Q2 2024 Canadian Natural Resources Ltd Earnings Call
Good morning. We would like to welcome everyone to Canadian National's 2024 Second Quarter Earnings Conference Call-In Webcast.
Operator: Good morning. We would like to welcome everyone to Canadian National's 2024 Second Quarter Earnings Conference Call and Webcast. After the presentation, we will conduct a question and answer session, and instructions will be given at that time. Please note, this call is being recorded today, August 1, 2024, at 9 a.m. Mountain Time. I would now like to turn the meeting over to your host for today's call, Lance Casson, Manager of
Speaker Change: After the presentation, we will conduct a question and answer session. Instructions will be given at that time. Please note, this call is being recorded today, August 1, 2024, at 9 a.m. Mountain Time.
Lance Casson: I would now like to turn the meeting over to your host for today's call, Lance Casson, Manager of Investor Relations.
Lance Casson: Thank you. Good morning, everyone, and thank you for joining Canadian Natural's second quarter 2024 Earnings Conference call. As always, I'd like to remind you of our forward-looking statements. It should be noted that in our reporting disclosures, everything is in Canadian dollars, unless otherwise stated, and we report our reserves and production before royalty.
Lance Casson: Thank you. Good morning, everyone, and thank you for joining Canadian Natural's second quarter 2024 Earnings Conference call.
Speaker Change: As always, I'd like to remind you of our forward-looking statements. It should be noted that in our reporting disclosures, everything is in Canadian dollars, unless otherwise stated, and we report our reserves and production before royalties.
Additionally, I would suggest you review our advisory section in our financial statements that includes comments on non-GAAP disclosures.
Lance Casson: Additionally, I would suggest you review our advisory section in our financial statements, which includes comments on non-GAAP disclosures. Speaking on today's call, we have Scott Stauth, our President, and Mark Stainthorpe, our Chief Financial Officer. Scott will provide highlights on our strong operational corridor that included the completion of planned turnarounds, setting us up for robust targeted production in the second half of the year. Mark will then summarize our excellent financial results, including significant liquidity and returns to shareholders. Your closed Scott will summarize prior to opening up the line for questions. With that, I'll pass it to you, Scott.
Speaker Change: Speaking on today's call, we have Scott Stauth, our President, and Mark Stainthorpe, our Chief Financial Officer.
Speaker Change: Scott will provide highlights on our strong operational quarter that included completion of planned turnarounds, setting us up a robust target of production in the second half of the year. Mark will then summarize our excellent financial results including significant liquidity and returns to shareholders.
Speaker Change: To close, Scott will summarize prior to opening up the line for questions. With that, I'll pass it to you, Scott.
Scott Stauth: Thank you, Lance, and good morning, everyone. The strengths of our well-balanced and diverse portfolio, combined with our ability to execute safe, effective, and efficient operations, delivered an excellent second quarter for Canadian Natural. Our team managed our planned maintenance activities very well and optimized production, resulting in a strong second quarter with production of 1.29 million BOEs per day, which is an increase of 8% compared to Q2 2023. Our thermal assets delivered strong production during the second quarter, primarily due to better than expected performance from the new pads combined with early completion of plant turnarounds at Jackfish and Kirby. At Horizon, we successfully completed the final tie-ins related to the Reliability Enhancement Project, as well as planned turnaround activities.
Scott: Thank you, Lance, and good morning, everyone.
Scott: The strength of our well-balanced and diverse portfolio, combined with our ability to execute safe, effective and efficient operations, delivered an excellent second quarter for Canadian Natural.
Scott: Our team managed our planned maintenance activities very well and optimized production, resulting in a strong second quarter with production of 1.29 million BOEs per day, which is an increase
Lance Casson: of 8% compared to Q2 2023.
Lance Casson: Our thermal assets delivered strong production during the second quarter, primarily due to better than expected performance from the new pads combined with early completion of planned turnarounds at Jackfish and Kirby.
Lance Casson: At Horizon, we successfully completed the final tie-ins related to the Reliability Enhancement Project, as well as plant turnaround activities.
Scott Stauth: Through optimization efforts, our team completed the turnaround at Horizon in 28 days, two days earlier than budgeted. Subsequent to the quarter end, we achieved a significant milestone at Horizon in July 2024, with production of the one billionth barrel of bitumen since operations began in 2009. Supporting this milestone is the company's significant total approved SEO reserves of approximately 6.9 billion barrels with a reserve life index of 44 years as at year-end 2023. Also, during July, SEO production of approximately 500,000 barrels per day was achieved, driven by strong production at Horizon, benefiting from the final tie-ins and commissioning of the Reliability Enhancement Project.
Lance Casson: Through optimization efforts, our team completed the turnaround at Horizon in 28 days, two days earlier than budgeted.
Lance Casson: Subsequent to the quarter-end, we achieved significant milestone at horizon in July 2024 with production of the one billionth barrel of bitumen since operations began in 2009.
Speaker Change: Supporting this milestone is the company's significant total approved SEO reserves of approximately 6.9 billion barrels with a reserve life index of 44 years as at year-end 2023.
Speaker Change: Also during July , SEO production of approximately 500,000 barrels per day was achieved, driven by strong production at Horizon, benefiting from the final tie-ins and commissioning of the Reliability Enhancement Project.
Scott Stauth: The commissioning of the TMX pipeline during the second quarter and the positive impact this incremental egress has had on the Canadian economy represents a significant achievement for Canada. The impact on the energy industry has been and will continue to be positive through the narrowing heavy oil differentials, improved realized prices, along with the development of a more diverse market for Western Canadian crude oil. TMX is a significant accomplishment, adding much needed egress capacity and increasing exposure to global market prices for crude oil products.
Speaker Change: The commissioning of TMX pipeline during the second quarter and the positive impact this incremental egress has had on the Canadian economy represents a significant achievement for Canada.
Speaker Change: The impact on the energy industry has been, and will continue to be positive through the narrowing heavy oil differentials, improved realized pricing, along with the development of a more diverse market for Western Canadian crude oil.
Speaker Change: TMX is a significant accomplishment at a much-needed egress capacity and increase in exposure to global market pricing for crude oil products.
Scott Stauth: Canadian Natural's strong execution, effective, and efficient operations combined with stronger realized prices drove significant free cash flow during the quarter despite a planned turnaround. I will now run through our Q2 operational results. Liquid production in the second quarter averaged approximately 934,000 barrels per day, and natural gas production averaged approximately 2.1 BCF per day. On the conventional side of the business,
Canada Natural: Canadian Natural's strong execution, effective and efficient operations combined with stronger realized prices drove significant free cash flow during the quarter despite planned turnarounds.
Speaker Change: I will now run through our Q2 operational results.
Speaker Change: Liquids production in the second quarter averaged approximately 934,000 barrels per day and natural gas production averaged approximately 2.1 BCF per day.
Scott Stauth: Primary heavy oil production averaged approximately 79,100 barrels per day in the second quarter, which is a 3% increase compared to production volumes in the second quarter of 2023, reflecting strong results from multilateral wells on our extensive heavy oil land base, which is the largest in Canada and includes the Manville and Clearwater fairways. Primary heavy oil operating costs averaged $17.59 per barrel in the second quarter, which is down 12% from the second quarter of 2023, primarily reflecting lower energy costs.
Canada Natural: On the conventional side of the business.
Speaker Change: Primary heavy oil production averaged approximately 79,100 barrels per day in the second quarter.
Speaker Change: which is a 3% increase compared to the production volumes in the second quarter of 2023, reflecting strong results from multilateral wells on our extensive heavy oil land base, which is the largest in Canada and includes the Manville and Clearwater Fairways.
Speaker Change: Primary heavy oil operating costs averaged $17.59 per barrel in the second quarter, which is down 12% from the second quarter of 2023, primarily reflecting lower energy costs.
Scott Stauth: We are seeing excellent results on our multilateral wells driven by our culture of continuous improvement and strong execution from the team. In 2024, we increased the average length of our multilateral heavy oil wells by 16% to approximately 9,900 metres, compared to an average budgeted well length of approximately 8,500 metres. This has lowered our cost per meter and increased our reservoir capture.
Speaker Change: We are seeing excellent results on our multilateral wells driven by our culture of continuous improvement and strong execution from the team.
Canada Natural: In 2024, we increased the average length of our multilateral heavy oil wells by 16% to approximately 9,900 meters, compared to an average budgeted well length of approximately 8,500 meters.
Scott Stauth: As a result of our optimized longer well designs and the technical expertise of our teams, average initial peak rates of multilaterals on stream in the first half of 2024 have increased 30% to 230 barrels per day per well compared to our average initial peak rates of 175 barrels per day per well. Our Pelican Lake production averaged approximately 45,000 barrels per day in the second quarter, which is down 5% from the second quarter of 2023, reflecting low natural field declines from this long-life world class asset. Operating costs at Pelican Lake were $8.92 per barrel in the second quarter, an increase of 4% compared to the second quarter of 2023, which was primarily due to lower production volumes, partially offset by lower energy costs.
Speaker Change: As a result of our optimized longer well designs,
Speaker Change: And the technical expertise of our team's average initial peak rates of multilateral on-stream in the first half of 2024 have increased 30% to 230 barrels per day per well, compared to our average initial peak rates of 175 barrels per day per well.
Scott Stauth: North American Lake crude oil and natural gas production averaged 108,000 barrels per day in the second quarter, which is up 5% from the second quarter of 2023. The increase was a result of strong drilling results over the past year and lower production in the second quarter of 2023 caused by wildfires and third-party pipeline outages. Operating costs in our alloy crude oil and NGL operations averaged $13.75 per barrel in the second quarter, a decrease of 24% compared to the second quarter of 2023 due to higher production and lower energy costs.
Scott Stauth: North American natural gas production averaged 2.1 BCF during the second quarter, which is comparable to the second quarter of 2023, reflecting strong results from a montana and deep basin wells offset by natural field degrees. Operating costs on our North American natural gas averaged $1.19 per mcf in the second quarter, which is down 12% compared to the second quarter of 2023, primarily a result of lower energy costs.
Speaker Change: North American natural gas production averaged 2.1 Bcf during the second quarter, which is comparable to the second quarter of 2023, reflecting strong results from Montoni and deep basin wells, offset by natural field declines.
Scott Stauth: As we outlined in our first quarter, we shifted certain natural gas development activity in 2024 to high-return multilateral heavy oil wells due to lower natural gas prices. Concurrently, approximately 20% of remaining 2024 planned natural gas wells will be drilled with production curtailed until the trend in natural gas prices improves. We maintain optionality to bring these natural gas wells on production in late 2024 or early 2025 to align with improved natural gas prices, maximizing value for our shareholders. Our 2024 corporate natural gas production guidance of 2.12 BCF to 2.23 BCF remains unchanged.
Speaker Change: Concurrently, approximately 20% of our remaining 2024 planned natural gas wells will be drilled with production curtailed until the trend in natural gas prices improve.
Scott Stauth: In our thermal and situ operations, we achieved strong thermal production in the second quarter, averaging just over 260,000 barrels per day. This is up 12% from our second quarter of 2023, driven by strong results from Jackfish, Kirby North, and primrose pad development. Second quarter thermal in situ operating costs averaged $10.95 per barrel, which is down 25% compared to the second quarter of 2023, primarily reflecting higher production volumes and lower energy costs.
Speaker Change: In our thermal and situ operations, we achieved strong thermal production in the second quarter.
Speaker Change: The second quarter thermal in situ operating cost averaged $10.95 per barrel, which is down 25% compared to the second quarter of 2023, primarily reflecting higher production volumes and lower energy costs.
Scott Stauth: Plant turnarounds at Jackfish and Kirby North facilities were successfully completed ahead of schedule in Q2 of 2020. At Jackfish, the first of two SAG-D pads was drilled in 2023, which reached full production capacity in Q2 of 2024, which is ahead of schedule. The second pad is currently being produced. This is a video that shows the full production capacity and is also ahead of schedule, originally budgeted for Q4 of 2024. The teams executed both of these jackfish pads very well from drilling to on stream, and both exceeded our previous production type curves.
Scott Stauth: Additionally, we are targeting to drill one SAGD pad at Jackfish in the second half of 2024 with production from this pad targeted to come on in Q3. Primrose, we finished drooling one CSS pad, which is targeted to come on production ahead of schedule in late June 4, 2024. This pad was originally targeted for Q2 of 2025. Again, the teams have done a good job of optimizing execution, advancing the first path through decoupling construction schedules.
Speaker Change: At Permos, we finished drilling one CSS pad, which is targeted to come on production ahead of schedule in late June 4, 2024.
Scott Stauth: The second pad is currently being drilled and is targeted to come on stream in Q2 of 2025. Wolf Lake, where we recently drilled one SAGD pad which is targeted to come on stream in Q1 of 2025. Kirby North, we started injecting solvent late June 2024. Currently, all eight wells at our commercial scale solvent sag d-pad are receiving solvent, and we target to increase solvent injection with subsequent reduction in steam injection over the coming months.
Speaker Change: at Wolf Lake where currently we recently drilled one SAGD pad which is targeted to come on full production in Q1 of 2025.
Speaker Change: In late June 2024, currently all eight wells at our commercial-scale solvent SAG-DPAD are receiving solvent.
Scott Stauth: We will monitor solvent recoveries and production trends as we evaluate ongoing results. Second quarter SEO production averaged approximately 411,000 barrels per day, an increase of 16% compared to the second quarter of 2023. At AOSP, due to the schedule optimization of the Scotford Upgrader in Q2. It includes a de-bottling project which is targeted to be completed during the planned turnaround and targets to add incremental capacity at AOSP of approximately 5,600 barrels per day net to Canadian Natural Resources.
Speaker Change: The increase in production reflected planned maintenance at Horizon that was successfully completed ahead of schedule compared to Q2 of 2023, which included planned turnarounds at both Horizon and AOSP.
Speaker Change: Operating costs on our oil sands mining and upgrading assets are top tier, averaging $25.95 per barrel in the second quarter, a 17% decrease compared to the second quarter of 2023.
Speaker Change: This reflects higher production volumes, reduced planned maintenance activities, and lower energy costs.
Speaker Change: The planned September turnaround is now targeted to last 39 days compared to the previous 49-day schedule.
Speaker Change: During this turnaround, Scottford Upgrader is expected to run at reduced rates with the impact to annual production targeted to be approximately 9,000 barrels per day, a 2,000 barrel per day improvement compared to budget.
Speaker Change: Our significant SEO reserves are world-class.
Speaker Change: We are executing near- and medium-term projects to evaluate longer-term projects to potentially bring value forward, including
Speaker Change: Near-term production growth of the Scottford Upgrader includes a debottling project, which is targeted to be completed during the planned turnaround, and targets to add incremental capacity at AOSP of approximately 5,600 barrels per day net to Canadian Natural.
Speaker Change: Median term production growth includes other oil sands mining and upgrading optimization projects such as the NAPTA Recovery Tailings Treatment Project which targeted to add approximately 6,300 barrels per day of production in late 2027.
Speaker Change: Our unique and diverse portfolio of assets is supported by long-life, low-decline assets which have large, low-risk, high-value reserves with low maintenance capital, making Canadian Natural truly a
Speaker Change: a unique and resilient energy company.
Speaker Change: The strategic weighting of our capital program this year
Speaker Change: and in growth in the second half of the year.
Speaker Change: positions as well, moving into 2025.
Speaker Change: while we target strong production and free cash flow in the last six months of this year.
Speaker Change: Now with that, I'll turn it over to Mark for a financial review.
Mark Stainthorpe: Thanks, Scott, and good morning, everyone. In the second quarter of 2024, we achieved excellent financial results driven by strong operational execution and our relentless focus on continuous improvement initiatives across the company.
Mark Stainthorpe: This drove significant returns to shareholders in the quarter totaling $1.9 billion with $1.1 billion in dividends and $800 million in share buybacks through our NCIB program.
Speaker Change: Our capital program for 2024 remains on track and with increasing production volumes forecasted in the second half of 2024, we target to generate significant free cash flow and additional returns to shareholders as we continue to allocate 100% of free cash flow to shareholders in 2024.
Speaker Change: Subsequent to quarter end, the board has declared a quarterly dividend of 52.5 cents per share, payable on October 4th, 2024.
Speaker Change: Our financial position is very strong with net debt at $9.2 billion and debt to EBITDA at 0.6 times at the end of Q2'24. And during the quarter, we repaid at maturity a U.S. $500 million bond and a $320 million Canadian medium-term note.
Speaker Change: Liquidity remained strong and including revolving bank facilities and cash, liquidity at the end of the quarter was approximately $6.4 billion.
Speaker Change: Our culture of continuous improvement, employee ownership alignment with shareholders, and our operational expertise drives our teams to create significant value across all areas of the company.
Speaker Change: With that, I'll turn it back to Scott for some final comments.
Scott Stauth: Thanks, Mark. And again, in summary here at Canadian Natural, our discipline, focus...
Scott Stauth: is the core of what we do.
Speaker Change: Our culture of continuous improvement focused on cost control, effective and efficient operations, and disciplined capital allocations continue to drive strong results.
Scott Stauth: We're maintaining financial flexibility, maximizing value for our shareholders. With that, I will turn it over for questions.
Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Should you have a question, please press star followed by the 1 on your touchtone phone.
Speaker Change: You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by 2. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Mino Halshov of TD Cohen. Please go ahead.
Mino Halshov: Thanks and good morning everyone. I'll start with a question on SEO given the
Mino Halshov: 500,000 barrel per day net combined rate you achieved in July. You've talked about the Stoddford upgrader turnaround and
Mino Halshov: Then you also have the, I guess, in 2025, there is no planned turnaround at Horizon given completion of the Reliability Enhancement Project. So can you just give us a sense of what the trajectory is going to look like for Synthetic through the end of the year and into 2025?
Speaker Change: I think our volumes are going to look pretty strong. I mean, the only thing that you'll see is our planned turnaround, which we've reduced at Scott from 49 days down to...
Speaker Change: 39 days, no further production interruptions or plant maintenance activities at horizon. So you would expect strong SEO volumes for the remainder of the year with the exception of that plant turnaround.
Speaker Change: And then for 2025, is there anything that you can say there? I mean, it should be a pretty clean year across the board, presumably.
Speaker Change: As you know, there will be no turnaround on Horizon next year. There will be a turnaround at Scottford next year, but not at Horizon. So it should be another strong year with correction rates at Horizon being approximately 28,000 barrels a day higher for next year.
Speaker Change: Perfect. And then maybe the second question would be on the solvent-enhanced oil recovery pilots at Kirby North and Primrose. Can you just give us a rundown on what you're currently seeing in terms of results, including
Speaker Change: solvent recovery and and when do you think you'll be in a position to make a decision on whether to commit to to that on a more commercial scale?
Speaker Change: Yeah, so as you know, we've recently placed the KNO6 pad on solvent injection at the end of July.
Speaker Change: We are seeing some early steam reduction results in and around the 20% range, so that's very positive, this early in the game.
Speaker Change: Other than that, nothing significant to report out to you at this point in time. Over the following quarters, we'll continue to update everyone here in terms of where we're at.
Mino Halshov: I would suspect by mid-next year, this time next year, we should be able to come out and report out in terms of how we see us taking the good results from this pad and extrapolating that out on future pads.
Mino Halshov: Thank you.
Mino Halshov: Your next question is from Gregg Party of RBC Capital Markets. Please go ahead.
Gregg Party: Yeah, thanks. Good morning. Thanks for the rundown, Scott. We don't see too many flawless quarters, but this sure looked like it.
Gregg Party: I'm kind of intrigued a little bit with what you're doing differently with the you know with the turnaround activity and the optimization. I know you referenced just in your comments where there's been some
Scott Stauth: differently with the, you know, with the turnaround activity and the optimization. I know you referenced this in your comments where there's been some.
Speaker Change: decoupling of construction activities but what when you start to kind of break down what you know optimization and planning and so on what maybe what has changed and what are you doing differently than in the past?
Speaker Change: Sure, yeah, good question, Greg. So if you looked at, take a look at Jackfish, you know, essentially right from strong drilling results to the team's doing a really good job of building the facilities and getting the pads on stream. That's our XX and our F pads.
Scott Stauth: Both of those pads, the execution was strong, but what really stood out on both of those pads was the production profile; the ramp-up of production exceeded our previous type curves. So we're very pleased with those results as they came in stronger than we had expected.
Speaker Change: Both of those pads, the execution was strong, but what really stood out on both of those pads was the production profile. The ramp-up of production exceeded our previous type curves, so we're very pleased with those results as they came in stronger than we had expected.
Dennis Fong: Hi, good morning, and thanks for taking my questions. My first one is a bit of a follow-on to Menno's question on Horizon and the cadence of production. As we think about, again, further optimization of the asset itself, how do you think your teams could potentially drive outperformance versus what you think is currently, we'll call it, quote-unquote, stated capacity? And then, secondarily, what do you think the implications of that happen to be for driving the cost structure lower just from that project in general?
Speaker Change: Hi, good morning and thanks for taking my questions. My first one is a bit of a follow-on to Meadow's question on Horizon and the cadence of production.
Scott Stauth: See what the impacts of the debottleneck project have truly been in terms of a daily run rate and subsequent production that we'll report out. I think it's early for us to estimate what that might look like in terms of total capacity. In the early stages, I can tell you it does look positive, but again, we need to see the components throughout the upgrader running at maximum rates here, and then we'll have a better idea. But we'll be able to report out a little bit better on that in the next quarter, Dennis.
Speaker Change: to see what the impacts of the de Bottleneck project have truly been in terms of a day run rate.
Speaker Change: and subsequent, you know,
Speaker Change: production that we'll report out. I think it's early for us to estimate what that might look like in terms of the total capacity, total capacity.
Speaker Change: Great, I appreciate that context. Shifting over to the Manville heavy oil and just your heavy oil
Speaker Change: from just the conventional heavy oil assets in aggregate. Now, I understand that's a long time ago, but
Speaker Change: Yeah, good question Dennis. I think you'd look at it just from an overall corporate capital allocation strategy and we'll direct our capital towards the projects that do create the best returns for us.
Speaker Change: based on cost and pricing received.
Speaker Change: You know, we'll continue to optimize the technology to put it to best use.
Speaker Change: We also continue to use our slant-well drilling in targeting certain zones.
Speaker Change: how we allocate our capital within our corporate portfolio.
Speaker Change: Yeah, and it's a very good question, and I think you mentioned one of the impacts, which is the wider crack spreads.
Speaker Change: And I think you're also seeing additions of Mexican crude into the U.S. Gulf Coast.
Speaker Change: Yeah, thanks team and solid results here. I just want to stay on the differential theme, this time talking about the gas side of the equation.
Speaker Change: take approximately half of the wells we have remain planned for the rest of the year. So that'd be about 20 wells out of a total of 40 that we're going to
Speaker Change: basically drill complete but not put on production until we see those prices improve and you know I think we're looking at
Speaker Change: Thank you and then the follow-up is and I know it's a little trickier to talk about some of this the ESG related stuff these days but how are we tracking on the on the pathways project what are gating items here
Speaker Change: Yeah, I'd say the three parties, the federal government, the provincial government, and the Pathways organization is still working very diligently.
Speaker Change: parameters that they're working with in terms of the cost structure.
Speaker Change: I'm still positive at this time that we're going to see something come together here and I can tell you that there's a lot of effort, a lot of focus on part of the CEOs and the representatives from the government to try to bring this forward and make it happen.
Operator: Your next question is from John Royall of J.P. Morgan. Please go ahead.
Tim: All right. Thanks, Tim.
Speaker Change: Your next question is from John Royal of J.P. Morgan. Please go ahead.
John Royal: Hi, good morning. Thanks for taking my question.
John Royal: So my first question is, you're pretty meaningfully below $10 billion in net debt as of the end of the quarter, which...
John Royal: I think was largely due to the work in capital release and the sale of the PSK shares. Understanding cash flows are volatile and it's difficult to be right at the $10 billion on any given day, but should we expect that maybe you can return in excess of 100% in the second half, given you have this buffer right now at 9.2?
Mark Stainthorpe: Hi John, it's Mark here and yes you're I mean you're correct there's the the working capital that we've talked about from quarter to quarter will fluctuate us around that 10 billion level.
Speaker Change: and then the sale of the Prairie Sky share is obviously going to reduce debt. But right now and since the beginning of 2024, we've been at that sort of 100% of free cash flow allocation and shareholders framework. So you can see that, you'll see that continue through the rest of 2024.
Speaker Change: Okay, great. And then can you speak about your current thinking on the M&A side? You know, we spoke about the small divestiture. Just anything else you might look at on the divestiture side? Obviously your balance sheet is where you want it to be, but anything else you might look to sort of prune there? And then just on the other side, how you're thinking about acquisitions from here?
Speaker Change: Yeah, I think we expect activity to be pretty quiet going forward here and there isn't anything that comes to mind in terms of...
Speaker Change: from that perspective. So I would think that, like, as you know, we have the asset base that we have, the amount of reserves that we have and the opportunities they have within those, our various areas.
Speaker Change: We're really confident and confident about not having to do any acquisitions and and having that strong internal growth here so yeah it's I don't have any other comments in terms of the M&A activity at this point.
Speaker Change: Thank you.
Speaker Change: Your next question is from Patrick O'Rourke of ATB Capital Markets. Please go ahead.
Patrick O'rourke: Hey, good morning guys. A very comprehensive rundown. A few things I was going to ask, actually just going to ask, but I want to walk back to the gas.
Patrick O'rourke: You spoke to the macro here. Over the last couple of years, you've reallocated capital from what was going to be directed to gassier assets over to oilier assets. Just kind of curious in terms of sort of the price range.
Speaker Change: In terms of the Montany, you've got significant liquids production, which really drive the economics there, so it doesn't take much of a gas price from that perspective to have the economics go around to drill and complete those wells.
Patrick O'rourke: where you get into the lower liquids production wells.
Speaker Change: I think we definitely need to see a little bit stronger activity, stronger pricing that we're seeing right now. Can't give you the exact price, but it has to be better than it is now. If you look at the forward pricing, we can make it work at what we're seeing in the strip.
John Royal: Okay and then just maybe to kind of build upon what John Royal was asking earlier you know you did take the net debt down meaningfully below the 10 billion dollars
Mark Stainthorpe: and Mark Stainthorpe.
Mark Stainthorpe: Can you just clarify in terms of free cash flow
Speaker Change: Do you consider those Prairie Skies, the funds from that to be free cash flow that you would distribute to shareholders when we're running our calculation here? And then I don't know if you can speak to what kind of the motivation for the timing of the sale of that asset was.
Speaker Change: Yeah, no, you should think of the Prairie Sky share sale as outside of the free cash flow. Because when you look at the free cash flow policy, it's adjusted funds flow from operations, lesser capital, lesser dividends. So it will, you know, we continue down that path of 100% free cash flow return to shareholders, but the Prairie Sky shares were outside of that.
Speaker Change: and then as far as you know for us it was just a good time to sell the right time to sell and capture that good value we have here from an investment over the period here.
Speaker Change: Okay, thank you very much.
Speaker Change: There are no further questions at this time. I will now turn the call over to the presenters for closing remarks.
Speaker Change: Thank you, Operator, and thanks to everyone for joining us this morning. If you have any questions, please give us a call. Thanks, and have a great day.
Speaker Change: This concludes today's presentation. Thank you for your participation. You may now disconnect.