Q4 2023 Cenovus Energy Inc Earnings Call

Good day, ladies and gentlemen, and thank you for standing by.

Operator: Good day, ladies and gentlemen, and thank you for standing by. Cenovus Energy's fourth quarter and year-end. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session in the queue at any time. For more information, visit www.fema.gov, www.cenovus.com, and Kathleen Merrigan. Thank you. Thank you.

Hmm to Synovus Energy's fourth quarter and yearend 2023 results as a reminder, today's call is being recorded.

At this time all participants are in a listen only mode. Following the presentation. We will conduct a question and answer session. You can join the queue at any time by pressing star one.

Members of the investment community will have the opportunity to ask questions first at the conclusion of that session members of the media May then ask questions. Please.

Please be advised that this conference call may not be recorded or rebroadcast without the express consent of Synovus Dynegy.

I would now like to turn the conference call over to Mr. Jason Apache Senior Vice President of Investor Relations. Please go ahead Mr. <unk>.

Jason: Thank you, operator. Good morning, everyone, and welcome to Cenovus' 2023 year-end and fourth quarter results conference call. On the call this morning, our CEO, John McKenzie, joined by Cenovus' management team, will take you through our results. Then, we'll open the line to take your questions.

Jason Apache: Thank you operator.

Jason Apache: Morning, everyone and welcome to <unk>, 2023, yearend and fourth quarter results Conference call.

Jason Apache: On the call. This morning are CEO, John Mckenzie joined <unk> management team will take you through our results.

Jason Apache: Then we'll open the lines to take your questions.

Jason: Prior to passing it over to John, I refer you to our advisories, located at the end of today's news release. These describe the forward-looking information, non-GAAP measures, and oil and gas terms referred to today. They also outline risk factors and assumptions relevant to this discussion.

Jason Apache: Prior to passing it over to John I'll refer you to our advisors located at the end of today's news release.

Jason Apache: Please describe the forward looking information non-GAAP measures and oil and gas terms referred to today.

Jason Apache: Also outline risk factors and assumptions relevant to this discussion.

Jason: Additional information is available in Cenovus' 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. You can view results on our website at cenovus.com. I'd ask that you keep to one question with a maximum of one follow-up. You're welcome to rejoin the queue for any other follow-up questions you may have. John, please go ahead.

Additional information is available in <unk> annual MD&A and our most recent F and form 40 F.

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

John Herrlin: You can view results on our website at Synovus Dot com.

John Herrlin: I'd ask that you keep to one question with a maximum of one follow up.

John Herrlin: Welcome to rejoin the queue for any other follow up questions you may have.

John Herrlin: John Please go ahead, great. Thank you, Jason and good morning, everybody.

John Mckenzie: Great. Thank you, Jason. And good morning, everybody.

John Mckenzie: I'm going to highlight some important safety milestones that we achieved in the fourth quarter of 2023 and in the full year. We achieved a total recordable injury frequency of 0.31 in 2023. And importantly, we noted a marked decrease in the potential severity of our safety incidents, a trend we are very focused on continuously improving. 2023 was an important year, which included the restart of two refineries and the progression of the West White Rose Project, which today stands at 75% complete. And we did this, as we would expect, without a significant incident.

John: I'm going to highlight some important safety milestones that we achieved in the fourth quarter of 2023.

John: And in the full year, we achieved a total recordable injury frequency of 0.31 in 2023.

John: And importantly, we noted a marked decrease in the potential severity of our safety incidents a trend we are very focused on continuously improving.

John: 2023 was an important year.

John: Which included the restart of two refineries and the progression of the West White Rose project, which today stands at 75% complete.

John: And we did this as we would expect without a significant incident I'm proud of the team for their continued focus on safety and what they have accomplished over the year.

John Mckenzie: I'm proud of the team for their continued focus on safety and what they've accomplished over the year. Early in 2023, we signaled that the first two quarters of the year would be impacted by the start-up of Superior and the delayed closing and start-up of Toledo. We also signal that we expect to have our full suite of assets operationally available to us in the third and fourth quarters. Our fourth quarter reflects the results of the second consecutive quarter of operating or integrated value chain. Our upstream business continued to build on operating momentum. We increased production to nearly 810,000 barrels of oil per day, our highest quarterly number for this year and the second highest in the company's history. This is something we are extraordinarily proud of.

John: Yes.

Early in 2023, we signaled that the first two quarters of the year would be impacted by the startup of superior and the delayed closing of startup of Toledo.

We also signaled that we expected to have a full suite of assets operate operationally available to us in the third and fourth quarters are fourth quarter reflects the results of the second consecutive quarter of operating our integrated value chain.

Our upstream business continued.

John: To build on operating momentum.

John: We increased production to nearly 810000 barrels of oil per day, our highest quarterly number for this year and the second highest in the company's history. This is something we are extraordinarily proud of.

John Mckenzie: We saw particularly strong performance at our oil sands assets, most notably at Foster Creek. The ramp-up of new sustaining pads added about 10,000 barrels of increased production relative to the third quarter, taking this asset to nearly 200,000 barrels per day. We also started steaming our first sustaining well pad at Sunrise, and we have two more well pads to bring on stream in 2024. This is the first step in our multi-year development of this asset that will see us push production volumes to or through nameplate capacity. Our upstream business generated an operating margin of about $2.5 billion in the fourth quarter, and this reflects higher production, lower unit OPEX, but also lower crude prices and wider heavy oil differentials. Now, with the start-up of the TMX pipeline, we anticipate light-heavy differentials to narrow.

John: We saw particularly strong performance at our oil sands assets, most notably at Foster Creek.

John: The ramp up of new sustaining pads added about 10000 barrels a day of increased production relative to the third quarter, taking this asset to nearly 200000 barrels per day.

John: We also started steaming our first sustaining well pads at Sunrise.

John: And we have two more well pads to bring on in 2024.

This is the first step in our multiyear development of this asset that will see us push production volumes two or through nameplate capacity.

John: Our upstream business generated an operating margin of about $2 5 billion in the fourth quarter and this reflects higher production lower unit Opex, but also a lower crude prices and wider heavy oil differentials.

John: Now with the startup of the <unk> pipeline, we anticipate light heavy differentials to narrow this is an important piece of infrastructure and creates additional egress in the western Canadian basin.

John Mckenzie: This is an important piece of infrastructure and creates additional egress in the western Canadian basin, and Cenovus is an anchor shipper. Our oil sands and thermal assets continue to perform exceptionally well as we enter 2024. We are focused on executing our capital plans at Christina Lake, Foster Creek, and Sunrise in support of the organic growth of this business over the next two years. In our conventional business, fourth-quarter production volumes remain steady around 124,000 BOE per day, and the business was consistent and stable after dealing with wildfires through much of the summer. Offshore production reached about 70,000 barrels a day in the fourth quarter, a 6% increase quarter over quarter.

John: Synovus is an anchor shipper.

Our oil sands and thermal assets continued to perform exceptionally well as we enter 2024, we're focused on executing our capital plans at Christina Lake.

John: Foster Creek Sunrise in support of the organic growth of this business over the next two years.

John: In our conventional business fourth quarter production volumes remained steady around 124000 Boe per day.

John: And the business was consistent and stable after dealing with wildfires through much of the summer.

John: Offshore production reached about 70000 barrels a day in the fourth quarter, a 6% increase quarter over quarter.

John Mckenzie: And in Asia-Pacific, gas volumes were up by about 20% in Indonesia as we brought on the MAC field in September. Our Asia-Pacific business continues to generate with great predictability, generating about a billion dollars of operating margin for the year. In the Atlantic region, the Terranova FPSO returned to production in late November, contributing about 4,000 barrels a day to Cenovus in the month of December.

John: And in Asia Pacific gas volumes were up by about 20% in Indonesia as we brought on the Mac fields in September.

John: Our Asia Pacific business continues to generate great with great predictability generating about $1 billion of operating margin for the year.

John: In the Atlantic region, the Terra Nova Fps, So return to production in late November contributing about 4000 barrels a day.

John: <unk> in the months of December the operator has since seen a ramp up of production in the field and is working towards the asset being <unk>.

John Mckenzie: The operator has since seen a ramp-up of production in the field and is working towards the asset being increased to full rates. We also advanced work for the Regulatory Dry Dock of the C. Rose FPSO. In late December, the vessel was taken off station.

John: <unk> to full rates.

John: We also advanced work for the regulatory Drydock of the <unk> Fps so.

John: In late December the vessel was taken off station.

John: The vessel has now arrived in Belfast and maintenance work has begun we anticipate to see Roes to return in the third quarter of 2020 for the investments we are making today ensure the vessel will be ready well in advance of the startup of the west White Rose project supporting production from that field well into the late 2000.

John Mckenzie: The vessel has now arrived in Belfast, and maintenance work has begun. We anticipate the Sea Rose to return in the third quarter of 2024. The investments we are making today ensure the vessel will be ready well in advance of the start-up of the West White Rose project, supporting production from that field well into the late 2030s. Overall, it's been a very strong quarter and a very strong start to 2024 for upstream businesses. Consistent with our guidance, planned turnaround activity will occur in the third quarter, and we expect to grow production exiting the year at higher production rates. Now turn to the downstream.

John: <unk>.

John: Overall, it's been a very strong quarter and a very strong start to 2024 for upstream businesses consistent with our guidance planned turnaround activity will occur in the third quarter and we expect to grow production exiting the year at higher production rates.

John: Turning to the downstream the fourth quarter was another good step forward for operated refining businesses.

John Mckenzie: The fourth quarter was another good step forward for operated refining businesses. In Canadian refining, crude utilization was 91% in the fourth quarter. The Lloyd-Minster upgrader and refinery demonstrated consistent and strong performance. This performance has continued in the first quarter as we prepare for a major turnaround of the Lloyd-Minster upgrader beginning in the second quarter. We anticipate the quarterly throughput impact to be about 42,000 to 46,000 barrels a day, consistent with guidance. And coming out of the turnaround, we expect the Lloyd Complex to continue to run reliably, with high rates of utilization for the foreseeable future.

John: In Canadian refining crude utilization was 91% in the fourth quarter, the Lloyd Minster, Upgrader and refinery and demonstrated consistent and strong performance. This performance has continued in the first quarter as we prepare for a major turnaround at the Lloyd mentioned or upgrade or beginning in the second quarter.

John: We anticipate the quarterly throughput impact to be about 42 to 46000 barrels a day consistent with guidance and coming out of the turnaround we expect the Lloyd complex to continue to run reliably.

John: With high rates of utilization for the foreseeable future.

John Mckenzie: In U.S. refining, our operated assets continue to run safely and reliably, performing mostly as expected. I'm very pleased with the improvements we continue to make in this business. The Toledo refinery ran steadily over the quarter and was able to take advantage of the wider light-heavy crude differentials.

John: In U S refining our operated assets continue to run safely and reliably performing mostly as expected.

John: I am very pleased with the improvements we continue to make in this business. The Toledo refinery ran steadily over the quarter and was able to take advantage of the wider light heavy crude differentials.

John Mckenzie: We also completed planned maintenance of the distillate hydrotreater at the Lima refinery in the quarter. We expect this asset to run at high levels of utilization through the first three quarters of this year going into the fourth quarter turnaround. Now we continue to have some challenges with superior firing, you'll see the throughput was in line with the prior quarter. We're working to improve reliability, which will allow us to increase crew throughput in the second quarter of 2024. Our non-operated Borger refinery underwent significant planned maintenance in the fourth quarter, and the operator experienced significant delays bringing the facility back online, which impacted utilization and profitability in the quarter. This refinery is now operating at full rate. The most notable item in the fourth quarter results was the weak Chicago crack price environment and volatility quarter over quarter. The Chicago 321 crack spread averaged $13.24 U.S. per barrel, a decline of over 50% compared to the third quarter.

John: We also completed planned maintenance at the distillate hydro trader at the Lima refinery in the quarter. We expect this asset to run at high levels of utilization through the first three quarters of this year going into the fourth quarter turnaround.

John: Now we continue to have some challenges at the superior refinery Youll see the throughput was in line with the prior quarter.

John: We're working to improve reliability, which will allow us to increase increased crude throughput in the second quarter of 2024.

John: Our non operated borger refinery underwent significant planned maintenance in the fourth quarter and the operator, operator experienced significant delays, bringing the facility back up which impacted utilization and profitability in the quarter. This refinery is now operating at full rates.

John: The most notable item in the fourth quarter results was the weak Chicago crack price environment and volatility quarter over quarter.

John: The Chicago 321, crack spread averaged $13 24 U S per barrel a decline of over 50% compared to the third quarter. The December crack averaged $7 65 U S per barrel and at times gasoline cracks were negative.

John Mckenzie: The December crack averaged $7.65 U.S. per barrel, and at times gasoline cracks were negative, which caused us to respond by economically optimizing throughput. This not only drove lower U.S. refining operating margin in the fourth quarter but also lower throughput and contributed to a significant FIFO headwind in U.S. refining of about $450 million as we processed higher-priced crudes that were purchased in prior periods. The wheat crack environment has persisted through the month of January with an average Chicago 3-2-1 benchmark of about $5.50 U.S. per barrel, but recently, the Chicago refining crack environment has improved.

John: Which caused us to respond by economically optimizing throughput.

John: This not only drove lower U S refining operating margin in the fourth quarter, but also lower throughput.

John: And contributed to a significant FIFO headwind in the U S refining about $450 million as.

John: As we processed higher priced crudes that were purchased in prior periods.

John: Now the weak crack environment has persisted through the month of January with an average Chicago 321 benchmark of about $5 50 per barrel.

John: Recently, the Chicago refining crack environment has improved.

John Mckenzie: Cracks have risen into the low teens and the high 20s, and with seasonal impacts easing and product inventories rebalancing, as well as refineries entering the turnaround season, we anticipate seeing more normalized cracks going forward. We expect to continuously improve our operating and financial performance in this business as we produce refined products into this pricing tailwind. Now to our corporate and financial performance. In the fourth quarter, Cenovus delivered approximately $2.1 billion of adjusted funds flow. As mentioned, the upstream business was impacted by lower realized prices with a wider WTI WCS differential, and the downstream business was impacted by lower refined product pricing in the U.S. and a negative FIFO impact. Through our base dividends, share buybacks, and final payment of the common share warrant obligation, we distributed over $700 million directly to our shareholders in the fourth quarter. In addition, the company's net debt was approximately $5.1 billion at the end of the fourth quarter, a reduction of more than $900 million from the third quarter, which reflects a working capital release as well as the application of free cash.

John: Cracks have risen into the low teens in the high <unk>, and we seasonal impacts easing and product inventories rebalancing as well as refineries entering the turnaround season, we anticipate seeing more normalized cracks going forward.

John: We expect to continuously improve our operating and financial performance in this business as we produce refined products into this pricing tailwind.

John: Now to our corporate and financial performance in the fourth quarter Synovus delivered approximately $2 1 billion of adjusted funds flow as mentioned in the upstream business was impacted by lower realized prices with wider WTO and WCS differentials and the downstream was impacted by lower refined product pricing.

In the U S and a negative FIFO impact.

John: Through our base dividend share buybacks and final payment of common share warrant obligation, we distributed over $700 million directly to our shareholders in the fourth quarter.

John: In addition, the company's net debt was approximately $5 1 billion at the end of the fourth quarter.

John: <unk> of more than $900 million from the third quarter, which reflects a working capital release as well as the application of free cash flow.

John Mckenzie: We remain focused on achieving our $4 billion net debt target and delivering 100% of excess refunds to our shareholders once this milestone is met. So looking back at 2023, there are some important achievements I'd like to highlight. We delivered safe and reliable upstream performance throughout the year while responding to the significant wildfire activity in our conventional areas in the spring and summer and safely executed a major turnaround at Foster Creek in the second quarter. We successfully delivered our capital spending guidance for 2023 with total investments of $4.3 billion and achieved several key project milestones as planned. We materially progressed construction of the West White Roast project, which, as I mentioned, is now about 75% complete, and reached a major milestone in the second quarter with the completion of the conical slip form on the gravity-based structure.

John: We remain focused on achieving our $4 billion net debt target and delivering 100% of excess free funds flow to our shareholders. Once this milestone as Matt.

Matt: So looking back at 2023, there are some important achievements I'd like to highlight.

Matt: We delivered safe and reliable upstream performance throughout the year, while responding to the significant wildfire activity in our conventional areas in the spring and summer and safely executed a major turnaround at Foster Creek in the second quarter.

Matt: We successfully delivered our capital spending guidance in 2023 with total investments of $4 3 billion and achieved several key project milestones milestones as planned.

Matt: We materially progressed construction of the West White Rose project, which as I mentioned is now about 75% complete.

Matt: And reached a major milestone in the second quarter with the completion of the clinical slipped form on the gravity based structure.

Matt: At Christina Lake, we achieved approximately 45% completion of our narrows Lake Tieback pipeline on time and on budget.

John Mckenzie: At Christina Lake, we achieved approximately 45% completion of our Narrows Lake tieback pipeline on time and on budget. This will allow us to bring our high quality, low SOR resource back to the Christina Lake processing facility. We further integrated our heavy oil production and refining capabilities through the acquisition of the remaining 50% of the Toledo refinery, and we safely returned that refinery to full operations in June. We brought Superior online, and combined with Toledo, we added approximately 130,000 barrels a day of refining capacity, much of that heavy oil refining capacity. We reduced our long-term debt by almost $1.6 billion, with $1 billion U.S. of that being repurchased debt. We also strengthened our credit ratings during the year with a credit rating upgrade from Fitch Ratings to BBB Stable and a change in our Moody's Outlook from Stable to Positive. We generated nearly $9 billion of adjusted funds flow in the year.

Matt: This will allow us to produce a high quality low SLR resource back to the Christina Lake processing facility.

Matt: We further integrated our heavy oil production and refining capabilities through the acquisition of the remaining 50% of the Toledo refinery and we safely return that refinery to full operations in June.

Matt: We brought a superior online and combined with Toledo, we added approximately 130000 barrels a day of refining capacity much of that heavy oil refining capacity.

Matt: We reduced our long term debt by almost $1 6 billion with $1 billion U S of that being repurchased debt.

Matt: We also strengthened our credit credit ratings.

Matt: During the year with a credit rating upgrade from Fitch ratings to Triple B stable and a change in our Moody's outlook from stable to positive.

Matt: We generated nearly $9 billion of adjusted funds flow in the year. This enabled us to deliver around $2 8 billion to shareholders through our base dividend to purchase of common shares and the purchase and cancellation of about 46 million synovus warrants.

John Mckenzie: This enabled us to deliver around $2.8 billion to shareholders through our base dividend, the purchase of common shares, and the purchase and cancellation of about 46 million Cenovus warrants. We end 2023 on a strong note operationally, and we'll continue to build on this through the year. 2024 will be focused on achieving our $4 billion net debt target, progressing our high-return growth projects in the upstream, and continuing to improve the profitability of the downstream business while running it safely and reliably. Ultimately, as part of our capital allocation framework, we look forward to shifting to 100% of excess refunds before going back to shareholders.

Matt: We end 2023 on a strong note operationally and we will continue to build on this through the year 2024 will be focused on achieving our $4 billion net debt target progressing.

Matt: Progressing our high return growth projects in the upstream and continuing to improve the profitability of the downstream business will running it safely and reliably.

Matt: Ultimately as part of our capital allocation framework, we look forward to shifting.

Matt: Two 100% of excess free funds flow going back to shareholders, we are well positioned as a company.

John Mckenzie: We are well positioned as a company. The achievements I just spoke about set us up well for 2024 and will continue to generate value for years to come. On March 5th, we'll be hosting an Investor Day, and I welcome you to attend to hear more about our strategy and detailed five-year plans at that time. And with that, I'll stop, and we're happy to take your questions. Hi, good morning, and thanks for taking my questions. Maybe starting with the downtrends here. Oh, yeah, good morning.

Matt: The achievements I just spoke to set us up well for 2024 and will continue to generate value for years to come.

Matt: On March 5th will be hosting an investor day.

Matt: And I welcome you to attend to hear more about our strategy and detailed five year plans at that time.

Matt: And with that I'll stop and we're happy to take your questions.

Speaker Change: Thank you.

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

Speaker Change: First question comes from Dennis Fong at CIBC World markets. Please go ahead.

Dennis Fong: Hi, good morning, and thanks for taking my questions.

Dennis Fong: Maybe starting with the downturn here.

Dennis Fong: Oh, yes, good morning.

Dennis: Maybe starting with the downstream here, do you mind discussing some of the opportunities that you're currently working on to help improve cost structure, improve runtime, and margin from the downstream business, especially now that you have a running and own and operate those three refineries in the US? Sure, so I'll let Keith answer the question, but as you know, Dennis... Toledo and Lima are sister refineries in their pipelines, interconnected, which does give us some opportunities to improve the integration of those two refineries and the overall synergy that we hope to capture when we bought that refinery. Superior, there's lots of opportunities that we think in the future we'll be able to take advantage of the focus today really. Although it's bringing that refinery to full capacity and running that in a reliable way. But maybe, Keith, you could talk a little bit about what you're seeing in terms of opportunities at the refinery. Yeah, thanks.

Dennis Fong: Maybe starting with the downstream here do you mind discussing some of the opportunities that you're currently working on to help improve the cost structure of a good run time and margin from the downstream business, especially now that you have running and own and operate those three refineries in the U S.

Speaker Change: Sure. So I'll, let Keith answered the question, but as you know Dennis.

Speaker Change: Toledo, and Lyme are assist to refineries in their pipeline interconnected, which does give us some opportunities to improve that.

Speaker Change: The integration of those two refineries in the overall synergy that we hope to catch capture when we bought that refinery.

Keith: Superior Theres lots of opportunities that we think in the future, we'll be able to take advantage of the focus today really.

Although as bringing up that refinery to full.

Keith: Capacity in running that in a reliable way, but maybe Keith you can talk a little bit about what youre seeing in terms of opportunities in the refining sector. Yes. Thanks. Thanks for the question Dennis I think in our guidance you will see a noticeable step up in our and our utilization in the downstream U S downstream in 2024 versus 2023.

Keith: Thanks for the question, Dennis. You know, I think in our guidance, you'll see a noticeable step up in our utilization in the downstream US downstream in 2024 versus 2023. And 2023 was really a year of restarting the refineries, and 2024 is a year of running the refineries. We were pretty happy with, you may remember, the little bit of cold snap in January that we had.

Keith: <unk> in 2023 was really a year of restarting the refineries in 'twenty 'twenty four is a year of running our refineries, we're pretty happy with.

Keith: You may remember the little bit of a cold snap in January that we had on the refiners ran through that reasonably well. So we're really focused on now running these well and capturing the margin out of the back end of them.

Keith: The refiners ran through that reasonably well. So, you know, we're really focused on now running these well and capturing the margin out of the back end of them. And, you know, reliability improvements will persist and continue. But, you know, in general, the kit is running well. You know, obviously, in January, cracks were still pretty weak, as John alluded to in his opening remarks, but we saw that change in February, and the kit ramped up to max throughput and did it reliably.

Keith: And reliability improvements will persist and.

Keith: And continue but in general the Kid is running well.

Obviously in January cracks were still pretty weak as John alluded to in his opening remarks, but we saw that change in February and ramped up the Max Max throughput and did it reliably so we're pretty happy with what we're seeing will continue to focus on ensuring long term reliability of these assets.

Keith: So, you know, we're pretty happy with what we're seeing. We'll continue to focus on ensuring long-term reliability of these assets and, you know, full integration. With over 110,000 barrels a day of increased heavy conversion capacity in this kit now that it's running, we have lots of opportunity and optionality to move our barrels down into this pad 2 network and capture the margins out of the back. Great, appreciate that call there

Keith: And full integration with with over 110000 barrels a day of increased heavy conversion capacity in this kit now that it's running we have lots of opportunity and optionality to to move our barrels down into this pad two network and capture the margins out of the Bakken.

Speaker Change: Great I appreciate that color there.

Dennis: My second question here is, maybe shifting views a little bit. It seems like there was obviously significant progress made on lowering outstanding leverage. I guess that progress, as you alluded to in the prepared remarks, was driven a little bit by the changes or the unwinding of working capital. As we think about this going forward, can we or can you provide maybe a little bit of structure or an idea as to what maybe a normalized rate of net debt paydown might be, and are there any one-time items we should watch out for in the next couple of quarters? Morning, Dennis. It's Cam.

Speaker Change: My second question, maybe shifting gears a little bit.

It seems like there was significant progress made on lowering leverage.

Speaker Change: The I guess that progressed as you alluded to in prepared remarks was driven a little bit by the changes or the unwinding of working capital.

Speaker Change: As we think about this going forward.

Speaker Change: Forward.

Speaker Change: Can we can you provide maybe a little bit of a structure or an idea as to what maybe a normalized rate of like net debt pay down might be.

Speaker Change: Are there any onetime items, we should watch out for in the next couple of quarters.

Speaker Change: Good morning, Dennis it's Cam.

Cam: So, you know, a couple of things I would highlight. Yes, you did notice we had a working capital release through the fourth quarter, and that was really a combination of, I would say, slightly lower absolute levels of inventory and also the change that you saw in pricing. You know, when you think about, I guess, anything unusual coming, I think we've articulated this previously. I think the only change that's really worthhighlighting is we're obviously continuing to wait for a line fill on TMX. We've had a small portion called, but we've got an amount still that we still owe them to fill that line at the time that they start up that line.

Cam: So a couple of things I would highlight yes, we did notice we had a working capital release through the fourth quarter and that's that's really a combination of I would say slightly lower absolute levels of inventory and also the change that you saw in pricing.

Cam: When you think about I guess.

Cam: Anything unusual coming I think.

Cam: Articulated this previously I think the only change that's really I would highlight is we're obviously continuing to wait for line fill on on <unk> X, we had a small portion.

Cam: But we've got amounts.

Cam: The amount still.

Cam: We still have them to fill that line on the timing that they start up that line. So.

Cam: So you should expect probably about a million barrels increment as a result of that. So that will likely happen here between now and kind of the middle of this year. So other than that, I would say, you know, you shouldn't expect anything else material.

Cam: You should expect probably about 1 million barrels increment as a result of that so that will be a that.

Cam: That will likely happen here between now and kind of middle of.

This year so.

Cam: Other than that I would say you shouldn't expect anything else material I think generally speaking the trajectory you saw on the debt in the fourth quarter is really strong I think given the pricing environment. We see today, both on the upstream and the downstream improving out of January into February I think youre going to continue to see us make progress on the debt.

John Mckenzie: Generally speaking, the trajectory you saw in the debt in the fourth quarter is really strong. I think given the pricing environment we see today, both on the upstream and the downstream, improving out of January into February, I think you're going to continue to see us make progress on the debt through this year. Dennis, I'd just add to that. I think we've been pretty clear with the value chains that we've built, whether it be, you know, condensate or the value chains that we've built to move our... Heavy Oil Out of Hardesty and into our refineries.

Cam: Through this year.

Speaker Change: Yes, Dennis I would just add to that I think I think we've been pretty clear with the value chains that we built whether it be condensate or the value change that we've built to move our.

Speaker Change: Heavy oil out of Hardisty and into our refineries you should expect us to be carrying somewhere around 45 to 50 million barrels in inventory.

John Mckenzie: You should expect us to be carrying somewhere around 45 to 50 million barrels in inventory. And we're always going to be optimizing that over time, and with the refineries running more stably and predictably, there's an opportunity maybe to optimize that some more and take a few more barrels out of inventory. The other thing that we do pretty consistently is we run that value chain for the optimum cash flow.

Speaker Change: And we're always going to be optimizing that through time and with the refineries running more stably and predictably.

Speaker Change: There is an opportunity maybe to optimize that some more and take a few more barrels out of inventory.

Speaker Change: The other thing that we do pretty consistently as we run that value chain for the optimum cash flow and where we have opportunities to store barrels and sell them in future periods at higher prices.

John Mckenzie: And where we have opportunities to store barrels and sell them in future periods at higher prices, we'll do that as well. But what you should count on us for is kind of that 45 to 50 million barrels, as Cam mentioned. There will be about a million barrels coming into that related to the startup of TMX, but we're always going to be optimizing that depending on the pricing scenarios that we see going forward and the opportunities that this value chain gives us. I really appreciate the additional color there, John.

Speaker Change: We'll do that as well, but what you should count on us as kind of that 45 to 50 million barrels as Cam mentioned, there will be about 1 million barrels coming into that related to the startup of <unk>, but we're always going to be optimizing that depending on the pricing scenarios that we see going forward and the opportunities of this value chain gives us.

Speaker Change: Okay.

Speaker Change: Great I really appreciate the additional color there John and Ken I will turn it back thanks.

Dennis: I'll turn it back. Thank you. The next question comes from Menno Hochschild at TD Securities. Please go ahead. Good morning, everyone.

Speaker Change: Thank you. The next question comes from Menno hospitals at TD Securities. Please go ahead.

Menno Hospitals: Good morning, everyone and thanks for taking my question I'm, just going to start with a quick follow up on superior <unk>.

Menno Hochschild: And thanks for taking my question. I'm just going to start with a quick follow-up on Superior and Toledo. You already answered quite a bit of it.

Menno Hospitals: You did answer quite a bit of it already but can you just guide us on what current utilization.

Menno Hochschild: But can you just guide us on what current utilization for the two refineries looks like today? And then, John, you talked about potentially seeing a bigger ramp up in Superior and Q2. Like, what are the risks that you see in successfully being able to ramp up Superior within that timeframe?

Menno Hospitals: Two refineries looks like today and then.

Menno Hospitals: John you talked about potentially seeing a bigger ramp in superior in Q2 like what are the risks that you see in <unk>.

Menno Hospitals: Successfully being able to.

Menno Hospitals: Superior within that timeframe.

Speaker Change: Yes, I'm going to let Keith answered. The first question last and I'll start with your last question and I'm sure Keith will have some thoughts there too.

John Mckenzie: Yeah, I'm going to let Keith answer the first question last, and I'll start with your last question, and I'm sure Keith will have some thoughts there too. You know, Superior has been a bit of a fist fight for us in starting a refinery that hasn't run in five years, and rebuilding it, you know, has been a bit of an issue. And any time you take a new set of kit and a refinery that hasn't run for that length of time through its first winter, you do find some deficiencies.

Theres no doubt superior has been a bit of a fist fight for us and starting a refinery that hasn't run in five years.

Keith: And rebuilding it.

Keith: There's been a bit of an issue and anytime you take a new set of kit.

Keith: In a refinery that hasn't run for that length of time through its first winter you do find some deficiencies and sure enough we found some deficiencies, but theres nothing.

John Mckenzie: And sure enough, we found some deficiencies, but there's nothing, uh... mechanically processor technically wrong with this refinery uh... it's just taking us a bit longer to get to where we want to get. You know, I'd also kind of point to the strategy of why we have these two refineries. And it's important to remember that when we get Superior up to nameplate capacity in that 49,000 barrels a day range, it's going to consume about 35,000 barrels a day of heavy crude. And we can get that from Hardesty to Superior for about $4 U.S. With no take or pay commitment on Enbridge, you know, that is the strategic rationale for wanting that refinery. It's not only going to make profits on its own, but it really does give us egress from Hardesty to Superior. Similarly, on Toledo, of the 150,000 to 160,000 barrels of daily throughput capacity, about 90,000 to 95,000 of that is heavy oil, and we can get our oil from Hardesty to Toledo for about $6 US a barrel.

Keith: Mechanically processor technically wrong with this refinery.

Keith: Just taken us a bit longer to get to.

Keith: Where we want to get too.

Keith: And also kind of point to the strategy of why we have these two refineries and it's important to remember.

Keith: When we get superior up to nameplate capacity and that 49000 barrel a day range, it's going to consume about 35000 barrels a day of heavy and we can get that from hardisty to superior for about $4 U S with no take or pay commitment enbridge.

Keith: That is.

Keith: The strategic rationale for wanting that refinery, it's not only going to make profits on its own but it really does give us egress.

Keith: From Hardisty to superior.

Keith: Similarly on Toledo.

Keith: Of the 150 to 160000 barrels a day through throughput capacity of about 90 to 95 of that is heavy oil and we can get our oil from hardisty to Toledo for about $6. A barrel. So these are really important assets for us not just on a standalone basis, but on an integrated basis.

Keith: So these are really important assets for us, not just on a standalone basis but on an integrated basis. So getting them up to full rates and demonstrating the full strategic value that we've seen for some time is really important to us, but maybe I'll turn it over to Keith, and he can talk to you more about the syntax of the path forward with those two assets. I think your question probably relates to the 76% utilization in the US downstream in the fourth quarter. During that period of time, we had a pretty large turnaround at Borger Refinery, and the operator had a little bit of a challenge starting that refinery back up. It's now back up and running at full rates.

Keith: We're getting them up to full rates.

Keith: And demonstrating the full strategic.

Keith: Value that we've seen for some time is really important to us, but maybe I'll turn it over to Keith and he can talk to you more about the syntax of.

Keith: The path forward with those two.

Keith: I think your question probably gears on the 76% utilization in the U S downstream in the in the fourth quarter in that period of time, we had a pretty large turnaround at borger refinery in and the operator had a little bit of challenge starting that refinery back up it's now back up and running at full rates Toledo ran well through there, but you will recall in <unk>.

Keith: Toledo ran well through there, but you will recall in December we saw cracks diminish in Pad 2 in the Chicago region, and we took the opportunity to optimize the kit and run it down. Heading into this quarter, though, we are back up north of 90% utilization across the kit, including Toledo and Superior. Superior, though, you should expect through the first several months of this year to run more in the 65% to 70% utilization range. All of the equipment is running, and to John's point about the heavy oil integration, we're able to run about 30,000 barrels a day of heavy, but we're just running off a bunch of intermediates that we built during startup and shutdowns over the past six months. That limits getting full utilization as we run those intermediates through the processes and fill out those process units.

Keith: <unk>, we saw cracks diminish in <unk>.

Keith: Two in Chicago region in and we took the opportunity to optimize the kit.

Keith: And run it down heading into this quarter, though we are back up north of 90% utilization across the kit.

Keith: Including Toledo and superior Superior, though you should expect through the first several months of this year to run more in the 65% to 70% utilization.

Keith: All of the Kid is running and to John's point about the heavy oil integration, we're able to run kind of that 30000 barrels a day of heavy but we're just running off a bunch of intermediates that we built during start up and shutdowns over the past six months that limits kind of getting the full utilization as we run those intermediates through the through the <unk>.

Keith: Assesses and fill up those process units so.

Keith: The kit's running, but you won't see that top-line utilization number go up until the second quarter. Terrific. I appreciate all of the detail.

Keith: The kits running.

Keith: But you won't see that top line utilization number go up until until the second quarter.

Speaker Change: Terrific I appreciate all of the detail and then I'll follow up with a question on solvent.

Keith: And I'll follow up with a question on solvents. Assisted SAG-D. We've seen quite a bit of news flow of late, with Imperial being the first to bring a commercial SAG-D project online a couple of months ago, and I believe CNQ is talking about commercial activity towards mid year. And I'm just going over past presentations.

Speaker Change: Consistent Sag D. We've seen quite a bit of news flow of late with imperial being the first to bring a commercial saggy project online a couple of months ago and I believe in CMT was talking about commercial activity towards mid year, and I'm just going over past presentations.

Keith: I believe it was at your last investor day that you talked about solvent assisted pilot activity within the five year plan. So, and you may wanna hold back on this for investor day, but if not, where does SACID rank on the excitement scale right now? What's getting done in the background, and would you be willing to fine-tune the timeline for commercial development? Thank you. Hey Mano, yeah, it's Keith again.

Speaker Change: I believe it was that GOR.

Speaker Change: Last Investor Day, you talked about solvent assisted pilot activity within the five year plan.

Speaker Change: And you may want to hold back on this for the Investor day, but.

Speaker Change: If not why.

Where does.

Speaker Change: <unk> rank.

Speaker Change: <unk> scale right now whats getting done in the background and would you be willing to fine tune the timeline to commercial development.

Speaker Change: You.

Speaker Change: Hey, Matt.

Keith: It's Keith again.

Keith: You know, the way we look at SA-SAG-D for Cenovus is that we're pretty gifted with very thick, clean reservoirs that allow for the actual recovery process to use SAG-D and be very effective and very efficient. You know, over the years, probably dating back 15 years, we've piloted all kinds of solvent recovery technology. So I would say those are, in our mind, commercialized, and they are waiting for the resources and opportunity to deploy them. But right now, you know, we have the resources and capability to utilize our steam most effectively and most economically to drive the highest shareholder return. So that's kind of where we're focused, but we do have that technology in our back pocket should we see an opportunity to deploy it in the future. Thanks, Keith. I'll turn it back on.

The way, we look at say Sag D.

Speaker Change: <unk>, we're pretty.

Speaker Change: Gifted with very thick.

Speaker Change: Clean reservoirs that allow for the actual recovery process to use Sag D and be very effective and very efficient over the years, probably dating back 15 years, we've piloted all kinds of solvent recovery technology. So I would say those are in.

In our mind commercialized and they are waiting for the resource and opportunity to deploy them at but right now we have resource and capability to utilize our steam.

Speaker Change: Most effectively and most economically to drive the highest shareholder returns. So that's kind of where we're focused and but we do have that technology in our back pocket should we see an opportunity to deploy it in the future.

Speaker Change: Yes.

Speaker Change: Terrific. Thanks, Keith I'll turn it back.

Keith: Thank you. As a reminder for analysts, should you have any questions, please press star 1. The next question comes from Greg Party at RBC Capital Markets. Please go ahead. Yeah, thanks. Good morning.

Speaker Change: Thank you as a reminder for analysts so do you have any questions. Please press star one.

Speaker Change: Next question comes from Greg Pardy at RBC capital markets. Please go ahead.

Greg Pardy: Yes, thanks, good morning.

Greg Party: So lots of emphasis on the downstream, which makes sense, John, the, the upstreams had good momentum. I'm just wondering if you can give us a little bit of an off topic there, including, you know, maybe where current production rates are roughly where production rates are. Sure, I'll get Keith to give you the detail on a property-by-property basis.

Lots of emphasis on the downstream, which which makes sense John.

Greg Pardy: The upstream has had good momentum I'm just wondering if you can give us a little bit of an ops update there, including maybe where current production rates are roughly where production rates are right now.

Speaker Change: Sure I'll give you a good case to give you the detail on a property by property basis, but we.

John Mckenzie: You know, we entered this year, again, as I mentioned, with kind of the second highest production quarter that we've ever had, but December was probably the second highest production month that we've ever had. As a company, now, all that needs to be tempered, you know, as you go into the summer months, and we have a turnaround schedule that's all part of our, uh, guidance that we've given you. And as I mentioned, we expect Q4 to be even bigger next year than it was this year, particularly as we kind of bring on more well pads right across the business. But I feel really good about how we've paced and staged capital right across the upstream to ensure that those rates that we put into our guidance are very achievable. We've seen some really good rates at places like Lloyd Minster, where we hit some of the daily production records in December and early January.

Speaker Change: We entered this year.

Speaker Change: Again as I mentioned was the second highest production quarter.

Speaker Change: We've ever had but December was probably the second highest production month that we've ever had.

Speaker Change: As a company not all of that needs to be tampered as you go into the summer months and we have a turnaround.

Speaker Change: Schedule, that's all part of our.

Speaker Change: Guidance that we've given you and as I mentioned, we expect Q4 to be even bigger.

Speaker Change: Next year than it was this year, particularly.

Speaker Change: As we kind of bring on more well pads right across the business, but I feel really good about how we've paced and stage the capital.

Speaker Change: Right across the upstream to ensure that those rates.

Speaker Change: That we put into our guidance are very achievable, we've seen some really good.

Speaker Change: Rates in places like Lloyd Minster.

Speaker Change: Where we had some daily production.

Speaker Change: Records in December and early January.

Keith: So, you know, it's kind of right across the business, and I think it really sets us up well for the growth projects and integration of those growth projects starting in 2025 with the Narrows Lake tieback. But, Keith, maybe you want to run through the portfolio and talk about where we are on the individual assets. Yeah, sure, John.

Speaker Change: So it's kind of right across the business and I think it really sets us up well for the growth projects and integration of those growth projects starting in 2025.

Speaker Change: The narrows Lake Tieback, but Keith maybe you want to run through the portfolio.

Keith: And talk about where we are on the individual assets.

Yes sure John.

Keith: Thanks for the question, Greg. It's actually been pretty impressive watching the ramp up in the back half of 2023 and into 2024, with, as John indicated, kind of the second best quarter ever in Q4. That performance has persisted into January. And, you know, I'd also like to commend the teams. We went through minus 45 degrees Celsius weather in January, and the winterization programs we have across the asset base allowed us to weather through that without any hiccups.

Keith: Thanks for the question, Greg, it's actually been pretty impressive watching the ramp up in the back half of 2023 and into 2024.

Keith: With as John indicated the second best quarter ever in Q4 that performance has persisted into January and.

Speaker Change: I would also like to commend. The teams we went through minus 45 degrees Celsius weather in January and the Winterize Asian programs, we have across the asset base allowed us to weather through that without any hiccups. So so really happy to see.

Keith: So we're really happy to see, you know, we put in some new well pads at Foster and Christina, and we're starting to see the success of those well pads with strong production starting into January, and that will continue through the quarter. As John indicated, the Lloyd Thermals, you know, we're actually above our expectations a little bit there as some of the redrills and redevelopments that we've done in the region, as well as implementing some of our subsurface technologies, has allowed us to increase production in the Lloyd Thermals. I am pretty happy with the combination of the Lloyd Thermals and conventional heavy oil.

Speaker Change: <unk> put in some some new well pads at foster and Christina and we're starting to see the success of those well pads with with strong production starting into January and continue that will continue through the quarter.

Speaker Change: As John indicated the Lloyd thermals.

Speaker Change: Were actually above our expectation a little bit there is some of the regionals and redevelopments that we've done in the in the region as well as <unk>.

Speaker Change: Implementing some of our subsurface technologies has allowed us to to incremental production in the Lloyd thermal so pretty happy with the combination of the Lloyd thermals in the conventional heavy oil.

Keith: You may recall that on the East Coast, we do have the life extension project happening on our CROs. So the boat has come off station, and it's in the dry dock going through that life extension project, and that will persist out to the back end of Q3. I am happy to note, though, that, you know.

Speaker Change: You may recall that on the east coast.

Speaker Change: We do have the life extension happening on our <unk>. So the boat has come off station and its in the dry dock going through that life extension project and that will persist.

Speaker Change: To the back end of Q3.

Speaker Change: Happy to note, though that.

Speaker Change: Terra Nova came back.

Greg Party: Terranova came back on station in the middle of last year and started production in November, and we're starting to see production from Terranova ramp up. And then our Asia business has been very strong for us as well, and that has continued into the new year. And then when I look back at conventional, you know, it's been performing well and, similarly to our oil sands assets, weathered through the real cold snap as well. So all in all, you know, across the portfolio and the upstream, really happy with the performance in Q4 and that's continuing early into Q1 of 2024. Okay, terrific. And completely, maybe just shifting over to financials, because in your opening remarks, you pretty much answered the question, which is, i.e., hitting that elusive $4 billion net debt target. I'm curious, maybe it's a question for Cam, just is there any more, maybe a bit more precision around that? Is that possible to get there by mid year? Or would that be jinxing it?

Speaker Change: On station in the Middle of last year and started production in November and we're starting to see production from turnover ramp up and then our Asia business has been very strong for us as well.

Speaker Change: That has continued into into the new year.

Speaker Change: And then when I look back at conventional it's been performing well and similarly to our oil sands assets, whether through the real cold snap.

Speaker Change: As well so all in all across the portfolio in the upstream really happy with the performance in Q4, and that's that's continuing early into Q1 of 2024.

Speaker Change: Okay terrific.

Speaker Change: Completely maybe just shifting over the financials because in your opening remarks, you pretty much answered the question, which is I E hitting.

Speaker Change: That that elusive for $1 billion net debt target.

Speaker Change: I'm curious maybe its a question for Ken is there any more maybe a bit more precision around that is that possible to get there by mid year or would that be James seeing it and then kind of related to that is that is the upstream portfolio.

Greg Party: And then kind of related to that is the upstream portfolio sufficiently streamlined? Or, you know, are there still aspects of the portfolio that could be, you know, i.e., non-core asset sales and so on? Or are we pretty much there?

Speaker Change: Sufficiently to streamlined.

Speaker Change: Or are there still still aspects of the portfolio that could be I E. Non core asset sales and so on are we pretty much done.

John Mckenzie: I'm going to answer the last question for Cam. We are very happy with the portfolio, Greg. This is probably the first quarter that we've had full access to all our assets. You know, I tell you, they're all investable, they all fit within our strategy, and they're all things that, you know..., are part of our plan going forward. So we're very happy with the portfolio that we have. Hey Greg, it's

Speaker Change: To answer the last question for Cam, we are we're very happy with the portfolio of Greg.

Speaker Change: Probably the first quarter.

We've had full access to all our assets.

Speaker Change: And I would tell you, they're all investable, they all fit within our strategy.

Speaker Change: And they're all things that.

Speaker Change: No.

Speaker Change: Our part of our plan going forward so.

Speaker Change: We're very happy with the portfolio that we have today.

Speaker Change: Hey, Greg it's Cam so.

Cam: So, you know, I think you're looking for a hard date on the debt target. To be honest, a soft date will be fine. Yeah, a soft date will be fine.

Greg Pardy: Thank you.

Cam: Youre looking for a hard date on on the date on that target to be honest, our stocks today it'll be fine.

Cam: It'll be hard to give that. So, a couple of things I would highlight. Look, we're continuing to see a lot of volatility in commodity prices, differentials widening out in Q4 and then now starting to see a bit of a narrowing into the first quarter and going into the back half of the year. And then, you know, obviously, cracks have improved.

Cam: So I'll say it will be hard to give that so a couple of things I would highlight look we're continuing to see a lot of volatility in commodity prices. So obviously, even with differentials widening out in Q4, and then now starting to see a bit of a narrowing into the first quarter and going into the back half of the year.

Cam: And then obviously cracks have improved so I would say the pricing environment oriented as quite constructive I think we're really focused on the things that are in our control and as you heard Keith and John talk about the operationally I think things are going really well. So I think the goal is to get there as quickly as we can I think.

Cam: So I would say the pricing environment we're in is quite constructive. I think we're really focused on the things that are in our control and, you know, as you heard Keith and John talk about operationally, I think things are going really well. So I think the goal is to get there as quickly as we can.

Cam: It's a number one priority for us as an organization, so I think when you look at the actions we're taking around the business, whether it's controlling our costs to working capital and then, obviously, running the assets, I think the goal is to try to get there in a reasonable time frame. So the focus of the whole organization is to get to that debt target, I would say in this price environment.

Cam: It's the number one priority for us as an organization. So I think when you look at the actions, we're taking around the business, whether it's controlling our costs to working capital and then obviously running the assets I think the goal is.

Cam: To try to get there in a reasonable timeframe. So the focus of the whole organization is to get to that target I would say in this price environment.

Cam: You know, I'm optimistic we can get there in a reasonable time frame. Whether that's in Q2 or Q4, it's really going to depend on commodity prices. No, I think it's a good answer.

Cam: I'm optimistic we can get there in a reasonable timeframe.

Cam: Whether thats in Q2 or Q4, it's really going to depend on commodity prices.

Speaker Change: Okay, No I think it's a good answer thanks very much.

Greg Party: Thanks very much. Thanks, Greg. Thank you. The next question comes from John Royal from J.P. Morgan. Please go ahead. Hi, good morning. Thanks for taking my question. I had another one on downstream.

Speaker Change: Thanks, Greg.

Thank you. The next question comes from John Royall from Jpmorgan. Please go ahead.

John Herrlin: Hi, good morning, Thanks for taking my question.

Another one on the downstream I was just hoping for some details on I think you had mentioned in the release and unplanned.

John Herrlin: I was just hoping for some details on, I think you had mentioned in the release, an unplanned, some unplanned downtime at Lima and how impactful that was on 4Q results. And then you also mentioned in the release what sounded like maybe some economic downtime you took in downstream. Could you just give a little detail around that, and did that continue into the early part of 1Q before cracks improved? Yeah, I'll speak to Lyman, and then Keith can answer your question more broadly. The only unplanned downtime that we had in Lima was a short outage that we had on the ice at Cracker.

John Herrlin: Some unplanned downtime at Lima.

John Herrlin: Impactful that was the <unk> results and then you also mentioned in the release what sounded like maybe some economic downtime you took in downstream can you just give a little detail around that and does that continue into the early part of <unk> before cracks improved.

Speaker Change: Yes, I'll speak to alignment and then Keith can.

Speaker Change: To answer your question more broadly, but the only unplanned downtime that we had in Lima was a short outage that we had on the IC cracker.

John Mckenzie: And as you know, John, the Isocracker is your biggest diesel-making unit, and when diesel is really your only product that's making money in the crack environment that we saw in late November, early December, or all through December, it really does impact here financial results. Now, that all being said, that was dealt with quickly, and the Lyme refinery today is at full rates, operating very, very well. Keith, maybe you can just touch on any other aspects. Yeah, thanks for the question, John. So, you know, cracks really collapsed in the December time period, so we did reduce the rate on kind of our lighter oil refinery, which is Lima, a little bit into December, as well as some of our non-operated refineries took some economic run cuts.

Speaker Change: And as you know John the Isa Cracker is your biggest diesel making unit and when diesel is really your only product that's making money in the crack environment that we saw in late November early December or all through December really.

Speaker Change: It does impact.

Speaker Change: Your financial results now that all being said.

That was dealt with quickly.

Speaker Change: The Lima refinery today is at full rates operating very very well so Keith.

Speaker Change: Keith maybe you can just touch on any other aspects you wanted to mention.

Keith: Yes. Thanks for the question John So you will recall cracks really collapsed in the December time period. So we did we did reduce rate on kind of our lighter oil refinery, which is lima, a little bit into.

Keith: December as well as some of our non operated refineries took some economic run cuts that did persist into January but you also probably are well aware on on February one we saw cracks release.

John Mckenzie: That did persist into January, but you also probably are well aware that on February 1, we saw cracks really improve, and we quickly ramped up all of our assets to get the full rates to capture money in that market. I think it was about a $15 to $20 move on the crack, which incented us to go to full rates, where we continue to operate.

Keith: Prove and we quickly ramped up all of our assets.

Keith: To get to full rates to capture.

Keith: Money in that market I think it was about a 15 to $20 move on the crack.

Keith: Which incentive for us to go to full rates, where we continue to operate and looking forward we are anticipating.

Keith: And, you know, looking forward, we're anticipating, you know, we're starting to get into driving season, and I believe there are some forecasted outages in the pad as well that should help sustain those cracks for the foreseeable future. Okay, great. Thank you. That's so that's helpful. And then just sticking with the downstream, when I look at this year's guidance for maintenance, is 30 to 35 KBD of maintenance a good level to think about going forward? Or is there some extra maintenance involved?

Keith: Starting to get into driving season, and I believe theres some forecasted.

Keith: Outages in the pad as well that should help sustain those cracks.

Keith: For the foreseeable future.

Speaker Change: Okay, great. Thank you that's helpful. And then just sticking with the downstream as well.

Speaker Change: When I look at this year's guidance is the 30% to 35 kvd of maintenance.

Speaker Change: That kind of a good level to think about going forward or is.

Speaker Change: Is there some extra maintenance in there given you had some restarts last year just I'm just trying to think about sort of how to model kind of the earnings power and refining and just the maintenance impacts there.

John Herrlin: You know, given you had some restarts last year, just trying to think about sort of how to model kind of the earnings power and refining and, and just the maintenance impacts there. Yeah, you know, there's sometimes a little bit lumpy with major turnarounds, but I think, in general, John, that's a pretty good number to model. But you know, you can probably follow up with our IR folks off the call, and they can give a little bit more detail. Thank you. Thanks, John.

Speaker Change: Yes.

Speaker Change: There is sometimes a little bit lumpy with with major turnarounds, but I think in general John That's a pretty good number to model, but you can probably follow up with our IR folks off the call and they can give a little bit more detail.

Speaker Change: Thank you.

Speaker Change: Great. Thanks, John.

John Herrlin: Thank you. The next question comes from Neil Mehta at Goldman Sachs. Please go ahead. Hey, this is Nicolette Flusser. Sorry about that.

Speaker Change: Thank you. The next question comes from Neil Mehta at Goldman Sachs. Please go ahead.

Neil Mehta: Hey, good morning.

Neil Mehta: Sir sorry about that.

Neil Mehta: Lots of earnings calls going on today. But on for Neil, and thank you for taking our question. I guess the first question will be on downstream. No, there's been a lot, but ours is a bit longer term in nature, which is, you know, assuming we get kind of all the assets up and running, and maybe it's 2024 and beyond, are there any sort of initiatives we should be on the lookout for, either on the cost side, which you see as low-hanging fruit in the downstream and US, in particular, Yeah, there's nothing that we have that we need to address that relates to, you know, vessel retirement or regulatory obligation of any kind of consequence.

Neil Mehta: [laughter] lots of earnings calls going on today.

Neil Mehta: But on for Neil and thank you for taking our question.

Neil Mehta: The first question will be on downstream know theres been a lot, but ours is a bit longer term in nature, which is assuming we get kind of all the assets up and running and then maybe it's 2024 and beyond is there any sort of initiatives, we should be on the lookout for.

Neil Mehta: Either on the cost side that you see as low hanging fruit in the downstream and U S. In particular or on the capture rate side that you see could be improved upon over time.

Yes, there's nothing that we have that.

Neil Mehta: We need to address that relates to vessel retirement to relates to.

Neil Mehta: Regulatory obligation of any kind of consequence, so our focus today.

John Mckenzie: Our focus today is continuing to run these assets well, integrate them with the upstream, and drive the value from this integrated value chain that we've put together. So don't think going forward that there are big lumps of capital that are coming your way to address, you know, those kind of big two issues that I talked about. Where we do have some capital that we've allocated to the downstream, it's more for projects that are economical in nature and allow us to expand margins and increase our heavy oil capacity throughput, but they're relatively modest. So what you can expect from us as a company over the next couple years is we're going to continue on the investments that we have in the upstream, and we've talked about those at Superior, Foster Creek, Christina Lake, and All right. Thank you. Very helpful.

He is continuing to run these assets well integrate them with the upstream.

Neil Mehta: And drive the value from this integrated value chain that we've put together so don't don't think.

Neil Mehta: Going forward there is.

Neil Mehta: Big lumps of capital that are coming.

Neil Mehta: Interaction to address those kind of big two issues that I talked about where we do have some capital that we've allocated to the downstream is more for projects that are economic in nature and allow us to expand margins and increase our heavy oil capacity throughput, but they're relatively modest so what you can.

Neil Mehta: Back from Us as a company.

Neil Mehta: Over the next couple of years is we're going to continue on the investments that we have in the upstream and we've talked about those.

Neil Mehta: Superior Foster Creek, Christina Lake and our West White Rose project with modest capital investment in the downstream to capture some incremental margin, but really looking to run our refineries well and integrate them with our upstream on a more sustained basis.

Speaker Change: Alright. Thank you very helpful and then not to get.

John Mckenzie: And then not to get ahead of ourselves, but just curious, are there any themes we should be on the lookout for? I know it's going to be a longer-term view at the upcoming March Investor Day, but any updates we should be looking out for, whether it's on pathways, or low carbon? I know you're going to talk a lot about these upstream projects that you've been investing in, but also if there's anything on the capital return side of things we should be looking out for, but any early thoughts would be very helpful. Well, you know, one of the things I think is we've been pretty consistent about what our strategy is.

Speaker Change: Head of ourselves, but just curious are there any themes, we should be on the lookout for I know, it's going to be a longer term view at the upcoming March investor day, but any updates we should be looking out for whether it's on pathway as low carbon.

Speaker Change: I know youre going to talk a lot about these upstream projects that you've been investing in but also if theres anything on the capital return side of things, we should be looking out for.

Speaker Change: Any early thoughts would be very helpful.

Speaker Change: Well you know one of the things I think as we've been pretty consistent on what our strategies since.

John Mckenzie: You know, Alex and I arrived here in 2018, so please don't believe that Investor Day is going to mark any kind of a left-hand turn from what's been really important to this company for the last five, six years, which is, you know, steady operations, driving to an under-levered balance sheet, getting to 100%. Shareholder returns, and Investing Profitably in this Business at the Margin. So, what we're really going to do at Investor Day is reinforce the strategy and the trajectory that we've been on but give you a lot more detail as to what the next five years are going to look like. All right, that's very helpful. Thank you so much.

Speaker Change: Alex and I arrived here in 2018, so please don't believe that <unk>.

Speaker Change: Investor Day is going to Mark any kind of a left hand turn.

Speaker Change: From what's been really important to this company for the last five six years, which is.

Speaker Change: Steady operations driving to an under levered balance sheet getting to 100%.

Speaker Change: <unk>.

Speaker Change: Shareholder returns and investing profitably in this business at the margin. So what we're really going to do at Investor day has reinforced the strategy and the trajectory that we've been on but give you a lot more detail as to what the next five years is going to look like.

Speaker Change: Alright, that's very helpful. Thank you so much.

Neil Mehta: Thank you. The next question comes from Jason Bouvier at Scotiabank. Please go ahead. Thanks and good morning everyone. Quick question on the preferreds.

Speaker Change: Thank you. The next question comes from Jason <unk> Scotiabank. Please go ahead.

Jason Apache: Thanks, and good morning, everyone. A quick question on the Preferreds My understanding is they become redeemable later this year and in the first half of next year, assuming you guys hit your net debt target in the back half of this year are those next on the plate or would you look for your <unk>.

Jason Bouvier: My understanding is they become redeemable later this year and in the first half of next year. Assuming you guys hit your net debt target in the back half of this year, are those next on the plate, or would you look for your shareholder returns to come through like share buybacks or dividends? Hey, Jason, it's Cam.

Jason Apache: Shareholder returns to come through like share buybacks or dividends.

Cam: Hey, Jason it's Cam.

Cam: So you're right, we do have some of our prep shares coming to maturity at the end of this year and some in 2024, or sorry, 2025. So we'll look at all those things as we do, whether it's our debt portfolio, our buyback program, and the prep. So, you know, I think we're always evaluating what the right economic decision is for the company and what the capital structure looks like. So we'll know differently than any of those other decisions.

Cam: So you're right, we do have some of our pressures coming two ones at the end of this year.

Cam: Some in 2024 or sorry 2025.

Cam: So we'll look at all of those things as we as we do whether it's our debt portfolio, our buyback program and the Prefs. So.

Cam: I think we're evaluating always what the right economical decision is for the company and what the capital structure looks like so well no different than any of those other decisions, we'll look at those as they come to maturity.

Cam: We'll look at those as they come to maturity. Great, thank you....

Speaker Change: Great. Thank you.

Speaker Change: Thanks, Jason.

Speaker Change: Thank you as a final reminder, for analyst. So do you have any questions. Please press star one now.

Jason Bouvier: Thank you. As a final reminder for analysts, should you have any questions, please press star 1 now. The next question comes from Manav Gupta at EBS. Please go ahead. Good morning, guys. I have a quick macro question first.

Speaker Change: Next question comes from Manav Gupta at UBS. Please go ahead.

Manav Gupta: Good morning, guys I have a quick macro question first.

Manav Gupta: Sure. Every now and then, we hear that TMX has cleared the last hurdle and the line is already set to come on, and then there is another hurdle. Like, is there any update you guys have? You're much closer to it. When do you think TMX hits the mechanical completion, and failure, and when do those diffs start actually coming in?

Manav Gupta: But every now and then we hear that Dms has cleared the last hurdle and the line is already set to come on and then there is another hurdle.

Manav Gupta: Is there any update you guys have you're much closer to it when do you think <unk> hit the mechanical completion line fill and when do those start actually coming in.

Drew: Manav, what you hear is what we hear as well, so we've heard all of the starts and stops and starts again, but Drew, you're very close to this, why don't you answer where we are on TMX and our latest thinking there? Sure, yeah, thanks Manav. Yeah, to John's point, it's, you know, it's sometimes daily and weekly here, as I think we're getting so close to being at the point where we can utilize a very important piece of infrastructure for the Western Canadian Basin, so we're all very, very excited to see that come on. Maybe just to back up, when we looked at our 2024 budget and when we planned when we would see this and what we would take into account, we always kind of anticipated mid-year, and so I still think that's very reasonable, and I think we talked about this on the last call. Even when it does come on and we, you know, get it full and it starts to operate, it's going to be a little bumpy probably out of the gate We expect the line fill call for the remaining volumes to come here in the next number of weeks and early Q2, but again, we also expect it to be a little bumpy as it kind of comes off the start-up, so we're still planning for mid-year, and we're looking forward to it like everyone else. Perfect.

Drew: But what do you hear what we hear as well. So we've heard all of the starts and stops and starts again, but drew you very cost is why don't you answer where we are on <unk> latest thinking there sure yes. Thanks Manav.

Speaker Change: To John's point it's.

Drew: It's sometimes daily and weekly years, and as I think we're getting so close to being at the point, where we can utilize a very important piece of infrastructure for the Western Canadian basin. So we're all very very excited to see that come on.

Drew: Maybe just to back up when we looked at our 2020 for budget and when we planned when we would see this in what we would take into account, we always kind of anticipated mid year.

Drew: And so I still think that's very reasonable and I think we talked about this on the last call even when it does come on and we get it full and it starts to operate it's going to be a little bumpy probably out of the gate. So we've taken a lot of that into account in our guidance.

Drew: When we've looked at it but we.

Drew: We still see and believe that it will come on here. Some time in mid to late Q2, we expect the line fill call for the remaining volumes to come here in the next number of weeks in.

Drew: Early Q2, and but again, we also expect it to be a little bumpy as it kind of comes off.

Drew: Startup so.

Drew: We're still planning for midyear and we're looking forward to it like everyone else.

Speaker Change: Perfect a quick follow up here is listening growth type loss take the bookings look at Christina and some other projects we talked about when we look at slide 26, 27, what would be a good thinking about the oil sands production level, just trying to understand ballpark, how should we be modeling 26, and 27 for the oil sands volume.

John Mckenzie: A quick follow-up here is you're pursuing growth at Foster, you're pursuing growth at Pristina, and some other projects you talked about. When we look at, you know, it's like 26 and 27, what would be a good way of thinking about the oil sands production level? Just trying to understand ballpark how should we model 26 and 27 for the oil sands volume.

John Mckenzie: Sure. So, the way you should think about our growth projects is that we've been investing since 2023 in our growth projects. And that investment cycle kind of ends in 2025. So, the money that we're spending last year, this year, and next year really facilitates the growth that you're going to see in 2025 and beyond. As I mentioned in my call notes, the first project to come on will be the Christina Lake Narrows Tieback. And that'll add 20 to 30,000 barrels a day starting in 2025, but more maturing in 2026. You'll see the foster expansion come on in the 2026 timeframe with full rates in 2027. You should see a continued growth in sunrise production as we continue to bring on four well packages over the next two, three years. And we believe, again, that we can take that asset beyond the nameplate capacity of 65,000 barrels a day. You know, today we're kind of in the 45 to 50 range.

Drew: Okay.

Speaker Change: Sure. So the way you should think about.

Speaker Change: Our growth projects as we've been investing since 2023, and our growth projects and that investment cycle kind of ends in 2025. So the money that were spending last year. This year and next year really facilitated the growth that youre going to see in 2025 and beyond as I mentioned.

Speaker Change: In my call notes the first <unk>.

Speaker Change: <unk> to come on will be the Christina Lake Narrows tieback.

Speaker Change: And that'll add kind of 20% to 30000 barrels a day.

Speaker Change: Starting in 'twenty, five but more maturing in 2026, you'll see the foster expansion come on in the 2026 timeframe with full rates in 2027, you should see.

Speaker Change: A continued growth in Sunrise production as we continue to bring on four well packages.

Speaker Change: Over the next two three years and we believe again that we can take that asset beyond the nameplate capacity of 65000 barrels a day today, we're kind of in the 45 to 50 range. So in those kind of Timeframes, Thats, where youll see the growth.

John Mckenzie: So, in those kind of timeframes, that's where you'll see the growth in our oil sands production, and it's really facilitated by having extra and incremental egress that we get from our refineries as well as TMX and having that under-levered balance sheet that we've been coveting for so long. The other project, Manav, and I think you're aware of this, is our West White Rose project, and we expect to see first oil there in 2026. Perfect. Thank you so much for all this, and I look forward to meeting you in person in about three weeks.

Speaker Change: In our.

Speaker Change: Oil sands production and its really facilitated by having extra and incremental egress that we get from our refineries as well as <unk> and having that under Levered balance sheet that we have been covenant for so long.

Speaker Change: The other the other project Manav and I think Youre aware of this is our west White Rose project and we expect to see first oil there in 2026.

Speaker Change: Perfect. Thank you so much sir on this and look forward to meeting in Boston and in about three weeks.

Manav Gupta: We look forward to it as well. Take care. Thank you. At this time, if any member of the media would like to ask a question, please press star 1. The next question comes from Lloyd Byrne at Jeffries. Please go ahead.

Speaker Change: We look forward to it as well take care.

Speaker Change: Yeah.

Speaker Change: Thank you at this time, if any members of the media would like to ask a question. Please press star one.

Speaker Change: The next question.

Large Burn: <unk> comes from large burn at Jefferies. Please go ahead.

Lloyd Byrne: Hey, thanks guys for doing this. I have a bit of a philosophical question, and maybe you want to address it on the analyst day coming up. But the market's kind of gotten stuck on the $4 billion number at $45 oil. And your debt is already below a lot of your peers, depending on how you want to look at it. But and then the second is your cost of equity is really high relative versus, obviously, your cost of debt.

Lance Burn: Hey, Thanks, guys for doing this.

Lage Burn: I haven't been of a philosophical question and maybe you want to address it on the on the.

Lage Burn: Analyst day coming up but.

Jefferies: The market has kind of gotten stuck on the $4 billion number at $45 oil.

Jefferies: Then the your debt is already below a lot of your peers, depending on how you want to look at it but.

Jefferies: And then the second is your cost of equity is really high relative versus.

John Mckenzie: And so given the fact you have a lot of projects coming on Sunrise Narrows, Foster Creek, Westwright Rose, it looks like your EBITDA is going to be $5 billion out and $26 or $45 anyway. So I guess my question is, would you ever consider accelerating the buyback at this point? Yeah, I'll take a crack at this, then I'm going to turn it over to Cam. But, you know, I would, I think we've been really clear on what our financial framework was, is and how we think about, um... capital structure capital allocation shareholder returns and the like and and we are absolutely of the view um... that companies like us that produce heavy oil in the mid-continent um... need to run under levered balance sheets and we need to have uh... a balance sheet that's sustainable at the bottom of the cycle which we define as forty five dollars we believe that's the price where growth in hydrocarbons uh... stop so you know for us achieving that four billion dollars is is kind of job one uh... and getting to a hundred percent shareholder returns beyond that is uh... you know something that we're absolutely looking forward to and uh... something that we've been coveting for a long period of time as we go forward through time we're always evaluating uh... you know the right level of debt for the company to have we believe that one times EBITDA at forty five dollars is that right level of debt but don't look for us to stray from our financial framework and try and be overly opportunistic by buying back stock in today's market at the expense of getting the balance sheet to that level. Yeah, and Lloyd, it's Cam.

Jefferies: Obviously your cost of debt and so.

Jefferies: Given the fact, you have a lot of product projects coming on Sunrise narrow as Foster Creek West White Rose it looks like your EBITDA is going to be $5 billion out.

Jefferies: 26 of $45 anyway. So.

Speaker Change: I guess my question is would you ever consider accelerating the buyback at this point.

Speaker Change: Yes, I'll take a crack at this and I'm going to turn it over to Kim.

Cam.

Kim: But I would I think we've been really clear on what our financial framework was is and how we think about.

Kim: Capital structure capital allocation and shareholder returns and the like and we are absolutely of the view.

Kim: The companies like us that produce heavy oil in the mid continent.

Kim: Need to run under Levered balance sheets, and we need to have a balance sheet that is sustainable at the bottom of the cycle, which we define as $45. We believe thats the price where growth in hydrocarbons.

Kim: Stop.

Kim: So for us achieving that $4 billion.

Kim: <unk> is kind of job one.

Kim: And getting to a 100% shareholder returns beyond that is.

Kim: Something that we're absolutely looking forward to Hum.

Kim: Something that we've been covenant for a long period of time as we go forward through time, we're always evaluating.

Kim: The right level of debt for the company to have we believe the one times EBITDA at $45 is that right level of debt, but don't look for us to stray from our financial framework and trying to be overly opportunistic by buying back stock in today's market at the expense of.

Kim: Getting the balance sheet to that level of.

Net.

Cam: I would just add a couple of things. Number one is, look, this debt target is not a short-term target. This is something we wanted to strive for, to get to for a long period of time. We've been on this de-leveraging journey now for the better part of five years, I would say, you know, even going back to 2018. And, you know, I think the goal is, let's have it, we want a capital structure that allows us to have a resilient balance sheet, and gives us the optionality to be opportunistic in times when others may not be able to.

Kim: And Lloyd it's Cam I always just add couple of things I think number one is this this debt target is not a short term target. This is something we.

Cam: Wanting to strive for to get to for a period of time, we've been on this deleveraging journey now for the better part of five years, I would say even going back to 2018.

Cam: I think the goal is let's let's let's haven't we want a capital structure that allows us to have resilient balance sheet gives us optionality to be.

Cam: Opportunistic in times, when others may not be able to.

Cam: And, you know, I think I would also highlight that we're in a period of time right now where our capital is a little bit elevated, just given that we have some big projects and commitments that we have ongoing, whether it's West White Rose or the oil sands growth. So I think that debt target is really important to us. We're not going to deviate from it.

Cam: I would also highlight we are in a period of time right now where our capital.

Is a little bit elevated just given that we are got some big projects and commitments that we have ongoing whether its west white rose of the oil sands growth. So I think that that target is really important to us we're not going to deviate from it.

Cam: And to John's point, we'll reassess it as the growth kind of comes through the business as we get into 2025 and 2026. Great, that makes sense. And your sustainable EBITDA is going up, too, so. I have one more question.

Cam: And to John's point, we'll reassess it as the growth kind of comes through the business as we get into 2000 22025 and 2026.

Speaker Change: Great makes sense and you're a sustainable EBITDA is going up though too so.

Speaker Change: I have one more question how about.

Lloyd Byrne: How about exports out of PAD2 going forward? I mean, last time I think I saw you guys, we were talking about potentially looking into different options going forward. Do you think there's an opportunity to get more product out so this doesn't happen, and the kind of margins you saw this year don't happen again in the future? Yeah, Lloyd. It's Drew.

Speaker Change: Exports out of pad two going forward I mean last time I think I saw you guys were talking about potentially looking into different options going forward.

Speaker Change: There is an opportunity to get more product out. So this doesn't have the kind of margins you saw this year don't happen again in the future.

Drew: Hey, Lloyd it's drew.

Drew: Yeah, you are correct that, you know, that that is a, you know, going into. Pat One is a nice market and we've got about 20,000 barrels a day of takeaway capacity there to get into the premium market. We're also using some storage and sell our products in later months, right now if I you know if we just think about summer versus winter gas spreads and you know we are doing that right now because of the ARB that's there it is on our radar there are some things we are looking at to be able to access our refined products into better markets that are a little more structured and probably have a little bit more global consistency to you know being a little more stable we're seeing that volatility in pad 2 right now and and we've talked about it today and we're seeing it in our results so it is it is part of some of our strategy and our thinking and um you know it's something that we're working on, Awesome. Great. Nice job, guys. Thanks. Thanks, Lloyd.

Lloyd: Yes, you are correct.

Drew: That is.

Drew: Going into.

Lloyd: Patent one is.

Lloyd: As a as a nice market and we've got about 20000 barrels a day of takeaway capacity there to get into the premium market.

Lloyd: We're also using some storage and solar products in later months right now.

Just think about summer versus winter gas spreads and we are doing that right now.

Lloyd: Because of the Arb that's there.

Lloyd: It is on our radar there are some things we're looking at to be able to access a refined products into better markets that are a little more structured and probably have a little bit more global consistency too.

Lloyd: Being a little more stable, we're seeing that volatility in pad two right now and we've talked about it today and we're seeing it in our results. So it is it is part of some of our strategy and our thinking.

Lloyd: It's something that we're working on.

Speaker Change: Awesome great.

Speaker Change: Nice job guys. Thanks.

Lloyd: Thanks Lloyd.

Lloyd Byrne: Thank you. The next question comes from Chris Barco at the Calgary Herald. Please go ahead. Morning, Chris. Morning, John.

Speaker Change: Thank you. The next question comes from Chris Barco at the Calgary Herald. Please go ahead.

Chris Barco: Good morning, Chris.

Chris Barco: Morning, John in November the Alberta government announced its carbon capture incentive program, which I believe is a 12% grants or Ccs projects and that obviously comes out of Ottawa announced its investment tax credit for Ccs project now that those pieces are in place what does <unk> need to see in order to progress the Ccs.

Chris Barco: In November, the Alberta government announced its carbon capture incentive program, which I believe is a 12% grant for CCUS projects. And that obviously comes after Ottawa announced its investment tax credit for CCUS projects. Now that those pieces are in place, what does Cenovus need to see in order to progress the CCUS foundational project? Or maybe, looking at it another way, what is still lacking? Hey Chris, it's Rona.

Chris Barco: Foundational project or maybe looking at it another way what is still lacking.

Hey, Chris It's Rona.

Rona: So we're still, I mean, there's still a lot of details that have to be ironed out with both the investment tax credit federally and the ASIP in the province. These are really good steps towards what needs to happen for decarbonization to progress. But, I mean, the ITC was announced a long time ago, and it's still not finalized.

Rona: So we're still I mean, there's still a lot of details that have to be ironed out with both the investment tax credit federally and the ASF and the province is that these are really good steps towards what needs to happen for decarbonization to progress.

Rona: But I mean, the ITC was announced a long time ago, and it's still not finalized things like the carbon credits for difference that have been announced by the federal government a long time ago, we still don't have any details there and so all along we've been saying that we continue to work with both governments and those discussions are ongoing and have.

Rona: Things like the carbon credits for difference that were announced by the federal government a long time ago, we still don't have any details on those. And so, you know, all along, we've been saying that we continue to work with both governments and those discussions are ongoing and have been for a long time. But this is really, this is very complex, and it can't just be figured out overnight. And so it just takes a little bit longer than I think a lot of people would like it to.

Rona: And for a long time, but this is a really this is very complex and it can't just be figured out overnight.

Rona: So it just takes a little bit longer than I think a lot of people would like it to but I think you have to look at that as being.

Rona: But I think you have to look at that as being somewhat of a positive thing, that this needs to be right because these are multi-billion dollar decarbonization projects for our sector but for other sectors as well, and they take a lot of thoughtful discussion in order for them to progress. The thing that's really positive is that the industry and the Alberta government and the federal government all have a shared goal of decarbonizing because it's good for the province, it's good for Canada, and it's good for our sector. But we need to make sure that we have the right fiscal support in place because, around the world, these decarbonization projects do not go ahead without significant investment from governments.

Somewhat a positive thing that this needs to be right. Because these are multibillion dollar decarbonization projects for our sector, but for other sectors as well.

Rona: And they take a lot of thoughtful discussion in order for them to progress. The thing that's really positive is that the industry and the Alberta government and the federal government all have a shared goal of Decarbonising because it's good for the province, it's good for Canada is good for our sector.

Rona: But we need to make sure that we have the right fiscal support in place because around the world. These decarbonization projects do not go ahead without significant investment from governments and so that's what we continue to have discussions with in the meantime, with the pathways Ccs project Theres a ton of work that's been ongoing.

Rona: And so that's what we continue to have discussions with. In the meantime, with the Pathways CCS project, there's a ton of work that's been ongoing, and we're getting ready in the next few months here to submit the regulatory application for the pipeline and for the pore space. So that's really, really positive. Lots of engineering work has gone into that. Lots of consultation with communities.

Rona: And we're getting ready over the next few months here to submit our regulatory application for the pipeline and for the poor space. So that's really really positive a lot of engineering work has gone into that lots of consultation with communities and we're continuing to work on a whole bunch of other project feasibility studies for the capture.

Rona: And we're continuing to work on a whole bunch of other projects. So feasibility studies for the capture, as it's been announced, NOVIS is working on a feasibility study for small modular reactors. There's solvent work going ahead. There's other companies looking at fuel switching.

Rona: It's been announced Synovus is working on feasibility study for small modular reactors. There solvents work going ahead. There's other companies are looking at fuel switching so tons of work is going forward and we're still working with government on the on the details of what the funding support will be.

Rona: So tons of work is going forward, and we're still working with governments on the details of what the funding support will be. And just to follow up, in December, the federal government announced its framework for the emissions cap for the industry, which looks at a 35-38% reduction by 2030. Do you think this is a doable target?

Speaker Change: Okay, and just a follow up in December the federal government announced the framework for the admissions cap or the industry.

Speaker Change: Looked at I believe it's a 35, 38% reduction by 2030.

Speaker Change: Do you think this is a doable target and I'm wondering just separately does the emission cap impact the desire a pathway to a destiny cc last evening.

John Herrlin: And separately, does the emission cap impact Pathways' desire to invest in CCUS? Yeah, you know, one of the things we've seen, Chris, is a real increase in the complexity, density, and velocity of proposed regulations coming out of Ottawa. And our view on all of this is, you know, it's largely unnecessary and that the right incentives already exist, assuming that we can get a framework together for financial support that incentivizes investment in this base and not just for decarbonization but for the business as a whole. So our view on these things is that they're unnecessarily complex, and they cloud the issue of trying to get to a place where we have some certainty as to what the financial incentive framework is going to look like that allows us to invest not just in the business but in the decarbonization of this business as well.

Speaker Change: Yes.

Speaker Change: One of the things we've seen Chris is a real increase in the complexity.

Density and velocity of.

Speaker Change: Proposed regulation.

Speaker Change: Coming out of Ottawa.

Speaker Change: Our view on all of this is.

Speaker Change: It's largely unnecessary.

Speaker Change: And that the right incentives already exist assuming that we can get a framework together for financial support.

<unk>.

Speaker Change: Yeah.

Speaker Change: That incentivizes.

Speaker Change: Investment in this base not just for de carbonization, but for the business as a whole. So our view on these things is that they are unnecessarily.

Speaker Change: Complex and they cloud the issue.

Speaker Change: Trying to get to a place where we have some certainty as to what the.

<unk>.

Speaker Change: Financial incentive framework is going to look like that allows us to invest not just in the business, but in the de carbonization of this business as well.

Chris Barco: Thank you. Thanks, Chris. Thank you. The last question comes from Robert Tuttle at Bloomberg News. Please go ahead.

Speaker Change: Okay.

Speaker Change: Thank you.

Thanks, Chris.

Speaker Change: Yeah.

Speaker Change: Thank you last question comes from Robert Tuttle at Bloomberg News. Please go ahead.

Robert Tuttle: Yeah, happy morning. Just following up on that, you guys have your own target for 2030 on emissions cuts. My understanding is you need to start ordering the pipes or the pipeline, various components, like right now.

Robert Tuttle: Yes, hi, good morning.

Robert Tuttle: Just following up on that you guys have your own targets for 2030.

Robert Tuttle: Uh huh.

Robert Tuttle: <unk> cuts.

Robert Tuttle: My understanding is you need to start you need to start ordering the pipe for the pipeline.

Robert Tuttle: Various components like right now are you going to reach your own target.

John Herrlin: Are you going to reach your own target, do you think, or is that being threatened? So our internal target, Robert, is a 2035 target. I think what you're referring to is the 2030 target that was put out by the federal government as well as the Pathways Group. There's no doubt that to reach the 2030 targets of what's doable, we need to move on that today. But we can't move on those targets until we get the certainty from the levels of government that we're currently negotiating with that allow for certainty and investment in these kinds of projects. As Rona mentioned, these are multi-billion dollar projects, multi-year projects, and they can't happen if they leave the industry uncompetitive with the peer group.

Speaker Change: Thank you.

Speaker Change: Or is that threatened.

Speaker Change: So our internal target Robert as a 2035 target.

Speaker Change: What youre, referring to is the 2030 target that was put out by the federal government as well as the pathways group there is no doubt that to reach.

Speaker Change: The 2030 targets of what's doable, we need to move on that today, but we can't move on those targets until we get the certainty from the.

Speaker Change: The levels of government that we're currently negotiating with.

That allow for.

Speaker Change: Certainty and investments in these kind of projects.

Speaker Change: Projects as Ronen mentioned these are multibillion dollar projects multiyear projects.

Speaker Change: It can't happen if they leave the industry uncompetitive.

Speaker Change: With the peer group. So once that certainty is established and we're working with the federal and provincial governments right now to try and get there we'll.

John Herrlin: So once that certainty is established, and we're working with the federal and provincial governments right now to try and get there, we'll move forward. But there's no doubt that to achieve the 2030 targets that have been floated, this needs to happen sooner rather than later. Have you been given a timeline or anything by the government on when they'll be able to give you certainty on things like the credits for difference and the other supports you need?

Speaker Change: We will move forward, but there is no doubt two rich.

Speaker Change: To kind of achieve the 2030 targets that have been floated.

Speaker Change: This needs to happen sooner rather than later.

Speaker Change: Have you been given a timeline or anything by the government on when they'll be able to give you certainty on legacy.

Speaker Change: Credits for difference in the other supports you mean I mean, they indicated anything.

Rona: I mean, have they indicated anything? Hey, it's Rona again, Robert. I mean, everybody, there's commitment from the government to move this forward as well because, again, as I mentioned, everybody has the same shared outcome we're trying to achieve. But I think it's hard to guess when you're having discussions that are complex like this. It's hard to put an exact date on it. But I think everybody wants to get this going because we wanna see these decarbonization projects underway and that's what the governments want, and that's what our sector wants.

Speaker Change: Hey, it's Ron again, Robert I mean.

Speaker Change: Everybody their commitment from the government to move this forward as well because everybody again as I mentioned everybody has the same shared outcome, we're trying to achieve but I think it's hard to guess when youre having discussions.

Speaker Change: Complex like this it's hard to put an exact date on it but I think every everybody wants to get this going because we want to see these decarbonization projects underway in that that's what the government's line and Thats, what our sector one.

Speaker Change: Oh.

Robert Tuttle: Okay, thank you. Thanks, Robert. Thank you. This concludes today's question and answer session. I will now turn the call back over to Mr. McKenzie for closing comments. Great, well I'd just like to thank everybody for their interest in the company and attending the call and wish everybody a great rest of their day and we look forward to seeing you on March 5th. Thank you very much. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines. Thanks for watching!

Speaker Change: Okay. Thank you.

Speaker Change: Thanks Robert.

Speaker Change: Sure.

Moderator: Thank you. This concludes today's question and answer session I will now turn the call back over to Mr. Mckenzie for closing comments.

Mckenzie: Great well I'd just like to thank everybody for their interest in the company and attending the call and wish everybody.

Mckenzie: A great rest of your day and we look forward to seeing you on March 5th Thank you very much.

Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and we ask that you. Please disconnect your lines.

Mckenzie: Yes.

Mckenzie: [music].

Mckenzie: Okay.

Mckenzie: Okay.

Mckenzie: Hum.

Mckenzie: Uh huh.

Mckenzie: Yes.

[music].

Mckenzie: Okay.

Mckenzie: Hum.

Mckenzie: [music].

Mckenzie: Yes.

Mckenzie: Yes.

Mckenzie: [music].

Mckenzie: Okay.

Mckenzie: Okay.

Mckenzie: Okay.