Q3 2021 Cenovus Energy Inc Earnings Call

November 3, 2021

[music].

Good day, ladies and gentlemen, and thank you for standing by welcome to Synovus Energy's third quarter results. As a reminder, today's call is being recorded at this time all participants are in a listen only mode. Following the presentation. We will conduct a question and answer session. You can join the queue at anytime Viper.

Operator 2: Good day, ladies and gentlemen, and thank you for standing by. Welcome to Cenovus Energy's Q3 results. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. You can join the queue at any time by pressing star one. Members of the investment community will have the opportunity to ask questions first. At the conclusion of that session, members of the media may then ask questions. Please be advised that this conference call may not be recorded or rebroadcast without the expressed consent of Cenovus Energy. I would now like to turn the conference over to Ms. Sherry Wendt, Vice President, Investor Relations. Please go ahead, Ms. Wendt.

Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to Cenovus Energy's Q3 results. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. You can join the queue at any time by pressing star one. Members of the investment community will have the opportunity to ask questions first. At the conclusion of that session, members of the media may then ask questions. Please be advised that this conference call may not be recorded or rebroadcast without the expressed consent of Cenovus Energy. I would now like to turn the conference over to Ms. Sherry Wendt, Vice President, Investor Relations. Please go ahead, Ms. Wendt.

Star one.

Members of the investment community will have the opportunity to ask questions first.

The conclusion of that session members of the media May then ask questions. Please be advised that this conference call may not be recorded or rebroadcast without the express consent of Synovus energy.

I'd now like to turn the conference over to MS. Sherry Wendt, Vice President Investor Relations. Please go ahead Ms Wendt.

Thank you operator, and welcome everyone to Synovus is 2021 third quarter results conference call.

Sherry Wendt: Thank you, operator, and welcome everyone to Cenovus's 2021 Q3 Results Conference Call. I'll refer you to the advisories located at the end of today's news release. These describe the forward-looking information, non-GAAP measures, and oil and gas terms referred to today, and outline the risk factors and assumptions relevant to this discussion. Additional information is available in Cenovus's annual MD&A and our most recent annual information form and Form 40-F. All figures are presented in Canadian dollars and before royalties, unless otherwise stated. Alex Pourbaix, our President and Chief Executive Officer, will provide brief comments, and then we will take your questions. We ask that you please hold off on any detailed modeling questions and instead follow up on those directly with our investor relations team after the call. If you could please keep to one question with a maximum of one follow-up.

Refer you to the advisories located at the end of today's news release.

Please describe the forward looking information non-GAAP measures and oil and gas terms referred to today and outline the risk factors and assumptions relevant to this discussion.

Additional information is available in synovus as annual MD&A and our most recent annual information form and form 40 F.

All figures are presented in Canadian dollars and before royalties unless otherwise stated.

Alex per Bay, our President and Chief Executive Officer will provide brief comments and then we will take your questions.

We ask that you. Please hold off on any detailed modeling questions and instead follow up on those directly with our Investor relations team after the call and.

And if you could please keep to one question with a maximum of one follow up you can rejoin the queue for any other questions.

Sherry Wendt: You can rejoin the queue for any other questions. Alex, please go ahead.

Alex Please go ahead.

Thanks, Sherry and good morning, everybody.

Alex Pourbaix: Thanks, Sherry, and good morning, everybody. First, let me update everyone on our current response to COVID-19, which remains a challenge in all of the jurisdictions where we operate. We continue to encourage full vaccination for all of our staff, and we're following the latest advice from public health officials, government, and our own health and safety experts. That includes continued rapid testing at a number of our field locations and mandatory work from home for office and other staff who are able to do so where required by local health officials. In addition, in alignment with recent direction from the Canadian government, we are now requiring proof of full vaccination as of 30 October for travel on all Cenovus scheduled and ad hoc flights to and from our sites, including charter, company-owned aircraft and helicopter flights.

First let me update everyone on our current response to COVID-19, which remains a challenge in all of the jurisdictions, where we operate we continue to encourage full vaccination for all of our staff and we're following the latest advice from public health officials government and our own health and safety experts that includes continued rapid.

Testing at a number of our field locations and mandatory work from home for office and other staff were able to do so we're required by local health officials. In addition in alignment with recent direction from the Canadian government. We are now requiring proof of full vaccination as of October 30 for traveling all synovus sketch.

<unk> and AD hoc flights to and from our sites, including charter company owned aircraft and helicopter flights as we modify protocols at our operations will continue to follow a public health guidance and work closely with government health authorities and industries to protect our people.

Alex Pourbaix: As we modify protocols at our operations, we'll continue to follow public health guidance and work closely with governments, health authorities, and industries to protect our people. Safety is foundational to how we operate. I was disappointed by our safety performance, and particularly our process safety performance, immediately after closing the Husky deal. We learned from these events and took rapid actions to strengthen our combined safety culture. Since then, and throughout Q2 and Q3, we've seen significant improvement in our safety performance. For example, we cut in half the frequency of process safety incidents in these periods compared to Q1. As another example, our conventional business did not have a single recordable occupational injury in the first nine months of this year. However, despite these improvements, we've had a couple of concerning safety incidents very recently.

Safety is foundational to how we operate I was disappointed by our safety performance and particularly our process safety performance immediately after closing the husky deal. We learned from these events and took rapid actions to strengthen our combined safety culture. Since then and throughout the second and third quarters, we have.

<unk> seen significant improvement in our safety performance for example, we cut in half the frequency of process safety incidents in these periods compared to the first quarter is another example, our conventional business did not have a single recordable occupational injury in the first nine months of this year.

Despite these improvements we've had a couple of concerning safety incidents very recently these serve as important reinforcement that we must be unrelenting in our top tier safety journey at Synovus Theres no priority more important than safety and continuing to do everything we can to make sure everyone goes home safely every day.

Alex Pourbaix: These serve as important reinforcement that we must be unrelenting in our top-tier safety journey. At Cenovus, there is no priority more important than safety and continuing to do everything we can to make sure everyone goes home safely every day. Turning now to our Q3 results. By now you've all seen our plans to increase shareholder returns, and I'm sure everybody is keen to talk a little more about that. Before we turn to that, though, why don't we start with the operating results that drove this quarter's financial results and led to that shareholder returns announcement. I'm incredibly proud of the accomplishment of our operations teams and assets this quarter and year to date.

Turning now to our third quarter results are by now you've all seen our plans to increase shareholder returns and I'm sure everybody is keen to talk a little more about that before we turn to that though why don't we start with the operating results that drove this quarters financial results and led to that shareholder returns announcement.

I'm incredibly proud of the accomplishment of our operations teams and assets this quarter and year to date.

In the upstream segment, we continued to deliver consistent and strong operating performance with total production of nearly 805000 Boe per day in the third quarter, an increase of 5% over the second quarter. This production increase was led by record single day in quarterly average.

Alex Pourbaix: In the upstream segment, we continue to deliver consistent and strong operating performance with total production of nearly 805,000 BOE/d in Q3, an increase of 5% over Q2. This production increase was led by record single day and quarterly average production rates at both Foster Creek and Christina Lake. Production at Christina Lake averaged about 243,000 barrels/d in Q3, a 5% increase over the prior record set in Q2. This reflected redevelopment and redrill wells coming online in the quarter. These redevelopment wells are high return, short-cycle projects we'd included in the capital budget this year and reflect the kind of opportunities that exist for Christina Lake. Moving to Foster Creek now.

Duction rates at both Foster Creek, and Christina Lake production at Christina Lake averaged about 243000 barrels per day in the third quarter, a 5% increase over the prior record set in the second quarter. This reflected redevelopment and re drill wells coming online in the quarter. These redevelopment.

Wells are high return short cycle projects. We've included in the capital budget this year and reflect the kind of opportunities that exists for Christina Lake moving to Foster Creek now you might remember that on our second quarter conference call I talked about some emulsion treating issues, we had coming out of the turnaround which impacted production.

Alex Pourbaix: You might remember that on our Q2 conference call, I talked about some emulsion treating issues we had coming out of the turnaround, which impacted production into July. As we discussed in the Q2 call, the teams quickly incorporated learnings and returned Foster Creek to full rates as of mid-July. With our Q3 results, we're pleased to report that the teams not only recovered Foster to full rates, but went on to deliver production of over 200,000 barrels per day from the asset in each of August and September. For perspective, remember that Foster Creek is an asset with a nameplate capacity of 180,000 barrels per day. This is just another demonstration of our industry-leading asset quality and operating expertise in the oil sands.

<unk> into July as we discussed in the Q2 call. The teams quickly incorporated learnings and returned Foster Creek to full rates as of mid July with our Q3 results. We're pleased to report that the teams not only recovered fostered a full rates, but went on to deliver production of over 200000 barrels per day.

<unk> from the asset in each of August and September for perspective, remember that Foster Creek is an asset with a nameplate capacity of 180000 barrels per day. This is just another demonstration of our industry, leading asset quality and operating expertise in the oil sands turning to Lloyd Mr. Theurer.

Alex Pourbaix: Turning to the Lloydminster thermal projects, the benefits of applying Cenovus's operating techniques continued to be demonstrated, and the assets delivered an average of about 98,000 barrels per day in Q3. Oil Sands operating performance combined with strong realized pricing to deliver segment operating margin of nearly CAD 2 billion, driving the company's total operating margin of CAD 2.7 billion for the quarter. Oil Sands unit operating costs decreased relative to Q2, mainly due to increased production from the well pads we brought online and the turnaround activity in Q2. Looking at our conventional business, production was down about 7% relative to Q2, primarily due to the impact of asset sales, as well as an unplanned third-party processing plant outage.

<unk> projects the benefits of applying synovus is operating techniques continued to be demonstrated in the assets delivered an average of about 98000 barrels per day in the third quarter.

Oil sands operating performance combined with strong realized pricing to deliver segment operating margin of nearly $2 billion driving the company's total operating margin of $2 7 billion for the quarter Oilsands unit operating cost decrease relative to the second quarter, mainly due to increase production.

<unk> from the well pads, we brought online and the turnaround activity in the second quarter.

Looking at our conventional business production was down about 7% relative to the second quarter, primarily due to the impact of asset sales as well as a unplanned third party processing plant outage, even with lower production volumes unit operating costs for conventional held flat relative to the second.

Alex Pourbaix: Even with lower production volumes, unit operating costs for conventional held flat relative to Q2 as the business delivered nearly CAD 200 million of operating margin. This was 35% higher than the Q2 operating margin, with the increase driven by increased realized prices and higher production uptime. Our offshore operations continue to be a strong contributor to free funds flow, delivering operating margin of nearly CAD 330 million in the quarter and operating margin totaling over CAD 1 billion so far this year. Asia Pacific operations continued performing well, with daily production of 60,000 BOE per day in Q3, which was in line with Q2. Production rose in Indonesia in response to strong demand, offsetting production impacts of planned maintenance at assets in China during the quarter.

<unk> is the business delivered nearly $200 million of operating margin. This was 35% higher than the second quarter operating margin with the increase driven by increased realized production, our realized prices and high production on time.

Our offshore operations continue to be a strong contributor to free funds flow delivering operating margin of nearly $330 million in the quarter and operating margin totaling over $1 billion. So far this year Asia Pacific operations continued performing well with daily production of 60000 Boe per day in the third.

Order, which was in line with the second quarter production Rose in Indonesia in response to strong demand offsetting production impacts of planned maintenance at assets in China during the quarter.

And as previously announced in respect of our Atlantic business, we received about $75 million during the quarter from exiting partners as a contribution towards future decommissioning liabilities with the restructuring of working interests in the Terra Nova field.

Alex Pourbaix: As previously announced in respect of our Atlantic business, we received about CAD 75 million during the quarter from exiting partners as a contribution towards future decommissioning liabilities with the restructuring of working interests in the Terra Nova field. Moving to the Downstream segments. In Canadian Manufacturing, reliable operating performance continued at the Lloyd Upgrader and Asphalt Refinery, with an average utilization of 98%. While utilization and unit refining margins at the upgrader and Lloyd Refinery were slightly higher than the Q2, total operating margin of CAD 130 million was about CAD 60 million lower than in Q2 for Canadian Manufacturing. The difference was about the amount of a settlement recorded in the Q2 on a customer contract at Bruderheim Crude by Rail Terminal. In US Manufacturing, refinery utilization averaged 89% in the quarter, which was 2% higher than the Q2.

Moving to the downstream segments and Canadian manufacturing reliable operating performance continued at the Lloyd Upgrader asphalt refinery with an average utilization of 98% while utilization and unit refining margins at the upgrader and Lloyd refinery were slightly higher than the second quarter.

Total operating margin of 130 million was about $60 million lower than in Q2 for Canadian manufacturing. The difference was about the amount of a settlement recorded in the second quarter on a customer contract at Bruder Heim crude by rail terminal.

In U S manufacturing, our refinery utilization averaged 89% in the quarter, which was 2% higher than the second quarter. This included the impact of some turnaround activity and other minor unplanned outages at some of our partner operated joint venture refineries during the quarter unit operating cost held them.

Alex Pourbaix: This included the impact of some turnaround activity and other minor unplanned outages at some of our partner-operated joint venture refineries during the quarter. Unit operating costs held about flat relative to Q2, while unit refining margin increased about 7% to $13.45 per barrel. This included the average unit cost of RINs decreasing by about 10% from Q2 to about $7.30 per barrel for the quarter. Just I'd remind everybody to keep in mind that's still nearly three times the average unit cost for RINs in Q3 a year ago. I'll take a moment to discuss in a little more detail our US refining assets where we are operator. At the Lima Refinery, recall that throughput rates began ramping up in Q2 following unplanned outages earlier in the year.

Flat relative to the second quarter, while unit refining margin increased about 7% to $13 45 per barrel. This included the average unit cost of rens decreasing by about 10% from the second quarter to about $7 30 per barrel for the quarter and just I'd remind everybody.

To keep in mind that still nearly three times the average unit cost for Rins in the third quarter a year ago.

I'll take a moment to discuss in a little more detail our U S refining assets, where we are operator.

At the Lima refinery recall that throughput rates began ramping up in the second quarter. Following unplanned outages earlier in the year in the third quarter, we achieved crude crude utilization of 93% at the Lima refinery, we've been pleased to see performance stabilizing at the refinery which reflects ally.

Alex Pourbaix: In Q3, we achieved crude utilization of 93% at the Lima Refinery. We've been pleased to see performance stabilizing at the refinery, which reflects the Lima's team focus on base operations. We slowed production at the Lima Refinery at the end of September in preparation for a planned turnaround we're completing in Q4. As we've said previously, this is a large turnaround, so it's fair to expect that throughputs will be lower in Q4 as a result. Closing out the discussion of US refining, I'm pleased to report that the Superior Refinery rebuild construction continues to proceed well. Capital spend remains on track, and we still expect rebuild costs to be largely offset by insurance. There is no change to our expectations for the refinery to be ramped back up in early 2023.

MS team focus on base operations, we slowed production at the Lima refinery at the end of September in preparation for our planned turnaround we're completing in the fourth quarter. As we've said previously this is a large turnaround. So it's fair to expect that throughput will be lower in Q4 as a result.

Closing out the discussion of U S. Refining I'm pleased to report that the superior refinery rebuilt construction continues to proceed well capital spend remains on track and we still expect rebuild costs to be largely offset by insurance. There is no change to our expectations for the refinery to be ramped back up.

In early 2023.

Focusing on sustainability, we continue critical work on emissions reduction for our company and the broader industry through the Oilsands pathways to net zero initiative Cofounded by Synovus pathways is currently advancing its foundational carbon capture utilization and storage project, which will have phase <unk>.

Alex Pourbaix: Focusing on sustainability, we continue critical work on emissions reduction for our company and the broader industry through the Oil Sands Pathways to Net Zero initiative, co-founded by Cenovus. Pathways is currently advancing its foundational carbon capture, utilization, and storage project, which will have phased capacity to transport carbon from more than 20 oil sands operations to a safe storage hub. In addition, the Pathways teams are analyzing other technology opportunities to address GHG emissions in the oil sands. Meanwhile, we're working with both levels of government to ensure the necessary policy and financial support is in place to achieve the Pathways vision and help Canada achieve its climate and economic recovery goals. We look forward to sharing more on this and our updated targets for our ESG focus areas at our virtual Investor Day to be held on 8 December.

Pasadena to transport carbon for more than 20 oil sands operations to a safe storage hub. In addition, the pathways teams are analyzing other technology opportunities to address G. H G emissions in the oil sands.

Meanwhile, we're working with both levels of government to ensure the necessary policy and financial support is in place to achieve the pathways vision and help Canada achieve its climate and economic recovery goals.

We look forward to sharing more on this in our updated targets for our ESG focus areas at our virtual Investor day to be held on December eight.

Turning now to our financial results for the quarter, our strong operating performance combined with rising commodity prices to drive solid financial outcomes and well. It is true that a rising tide lifts all boats synovus maximize the opportunity by increasing oil sands production and optimizing our pipeline capacity.

Alex Pourbaix: Turning now to our financial results for the quarter. Our strong operating performance combined with rising commodity prices to drive solid financial outcomes. While it's true that a rising tide lifts all boats, Cenovus maximized the opportunity by increasing oil sands production and optimizing our pipeline capacity to make the most of higher prices. This supported the generation of cash from operating activities of CAD 2.1 billion, adjusted funds flow of CAD 2.3 billion, and free funds flow of CAD 1.7 billion during the quarter. We also took the opportunity to deleverage as quickly as possible.

To make the most of higher prices. This supported the generation of cash from operating activities of $2 1 billion adjusted funds flow of $2 3 billion in free funds flow of $1 7 billion. During the quarter. We also took the opportunity to deleverage as quickly as possible as promised.

Alex Pourbaix: As promised, we applied free funds flow to the balance sheet, and we completed strategic financing transactions in the quarter aimed at deleveraging. These transactions extended the overall maturities profile as we executed public offerings of 10- and 30-year notes at attractive rates while repurchasing a portion of our near-term maturity notes. These transactions supported deleveraging and helped reduce financing risk in the near term. In addition, we leveraged the strong market to progress several asset sales during the quarter. This included the sale of our shares of Headwater Exploration for net proceeds of nearly CAD 220 million, announced in the quarter with proceeds received shortly after quarter end. We also closed previously announced asset sales in the East Clearwater and Kaybob areas for combined gross proceeds of about CAD 110 million.

We applied free funds flow to the balance sheet, and we completed strategic financing transactions in the quarter aimed at deleveraging. These transactions extended the over all maturities profile as we executed public offerings of 10, and 30 year notes at attractive rates, while repurchasing a portion of our near.

Term maturity notes these transactions supported deleveraging and helped to reduce financing risk in the near term.

In addition, we leveraged the strong market to progress several asset sales during the quarter. This included the sale of our shares of headwater explore exploration for net proceeds of nearly 220 million announced in the quarter with proceeds received shortly after quarter end. We also closed <unk>.

Obviously announced asset sales in the east Clearwater and K Bob areas for combined gross proceeds of about $110 million. All of this has led to synovus deleveraging faster than anyone could have imagined a year ago. We finished the third quarter with net debt of about 11 billion a reduction of $1 4 billion since the.

Alex Pourbaix: All of this has led to Cenovus deleveraging faster than anyone could have imagined a year ago. We finished Q3 with net debt of about CAD 11 billion, a reduction of CAD 1.4 billion since the end of Q2. Today, we are very close to achieving our interim net debt target of below CAD 10 billion. Which takes me to our shareholder returns announcement. We've been clear that increase in shareholder returns would be our first priority upon reaching our interim net debt target. Delivering on that commitment, our board has approved doubling the dividend on our common shares effective for the Q4 dividend to CAD 0.14 per share.

The end of the second quarter and today, we are very close to achieving our interim net debt target of below 10 billion.

Which takes me to our shareholder returns announcements, we've been clear that increase in shareholder returns would be our first priority upon reaching our interim net debt target delivering on that commitment. Our board has approved doubling the dividend on our common shares effective for the fourth quarter dividend to <unk> 14.

The 14th.

Per share.

In addition, the board has approved filing of an N CIB application with the T. S X for a share buyback program of.

Alex Pourbaix: In addition, the board has approved filing of an NCIB application with the TSX for a share buyback program of up to about 150 million common shares, which we expect to commence following achievement of net debt below CAD 10 billion. We'll provide more context on how we think about capital allocation at our virtual Investor Day on 8 December. However, as we've said previously, when we're below CAD 10 billion net debt, you should expect to see a more balanced approach to free funds flow application between further deleveraging and shareholder returns. At current commodity prices, we would expect to be able to execute our buyback plan in 2022 while achieving net debt under CAD 8 billion around mid-year. This disciplined approach will also support our commitment to achieving mid triple B investment grade ratings over time.

Of up to about 150 million common shares, which we expect to commence following achievement of net debt below 10 billion.

We will provide more context on how we think about capital allocation at our virtual Investor day on December eight however, as we've said previously when were below 10 billion net debt you should expect to see a more balanced approach to free funds flow application between further deleveraging and shareholder returns and at current commodity.

The prices, we would expect to be able to execute our buyback plan in 2022, while achieving net debt under 8 billion around mid year. This disciplined approach will also support our commitment to achieving mid triple B investment grade ratings over time.

In closing this quarter is once again reinforce the strength of our business, including the benefits of our best in class assets and reliable operating performance as well as our financial results driven by those operations.

Alex Pourbaix: In closing, this quarter has once again reinforced the strength of our business, including the benefits of our best-in-class assets and reliable operating performance, as well as the financial results driven by those operations. I think it has also once again demonstrated this company's discipline to delivering on our goals. With that, we're happy to take your questions.

I think it is also once again demonstrated this company's discipline to delivering on our goals. So with that we're happy to take your questions.

Ladies and gentlemen, as a reminder, you can join the queue to ask a question by pressing star. One we will now begin the question and answer session and go to the first caller.

Operator 2: Ladies and gentlemen, as a reminder, you can join the queue to ask a question by pressing star one. We will now begin the question and answer session and go to the first caller. We'll take our first question from Greg Pardy with RBC.

Operator: Ladies and gentlemen, as a reminder, you can join the queue to ask a question by pressing star one. We will now begin the question and answer session and go to the first caller. We'll take our first question from Greg Pardy with RBC.

We'll take our first question from Greg Pardy with RBC.

Yeah. Thanks, Good morning, Thanks for the rundown on Alex couple of questions for you.

Greg Pardy: Yeah, thanks. Good morning. Thanks for the rundown, Alex. A couple of questions for you. The first one is probably just surrounding your appetite for organic investment, you know, once you hit that CAD 8 billion target. Let's just say that that's kind of mid-next year. How does the modus operandi begin to change at Cenovus?

First one is is probably just surrounding your.

Your appetite for organic investment you know once you hit that $8 billion target, let's just say that that's kind of mid next year. How does the how does the motorcycle Ryan may begin to change it at this.

You know I think when when you talk about organic investment, Greg and I think I've talked about this a little bit at the last quarter, but you know I think one of the things in and I might I might at some point turn this over to John to talk a little bit too, but one of the things that I think has been.

Alex Pourbaix: You know, I think when you talk about organic investment, Greg, and I think I talked about this a little bit at the last quarter. You know, I think one of the things, and I might at some point turn this over to John to talk a little bit too, but you know, one of the things that I think has been a huge positive out of the Husky transaction is we are finding very significant opportunities to grow production, improve our profitability. These are largely what I would call small or smaller greenfield or brownfield type opportunities coming out of our existing asset base. You know, I think that's going to be a continued focus area with us.

Our huge positive out of the out of the Husky transaction is we are finding very very significant opportunities.

To grow production and improve our profitability and Oh. These are largely what I would call small.

Smaller greenfield or brownfield type opportunities coming out of our existing asset base and so I you know I think that that's going to be a continued focus area with us. The other thing I would say before I turn it over to John as you know.

Alex Pourbaix: The other thing I would say before I turn it over to John is, you know, with the advances the company has made in our operating strategies, you know, it's just really unlikely, I think, that you're gonna see this company announcing any large scale greenfield developments anytime in the near to medium term. You know, a great example I think would be Narrows Lake. You know, that was a project that for decades was thought of in this company. Frankly, construction started on it as a standalone greenfield facility.

With with the advances the company has made in our operating strategies.

It's just really really unlikely I think that youre going to see this company announcing any large large scale greenfield.

Developments any anytime in the near to medium term. We if you are a great example, I think would would be narrows Lake that was a project that for for decades was sought thought of in this company and frankly construction started on it as a standalone greenfield.

<unk> facility and we've made so many advances in our ability to move a motion in steam long distances that we are going to develop narrows lake, but it's really going to be developed as pads at narrows Lake a with the emulsion being brought back to Christina Lake for processing and treating then that those those.

Alex Pourbaix: We've made so many advances in our ability to move emulsion and steam long distances that we are gonna develop Narrows Lake, but it's really gonna be developed as pads at Narrows Lake, with the emulsion being brought back to Christina Lake for processing and treating then. Those kind of advances just give us an opportunity to massively reduce the capital associated with these sorts of facilities. Maybe I'll turn it over to John. I know he has some thoughts.

Advances just give us an opportunity to massively reduce the capital associated with these these sorts of facilities, but maybe I'll turn it over to John I know he has some thoughts.

Yeah. Good morning, Greg, It's John and maybe you know one of things that I would just remind you is just some of the principles we have around organic investment in our core.

[Company Representative] (Cenovus Energy): Yeah. Good morning, Greg. It's John. Maybe, you know, one of the things that I would just remind you is just some of the principles we have around organic investment. You know, a couple of those that are core to this company are, you know, any investment that we put into the ground has to return a cost of capital return at $45 WTI or $1.70 gas.

john john: Yeah. Good morning, Greg. It's John. Maybe, you know, one of the things that I would just remind you is just some of the principles we have around organic investment. You know, a couple of those that are core to this company are, you know, any investment that we put into the ground has to return a cost of capital return at $45 WTI or $1.70 gas.

Couple of those that are core to this company are.

You know any investment that we put into the ground has to return our cost of capital.

Return at $45 W T I or <unk> or $1 70 gas.

And then secondly, I guess reminds you that you know in terms of sustaining capital you know a good run rate for this company is still in that $2 4 billion range, but one of the things that we've been really looking at particularly with the asset base that we've inherited and then again with our own assets is what are the real short cycle opportunities.

[Company Representative] (Cenovus Energy): I'd secondly, I guess, remind you that, you know, in terms of sustaining capital, you know, a good run rate for this company is still in that CAD 2.4 billion range. One of the things, you know, that we've been really looking at, particularly with the asset base that we've inherited, and then again, with our own assets, is what are the real short cycle opportunities that we have, you know, that don't require a lot of capital and generate, you know, cost of capital returns well and above $45 that we have available to us. You're seeing some of those this quarter in Foster Creek and Christina. We're working in our deep basin assets, as well as our heavy oil assets to, you know, identify even more of those kind of opportunities.

john john: I'd secondly, I guess, remind you that, you know, in terms of sustaining capital, you know, a good run rate for this company is still in that CAD 2.4 billion range. One of the things, you know, that we've been really looking at, particularly with the asset base that we've inherited, and then again, with our own assets, is what are the real short cycle opportunities that we have, you know, that don't require a lot of capital and generate, you know, cost of capital returns well and above $45 that we have available to us. You're seeing some of those this quarter in Foster Creek and Christina. We're working in our deep basin assets, as well as our heavy oil assets to, you know, identify even more of those kind of opportunities.

We have.

You know that don't require a lot of capital and generate you know cost of capital returns well above our $45 that we have available to us and you're seeing some of those this quarter and Foster Creek and Christina.

And we're working in our in our deep basin assets as well as our our heavy oil assets to identify even more of those kind of opportunities and we think we've built a pretty good.

[Company Representative] (Cenovus Energy): We think we've built a pretty good backlog of those, you know, kind of short cycle, low capital, brownfield type debottlenecking opportunities that we have that are really high return. You know, I would say that, you know, we've been pretty clear on what we're doing on our capital going forward, and you shouldn't expect a left-hand turn, you know, from what we've talked about before, which is largely a sustaining capital budget with some, you know, marginal increases going forward. We have lots of opportunities, I think, on or across the asset base on that kind of a paradigm.

john john: We think we've built a pretty good backlog of those, you know, kind of short cycle, low capital, brownfield type debottlenecking opportunities that we have that are really high return. You know, I would say that, you know, we've been pretty clear on what we're doing on our capital going forward, and you shouldn't expect a left-hand turn, you know, from what we've talked about before, which is largely a sustaining capital budget with some, you know, marginal increases going forward. We have lots of opportunities, I think, on or across the asset base on that kind of a paradigm.

Backlog of those kind of short cycle low capital brownfield type debottlenecking opportunities.

Opportunities that we have that are really high returns so.

No I would say that.

We've been pretty clear on what we're doing on our capital going forward and you shouldn't expect a left hand turn.

You know from what we've talked about before which is largely a sustaining capital budget with some.

Marginal increases going forward, but we have lots of opportunities I think on or across the asset base on that kind of a paradigm.

Okay terrific. Thanks for thanks for clarifying that and then.

Greg Pardy: Okay. Terrific. Thanks for clarifying that. Just on the non-core asset side, I know you indicated in the release, you know, you've done around CAD 440 million. You've got lots of irons in the fire. What I'm curious about is whether the sharp escalation in oil prices is actually making, you know, non-core asset sales harder from a bid-ask perspective. Any color around the processes underway would be great.

Just on the noncore assets that I know you indicated in the release you know you've done around 440 million you've got lots of irons in the fire what I'm curious about is whether the sharp escalation oil prices actually making noncore asset sales harder from a from a bid ask perspective, but any color around the processes underway would be great.

No I mean, I I I I My general observation is that sort of trend to higher higher commodity prices has kind of been with us for quite some time and I think it's actually helped us in in terms of creating some competitive tension for those those non those noncore assets.

Alex Pourbaix: No, I mean, my general observation is, you know, that sort of trend to higher commodity prices has kind of been with us for quite some time. I think it's actually helped us in terms of creating some competitive tension for those non-core assets. You know, I think, you know, when you're in these processes, I would say, you know, as commodity prices rise, our expectation of value commensurately rises. You know, I'm quite happy at the state that we are at with our non-core asset divestiture program.

And I think when you know it it is you're in these processes I would say.

You know as commodity prices rise our expectation of value commensurately rises.

I'm quite happy at the state that are that we are at with with our noncore asset divestiture program.

Okay. Thanks, very much Alex Thanks, John Yes. Thanks.

Greg Pardy: Okay. Thanks very much, Alex. Thanks, John.

Thanks, Greg.

Alex Pourbaix: Yeah, thanks, Greg.

Well take our next question from Menno.

Operator 2: We'll take our next question from Menno Hulshof with TD Securities.

Operator: We'll take our next question from Menno Hulshof with TD Securities.

With TD Securities.

Thanks, everybody.

Menno Hulshof: Thanks and good morning, everyone. I'll start with a question on the balance sheet. Like Greg, I see you getting to rough numbers, CAD 8 billion of net debt towards the middle of next year. My question is, can we assume that the plan is to reset that to CAD 6 billion? More generally, what is the end game for the balance sheet beyond a mid-triple-B rating? How are you balancing that against buyback activity?

Good morning, everyone, just I'll start with a question on the balance sheet.

And like Gregg I see you're getting too rough numbers 8 billion of net debt towards the middle of next year. So my question is can we assume that the plan is to reset that $2 billion to $6 billion and more generally what is the end game for the balance sheet beyond a mid triple B I G rating and how are you balancing that against our buyback.

Activity.

Well I think in in terms of ultimately where we want to get to them and we're doing we're doing a lot of work on that.

Alex Pourbaix: Well, I think in terms of ultimately where we wanna get to, we're doing a lot of work on that. You know, right now, you know, our kind of professed target is CAD 8 billion. As you make a point, Menno, you know, I think if you know, you take a look at your model, you take a look at prevailing market prices, you can see us hitting that, you know, sometime mid-next year, and that's without giving any credence to asset divestitures. We think that there's an opportunity to hit that target in very short order.

Right now.

[laughter] are kind of professed target is is a billion and as you make a point mento.

I think if if you take a look at your model you take a look at prevailing market prices you you can see us hitting that.

Sometime sometime mid next year, and and that's without giving any credence to asset divestitures. So we we think that there's an opportunity to hit that target are in very very short order and I think from from my perspective are.

Alex Pourbaix: I think from my perspective, you know, that the one thing I've learned about this business in my four years running the company is a pristine balance sheet, and John calls it the fortress balance sheet, is incredibly important as part of our strategy. I think at eight, we're in pretty good shape. But you know, you won't see me cry any tears if at moments of time we're below that number. We'll probably be able to give a little more guidance as we head into our investor day in December. Anything to add on that, Jeff?

The one thing I've learned about this business in my four years running the company is a pristine balance sheet and John calls it the fortress balance sheet is incredibly important as part of our strategy I think at eight we're in a we're in pretty pretty good shape, but you know you you won't.

See me crying tears, if fed moments of time, where we're below that number and we'll probably be able to give a little more guidance as we head into our investor day in December.

Anything to add on that Jeff.

No I think you hit it Alex and I.

[Company Representative] (Cenovus Energy): No, I think you hit it, Alex. I, you know, in the long term, I think we feel that mid triple B is really the sweet spot. We've always articulated it as, you know, CAD 8 billion as more of a ceiling, but we wanna hold that through the cycle. You know, between CAD 10 billion and 8 billion, we'll be balanced between shareholder returns and deleveraging. Then we'll, you know, rebalance from there, sub CAD 8 billion. Just to note in the quarter, we did go down, our net debt did go down CAD 1.4 billion. But I think as you see that, to Alex's point, we're very conscious of balancing liquidity, maturities, and de-risking the portfolio.

john john: No, I think you hit it, Alex. I, you know, in the long term, I think we feel that mid triple B is really the sweet spot. We've always articulated it as, you know, CAD 8 billion as more of a ceiling, but we wanna hold that through the cycle. You know, between CAD 10 billion and 8 billion, we'll be balanced between shareholder returns and deleveraging. Then we'll, you know, rebalance from there, sub CAD 8 billion. Just to note in the quarter, we did go down, our net debt did go down CAD 1.4 billion. But I think as you see that, to Alex's point, we're very conscious of balancing liquidity, maturities, and de-risking the portfolio.

In the long term I think we feel the mid Triple B is is really the sweet spot and and we've always articulated is $8 billion is more of a ceiling, but we want to hold that through the cycle and you know between 10 and eight will be balanced between shareholder returns and deleveraging and then will you know rebounds from there are sub eight and just to note in the quarter. We did go.

Down our net debt did go down 1.4 billion, but I think as you see that to Alex's point is we're very conscious of balancing liquidity maturities and derisking. The portfolio. So we took the opportunity here in Q3 really to de risk that and if you look at it really extend our bond term viable three years and really balance all of that before.

[Company Representative] (Cenovus Energy): We took the opportunity here in Q3 really to de-risk that, and if you look at it, really extend our bond term by about three years and really balance out that portfolio and de-risk near-term maturities as well.

john john: We took the opportunity here in Q3 really to de-risk that, and if you look at it, really extend our bond term by about three years and really balance out that portfolio and de-risk near-term maturities as well.

Oh and de risk, our near term maturities as well.

Terrific. Thanks for that and my second question I believe is for John John John.

Menno Hulshof: Terrific. Thanks for that. My second question, I believe is for John. John, I think you talked about rethinking some of your non-operated JVs within your refinery portfolio on the last call. I think your wording was whether they were held within the right vehicle. Do you have any updated thoughts on that? How much of a priority is that process?

You've talked about rethinking some of your non operated Gpus within a refinery portfolio on the on the last call and I think your wording was whether they were held within the REIT vehicle do you have any updated thoughts on that and how much of a priority is that that process.

You know I think Menno, we're always challenging our thinking on that and we're always.

[Company Representative] (Cenovus Energy): You know, I think, Menno, we're always challenging our thinking on that. We're always, you know, I think progressing, you know, how we're thinking about the downstream and, you know, whether non-operated joint ventures are the right vehicles to hold our refining assets. What I would tell you during the quarter is we've been pretty focused on our knitting, and we've talked about synergy capture and deleveraging, getting our dispositions completed. You know, it's something we continue to think about, but, you know, I'd say in the short term, our priorities are pretty clear around the balance sheet, managing costs and ensuring that we exit this year, you know, where we wanna be on both of those counts.

john john: You know, I think, Menno, we're always challenging our thinking on that. We're always, you know, I think progressing, you know, how we're thinking about the downstream and, you know, whether non-operated joint ventures are the right vehicles to hold our refining assets. What I would tell you during the quarter is we've been pretty focused on our knitting, and we've talked about synergy capture and deleveraging, getting our dispositions completed. You know, it's something we continue to think about, but, you know, I'd say in the short term, our priorities are pretty clear around the balance sheet, managing costs and ensuring that we exit this year, you know, where we wanna be on both of those counts.

I think progressing how are.

We're thinking about downstream.

Whether non operated joint ventures, or the right vehicles to hold our refining assets in what I would tell you during the quarter as we've been pretty focused on our knitting and we've talked about synergy capture and deleveraging.

Getting our dispositions.

Completed so.

It's something we continue to think about but you know what I'd say in the short term our priorities are pretty clear.

The balance sheet, managing costs and ensuring that we exit this year, where we wanted to be on both of those counts.

Thanks, a lot John.

Operator 2: Thanks a lot, John. We'll take our next question from Neil Mehta with Goldman Sachs.

Operator: Thanks a lot, John. We'll take our next question from Neil Mehta with Goldman Sachs.

Okay.

Yeah.

And we'll take our next question from Neil Mehta with Goldman Sachs.

Hi, Good morning. This is carly on for Neil Thanks for taking the questions and congrats on the good quarter.

[Analyst] (Goldman Sachs): Hi, good morning. This is Carly on for Neil. Thanks for taking the questions, and congrats on the good quarter. The first one was just around the buyback, and great to see the incremental capital returns announced there. Can you just talk a little bit about how you're thinking about the pace of the buyback going forward as we move into 2022?

The first one was just around the buyback and great to see that the incremental capital returns announced there can you just talk a little bit about how you're thinking about the pace of the buyback going forward as we move into 'twenty two.

Sure I can.

Alex Pourbaix: Sure, I can hopefully help a little bit. I'm not sure the answer will be completely satisfactory, but you know, I always say we endeavor always to do exactly what we say we're going to do. You'll recall that I have been saying that we will not buy back shares till we hit our CAD 10 billion net debt target. People should not think of that as a 2022 exercise. Our reaching CAD 10 billion is imminent. At that point, I'll feel that we have fulfilled that commitment in the market. You know, I'm not sure I think everybody should understand we are very serious about the share buyback.

Hopefully I can help a little bit I'm not sure the answer will be completely satisfactory, but.

I you know I always say Ah, we endeavor always to do exactly what we say, we're going to do and you'll recall that I have been saying that we will not buy back shares until we hit our $10 billion net debt target people should not think of that as a 2022.

Exercise.

Our reaching 10 billion is imminent.

And at that point, all feel that we have fulfilled that that commitment.

In in the market.

I you know I I.

I'm not sure I I think everybody should understand we are very very serious.

About the share buyback, we wouldnt have announced it if we werent and we've announced an intention to complete that share buyback by the end of 2022.

Alex Pourbaix: We wouldn't have announced it if we weren't, and we've announced an intention to complete that share buyback by the end of 2022. You know, beyond that, you know, there's obviously, you know, gonna be puts and takes in market conditions. You know, it is our intention to execute it, you know, by the end of 2022. I don't think I'm able to give you much more granularity beyond that other than it's a pretty big number, it's a pretty large commitment, and it's gonna take a while to do it, so you can expect that we'll be pretty active on it.

Beyond that you know there there, there's obviously going to be puts and takes and market conditions, but you know I I I. It is our intention to execute it in.

By the end of 2022 and I don't think I'm I'm able to give you much more granularity b beyond that other than it's a pretty big number it's a pretty large commitment and it's going to take a while to do it. So you can expect that there will be pretty active on it.

Great. That's helpful. Thank you and then the follow up is just kind of around the assets you guys have made a lot of progress.

[Analyst] (Goldman Sachs): Great. That's helpful. Thank you. The follow-up was just kind of around the assets. You know, you guys have made a lot of progress at assets like Lloyd since applying some of the Cenovus best practices to those operations. Just wanted to get your latest sense on if there are any other opportunities that you've identified to drive optimization at the legacy Husky assets.

Assets like Boyd since applying some of the synovus best practices.

Those operations and just wanted to get your latest sense on if there are any other opportunities that you've identified.

To drive optimization at the legacy Husky assets.

Yes. This is Mary Rumsey here around the upstream part of this portfolio. Yes, we're very pleased we've been applying our foster Creek and.

Norrie Ramsay: Yep, this is Norrie Ramsay here. I run the Upstream part of this portfolio. Yep, we're very pleased. We've been applying our Foster Creek and Christina Lake processes over to Lloyd. We actually see we're just scratching the surface at the moment. We see lots and lots of opportunities. We've been able to apply them at Lloyd firstly. That's been the priority. We've been spending capital there, and we've been reducing the spend rate, which has been really good. We've also been doing a lot of surveillance of the wells, and we see a huge portfolio of opportunities, and we intend to apply that across the other portfolios to Sunrise and Tucker, which haven't been spending capital this year.

Christina Lake processes over to Lloyd we actually see we're just scratching the surface at the moment, we see lots and lots of opportunities we've been able to apply them at Lloyd Firstly, that's been the priority we've been spending capital there and we've been reducing the spend rate, which has been really good most of them into the motor surveillance of the wells.

And we see a huge portfolio of opportunities and we intend to apply that across the other portfolios to sunrise and Tucker.

Jumping spending capital this year and as we go into a planned program next year, we see basically applying goes F CCL processes to to leverage the same magnitude of advantage going forward.

Norrie Ramsay: As we go into our planned program next year, we see basically applying those FCCL processes to leverage the same magnitude of advantage going forward.

Okay.

Yeah. This is John I'll, just add on to that too I think we see a lot of opportunities even beyond the heavy oil assets.

[Company Representative] (Cenovus Energy): Yeah, it's John. I'll just add on to that too. I think we see a lot of opportunities even beyond the heavy oil assets. You know, in the conventional business, I think we've also been able to work assets like Ansell Well Ridge, where, you know, we've again applied sort of our drilling techniques to that too, you know, I think the benefit of the company. You know, the other thing that we've hinted at, and one of the reasons that we really like this merger, was the overall integration opportunities that we have with the upstream and the downstream that we acquired. We still think that there is, you know, integration opportunities that we will have at Lloydminster, where, you know, we acquired an upgrader and an asphalt refinery.

john john: Yeah, it's John. I'll just add on to that too. I think we see a lot of opportunities even beyond the heavy oil assets. You know, in the conventional business, I think we've also been able to work assets like Ansell Well Ridge, where, you know, we've again applied sort of our drilling techniques to that too, you know, I think the benefit of the company. You know, the other thing that we've hinted at, and one of the reasons that we really like this merger, was the overall integration opportunities that we have with the upstream and the downstream that we acquired. We still think that there is, you know, integration opportunities that we will have at Lloydminster, where, you know, we acquired an upgrader and an asphalt refinery.

The conventional business you know I think we've also been able to work assets like answer well rich where.

Again applied sort of our drilling techniques to that too.

I think the benefit of the company and then the other thing that we've hinted at in one of the reasons that we really like this merger was the overall integration opportunities that we have with the upstream and the downstream that we acquired.

And we still think that there is you know integration opportunities that we will have in Lloyd mentioned here, where you know we acquired an upgrader asphalt.

Nashville refinery and then remember in the midst of rebuilding a superior which is a small refinery, but it will eat the asset or eat the molecules.

[Company Representative] (Cenovus Energy): Remember we're in the midst of rebuilding Superior, which is, you know, a small refinery, but it will eat the acid or eat the molecules, you know, that we produce here in Western Canada. You know, we think there's opportunities across the portfolio to improve, you know, the operating metrics in the upstream, but longer term, we also think there's integration opportunities between the upstream and the downstream that we've acquired.

john john: Remember we're in the midst of rebuilding Superior, which is, you know, a small refinery, but it will eat the acid or eat the molecules, you know, that we produce here in Western Canada. You know, we think there's opportunities across the portfolio to improve, you know, the operating metrics in the upstream, but longer term, we also think there's integration opportunities between the upstream and the downstream that we've acquired.

We produce here in Western Canada, So we think there's opportunities across the portfolio to improve the.

<unk> metrics in the upstream but longer term. We also think there's integration opportunities between the upstream and the downstream that we've acquired.

Yeah, and it's Alex maybe I'd I'd make.

Alex Pourbaix: Yeah, it's Alex. I'd just make one comment, and I think both John and Norrie are probably too bashful to say this, but I was looking on the Alberta Energy Regulator's website the other day and saw that the top 15 oil wells in the province are all Cenovus wells. That is a testament to the operating techniques and strategy that Norrie's team bring to that upstream, and Drew's team on the conventional, very similar.

Just make one comment and I think both John and Lori or are probably too bashful to say this but I was looking on our energy regulator in Alberta is website. The other day and saw that the top 15 oil wells in the province are all Synovus wells and that is a testament to the operating.

Techniques and strategy that northeast team bring to that upstream and drew his team on the conventional very very similar.

That's great I appreciate the color.

[Analyst] (Goldman Sachs): That's great. Appreciate the color.

Thanks.

Alex Pourbaix: Thanks.

And we'll take our next question from Phil Gresh with J P. Morgan.

Operator 2: We'll take our next question from Phil Gresh with JP Morgan.

Operator: We'll take our next question from Phil Gresh with JP Morgan.

Yes, hi, good morning.

Phil Gresh: Yes. Hi, good morning. Thanks for all the updates today around capital allocation. I did have one follow-up with respect to the dividend piece of the plan moving forward. John, just any thoughts you could share around how you think about the right framework for dividend as a percentage, as a capital allocation, whether it's you're focused on a breakeven or a percentage of cash flow or something like that, at perhaps on a longer term basis?

Thanks for all the updates today around capital allocation I did have one follow up with respect to the dividend piece.

The plan moving forward John just any thoughts you could share around how you think about the right framework for for dividend as a as a percentage of the capital allocation, whether it's your focus on a break even or a percentage of cash flow or something like that perhaps on a longer term basis.

Well I can give you my thoughts and remember this isn't my decision in isolation.

[Company Representative] (Cenovus Energy): Well, I can give you my thoughts, Phil, but remember, this isn't my decision in isolation. This is something that the board thinks about pretty regularly. You know what I would say, and we had a long discussion around this at the board meeting and you know, lots of views. Our view around the dividend is that it needs to be sustainable and paid out of free cash flow at $45. You know, under that scenario, this company still has lots of room to grow the dividend. Similarly, we would be of the view that share buybacks need to happen when the share price isn't reflecting its net asset value at mid-cycle pricing.

john john: Well, I can give you my thoughts, Phil, but remember, this isn't my decision in isolation. This is something that the board thinks about pretty regularly. You know what I would say, and we had a long discussion around this at the board meeting and you know, lots of views. Our view around the dividend is that it needs to be sustainable and paid out of free cash flow at $45. You know, under that scenario, this company still has lots of room to grow the dividend. Similarly, we would be of the view that share buybacks need to happen when the share price isn't reflecting its net asset value at mid-cycle pricing.

The board thinks about pretty regularly.

But what do you know what I would say and we had a long discussion.

Around this at the board meeting and you know lots of views.

Our view around the dividend is that it needs to be sustainable and pay it out of free cash flow at $45. So under that scenario and this company still has lots of room.

To grow the dividend.

Similarly, we would be of the view that share buybacks need to happen when the share price isn't reflecting its net asset value at mid cycle pricing.

And when we looked at the shareholder returns that we wanted to implement.

[Company Representative] (Cenovus Energy): When we looked at, you know, the shareholder returns that we wanted to implement in this quarter and recognize this is a point in time, you know, this isn't the definitive discussion we're gonna have on shareholder returns. We felt that there was much more value to the shareholder in us buying back shares at these kind of valuations relative to increasing the dividend even farther. What I would also say is that, you know, at these kind of commodity prices, this company's generating, you know, CAD 600 to 700 million of free cash flow a month. These discussions on how we think about shareholder returns are really gonna be dependent on that framework that I talked about, as well as sort of price movements of our equity in the future.

john john: When we looked at, you know, the shareholder returns that we wanted to implement in this quarter and recognize this is a point in time, you know, this isn't the definitive discussion we're gonna have on shareholder returns. We felt that there was much more value to the shareholder in us buying back shares at these kind of valuations relative to increasing the dividend even farther. What I would also say is that, you know, at these kind of commodity prices, this company's generating, you know, CAD 600 to 700 million of free cash flow a month. These discussions on how we think about shareholder returns are really gonna be dependent on that framework that I talked about, as well as sort of price movements of our equity in the future.

In this quarter and recognize this is a point in time.

Susan the definitive discussion we're going to have on shareholder returns. We felt that there was much more value to the shareholder in us buying back shares at these kind of valuations relative to increasing the dividend even farther.

What I would also say is that you know at these kind of commodity prices in this company's generating 6% to $700 million of free cash flow a month. So you know these discussions on how we.

About shareholder returns are really going to be dependent on that.

Framework that I talked about as well as sort of price movements of our equity in the future.

So I think this will be you know.

[Company Representative] (Cenovus Energy): you know, I think this will be, you know, plenty of room for future discussion on this, but this is where we are today. This is kind of the point in time and how we think we can maximize the return to the shareholders.

john john: you know, I think this will be, you know, plenty of room for future discussion on this, but this is where we are today. This is kind of the point in time and how we think we can maximize the return to the shareholders.

Plenty of room for future discussion on this but this is where we are today and this is kind of the point in time and how we think we can maximize the return to the shareholders.

Got it that makes a lot of sense.

Phil Gresh: Got it. That makes a lot of sense. In terms of CapEx, as you look at 2022, you know, do you think you can stick with the same kind of sustaining framework with maybe a little bit of growth capital and superior or, you know, any inflation pressures or other things that we should be thinking about?

In terms of cut.

Capex.

As you look at 2022.

Do you think you can stick with us.

At the same kind of sustaining framework with maybe a little bit of growth capital and superior or any inflation pressures or other things that we should be thinking about.

Yes, I think I think we've been really clear fill the $2 4 billion is the right number across this asset base to sustain production.

[Company Representative] (Cenovus Energy): Yeah. I think we've been really clear, Phil, that CAD 2.4 billion is the right number across this asset base to sustain production in and around sort of 775,000 to 800,000 barrels a day, as well as keep the downstream in that safe and stable condition. That continues to be a good run rate, and you can hold that for the foreseeable future. We've also been pretty clear that over the last few years, we have underinvested in the upstream, and there is some catch up to do. It's not something that's, as I mentioned before, a left-hand turn from where we've been. There will be some incremental capital to catch up on some underspending that we've had in the upstream.

john john: Yeah. I think we've been really clear, Phil, that CAD 2.4 billion is the right number across this asset base to sustain production in and around sort of 775,000 to 800,000 barrels a day, as well as keep the downstream in that safe and stable condition. That continues to be a good run rate, and you can hold that for the foreseeable future. We've also been pretty clear that over the last few years, we have underinvested in the upstream, and there is some catch up to do. It's not something that's, as I mentioned before, a left-hand turn from where we've been. There will be some incremental capital to catch up on some underspending that we've had in the upstream.

In and around sort of 775 to 800000 barrels a day as well as keep the downstream in that safe and stable condition that continues to be a good run rate and.

And you can hold that for the foreseeable future. We've also been pretty clear that over the last few years, we have underinvested in the upstream and there is some catch up to do so it's not something that's you know as I mentioned before a left hand turn from where we've been.

But there will be some incremental capital to catch up on some underspending than we've had in the upstream and and as you mentioned, we still have to finish superior.

[Company Representative] (Cenovus Energy): As you mentioned, we still have to finish superior, you know, and we think there'll be, you know, CAD 200 to 300 million more that we're gonna have to spend in 2022 to finish that project. Again, we believe that most of that capital will be covered off with insurance proceeds. When we do release the budget, Kam, I think we're in December, around 5 December, of this year, you'll see a full picture, but nobody should be surprised. You know, that'll be very consistent with what we've talked about through this year and, you know, what we've talked about since we made the acquisition of Husky.

john john: As you mentioned, we still have to finish superior, you know, and we think there'll be, you know, CAD 200 to 300 million more that we're gonna have to spend in 2022 to finish that project. Again, we believe that most of that capital will be covered off with insurance proceeds. When we do release the budget, Kam, I think we're in December, around 5 December, of this year, you'll see a full picture, but nobody should be surprised. You know, that'll be very consistent with what we've talked about through this year and, you know, what we've talked about since we made the acquisition of Husky.

And we think there'll be two to 300 million more.

We're gonna have to spend in 2022 to finish that project, but again, we believe.

But most of that capital will be covered off with insurance proceeds. So when we do release the budget camera I think we are in December around December five.

This year, you'll see it you'll see a full picture, but nobody should be surprised.

It'll be very consistent with what we've talked about through this year.

What we've talked about since we made the acquisition of Husky.

Got it and then just on the superior proceeds.

Phil Gresh: Got it. Then just on the superior proceeds, is there a way to think about the cadence of what has been spent versus what has been collected so far? Obviously, there will be the spend next year and the related collections for that piece, but is there any kind of additional catch up that we need to be thinking about relative to what has already been spent?

Is there a way to think about the cadence of.

What has been spent versus what has been collected so far obviously there'll be spent next year and their related collections for that piece, but is there any kind of additional catch up.

We need to be thinking about relative to what has already been spent.

Yeah.

[Company Representative] (Cenovus Energy): It's Jeff here. There will be some catch up. I'll just give you some color. We brought in about $100 million in this past quarter. I would expect us to exceed that in Q4. You will see it at some point ratable here, lagging the spend. Then I think, you know, there will be a catch up here as we get into early part of next year with the insurance providers. That's just kind of where we're at. You know, we're a few hundred million in on both the PD and the business interruption recoveries to date. You know, as I said, we're about $100 million this past quarter.

jeff Hart: It's Jeff here. There will be some catch up. I'll just give you some color. We brought in about $100 million in this past quarter. I would expect us to exceed that in Q4. You will see it at some point ratable here, lagging the spend. Then I think, you know, there will be a catch up here as we get into early part of next year with the insurance providers. That's just kind of where we're at. You know, we're a few hundred million in on both the PD and the business interruption recoveries to date. You know, as I said, we're about $100 million this past quarter.

Jeff here, Yeah, there will be some catch up I'll just give you. Some color we brought in about 100 million USD in this past quarter I would expect us to exceed that in Q4, and so you will see it.

At some point ratable here lagging the spend and then I think you know there will be a catch up here as we get into early part of next year with the insurance providers, but that's just kind of where we're at in and we've you know we're a few hundred million dollars in on both the PD and the business interruption recoveries to date and you know and as I said, we were about 100 million this past quarter I expect.

[Company Representative] (Cenovus Energy): I expect to exceed that in Q4, and then we'll have some probably catch up into next year.

jeff Hart: I expect to exceed that in Q4, and then we'll have some probably catch up into next year.

To exceed that in Q4, and then we will have some probably catch up into next year.

Great. Thank you for that.

Phil Gresh: Great. Thank you for that.

Yeah.

Go to our next question from Dennis Fong with CIBC World markets.

Operator 2: Go to our next question from Dennis Fong with CIBC World Markets.

Operator: Go to our next question from Dennis Fong with CIBC World Markets.

Hi, good morning, and thanks for taking my questions I really appreciate the color you provided around capital allocation as well as the balance sheet.

Dennis Fong: Hi, good morning, and thanks for taking my questions. Really appreciate the color that you provided around capital allocation as well as the balance sheet. If possible, I'd like to switch over to the operational side a little bit more. We're obviously seeing a little bit of an energy crunch within Europe and Asia. Just wondering in terms of if you could give incremental context. I know you had a small comment there on the Indonesian assets, but how are you seeing Asia Pacific as a whole in terms of relative gas demand, just given obviously you guys garner quite strong pricing in that region and that asset generates a lot of free cash flow. Just curious as to what you guys are seeing with respect to Q4 and Q1 upcoming as well.

I'd like to switch over to the operational side, a little bit more where we're at.

Honestly seeing a little bit of and energy Crunch within Europe and Asia.

Just wondering in terms of if you could give incremental context I know you had.

A small comment there on the.

The Indonesian assets, but how are you seeing Asia Pac as a whole in terms of relative gas demand just given obviously you guys garner quite strong pricing in that region in that asset generates a lot of free cash flow. So just curious as to what you guys are seeing with respect to Q4 and Q1 upcoming as well.

Yeah, Dennis it's John what I know.

[Company Representative] (Cenovus Energy): Yeah, Dennis, it's John. What and, you know, Norrie may wanna chime in on this as well, but, you know, what I would remind you is that when we sell gas in Asia, whether it be with our South Pacific or South Asia assets just off the coast of China or Indonesia, this is all fixed price gas, and it's all governed by contracts that have minimum and maximum DCQs. You know, the volume and the price is really set by the contract. What we've been seeing, you know, and this should surprise nobody, I guess, is that the PRC has been maximizing the daily takes from the assets from the South China Sea, and we've had ratable takes off of Indonesia.

john john: Yeah, Dennis, it's John. What and, you know, Norrie may wanna chime in on this as well, but, you know, what I would remind you is that when we sell gas in Asia, whether it be with our South Pacific or South Asia assets just off the coast of China or Indonesia, this is all fixed price gas, and it's all governed by contracts that have minimum and maximum DCQs. You know, the volume and the price is really set by the contract. What we've been seeing, you know, and this should surprise nobody, I guess, is that the PRC has been maximizing the daily takes from the assets from the South China Sea, and we've had ratable takes off of Indonesia.

He may want to chime in on this as well, but you know what I would.

Mind, you is that when we sell gas in Asia, whether it would be.

Weather South Pacific herself.

Assets just off the coast of China, or Indonesia. This is all fixed price gas and it's all governed by contracts that have minimum and maximum D. C queues.

So you know the volume and the price is really set by the contract and what we've been seeing you know and this should surprise nobody I guess.

Is that the.

The PRC has been maximizing the daily takes from the assets from.

The South China Sea and we've had ratable takes half of Indonesia. So you know that's been a you know.

[Company Representative] (Cenovus Energy): You know, that's been a very good news story for us, and Alex has kind of talked about the amount of free cash flow those assets have generated, you know, through the past nine months and where we see that going through the end of the year. You know, one of the things we are working on is increasing our gas sales there. Looking for, you know, with our partner, CNOOC, to increase the amount of gas sales that we can take into China. We've made some progress on that. You know, nothing is imminent there, but you know, those are things that are opportunities for us to increase our gas sales.

john john: You know, that's been a very good news story for us, and Alex has kind of talked about the amount of free cash flow those assets have generated, you know, through the past nine months and where we see that going through the end of the year. You know, one of the things we are working on is increasing our gas sales there. Looking for, you know, with our partner, CNOOC, to increase the amount of gas sales that we can take into China. We've made some progress on that. You know, nothing is imminent there, but you know, those are things that are opportunities for us to increase our gas sales.

I think a very good news story for us and Alex has kind of talked about the amount of free cash flow of those assets have generated.

Through the past nine months, and where we see that going through the end of the year.

One of the things we are working on is increasing.

Our gas sales there so looking for.

You know with our partner <unk> to increase the amount of gas wells that we can take into.

And to China, and we've made some progress on that you know nothing is eminent there, but you know those are things that are opportunities for us to increase our gas sales. The other thing I would kind of remind you is that.

[Company Representative] (Cenovus Energy): The other thing I would kind of remind you is that, you know, although today we're selling somewhere between 8 to 10,000 barrels a day in Indonesia, we have three expansion projects underway that'll take that production up to about 20 to 22,000 barrels a day at the end of 2023. Those barrels, although it's a relatively small number, will generate about CAD 250 million of free cash flow a year. It's a very profitable business. It isn't volatile on pricing, and it's not volatile on the offtakes. It's all really governed by those gas contracts in South China.

john john: The other thing I would kind of remind you is that, you know, although today we're selling somewhere between 8 to 10,000 barrels a day in Indonesia, we have three expansion projects underway that'll take that production up to about 20 to 22,000 barrels a day at the end of 2023. Those barrels, although it's a relatively small number, will generate about CAD 250 million of free cash flow a year. It's a very profitable business. It isn't volatile on pricing, and it's not volatile on the offtakes. It's all really governed by those gas contracts in South China.

Although today, we're selling somewhere between eight to 10000 barrels a day in Indonesia, we have three expansion projects underway that will take that.

Production up to about 20 to 22000 barrels a day.

At the end of 2023.

Barrels, although that's a relatively small number will generate about $250 million of free cash flow a year. So it's a very profitable business. It isn't volatile on pricing and it's not volatile on the off takes its all really governed by.

By those gas contracts.

In South China.

I would just that Dennis.

Norrie Ramsay: I would just add, Dennis, our gas is rich, so it has high liquid content. We're actually seeing very strong Brent plus prices as we do our liquid liftings as well. Across that whole portfolio, gas and liquids, we're kind of maximizing as much as we can contractually do at the moment. We see that going forward for the rest of the year.

Augusta is a rich has liquid high liquid content and we're actually seeing very very strong Brent plus prices as you do a liquid lifting as well so across the whole portfolio.

Gas and liquids, what we're kind of maximizing as much as we can contractually due at the moment and we see that going forward for the rest of the year.

Great.

Dennis Fong: Great. I appreciate that color. Further, my second question here is also shifting over to more of the ESG side. You've outlined a couple carbon capture projects that you're participating in within the Lloyd region, as well as further kind of work on a solvent pilot at Foster Creek. I was just curious if we could get a quick update on that side, as well as any of the, we'll call it, key items or takeaways that you're looking for from those various pilots or initial projects, both at Pikes Peak and the Lloyd ethanol plant.

I appreciate that color.

And then further my my second question here is also shifting over to more of the ESG side, you you've outlined a couple carbon capture projects that you're participating in within the Lloyd region.

As well as a further kind of work on on a solvent pilot.

At Foster Creek I was just curious if you can get a quick update on that side as well as any of the we'll call. It key.

Items or takeaways that you are looking for from those those various pilot there or initial lot project.

Both at Titan.

<unk> peak and the law.

That's all planned.

Sure happy to do that Dennis I think what I might do a rona Dell Ferrari is here and rone is our chief sustainability officer and this is probably a good time to introduce her.

[Company Representative] (Cenovus Energy): Sure. Happy to do that, Dennis. I think what I might do, Rhona DelFrari is here, and Rhona's our chief sustainability officer, and this is probably a good time to introduce her, on our call. Rhona, why don't you take that?

john john: Sure. Happy to do that, Dennis. I think what I might do, Rhona DelFrari is here, and Rhona's our chief sustainability officer, and this is probably a good time to introduce her, on our call. Rhona, why don't you take that?

On our on our call, but Ron why don't you take that.

Dennis Thanks for your interest in that so right now we plan to come out with our revised ESG targets, along with our Investor day in December.

Rhona DelFrari: Hi, Dennis. Thanks for your interest in that. Right now, we plan to come out with our revised ESG targets along with our Investor Day in December. Part of that will be some examples of how we expect to achieve them, both in near term and then our longer term ambition to get to net zero. This work is also connected to the Oil Sands Pathways to Net Zero initiative that we're part of, along with, we just announced, ConocoPhillips Canada joined today, so along with five of our other oil sands peers. Those projects in particular that you're mentioning, some are at different stages. Some are at the feasibility stage that we're looking at. And then there are projects to reduce our emissions, such as what we're doing to reduce methane in the conventional area, that are already well underway.

And part of that will be some examples of how we expect to achieve them Boston near term and then our longer term ambition to get to net zero.

This work is also connected to the oil sands pathways to net zero initiative that we're part of along with that we just announced a conocophillips Canada joined today's along with five of our other oil pan pairs and so those projects in particular that you are mentioning some are at different stages of the summer at the feasibility stage that we're looking.

At and then Theres projects to reduce our emissions such as what we're doing to reduce methane in the conventional area at all.

Already well underway and so there are many pathways. That's the name of a broader initiative to suggest for how we're going to achieve these targets a lot of them are the bigger projects such as larger capture carbon capture and storage that we're looking at for our oil sands assets were needing to decide whether that is something that we are.

Rhona DelFrari: There are many pathways, as the name of the broader initiative suggests, for how we're going to achieve these targets. A lot of them are the bigger projects, such as larger capture, carbon capture and storage, that we're looking at for our oil sands assets. We're needing to decide whether that is something that we are going to pursue. We're right now working closely across our organization, but with the operations groups as well as with the technology development group to look at different ideas. Really we see that there are many different solutions that we can pursue.

Going to pursue but where were right now and working closely across our organization, but with the operations groups as well as with the technology development group to look at different ideas and and really we see that there are many different solutions that we can pursue.

We're working closely with the federal and provincial governments right now because as they've made really a strict.

Rhona DelFrari: We're working closely with the federal and provincial governments right now because as they've made really strict commitments to achieve their Paris goals, they've talked about how they need to work with industry on things like tax incentives, grants to really encourage some of these early-stage technologies that are really you know need a lot of collaboration with the clean tech industry, with government, with industry, and with others to get them off the ground. So those projects that you talked about and you mentioned in particular, we'll provide a bit more color on some of them when we get to Investor Day.

Our commitment to achieve their or their parents' gall.

They've talked about how they need to work with industry on things like tax incentive.

Graham to really encourage some of these early stage technologies that are really.

Need a lot of collaboration with the clean tech industry with government with industry and with others to get them off the ground. So those projects that you talked about and you mentioned in particular, we will provide a bit more color on some of them when we get to Investor day.

Okay, great. So it sounds like that.

Dennis Fong: Okay, great. Sounds like I have to hold tight for the details then. Appreciate it. Thank you for taking my questions.

The whole tight for further details there.

[laughter].

I appreciate it thank you.

My question.

Thanks Dennis.

[Company Representative] (Cenovus Energy): Thanks, Dennis.

john john: Thanks, Dennis.

And we'll take our next question from Matt Murphy with Tudor Pickering Holt.

Operator 2: We'll take our next question from Matt Murphy with Tudor, Pickering, Holt & Co.

Operator: We'll take our next question from Matt Murphy with Tudor, Pickering, Holt & Co.

Hi, Thanks, and good morning, just on the operation side I was wondering if you could comment on how we should think about the path forward for Foster Creek. Its just thinking primarily on the new pads that came on that appear to be running at I think a record rates I guess the question is should we anticipate these falling to a lower plateau rates or wood.

Matt Murphy: Hi, thanks, and good morning. Just on the operations side, I was wondering if you could comment on how we should think about the path forward for Foster Creek. I guess just thinking primarily on the new pads that came on that appear to be running at, I think, record rates. I guess the question is, should we anticipate these falling to lower plateau rates, or would you characterize them as already in that kind of standard sort of SAGD plateau rate in the curve?

You characterize them is already in that kind of standard sort of Sag D plateau rate in the curve.

Yeah, it's nobody here, yes, we're very pleased with the strong production, we're getting from our western Theres been three pods being brought on I mean, just sort of it is scale W. 34, one of the pods as students instead.

Norrie Ramsay: Yeah, it's Norrie here. Yeah, we're very pleased with the strong production we're getting from our west arm. There have been three pads brought on. I mean, just for a bit of scale, W34, one of the pads is doing steadily for the last 60 days, about 40,000 barrels a day. Another one, W35, 20,000 barrels a day. Very strong production. We're benefiting very deep pay, very clean pay, and very high ops availability in our plant at the moment. We actually have. If you like to, you know, think of it this way, we have about three pads a year that we bring on, and we augment it with redrills and redevelopment opportunities. We basically see a path forward to sustaining strong production for the remainder of the year.

Steadily for the last 60 days about 40000 barrels a day and another one W. 35, 20000 barrels a day very strong production, we're benefiting very very deep pea very clean and very high availability in our plant at the moment.

Do you live.

As you know thinking of is we have about three pads a year that will bring on augment it with three drills and redevelopment opportunities. So we basically see a path forward to sustaining strong production.

For the remainder of the year and then you know it.

Norrie Ramsay: You know, into next year at Investor Day, we'll kinda like give you an update of the range then.

Into next year, we'll we'll at Investor Day, we'll give you an update of the range then.

Okay, Great and just a follow up just that at Lee you want maybe following up there I mean I was wondering if you could remind us on how we should think about the the pricing mechanism for I think the legacy Lee one going forward not the 29, one component of sales I think going back a year or more there was some concern that it might get repriced lower.

Matt Murphy: Okay, great. Just a follow-up to that at Liwan, maybe following up there. I was just wondering if you could remind us on how we should think about the pricing mechanism for, I think, the legacy Liwan going forward, not the 29-1 component of sales. I think going back a year or more, there was some concern that it might get repriced lower, but we're obviously in a bit of a different global gas market today. Thanks.

But we're obviously in a bit of a different global gas market today.

Okay.

Yeah, and we have a we have a mechanism where just node over lifting.

Norrie Ramsay: Yeah, we have a mechanism where just now we're over-lifting above 120%, and it goes back to the contract amounts mid-next year. The actual rates are based, obviously, on the market gas and oil prices in China. We're still working within those kind of confines, but production basically goes from this 120% lifting to 85% lifting next year. As John mentioned, we're actually looking at potential alternative commercial models to actually help sustain gas production at a high level going forward.

Above at 120% and it goes back to the contract to mid next year. So.

The actual rates are based obviously on the market gas and oil prices in China. So we're still working within those confines, but production basically goes from this 120% lifting 285% lifting next year.

And as John mentioned, we're actually looking at potential alternative commercial models to actually help sustain gas production at a high level going forward.

Yeah, Matt it's John if Youre actually looking for the mechanisms on the three producing areas as well as Indonesia, why don't you give an IR call and they can kind of walk you through that.

Norrie Ramsay: Yeah, Matt, it's John. If you're actually looking for the mechanisms on the three producing areas as well as Indonesia, why don't you give IR a call and they can kind of walk you through that. If you look at the quarter, though, on a blended basis, it's because, as Norrie mentioned, you know, they're over-lifting relative to the normal DCQ. You know, the blended price in China was about $12 an MM for the quarter. But there's a few puts and takes in there, and then you got to remember that we have different working interests in 29-1 relative to 3-1 and 34-2.

john john: Yeah, Matt, it's John. If you're actually looking for the mechanisms on the three producing areas as well as Indonesia, why don't you give IR a call and they can kind of walk you through that. If you look at the quarter, though, on a blended basis, it's because, as Norrie mentioned, you know, they're over-lifting relative to the normal DCQ. You know, the blended price in China was about $12 an MM for the quarter. But there's a few puts and takes in there, and then you got to remember that we have different working interests in 29-1 relative to 3-1 and 34-2.

If you look at the corner, though on a blended basis and it's because as Lorie mentioned you know there are over lifting relative to the.

Normal D C Q the blended pricing in China was about $12 a ma'am.

For the quarter, but there's a few puts and takes in there and then you got to remember that we have different working interests in 29, one relative to three 1% and 34 two.

But IR can kind of walk you through the kind of the sliding scale as well as the difference in pricing as it relates to the layers of offtake that.

Alex Pourbaix: IR can kind of walk you through the kind of sliding scale as well as the difference in pricing as it relates to the layers of offtake that CNOOC is entitled to.

john john: IR can kind of walk you through the kind of sliding scale as well as the difference in pricing as it relates to the layers of offtake that CNOOC is entitled to.

<unk> is entitled to.

Okay, great. Thanks, Dave.

Matt Murphy: Okay, great. Thank you.

Well go to our next question from Manav Gupta with credit Suisse.

Operator 2: We'll go to our next question from Manav Gupta with Credit Suisse.

Operator: We'll go to our next question from Manav Gupta with Credit Suisse.

Hey, Hey, guys Congrats on Marie <unk>.

Manav Gupta: Hey guys, congrats on reinstating the buyback. I'm just wondering, is there a way any kind of agreement can be worked out where the shares that ConocoPhillips has, which they own, can be traded in a block to you directly or so they don't come to the market and then you have to buy them? I mean, is this something possible or something could be worked out in that direction?

The buyback.

I'm just wondering.

You say Lee <unk>.

Any kind of agreement can be worked out there.

Has that gone nickel has which state owned.

Can be treated in a block to you directly or so they don't come to the market and then you have to buy them. I mean is this something possible or something could be worked out on that direction.

Yes, it's Jeff here I think you know what.

[Company Representative] (Cenovus Energy): Manav, it's Jeff here. I think you know, this process, we kind of view the NCIB as is obviously through that execution is more open market purchases, and I think that provides us flexibility in execution. I think ConocoPhillips has been you know, looking at the public disclosures fairly ratable in how they've been winding down their position. You know, I think through the NCIB, you know, we have flexibility to do the open market, and we feel that will provide the support to the share price and really balance out in the market. I think we feel this is the best mechanism we have now and it provides us flexibility in execution versus you know, a direct block purchase.

jeff Hart: Manav, it's Jeff here. I think you know, this process, we kind of view the NCIB as is obviously through that execution is more open market purchases, and I think that provides us flexibility in execution. I think ConocoPhillips has been you know, looking at the public disclosures fairly ratable in how they've been winding down their position. You know, I think through the NCIB, you know, we have flexibility to do the open market, and we feel that will provide the support to the share price and really balance out in the market. I think we feel this is the best mechanism we have now and it provides us flexibility in execution versus you know, a direct block purchase.

This process, we kind of view the NCI B is is obviously through that execution is more open market purchases and I think that provides us flexibility and execution I think conoco has been looking at the public disclosures fairly ratable and how they've been winding down their position.

I think through the CIB.

We have flexibility to do the open market and we feel that will provide the support to the share price and really balance out in the market, but I think we feel this is the best mechanism. We have now and provides us flexibility and execution versus you.

Our direct a block purchase it and many of its Alex and just kind of if anyone missed that I mean.

Alex Pourbaix: Manav, it's Alex. Just kind of, if anyone missed that, I mean, you know, if you look at the scale of the NCIB that we announced, you know, we always, you know, we're always talking to ConocoPhillips and, you know, that we're always trying to see if there's an opportunity. I would say that we're pretty confident that even in the event there isn't an opportunity to do one of those big block trades, with the size of the NCIB, you know, that we're contemplating, we believe that we can more than offset any of the pressure that's coming on the stock through the ConocoPhillips sort of ratable sell down.

If you look at the scale of the NCI B that we announced.

We always we're always talking to Conoco and you know that we're always trying to see if theres an opportunity, but I would say that we're pretty confident that even in the event. There is an opportunity to do one of those big block trades with the size of the NCI B, where you know that we're contemplating and we believe that we can more than offset.

At any of the pressure thats coming on the stock through the conoco sort of ratable a sell down.

Perfect and my follow up quickly on the carbon capture and sequestration and you kind of mentioned some of the things that Dennis I will have to be a collaboration between you and the government and stuff and I'm just trying to understand from your perspective.

Manav Gupta: Perfectly clear. My follow-up quickly is on the carbon capture and sequestration, and you kind of mentioned some of the things that there will have to be a collaboration between you and the government and stuff. I'm just trying to understand from the perspective of Cenovus or the consortium, any idea of what kind of partnership or support the government could provide, whether they could chip in with some of the CapEx, whether they could give you more in terms of carbon credits at a price. You know, anything in that direction, what kind of help would the consortium be looking for from the government to take this thing and make it work?

So none of us are the consortium.

Any idea of what kind of partnership or support the government could provide but then they could chip in with some of the Capex, but then they could give you more in terms of carbon credits at a price anything on the direction, what kind of help with the consortium. We're looking from the government to take this thing and make it.

Look.

Yeah, I'm I'm happy to to to take a cut a cut at that Manav and Rona may may jump in but I mean the.

Alex Pourbaix: Yeah, I'm happy to take a cut at that, Manav, and Rona may jump in. I mean, you know, you would have seen, probably about three or four months ago, the federal government announced, I don't know, a process with respect to setting up a tax credit for people investing in carbon capture and sequestration. That's a process. There's a consultation process that's been going on for quite some time. You know, I think there's many ways that governments can

You you would've seen probably.

Probably about three or four months ago, the federal government announced a.

Oh, I don't know what our process with respect to setting up a a tax credit.

For people in <unk>.

<unk> in carbon capture SEAQUEST and sequestration and that's a process. There there is a consultation process that that's been going on for quite some time.

I think there's there's many many ways that that governments can be of help and then we can collaborate with governments and you've seen that you know you see that in Norway Youll see it in U S government's using.

[Company Representative] (Cenovus Energy): Be of help and that we can collaborate with governments. You've seen that, you know, you see that in Norway, you see it in US, governments using, you know, tax policy to make it easier for new entrants in this kind of technology. You know, I think that to me is the most obvious first step on our collaboration with the government. I think that consultation is going pretty well, but maybe I'll turn it over to Rona.

Alex Pourbaix: Be of help and that we can collaborate with governments. You've seen that, you know, you see that in Norway, you see it in US, governments using, you know, tax policy to make it easier for new entrants in this kind of technology. You know, I think that to me is the most obvious first step on our collaboration with the government. I think that consultation is going pretty well, but maybe I'll turn it over to Rona.

Tax policy.

To make it easier for new entrants.

In this this kind of technology. So I think that that to me is the most obvious first step.

On on our collaboration with with the government and I think that consultation is going pretty well, but maybe I'll turn it over to Rona.

Yeah, No, we're having excellent talked with with all layers of the government on this and again, it's a shared goal that we have a it's it's Canada goal to get to net zero and it's our industry's goal and synovus is goal to get to net zero by 2050, and so it only makes sense that we're working closely together and what we're talking to them about.

Rhona DelFrari: Yeah, no, we're having excellent talks with all layers of government on this. Again, it's a shared goal that we have. It's Canada's goal to get to net zero, and it's our industry's goal, and Cenovus's goal to get to net zero by 2050. It only makes sense that we're working closely together. What we're talking to them about is, you know, the tax credit in particular, or the investment tax credit that has been announced already is for CCUS. It's very specific. That will be, we expect, a large part of how it makes these CCUS projects economic to be able to proceed. Because again, CCS works. We know that CCS works. It's been proven many times. At the scale that we're talking about, it's never been done before.

Yes, you know the tax credit in particular or the investment tax credit that has been announced already is for CC. You asked it's very specific and that well that will be we expect a large part of how it makes the ccs projects economics that you'd be able to proceed because again CCF works, we know that Ccs works. It has been proven many.

<unk>.

But at the scale that we're talking about what it's never been done before and so there are a lot of.

Rhona DelFrari: There are a lot of risks associated with that. Any time that you're in any industry, when you're going forward with something that's at early stages, you have to de-risk that. Part of that is when government steps in to encourage these technologies that are for the benefit of, you know, all Canadians, but also that the industry can progress. The other things that we're talking to the government about is really multi-departmental. There's certain opportunities through programs to encourage technology development in Natural Resources Canada, in Environment and Climate Change Canada, even the Canada Infrastructure Bank has some opportunities.

There are some risks associated with that and any time that you're in any industry. When youre going forward with something that's at early stages, you have to derisk that and part of that is when government stepped in to encourage these technologies that are for the benefit of all Canadians, but also that the industry can progress.

And the other things that we're talking to the government about its really multi departmental and so there is there are certain opportunities.

Two programs to encourage technology development.

And natural resources Department, and the environment climate change, Canada Department, even the Canadian infrastructure Bank has some opportunities and so government departments. When we when we talk to them. We're not just talking to one ministry or department, we're talking to multiple departments and they're working with us to say these are the types of initiatives that we can provide.

Rhona DelFrari: Government departments, when we talk to them, we're not just talking to one ministry or department, we're talking to multiple departments, and they're working with us to say, these are the types of initiatives that we can provide to you to support and really grow this clean tech industry in Canada, working along with the oil and gas sector, so that we have both a thriving oil and gas sector that's low cost and low carbon, but also a thriving clean tech sector that is feeding into the oil and gas sector, some of these technologies that can then be exported around the world. Lots of opportunities that the government acknowledges and that our industry does as well.

<unk> to support and really.

ROE that's clean tech industry in Canada, working along with the oil and gas sector. So that we have both a thriving oil and gas sector that is low cost and low carbon but also a thriving cleantech sector that is feeding into the oil and gas sector. Some of these technologies that can then be export it around the world So lots of opportunities.

Government acknowledges and that our industry does as well.

Thank you for taking my questions.

Manav Gupta: Thank you for taking my questions.

Thanks, Matt.

[Company Representative] (Cenovus Energy): Thanks, Manav.

john john: Thanks, Manav.

Well go to our next question from Harry Mateer with Barclays.

Operator 2: We'll go to our next question from Harry Mateer with Barclays.

Operator: We'll go to our next question from Harry Mateer with Barclays.

Hi, good morning.

Harry Mateer: Hi, good morning. One follow-up I have on the balance sheet is that, you know, you made the rationale for the refinancing transaction very clear in terms of pushing out and de-risking the maturity calendar. You know, I guess thinking through it, doing that has a bit of a cost in terms of shrinking the available pool of shorter-term debt that can be cheaply paid down in advance. You know, rating agencies do vary in approach, but generally, gross debt tends to be viewed a little bit more important than net debt. You know, if you wanna get to maturity, how should we think about you guys converting net debt reduction into gross debt reduction in the next year or so?

And then one follow up I have on the balance sheet. As you you made the rationale for the refinancing transaction very clear in terms of pushing out of Derisking the maturity calendar, but I.

I guess thinking through doing that has a bit of a cost in terms of shrinking the available pool of shorter term debt that can be cheaply pay down in advance.

The rating agencies do vary and approach, but generally gross debt tends to be viewed a little bit more important the net debt. So if you want to get the materially how should we think about you guys converting net debt reduction into gross debt reduction in the next year or so.

Yes, it's Jeff here.

[Company Representative] (Cenovus Energy): Yeah, it's Jeff here. I mean, I think I'll use Q3 as a color. I mean, we'll be balanced in approach. There was opportunities, I think, in the market to, you know, effectively refinance, de-risk the front end. You know, obviously, I think we'll continue to look at different opportunities to, you know, attack the gross debt here over time. You know, look, the market moves, and I think, you know, we're seeing upward movements on interest rates. We'll be balanced in that. I think we'll continue to focus on, you know, more at the front end, but again, it's market dependent.

jeff Hart: Yeah, it's Jeff here. I mean, I think I'll use Q3 as a color. I mean, we'll be balanced in approach. There was opportunities, I think, in the market to, you know, effectively refinance, de-risk the front end. You know, obviously, I think we'll continue to look at different opportunities to, you know, attack the gross debt here over time. You know, look, the market moves, and I think, you know, we're seeing upward movements on interest rates. We'll be balanced in that. I think we'll continue to focus on, you know, more at the front end, but again, it's market dependent.

I'll use Q3 as a color I mean, we will be we will be balancing approach. We there was opportunities I think in the market to effectively refinance derisk the front end.

You know and you know obviously I think we'll continue to look at different opportunities to.

Attack the gross debt here over time, and you know look the market moves and I think we're seeing upward movements on interest rates, but we'll be we'll be balanced in that and I think you know we I think we will continue to focus on.

More of the front end, but again its market are market dependent and I think you know.

[Company Representative] (Cenovus Energy): I think, you know, I think over the next little bit, you could probably see us hold a little bit more cash than we have, that we say our floor is CAD 1 billion. Look, I think we saw an opportunity in the market, to de-risk, take care of the front end, at an effective cost, save, you know, over CAD 40 million annually in interest. You know, as the market presents itself, we'll be judicious and take those opportunities on the gross debt. Expect us to balance all of that, both the maturities, the liquidity, and then the gross deleveraging. You know, I think we've worked through and obviously have very good relationships with the rating agencies as well.

jeff Hart: I think, you know, I think over the next little bit, you could probably see us hold a little bit more cash than we have, that we say our floor is CAD 1 billion. Look, I think we saw an opportunity in the market, to de-risk, take care of the front end, at an effective cost, save, you know, over CAD 40 million annually in interest. You know, as the market presents itself, we'll be judicious and take those opportunities on the gross debt. Expect us to balance all of that, both the maturities, the liquidity, and then the gross deleveraging. You know, I think we've worked through and obviously have very good relationships with the rating agencies as well.

I think over the next little bit you could probably see us hold a little bit more cash than we have that we see our floors of $1 billion, but.

Look I think we saw an opportunity to market to Derisk take care of the front end at an effective cost save over $40 million annually in interest in and as the market presents itself.

Itself will be we'll be judicious and take those opportunities on the gross debt. So expect us to balance all of that both.

The maturities of the liquidity and then the gross deleveraging and you know and I think we've worked through and obviously you have very good relationships with the rating agencies as well.

Okay. Thanks for that and then switching gears a bit.

Harry Mateer: Okay, thanks for that. Switching gears a bit, just wondering if you have any color on the recent widening in the WCS diff in the past few weeks. You know, what might be driving that? It's not necessarily what we would have expected after L3R started Line 3, but, you know, I know it also had narrowed into that event. Just curious, you have perspective there.

If you have any color on the recent widening in the WCS diff in the past few weeks you know what might be driving that it's not necessarily what we would've expected. After L. Three are started line fill but you know I know, it's also a narrowed into that event. So I'm just curious have perspective there.

Yeah, Harry it's Keith here I think our I think it's a bit of two stories you know, we're seeing a bit of widening on the heavy barrel down in the U S Gulf Coast.

[Company Representative] (Cenovus Energy): Yeah, Harry, it's Keith here. I think it's a bit of two stories. You know, we're seeing a bit of widening on the heavy barrel down in the US Gulf Coast. There's some refinery turnarounds that are happening in the Gulf Coast that are kinda pushing that a little wider. Also, I think with kinda natural gas prices globally, it's causing some refiners to choose to try to run a little leaner and reduce kind of their operating costs and not process as many heavy barrels. When you back up to Alberta, obviously, inventories are running high and you know, we're seeing some increased production you know, right here at Cenovus, we're hitting some records. You know, that's kinda putting a little pressure.

john john: Yeah, Harry, it's Keith here. I think it's a bit of two stories. You know, we're seeing a bit of widening on the heavy barrel down in the US Gulf Coast. There's some refinery turnarounds that are happening in the Gulf Coast that are kinda pushing that a little wider. Also, I think with kinda natural gas prices globally, it's causing some refiners to choose to try to run a little leaner and reduce kind of their operating costs and not process as many heavy barrels. When you back up to Alberta, obviously, inventories are running high and you know, we're seeing some increased production you know, right here at Cenovus, we're hitting some records. You know, that's kinda putting a little pressure.

Theres some refinery turnarounds that are happening in the in the Gulf Coast.

That are kind of pushing out a little wider also I think with a kind of natural gas prices.

Globally it's.

Causing some refiners to choose to.

Tried to run a little leaner and reduce their operating costs and not processes many heavy barrels.

When you back up to Alberta, obviously inventories are running high.

And we're seeing some some increased production ratio.

Great here at Synovus, we're hitting some records so.

That's kind of putting a little pressure we're into the winter blending season, so condensate usage is up.

[Company Representative] (Cenovus Energy): We're into the winter blend season, so condensate usage is up. You know, you couple that with Line 3 coming on and taking additional egress out and kind of rail running at minimum, you know, kinda baseline rates. You know, we're kinda seeing the differential normalize around that $15, $16, but a lot of it's because of what's going on down in the Gulf Coast.

john john: We're into the winter blend season, so condensate usage is up. You know, you couple that with Line 3 coming on and taking additional egress out and kind of rail running at minimum, you know, kinda baseline rates. You know, we're kinda seeing the differential normalize around that $15, $16, but a lot of it's because of what's going on down in the Gulf Coast.

So you couple that with the line three coming on and taking additional egress out and kind of rail running at at minimum kind of baseline rates, we're kind of seeing the differential.

Normalize around that $15 $16, but a lot of it is because of what's what's going on down in the Gulf coast.

Great. That's helpful. Thank you.

Harry Mateer: Great. That's helpful. Thank you.

Okay.

Once again as a reminder.

Operator 2: Once again, as a reminder, join the queue to ask a question by pressing star one. Again, that is star one for questions. There are no further questions at this time. Mr. Pourbaix, I'll turn the call back to you for any additional or closing remarks.

Operator: Once again, as a reminder, join the queue to ask a question by pressing star one. Again, that is star one for questions. There are no further questions at this time. Mr. Pourbaix, I'll turn the call back to you for any additional or closing remarks.

Join the queue to ask a question by pressing star one again that is star one for questions.

Okay.

Yeah.

There are no further questions at this time, Mr for Vale turn the call back to you for any additional or closing remarks.

Thanks, very much and thanks.

Alex Pourbaix: Thanks very much. Thanks everybody for your continued interest in the company. With that, we'll sign off and let everyone get back to their day. Take care.

The body for your continued interest in and the company and with that we'll sign off and let everyone get back to their day take care.

Operator 2: That concludes today's call. Thank you for your participation. You may now disconnect.

Operator: That concludes today's call. Thank you for your participation. You may now disconnect.

Today's call. Thank you for your participation you may now disconnect.

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Yes.

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