see that ramp up in the 2024 timeframe.

Great. Thank you.

Okay, we're going to go to a couple of more of the pre submitted questions now so Brad I've got a couple of here from Benny Wong of Morgan Stanley.

Pennies first question is what's your chemical margin outlook over the course of this year is the worst over and if we reached the bottom or could there be some more pressure to work through.

Yes, Thanks for that question, Benny and you know as as you heard from Dan's a description of the financial results obviously.

Fourth quarter margins were downs fourth quarter chemical margins were down significantly.

From prior quarters and prior years.

That is reflective of.

You know a cyclical down cycle that that we're experiencing right now in the chemicals business.

No I don't know for at the bottom sure feels like the bottom end.

And I hope, it's the bottom.

But time will tell.

But what I would say is you know despite that we've seen this sort of cyclical.

Market conditions in the past CNO and it wont be unusual if it were to last for many months.

But.

We have a facility that.

You know operates to a very high standard very high reliability is very efficient it's in.

It's in a great location.

Relative to the customer demand for our product.

And we also have with the integration with.

The refinery we have we have good access to advantaged.

Fuel and feedstock costs, so when I put all that together.

Well, if anybody is going to bank money in this business, it's going to be us at this plant so.

I feel good about that you heard me comment that.

We do have a very large turnaround plan there this year, which again I think this seems like a good time to have the facility down and to be preparing for when the market recovers.

Okay, and Binney had a second question Theres been some exceptionally cold days in Alberta recently can you give us some color around productivity impact. This has had on your upstream and rail loading operations.

Well, let me first say coming from Houston.

This cold weather certainly impacted me in Alberta.

The good news is you know I think our operations are well suited for these cold weather conditions, there well prepared are used to it.

It it really has not had any major productivity impacts to our operations are interrupted them.

It's hard work for anybody working and those extreme weather conditions, there's no doubt about it but.

Fortunately the folks are used to it and and again it hasn't adversely impacted us.

Okay, operator, I'm going to turn it back to you to take the next couple of questions on the line.

Our next question comes from line Emilie Chang from Goldman Sachs You may begin.

Thank you.

Brad curious as to why your priorities and strategic rationale for the company that now that you've taken a look at the business for a couple of months now.

In particular with respect to carry both organic and any sort of inorganic opportunities that may be out there is lots capital to attend.

Well thanks for that question Emily.

As as you would expect I'm spending a lot of time, reflecting on the business and our strategies going forward.

You know I would I would suggest several things that are driving us as an organization and things that Thats certainly albi.

Continuing to emphasize and focus on.

First.

We want to continue to achieve our industry, leading performance in safety and operations integrity, that's our license to operate.

That is key for us where wherever we do business.

But beyond that you know I want to also.

Ensure that we are achieving industry leading performance in SG.

And operational reliability operational performance and cost efficiency.

And I think this organization has clear line of sight on those objectives and they're working hard to achieve.

You heard through my comments.

Theme of delivering on commitments and that's very important.

No I want to ensure that we are.

Managing the existing portfolio of opportunities we have to maximize value.

But at the same time, continuing to aggressively evaluate and pursue where it makes strategic sense any new opportunities.

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Certainly I want us to be the most trusted and admired companies in our industry and to be the most valued partner with our key stakeholders.

And I commented a little bit on digital we need to fully leverage our research initiatives and our digital applications to continuously improve.

The efficiency of our business, while at the same time, reducing greenhouse gas intensity of our operations and so now you put all that together.

And what I want to do as maximize the value of this company, while delivering significant returns to our shareholders. We have a long history hundred years.

A reliable dividends, we've been growing that dividend now for 25 years.

And certainly it's in our objective to continue that path.

Now.

That's a long answer.

Let me give you a simple.

Quick answer.

I want to take a great company and make it greater.

So bottom line.

Great. Thanks, Brandon just one follow up if I might.

I would love to hear your views around like Canadian crude pricing for 2000 Tony.

And can make sweetened syncrude barrels have been fairly discounted in the fat part of a month likely to your inventories but.

Interesting what your views on how the light Canadian barrels compete.

Just a barrel and how that all should trade relative to tell you tie trapping you.

Yes again.

I don't want to put myself in a position of predicting any any pricing our market drivers there.

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That's something we obviously monitor very closely and we let those differentials drive our decisions around where we dispatch our crude.

How we feel our refinery slates.

But again, there's there's so much volatility in the market right now I don't want to go on record with the forecast.

No problem. Thank you.

Thank you.

And our next question will come from Ryan Mike Dunn from Stifel First energy you may begin.

Thank you.

Question is about the downstream if I may Brad.

Just wondering if you could provide some more detail on the stress Kona.

Faults project I guess the press release mentioned an expansion of I'm not sure of total crude throughput capacity, but certainly heavy crude.

Processing capacity.

Yes, I believe.

And so it just wondering how much has crude processing capacity going up if at all how much as heavy processing capacity going up.

And how much has your rational production capabilities gone up.

And.

That's helpful. But that's the first part and then the second part would be if you. If you give folks could provide any more detail.

On the seemingly elevated downstream spending that you're planning for the next few years in terms of.

Specific projects that those really too thank you.

Okay, yes, thanks, Thanks those questions Mike.

In terms of stress Kona and the expansion projects there.

It is primarily focused on our asphalt.

Production capacity.

You know when.

We have.

Verizon.

Significant market position in asphalt.

And have.

For several years, we continue to see growing demand.

For asphalt and so that has motivated us too so look for.

Expansion.

Options and so I'm quite excited about the work by the stress Kona team to kind of seized that opportunity.

They just completed that work.

Our our target is to increase that capacity by.

Probably 20% to 25%.

It's early days, we've just come out of that.

Out of that project work so.

No early for me to commit more than that but.

We feel very very good about that.

And again for us its strategic.

And then.

And then other downstream spending.

You know as as you looked at kind of our guidance from the November Investor Day.

What I think we characterized was total growth capital over the next five years of seven 800 million per year that excludes Aspen of course.

Historically weve probably spent more.

Our capital in the upstream.

Versus a downstream on growth projects and I would anticipate thats likely going to continue but for the downstream.

Investments that we see looking ahead, our really related to refinery optimization, you know capital efficient projects that allow us to incrementally.

Grow refinery production.

But also some investments potentially in logistics that allow us to take you know.

Better advantage of market situation to access.

Premium customers.

I would also include continued to increase our if you will supply chain reliability, we pride ourselves on being.

Very reliable supplier of products to our customers and so we want to make sure that continues even as we grow product outlets.

So that's that's kind of a broad description I think it's probably premature for me to detail any individual projects looking out over the next five years, but but as we refine the details on those certainly we'll we'll discuss those.

As you were in future calls.

Thanks, Brett that's all for me.

Thank you.

Okay, we're going to hop back in Tech, we've got a couple of the pre submitted questions left the next one is from Phil Skolnick at eight capital with continued uncertainty around two ingevity of curtailments. How do you now think of Aspen in a buy versus build scenario.

Well thanks, Thanks for that question Phil.

Yes, I'll comment that comment that question two ways. One just in terms of Aspen itself is the longevity of curtailments.

Obviously, we continue to be.

Disappointed.

By the ongoing curtailment that exists.

So we certainly want to see that eliminated.

And I'm encouraged by the comments.

That the Alberta government has made where they.

Indicated that they would expect curtailment to be eliminated by the end of year.

Yes.

But while curtailment continues you know there continues to be uncertainty around long term.

Investment economics, and the ability to.

To get product out of out of Alberta and to maximize value of of our production. So while curtailment exists. We've said Aspen is off the table and and I don't see that changing.

I think the second may be corollary part of your question around buy versus build is really.

Now with Aspen, obviously, they're in a curtailment scenario there is no additional quota that goes with.

A new build.

Whereas if you know market conditions were right. We saw a target acquisition that has existing production.

Production comes with an existing quota.

But I would say again, we are not motivated to pursue even an acquisition in a in a curtailed a world.

You know one because just the fact that curtailment exists there continues to be long term uncertainty around market.

Dynamics in the province and.

And so so that adds additional risk to any investment.

Even even if it can produce today, but may be equally important in general when you're looking to make an acquisition you're not just looking to buy the existing production flow stream.

The economics generally aren't very good with that you're also looking at.

Acquiring growth opportunities, that's where the real upside is that's where a company like ours can differentiate ourselves, bringing our all of our skills and capabilities to create unique value for our shareholder but again.

Now if if a key driver for any acquisition is the growth portfolio.

You're going to find yourself for the same situation you are with Aspen.

Okay and the last question I have here is from for shot rapid city full year 2019, Capex came in at the low end to guidance and a step down in Q4 seems to have help what drove the step down in is there any read through for 2020 Capex.

Well being at the low end of guidance when it comes a capex I think it's a good thing.

Especially in this in this business environment, so actually I'm I'm quite pleased.

That weve came in.

At that 1.8 billion, which again was was within the range that we had signaled.

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You know the fourth quarter was a little bit lower.

You know a variety of things you know, we're kind of wrapping up the supplemental crusher project.

And earlier in the year as we suspended Aspen you know, we we had some capital expenditures that were kind of already in progress that we've had to ramp down and so again that brings us had a much lower level in the fourth quarter.

Versus what you might have seen or anticipated a year ago at this time.

In terms of 2020, what we've indicated is a capital.

Expenditure profile in the one six to one seven range. So actually our plans are to spend a bit less than what we did this year.

And again, we think thats very prudent.

The things, we are pursuing or things that have very robust economics.

But again in this in this market environment I think capital discipline is very important.

And it also positions us in a good place to continue to return cash to our to our shareholders.

Okay, I think operator and thats it for the questions if I'm not mistaken.

Yes, I'm not showing any further questions at this time.

Okay, then just before we close I'd like to turn it back to Brad for any closing remarks, alright, well. Thank you David and again just to wrap it up I.

We'd like to thank all our view for for your participation in the call today.

For all of you that ask questions I thought those were very good questions and and I enjoyed the opportunity for myself and Dan and John to to address those with you in.

My objective continues to be one of transparency with the market.

No big credit to my predecessor, Rich Krueger, who established this practice of.

Of the management team participating in these earnings calls.

And I fully expect that we will continue that practice.

And so over the coming quarters I look forward to to meeting as many of you as possible and continuing this this rich dialogue about this company that I feel so strongly about and and our organization is so proud of thank you.

Okay, well. Thank you everybody as always if you have any further questions. Please don't hesitate to reach out to the IR team here anytime. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.