Q1 2021 Canadian Natural Resources Ltd Earnings Call
[music].
Yeah.
Good morning, we would like to welcome everyone to the Canadian Natural resources first quarter 2021 earnings conference call and webcast.
<unk> slides are available to view with the webcast and in PDF format at W. W. W.
C N R. L dot com after the presentation, we will conduct a question and answer session and instructions will be given at that time.
Please note that this call is being recorded today may six 2021 at nine a M Mountain time.
And I'd like to turn the meeting over to your host for today's call Corey Bieber Executive advisor. Please go ahead Mr. Bieber.
Thank you operator, and good morning, everyone and welcome to Canadian Natural's first quarter 2021 corporate update conference call.
As mentioned to facilitate today's call you'll find a copy of the presentation slides on our website, which I'd encourage you to download now in order to follow along.
Canadian natural had a strong first quarter financially and operationally our asset base is unique amongst our peer group underpinned by long life low decline assets complemented by our conventional assets that allow us significant flexibility and all of which can generate significant free cash flow beyond our robust asset base. There is a corporate strategy.
That focuses on generating real returns for shareholders and have driven management team and a corporate culture that focuses on being effective and efficient.
Over the years Canadian natural has demonstrated its robustness sustainability and the strength of its business plan for 2021 and beyond I believe we were one of them.
Few companies capable of delivering meaningful economic growth, increasing returns to shareholders and reducing absolute debt in a responsible manner.
For today's call Tim Mckay, our President will first provide a corporate update Marc <unk>, Our Chief Financial Officer will then provide an update on our financial debt.
'twenty, one financial outlook as well as our strong financial position, Tim will then provide a summary prior to opening up for questions.
Before we kick off I'd like to remind you of our forward looking statements shown on slide three and our reporting disclosures shown on slide four of note in our reporting disclosures is that everything will be in Canadian dollars, unless otherwise stated and as well we reported our reserves and production before royalties I would also suggest you review on Com.
On non-GAAP disclosures, so with that I'll turn it over to you Tim. Thank you Cory and good morning, everyone starting with slide five Canadian natural is in a very strong position, we have great assets operating excellence and with our capital.
The ability to strengthen our balance sheet and deliver returns to our shareholders.
This also applies to environmental social and governance side of the business ESG.
We are delivering industry, leading performance across the board.
Inefficient factor in our long term sustainability.
K on natural takes a long term view on ESG aimed at creating long term value, ensuring we identify assess quantify adapt on aligning ourselves and then execute.
We are developing plans to address these risks by applying technology and innovation. So we can continuously improve our performance in the near mid and long term always ensuring it's adding value move.
Moving to slide six.
If you look at the overall ESG performance in terms of investment priority. It's very clear that Canada is a world leader and scores the highest in every category and should be an investment priority.
Slide seven a few weeks ago, our federal government had two announcements. The first on April 19th was the federal budget, which recognizes the carbon capture utilization and storage Cc U S.
He is an important pathway for Canada to achieve its environmental goals.
Well a few days later, the federal government announced account it will be increasing its goal from 40% to 45% reduction in <unk> emissions by 2030 as part of the federal government budget announcement, we will participate in the consultation process with respect to <unk> U S.
As well, we will work to align with these new goals.
Next slide.
Natural Canadian.
Canada's oil and gas sector recognize the need to reduce ghd emissions and we've been able to leverage technology and Canadian ingenuity to deliver impressive results Canadian natural has invested approximately $3 9 billion in R&D since 2009.
Using this investment to reduce our environmental footprint unlock reserves and drive ever more effective and efficient operations investing now to do even better in the future.
Slide as can be seen on slide nine.
A third party has reviewed our oil sands emissions and determined that per scope, one emissions Canadian natural was 35% or on our peer average well. This is a good starting point, we are still progressing projects that will continue to drive our GHT intensity down.
<unk> 10 for Cc U S.
Canadian natural is using state of the art carbon capture reduction technology and he was a leader in the oil and gas industry in the world with this since per structure in place, we can leverage them to capture more C O two.
These three facilities are currently operating and are capturing approximately two 7 million tonnes of cotwo per year equivalent to taking approximately 576000 cars off the road annually.
Next slide.
Other promising technologies solvents, and both <unk> and the potential at Primrose and the steam flood area at Kirby South the pilot continues to perform well with ghd intensity reduction of approximately 45% within the targeted range and we'll continue to monitor its performance in 2021 day.
Highlighted at Primrose as target for commencement in Q4, 2021, and similar to Kirby South It will take a few years to evaluate its performance in both cases. This technology can be applied to similar properties and can reduce our GHT intensity up to 50% and.
And have targeted operating cost savings from approximate dollar per barrel moving.
Moving to slide 12, getting day net zero takes the ability to leverage technology, the innovative using Canadian industry as well we have defined actions in the near mid and long term.
Canadian natural has a huge technology funnel with just a few of those activities listed here as we progress our journey to net zero.
Slide 13, we have a track record of continuously improving our GHT intensity. Since 2012, we have methodically improved our ghd intensity by 32%.
Equivalent to taking one approximately $1 9 million cars off the road annually and we are progressing projects to continue that trend on reducing our ghd intensity moving to the next slide in summary, Canadian natural is delivering leading ESG performance, our long life low decline assets our advantage because we can leverage technology.
<unk> and continuous improvement to deliver ever improving environmental performance.
Delivering results over the long term with a pathway to attaining net zero and you're all set as we worked with governments, it's clear that clear natural should be an ESG investment priority.
Moving to our corporate update slide 16, Canadian natural continues to deliver strong operational results and we are focused on delivering value for our shareholders in the first quarter. We delivered record production of approximately one point to 46 million Boe.
Record liquids production of approximately 979000 barrels a day, an increase of 6% and 4% respectively over Q1 'twenty.
Primarily as a result of our record oil sands mining SCO production of approximately 468800 barrels a day and strong North American E&P production, including thermal of approximately 478700 barrels a day on natural gas production was strong at approximately one six bcf.
At 11% increase over Q1 'twenty.
Operating performance all areas with strong with oil sands mining being top tier at $19 82 per barrel Canadian <unk>.
5% lower than a year ago, and if you look at it from a macro perspective, it's even more price more impressive compared to a year ago.
About 41000 barrels a day higher than when you exclude the cost of natural gas the absolute color dollar basis is very comparable to Q1 2020, a great job done by our close hence mining team.
Slide 17 Canadian.
On natural has robust economic long life low decline assets and relative to most of our peers the ability to enhance our margins and grow production.
Which results in more long term value.
We have a diversified asset base with value enhancement plans for every product and basin. We operate this is driven by our effective and efficient operations our area of knowledge ownership and operator ship of infrastructure.
Can natural has a history of capital discipline, which includes a flexible and effective capital allocation and our ability to be nimble to capture opportunities. We continue to simply optimize capital allocation to maximize value for our shareholders. We're ensuring we maintain a strong balance sheet.
With our low maintenance capital and a culture of leveraging technology innovation driving continuous improvement throughout the company gives us ever improving operations.
For these reasons Canadian natural has a leading free cash flow generation.
Next slide.
Indian natural as a balance and diverse product mix with approximately 48% as high value light crude oil SCO NGL on a Boe basis, limiting our exposure to one product for liquids production approximately 81% from long life low decline assets, which requires less maintenance capital than our peers as well we have one.
Six approximately one six bcf of natural gas production by approximately 22% of our view is well positioned to capture additional value as natural gas prices strengthen.
Slide 19.
As a result of our unique asset base Canadian natural corporate decline is low at approximately 10%.
With approximately 63% of our production being long life low decline for zero decline production.
Because of this we require less maintenance capital to maintain production than our peers.
Slide.
We are executing our 2021 budget. The total budget of $3 2 billion of which only $200 million is for growth capital and we're growing our production by approximately 5%.
<unk> performance given that clear natural is over 1 million Boe's a day.
With first quarter behind US we are on track and we will continue to be disciplined in 2021 with improved pricing that we're seeing today, we will generate significant free cash flow and pay down our debt very quickly.
Slide 21, Canadian natural <unk> reserves are world class, among our global peers, which concludes the supermajors.
A strong indicator on the strength and depth of our assets with approximately 30 year Reserve life index of which approximately 61% represents long life no decline SCO reserves.
Debt has lower execution risk and many of our peers as well I remind you that 100% Canadian natural reserves are externally evaluated reviewed by independent qualified reserve evaluators.
Moving to the next slide when you look at net debt to one P reserves the lowest among global peers as well as you saw earlier with two thirds being long life no decline SCO reserves, we have a lower cost structure and reserve risk.
As you can see here on slide 23, Canadian natural has the highest free cash flow yield among our global appeal.
On indicator of the strength of our assets, our effective and efficient operations and low maintenance capital.
Slide 24, net debt to cash flow, we are well positioned compared to our global peers with less debt to cash to cash flow than our peer average and it's only it's coming down very quickly given our free cash flow profile for 2020 line.
Slide 25, there are many positive factors ahead for the Canadian oil and gas industry and in our opinion the discount to global peers should disappear egress is improving heavy oil differentials are back to historical levels in the low 20% ESG as a priority and Canada being a leader will be recognized.
Canadian natural has much lower operating and maintenance capital as compared to our global peers and should not be undervalued when compared to these peers.
It is for these reasons, it's clear Canadian natural should be on an investment opportunity. We have a sustainable business model a growing sustainable dividend track record of 21 years at a 20% CAGR, which is top tier compared to our global peers.
Slide 26.
Natural is a world class investment opportunity, we have world class reserves much of it being long life low decline assets, which gives us a low decline of approximately 10%, meaning low maintenance capital as compared to our peers.
Our top tier effective and efficient operations and our drive for continuous improvement will ensure our balance sheet will strengthen very quickly in 2021 as Mark will show you here. Shortly as you saw earlier this gives us the largest free cash flow yield percentage nearly double our global peer average finally, we are focused on.
Value creation as we have grown our sustainable dividend for 21 years, 20% CAGR impressive when compared to our global peers I will now turn it over to Mark for a financial review.
Thanks, Tim and good morning, everyone I'll start on slide 28, with the Q1 financial highlights.
Q1 was a very strong financial quarter as effective and efficient operations, along with the improved commodity price backdrop led to adjusted funds flow over $2 7 billion.
Free cash flow generated was over $1 4 billion after the prudent capital program and dividends in the quarter.
This led to substantial balance sheet deleveraging as absolute debt was reduced by $1 4 billion compared to Q4 'twenty levels.
This represents $2 9 billion of debt reduction since June of 2020 further underscoring the ability of our long life low decline assets combined with safe effective and efficient operations to generate leading free cash flow.
The sustainability of our funds flow allows for consistent and increasing returns to shareholders. In March of this year, we increased our quarterly dividend by 11% to <unk> 47 per share, which contributed to a year to date shareholder return of about $1 1 billion.
This year's dividend increase represents the 20 <unk> consecutive year of dividend increases at Canadian natural.
Canadian natural is balanced approach to capital allocation, coupled with our sustainable free cash flow allows for increasing returns to shareholders, while paying down absolute debt and growing our diverse asset base something that sets Canadian natural apart.
This can be seen on slide 29.
The ability to deliver significant and sustainable free cash flow.
As you can see in 2020, we generated strong free cash flow on a lower commodity price environment.
Now with the economic rebound on increased demand and pricing for commodities at approximately U S $60 <unk> Canadian natural is targeted to deliver substantial free cash flow in the range of $5 seven to $6 2 billion after budgeted capital and dividends and as Tim mentioned, our free cash flow yields are tracking higher than global peers.
Our long life low decline low risk assets continue to demonstrate why <unk> should be an investment priority.
On Slide 30, you can see the results and the forecast showing the impact of our free cash flow generation.
At strip pricing, our absolute debt is targeted to decline significantly while returns to shareholders over the same period are targeted to be approximately $3 2 billion.
<unk> peers, if any have the ability to generate and balance this level of free cash flow and create long term shareholder value.
The impact of leverage metrics as shown on slide 31.
Debt to EBITDA is targeted to exit 2021 at one one times and debt to book capital is targeted to be under 30%.
With a purposeful maturity profile the facilitates paying down absolute debt you can see that so far in 2021, we have repaid and canceled over $1 6 billion of non revolving facilities.
Our history and commitment to balance free cash flow allocation as seen on slide 32.
Notwithstanding the challenging commodity environment in 2020, our assets and business model delivered.
We were able to essentially maintain our net debt levels through the year, while executing on accretive natural gas acquisition.
Maintained our March 2020 dividend increase followed by a further 11% increase in March 2021.
We repurchase shares and increased both reserves and production.
These are top tier results improve the resilience of the Canadian natural business model and our commitment to financial discipline.
On Slide 33, you can see the sustainability of the dividend at Canadian natural.
Dividend levels are continually evaluated against internal forecast for cash flow capital free cash flow generation and our ability to remain nimble and adjust our plans if conditions warrant.
This results in a business that can support a sustainable and increasing dividend over time and creates consistent value for shareholders over the long term.
Slide 34 shows the five year compound annual change in our dividend compared to global peers.
Slide 35 displays this growth over 10 years.
And slide 36 shows this growth over a 20 year timeframe.
All of these slides illustrate the sustainability of our free cash flow generation and the company's priority to ensure ever increasing returns to shareholders, including sustainable and growing dividends.
As well as the prudent capital allocation at Canadian natural.
Slide 37 displays the history of dividend increases as you can see increases have varied depending on our position as it relates to cash flow capital flexibility to at any point in time with a focus on sustainable increases.
So in summary on slide 38, Canadian natural has built an asset base that is unique and sustainable and has developed a resilient business model that is flexible and can quickly adapt to changing environments.
Assets and business model provides protection in challenging environments like we saw on 2020.
Additionally, we are positioned to benefit exponentially when commodity prices and markets are more favorable like what we're seeing now in 2021.
Our emphasis on balancing our four pillars, our enviable and diverse asset base and our execution focus teams with a history of strong results are all focused on driving long term and increasing shareholder value.
With that I'll turn it back to you Tim Thanks.
Thanks, Mark in summary, slide 40, Canadian natural's ability to deliver significant free cash flow in today's environment starts with our large reserve base of which 83% being long life low decline.
Of our approximately one to $4 6 million Boe's, a day long life low decline assets asset base makeup approximately 770000 barrels a day of which approximately 455000 barrels a day is no decline high value SCO production.
We have a diversified product and asset.
That are driven by our effective efficient operations.
Knowledge ownership and operator ship of infrastructure, and we have a low sustainable maintenance capital.
We have one six bcf of natural gas and with our diverse assets ability to add low cost production.
We have flexible and effective capital allocation and our ability to be nimble to capture opportunities, we simply optimize capital allocation to maximize value for our shareholders. Our culture of continuous improvement is unique among our peers as our teams are focused on delivering safe reliable effective and efficient operations.
Across our asset base next.
Next slide.
With oil at approximately $60 U S per barrel.
In 2021, Canadian natural can deliver leading free cash flow generation of approximately $5 seven to $6 2 billion.
Which supports our sustainable growing dividend of 21 years.
Significant debt reduction and improving.
Our already strong balance sheet finally across the company. Our teams are focused on reducing our environmental footprint through technology and innovation and we look forward to participating in the federal government consultation period with that I'll turn it over for questions. Thank you.
At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad, we will pause for just a moment to compile the Q&A roster.
Your first question comes from the line of mental whole shelf from TD Securities. Your line is open.
Thanks, and thanks for taking my question and good morning, I'll start with a question on the balance sheet. So your debt metrics as you talked about theyre coming down really quickly and you've made it very clear that the balance sheet will continue to attract the the vast majority of free cash flow over the near term. So my question is what is.
The end game in terms of the <unk>.
Deleveraging process pre COVID-19 I believe you were targeting one five times and <unk>.
$15 billion of total debt so do those targets still apply and at what point can we reasonably expect buybacks to ramp back up again.
Yeah, Hey metal thanks, good morning, it's mark.
I think that when you look at the free cash flow generation. There is lots of optionality going forward here.
As you have recognized the focus though is going to be on on the balance sheet or on absolute debt repayment in the near term.
We evaluate this all the time and we'll continue to that go forward.
As far as the buyback right now where we're looking at really just offsetting our dilution.
Through the rest of this year and that's the target today.
Okay. Thanks, Mark and then my follow up would be on <unk>.
And egress, maybe we could just get your thoughts on that.
Current on current market access, including any any thoughts on abortion mentioned.
Inventories and how that is impacting your very early thoughts I suppose on on pure maintenance versus growth into into 2022.
Boy, there's a lot of speculation on.
On that line because there's a lot of.
Different items going on the news here today.
But I think we'll just going to step through it.
We expect the egress to continue to improve on.
Line three looks like it will be.
Q4, <unk>, maybe a little late but still moving forward.
Obviously, there are issues with the on line five and potentially.
Code access, but it's too early to speculate.
If you look at in Alberta today day.
Light oil side has zero parchment and.
So it's.
It's hard to speculate what that impact of.
Of those two items will be obviously, it will hurt Alberta to some extent if there is a portion of tenant discount.
And as well with the Dakota access again.
If oil starts to come back into Cromer.
May or may not impact us on because I would suspect the people that are on the Dakota access are making their own arrangements.
Ahead of time, if they need to so it's just really there's a lot of different issues there.
I'm still very bullish in terms of.
Debt a lot of these egress issues will continue to move forward.
So fair to say that picture on a holding pattern through the through the end of the year.
Well, we're not changing our capital.
Basically it just staying with the status quo.
Perfect. Thanks, Dan.
Your next question comes from the line of Greg Pardy from RBC capital markets. Your line is open.
Thanks. Thanks, Good morning, Thanks for the rundown on guys.
Tim just in your I guess it was putting it in the opening remarks.
Talked about solvents, and so forth, but I'm just wondering if you can maybe give us an update on where you would expect to apply.
The solid technology, and then just anything you might have to stay on.
And can extraction and then also potentially on autonomous haul trucks, just interested where youre going with that technology.
Sure so for the solid.
Obviously the pilot at Kirby South is very advanced.
And if we look across our asset base.
Both the Kirby sites and the jackfish sites could be very amenable to that technology. So we're very happy with the results today and now it's just trying to work.
Work out a plan of going forward in terms of Primrose East steam flood area, that's a little more experimental.
We obviously have to pilot it for a couple of years to see if that can be applied to that the primrose area on the steam plant pieces. So too early to say on Primrose, but I would say for the Sag D. It looks very promising.
We continue to advance our commercial engineering.
It's.
Theres a lot of benefits, but there's also a lot of capital costs upfront. So our teams are still evaluating it and we hope to have something this year to say.
Other we're moving forward with it or not.
Obviously.
As a leading technology, but again one other things we pride ourselves on is doing the detailed work and ensuring that the capital forecast that we use is correct.
And then.
I guess what was the last question there Greg.
On the salt trucks I was thrown everything in there.
The trucks yeah.
What.
Yeah Thomas trucks.
Some operators have more benefit.
Because of the way they operate and that and we have less benefit, but having said that I mean, our teams are looking at.
On electric and hydrogen technologies as well.
To reduce our environmental footprint, that's probably the biggest.
Thing, we see for our benefit.
Is reducing our <unk> and how to do it with either electric or hydrogen.
On the autonomy trucks.
There is a bit of cost piece, there to that and it really depends how efficient you are and our teams do a great job day.
They measure.
Our performance down to the second so it's a.
I'm really proud of the way our teams are operating in the oil sands.
Okay, and just as well.
Question, you touched on carbon capture storage.
You guys have done this very early on I think on horizon.
Or is that a lot of C you'd mentioned AOSP on them.
On the northwest upgrader, as well, but maybe just focusing on.
Horizons for a moment.
I think you've got that corporate cash from start to roll off the hydrogen plant.
Would there be scope for you to in place.
How much of the C O two you're capturing off about on the horizon facility overall or are you doing much of that line I'm, just trying to get a sense there.
Sure what we did early on.
Was the question the <unk> and the tailings.
So off of one of the hydrogen plants, we have capture it's not fully utilized because there's only so much C. O. Two that we can put into the tailings and so there is.
Global capacity, there as well as on the second hydrogen union that we could expand capture and obviously increase.
More cotwo per it tracks and so there is those opportunities for share.
Okay terrific. Thanks, very much thanks.
Thanks, Greg.
Your next question comes from the line of Dennis Fong from CIBC World markets. Your line is open.
Hi, Good morning, and thank you for taking my question.
First maybe just to follow along with the evolving strategy I. Appreciate that you kind of give us a little bit more context to the stage of development or your work at Primrose vs. The Sag D component of things and obviously you guys have been doing quite a bit on in terms of lowering your your jixi intensity as well I'm just curious as to how much of the <unk>.
<unk> of <unk>.
Solving technology at Kirby and Jackfish are currently potentially within your 2025 goals of reducing jixi intensity across your platform and secondarily, how much do you think could be incremental.
Incremental to that with a successful pilot out of Primrose.
Yes, I would say.
It depends on obviously on how aggressive you want to be.
On that target so you know.
If you look at it just a normal approval building and that Youre, probably looking in that 2025.
On a timeframe.
For something like the safety piece here.
To really start to get into service, but.
That would be in my mind pretty aggressive.
Obviously I think the best thing for our company is to step through it.
And make sure that.
We do the right homework.
Just from a construction point of view.
<unk> net we're basically halfway through 2021 that would be in my mind kind of on the aggressive side.
Two.
To start to flow, we would have to start to almost a day to to get it in place by 2025.
Okay. So the idea then would be that any of these technologies could provide incremental benefit versus your existing 2025 goal of GSE intensity reduction.
I E.
The benefits are not currently kind of included in your goals at it yet.
Yes, that's correct if you look at.
There's a number of technologies, we're working on obviously in the meantime, there's a lot of other work being done to reduce our GHT commissions, but yes carbon capture.
The solvents are all future technologies and same with the molten fuel carbonate itself.
They're all future technologies that will actually help us to reduce the absolute C O two emissions.
Perfect and then just following on to on.
From a meadows question there just around capital allocation, obviously, the primary focus here is around reducing the absolute debt number and getting to a lower leverage situation. How should we be thinking about kind of the longer term strategy, obviously balancing between the four pillars.
Thinking about returning value back to shareholders, but also there are a number of projects.
That are fairly low capital intensity and actually have free.
Really significant economic upside how should we be thinking about maybe some other criteria from a leverage perspective that you would consider before as well as egress before you would consider moving forward on things like Ipass, obviously versus what you kind of described before or even debottlenecking projects at.
Our horizon or were some of the other low cost projects that you've just kind of discuss at AOSP as well.
Alright.
A very.
The hard part of that is this year.
We would have to kind of speculate on certain conditions, whether it's <unk> or pricing and it's really difficult to say what I can say is if you look out.
Can't see us doing a major project in terms of capital expenditure in terms of our horizon expansion.
If we do anything I suspect it will be very small leverage off our.
Our facilities, we're doing drill to fill.
On the gas side.
With the oil side it would be essentially.
Brownfield small developments I just don't see.
Any industry anybody on the industry really king aggressive on any any kind of major capital program.
Perfect. Thank you.
Your next question comes from the line of Neil Mehta from Goldman Sachs. Your line is open.
Thank you. So much you guys have proven out M&A is a core competency for your business.
Tim I just wanted your perspective on how youre seeing the A&D market at this point.
And the other attractive opportunities either to buy or to sell.
What we see in that market today is that.
No a lot of the smaller entities or.
<unk> deals are emerging.
And that and I think they need to.
On a bigger scale I really don't see anything other.
If I look at ourselves we have no gaps.
We have lots of opportunities within our own portfolio today.
So I just what I see is there will probably be a little more consolidation, but it will still continue with the at the smaller companies level.
Okay. That's helpful and you guys did the painted pony acquisition, you're a large natural gas producer I just curious what your thoughts are on the echo market here.
And any comments on on how the natural gas part of your business is contributing to the cash flow in 2021.
Well.
Paid pone assets.
Really an opportunistic acquisition about a year ago.
Gas prices were obviously.
Quite a bit different and even the forecast was quite a bit different at that time and.
With it.
Gas prices have strengthened.
Yeah.
Thank everybody is being for the most part.
Difficulty more capital disciplined.
Now than they ever have been and so I don't see any big.
Big concerns on the egress here in the short term but.
I think people are getting their balance sheets in order and.
The nickel price is looking strong in our budget.
About a $2 50, I think around 270, maybe $2 75 for the year now so it's a little bit stronger but it's.
Obviously, we're continuing with our gas program as is.
Yeah.
It seems to be holding in.
Thanks, guys.
Once again, if you would like to ask a question. Please press Star then the number one on your telephone keypad. Your next question comes from the line of Phil Gresh from Jpmorgan. Your line is open.
Yes.
Yeah.
I wanted to try just to the balance sheet follow up question, maybe just worded a little bit of a different way.
The one five times leverage target has historically correlated with something around $15 billion on net debt.
On your target for the end of the year at these prices would be below that looked like closer to $14 billion.
So I was just curious if.
Has.
The net debt target, having gone through COVID-19 and things like that is that longer term target changed at all on your view do you still think it's a.
Fair bogey for us to be thinking about recognizing that even moving forward.
<unk> shifted the mix debt.
Theres still be on a debt paydown element to it I would think.
Yes, I mean, when we were going into 2020, we were obviously forecasting some large you know debt reductions and that that year things changed a little bit we were able to kind of enter and exit pretty much flatten and do that acquisition at the end of the year, which was strong and that now as we go on to 2021, we're just back on that track of paying down absolute.
Debt as I mentioned with that maturity profile to actually facilitate being able to do that on an absolute basis. So I think yes, we track down lower theres always going to be opportunity to.
I would look at that free cash flow on the Optionality, there too to balance the four pillars, but just here in the near term we're focused on that absolute debt reduction.
Okay.
My second question is just around the sustaining capex of the business.
Coming into the.
Downturn I think it was around the $3 7 billion forecast net.
3.0.
And I was just wondering how much of that in retrospect do you view as a.
Cyclical versus structural factors that you've just improved.
Costs out.
And just with your updates here around around GHT do you think that there will be incremental cash.
Capital spending required.
On.
To achieve these objectives that maybe it would be considered sustaining capital.
Hello, Phil.
Yes, the sustained capital I mean, obviously, there's a lot of factors that change from year to year, obviously the cost.
The absolute cost of doing business changes.
The cost of steel and everything else. So today, we're at the $3 billion, it's based on a balance pretty much.
Global oil and gas gross so to me.
It depends on what kind of program, we do in the future.
A lot of times depends on the.
Where our sustaining capital would be.
In terms of the GHT piece.
Too early to say in terms of what debt capital profile would be.
Obviously.
A big part of it is going to come out of what the federal government has in mind. After this consultation period and so.
Today, I think we will just look at it.
Participated in that debt.
Process and then we'll figure out.
Where you know what that capital profile could look like obviously.
Carbon capture.
The way they had it obviously lends itself very good for the bigger facilities, whether they're cement plants or <unk> plants are.
<unk> laser companies.
It seems to be targeting some of the larger visitors. So.
We'll have to see what debt to.
That total.
That program looks like here in the future.
Okay. Thank you.
There are no further questions at this time I'll turn the call back to management for closing remarks.
Thank you operator, and that wraps up our formal presentations I'd like to thank all of you for your participation. This morning. If you do have any questions or follow ups. Please don't hesitate to give us a show that the IR team. Thank you very much.
Sure.
That concludes today's conference call. Thank you everybody for joining you may now disconnect.
Zone.
[music].
Okay.
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No.
Yes.
Yeah.