Q4 2021 Imperial Oil Ltd Earnings Call

February 1, 2022

Hello, Thank you for standing by and welcome to Imperial fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised.

Today's conference maybe recorded.

Wire any further assistance. Please press star Zero I would now like to hand, the conference over to your Speaker today, Dave Hughes Vice President Investor Relations. Please go ahead.

Thank you very much good morning, everybody and welcome to our fourth quarter earnings call I'll start by introducing you to the management team we have in attendance, Brad Corson, Chairman, President and CEO , Dan Lyons Senior Vice President of Finance and administration, Simon younger senior Vice President of the upstream Sherry <unk> Vice.

President of commercial and corporate development, and John Whitmore, Vice President of the downstream. So I'll quickly go over the cautionary statement todays comments include reference to non-GAAP financial measures the definitions and reconciliations of these measures can be found in attachment six of our most recent press release and are available on our website with a link to this conference call.

Todays comments may also contain forward looking information in any forward looking information is not a guarantee of future performance and actual future financial performance and operating results can differ materially depending on a number of factors and assumptions.

Forward looking information and the risk factors and assumptions are described in further detail on our fourth quarter earnings press release that we issued this morning as well as our most recent Form 10-K and all of these documents are available on SEDAR Edgar and on our website. So I'd ask you to please refer to those.

So just before I turn it over to Brad for his opening remarks once he has done and he and Dan go over our financial and operating performance for the quarter, we will be moving to the Q&A session as usual so with that I'll turn it over to Brad.

Good morning, everybody and welcome to our fourth quarter of 2021 earnings call I Hope each of you are doing well and are a good health to start the new year.

As we bring 2021 to a close well at least from a reporting point of view.

I would like to repeat something I said on the third quarter call Wow, what a difference a year makes.

I am very pleased to report that we finished the year strong with another quarter of solid operating performance and strong financial results. In 2020, we focused heavily on ensuring imperial was well positioned to take advantage of the market recovery through ongoing focus on reducing our cost structure.

Improving our reliability and progressing high return brownfield projects.

And you can now see the benefits of those efforts in our 2021 results as we continue to make the most of the improving and attractive business environment.

This performance was reflected in all business lines, although we did see some pretty challenging weather to close out the year.

And as it has all year. This performance allowed us to return a material amount of cash to shareholders in the quarter and in fact.

To accelerate the pace of these returns resulting in around $3 billion for the full year the highest level in the company's history.

Throughout 2021, we continued to manage the ongoing challenges due to COVID-19.

Our focus on maintaining the health and safety of our workforce was key not only in minimizing disruptions to our operations, but also and most importantly, ensuring the well being of our people from.

From a business perspective, we saw continued demand recovery throughout the year and significant improvement in commodity prices.

Both of which are reflected in our results over the next few minutes, Dan and I will detail the results.

Of what was a very strong quarter.

So now, let's turn more specifically to the fourth quarter results earnings for the fourth quarter were $813 million and our cash from operating activities was over $1 6 billion.

Both somewhat lower versus the third quarter earnings were negatively impacted by approximately $160 million in onetime noncash events.

And cash flow, excluding working capital effects was up more than $100 million.

Reflecting our strong operating performance and the strong commodity fundamentals in the quarter.

Crude prices continued to strengthen through the quarter, while both downstream and chemical margins remains strong.

Our upstream continued to perform very well delivering its highest annual production in over 30 years.

And our downstream performed well also we saw utilization of 97% for the quarter and higher product sales as demand continued to recover.

Our chemical business closed out the year with another strong quarter and delivered the highest full year earnings in over 30 years.

As expected polyethylene margins did soften somewhat in the quarter, but remains strong and supported the best ever full year earnings for this business.

So in total our strong cash flow generation and a period of strong commodity prices was underpinned by continued strong operational performance, we were able to take advantage of attractive markets for crude refined products and chemicals.

And all of this contributes to a very strong cash position, which continues to allow us to deliver on our priority of returning cash to shareholders in the quarter, we returned $950 million to our shareholders in the form of dividends and accelerated share buybacks.

For the year, we generated about five $5 billion of cash from operating activities and around $4 $5 billion of free cash flow.

And we put this cash to good use early in the year, we announced the largest quarterly dividend in the company's history and reinstituted, our share buyback program, which we suspended 2020 due to the business environment brought on by the pandemic.

And in the fourth quarter, we announced an acceleration of the renewed and CIB.

All of this resulted in the return of nearly $3 billion of cash to our shareholders in the year.

2021 marks the 27th consecutive year of dividend increases.

And you would've seen US continue this trend with the announcement. This morning of another significant dividend increase of seven cents per share, which is around 26% our largest dividend increase in history.

This equates to a 55% increase since the beginning of 2021.

And represents an increase of almost 80% since the beginning of 2019.

Going forward following yesterday's completion of our accelerated and CIB and today's announcement of a sizable dividend increase we remain committed to returning surplus cash to shareholders and are actively evaluating our next steps in this area, including a potential <unk>.

Stansell issuer bid.

We are unwavering in our commitment to a reliable and growing dividend and delivering further shareholder value and returns.

I'll now turn it over to Dan to go through our financial performance for the quarter in more detail.

Thanks, Brad getting into the financial results for the full year, we recorded net income of almost $2 $5 billion, an increase of around $3 $2 billion. Excluding the one time $1 $2 billion noncash impairment charge related to our unconventional business that we recognized in the fourth quarter.

Of last year.

For the fourth quarter of 2021, our net income was $813 million excluding identified items net income increased almost $800 million from the fourth quarter of last year. This increase was primarily driven by stronger realizations in the upstream and improved margins in the downstream and chemicals.

Now if we look sequentially, our fourth quarter income of $813 million is down about $95 million from the third quarter of this year as Brad noted the fourth quarter results include a number of unrelated one time noncash charges totaling about $160 million.

Looking at each business line. The upstream recorded net income of $545 million up $20 million from our third quarter net income of $524 million as a result of higher realizations and volumes, partly offset by higher operating expenses driven in part by mine progress spend yet.

Carl and higher energy costs upstream.

Upstream results included a number of one time charges of about $85 million.

The downstream recorded net income of $250 million down $43 million from net income of $293 million in the third quarter.

Downstream results included a number of one time charges totaling around $75 million.

<unk> continued to demonstrate strong performance in the fourth quarter with net income of $64 million down about $60 million from the third quarter of this year as polyethylene prices moderated from the extremely extremely strong levels seen in the third quarter.

Moving on to cash flow.

In the fourth quarter, we generated over $1 $6 billion in cash flow from operating activities and improvement of that $1 $3 billion from the fourth quarter of 2020.

Our free cash flow for the quarter was just over $1 $2 billion looking at the full year, our strong results and capital discipline to deliver free cash flow of almost $4 5 billion.

As we start 2022 strong commodity prices, along with our continued cost and capital discipline position us well to generate very substantial free cash flow going forward.

Moving on to Capex capital expenditures in the fourth quarter totaled $441 million up from $195 million in the fourth quarter of 2020.

Full year capital expenditures were in line with revised guidance at just over $1 1 billion.

Capital spending in 2021 was focused on progressing key projects such as curl in pit tailings infrastructure and the Sarnia products pipeline. We also continue to invest in improving volumes through projects like the solvent assisted laser project at our Mckee City Cold Lake plant and improving the efficiency and cost structure of our operations.

By continuing to invest in projects like our autonomous haul truck fleet and related infrastructure as well as installing our first boiler flue gas heat recovery unit.

Carl.

Tailings project ongoing investment in our autonomous truck fleet and installing additional boiler flue gas heat recovery units at Cold Lake, We will work on developing phase one of our Grand Rapids project continue to progress solvent assisted laser as well as infill drilling and well work.

In the downstream spending includes the completion and commissioning of the Sarnia products pipeline and spending on the stress <unk> renewable diesel project, we will have an opportunity to discuss these plans in more detail at our Investor day.

Shifting to shareholder distributions.

As I mentioned earlier, we generated about $4 $5 billion of free cash flow in 2021. This performance supported record returns of almost $3 billion of cash to shareholders, including returns of about $950 million in the fourth quarter alone, we repurchased 17 5 million shares for 700.

Third $61 million in the quarter under an accelerated program, bringing our full year buyback to 56 million shares for over $2 2 billion, we paid dividends of $188 million in the fourth quarter and a total of over $700 million for the full year.

Despite these record distributions we ended the year with about $2 $2 billion of cash on hand, consistent with our previous announcement, we continued our accelerated and CIB purchases in January 2022, and completed this program on January 31.

Also declared an increased dividend of <unk> 34 per share payable on April one.

Furthermore, as Brad mentioned in light of our current cash balance and the strong business outlook. We are actively evaluating options for additional shareholder returns, including a potential substantial issuer bid now I'll turn it back to Brad to discuss our operational performance.

Thanks, Dan as we switch our focused operations I would sum up the fourth quarter as being another strong quarter operationally across all business lines.

In the upstream we averaged 445000 oil equivalent barrels per day, which is an increase of 10000 barrels per day versus the third quarter, but is down 15000 barrels per day versus the fourth quarter of 2020. This decrease year on year was due mainly to them.

Early start to winter.

In fact, Alberta saw several weeks of extreme Arctic temperatures in the last half of December and early January which as you know presents some operational challenges, particularly in our mining operations.

At our Investor day in late 2020, we communicated our intent to focus the upstream organization's efforts on maximizing the performance of our existing asset base and.

And given how the assets performed in 2021 I would say.

We are on that strategy in achieving it.

And it is also paying off for us in fact, our full year 2021 production was 428000 oil equivalent barrels per day, which is the highest in over 30 years and exceeded our guidance for the year.

I would also note the current market environment and the strong commodity prices, we are seeing while in the fourth quarter. There were a number of factors, which drove the WTO WCS spreads wider such as the face startup of line three and other smaller disruptions. We are now seeing narrower spreads in our <unk>.

Well positioned to continue to benefit from this.

So now let's move on and talk about Carl.

Production at Kearl in the fourth quarter averaged 270000 barrels per day, gross which was down 4000 barrels per day versus the third quarter and 14000 barrels per day lower than the fourth quarter of 2020 as I mentioned Western Canada saw an early start to winter feeling the.

The effects of the deep freeze that started late in the fourth quarter and extended into the new year and as we've talked about in the past extended periods of extreme cold weather can be challenging for our operations and particularly mining.

So as a result of these weather challenges.

Was lower than expected production in the fourth quarter at Kearl with an estimated impact of around 13000 barrels per day in the quarter or just over 3000 barrels per day on a full year basis the.

The impacts of the extreme cold weather continued to linger into January but I'm pleased to say that as of now our operations have essentially returned to normal.

I would also like to take a moment to recognize the tremendous dedication of our workforce, whose efforts to safely maintain our operations in these extreme conditions and mitigate the production impacts are a huge credit to the organization.

Despite the weather impacts total full year production for <unk> was 263000 barrels per day, the highest in the assets history.

This compares to 222000 barrels per day in 2020, an increase of 41000 barrels per day for the year.

And as Carl continues to deliver on its production and reliability commitments, including the elimination of the second annual turnaround a full year ahead of schedule.

Looking forward, we continue to be excited about <unk> potential as we make progress on our accelerated journey to 280000 barrels per day.

And despite the slower start to the year, we reiterate our 2022 guidance of 265 to 270000 barrels per day, reflecting the next step and production growth at the site.

I would also note that this 2022 guidance reflects one major planned turnaround expected to be executed in the second quarter of the year.

I'd like to wrap up our discussion about curl with some comments about unit costs.

Another positive reflection of the asset performance.

As I mentioned on our third quarter call continued pressure from higher energy prices and the strength of the Canadian dollar presented some challenges in meeting our unit cash cost target of U S $20 per barrel.

In 2021 higher energy costs and the strength of the Canadian dollar represented approximately an incremental $2 50 per barrel relative to 2020.

However, if we normalize for energy costs and Forex.

Both items outside our control our unit costs would have achieved a reduction of almost $1 per barrel from 2020 and been below the target of U S $20 per barrel.

Close management of unit cost.

<unk> to be core to our approach to maximizing profitability at <unk> and we remain focused on achieving further unit cost reductions as we go forward.

So now let's talk about cold Lake.

Cold Lake has been a really positive story throughout 2021.

Production for the quarter averaged 142000 barrels per day, which was up 7000 barrels per day versus the third quarter and 6000 barrels per day higher than the fourth quarter of 2020.

This strong performance reflects the benefits of our continued focus on production optimization and reliability.

And while cold Lake experienced the same stream same extreme cold temperatures in December it did not have a material impact given the nature of this operation.

For the year production averaged 140000 barrels per day exceeding our updated guidance of 135000 barrels per day.

Our full year production at Cold Lake was driven by significant improvement to the base performance highlighting the effectiveness of our strategy to focus on reliability and optimization.

We also saw the benefits from recent drilling investments in our operations, which contributed almost 2000 barrels per day of production for the year.

We're looking forward to continuing to benefit from these improvements in the coming year.

For 2022, we have issued guidance of 135000 to 140000 barrels per day for Cold Lake, which includes a typical plant turnaround in the second quarter.

Now at Syncrude Imperial's share of production for the quarter averaged 79000 barrels per day, which was up slightly from 78000 barrels per day in the third quarter.

But down 8000 barrels per day from the fourth quarter of 2020.

Unplanned downtime coupled with extreme cold weather presented challenges for these operations in December as detailed in the statement issued by the operator Suncor earlier in January .

We estimate the impact to be close to 5000 barrels per day, our share in the quarter.

Imperial share our full year production averaged 71000 barrels per day, an increase of 2000 barrels per day versus 2020.

As the ownership continues its focus on improving asset reliability, we reiterate our guidance for 2022 of $75 to 80000 barrels per day. This guidance reflects the impacts of planned maintenance in the second quarter and a major coker turnaround in the third quarter.

2021 also marked a change in the operating structure at Syncrude and we remain confident that this change will better support the continued focus on improved reliability and cost performance for this asset.

So now moving to the downstream we refined an average of 416000 barrels per day in the fourth quarter, which was up 12000 barrels a day versus the third quarter of 2021 and up 57000 barrels per day versus the fourth quarter of 2020, reflecting the strong operating <unk>.

Performance and the continuation of demand recovery, we have seen throughout 2021.

The fourth quarter throughput equates to a utilization of 97%, which is the highest fourth quarter utilization and over 30 years.

This represents a 3% increase over the third quarter, bringing our full year utilization to 89%, which is right on the guidance. We provided for 2021 and for the year throughput was 379000 barrels per day up 39000 barrels per day versus <unk>.

20.

Looking forward to 2022.

We have a fairly light turnaround year planned supporting our increased guidance for 2022 of 92% to 94% utilization.

Looking at cash operating cost our downstream business continues to do an exceptional job in managing its operating costs full year cash operating costs were down $70 million compared to 2020 and down even more when normalizing for the rising energy prices we saw in 2020.

One.

This decrease is especially notable because over the same period, our refining throughput increased by 39000 barrels per day, and our petroleum product sales grew by 35000 barrels per day.

So we are refining more barrels and selling more products and we're doing it at a lower absolute costs.

And again this was a year of significant turnaround activity and higher energy costs.

Petroleum product sales in the fourth quarter were 496000 barrels per day up 11000 barrels per day from the third quarter and continued strong demands and up 80000 barrels per day from the fourth quarter of 2020, reflecting significant recovery from.

Pandemic related softness of 2020.

We continue to see industry demand trends pretty consistent with what we saw through 2021.

With gasoline and diesel demands hovering around 90% to 95% of historical levels and jet continuing to improve averaging around 70% to 75%.

However, as mentioned jet continues to be somewhat volatile as we experienced.

Experienced subsequent waves of COVID-19, and the associated restrictions related to travel.

Also of note is that our jet sales volumes continue to track about 10% ahead of industry predominantly related to competitive gains we were able to capture in 2021, increasing our overall market share.

And with respect to downstream margins, unlike crude prices, our fourth quarter crack spreads continued to hover around the middle of the five year band, which reflects fairly steady improvement over early 2020 at the onset of the pandemic.

Despite ongoing demand volatility our continued focus on reliable and efficient operations ensures we are capturing as much value as possible in the current downstream pricing environment.

Looking forward to 2022.

The outlook is positive as we continue to see improvements in the market environment driving further strengthening of our downstream business, which supports our continued journey back to typical earnings and cash flows for this business segment.

And I will wrap up our operating results with chemicals 2021 was an incredible year for this key part of our business and I just can't say enough about how pleased I am with the performance that delivered making the most of capturing a very favorable market environment.

The fourth quarter was another solid quarter earnings in the fourth quarter were $64 million supported by continued strong production reliability and margins fourth quarter earnings were down $57 million versus the third quarter, which I will remind you was the highest quarterly earnings.

And over 30 years.

This reduction was driven largely by expected softening of polyethylene margins.

And while margins did soften somewhat in the quarter, they still remain quite strong and that sets the chemical business up well for a strong 2022.

Full year chemical earnings were $361 million $74 million higher than the previous full year record of $287 million set in 2015, an outstanding year for our chemicals business, which continues to be a differentiator for us the integrated <unk>.

<unk> of our business supports a long history of profitability, even in a year like 2020, and we expect this to continue even as we see polyethylene prices normalizing somewhat.

Sure.

And just before wrapping up I wanted to highlight a couple of other important items of note.

First we announced our plans to market our interest in <unk> energy, Canada, a few weeks ago, which as you will recall as our unconventional business.

We have been quite opened recently about where this business fits into our longer term upstream strategy and our decision to market. The assets is fully consistent with us to be clear, though no decision has been made to sell these assets, but in our view we felt it was appropriate to test the market in the event there is an opportunity to Jennie.

<unk> increased value through a potential sales transaction.

I also wanted to highlight the announcements we made recently on imperial's plans for further reductions in greenhouse gas emissions intensity over the next decade to help support Canada's net zero goals.

Imperial has set a 2030 goal to reduce scope, one and scope two greenhouse gas emissions intensity of our operated oil sands facilities by 30% compared with 2016 levels. This target builds on our previous 2023 commitment, which we are well on track to deliver.

Ever.

I am quite proud of the progress we've made to date and reducing the intensity of our greenhouse gas emissions at our operated oil sands assets and our recent announcement is another step in our journey to net zero at our operated oil sands assets by 2050.

So in closing another strong quarter, which brings to a close a year of very strong results, both operationally and financially.

As you've heard me say before the decisions we have made and the work. The organization has done over the past several quarters is allowing us to take maximum advantage of the prevailing market conditions.

And this performance supports our ongoing commitment to drive increased shareholder value.

And our continued commitment to shareholder returns.

As you heard Dan and I've mentioned in 2021, we returned nearly $3 billion to our shareholders via our reliable and growing dividend and share buybacks.

And we are also excited to reinforce our commitments to sustainability not only with our recent announced greenhouse gas intensity reduction target, but with our participation in the pathways initiative and unprecedented industry Alliance.

Our long term focus on reducing our environmental footprint through investments in things like solvent technologies and carbon capture and storage underpin our confidence in meeting these goals.

Looking forward to 2022.

We continue to see support for commodity prices and fully expect to deliver another year of strong operational performance underpinning our ability.

To take utmost advantage of the current market conditions.

We will continue our focus on reduced emissions and sustainability, including our plans for renewable diesel at our stress Kona refinery.

We will remain disciplined with respect to spending levels, both operating and capital.

And we will also continue to return cash in excess of these needs to our shareholders.

And finally I'd like to thank all of you for your continued support.

I hope you're as excited about 2022 as we are.

Thank you and back to you Dave.

We're going to move to the Q&A now we did have a couple of questions pre submitted which we'll get to first and then we'll go to the live Q&A line. So the two questions came from Phil Skolnick at eight capital.

First one what are you and Exxonmobil looking for in order to make a decision on marketing the <unk> assets would you consider selling it in pieces.

Yes, Thanks for that question, Phil and as as you know we announced earlier in January our intention to market those assets jointly with Exxonmobil and in fact, we we progressed those activities now have the data room open.

There is a lot of interest in.

Our decision around marketing was really driven by.

The strategic work, we have done over the last couple of years, where we have prioritized our focus on on certain assets in our portfolio and and really prioritized, our capital as well and through that work.

We have concluded that we have higher value opportunities.

With our with our core mining assets and as such.

Youll recall, we took.

An impairment decision in late 2020 for some of the unconventional assets that we had not.

Not included in our development plans. So again this is really a key.

Continuation of that strategy, we have not made the decision to sell though so we're going to be looking at.

How do we create maximum value for us for our shareholders.

Yeah.

Prior to.

To putting the assets in the marketplace. We had received several unsolicited offers.

For for those assets.

We shouldnt be surprised by that.

There's been a lot of consolidation that's occurring in the in the Montney and Duvernay shale resource plays and.

So it's really the culmination of all that that that drove us to put those assets in the marketplace.

And we will see what we get back.

It is a very large resource play.

Over 650000 net acres.

And so from a.

From a transaction structure, we are open to to.

To selling it in pieces.

We do know that there are some industry players that are primarily focused in the montney theres others that are primarily focused in the duvernay.

There are some that are in both so we are open to considering alternative structures for the transaction.

The key is going to be what delivers the most value and how does that compare to our view of value. If we were to continue.

To retain the asset and develop it further ourselves.

So we're excited to see what comes out of the data room in the bids.

In another month or so thanks for that question.

And fills a follow up I think Dan ill direct straight to you is are you still considering in <unk> given the dividend increase.

Yes, Thanks, Phil you talked about this.

In our in our prepared remarks, but it's probably worth.

Talking a little more I mean, the short answer is yes, we are.

We are considering and <unk> and just stepping back.

We have a long standing philosophy, I think as you know to return surplus cash to shareholders.

Starts with a reliable and growing dividend, which we've demonstrated over many years and of course this morning's announcement of a sizable increase is another step in that.

In that direction.

After dividends our next vehicle for surplus cash is the NCI and CIB, it's simple efficient and flexible.

We used it certainly to the Max in 2021, we had a program we restarted in May June we bought a bunch of shares we launched a new program in June we ended up accelerating that to wrap up early over the course of 2021, we repurchased over $2 $2 billion through that program.

<unk> and <unk>.

Yes.

<unk> 31st yesterday, we wrapped up that program with our acceleration through January 31, or another incremental $450 million. So over 13 months about $2 $7 billion.

Through the NCI.

You know as well were limited to 5% of outstanding shares annually in that program.

Our next renewal would be late June of this year, we certainly plan to do that.

But looking at our cash balances and our outlook for strong cash flow.

Anticipating taking action on shareholder returns additional action before renew of the CIB in late June we haven't made a final decision, but we certainly heard the market's feedback.

Strong preference foreign SIV and Thats, our lead case at this point.

Okay.

Operator can we turn it over to you now pleased to go to the live Q&A line.

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

Draw your question press the pound key.

Our first question comes from Dennis Fong with CIBC World Markets. You May proceed with your question.

Good morning, and thanks for taking my questions. The first wondering if it falls in line with Dan's comment there on.

On returning cash back to shareholders, obviously imperial oil's, an enviable position with respect to leverage can you maybe describe what you view the ideal capital structure for in European for the company and how we should be thinking about that obviously balancing the available free cash flow that you're generating the relative capex that you have already outlined with you too.

Thousand 'twenty two guidance as well as the various other levers that you have and returning cash back to shareholders.

I'll turn that question over to Dan who can build on his comments about.

About shareholder returns.

Look.

We could have about $5 billion of debt, which we've had for.

Pretty been stable for a number of years, we feel comfortable with that level of debt given our leverage on an absolute basis and relative to peers is low.

Not it's not our first move to repay the debt so to the extent we have surplus cash are really once we've exhausted the NCI.

Its use other mechanisms to return that to shareholders. So.

That's maybe a short answer but I think I think that is that nutshell and you see we haven't fairly as I mentioned in my remarks are fairly modest capital program in 2022.

At current price levels, we anticipate generating significant free cash flow. In addition to a pretty significant cash balance right now.

Great Great. Thanks, and my second question here is more on the op side. So maybe directed to you Brad or to Simon.

Just with respect to cold Lake, you've obviously seen fairly strong.

Production levels.

A lot of success from the optimization side, you mentioned, a little bit around a laser and the utilization and solvent just curious as to how the optimization is continuing what maybe some of the next steps happened to be and what does that potentially mean for project like Grand Rapids, which was potentially going to utilize existing infrastructure in the area.

Thanks.

Yes, thanks for that question Dennis.

We are super excited about the progress, we're making at Cold Lake.

We have put a lot of focus into optimizing the reservoir performance of those assets. We've continued to focus on reliability as well and then.

As you mentioned and we've commented on this call and in the past.

We continue to look for ways to employ.

Kind of next generation solvent technologies.

Like laser that achieved multiple objectives for us.

They do have the benefit of enhancing reservoir performance.

But equally important they reduce the greenhouse gas emissions.

They have lower steam and energy intensity and so it.

It is a continued strategy of ours.

To continue to to.

To deploy.

Solvent technologies to enhance <unk> performance.

Next on the docket is.

Grand Rapids Phase, one, which will employ SA Sag D technology, and then looking a little bit longer term.

We are.

Evaluating application of cyclic solvent process referred to as CSP, which allows us to replace steam with propane and achieve even further reductions in.

And greenhouse gas intensity, while improving reservoir performance and in the case of CSP.

We've already piloted that quite successfully and so now looking at the further application so.

I think over over the coming quarters and years Youre going to continue to hear us talk about the evolution of these technologies, how they are integral to both our reservoir optimization, but also our greenhouse greenhouse gas intensity reduction objectives.

And I'm sure in our in our upcoming Investor Day, we will spend some more time talking about each of those and how they fit in.

Thanks for the question and again, we're very excited about about our actions at Cold Lake.

Thank you. Our next question comes from Manav Gupta with Credit Suisse. You May proceed with your question.

Hey, guys. My first question is more on the on the renewable diesel side I'm just trying to understand if you can give us I'm sure you've done some preliminary work what kind of feedstock side, you are looking to run soybean canola and you're going into the vegetable oil bank. So is it primarily going to be visiting Illinois can you bring in some used cooking oil.

Some animal fats and so.

If I could get some understanding of that.

Yeah. Thanks, Thanks for that question and again, we're going to spend some more time at Investor day, describing this project but.

Kind of at the.

The foundation of your question fundamentally this is going to be plant based materials.

We're not looking at.

Animal fat or other sorts of.

Of supply, it's very much focused on.

On plant based materials that are sourced generally in the region.

We haven't talked explicitly about.

The specific type of plant, we're still in commercial discussions with potential suppliers.

And so those those <unk>.

Commercial discussions are still sensitive around the type.

But needless to say there is there is an abundant supply of available materials and good options for us that are going to allow us to.

Ultimately produce 20000 barrels a day of very.

Competitive supply.

And so we're really excited about this project.

Driven by kind of the overall benefits it will bring to to Canada and in achieving.

No.

Achieving our.

Total emissions objectives of net zero by 2050. This this is a key contributor to reduced in scope three emissions.

So more to come with that.

Perfect.

Again.

Keeping on the lineup of emission reductions you and others have obviously committed to carbon capture and sequestration.

It was a big project kind of niche was announced but.

How is it progressing how are the partner wins what are you looking from the government in terms of help.

Excellent project, but we don't get too many details on that carbon capture and sequestration project. So if you could just help us understand how the discussions are progressing between you and all the others and the government about that project.

Yes, thanks for the question and I am excited to talk about it.

We're making I think really really good progress.

This is a very complex undertaking to achieve net zero by 2050.

And the alliance we've established amongst the member companies is unprecedented the level of cooperation the amount of investment that will ultimately be required to get to net zero.

We've estimated as.

$70 $75 billion from now to 2050, so it's a.

A huge undertaking it's not just one.

Single project, it's multiple projects.

There is a foundational project, which is building. This large trunk line that will allow the transport of carbon that's captured in the Fort Mcmurray area, all the way down to the Cold Lake region.

Where we've applied with the government for access to pore space. So we can.

So we can sequester the carbon there.

So building. This large trunk line is significant project, but then there are several other projects around the capture side at each of the individual sites, so where we are.

Producing hydrocarbons today.

And then on top of that.

As I just talked at Cold Lake not only are we focused on.

Capturing carbon and transporting it to our site to store it but we're also looking at how can we fundamentally reduce the amount of carbon that is generated and so things like solvent technologies are quite important there. So a lot of moving pieces. If you will.

Will two to progress this project, but.

We as an alliance.

Have been able to develop.

Preliminary plans around.

Kind of the sequence of the trunk line project.

The carbon capture projects as well as other technology initiatives.

We will talk more about that on Investor day.

But I think it's moving quite well.

We are also.

Spending a lot of time with both the federal and provincial governments around enabling steps that are necessary to progress these huge investments.

Pacifically, we are looking for investment tax credit and other financial support from the government.

Given the nature of these investments the risks associated with them. So those discussions are ongoing.

The cooperation amongst the companies is just exceptional.

In fact as as Ceos.

The six companies, we get together every single week and are having discussions about the progress of the project key priorities, how do we keep it moving along what are some of the key issues and again as I mentioned, we're also actively engaged.

With the government so as Ceos, we're meeting directly with key officials and certainly our teams are meeting.

With with officials at staffs as well that at both the federal provincial level. So it's all hands on deck.

This is a huge challenge, but we think it's achievable and we think it's unnecessary and so we're going to do what it takes.

That is great color and hoping to meet you at an in person Investor day in March.

Thank you. Thank you well I look forward to meeting you as well you know unfortunately.

Overcrop Iris has has continued to delay many in person meetings, but.

Soon as as soon as the opportunity affords itself I very much look forward to it as well, but it's been a long two years right. So so again I look forward to meet you as well. Thank you.

Yes.

Thank you. Our next question comes from Doug Leggate with Bank of America. You May proceed with your question.

Thanks, Good morning, everyone I'm delighted to be on your call. Thanks for taking my questions.

Brian I Wonder if I could start with Exxon mobil's announcement yesterday of combining their downstream and chemicals business.

Wonder if theres any read through for imperial as it relates to incremental cost cutting initiatives and whether your full suite.

Yes, thanks for the question Doug.

It's good to hear your voice, it's been a while since we've connected so so thanks for joining the call today.

Regarding Exxon Mobil's announcements yesterday Super Super exciting news.

For Exxonmobil and.

With Exxonmobil being majority share holder of Imperial we benefit from that relationship in many ways.

We often talk about.

The technology benefits that we're able to leverage kind of their global best practices. Some some operational synergies and I think all of that comes to play with the announcement that was made yesterday.

We still have a lot of work to do to fully understand their plans and then see how we can best leverage them and adapt them, but I fully expect.

We will within imperial see benefits from their announcements to strategies that they're progressing and like I said, we're super excited.

Okay. Thank you for that my follow up is I don't want to get ahead of myself here for Europe coming analyst day it.

It seems Exxon has also decided to go virtual and unfortunately, so I don't know what you ultimately decide but.

But my question is specifically on apparel.

Lead out the kind of reliability trajectory.

Towards 2025.

It seems that you are well under way to that.

Probably a little bit ahead of the pace I would guess.

Is there any any thoughts you could you could provide in terms of the timing or the scale of what you ultimately see kettle doing on not original timeline and I'll leave it there. Thanks.

Yeah. Thanks, Thanks for that question.

Youre right it is.

Unfortunately, some of the impacts that.

That COVID-19 has had on.

Plans for Investor day in.

Impacted us last year has the risk of impacting us this year, but we're committed to two.

<unk> engaging.

With our investors our analysts and.

And sharing our forward plans I think it's a very it's a very positive story.

And in terms of apparel youre exactly right each year.

Over the last couple of years, we continue to set new records at Pearl and.

So as I mentioned, we just completed 2021 with 263000 barrels a day.

Gross.

Our guidance for next year is $2 65 to $2 70.

Which again moves us one step closer to $2 <unk>, which as you accurately note. We previously indicated that we would get to $2 80 in that 2025 timeframe, but we are well ahead of that.

And at Investor Day, we will lay out kind of a revised plan, but but safe to say, it's there's a lot of organizational focus.

And how we can get to that 280000 level sooner than the 2025.

And so some of the things we've already done that will contribute or things like moving to one turnaround per year, which we achieved a year earlier than what we shared at last Investor day.

We have multiple debottlenecking projects that we're progressing we're continuing to look at how do we optimize.

Ore recovery and and movement in the mines.

And then.

Taking full advantage of digital.

I've talked on prior calls about how we're employing multiple digital techniques that are adding real value to us.

That will also have beneficial effects on our production rates so.

I still I think $2 65 to $2 70 as is appropriate for 2022, but you can see that's going to step us to $2 80 quicker than than the 2025 time frame.

And we will assignment that Investor day, we'll give a lot more detail about those individual projects.

Thanks for the full answer guys and look forward to thanks again, thanks a lot.

Thank you. Our next question comes from Greg Pardy with RBC capital markets. You May proceed with your question.

Yes, thanks, good morning, and thanks for the rundown is always very thorough.

Again at the risk of probably jumping ahead, but but.

Brad you had mentioned that there are steps youre, taking to strengthen the downstream business I'm just wondering if theres anything you can kind of share and whether the.

I'm, assuming the products pipeline fix into that mix, but any color there would be great.

Yes. Thanks for the question, Greg and you are right, we'll give a much more comprehensive story at at Investor day, but.

It starts fundamentally with our cost structure and as I mentioned, we've done a lot of things.

Around our cost structure.

And I feel really good about that and then it's.

Ensuring that we are leveraging.

All the synergy that we have.

Based on our our location of our three refineries.

The integration that they have between themselves, but they also have.

With our upstream production assets.

And then.

Ensuring that we maximize the flexibility of their run slate, which has been key through the pandemic as we've had to adjust to much lower jet demand.

And move that into other other products.

And then look at where we have an opportunity to grow new.

Product outlets.

We've talked about things, we've done with asphalt over the last couple of years and how that's an increasing part of our portfolio and again leverages on our on our heavy crude slate.

Ill.

And then.

Most recently of course.

<unk> projected our ability to generate.

Renewable diesel that stress Kona will be a key strategic undertaking for us.

<unk>.

And then of course.

The integration we have between.

Sorry.

Finery and Sarnia chemical plant also allows us to.

Further capture market value and.

So again, that's kind of a broad brush on it.

John Wetmore.

We'll give a much more comprehensive story at at Investor day, but.

But exciting opportunities for us in the downstream.

Okay terrific.

Maybe now it's probably more of a question for Dan, but I mean, just as an observation and we've been talking about for a long time.

And I totally understand where you guys are coming from in terms of evaluation, but maybe Dan specifically.

Would it be possible for you to just frame what the mechanics are like I've never worked through one of these.

From that standpoint, and is it possible just to again enlighten us in terms of blackouts like I'm not trying to pin you down on a date per se because you're sort of seeing within the June timeframe, but I, just I think I'd love to know what needs to go into this in terms of formalizing our decision process.

Yes, I mean technically the technicalities of <unk> requires a filing it's open for 35 days generally speaking.

You Shouldnt do it during a blackout period, which is typically sort of 30 days before the earnings release ballpark is into the blackout periods are so that's the that's sort of.

The timing and technicalities of it.

Okay. Thanks very much.

Thanks, Greg.

Yeah.

Thank you. Our next question comes from Neil Mehta with Goldman Sachs. You May proceed with your question.

Thanks, so much.

And one of the core competencies that <unk> had and you brought into the business is your background around M&A given your prior role at Exxon and just be curious on your own perspective, do you view Imperial is a logical consolidator, especially in light of the deferred tax.

<unk>.

In your.

Our success in turning around operations and debt and scale and cost of capital.

And if so how do you think about balancing that versus return of capital. So big picture question, but any thoughts would be appreciated.

Yeah, Thanks, Neil and good to hear from you.

<unk>.

As we've said in the past.

We continue to keep an open mind and open aperture around potential.

M&A opportunities.

It's not our top priority our top priority centers around our existing asset base.

And maximizing value from those assets, which I think we have demonstrated success over over the last couple of years and has us well positioned for the future with.

Some very long life assets that.

Under under favorable markets will continue to generate significant cash and so when we look at potential M&A opportunities.

We need to convince ourselves that not only do.

Do they fit into our long term strategy, but they are accretive and they do compete for capital relative to.

The brownfield investments that that we already have identified and are progressing.

Sure.

We're not.

Driven to acquire something just to grow for the sake of growing in fact.

We've demonstrated our ability to grow with the existing asset base.

Take Karl for example.

It was just just a couple of years ago that that we were at or below 200000 barrels a day and so now this year. We were at $2 63, we expect to grow that to $2 65 to $2 70.

Within a relatively short timeframe I expect we'll be at $2 80, or higher and so in a few short years. We will have added 80000 barrels a day of growth in our portfolio at a cost much much lower then.

Any acquisition, we could have contemplated so that will continue to be the priority is making sure. We first focus on our existing assets, but there is a lot of consolidation occurring and.

And we want to make sure we are making thoughtful decisions and so.

We look at.

Potential acquisitions, and evaluate them and we discuss them as a management team.

And.

That guides us accordingly.

So I hope that answered your question.

Thats a helpful framework, Brad and then the follow up is just around cash taxes can you just remind us.

Team, how youre thinking about your deferred tax position.

Problem to have to have a lot of earnings per share.

But I would imagine that would also.

Taken to create some considerations that we need to.

Embedded in the model going forward.

Yes, absolutely Dan and his team spend a lot of time thinking about that and so I'll ask him to answer.

Just for the record we're against cash taxes.

Didn't know our position but.

We don't expect in.

2021 ask Luke actual cash taxes will be quite small.

22 will be sort of a transition year and by 2023 current with current economic conditions, we would expect to be fully tax paying so.

Yes, I think that's probably as much as I can tell you but on.

On a pure cash basis out the door, we should pay less than the statutory rate in 2022, but by 2023 will be full.

Fully tax paying on a cash basis, that's kind of where we are.

Makes sense Dan Thank you.

Thank you. Our next question comes from Menno <unk> with TD Securities. You May proceed with your question.

Good morning, everyone and thanks for squeezing me in.

Most of my questions have been answered, but maybe I'll just round things out with.

Cost inflation, we have a pretty good sense of what that could look like for upstream across the industry, but what are you seeing in terms of <unk>.

Cost pressures for downstream and would you be able to provide separate ranges for the two.

Yes, thanks for the question and no doubt that as a.

As an emerging theme.

Across industry and more broadly society right now inflationary pressures from from lots of angles I think.

Fortunately for us.

We havent seen huge impacts of inflationary pressures yet.

But that's not to say, we won't going forward, probably the single largest.

The impact we've had is around our own energy costs.

Where we purchase natural gas.

For our facilities.

And obviously, we all know what's happened there but.

<unk>.

As somebody who also produces energy balance that's still favorable for us.

<unk>.

We're taking a close look at other consumable supplies and things like that.

First making sure we have access to the supplies and were not impacted by any market shortages.

But then also looking at how we can optimize the cost and mitigate any any cost pressures.

Where we could see.

More significant impacts would be things like.

Steel for example, but the good news is when we look at.

Our large projects.

For next year, we talk about Saudi.

Sarnia products pipeline.

That project is essentially complete steel bought.

A long time ago.

Curl in pit tailings project.

As has some steel associated with it again, most of which has already been been procured, but it's more of a.

Earth moving project.

More than anything.

Very labor intensive and so we've got to keep an eye on labor costs, but but again, so far we haven't seen huge impacts there so something we're going to keep a very close eye on going forward.

But so far we've been able to manage it quite well.

Thanks, Brian I'll leave it there.

Okay. Thanks.

Thank you. Our next question comes from Phil Gresh with Jpmorgan you May proceed with your question.

Yes, hi, good morning.

My first question is on the dividend obviously as you noted two very large increases.

Two years since the last time.

You had an analyst day.

And you had talked about certain breakeven level.

At that time. So I was just wondering if you could refresh us on how you think about what that breakeven would be today and then as you go forward.

How do you think about sustainable levels of increases in the dividend.

With respect to a breakeven framework or however else you might look at it.

Thanks for the question I think Dan I'll give an answer on that.

Hey, Phil will talk more about breakeven at the analyst day last year, we talked about.

36 box with.

Both including sustaining capital and dividend I think that's still a still a good number so we're pretty far way away from that so it is important to us obviously that.

The dividend.

Our sustainable and growing dividend is our core kind of one of our core investor offerings, and we do think about that and we feel given given our outlook.

<unk> is warranted and we feel quite good about it.

Going forward, so I guess, it's probably as much as much as I'll say, but our breakeven is well below current prices. So that gives us a lot of comfort and obviously as we go forward. We continue to we've had energy inflation as has been discussed.

But we continue to work on our base cost structure.

So obviously, we want to get that breakeven down as low as long as we can.

Understood. Okay. Thank you.

And then just one other question on the Opex in the quarter, obviously, it was up sequentially.

I wasn't sure if some of the onetime costs that you called out in any way flowed through opex or not but just in general.

Latest opex.

Opex in 'twenty two.

Yes of that $160 million, there's a lot of things and there is deferred tax adjustments there is LIFO and inventory changes, but there is also I would say $60 million of Opex in the upstream included in that number so yes part part of that.

Part of that $160, one time opex from some smaller write downs.

Number of things.

Okay, great. Thank you.

Thanks, Phil.

Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Dave Hughes for any further remarks.

Alright, well, thank you very much and thank you everybody for joining us this morning.

As usual if you have any further questions. Please don't hesitate to reach out to us at any time. Thank.

Thank you.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

[music].

Yes.

[music].

Yes.

[music].

Hello, Thank you for standing by and welcome to Imperial fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation there'll be a question and answer session. SaaS. A question. During the session you will need to press star one on your telephone.

Please be advised that today's conference may be recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today, Dave Hughes Vice President Investor Relations. Please go ahead.

Thank you very much good morning, everybody and welcome to our fourth quarter earnings call I'll start by introducing you to the management team we have in attendance.

Brad Corson, Chairman, President and CEO , Dan Lyons Senior Vice President of Finance and administration, Simon younger senior Vice President of the upstream Sherry <unk>, Vice President of commercial and corporate development and John Whitmore, Vice President of the downstream. So I'll quickly go over the cautionary statement in todays comments include reference to non-GAAP financial measures.

<unk> and reconciliations of these measures can be found in attachment six of our most recent press release and are available on our website with a link to this conference call.

Todays comments may also contain forward looking information in any forward looking information is not a guarantee of future performance and actual future.

Financial performance and operating results can differ materially depending on a number of factors and assumptions.

Just before I turn it over to Brad for his opening remarks once he's done in energy and Dan go over our financial and operating performance for the quarter, we will be moving to the Q&A session as usual so with that I'll turn it over to Brad.

Good morning, everybody and welcome to our fourth quarter of 2021 earnings call I Hope each of you are doing well and are in good health to start the new year.

As we bring 2021 to a close well at least from a reporting point of view I would like to repeat something I said on the third quarter call Wow, what a difference a year makes.

<unk>, improving our reliability and progressing high return brownfield projects.

And you can now see the benefits of those efforts in our 2021 results as we continue to make the most of the improving and attractive business environment.

This performance was reflected in all business lines, although we did see some pretty challenging weather to close out the year.

And as it has all year. This performance allowed us to return a material amount of cash to shareholders in the quarter and in fact.

To accelerate the pace of these returns resulting in around $3 billion for the full year the highest level in the company's history.

Throughout 2021, we continued to manage the ongoing challenges due to COVID-19, our focus on maintaining the health and safety of our workforce was key not only in minimizing disruptions to our operations, but also and most importantly in ensuring the well being of our people.

From a business perspective, we saw continued demand recovery throughout the year and significant improvement in commodity prices both of which are reflected in our results over the next few minutes, Dan and I will detail the results.

Of what was a very strong quarter.

So now, let's turn more specifically to the fourth quarter results earnings for the fourth quarter were $813 million and our cash from operating activities was over $1 6 billion, both somewhat lower versus the third quarter <unk>.

Earnings were negatively impacted by approximately $160 million in one time noncash events and cash flow, excluding working capital effects was up more than $100 million.

Reflecting our strong operating performance and the strong commodity fundamentals in the quarter.

Crude prices continued to strengthen through the quarter, while both downstream and chemical margins remains strong.

Our upstream continued to perform very well delivering its highest annual production in over 30 years.

In our downstream performed well also we saw utilization of 97% for the quarter and higher product sales as demand continued to recover.

Our chemical business closed out the year with another strong quarter and delivered the highest full year earnings in over 30 years as.

As expected polyethylene margins did soften somewhat in the quarter, but remains strong and supported the best ever full year earnings for this business.

For the year, we generated about $5 $5 billion of cash from operating activities and around $4 $5 billion of free cash flow.

And in the fourth quarter, we announced an acceleration of the renewed and CIB.

All of this resulted in the return of nearly $3 billion of cash to our shareholders in the year.

2021 marks the 27th consecutive year of dividend increases.

And you would have seen US continue this trend with the announcement. This morning of another significant dividend increase of seven cents per share, which is around 26% our largest dividend increase in history.

This equates to a 55% increase since the beginning of 2021.

And represents an increase of almost 80% since the beginning of 2019.

Stansell issuer bid.

We are unwavering in our commitment to a reliable and growing dividend and delivering further shareholder value and returns.

I'll now turn it over to Dan to go through our financial performance for the quarter in more detail.

Thanks, Brad getting into the financial results for the full year, we recorded net income of almost $2 $5 billion, an increase of around $3 2 billion. Excluding the one time $1 $2 billion noncash impairment charge related to our unconventional business that we recognized in the fourth quarter.

Of last year.

Carl and higher energy costs upstream.

Upstream results included a number of one time charges of about $85 million.

The downstream recorded net income of $250 million down $43 million from net income of $293 million in the third quarter.

Downstream results included a number of one time charges totaling around $75 million.

Chemical has continued to demonstrate strong performance in the fourth quarter with net income of $64 million down about $60 million from the third quarter of this year as polyethylene prices moderated from the extremely extremely strong levels seen in the third quarter.

Moving on to cash flow.

In the fourth quarter, we generated over $1 6 billion in cash flow from operating activities and improvement of that $1 $3 billion from the fourth quarter of 2020, our free cash flow for the quarter was just over $1 $2 billion looking at the full year, our strong results and capital discipline to deliver free cash flow of <unk>.

Most $4 5 billion.

As we start 2022 strong commodity prices, along with our continued cost and capital discipline position us well to generate very substantial free cash flow going forward.

Moving on to Capex capital expenditures in the fourth quarter totaled $441 million up from $195 million in the fourth quarter of 2020.

Full year capital expenditures were in line with the revised guidance at just over $1 1 billion capital spending in 2021 was focused on progressing key projects such as Karl in pit tailings infrastructure and the Sarnia products pipeline. We also continue to invest in improving volumes through projects like the solvent assist.

<unk> laser project at our Mckee City Cold Lake plant and improving the efficiency and cost structure of our operations by continuing to invest in projects like our autonomous haul truck fleet and related infrastructure as well as installing our first boiler flue gas heat recovery unit at Carl.

In December we announced our 2022 capital guidance at $1 $4 billion, reflecting our strong ongoing capital discipline and the upstream at Kearl capital spending includes the ramp up of the curl in pit tailings project ongoing investment in our autonomous truck fleet and installing additional.

Boiler flue gas heat recovery units at Cold Lake, we will work on developing phase one of our Grand Rapids project continue to progress solvent assisted laser as well as infill drilling and well work.

Shifting to shareholder distributions.

We repurchased 17 5 million shares for $761 million in the quarter under an accelerated program, bringing our full year buyback to 56 million shares for over $2 2 billion, we paid dividends of $188 million in the fourth quarter and a total of over $700 million for the <unk>.

Full year.

Despite these record distributions we ended the year with about $2 $2 billion of cash on hand.

<unk> with our previous announcement, we continued our accelerated and CIB purchases in January 2022, and completed this program on January 31.

We also declared an increased dividend of 34 per share payable on April one.

Thanks, Dan as we switch our focused operations I would sum up the fourth quarter as being another strong quarter operationally across all business lines in the upstream we averaged 445000 oil equivalent barrels per day, which is an increase of 10000 barrels per day.

Versus the third quarter, but is down 15000 barrels per day versus the fourth quarter of 2020. This decrease year on year was due mainly to an early start to winter and.

At our Investor day in late 2020, we communicated our intent to focus the upstream organization's efforts on maximizing the performance of our existing asset base and.

And given how the assets performed in 2021 I would say.

We are on that strategy in achieving it.

And it is also paying off for us in fact, our full year 2021 production was 428000 oil equivalent barrels per day, which is the highest in over 30 years and exceeded our guidance for the year.

I would also note the current market environment and the strong commodity prices, we are seeing while in the fourth quarter. There were a number of factors, which drove the WTO WCS spreads wider such as the phased startup of line three and other smaller disruptions. We are now seeing narrower spreads in our <unk>.

Well positioned to continue to benefit from this.

So now let's move on and talk about Carl.

As I mentioned Western Canada saw an early start to winter feeling the effects of a deep freeze that started late in the fourth quarter and extended into the new year and as we have talked about in the past extended periods of extreme cold weather can be challenging for our operations and particularly mining.

As a result of these weather challenges.

It was lower than expected production in the fourth quarter. It curl with an estimated impact of around 13000 barrels per day in the quarter or just over 3000 barrels per day on a full year basis.

The impacts of the extreme cold weather continued to linger into January but I am pleased to say that as of now our operations have essentially returned to normal.

Despite the weather impacts total full year production for <unk> was 263000 barrels per day, the highest in the assets history.

This compares to 222000 barrels per day in 2020, an increase of 41000 barrels per day for the year.

And as Carl continues to deliver on its production and reliability commitments, including the elimination of the second annual turnaround a full year ahead of schedule.

Looking forward, we continue to be excited about <unk> potential as we make progress on our accelerated journey to 280000 barrels per day.

And despite the slower start to the year, we reiterate our 2022 guidance of 265 to 270000 barrels per day, reflecting the next step and production growth at the site.

I would also note that this 2022 guidance reflects one major planned turnaround expected to be executed in the second quarter of the year.

I'd like to wrap up our discussion about curl with some comments about unit cost another positive reflection of the assets performance.

In 2021.

Higher energy costs and the strength of the Canadian dollar represented approximately an incremental $2 50 per barrel relative to 2020.

However, if we normalize for energy costs and Forex.

Both items are outside our control our unit costs would have achieved a reduction of almost $1 per barrel from 2020, and then below the target of U S $20 per barrel.

Close management of unit cost.

<unk> to be core to our approach to maximizing profitability at <unk> and we remain focused on achieving further unit cost reductions as we go forward.

So now let's talk about cold Lake.

Cold Lake has been a really positive story throughout 2021.

Production for the quarter averaged 142000 barrels per day, which was up 7000 barrels per day versus the third quarter and 6000 barrels per day higher than the fourth quarter of 2020.

This strong performance reflects the benefits of our continued focus on production optimization and reliability.

While cold like experience the same stream same extreme cold temperatures in December it did not have a material impact given the nature of this operation.

For the year production averaged 140000 barrels per day.

Exceeding our updated guidance of 135000 barrels per day.

Our full year production at Cold Lake was driven by significant improvement to the base performance highlighting the effectiveness of our strategy to focus on reliability and optimization.

We also saw the benefits from recent drilling investments in our operations, which contributed almost 2000 barrels per day of production for the year.

We're looking forward to continuing to benefit from these improvements in the coming year and for 2022, we have issued guidance of 135000 to 140000 barrels per day for Cold Lake, which includes a typical plant turnaround in the second quarter.

Now at Syncrude Imperial's share of production for the quarter averaged 79000 barrels per day, which was up slightly from 78000 barrels per day in the third quarter.

But down 8000 barrels per day from the fourth quarter of 2020.

Unplanned downtime coupled with extreme cold weather presented challenges for these operations in December as detailed in the statement issued by the operator Suncor earlier in January .

We estimate the impact to be close to 5000 barrels per day, our share in the quarter.

Imperial share our full year production averaged 71000 barrels per day, an increase of 2000 barrels per day versus 2020.

Performance and the continuation of demand recovery, we have seen throughout 2021.

The fourth quarter throughput equates to a utilization of 97%, which is the highest fourth quarter utilization and over 30 years.

20.

Looking forward to 2022.

We have a fairly light turnaround year planned supporting our increased guidance for 2022 of 92% to 94% utilization.

One.

This decrease is especially notable because over the same period, our refining throughput increased by 39000 barrels per day, and our petroleum product sales grew by 35000 barrels per day.

So we are refining more barrels and selling more products and we're doing it at a lower absolute costs.

And again this was a year of significant turnaround activity and higher energy costs.

Pandemic related softness of 2020.

We continue to see industry demand trends pretty consistent with what we saw through 2021.

With gasoline and diesel demands hovering around 90% to 95% of historical levels and jet continuing to improve averaging around 70% to 75%.

However, as mentioned jet continues to be somewhat volatile as we experienced.

Experienced subsequent waves of COVID-19, and the associated restrictions related to travel.

Despite ongoing demand volatility our continued focus on reliable and efficient operations ensures we are capturing as much value as possible in the current downstream pricing environment.

Looking forward to 2022.

And over 30 years.

This reduction was driven largely by expected softening of polyethylene margins.

And while margins did soften somewhat in the quarter, they still remain quite strong and that sets the chemical business up well for a strong 2022.

<unk> of our business supports a long history of profitability, even in a year like 2020, and we expect this to continue even as we see polyethylene prices normalizing somewhat.

Yes.

And just before wrapping up I wanted to highlight a couple of other important items of note.

First we announced our plans to market our interest in <unk> energy, Canada, a few weeks ago, which as you will recall as our unconventional business.

We have been quite open recently about where this business fits into our longer term upstream strategy and our decision to market. The assets is fully consistent with this to be clear, though no decision has been made to sell these assets, but in our view we felt it was appropriate to test the market in the event there is an opportunity to Jennie.

<unk> increased value through a potential sales transaction.

<unk>.

So in closing another strong quarter, which brings to a close a year of very strong results, both operationally and financially.

As you have heard me say before the decisions we have made and the work. The organization has done over the past several quarters is allowing us to take maximum advantage of the prevailing market conditions.

And this performance supports our ongoing commitment to drive increased shareholder value.

And our continued commitment to shareholder returns.

As you heard Dan and I mentioned in 2021, we returned nearly $3 billion to our shareholders via our reliable and growing dividend and share buybacks.

Our long term focus on reducing our environmental footprint through investments in things like solvent technologies and carbon capture and storage underpin our confidence in meeting these goals.

Looking forward to 2022.

We continue to see support for commodity prices and fully expect to deliver another year of strong operational performance underpinning our ability.

To take utmost advantage of the current market conditions.

We will continue our focus on reduced emissions and sustainability, including our plans for renewable diesel at our stress Kona refinery.

We will remain disciplined with respect to spending levels, both operating and capital.

And we will also continue to return cash in excess of these needs to our shareholders.

And finally I would like to thank all of you for your continued support.

I hope you're as excited about 2022 as we are.

Thank you and back to you Dave.

First one what are you and Exxonmobil looking for in order to make a decision on marketing the <unk> assets would you consider selling it in pieces.

Yes, Thanks for that question, Phil and as as you know we announced earlier in January our intention to market those assets jointly with with Exxonmobil and.

And in fact, we we progressed those activities now have the data room open.

There is a lot of interest in.

Our decision around marketing was really driven by.

The strategic work, we have done over the last couple of years, where we have prioritized our focus on on certain assets in our portfolio.

And really prioritized, our capital as well and through that work.

We have concluded that we have.

Higher value opportunities.

With our with our core mining assets and as such.

Youll recall, we took an impairment decision in late 2020 for some of the unconventional assets that we had.

Not included in our development plans. So again this is really a continuation of that strategy. We have not made the decision to sell though so we're going to be looking at.

How do we create maximum value for us for our shareholders.

Prior to.

So putting the assets in the marketplace. We had received several unsolicited offers.

For for those assets and.

And we shouldnt be surprised by that.

There's been a lot of consolidation that's occurring in the in the Montney and Duvernay shale resource plays and.

So it's really the culmination of all that that that drove us to put those assets in the marketplace and.

We'll see what we get back.

It is a very large resource.

Play.

Over 650000 net acres.

And so from a.

From a transaction structure, we are open to.

To selling it in pieces.

We do know that there are some industry players that are primarily focused in the montney. There is others that are primarily focused in the duvernay.

There are some that are in both.

We are open to considering alternative structures for the transaction.

The key is going to be what delivers the most value and how does that compare to our view of value. If we were to continue to to retain the asset and develop it further ourselves.

So we're excited to see what comes out of the data room in the bids.

Another month or so thanks for that question.

Okay and fills a follow up I think Dan ill direct straight to you is are you still considering in <unk> given the dividend increase.

Yes, Thanks, Phil you talked about this.

And our kind of prepared remarks, but it's probably worth.

And a little more I mean, the short answer is yes.

We are considering and <unk> and just stepping back.

We have a long standing philosophy, I think as you know to return surplus cash to shareholders.

Darts of the reliable and growing dividend, which we've demonstrated over many years and of course this morning's announcement of a sizable increase is another step in that.

In that direction after dividends or next vehicle for surplus cash is the NCI and CIB, it's simple efficient and flexible.

We used it certainly to the Max in 2021, we had a program we restarted in May June we bought a bunch of shares we launched a new program in June we ended up accelerating that to wrap up early.

Over the course of 2021, we repurchased over $2 $2 billion through that program and.

Yes January 31st yesterday, we wrapped up that program with our acceleration through January 31, or another incremental $450 million. So over 13 months about $2 $7 billion.

Through the NCI.

You know as well were limited to 5% of outstanding shares annually in that program.

Our next renewal would be late June of this year, we certainly plan to do that.

But looking at our cash balances and our outlook for strong cash flow.

Anticipating taking action on shareholder returns additional action before renew of the CIB in late June we haven't made a final decision, but we've certainly heard the market's feedback.

Strong preference for an SUV and Thats our lead case at this point.

Okay.

Operator can we turn it over to you now pleased to go to the live Q&A line.

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

Draw your question press the pound key.

Our first question comes from Dennis Fong with CIBC World Markets. You May proceed with your question.

Good morning, and thanks for taking my questions. The first wondering if it falls in line with Dan's comment there on.

On returning cash back to shareholders, obviously imperial oil's in an enviable position with respect to leverage can you maybe describe what you view the ideal capital structure for in European for the company and how we should be thinking about that obviously balancing the available free cash flow that you're generating the relative capex that you have already outlined with you too.

Thousand 'twenty two guidance as well as the various other levers that you have and returning cash back to shareholders.

I'll turn that question over to Dan who can build on his comments about.

About shareholder returns yes.

We could have about $5 billion of debt, which we've had for.

Pretty been stable for a number of years, we feel comfortable with that level of debt given our leverage on an absolute basis and relative to peers is low.

It's not our first move to repay the debt so to the extent we have surplus cash.

Really once we've exhausted the NCI.

Its use other mechanisms to return that to shareholders.

That's maybe a short answer but I think I think that is that it in a nutshell and you see we haven't fairly as I mentioned in my remarks are fairly modest capital program in 2022.

At current price levels, we anticipate generating significant free cash flow. In addition to a pretty significant cash balance right now.

Great Great. Thanks, and my second question here is more on the upside. So there maybe directed to you Brad or to Simon.

Just with respect to cold Lake, you've obviously seen fairly strong.

Production levels are.

A lot of success from the optimization side, you mentioned, a little bit around a laser and the utilization of solvent just curious as to how the optimization is continuing what maybe some of the next steps happened to be and what does that potentially mean for a project like Grand Rapids, which was potentially going to utilize existing steam infrastructure in the area.

Thanks.

Yes, thanks for that question Dennis.

Dennis.

We are super excited about the progress, we're making at Cold Lake.

We have put a lot of focus into optimizing the reservoir performance of those assets. We've continued to focus on reliability as well and then.

As you mentioned and we've commented on this call and in the past.

We continue to look for ways to employ.

Kind of next generation solvent technologies.

Like laser that achieved multiple objectives for us.

They do have the benefit of enhancing reservoir performance.

But equally important they reduce the greenhouse gas emissions.

They have lower steam and energy intensity and so it is a continued strategy of ours.

To continue to.

To deploy.

Solvent technologies to enhance <unk> performance.

Next on the docket is.

Grand Rapids Phase, one, which will employ SA Sag D technology, and then looking a little bit longer term.

We were.

Evaluating application of cyclic solvent process, we referred to our CSP, which allows us to replace steam with propane and achieve even further reductions in.

And greenhouse gas intensity, while improving reservoir performance and in the case of CSP.

We've already piloted that quite successfully and so now looking at the further application so.

I think over over the coming quarters and years Youre going to continue to hear us talk about the evolution of these technologies, how they're integral to both our reservoir optimization, but also our greenhouse greenhouse gas intensity reduction objectives.

And I'm sure in our in our upcoming Investor Day, we will spend some more time talking about each of those and how they fit in.

Thanks for the question and again, we're very excited about about our actions at Cold Lake.

Okay.

Thank you. Our next question comes from Manav Gupta with Credit Suisse. You May proceed with your question.

Hey, guys. My first question is more on the renewable diesel side I'm just trying to understand if you can give us I'm sure you've done some preliminary work what kind of feedstock side Youre looking to run soybean canola and you're going into the vegetable oil bench. So is it primarily going to be very stable noise can you bring in some used cooking oil.

Some animal fats and so.

If I could get some understanding of that.

Yeah. Thanks, Thanks for that question and again, we're going to spend some more time at Investor day, describing this project but.

Kind of at the.

The foundation of your question fundamentally this is going to be plant based materials.

We're not looking at.

Animal fat or other sorts of.

Of supply, it's very much focused on.

On plant based materials that are sourced generally in the region.

We haven't talked explicitly about.

The specific type of plant, we're still in commercial discussions with potential suppliers.

And so those those.

Commercial discussions are still sensitive around the type.

But needless to say there is there is an abundant supply of available materials and good options for us that are going to allow us to.

Ultimately produce 20000 barrels a day of very.

Competitive supply.

And so we're really excited about this project.

Yes.

Driven by kind of the overall benefits it will bring to to Canada.

In achieving.

Achieving our.

Total emissions objectives of net zero by 2050. This this is a key contributor to reduced in scope three emissions.

So more to come about.

Perfect and again.

Keeping on the lineup of emission reductions you and others have obviously committed to carbon capture and sequestration.

It was a big project kind of reach was announced but.

How is it progressing.

All other partner wins, what are you looking from the government in terms of help.

It's an excellent project, but we don't get too many details on that carbon capture and sequestration project. So if you could just help us understand how the discussions are progressing between you and all the others and the government about that project.

Yes, thanks for the question and I am excited to talk about it.

We're making I think really really good progress.

This is a very complex undertaking to achieve net zero by 2050.

And the alliance we've established a amongst the member companies is unprecedented the level of cooperation the amount of investment that will ultimately be required to get to net zero.

We've estimated as is.

$70 $75 billion from now to 2050, so it's a huge undertaking it's not just one.

Single project, it's multiple projects.

There is a foundational project, which is building. This large trunk line that will allow the transport of carbon that's captured in the Fort Mcmurray area, all the way down to the Cold Lake region.

Where we've applied with the government for access to pore space. So we can.

So we can sequester the carbon there.

So building. This large trunk line is a significant project, but then there are several other projects around the capture side at each of the individual sites, so where we are.

Producing hydrocarbons today.

<unk>.

And then on top of that.

As I just talked at Cold Lake not only are we focused on.

Capturing carbon and transporting it to.

Get to store it but we're also looking at how can we fundamentally reduce the amount of carbon that is generated and so things like solvent technologies are quite important there.

No.

A lot of moving pieces, if you will to progress this project, but we as an alliance.

Have been able to develop.

Preliminary plans around.

Kind of the sequence of the trunk line project.

Carbon capture projects as well as other technology initiatives.

We will talk more about that on Investor day.

But I think it's moving quite well.

We are also spur.

Spending a lot of time with both the federal and provincial governments around enabling steps that are necessary to progress these huge investments.

Specifically, we are looking for investment tax credit and other financial support from the government.

Given the nature of these investments the risks associated with them. So those discussions are ongoing.

The cooperation amongst the companies is just exceptional.

In fact as as Ceos.

The six companies, we get together every single week.

And are having discussions about the progress of the project key priorities, how do we keep it moving along what are some of the key issues and again as I mentioned, we're also actively in.

Gauged with the government so as Ceos, we're meeting directly with key officials and certainly our teams are meeting.

With with officials in staffs as well at both the federal or the provincial level. So it's all hands on deck.

This is a huge challenge, but we think it's achievable and we think it's unnecessary and so we're going to do what it takes.

That is great color and hoping to meet you at an in person investor.

Investor Day in March.

Thank you. Thank you well I look forward to meeting you as well you know unfortunately.

Overcrop Iris has has continued to delay many in person meetings, but as soon as.

As soon as the opportunity affords itself I very much look forward to it as well, but it's been a long two years right. So so again I look forward to meet you as well. Thank you.

Sure.

Okay.

Thank you. Our next question comes from Doug Leggate with Bank of America. You May proceed with your question.

Thanks, Good morning, everyone I'm delighted to be on your call. Thanks for taking my questions.

Brian I Wonder if I could start with Exxon mobil's announcement yesterday of combining their downstream and chemicals business I wonder if theres any read through for imperial as it relates to incremental cost cutting initiatives and whether your full suite.

Yes, thanks for the question Doug.

Good good to hear your voice, it's been a while since we've connected so so thanks for joining the call today.

<unk>.

Regarding Exxon Mobil's announcements yesterday Super Super exciting news.

For Exxonmobil and.

With Exxonmobil being majority share holder of Imperial we benefit from that relationship in many ways.

We often talk about.

The technology.

Benefits that we're able to leverage kind of their global best practices. Some some operational synergies and I think all of that comes to play with the announcement that was made yesterday.

We still have a lot of work to do to fully understand their plans and then see how we can best leverage them and adapt them, but I fully expect.

That we will within imperial see benefits from their announcements to strategies that they're progressing and like I said, we're super excited.

Okay. Thank you for that my follow up is I don't want to get ahead of myself here for Europe coming analyst day soon.

It seems Exxon has also decided to go virtual and unfortunately, so I don't know what you ultimately decide but.

But my question is specifically on Carol when you lead out the kind of reliability trajectory.

Towards 2025.

It seems that you are well under way to not youre, probably a little bit ahead of the pace of our guests.

Is there any any thoughts you could you could provide in terms of the timing or the scale of what you ultimately see kettle doing on not original timeline and I'll leave it there. Thanks.

Yeah. Thanks, Thanks for that question and Youre right. It is is an unfortunate some of the impacts that.

That COVID-19 has had on.

Plans for Investor Day.

Impacted us last year has the risk of impacting us this year, but we're committed to.

To engaging.

With our investors our analysts and sharing our forward plans I think it's a very it's a very positive story.

And in terms of apparel youre exactly right each year.

Over the last couple of years, we continue to set new records at Pearl and.

And so as I mentioned, we just completed 2021 with <unk>.

263000 barrels a day.

Gross.

Our guidance for next year is $2 65 to $2 70.

Which again moves us one step closer to <unk> to $2 <unk>, which as you accurately note. We've previously indicated that we would get to $2 80 in that 2025 timeframe, but we are well ahead of that.

And at Investor Day, we will lay out kind of a revised plan, but but safe to say, it's there's a lot of organizational focus on how we can get to that 280000 level sooner than the 2025.

<unk>.

And so some of the things we've already done that will contribute or things like moving to one turnaround per year, which we achieved a year earlier than what we shared at last Investor day.

We have multiple debottlenecking projects that we're progressing we're continuing to look at how do we optimize.

Or recovery.

And movement in the mines and then.

Taking full advantage of digital.

I've talked on prior calls about how we're employing multiple digital techniques that are adding real value to us.

That will also have beneficial effects on our production rates so.

I think $2 65 to $2 70 as is appropriate for 2022, but you can see that's going to step us to $2 80 quicker than than the 2025 time frame.

And we will assignment at Investor Day, we'll give a lot more detail about those individual projects.

Thanks for the full answer guys look forward to thanks again, thanks a lot.

Thank you. Our next question comes from Greg Pardy with RBC capital markets. You May proceed with your question.

Yes, thanks, good morning, and thanks for the rundown is always very thorough.

Again at the risk of probably jumping ahead, but but.

Brad you had mentioned that there are steps youre, taking to strengthen the downstream business I'm just wondering if theres anything you can kind of share and whether the.

I'm, assuming the products pipeline fix into that mix, but any color there would be great.

Yes. Thanks for the question, Greg and you are right, we'll give a much more comprehensive story at at Investor day, but.

It starts fundamentally with our cost structure and as I mentioned, we've done a lot of things.

Round our cost structure.

And I feel really good about that and then it's.

Ensuring that we are leveraging.

All the synergy that we have.

Based on our our location of our three refineries.

The integration that they have between themselves, but they also have.

With our upstream production assets.

And then in.

During that.

Maximize the flexibility of their run slate, which has been key through the pandemic as we've had to adjust to much lower jet demand and.

And move that into other other products.

And then look at where we have an opportunity to grow new.

Product outlets.

We've talked about things we've done with asphalt.

Over the last couple of years and how that's an increasing part of our portfolio and again leverages on our on our heavy crude slate.

Al.

And then.

Most recently of course, the shred projected our ability to generate.

Renewable diesel that stress Kona will be a key strategic undertaking for us.

<unk>.

And then of course.

The integration we have between.

Sarnia refinery in Sarnia chemical plant also allows us to.

Further capture market and value and.

So again.

That's kind of a broad brush on it.

No.

John Wetmore.

We'll give a much more comprehensive story at at Investor day, but.

But exciting opportunities for us in the downstream.

Okay terrific and maybe now it's probably more of a question for Dan, but I mean, just as an observation and we've been talking about <unk> for a long time.

And I totally understand where you guys are coming from in terms of evaluation, but maybe Dan specifically.

Would it be possible for you to just frame what the mechanics are like I've never worked through one of these.

From that standpoint, and is it possible just again enlighten us in terms of blackouts like I'm not trying to pin you down on a date per se, because you're sort of saying within the June timeframe, but I, just I think I'd love to know what needs to go into this in terms of formalizing our decision process.

Yes, I mean technically the technicalities of <unk> requires a filing it's open for 35 days generally speaking.

You Shouldnt do it during a blackout period, which is typically sort of 30 days before the earnings release ballpark is in the blackout periods are so that's the that's sort of.

The timing and technicalities of it.

Okay. Thanks very much.

Thanks, Greg.

Yeah.

Thank you. Our next question comes from Neil Mehta with Goldman Sachs. You May proceed with your question.

Thanks, so much.

<unk>.

And your success in turning around operations and debt and scale and cost of capital.

And if so how do you think about balancing that versus return of capital. So big picture question, but any thoughts would be appreciated.

Yes, thanks, Neil and good to hear from you.

<unk>.

As we've said in the past.

We continue to keep an open mind and open aperture around potential.

M&A opportunities.

It's not our top priority our top priority centers around our existing asset base.

And maximizing value from those assets, which I think.

We have demonstrated success over over the last couple of years and has us well positioned for the future with some.

Some very long life assets that.

Under under favorable markets will continue to generate significant cash and so when we look at potential M&A opportunities.

We need to convince ourselves that not only do.

Do they fit into our long term strategy, but they are accretive and they do compete for capital relative to.

The brownfield investments that that we already have identified and are progressing.

Sure.

We're not driven to acquire something just to grow for the sake of growing in fact.

I think we've demonstrated our ability to grow with the existing asset base.

Take Karl for example.

It was just just a couple of years ago that that we were at or below 200000 barrels a day and so now this year. We were at $2 63, we expect to grow that to $2 65 to $2 70.

Any acquisition, we could have contemplated so that will continue to be the priority is making sure. We first focus on our existing assets, but there is a lot of consolidation occurring and.

And we want to make sure we are making thoughtful decisions and so.

We look at potential.

Potential acquisitions, and evaluate them and we discuss them as a management team.

And that.

And that guides us accordingly.

So I hope that answered your question.

That helps.

Framework, Brad and then the follow up is just around cash taxes can you just remind us.

Team.

Thinking about your deferred tax position.

Problem to have to have a lot of earnings per share.

But I would imagine that would also.

Taken create some considerations that we need to.

Embedded in the model going forward.

Yes, absolutely Dan and his team has spent a lot of time thinking about that and so I'll ask him to answer yes.

Just for the record we're against cash taxes.

You didn't know our position but.

We don't expect we will.

2021 actual actual cash taxes will be quite small.

22 will be sort of a transition year and by 2023 current with current economic conditions, we would expect it to be fully tax paying.

No.

Yes, I think that's probably as much as I can tell you but.

On a pure cash basis out the door.

We should pay less than the statutory rate in 2022, but by 2023 will be fully tax paying on a cash basis, that's kind of where we are.

Makes sense Dan Thank you.

Thank you. Our next question comes from Menno <unk> with TD Securities. You May proceed with your question.

Good morning, everyone and thanks for squeezing me in.

Most of my questions have been answered, but maybe I'll just round things out with <unk>.

Cost inflation, we have a pretty good sense of what that could look like for upstream across the industry, but what are you seeing in terms of cost pressures for downstream and would you be able to provide separate ranges for the two.

Yes, thanks for the question and no doubt that as a.

As an emerging theme.

Across industry and more broadly society right now.

Inflationary pressures from from lots of angles I think.

Fortunately for us.

We haven't seen.

Huge impacts of inflationary pressures yet.

But thats not to say, we won't going forward, probably the single largest.

Impact we've had is around our own energy costs.

Where we purchase natural gas.

For our facilities.

And obviously, we all know what's happened there but as.

As somebody who also produces energy.

Balance that's still favorable for us.

We're taking a close look at other consumable supplies and things like that.

First making sure we have access to the supplies and were not impacted by any market shortages.

But then also looking at how we can optimize the cost and mitigate any any cost pressures.

Where we could see more significant impacts would be things like <unk>.

Steel for example, but the good news is when we look at our large projects.

For next year, we talk about sorry.

Sarnia products pipeline.

That project is essentially complete steel bought.

A long time ago.

Hurdle in pit tailings project.

<unk> had some steel associated with it again, most of which has already been been procured, but it's more of a.

Earth moving project.

More than anything.

Very labor intensive and so we've got to keep an eye on labor costs, but but again, so far we haven't seen huge impacts there so something we're going to keep a very close eye on going forward.

But so far we've been able to manage it quite well.

Thanks, Brian I'll leave it there.

Okay. Thanks.

Thank you. Our next question comes from Phil Gresh with Jpmorgan you May proceed with your question.

Yes, hi, good morning.

My first question is on the dividend obviously as you noted two very large increases.

Two years since the last time.

You had an analyst day.

And you had talked about certain breakeven level.

At that time. So I was just wondering if you could refresh us on how you think about what that breakeven would be today and then as you go forward.

How do you think about sustainable levels increases in the dividend.

With respect to a breakeven framework or however else you might look at it.

Thanks for the question I think Dan will give us an answer on that yeah, Hey, Phil will talk more about break evens at the analyst day last year, we talked about.

36 box with.

Both including sustaining capital and dividend I think it's still it's still a good number. So we're we're pretty far way away from that so it is important to us obviously that we the.

The dividend.

Our sustainable and growing dividend is there a core kind of one of our core investor offerings.

We do think about that and we feel given given our outlook at <unk> is warranted and we feel quite good about it going forward. So I guess, it's probably as much as much as I'll say, but our breakeven is well below current prices. So that gives us a lot of comfort and obviously as we go forward. We continue to we've had energy inflation.

<unk> has been discussed.

But we continue to work on our base cost structure.

Obviously, we want to get that breakeven down as low as long as we can.

Understood. Okay. Thank you.

Just one other question on the Opex in the quarter, obviously, it was up sequentially.

I wasn't sure at some of the onetime costs that you called out in any way.

Flowed through opex or not.

Just in general.

The latest.

Opex in 'twenty two.

Yes.

60 million Theres, a lot of things and there is deferred tax adjustments there is LIFO and inventory changes, but there is also I would say $60 million of Opex in the upstream included in that number so yes part part of that.

Part of that $160, one time opex from some smaller write downs.

A number of things.

Okay, great. Thank you.

Hi.

Thanks, Phil.

Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Dave Hughes for any further remarks.

Alright, well, thank you very much and thank you everybody for joining us this morning.

As usual if you have any further questions. Please don't hesitate to reach out to us at any time.

You.

Yeah.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

Q4 2021 Imperial Oil Ltd Earnings Call

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