Q3 2023 Cenovus Energy Inc Earnings Call
Good day, ladies and gentlemen, and thank you for standing by.
Kim.
This energy third quarter results.
A reminder, today's call is being recorded.
At this time.
The plants are in a listen only mode.
During the presentation.
Conduct a question and answer session.
Dan joined the queue at any time by pressing star one.
Members of the investment community will have the opportunity to ask questions first at the conclusion of that session.
<unk> will be then ask questions.
Advice that this conference call may not be recorded or rebroadcast without express consent of <unk> energy.
I'd now like to turn the conference call over to Mr. Jason <unk> Senior Vice President Investor Relations. Please go ahead, Mr. A button.
Thank you operator, and welcome everyone to <unk> 2023 third quarter results Conference call. Please refer to the advisory located at the end of today's news release do you describe the forward looking information non-GAAP measures and oil and gas terms referred to today. They also outline the risk factors and assumptions relevant to this discussion.
Additional information is available in <unk> annual MD&A and our most recent Aif and form 40 F.
All figures are presented in Canadian dollars and before royalties unless otherwise stated we have also posted our results on our website at <unk> Dot com.
John Mckenzie, our President and Chief Executive Officer will provide brief comments and then we'll take your questions. We ask that you hold off on any detailed modeling questions. You can follow up with those directly with our Investor relations team after the call.
Please also keep to one question with a maximum of one followup you're welcome to rejoin the queue for any other follow up questions. You May have John. Please go ahead Greg.
Great and thank you, Jason and good morning, everybody I'll start this call with our top priority, which is always health and safety.
At our offshore China operations Lee one three dash, one recently achieved a significant milestone of producing one Chilean standard cubic feet of natural gas sales with no serious incidents or safety events.
This is truly impressive.
Our record of safety.
And the comprehensive pre startup safety reviews conducted at our Toledo and superior refineries resulted in strong process safety performance.
About the restart of these assets these achievements underscore the importance of our values and safety commitments and the work that we do every day.
I am proud of our staff for the hard work and effort that they put into achieving these milestones.
We forecasted earlier this year that we would see strength of our operations and the value of our integrated strategy in the back half of the year.
Our third quarter results are a demonstration of that with both upstream and downstream business is delivering strong operational and financial results.
Our upstream business saw an increase of production to nearly 800000 Boe per day in the third quarter and combined with higher commodity prices, we generated an operating margin.
Global $3 4 billion.
In the conventional business production volumes were impacted by wildfire activity in Q2, but returned to normal rates in the third quarter.
Our production increased over 127000 barrels.
Per day versus the second quarter number of 105000 Boe per day.
So I would again like to thank our staff and contractors that played an integral role in our ability to resume safely resume our operations following the unprecedented wildfire events.
In our oil sands as our oil sands assets continue to perform exceptionally well following the execution of redevelopment programs.
And the startup of new well pads both.
All of which support short and long term production growth production increased over 600000 barrels per day versus the second quarter number of 300 or 572000 barrels per day.
At our Sunrise oil sands production.
Third quarter production rose, 17% to about 55000 barrels per day.
The asset continues to perform well.
As we apply synovus operating processes, including the implementation of redevelopment wells.
Adjusting well designs and operating parameters.
No I expect oil sands assets to continue their positive performance through the remainder of 2023 and beyond.
We will remain focused on operational reliability in a safe and efficient execution of our growth capital and optimize product optimization projects.
We the Narrows Lake Tieback Foster Creek Steam addition, and new well pads Sunrise being a few key examples support short to medium term growth plans.
In our offshore segment, our Asia Pacific assets performed extremely well the company achieved first gas from the Mac field in Indonesia in September.
In the Atlantic the Terra Nova Fps. So has now returned to.
Offshore Newfoundland and is expected to produce first oil in the fourth quarter.
While our west White Rose project.
It is also progressing as planned with approximately 75% of the work completed to date.
We will continue to advance the work for the regulatory dry dock of the <unk> Fps So that will commence in January.
Preparation for the startup for the West White Rose project.
So now turning to the downstream business the third quarter results generated much healthier operating margins from the refining and upgrading assets in our portfolio.
Overall, our downstream business continued contributed over $900 million and operating margin with favorable crack spreads and FIFO tail winds.
Following a challenging first half of the year in the U S manufacturing segment, we delivered on our expectations of getting the last of the refining assets online and running reliably.
Following the purchase of the startup of Toledo, and the commissioning and startup of superior crude utilization increased significantly from 70% in the prior quarter to 88% in this quarter.
This is largely due.
Toledo haven't performed well at 90% utilization through the quarter.
You also would have seen a sizable reduction in the unit operating costs in our U S manufacturing segment with the majority of our refining assets running at or near full rates in the third quarter and a reduction in the overall operating costs associated with the startup of Toledo and superior.
At the superior refinery, we achieved a safe startup of the fluid cat Cracker in early October while the startup of this unit was delayed.
The business unit completed this complex work without compromising the safety of our staff and assets.
And you will know that the borger refinery is now undergoing planned maintenance, which will impact Q4 throughput.
We're really pleased with the Canadian manufacturing segment crude utilization was 98% in the quarter with Lori administer upgrader and refinery demonstrating strong and stable performance in the ability to capture margins as heavy oil differentials widen.
With a seasonally weaker crack spreads in the recent weakness in gasoline cracks.
We're focused on optimizing our assets to maximize the economic result.
We will continue to build on solid operational execution and reliability, we've demonstrated this quarter going through year end.
I would now like to highlight our corporate and financial performance in the third quarter Synovus delivered approximately $3 4 billion of adjusted funds flow with both upstream and downstream businesses, demonstrating strong performance and contributions to operating margin.
Through our dividend base share buybacks.
Sorry through our base dividend share buybacks.
And partial payment of common share warrant obligation, we distribute over $1 2 billion directly to shareholders. In addition, the company's net debt was approximately $6 billion at the end of the third quarter.
Long term debt decreased to $7 2 billion. After we purchased $1 billion of notes that were due between 2029 and 2047, we did see an increase in our working capital as compared to Q2.
This was driven by largely higher commodity prices.
Looking forward, we remain focused on achieving our $4 billion net debt target and delivering 100% of excess free funds flow to shareholders at that time.
So in closing we believe we have delivered a stronger third quarter in line with our expectations.
We're focused on furthering the operational successes that we've achieved in the quarter and continuing to progress both short and long term goals of the company.
And with that we're happy to take your questions.
Okay.
Okay.
Thank you ladies and gentlemen.
You can join the queue to ask a question. My question is one we will now begin the question and answer session and go to the first caller.
Your first question is from Dennis Coleman from CIBC Zoster question.
Hi, Good morning, and thank you for taking my questions. My first one is just around the.
I guess the pay down of the warrant obligations. So in the quarter as you highlighted you did about $600 million.
When you think about what's remaining.
For that debt obligation as well as your cash returns back going into the fourth quarter, how should we be thinking about.
Share buyback cadence as well as any other considerations youre taking into going into the end of the year around the buyback. Thanks.
Yes, I'll turn that question over to Kim to answer, but you remember we did those warrant buybacks I think around $22 and we did take the opportunity in the quarter to pay down about 600 of that so I think there's about 111 left that.
But we need to pay.
The deadline is early January but maybe you could talk a little bit about our thinking around.
Share buybacks.
Thanks, John Hey, Dennis.
No.
I think a couple of things I would highlight first off.
John alluded to this but the price at which we had transacted on those warrants side, obviously, a lot lower than where our share prices. Today. So we made a very conscious decision to.
Proactively pay that warranty obligation down in Q3.
In.
Relative to continuing to buy back stock. So I would say the principles around that arent going to change.
We will continue to look at probably paying down that warrant liability in the fourth quarter I think given where you are in our share price. It is today I think is not are not an unreasonable assumption to assume that we would.
Pay the rest of that obligation in Q4, and then when you think about the rest of the.
Buyback program and potential for variables. The approach for US has not changed we're going to continue to test intrinsic value of the share price at a sort of flat $60 <unk> price. If we continue to see opportunity in buying back stock you should see us active in the market.
And the goal is always to fulfill that 50% of excess free funds flow in any particular quarter, either through buybacks or through variable dividends, but we've been continuing to buy back stock through Q3.
Continue to see US active in Q4, and I think part of that will also include.
Payment at that warrant obligations.
Great I appreciate that color Kevin John.
Second question here.
A follow up is shifting gears, a little bit more to the operation side.
The color that you've provided John on the flexibility of your downstream operations I just wanted to ask a quick question about superior in the FCC unit.
As I recall the FCC unit is generally used to help finished gasoline.
And that through the third quarter, you were building some intermediate product how should we be thinking about the opportunity set or how youre going to manage that inventory again, just given where gasoline cracks happen to sit at and your ability to you.
Maintain flexibility within that particular refinery.
Yes, I'll, let Keith give you a fuller picture on that you're exactly right. The FCC and it is a big gasoline producing asset and one of the things. We always look at is the forward markets and our ability.
To move the sales of the gasoline into.
A higher netback periods and so we're always watching sorted the winter summer spreads looking at that with.
With an eye on containment as well, but maybe Keith you got some additional thoughts on how we're managing gasoline.
In particular, yes, thanks, Dennis obviously.
Superior being the first stop on on kind of the mainline system and the current rate of differentials.
It does provide a significant crude advantage and something different than we had online at the end of 2022, so pretty pretty excited to have this asset up and running and fully operational. So we will continue to look at the economics, and obviously, we will make economic decisions on on when we run that inventory off.
But in today's environment, we're still seeing.
Relatively robust returns to do that I think the other thing I would offer up Dennis as we have.
Now that we have the integrated network up and running and the other assets up and running.
Been moving some of that intermediate inventory to other assets to run off those products and make finished product and we've been doing that for a period of time. So it's not just that we have to run it through the existing asset.
Great.
I appreciate I appreciate the color I'll turn it back thanks.
Great. Thanks, Dennis.
Thank you. Your next question is from Neil Mehta from Goldman Sachs.
Christian.
Good morning team.
I appreciate all the color. This morning, just some early thoughts on 2024 capital would be great. Thank you.
Can you guys do have some interesting growth projects in flight and so can you help us think about framing framing this out recognizing we're going to get a little more clarity here over the next couple of months.
Yes, Thanks, Neil you and you're exactly right, we are going to come up with.
A more formal budget.
<unk>.
Release in December, but what we've been really trying to communicate to the market.
Is that our capital spending over the next number of years, he is going to be between $4 $5 to $5 billion range. So very similar to what you saw in 2023 and 2023, we made a conscious decision to put some capital to work.
On some growth projects that we have in the portfolio. These are very high return very efficient projects.
That we started funding in 'twenty, three and will continue to fund.
Through next year and really through the planning period that.
We're looking at but.
I don't think that the capital.
Budget is going to look much different than what you've seen this year in that four $5 billion to $5 billion range.
That's helpful. And then the buildup that can you talk about what some of those key growth projects are in 2024.
That maybe the higher spend than maybe some were expecting a couple of years ago, So handsets because.
Differentiated projects, not just because of higher sustaining capital levels, providing a little more.
More color on what those are can be helpful.
Sure and again, we've been we've been hopefully clear on differentiating what we consider to be sustaining capital and Thats the capital keep production flat and our fixed assets in a safe and stable condition from the growth capital.
But again these these projects we started funding them in 'twenty three.
We will continue through $2004 25, and 26, but maybe Keith you might want to talk about the big four projects that we've got going on in particular.
Yes, sure John Knapp.
And thanks, Thanks for the question.
Just wanted to anchor first on the.
The fact that we look at investments in these growth projects at the bottom of the cycle and they all obviously can the bar and our relatively low capital to get the growth that we're going to be talking about and we as John indicated we've kind of kick. These off to the 2023 period now continue through 2024, but we're pretty excited about the Foster Creek.
Christina Lake Sunrise Dam West White Rose project, all contributing about <unk>.
North of 100000 barrels a day of growth so.
At Foster Creek were doing a steam expansion, we will be able to kind of wrap that up in the 2025 time period and start ramping up steam and production.
That will add about 30000 barrels a day of production in.
In the 2026 2027 time period at Christina Lake, we've been talking about this one for a little bit, but really it's building a pipeline up into the narrows resource and bringing that back in processing of that at Christina Lake, which is a much different.
Concept than we had probably five six years ago and a way to access this resource at a much lower capital costs. So by doing that we will drop our Sos and we will see kind of an incremental 20 to 30000 barrels a day of production at Christina Lake again that kind of starts ramping up in the 2025 time period.
And full production kind of in the 2026 time period.
At Sunrise, we've been actively working on applying the synovus technology sense.
Since acquiring the asset.
We've spent a bit of time with infill and re drills and redevelopment wells this year and so youre seeing production kind of north of that 50000 barrels a day, but we're now we're adding pads. So the last time a pad was added at Sunrise was in the 2017 timeframe. So we have a whole pad development program and the <unk>.
First one will be steaming at the back end of 2023 here and through 2024.
But we're also adding additional pads so through kind of that 2025 2026 timeframe you can see as fully getting the full utilization of all the steam capacity at the asset and that should drive our production up into that.
Mid <unk> type range. So we're kind of going to see a 2015 to 20000 barrel a day gross at Sunrise and then on our East coast projects. The West White Rose project. This is where a bit more capital will be going in.
Thousand 24, and 2025 time periods as we finish that project, where we're north of 70%.
Complete we hit some milestones on our gravity based structure.
In the quarter.
And we will be spending 2024, and 2025 to finish construction.
So in offshore made up the top sides and the gravity based structure and commenced drilling in 2025. So we will start seeing production growing in 2026, and peaking kind of in that 22028 timeframe at about an incremental 45000 barrels a day, so really excited about the <unk>.
Growth projects the volume it adds at relatively modest or low capital and.
And to John's point doing all this in that four 5% to $5 billion capital range over the next couple of years.
Yes, so Neal just.
Should we be thinking about could you just for your model Neil you should be thinking kind of two nine to three range for sustaining capital and then the residual being growth.
Okay. That's really helpful. Thanks, Thanks, Jeff.
Okay. Thanks Neil.
Yes.
Thank you. Your next question is from Menno <unk> from DB Securities. Please ask your question.
Thanks.
Good morning, So I've got a couple of follow up questions from some of the prior.
Question, So maybe I'll start with a high level one on the operational outlook for downstream a scale of one to 10, where do you think you are today on a downstream performance from a pure operational perspective relative to where you'd like to get to and then where else do you see room for improvement within U S refining.
Well I'm going to let Keith answer the specifics on this but what I would tell you menno is.
Refining is a core part of our business.
We have built a heavy oil value chain that we think has.
Significant value to the shareholders and we think it's actually quite unique in its construct but our goal is to be as good at running the downstream as we are our thermal assets and that's not necessarily going to happen overnight, but that's the trajectory that we're on and that's where we want to take.
This piece of business refining and upgrading is absolutely core to this business. So what youll see from us over the coming years as our continued focus.
Sweating these assets grinding out value not just on the operating side in terms of reliability throughput and the like but also on on the commercial side of this business in May.
Making sure that we're making all the right decisions and capturing as much margin as possible, but maybe I'll turn it over to Keith I don't know if it is going to give you an answer on 1% to 10, but I think ill give you some indication on where we think we are.
Thanks, Menno and I think I, just got some direction so.
Yes.
Basically.
We.
You got to think about kind of with the downstream organization has been through superior was down for about five years, and we've now safely restart at that refinery and pretty excited about it.
<unk> kind of came through an event and then a winter freeze event as well and and the team. There has has successfully restarted and is ran that.
Refinery reliably since kind of the June timeframe, so pretty excited about kind of where we are I think we do continue to have opportunity, though and part of that opportunity is around the integrated nature of that value chain.
Now that we're up and running and running reliably we are actively looking at integration opportunities between lime in Toledo in ways to capture additional margin.
Obviously, having.
Around 120000 barrels a day of heavy conversion capacity in today's differential market provides a lot of opportunity and flexibility to capture additional crude advantage at those two refineries. So we.
We're going to continue that you would've seen our unit opex dropped substantially in the U S downstream in the in the quarter, how we're going to continue to work to grind that even lower over the next several quarters and continue to work on our reliability and continued to improve that so we're not stopping but we think we have additional opportunity.
To drive down unit, Opex improved reliability, and really extract additional margin, but the assets are up and running and performing well today.
Terrific. Thanks that was that was a great rundown, maybe I'll just circle back on.
West White rose at 75% complete side, you've got $440 million invested on a net basis since since restart.
Is that project generally tracking relative to your internal targets and given that its offshore where do you see the most risk between now and 2026 as it is at in the timeline of the budget.
Yes.
We're pretty happy with where we're at when we picked up this project.
The gravity based structure had kind of the base of the structure part and over the past six to eight months we finished.
Prominently finished that gravity based structure, we have all the necessary contracts in place for the remainder of the project at the top sides are essentially mechanically complete down in down in Texas, and we're going to start progressing through the commissioning phase. So all in all things are lining up I will remind.
Folks, though we do have an asset life extension on an on.
On the heroes Fps, so and that will take about nine months here in 2024, So we will we.
We will come off station in early January and come back on production in late August early September.
And that extension really is setting us up for kind of the drilling activity that will happen in 2026, and making sure the asset can stay in place.
And the life so.
All in all I would say, it's a big project, but it's trending well.
Kind of as per our expectations on both cost and schedule.
Thanks, a lot I'll turn it back.
Great. Thanks Menno.
Thank you. Your next question is from John Royall from Jpmorgan. Please ask your question.
Hi, good morning, Thanks for taking my question.
So just wanted to clarify one thing.
On the capital allocation.
You are it sounds like including the warrant pay down in your calculation for the 50.
<unk>, 50% allocation and then.
Any update you can give us on potential timing of getting to that four would be helpful. Thanks.
Sure maybe we get that question just about every quarter. So I don't I can't I think youre well practiced at this one sure. So just just on the warrants. So I think John I would just highlight so when you remember the time, when we announced the transaction on the Werent part purchase we did remind everybody that the warrant paydown will be.
Included as part of our shareholder framework, so to the extent that we pay that liability down it will be included as part of that 50% of excess free funds flow that we allocate to shareholder returns so.
As John mentioned.
We paid $600 million of that through Q3.
On top of the.
$360 million of buybacks, we did in.
So going to Q4, you should expect us to probably pay that warrant liability completely the remaining 111 with the incremental either going back to share buybacks or variable dividends.
And then on your second question just around the debt I think what I would just say is right now the focus for us.
Team has talked about us executing the base business focusing on continuing to progress these growth projects.
Moving to downstream too.
Continued improvement in our reliability and sustained.
Throughput.
And the function of our debt is really going to be dependent on that and commodity prices. So.
I think we'll get there when we get there I don't think I can give you a timeline just given we've seen a lot of volatility in commodity pricing even in the last month or two so.
That timing is going to move around but I would tell you. The focus is absolutely in getting there as quickly as we can.
And Jonathan I think that's the important piece is we are just operating this business with a focus of getting to $4 billion as quickly and as prudently as we can.
Yeah.
One of the things that you can count on US is that we will continue on that trajectory unimpeded until we get there.
Alright. Thank you fair enough and then you've also you've talked about being happy with your portfolio.
<unk>.
But you've also talked about not wanting to be at 50 50. JV is you still have the one JV on the downstream side.
Hanging out there and your partners now rolled out an asset sale target so.
How are you thinking about that structure right now with WR base.
Yes, we've been really clear on.
That set of assets for years, now and we have been clear that.
We want to own and operate those assets that we see as core we have been also clear that we are more likely sellers of those assets than buyers of those assets.
And we've also been clear Theres, a fairly healthy bid ask spread that has persisted through time so.
Don't want to comment on.
What Philips is proposing within their portfolio, what we're focused on is running the business.
We're quite happy with.
Holding that JV.
The log too if that's required.
Thank you.
Alright, Thanks John.
Thank you. Your next question is from Greg Pardy from RBC capital markets. Please ask your question.
Hey, Thanks, good morning, Thanks for the rundown guys.
You've got lots of capacity on Trans Mountain, just curious how youre thinking about.
Timing, but perhaps more importantly, how will your marketing strategy work.
Will you sort of look to sell at the dock the tankers or are you looking at something perhaps more.
Integrated with.
With markets in Asia, and so on.
No. It's a great question, Greg it's something we're spending a lot of time on so I'm going to turn this one over to drew <unk> right in the middle of this right now.
Yes.
Sure, Yes, good morning, Greg Thanks for the question.
Maybe you can kind of speak on.
Kind of the premise of the Tms.
Really pleased that it is still continuing and progressing and I think even with these latest.
Route change approvals and whatnot I think it's still pretty positive that that line is going to come into service here in Q2.
And what you can expect from US is that we're probably going to get a call online feel early in the new year, so with that we're going to see.
Working capital build in order to fulfill our kind of volume commitment there.
And then how we're thinking about that.
Being one of the biggest shippers on that line is that.
We're also planning for.
Some obvious.
Startup variability.
Like that it's pretty substantive and getting that operation up and running it to smooth the rate is likely to also take some time. So we expect through 2024 to kind of manage that with probably a little bit of bumping. This in all reality. So how we're thinking from a marketing strategy is that we're going to initially be looking to.
Cure some agreements in supply Fob at the dock itself, we're going to want to see that get up to a good stable rate.
However, we do have some intention to get into new markets. It gives us another great tool in a suite potentially into global markets. We've obviously got some good connections in.
Access into Asian markets with some of our offshore Workover in Indonesia, and China. So yes, we are looking at that as a full suite of a new market access for us, but we're going to.
Do the right thing as we go into 2024 make sure that once they get up and operating that we can see the reliability of that get there, which I think will take a bit of time, and we will step our self into.
Going on to the water at some point in accessing those new markets that <unk> is going to allow us all to go after.
Okay terrific that is helpful.
Look forward to hearing more about it as we go.
Kind of a good segue.
Into.
It did.
Net working capital I guess a question for Cam.
Is.
Good cash flow generation, obviously, there's headwinds and there is an increasing pricing as John alluded to what is the what is the balance of the year look like and the reason I ask that obviously is 65000 or question with you guys. When do they when does the company get to $4 billion.
Just curious what your thinking is there.
Thanks, Greg So just on the working capital. So a couple of things I would highlight when you look at Q2 relative to where we ended Q3.
First off we did remember we did book the liability associated with the warrant purchase which was that full $711 million. So we drew that down at the end of Q3 for $600 million. So that was partly what drove working capital up in Q3 relative to Q2, the second piece of it.
I would just say is when you look at our inventory didn't see a lot of change from a volume perspective relative to where we were in Q2, but obviously prices moved up significantly.
Quarter over quarter, which is the lion's share.
Of the increase that you've seen in the working capital, but as we move into the fourth quarter.
Obviously, if things continue to move around as we look at our marketing strategy on.
<unk>.
Selling our barrels, but I don't expect a big change and drew kind of highlighted.
One sort of more structural change that youll see in Q1, when we add more barrels into the system.
The line fill associated with <unk>.
Okay understood thanks very much.
Great. Thanks, Greg.
Sure.
Thank you, ladies and gentlemen, as a reminder, you can join the queue to ask a question by pressing star one.
Our next question is from Manav Gupta from UBS. Please ask your question.
Okay.
Thank you guys a little bit of a macro question here, we have seen some widening Gulf WCS here can.
Can you help us understand what's exactly going on and then where do you see this spread once as you said Pia mix does come online.
Into Q.
You could help us understand some of those things.
Sure good morning, its drew.
Yes, great question as you've alluded to.
Or the diff is widened here and that was not unexpected we've had some incremental growth come out of the basin here over the course of this year.
With.
With condensate pricing and whatnot being quite attractive people are really moving a lot of sales volume so.
We expected this.
Widen out and as I alluded to with <unk> coming on I think in the near term people also probably saw some of those potential delays in construction issues that have kind of come out as of late.
And I think people probably shifted some of their positions on timing, but.
We fully expect as the line fill even starts here early in the new year, I think youll start to see things already start to head down the path of tightening back up.
And as it comes into full operation into Q2. Some time, we do expect in the second half of next year for it to kind of tightened back up to what we saw when we had some egress.
Space here.
Earlier this year and late last year. So we would expect it to come down substantially from where it is probably in the order of half of what we're seeing today.
But that probably won't show itself till it's actually up and operational and probably gets through some of its bumping as it starts up.
Yes.
Manav I'd say one of the big differences this year from last year, and we certainly saw differentials widened last year, when we had the Keystone outage and the like.
With the upstream or sorry with the downstream.
Up and running and performing the way. It is does insulate us from a lot of those wider spreads that were exposed to last year. So.
While it.
Corporate level, we'd still like to see narrower spreads.
We are much less exposed to that kind of widening.
Through the fourth and first quarter. This year than we were last year. So we're again really pleased to have those refining assets up running and performing well.
Perfect.
Ask a follow up question.
On the response you provided for John I got a whole bunch of questions on my Bloomberg. So I wanted to follow up on.
As.
As it relates to those two assets is it more of a case of it price or is it more of a case that you always thought of Toledo as a core asset do you want to operate in these still you don't actually care, which one is it more of that price or is it more to do there.
They don't take them.
Yes.
What I wanted to tell you is Toledo is an absolutely core asset for us.
<unk> 90000 barrels a day of heavy.
And it consumes the molecules that we produce inside our.
<unk>.
Stream.
<unk>, Christina Lake and it consumes Sunrise heavy oil and provides us insulation against heavy oil differentials.
And location differentials. So it's an absolutely a core asset for us and a key piece of infrastructure.
What I don't want to do is give anybody the impression that we're doing anything other than focusing on our base business right now in our core set of assets that we have.
Our intention is to continue to.
Build on the operating momentum, we have drive our debt down to $4 billion move too.
<unk>.
100% shareholder payout that is our focus right now and I understand theres rumors swirling, but.
They shouldn't be.
Thank you congrats on a great quarter and good to see downstream make a material contribution. Thank you Sir.
Yes. Thank you very much I appreciate the questions.
Thank you once again as a reminder, you can join the queue to ask a question by pressing star one.
There are no further questions that concludes our question and answer session I will hand the call.
Back to Mr. Mckenzie for any closing remarks.
Okay, well. Thank you very much everybody. We certainly appreciate your interest in the company and wish you the best and we'll talk to you again in the new year. Thank you.
Thank you ladies and gentlemen, the conference has now ended thank you all for joining.
I'll disconnect.