Q2 2022 Canadian Natural Resources Ltd Earnings Call
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Good morning.
Welcome everyone to the Canadian Natural resources, 2022, second quarter earnings conference call and webcast.
After the presentation, we will conduct a question and answer session and.
Instructions will be given at that time.
Please note that this call is being recorded today August 4th 2022 at nine a M Mountain time.
I would now like to turn the meeting over to your host for today's call Lance Catherine manager of Investor Relations. Please go ahead Sir.
Thank you operator, good morning, everyone and welcome to Canadian Natural's second quarter 2022 results conference call.
Before we begin.
I'd like to remind you of our forward looking statements.
It should be noted that in our reporting disclosures everything is in Canadian dollars, unless otherwise stated Andrew.
And report our reserves and production before royalties.
I would suggest you review our comments on that.
non-GAAP disclosures in our financial statements.
With me this morning, Tim Mckay, our president and Mark <unk>, our Chief Financial Officer.
Tim will first provide highlights of our ESG achievements evident in our 2021 stewardship report to stakeholders that was published today and.
And how strong execution and efficiencies so far this year have a Canadian natural in a unique position to maximize value for our shareholders by executing on additional strategic growth opportunities.
Followed by an overview of the quarter, including specifics of our World class assets and operations. Mark will then provide an update on our strong financial position and substantial free cash flow generation and increasing returns to shareholders to close Jim will summarize our call prior to opening up the line for questions with that I'll turn it over to you Tim.
Good morning, everyone.
Natural delivered strong operational results in the second quarter of 2022.
We achieved quarterly production of approximately 121 million Boe's, a day, which included record natural gas production of approximately two one Bcf a day.
Liquids production was strong at approximately 860000 barrels a day as planned maintenance was completed on our oil sands mining assets.
This combined with our capital discipline generated significant free cash flow as we continue to balanced free cash flow to our four pillars of capital allocation maximizing value to our shareholders.
Turned approximately $6 4 billion to our shareholders through dividends and share repurchases.
We continue to apply that same drive to ESG, environmental social and governance first a significant factor in our long term sustainability as we move forward, we will continue to outline our path to lower carbon emissions across the asset base and our journey to achieve our goal of net zero <unk> emission.
And you asked hands by 2050.
Canadian natural is an R&D investment leader, we have increased our investments in R&D and technology Cabela's by 33% over 2020 levels with $450 million invested in 2021, and this is targeted to grow with our participation in the pathways Alliance.
As well Canadian natural continues to work together with 144 and <unk> businesses.
Through which $572 million in contracts were awarded in 2021, a 17% increase from 2020 level.
You all sands pathway to net zero initiatives.
Ill call the pathway Alliance and was launched in June of 2021.
We've clearly defined plan to achieve 2020.
<unk> 22 Mega tons of annual emission reductions by 2030.
And net zero emissions by 2050.
The federal government's announcement.
Announced support through the investment tax credit as well as additional support from the Alberta government will be fundamental to achieving these reductions and the tax credit is a positive approach where industry and government can co invest and Ccs infrastructure to materially reduce Canada's GHT commissions.
Environment and climate change, Canada has recently proposed GHT emission cap on the oil and gas sector and our view. This cap is unnecessary and overly ambitious in light of our stated preference for governments and industry to continue to work together through the pathways initiatives to achieve and already <unk>.
<unk> emission target reduction.
Important for all parties to continue to work together Canadian natural will continue to provide input to the government on the importance of balancing environmental and economic objectives, as well as being able to support candidates allies with energy security.
Canadian natural has had a strong execution with its drilling progress so far in 2022, resulting in the company drilling 22 net operated wells ahead of forecast consisting of 11 net thermal in situ and 11 conventional E&P wells with drilling cost on a per well basis comparable budget.
With improved efficiency disease mitigating some of the inflationary cost pressures.
As a result, the 2022 capital, especially.
Expenditures will be adjusted with the base capital has increased by approximately 5% or $200 million over the original 2022 levels and will now be targeted for approximately $3 845 billion.
Primarily due to the forecasted inflationary pressures and all operating areas for items, such as steel manufactured goods services and labor.
Strategic growth capital will now target to be approximate 1070 $5 million, an increase of approximately $375 million over the original 2022 levels.
With this increased Canadian natural targets to drill an additional 41 net conventional E&P wells and 15 net thermal in situ us, which essentially backfill the latter half of the drilling program, which includes pipelines facility and additional non op activity.
We will progress liquid rich montney natural gas projects that will add capacity.
Approximately 140 million cubic feet of natural gas and $25 five.
500 barrels a day of liquids in the future years.
As well long leads for thermal in situ offshore Africa, as well as incremental shovels and tailings pipe for horizon.
As a result, our guidance has been increased to 12, 95% to $30 35000, Boe's a day.
As a result of efficiencies gained.
And the increased capital in both conventional natural gas and E&P crude oil and liquids.
I will now do a brief overview of the assets starting with natural gas.
Overall Q2 2022 natural gas production was two one Bcf, which was a record for the company a 5% increase over Q1 2022.
For North American operations Q2, natural gas production was 2.05 Bcf versus the 199 Bcf in Q1, primarily a result of the company's strategic decision to invest in our drilling field strategy, adding low cost high value liquid rich natural gas production volumes as well as opportunistic.
<unk>.
Our Q2 2022 natural gas operating costs were strong at $1 15, an mcf, which is down 10% compared to Q1 'twenty two 'twenty eight good operating performance as our teams continue to focus on operational excellence.
A couple of area highlights are at Thompson, six well pad came on production in Q2 2022.
Strong capital efficiency of approximately $4500 per bvd with July .
Monthly production of approximately 54 million cubic feet per day.
Three wells came on late in Q1 of 2022 at about $2800 per day with total July production of approximately 32 million cubic feet per day, and 560 barrels per day of liquids.
Natural's diversified sales for our natural gas realized natural gas pricing of $7 93 per Mcf in Q2 at.
51% increase above Q1, 2022 levels and approximately 30% higher than the <unk> benchmark price in Q2 further improving the economics of our low cost drilled the field liquids rich natural gas projects.
For North American light oil and NGL Q2 production was 109997 barrels.
Up 2% from Q1, 'twenty two primarily a result of strong drilling results in previous acquisitions.
Q2, 2022 operating costs were 15, 19 barrel comparable to Q1 'twenty two operating costs of $15 24.
At Wembley nine liquid rich Montney wells are on production with July production, approximately 8200 barrels a day of liquids and 27 million cubic feet of natural gas exceeding budget and maximizing the existing facility capacity when the capital efficiency of approximately $3400 per <unk>.
International assets in Q2 had had oil production of 25097 barrels which is down from Q1 'twenty two levels, primarily due to unplanned maintenance in the North Sea offshore Africa production.
Offshore Africa Q2 production was 15190, <unk> 19 barrels per day.
Versus Q1 of 'twenty 215742 barrels a day with operating costs in Q2 at $15 73 per barrel in the North Sea production averaged only 10788 barrels a day in Q2 versus Q1 of 15961 barrels a day.
Operating costs of $84 38 per barrel for international assets continue to generate free cash flow and value for the company.
$2, a barrel primarily result of higher trucking related costs at Smith, and the Clearwater play Canadian natural drilled 12 horizontal multilateral wells on four pads current production from these wells is approximately 4400 barrels a day with a strong capital efficiency of approximately $6300 per <unk>.
Canadian natural has now drilled a total of 19 wells in 2022 with the company Clearwater with total company Clearwater production now excess of 10000 barrels a day up from approximately 3900 barrels a day at the start of 2022.
As part of our strategic capital growth capital, we are delineating additional opportunities on our large undeveloped Clearwater land base of approximately 940000 net acres.
The key component of our long life low decline assets is our world class Pelican Lake pool, where our leading edge polymer flood continues to deliver significant value.
Q2 production was 51112 barrels a day versus Q1 'twenty two average of 51991 barrels a day, reflecting the low decline nature of this property.
<unk> continues to do a great job. We had good Q2 operating cost of 799 per barrel an increase from our Q1 2022 operating costs of $7 48 per barrel with our low decline and very low operating cost Pelican Lake continues to have excellence netback.
And our thermal in situ operations in 2022, we continue to leverage continuous improvement culture, and our expertise to deliver effective and efficient operations.
Q2, 2022 production was 249938 barrels a day down from the Q1 2022 truck production of 261743 barrels a day with Q2 operating cost of 18, 19, $18 93 per barrel, which is up when compared.
To Q1 of 2022 operating cost of $14 35.
Primarily as a result of increase related costs increased energy related costs as part of our original thermal in situ strategy growth plan released in January and as a result to efficiencies realized today. We're now targeting an additional 15 net <unk> wells originally targeted for 2023.
Totaling approximately $45 million in capital spend which includes pipelines and facilities.
Natural now targets to drill a total of 117 net <unk> wells in 2022.
As well as part of our capital update we are targeting to progress engineering and long lead for two thermal in situ pads.
Additions at Pike targeting to add approximately 28000 barrels a day of capacity by 2026.
And the Companys oil and the Companys World class oil sands mining and upgrading assets, we had Q2 production averaging.
Approx, averaging 356953 barrels a day of SCO down from Q1 of 2022 levels, primarily as a result of the Scott <unk> and horizon planned major turnarounds in the quarter.
Q2 operating costs were at $33 76 per barrel of SCO. This increase was primarily driven by decreased production volumes due to turnarounds and increased energy related costs.
The planned turnaround at Horizon went very well completed eight days ahead of our 32 day budgeted and at the non op Scottrade Upgrader. It went $17 70 days longer to note. The original target of 65 days.
Horizon reliability enhancement project is progressing as planned and as part of a capital update we target to add additional shovels tailings pipe horizon supporting the reliability project I will now turn it over to Mark for a financial review.
Thanks, Tim Good morning, everyone.
Our second quarter financial results were very strong on the back of safe effective and efficient operations and a robust pricing environment, including a strong SCO premium to <unk>.
In Q2 net earnings were $3 5 billion and adjusted funds flow were $5 4 billion.
Allowing for significant allocation to shareholder returns through dividends and share buybacks further debt repayment and to just strategic growth opportunities all providing long term shareholder value.
Returns to shareholders have been significant and increasing through 2022.
As we have returned a total of approximately $6 4 billion to shareholders through $2 4 billion in dividends and 4 billion through share repurchase equaling about 56 million shares year to date up to and including August 3rd.
Our base.
Dividend is growing and sustainable and is supported by our long life low decline assets.
On March <unk> 2022, the board of directors approved a 28% increase to our quarterly dividend to <unk> 75 per share or $3 per share annually.
This continues the company's leading track record of 22 consecutive years of dividend increases for the significant compound annual growth rate of 22% over that period of time.
Strong execution across the company's operations has resulted in substantial free cash flow generation, driven by our large and balanced asset base with a top tier cost structure.
As a result, our financial position continues to strengthen with net debt balances targeted to continue to decrease and we remain committed to being balanced on allocation to our four pillars.
This includes incremental strategic capital to growth opportunities that provide incremental production.
And to increasing returns to shareholders with the board of directors approved a special dividend of $1 50 per share payable on August 31, 2022 to shareholders of record on August 23, 2022, which is in addition to our regular quarterly dividend.
At the same time shareholder returns have significantly increase in 2022, our strong financial position continues to get stronger.
Net debt decreased to $12 4 billion in Q2 down $1 4 billion in the quarter and is targeted to decline further through the year.
As part of our financial strength, we continue to maintain strong liquidity, including.
Including our revolving bank facilities cash and short term investments liquidity at the end of Q2 was approximately $6 1 billion.
We remain committed to our balanced approach to capital allocation as the uniqueness of our high quality reserve base long life low decline production and leading cost structure drive substantial and sustainable free cash flow.
This provides significant opportunity for value growth, increasing returns to shareholders and further financial strength.
Setting Canadian natural apart from the global peer group.
With that I'll turn it back to you Tim.
Thank you Mark.
Canadian Natural's advantage is our ability to effectively allocate cash flow to our four pillars.
We have a well balanced diverse large asset base with significant portion long life low decline, which requires less capital to maintain and we continue to allocate cash flow to our four pillars in a disciplined manner to maximize value for our shareholders, which is all driven by effective capital allocation effective efficient.
Operations and by our teams who delivered top tier results.
We have a robust sustainable free cash flow.
Through our free cash flow.
Allocation policy returns to shareholders are significant our dividend was increased by 28% for the 20 <unk> consecutive year in March and has a CAGR of over 22% over that time.
Year to date and up to including August 3rd Canadian Natural has returned approximately $66 4 billion to shareholders through approximately $2 4 billion in dividends and 4 billion through share repurchases.
<unk> Board of directors approved an increase.
To returns to shareholders by declaring a special dividend of $1 50 per share payable on August 31 to shareholders of record on August 20 <unk>.
Third 2022.
In summary, we'll continue to focus on our safe reliable operations and enhancing our top tier operations.
Continue to drive our environmental performance.
We're in a very strong position being nimble and enhances our ability to create value for our shareholders.
Canadian natural is delivering top tier free cash flow generation, which is unique sustainable robust and clearly.
<unk> demonstrates our ability to both economically grow the business and deliver returns to shareholders by balancing our four pillars.
With that I will now open up the call for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone you.
You will hear a three Tony prompt acknowledging your request and your questions will be pulled in the order they are received.
Should you wish to decline from the polling process. Please press the star followed by the two.
You're using a speaker phone please lift the handset before pressing any keys.
One moment. Please for your first question.
Your first question comes from Dennis Fong of CIBC World markets. Please go ahead.
Hi, good morning, and thanks for taking my questions.
I'm going to start with.
So the capital allocation.
Perspective of things, having announced this $1 50 per share special how should we be thinking about.
I understand that you continued to allocate 50 50 between buybacks and debt repayment.
How should we be thinking about potential future special dividends in bullet kind of some of the prior catalysts that drove this decision here today.
Hi, Dennis it's Mark.
The best way to answer that is.
We are committed to our balanced allocation as Tim and I talked about today on the free cash flow and that includes shareholder returns and that's shown in our track record and as.
As you mentioned, our free cash flow allocation policy.
Our board will continue to review incremental returns to shareholders going forward as part of our quarterly process and as part of our free cash flow allocation policy.
Great. Thanks, maybe the follow up then I'll have here.
Around the Pike asset you discussed two thermal in tissue.
At Pike.
Obviously now that you've consolidated the working interest that that asset is it more along the lines that you are sourcing steam from one of your existing either Kirby south or jackfish or is there kind of a new central processing facility and steam generation capacity in that region to kind of tackle that 28000 barrels a day.
Yes, it's Tim Mckay here.
Yes, with the <unk> assets as you indicated we've consolidated that and we're now a 100% and so with that we're able to leverage the jackfish Kirby facilities.
Two two.
To basically use existing assets to increase the production. So it's very cost effective as you know doing pad adds versus.
Greenfield.
<unk> so yeah.
Yes.
The facilities, we have in the area were able to leverage that to these pad adds into those various facilities.
Great. Thanks, I'll turn it back thanks.
Okay. Thank you.
Thank you.
The next question comes from Greg Pardy of RBC. Please go ahead.
Thanks, and thanks for the rundown a couple of operating questions, Tim probably more aimed at you, but I guess the first one is just on.
On your in pit extraction, just reading the release it looks as though you are a bit more serious on that and then also interested in whether you're pursuing autonomous haul trucks just in AOSP horizon.
Yes.
<unk>.
It's just work in progress obviously.
With most of these projects you have to do a lot of engineering work upfront.
So to me, it's just normal course, if theres an opportunity there we will bring it forward to the board.
Two for their blessing right now it's not in our plan.
But.
The teams at both mining sites are looking at a lot of different options to increase our production and.
Whether it's <unk> or increasing the SCO production on both sites. The teams are always looking for creative ways to increase production and lower costs.
That's really.
What.
Let the telephone is in terms of our jobs.
Okay, and then just related to that just a ton of MS. Haul trucks are you going down that road.
It may be an option in the future.
If you look at.
Our efficiencies on our trucks and.
The way we operate.
It is.
It's not necessarily.
A good option today.
Our people are very safe.
Very high efficiency on our trucks. So at this time.
It's an option it's.
It's available and maybe in the future, but right now our teams are doing such a great job it really doesn't.
Makes sense at this time.
Okay, and just a regional second question and then I guess would have been on just your oil sands mining Opex right.
A few years ago in numbers you've hit before then around 20 Canadian barrel gas prices are a lot higher diesel is higher and everything else like when you're kind of running down the fairway with with horizon AOSP in the world. We're living in now how should we think about opex.
But when you look at the underlying.
Efficiencies the teams are actually doing a very good job in managing the costs, we can control.
And.
So I look at it will probably be in the low twenties as an average.
Really if you look at the underlying fuel costs that they are basically doubles. They were above 50, now they're close to $3 just not piece, but the underlying cost of the teams are doing very good and if we get the production volumes keep it reliable and both sites. It really is down in the low <unk>.
<unk>.
Okay. Thanks very much.
Yes.
Thank you.
The next question comes from Doug Leggate from Bank of America. Please go ahead.
Okay.
Hello, This is <unk>.
Fernandez in for Doug.
Just wanted to touch on first on the realizations front on the gas side.
Particularly robust in the quarter.
Can you provide maybe some color around the mix.
With regards to the diversified points of sales.
Your ability to kind of optimize the portfolio.
Redirect the volumes too.
Premium pricing locations.
Yes, Dave.
We've always done the natural gas side, taking a high diverse.
Product diversification.
Portfolio. So if you look at our total portfolio, 37% as Alec is set for export. So so that's really all it is is as we've diversified our portfolio, which we've always indicated it was the best way to maximize value.
Not just.
Just for the fact that markets do change at times and and as a result, we're seeing those benefits here this last quarter.
Got it and on the capital raise.
The increase in Montney on that activity can you, maybe perhaps equal on.
Beyond kind of just like the broader supportive natural gas price environment.
There are there any underlying takeaways with regards to your view around the regulatory front, particularly as it relates to.
Your montney acreage in DC versus Alberta and.
How that might have to get into your into your plans.
Yes.
The BC issue there.
We're confident that the government will sort that out here.
Over the next while here, but at this time, it's not impacting us.
The deferral Creek piece that we have it.
It's all on site and it's really just liquid handling so that they can handle the liquid rich montney. So.
Really.
There will be no impact in the short term.
<unk> is a grassroots facility, which leverages all our montney.
Grand Prairie acreage so.
Right now it has no impact to us so far and we are confident in the BC government will have it.
Sorted out.
Got it I appreciate the color. Thank you for taking my questions.
Thank you.
Thank you.
The next question comes from Menno Hudson.
TD Securities. Please go ahead.
Thanks, Doug Good morning, everyone I'll start with a question on the Clearwater.
You mentioned that you have a ton of runway with 940000 net acres current production in that 10000 barrel per day range at the moment, which is obviously very small in the context of the broader portfolio.
Is your plan for the.
Also for the next couple of years and how much do you realistically think you can scale it up with Tms, becoming fully available in 2024.
Yes.
Well you never want to speculate on the future in terms of pricing in.
That piece, but for the Clearwater.
Really.
Nice about it is we have a lot of <unk>.
Acres a lot of it very consolidated so.
Really during the winter here late fall winter.
We have a program to delineate various periods, which we think are.
Comparable to what we have at Smiths. So so it's just early days the teams have been working behind the scenes on various opportunities and whats really also unique about it is we're able to leverage our facilities and the Pelican area of Britain. So so.
Between the Smith Pelican area, we have a very good infrastructure that we can leverage up so it's just it's just a great opportunity.
Opportunities, it's just one of those.
Another opportunity in our portfolio.
Okay. So it's fair to say, it's the first call on capital within your conventional oil weighted business.
It looks to be a very good opportunity.
Okay. Thanks, Tim and just just to wrap things up on sorry.
Just on that turnarounds are you just completed.
Scott Bergen to Horizon, and so my question is what should we be expecting for turnaround activity in 2023, and more specifically are there any out of cycle larger turnarounds that we should be aware of and I'm thinking along the lines of the tie in of the Btu and D argue argue furnaces at horizon.
Example.
Yes, it certainly to say, but I would suspect horizon would be very similar to this year.
And that.
So that 24% to 30 day outage and Youre right that will be doing the final tie ins.
<unk>.
Work related to the Btu there.
And then Scott effort, they should be really on the.
Perfect. Thank you Tim.
The next question comes from Neil Mehta of Goldman Goldman Sachs. Please go ahead.
Hi, This is Carly Davenport on for Neil Thanks for taking the questions I wanted to just start on the Capex side can you talk a little bit about the 200 million dollar AD that was mainly due to inflation and any read across for how those pressures could evolve into next year, and then and then what kind of steps you're taking to mitigate inflation more broadly across the portfolio.
<unk>.
Yes, so there is cost pressures.
Primarily if I look ahead here it's on the.
Manufacturing side, where you use a lot of steel so your vessels.
Pipe.
Equipment manufacturing, so we see probably the highest pressure not park and then less pressures on course labor.
Pieces and knits.
And that's embedded there so it's.
It's kind of broadly across more focused I would say to the facility side at this point.
Having said that I look at our drilling completions pipelines and facilities teams there.
They are doing a great job finding efficiencies and opportunities to mitigate a lot of the pressures and so I look at the drilling costs for the first half of the year.
They were within kind of one 2% of.
The per well cost so while the rover they've done a lot of work to try and mitigate those costs. So it's just it's really broad brush, it's always hard looking ahead.
What that number will be by in going into next year, but.
Today I think our teams are doing a really good job mitigating as much of the inflationary pressures as they can.
Great. That's really helpful color and then the follow up would just be on the outlook for the incremental production adds that you talked about in 2023 and 2025 could you just talk a bit about how you arrived at the optimal split between the liquids versus gas production ads and how we should think about the split of spend between the two more broadly going for.
<unk>.
Yes.
<unk> always do is we just rank our projects from the highest return opportunities.
And that is split and then of course with that.
Essentially 13 rigs working so so what there was is it just a combination of <unk>.
What's the capability of the rigs where are they in their location and how could we optimize that to keep our cost down and maximize value in terms of.
That commodity in that area. So.
Let's say for example in the heavy oil area Theres certain rigs that only can do certain types of work and therefore maximize value. So it's really.
Kind of a twofold.
Opportunity one is to understand what the risks capable proximity and what's.
What's the maximum value, we can get onto those rigs.
Great. Thanks for the time.
You.
Thank you.
The next question comes from John Royall JP Morgan. Please go ahead.
Hey, good morning, guys. Thanks for taking my question.
Just to follow up on the Opex at the mine in the second quarter, just looking at a dollar millions basis not on the per barrel looks.
Looks like it's up about 10% over <unk> and you guys mentioned energy costs, but I'm wondering if there's any portion of that.
Related to the maintenance overruns and I'm, just trying to think through kind of how to think about the second half from a from a total opex perspective at the mine I don't know if anything kind of hit in <unk> that wouldn't repeat.
No really what it is is it's all barrels in.
As you recall, one of our mattresses safe and reliable.
Operations and so if you look at it if the facilities are running reliably.
We are in excess of 480000 barrels a day so.
And in that quarter with the downtime for.
The planned maintenance a lot of those costs you still are fixed so you carry them through your turnarounds. So in the case of horizon.
It did a great job in terms of.
Getting through.
That turnaround very efficiently and then Scott.
Had a few issues around longer but no really on your oil sands mining. Its a huge portion is just efficiencies and maximizing value barrels.
Okay. Thank you and then.
I'm just curious on your thoughts on the SCO premium to WTS right now I know theres been some maintenance and.
Synthetic crude has a higher distillate cut.
And any other drivers that I should be thinking about there.
How do you expect that to shape up in the back half of the year.
Yes, I think youre exactly right with crack spreads in the distance so.
There we got extremely good premium here this last quarter.
It is softening with the crack spreads tightening.
So September I believe is closer to about seven to $8 premium.
Yes, it's all to me, it's just the supply demand.
Equation in general with the synthetic.
With the cuts being so high as it was.
Receiving a premium so I suspect it will tighten a bit.
And same time heavy all could tighten a little bit as well.
Okay. Thank you very much.
Thank you.
Thank you.
The next question comes from Manav Gupta of Credit Suisse. Please go ahead.
Tom.
Hey, guys. My first question here is.
If you could help us a little more on how to model the royalty rate for the oil sands now that horizon is in a post payout I think this quarter was a little bit of anomaly given the number of barrels produced so.
Anything you could help us out with how we can model.
The royalty eight blood battle on a go forward basis.
Hi, Manav, it's mark.
Now you're right now that horizons and payout in was in payout for the whole quarter in Q2.
I think a good way to look at it although the royalty is based on a bitumen price, which we do publish in our MD&A a good way to look at it is.
From Q2 to Q3, I would expect the rate the royalty rate based on sort of gross pricing to be about consistent as you go through now of course, the sliding scale rate will change with.
<unk> pricing.
In the current environment I guess, we've come off a little button recent environment, we've been at the maximum rates. So I think at a starting point. If you look at the rate based on SCO or gross revenue youll see that its pretty consistent now from Q2 to Q3.
And.
We can help with that but that's kind of a good starting point.
Thank you and my quick follow up here is when we look at the egress situations like any other opinion I'll be like four or five quarters have been from the point Glenn DMX expansion could still come online is that the timeframe, we should be looking at.
Really for Trans Mountain do you need to speak to.
Them.
We are just like you we get the updates from time to time and as far as I know its still on for.
That Q4 'twenty three.
Thank you so much for taking my questions. Okay.
Thank you.
The next question comes from Roger read of Wells Fargo. Please go ahead.
Hey, good morning.
Alright, good morning.
Just wanted to I apologize I missed the beginning of the call because some conflicts and other coverage but.
So if you addressed the question has been asked I apologize, but I just wanted to understand is you set up for some modest production growth.
There's obviously been some pipeline constraints adjusted for some pipeline improvements just wondering how you're set up for <unk>.
<unk> to <unk>.
Export is needed and whether or not you see a situation developing here, where you could actually end up.
With some access.
As an overall statement between.
Canada in the lower 48.
Is that in terms of the natural gas piece Roger oil oil only as was my main focus.
Okay.
No.
It's always.
A little difficult to forecast every individual company's forecast in terms of how it will impact.
The export pieces, but.
If I look ahead it looks pretty.
Reasonable for this year.
Going into 2023.
Depending on the commodity prices it would be very good timing to have trans mountain come on so.
Lot of.
A lot of our projects if you look on the thermal side they take kind of.
Really one to two years for the all too to start to ramp up and peak so.
You know it.
If the biggest pieces lung the thermal side, we will see that ramp up over the next few years and hopefully by then <unk> and covers off that.
That growth.
Okay and then one other question along the production side as you've come through the various turnarounds.
The other maintenance.
A lot of these facilities are fairly.
Young still just curious are you seeing operational improvements post turnaround or debottlenecking, that's helping out.
Yes.
The teams on the oil sands mining side I've been really impressed with.
How do they.
Keep looking for opportunities to improve our operations and find incremental capacities.
And yes to the reliability project will see an incremental 5000 barrels a day next year.
Which goes to 14000 2025.
Underlying that there are looking at more opportunities to two <unk> dot up so as the teams do the work and do the engineering and which is a lot of work I Shouldnt underestimate the work that these guys do and plus sites.
Find those opportunities but.
As they worked through the details.
Teams pushing forward for sanction and we'd look to obviously every barrel is a low cost barrels. In addition, so theyre very economic provided the costs again.
Okay.
Okay, great. Thank you.
Okay.
Thank you.
Once again, ladies and gentlemen, if you do have a question. Please press star one at this time.
Our next question comes from Patrick <unk> of RBC capital markets. Please go ahead.
Hey, good morning, guys. Thanks for taking my question a lot.
What I had to ask has already been covered off but I'm wondering.
In terms of the M&A markets and the outlook for potential acquisitions, I know theres no real gaps in the portfolio in any way but.
<unk> been pretty acquisitive over the last several years are there any opportunities out there and what's your sort of overall feel for the M&A market I know, we saw a pretty large transaction. This week on the private side.
Yes, the M&A.
Market as always.
Interesting.
Obviously with the volatility of pricing there is always a.
What I would call.
Bid ask disconnect.
Because it is very difficult to look forward and say what is.
Good price in what is a good opportunity so.
Currently.
Not really see anything.
That.
We have no gaps.
In general, we try and find good opportunities to have a lot of growth potential for.
For the future.
Maximize value so I really don't see too much there.
The bid ask today is.
Not that great environment to do any M&A.
Okay, Great and then.
Folks on the liquid side, but in terms of the gas side here, obviously LNG markets and waterborne prices are pretty strong.
Any intent to look to participate in those in the future with your large gas portfolio.
Yeah.
They are opportunities once they're up and running and where our gas marketing.
Folks generally are talking with a lot of different groups and a lot of different ways and always looking for.
Some diversification as long as it maximizes the value of the products. So.
They're always working with different parties to look for opportunities on the natural gas side and.
As you saw with our realized pricing in the second quarter, they've done a really good job.
Okay. Thank you very much.
Thank you.
There are no further questions at this time I will turn the call back to Mr. Kessel for closing remarks.
Thank you operator, and thank you to those who joined US. This morning. If you do have any follow up questions. Please give us a call thanks and have a great day.
Yes.
Thank you. This does conclude our conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.
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Okay.
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