Q2 2024 Imperial Oil Ltd Earnings Call
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Operator: Good day, and welcome to the Imperial Oil second quarter 24 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Peter Shaw, Vice President of Investor Relations. Please go ahead.
Good day and welcome to the Imperial oil second quarter 'twenty four earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Peter Shah Vice President of Investor Relations. Please go ahead.
Peter Shaw: Morning, everyone. Welcome to our second quarter earnings conference call. I'm joined this morning by the Imperial senior management team, including Brad Corson, Chairman, President, and CEO, Dan Lyons, Senior Vice President, Finance and Administration, Sherry Evers, Senior Vice President of Sustainability, Commercial Development, and Product Solutions, and Cheryl Gomez-Smith, Senior Vice President of the Upstream. Today's comments include reference to non-GAAP financial measures. The definitions and reconciliations of these measures can be found in Attachment 6 of our most recent press release and are available on our website with a link to today's conference call.
Speaker Change: Good morning, everyone welcome to our second quarter earnings Conference call I'm joined this morning by Imperial Senior management team, including Brad Corson, Chairman President and CEO.
Speaker Change: Dan Lyons Senior Vice President Finance and administration, Sherry <unk> Senior Vice President of sustainability commercial development and product solutions and Cheryl Gomez Smith senior Vice president of the upstream.
Speaker Change: <unk> comments include reference to non-GAAP financial measures definitions and reconciliations of these measures can be found in the attachment six of our most recent press release and are available on our website with a link to todays conference call.
Peter Shaw: Today's comments may also contain forward-looking information. However, any forward-looking information is not a guarantee of future performance or actual performance, and operating results can vary materially depending on a number of factors and assumptions. Forward-looking information and the risk factors and assumptions are described in further detail in our second quarter earnings release that we issued this morning, as well as in our most recent Form 10-K. All these documents are available on CDAR Plus, EDGAR, and our website.
Todays comments may also contain forward looking information any forward looking information is not a guarantee of future performance and actual performance and operating results can vary materially depending on a number of factors and assumptions.
Looking information and the risk factors and assumptions are described in further detail on our second quarter earnings release that we issued this morning as well as our most recent Form 10-K.
Speaker Change: All of these documents are available on SEDAR, plus Edgar and our website. So I'd ask.
So I would ask that you refer to those.
Peter Shaw: So, it asks, so I would ask that you refer to those. Brad is going to start with some opening remarks and then hand it over to Dan, who is going to provide a financial update, and then Brad will provide an operations update. Once that is done, we will follow up with the Q&A session. So with that, I will turn it over to Brad for his opening remarks.
Brad is going to start with some opening remarks, and then hand it over to Dan who is going to provide a financial update and then Brad will provide an operations update once that is done we will follow with a Q&A session. So with that I will turn it over to Brad for his opening remarks.
Bradley Corson: Thank you, Peter. Good morning, everybody, and welcome to our second quarter earnings call. I hope everyone is doing well. I wanted to start today's call by taking a moment to talk about the serious wildfire situation that has occurred across Western Canada over the past few weeks. We are deeply thankful for the courageous work of the emergency services as they battle the fires in very difficult conditions to keep our community safe. Our thoughts are with the community of Jasper and others who have been tragically impacted by the destruction of the devastating fires and now as the communities work to rebuild.
Brad: Thank you Peter Good morning, everybody and welcome to our second quarter earnings call I Hope everyone is doing well I wanted to start today's call by taking a moment to talk about the serious wildfire situation that has occurred across western Canada over the past few weeks, we are deeply thankful for the courageous.
Brad: Work of the emergency services as they battle the fires in very difficult conditions to keep our community safe.
Our thoughts are with the community of Jasper and others, who have been tragically impacted by the destruction of the devastating fires and now as the communities work to rebuild.
Bradley Corson: There have been large fires in the Fort McMurray region near our curl operations and, to a lesser extent, around Cold Lake. The teams at our operations have been working closely with local and provincial agencies to ensure we're taking the necessary precautions to protect our people and our assets. Fortunately, to date, there have been no impacts on our production, and the situation has improved over the past few days. And, of course, it's a situation that we will continue to closely monitor and take appropriate action.
There have been large fires in the Fort Mcmurray region near our current operations and to a lesser extent around cold Lake.
Speaker Change: The teams at our operations have been working closely with local and provincial agencies to ensure we are taking necessary precautions to protect our people and our assets and Fortunately to date, there have been no impacts to our production and the situation has improved over the past few days.
And of course, it's a situation that we will continue to closely monitor and take appropriate actions.
Bradley Corson: Now turning to our performance over the quarter, our upstream saw record production coupled with stronger price realizations due to the combined benefit of strengthening WTI prices and the tightening of WCS crude differentials. We were pleased to see the successful startup of TMX in May, bringing additional egress capacity for Western Canadian crudes, which has resulted in a structural tightening of the differential, reduced price volatility, and a net benefit to Imperial. Our downstream business also performed well over the quarter and contributed very solid earnings, despite significant turnaround activity and some softening of refinery crop spread. The downstream continues to realize the structural benefits of the Canadian market, including advantaged feedstocks and import parity prices.
Now turning to our performance over the quarter, our upstream saw record production, coupled with stronger price realizations due to the combined benefit of strengthening WT high prices and the tightening of WCS crude differential.
Brad: We were pleased to see the successful startup of <unk> in may bringing additional egress capacity for western Canadian crudes, which has resulted in structural tightening of the differential reduced price volatility.
Brad: And a net benefit to imperial.
Brad: Our downstream business also performed well over the quarter and contributed very solid earnings despite significant turnaround activity and some softening of refinery crack spreads.
Brad: The downstream continues to realize the structural benefits of the Canadian market, including advantaged feedstocks and import parity pricing.
Bradley Corson: So now let's review the second quarter results. I'm very pleased to report a strong second quarter, with earnings per share up over 80% year over year. These results were underpinned by strong operations that included the safe and successful execution of several major planned turnaround activities across our integrated portfolio. And while we still have some scheduled turnaround work ahead, we're well positioned for a strong second half of the year. Earnings for the quarter were $1,133,000,000, with cash from operating activities of $1,508,000,000 when excluding the impact of working capital.
Brad: So now let's review the second quarter results I am very pleased to report a strong second quarter with earnings per share up over 80% year over year.
Brad: These results were underpinned by strong operations that included the safe and successful execution of several major planned turnaround activities across our integrated portfolio.
And while we still have some scheduled turnaround work ahead, we are well positioned for a strong second half of the year.
Brad: Earnings for the quarter were $1 billion $133 million with cash from operating activities of $1.508 billion when excluding the impact of working capital I'm very pleased by the strong financial results, we achieved especially from our quarter which include.
Bradley Corson: I'm very pleased with the strong financial results we achieved, especially from a quarter that included significant planned turnarounds, both in the upstream and downstream. In the upstream, we achieved total production of 404,000 gross oil equivalent barrels per day in the second quarter. This marks the highest ever second-quarter production over the past 30 years when adjusting for the sale of XTO in 2022. The results were underpinned by strong and reliable operations across all of our assets and successful turnaround execution at Curl and Syncrude.
Brad: Significant planned turnarounds, both in the upstream and downstream.
Brad: In the upstream we achieved total production of 404000 gross oil equivalent barrels per day in the second quarter. This marks the highest ever second quarter production over the past 30 years when adjusting for the sale of <unk> in 2022.
Brad: The results were underpinned by strong and reliable operations across all of our assets and successful turnaround execution at Pearl and Syncrude.
Bradley Corson: Curl had another fantastic quarter and matched the asset's record for highest second quarter production. This result contributed to achieving the highest first half production in the asset's history. And you may recall this follows a record second half in 2023.
Speaker Change: <unk> had another fantastic quarter and match the assets record for highest second quarter production. This result contributed to achieving the highest first half production and the assets history.
Speaker Change: You May recall this follows a record second half in 2023.
Bradley Corson: Coal Lake also saw a strong second quarter, including first production from our Grand Rapids Phase I project, the industry's first solvent-assisted SAGV operation, which we will discuss in more detail shortly. In the downstream, we continue to see strong operating performance as well. Refinery throughput averaged 387,000 barrels per day, which equates to a refinery utilization rate in the quarter of 89% and includes the successful month-long turnarounds at both Sarnia and Strathcona.
Brad: Cold Lake also saw a strong second quarter, including first production from our Grand Rapids Phase One project. The industry's first solvent assisted Sag D operation, which we will discuss in more detail shortly.
Brad: In the downstream, we continued to see strong operating performance as well.
Brad: Binary throughput averaged 387000 barrels per day, which equates to a refinery utilization in the quarter of 89% and includes the successful month long turnarounds at both Sarnia and stress Kona.
Bradley Corson: Overall, we feel very positive about the strong first half of the year and are well positioned to meet our annual guidance. We continue to deliver significant value to our shareholders through our reliable and growing dividend and share repurchase program. And consistent with our commitment to return surplus cash to shareholders, we announced this morning our plans to accelerate repurchases under the normal course issuer bid with a target to complete the program prior to the end of this year. With that, I'll pass things over to Dan to discuss our financial results in more detail.
Brad: Overall, we feel very positive about the strong first half of the year and are well positioned to meet our annual guidance.
Brad: We continue to deliver significant value to our shareholders through our reliable and growing dividend and share repurchase programs.
Brad: And consistent with our commitment to return surplus cash to shareholders. We announced this morning, our plans to accelerate repurchases under the normal course issuer bid with a target to complete the program prior to the end of this year.
Brad: With that I'll pass things over to Dan to discuss our financial results in more detail.
Daniel Lyons: Thanks, Brad. Starting with financial results for the second quarter, we recorded net income of $1,133,000,000, an increase of $458,000,000 from the second quarter of 2023, primarily reflecting higher realizations and volumes in the upstream and lower turnaround impacts in the downstream. Looking sequentially, our second quarter net income is down $62 million from the first quarter of 2024, reflecting lower margins in the downstream and lower volumes in the upstream, partly offset by higher realizations in the upstream.
Dan: Thanks, Brad starting with financial results for the second quarter, we recorded net income of $1 billion $133 million, an increase of $458 million from the second quarter of 2023, primarily reflecting higher realizations and volumes in the upstream and lower turnaround.
Dan: Impacts from the downstream looking sequentially, our second quarter net income is down $62 million from the first quarter of 2024, reflecting.
Brad: Lower margins in the downstream and lower volumes in the upstream partly offset by higher realizations in the upstream.
Daniel Lyons: Now looking at each business line, upstream earnings of $799 million are up $241 million from the first quarter, driven primarily by higher realizations, partly offset by lower volumes associated with a high level of turnaround activity. Downstream earnings of $294 million are down $337 million from the first quarter, mainly reflecting lower refining margins and turnaround impact.
Brad: Now looking at each business line upstream earnings of $799 million or up $241 million from the first quarter, driven primarily by higher realizations, partly offset by lower volumes associated with a high level of turnaround activity downstream earnings of 290.
Brad: <unk> 4 million or down $337 million from the first quarter, mainly reflecting lower refining margins and turnaround impacts finally, our chemicals business generated earnings of $65 million up $8 million from the first quarter, reflecting higher volumes move.
Daniel Lyons: Finally, our chemicals business generated earnings of $65 million, up $8 million from the first quarter, reflecting higher volume. Moving on to cash flow. In the second quarter, we generated about $1.6 billion in cash flows from operating activities, excluding working capital effects of $121 million. Cash flows from operating activities for the second quarter were about $1.5 billion, up about $400 million from the second quarter of 2023, in line with earnings. We ended the quarter with just over $2 billion of cash on hand.
Brad: On to cash flow.
Dan: In the second quarter, we generated about $1 $6 billion in cash flows from operating activities.
Brad: Excluding working capital effects of $121 million cash flows from operating activities for the second quarter were about $1 $5 billion up about $400 million from the second quarter of 2023 in line with earnings we ended the quarter with just over 2 billion.
Dan: Our cash on hand.
Daniel Lyons: Discussing CapEx, capital expenditures totaled $462 million in the second quarter, down $31 million from the second quarter of 2023. In the upstream, second quarter spending focused on smaller projects to sustain and grow production at Curl, Syncrude, and Cold Lake, as well as progressing the In-Pit Tailings Project at Curl and the S.A. Sag-Dee Grand Rapids Project at Cold Lake. In the downstream, second quarter spending mainly included progressing a renewable diesel project at Stratcona.
Dan: Discussing capex capital expenditures totaled $462 million in the second quarter down $31 million from the second quarter of 2023, and the upstream second quarter spending focused on smaller projects to sustain and grow production at curl Syncrude and cold lay.
Dan: As well as progressing the in pit tailings project get Carl and the SA Saggy Grand Rapids project at Cold Lake and the downstream second quarter spending mainly included progressing our renewable diesel project abstract conant.
Daniel Lyons: Year to date capital expenditures totaled $958 million, which is consistent with 2023 year to date spend. Our full year guidance remains $1.7 billion. Shifting to shareholder distributions, in the second quarter of 2024, we paid $321 million in dividends. On June 24th, we mentioned the renewal of our normal course issuer bid, which allows us to purchase up to 5% of our outstanding common shares over the following 12 months. We started purchasing shares ratably in July, but as Brad mentioned, we plan to accelerate our purchases and complete the program prior to year-end, in line with our long-standing practice of returning surplus cash to shareholders. Lastly, this morning, we announced a third quarter dividend of $0.60 per share, in line with our second quarter dividend. Now I'll turn it back to Brad to discuss her operational performance. Thanks.
Brad: Year to date capital expenditures totaled $958 million, which is consistent with 2023 year to date spend our full year guidance remains $1 7 billion.
Brad: Shifting to shareholder distributions in the second quarter of 2024, we paid $321 million in dividends.
Brad: On June 24th we mentioned the renewal of our normal course, issuer bid, which allows us to purchase up to 5% of our outstanding common shares over the following 12 months, we started purchasing shares ratably in July, but as Brad mentioned, we plan to accelerate our purchases and complete the probe.
Brad: Graham prior to year end in line with our long standing practice of returning surplus cash to shareholders. Lastly, this morning, we announced a third quarter dividend of <unk> 60 per share in line with our second quarter dividend now I'll turn it back to Brad to discuss our operational performance.
Bradley Corson: Thanks, Stan. Now, I'll cover our operating results for the quarter. Upstream production for the quarter averaged 404,000 oil equivalent barrels per day, which is down 17,000 barrels per day versus the first quarter and up 41,000 barrels per day versus the second quarter of 2023. While the second quarter typically has higher levels of planned maintenance activity affecting the sequential comparison, I'm very pleased to see a greater than 10% increase in quarterly production year over year and the achievement of the highest second quarter production in over 30 years when So now I'd like to move on and talk specifically about Curl.
Brad Corson: Thanks, Stan So now I'll cover our operating results for the quarter upstream.
Brad Corson: Production for the quarter averaged 404000 oil equivalent barrels per day, which is down 17000 barrels per day versus the first quarter and up 41000 barrels per day versus the second quarter of 2023.
Brad Corson: While the second quarter typically has higher levels of planned maintenance activity affecting the sequential comparison I'm very pleased to see a greater than 10% increase in quarterly production year over year and the achievement of the highest second quarter production and over 30 years when adjust.
Speaker Change: <unk> for the sale of X T O.
Bradley Corson: Curl's production in the second quarter averaged 255,000 barrels per day gross, which was down 22,000 barrels per day versus the first quarter and up 38,000 barrels per day from the second quarter of 2023. As I mentioned earlier, this matched the best second quarter production ever achieved at Curl and resulted in a record first half production of 266,000 barrels per day. And these record first-half results follow a record second-half in 2023, which further reinforces our confidence in the production guidance we set for Curl.
Carl: So now I'd like to move on and talk specifically about Carl <unk>.
Brad: <unk> production in the second quarter averaged 255000 barrels per day gross.
Brad: Which was down 22000 barrels per day versus the first quarter and up 38000 barrels per day from the second quarter of 2023 as I mentioned earlier. This matched the best second quarter production ever achieved at Kearl and resulted in record first half production of 206.
Speaker Change: 6000 barrels per day.
Speaker Change: And these record first half results follow a record second half of 2023, which further reinforces our confidence in the production guidance, we set for Carl.
Bradley Corson: During last quarter's call, I highlighted that the team was hard at work optimizing the schedule and scope of the annual turnaround with the goal of continuing to minimize downtime and cost. I'm very pleased to share that the team delivered.
Speaker Change: During last quarter's call I highlighted that the team was hard at work optimizing the schedule and scope of the annual turnaround with the goal of continuing to minimize downtime and costs.
Speaker Change: I am very pleased to share that the team delivered on this.
Bradley Corson: The planned turnaround work was completed in under 20 days for the first time in the asset's history, and at a cost below our guidance as well. We've talked extensively about the step change improvement we made in 2021, when we moved from two turnarounds per year to one. Looking more closely at the number of days required for the turnaround activity, at that time, we were averaging approximately 70 days per year with two turnarounds. We have now reduced that duration by more than 70% with this year's results.
Speaker Change: The planned turnaround work was completed in under 20 days for the first time in the assets history.
Speaker Change: And at a cost below our guidance as well.
Speaker Change: We've talked extensively about the step change improvement we made in 2021, when we moved from two turnarounds per year to one.
Speaker Change: Looking more closely at the number of days required for the turnaround activity.
Speaker Change: At that time, we were averaging approximately 70 days per year with two turnarounds.
Speaker Change: We have now reduced that duration by more than 70% with this year's results and while we are thrilled with this important achievement. The team is already looking ahead for additional opportunities to reduce turnaround durations and costs even further.
Bradley Corson: And while we are thrilled with this important achievement, the team is already looking ahead for additional opportunities to reduce turnaround durations and costs even further. And turning to costs, Kurl's unit cash operating costs in the quarter were $22.12 U.S. per barrel. While we saw an increase versus the first quarter due primarily to the plan turnaround cost, which we generally expense, we also saw a decrease of about $6 US per barrel compared to the second quarter of 2023, which reflects our focus on cost reductions, including improvements to our plan turnarounds and reliability.
Speaker Change: And turning to cost curls unit cash operating costs in the quarter were $22 12 U S per barrel.
Speaker Change: While we saw an increase versus the first quarter due primarily to the planned turnaround costs, which we generally expense. We also saw a decrease of about $6 U S per barrel compared to the second quarter of 2023.
Speaker Change: Which reflects our focus on cost reductions, including the improvements to our planned turnarounds and reliability.
Bradley Corson: This second quarter performance is also contributing to our year-to-date unit cash costs of $21.45 US per barrel, a $5 US per barrel decrease versus the first half of 2023. With the turnaround behind us now and our expectation for higher volumes in the second half of the year, we expect to make further progress on unit costs towards our $20 US per barrel or below target. Overall, PERL continues to deliver great results, and with a turnaround in the rearview mirror, it is well positioned for a strong second half.
Speaker Change: This second quarter performance is also contributing to our year to date unit cash cost of $21 45.
Speaker Change: <unk> per barrel, a $5 U S per barrel decrease versus the first half of 2023.
Speaker Change: With the turnaround behind us now and our expectation for higher volumes in the second half of the year, we expect to make further progress on unit costs.
Speaker Change: Towards our $20 U S per barrel or below target.
Speaker Change: Overall <unk> continues to deliver great results and with the turnaround in the rearview mirror and is well positioned for a strong second half.
Speaker Change: And now turning to Cold Lake.
Bradley Corson: Coal Lake production for the second quarter averaged 147,000 barrels per day, which was up 5000 barrels per day versus the first quarter and up 15,000 barrels per day versus the second quarter of 2023. You may recall that we went through an extended period of lower production in 2023 due to production and steam cycle timing. So I'm very pleased to see this strong performance so far this year, and we are squarely on track to meet our annual guidance. This strong production, along with lower energy costs, resulted in unit cash costs of $14.30 U.S. per barrel, which is a decrease of over $3 U.S. per barrel compared to last year.
Speaker Change: Cold Lake production for the second quarter averaged 147000 barrels per day, which was up 5000 barrels per day versus the first quarter and up 15000 barrels per day versus the second quarter of 2023 you.
Speaker Change: You may recall that we went through an extended period of lower production in 2023 due to production and steam cycle timing. So I'm very pleased to see.
Speaker Change: This strong performance so far this year and we are squarely on track to meet our annual guidance.
Speaker Change: This strong production along with lower energy costs resulted in unit cash costs of $14 30 U S per barrel, which is a decrease of over $3 U S per barrel compared to last year.
Bradley Corson: And this includes the impacts of Grand Rapids phase one, which achieved first oil in May and contributed about three thousand barrels per day to our second quarter results. Grand Rapids continues to ramp up with the pumps installed on the majority of well pairs, and the remaining pumps are on track to be installed over the next several weeks. In June, Grand Rapids achieved production of about eight thousand barrels per day and is currently producing 10,000 to 12,000 barrels per day as we just completed the month of July.
Speaker Change: And this includes the impacts of Grand Rapids Phase, one, which achieved first oil in May and contributed about 3000 barrels per day to our second quarter results.
Speaker Change: Rand Rapids continues to ramp up with the pumps installed on the majority of well pairs and the remaining pumps are on track to be installed over the next several weeks in June Grand Rapids achieved production of about 8000 barrels per day.
Speaker Change: And is currently producing 10 to 12000 barrels per day as we've just completed the month of July.
Bradley Corson: On-site reservoir performance continues to be monitored and is aligned with our expectations as we ramp up production and solvent injection. We are well on our way to reaching the expected 15,000 barrels per day of efficient lower unit cash cost barrels as we complete this important step in our strategy to transform Coal Lake. We expect phase one alone will lower Cold Lake's unit costs by around one dollar U.S. per barrel.
Speaker Change: On site reservoir performance continues to be monitored and is aligned with our expectations as we ramp up production and solvent injection.
Speaker Change: We are well on our way to reach and the expected 15000 barrels per day of efficient lower unit cash cost barrels as we complete this important step in our strategy to transform cold Lake.
Speaker Change: We expect phase one alone will lower cold lake's unit costs by around $1 U S per barrel I am very proud of the work. The project team has done to accelerate this project.
Bradley Corson: I'm very proud of the work the project team has done to accelerate this project by a year and deliver the industry's first ever SA-SAGV development. I also wanted to take a moment to provide a brief update on our Lemming redevelopment project, which is another key project for us at Coal Lake. The focus for this year continues to be on facility construction and well completion. During the quarter, fabrication started on various units as civil work continued on site, with installation expected in the coming week.
Speaker Change: A year and deliver industry first ever SA Sag D development.
Speaker Change: I also wanted to take a moment to provide a brief update on our lending redevelopment project, which is another key project for us at Cold Lake.
Speaker Change: The focus for this year continues to be on facility construction and well completions during the quarter fabrication started on various units at civil work continued on site with installation expected in the coming weeks.
Bradley Corson: We are progressing on the plan for startup in 2025, with the project expected to average about 9000 barrels of production per day at peak. I would also like to remind everyone that Cold Lake has just started its planned turnaround at Masquois and will run through to mid-September with an expected volume impact of 3,000 barrels of per day in 2024. Now, a few comments on Syncrude.
Speaker Change: We are progressing on plan first startup in 2025 with.
Speaker Change: With the project expected to average about 9000 barrels per day of production at peak.
Speaker Change: I would also like to remind everyone that cold Lake has just started its planned turnaround at mass floor and will run through to mid September with an expected volume impact of 3000 barrels per day in 2024.
Bradley Corson: Imperial's share of Syncrude production for the quarter averaged 66,000 barrels per day, which was down 7,000 barrels per day versus the first quarter and flat versus the second quarter of 2023. During the quarter, Syncrude completed its two-month-long coker turnaround ahead of schedule and is expected to start a hydrotreater turnaround at the end of the third quarter. During the quarter, Syncrude leveraged the bi-directional function of the InterConnect pipeline to export about 2,000 barrels per day, our share, of bitumen to maximize mine production during the Coker turnaround.
Speaker Change: And now a few comments on Syncrude.
Speaker Change: Imperial share of Syncrude production for the quarter averaged 66000 barrels per day.
Speaker Change: Which was down 7000 barrels per day versus the first quarter and flat versus the second quarter of 2023.
Speaker Change: During the quarter Syncrude completed its two months long Coker turnaround ahead of schedule and is expected to start a hydro treater turnaround at the end of the third quarter.
Speaker Change: During the quarter Syncrude leverage the bi directional function of the interconnect pipeline to export about 2000 barrels per day, our share of bitumen to maximize mine production during the coker turnaround.
Bradley Corson: Once the turnaround was completed, Syncrude reversed the pipeline flow in order to import bitumen and maintain high upgrader utilization rates, helping to produce about 5,000 barrels per day, our share of incremental Syncrude Suite premium. The interconnect pipeline is an important tool that provides optionality, ensuring the team is able to maximize both mine productivity while also maintaining high upgrader utilization rates. So now let's move on and talk about the downstream, which is another positive story. In the second quarter, we refined an average of 387,000 barrels per day, resulting in a utilization of 89%.
Speaker Change: Once the turnaround was completed syncrude reverse the pipeline flow in order to import bitumen and maintained high upgrader utilization rates, helping to produce about 5000 barrels per day, our share of incremental Syncrude sweet premium.
Speaker Change: The interconnect pipeline is an important tool that provides optionality ensuring the team is able to maximize both mine productivity, while also maintaining high upgrader utilization rates.
Speaker Change: Sure.
Speaker Change: So now let's move on and talk about the downstream, which is another positive story.
Speaker Change: In the second quarter, we refined an average of 387000 barrels per day, resulting in a utilization of 89%. This was down 20000 barrels per day versus the first quarter due to month long turnarounds at both stress Kona and Sarnia.
Bradley Corson: This was down 20,000 barrels per day versus the first quarter due to month-long turnarounds at both Strathcona and Sarnia, and down slightly by 1,000 barrels per day versus the second quarter of 2023. However, I'm pleased to highlight that Nanticoke achieved record April throughput, which contributed to its highest ever first half throughput record. And from a financial perspective, our structurally advantaged downstream business remained quite profitable in the quarter, despite the significant turnaround activity and narrower crude differentials that affected margin caps. Canadian crack spreads have softened in 2024. However, they do remain above the average of the last five years, so it's important to keep that in context.
Speaker Change: And down slightly by 1000 barrels per day versus the second quarter of 2023.
Speaker Change: I am pleased to highlight that nanticoke achieved record April throughput, which contributed to its highest ever first half throughput record.
Speaker Change: And from a financial perspective are structurally advantaged downstream business remains quite profitable in the quarter. Despite the significant turnaround activity.
Speaker Change: And narrower crude differentials that affected margin capture Canadian crack spreads have softened in 2024. However, they do remain above the average over the last five years. So it is important to keep that in context.
Bradley Corson: In the third quarter, there is a planned turnaround at our Nanticoke refinery that is scheduled to start in early September and finish in late October. Strathcona will also be executing its second smaller turnaround, which will include work to enable the co-processing of vegetable oils alongside conventional feedstock. We continue to progress the construction of Canada's largest renewable diesel facility at our Strathcona refinery that will add 20,000 barrels a day of throughput capacity when completed.
Speaker Change: In the third quarter, there was a planned turnaround at our Nanticoke refinery that is scheduled to start in early September and finished in late October.
Speaker Change: <unk> will also be executing its second smaller turnarounds, which will include work to enable the co processing of vegetable oils alongside conventional feedstock.
Speaker Change: We continue to progress the construction of Canada's largest renewable diesel facility at our stress Kona refinery that will add 20000 barrels a day of throughput capacity when completed modules continue to arrive on site and I am pleased with the progress of the construction, which will continue into next year.
Bradley Corson: Modules continue to arrive on site, and I'm pleased with the progress of the construction, which will continue into next year. The Strathcona Renewable Diesel Project is a highly attractive and strategic opportunity within our portfolio and one that leverages the numerous competitive advantages we have, including our location, scale, expertise, and technology. Another exciting milestone in the quarter was the completion of the Calgary Renewable Diesel Blending and Offloading Distribution Terminal, which will further develop our capabilities to continue to meet our customers' demands for lower emission fuel options. Petroleum product sales in the quarter were 470,000 barrels per day, which is up 20,000 barrels per day versus the first quarter and down 5000 barrels per day versus the second quarter of 2023.
Speaker Change: The stress Kona renewable diesel project is a highly attractive and strategic opportunity within our portfolio and one that leverages. The numerous competitive advantages, we have including our location scale expertise and technology.
Speaker Change: Another exciting milestone in the quarter was the completion of the Calgary renewable diesel blending and Offloading distribution terminal, which will further develop our capabilities to continue to meet our customer.
Speaker Change: Customers' demands for lower emissions fuel options.
Speaker Change: Petroleum product sales in the quarter were 470000 barrels per day, which is up 20000 barrels per day versus the first quarter and down 5000 barrels per day versus the second quarter of 2023.
Bradley Corson: We continue to see steady, refined product demand, with gasoline, diesel, and jet demand generally consistent with the prior year. During the quarter, we completed the proactive replacement of a segment of the Winnipeg products pipeline after a routine inspection found riverbank erosion was causing stress on the pipeline. The maintenance work required several weeks of horizontal drilling under the Red River, with the first of the two pipelines being returned to service in May and the second pipeline returning to service in late June.
Speaker Change: We continue to see steady refined product demand with gasoline diesel and jet demand generally consistent with prior year.
Speaker Change: During the quarter, we completed the proactive replacement of a segment of the Winnipeg products pipeline. After a routine inspection found river bank erosion was causing stress on the pipelines.
Speaker Change: The maintenance work required several weeks of horizontal drilling under the Red River was the first of two pipelines being returned to service in May and the second pipeline returning to service in late June.
Bradley Corson: We worked closely with impacted neighbors and communities, as well as the Manitoba government and regulators and also customers throughout this process to ensure they had the latest information on the status of the maintenance work. Our priority was returning the pipeline to service on time and in the safest, most environmentally responsible way. And we appreciate everyone's patience and understanding as we completed this important work. I also want to thank our team for working nonstop since March to complete the work as we committed and minimize the disruption to our customers and communities.
Speaker Change: We work closely with impacted neighbors and communities.
Speaker Change: As well as the Manitoba government and regulators and also customers throughout this process to ensure they have the latest information on the status of the maintenance work.
Speaker Change: Our priority was returning the pipeline into service on time and in the safest most environmentally responsible way and we appreciate everyone's patience and understanding as we completed this important work.
Speaker Change: I also want to thank our team for working nonstop since March to complete the work as we committed and minimize the disruption to our customers and communities.
Bradley Corson: And turning now to chemicals, earnings in the quarter were $65 million, which was up $8 million versus the first quarter and down $6 million versus the second quarter of 2023. The higher earnings versus the first quarter were the result of strong polyethylene sales.
Speaker Change: And turning now to chemicals earnings in the quarter were $65 million, which was up $8 million versus the first quarter and down $6 million versus the second quarter in 2023.
Speaker Change: The higher earnings versus the first quarter were the result of strong polyethylene sales.
Bradley Corson: And before I wrap up, I'd also like to highlight the ongoing work that the Pathways Alliance is progressing. Pathways continues to make progress on the engineering and design of the proposed carbon capture and storage pipeline project, with regulatory filings continuing through the second quarter. In parallel, we continue to have constructive discussions with the federal and provincial governments in order to finalize the fiscal frameworks necessary for these important projects to proceed smoothly. And so, to wrap up.
Pat: And before I wrap up I'd also like to highlight the ongoing work that the pathways Alliance is progressing Pat.
Speaker Change: Pathways continues to make progress on the engineering and design of the proposed carbon capture and storage pipeline project with regulatory filings continuing through the second quarter.
Speaker Change: Parallel we continue to have constructive discussions with the federal and provincial governments in order to finalize the fiscal frameworks necessary for these important projects to proceed timely.
Speaker Change: And so to wrap up.
Bradley Corson: This was a really strong quarter for us, underpinned by reliable operating performance and successful execution of significant planned maintenance at four of our major facilities. I want to recognize the dedication and hard work by all our teams that delivered these exceptional results. I'm also very excited to see the production growth from further records at Pearl and the ramp-up of Grand Rapids and the continued construction progress of our Stratona Renewable Diesel Project.
Speaker Change: This was a really strong quarter for us underpinned by reliable operating performance and successful execution of significant planned maintenance at four of our major facilities I want to recognize the dedication and hard work by all our teams that delivered these exceptional results.
Speaker Change: I am also very excited to see the production growth from further records at Pearl and the ramp up of Grand Rapids, and the continued construction progress of our stress Kona renewable diesel project.
Bradley Corson: Both the Grand Rapids and Strathcona Renewable Diesel Projects are an important part of our growth plans to meet the energy needs of society while generating value for our shareholders. As I look ahead to the second half of the year, we're very focused on delivering a strong finish, and I'm confident in our ability to achieve our guidance for 2024. We remain committed to returning surplus cash to our shareholders, and as we announced this morning, we are accelerating our recently renewed normal course issuers' bid with the intent of completing it prior to year end. As always, I'd like to thank you once again for your continued interest and support. And now we'll move on to the Q&A session, so I'll pass this back to Peter.
Speaker Change: Both Grand Rapids, and stress Kona renewable diesel projects are an important part of our growth plans to meet the energy needs of society, while generating value for our shareholders.
Speaker Change: Missions.
Speaker Change: As I look ahead to the second half of the year, we're very focused on delivering a strong finish and I am confident in our ability to achieve our guidance for 2024, we remain committed to returning surplus cash to our shareholders and as we announced this morning, we are accelerating our recently renewed normal course issue.
Speaker Change: <unk> <unk> with the intent of completing it prior to year end.
Speaker Change: As always I'd like to thank you once again for your continued interest and support.
Speaker Change: And now we'll move to the Q&A session. So I'll pass it back to Peter.
Peter Shaw: Thank you, Brad. As always, we'd appreciate it if you could limit yourself to one question plus one follow-up so that we can get to as many questions as possible. And with that, operator, could you please open up the phone line for questions?
Peter Shah: Thank you Brad as always be depreciated, you could limit yourself to one question plus one follow up so that we can get to as many questions as possible.
Speaker Change: With that operator could you. Please open up the phone line for questions.
Operator: Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach your equipment.
Speaker Change: Thank you.
Speaker Change: <unk> via the telephone and we'd like to ask a question. Please signal by pressing star one on your telephone keypad.
Speaker Change: As soon as speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
Operator: Again, please press star 1 to ask a question. Your first question comes from Greg Pardy with RBC Capital Markets. Thanks. Yeah, thank you, and Brad, thanks for the detailed rundown.
Speaker Change: Again, Please press star one to ask a question.
Peter Shah: Your first question comes from Greg Pardy with RBC capital markets.
Speaker Change: Please go ahead. Thanks.
Greg Pardy: Yes, Thank you and Brad Thanks for the detailed rundown.
Greg Pardy: I wanted to stay with, or just dig in rather, into maybe the Grand Rapids and in-situ in general. But the technical question, I guess, on the Grand Rapids is... What kind of recovery rate are you targeting from the reservoir with respect to just like the percentage of whatever you're bringing back? And then how much how much degree of recycling of the solvent is there? I'm just trying to get a better understanding as to how much the closed systems
Speaker Change: Wanted to stay with.
Greg Pardy: Or just dig in rather into maybe the Grand Rapids and in situ in general, but the technical question I guess in the Grand Rapids is.
Speaker Change: What kind of recovery rate are you targeting from the reservoir with respect to.
Speaker Change: Just like the percentage of whatever you're bringing back.
Speaker Change: And then how much how what degree of recycling of the solvent is there I'm just trying to get a better understanding as to how much of a closed system offices.
Bradley Corson: Yeah, thanks for that question, Greg, and good to hear from you. I don't necessarily have those specific details on the reservoir performance on a planned basis. What I will tell you, though, is based on the early data we've gathered. You know, as we just started this production in May, and as I just commented on, you know, we saw 3,000 barrels per day average for the quarter, and then 8,000 barrels per day in June, and now we're seeing 10,000 to 12,000 barrels per day.
Speaker Change: Yes, thanks for that question.
Speaker Change: Greg and good to hear from you.
Speaker Change: I don't necessarily have those specific details on the reservoir performance.
Speaker Change: From from a planned basis, what what I will tell you though.
Speaker Change: Is based on the early data we gather.
Speaker Change: As we just started this production up in May.
Speaker Change: And as I just commented on.
Speaker Change: We saw 3000 barrels per day average for the quarter.
Speaker Change: And then 8000 barrels per day in June and now, we're seeing 10% to 12000 barrels per day.
Bradley Corson: All of that is reflective of performance, very consistent with our planning basis. We are quite pleased with how the ramp-up has gone so far, recognizing we're at this 10 to 12,000 barrels a day range. And we still have multiple pumps still to install, which will allow us to get all the wells in a production state, as well as we're just in the process of ramping up diluent injection now as well.
Speaker Change: All of that is reflective of performance very consistent with our planning basis.
Speaker Change: <unk>.
Speaker Change: We are quite pleased with how the ramp up has gone so far recognizing.
Speaker Change: We're at this 10 to 12000 barrel a day range and we still have multiple.
Speaker Change: Our pumps still to install.
Speaker Change: Which will allow us to get all the wells.
Speaker Change: In a production state as well as we're just in the process of ramping up Bill you went in.
Bradley Corson: So we're still in, you know, I would say, fairly early stages but very encouraged by the results we're seeing. And so, you know, I think we'll have more data for you in the coming quarter. And that may be a good time to talk more about some of the details of the reservoir.
Bill: Injection now as well so we're still in I would say fairly early stages.
Bill: But very encouraged by the results, we're seeing and so I.
Bill: I think we will have more data for you.
Bill: And in the coming quarter and that might be a good time to talk more about kind of some of the details of the reservoir.
Greg Pardy: Thanks for that. And then, related, but perhaps just a broader question is you've got, you know, the, the, not a JV with Suncor, but I guess a data sharing or a collaboration going on with respect to Aspen. And I'm just wondering how you think about that partnership and then, you know, what the benefits are to IMO.
Speaker Change: Okay understood. Thanks for that and then.
Speaker Change: Related but perhaps just a broader question is you've got the.
Speaker Change: Not a JV with suncor, but I guess.
Speaker Change: Data sharing or collaboration going on with respect to Aspen and I'm, just I'm wondering how you're thinking about that partnership and then what the benefits are.
Bill: No.
Bradley Corson: Yeah. Well, and I think what you're referring to is the joint pursuit of the EBRT pilot that we are in kind of the process of constructing now. And that is a partnership between us and Suncor to build that pilot and operate it. And I just want to clarify the pilot for us, you know; we believe it has future applicability to Aspen. The partnership with Suncor is limited to this pilot, and that partnership has nothing to do with Aspen per se.
Bill: Yes.
Speaker Change: Well I think what you're referring to is.
Bill: The.
Bill: Joint pursuit of the <unk>.
Speaker Change: <unk> T pilot.
Speaker Change: That we are in the process of constructing now and that there is a partnership between us and suncor.
Bill: To build.
Bill: Build that pilot then operate it.
Bill: And I just wanted to clarify the pilot for us.
Bill: We believe has future applicability to ad spend.
Bill: Partnership with Suncor is limited to this pilot.
Bill: <unk>.
Bill: <unk>.
Bradley Corson: But in terms of the pilot itself, you know, we do see it as a potential enabler of new technology that we can apply to Aspen that will allow us to lower the capital costs, lower the operating costs because it uses significantly more affiant and less steam. And also, as a result, it achieves much lower emissions intensity for the barrels that we would produce. Working together with Suncor allows us to expedite the progress on that pilot, allows us to jointly share in the cost of that pilot, and allows us to share technology and insights that will together result in a more successful pilot. So we feel quite good about the opportunity. We feel good about where we are progressing with this pilot, and we're optimistic that it'll have longer-term strategic value to us for Aspen.
Bill: But in terms of the pilot itself.
Bill: We do see it as a potential.
Bill: Enabler of a new technology that we can apply to ask then that will allow us to lower the capital cost.
Bill: Lower the operating cost because it uses significant more.
Bill: <unk> 10 less theme.
Bill: And also as a result, then achieves much lower.
Bill: Emissions intensity for the barrels that we produce.
Bill: Working together with Suncor allows us to.
Bill: <unk>.
Bill: The progress on that pilot.
Bill: Laos us to jointly share in the cost of that pilot allows us to share.
Bill: Technology and insights.
Bill: We have no debt, we together will result in a more successful pilot.
Bill: So we feel quite good about the opportunity we feel good about where we are progressing this pilot and we're optimistic that it will have longer term strategic value to us for Aspen.
Speaker Change: Okay very good thanks, very much Greg.
Greg Pardy: Very good. Thanks very much, Brad.
Greg Pardy: Thanks, Greg.
Operator: Thank you. Your next question...
Speaker Change: Thank you. Your next question comes from the line of Menno <unk> with TD Cowen.
Menno: Please go ahead, thanks, and good morning, everyone I, just I'll start with a follow up on Greg's question on the Grand Rapids, which is.
Operator: Thanks, and good morning, everyone. I'll start with a follow up on Greg's question on the Grand Rapids, which is obviously ramping up quite nicely. I'm guessing you may not want to answer this, but what is your current thinking on the next potential growth phase in the Grand Rapids, in terms of timing and size? Presumably, the next one would be in the 15,000 barrel per day range as well, but any thoughts there would be helpful. Yeah, thanks for the question.
Speaker Change: Obviously ramping up quite nicely.
Menno: I'm guessing you may not want to answer this but what is your current thinking on the next potential growth phase in the.
Speaker Change: In the Grand Rapids in terms of timing and size them, presumably the next one would be in the 15000 barrel per day range as well, but any thoughts there would be would be helpful.
Speaker Change: Yes, thanks for the question.
Operator: And and and again, it's exciting to talk about Grand Rapids because we've been working on this project, you know, for several years. And and and then, more recently, we were able to accelerate it. And now we're seeing some very good reservoir results.
Speaker Change: And again.
Speaker Change: Exciting to talk about Grand Rapids, because we've been working on this project for several years and.
And then more recently were able to accelerate it and now we're seeing some very good reservoir results. So all of that is really exciting and all of that will inform our future development plans I think it's a little premature for us to talk specifically about the next phase the next volume.
Bradley Corson: So all that's really exciting, and all of that will inform our future development plans. I think it's a little premature for us to talk specifically about the next phase, the next volume that would come with the next phase. But fair to say, you know, we're going to take all the data from this first phase, and that will inform a longer-term development strategy. And, you know, as we firm that up, we'll certainly share that with the market, you know, in future investor days.
Speaker Change: <unk>.
That would come with the next phase.
Speaker Change: But fair to say.
Speaker Change: We're going to take all the data from this first phase and that will inform our longer term development strategy.
Speaker Change: As we firm that up.
Speaker Change: We'll we'll certainly share that.
Speaker Change: With the market.
Speaker Change: And in future Investor days so.
Bradley Corson: So, again, it's premature to give any details, but it's an exciting opportunity for us. We do see significant running room beyond this first phase. And so now we just need to finish the startup, gather as much data as possible, and then optimize future plans accordingly. So, more to come.
Speaker Change: So again premature to give any details, but it's an exciting opportunity for us we do see.
Speaker Change: Significant running room beyond this first phase.
Speaker Change: So now we just need to.
Speaker Change: To finish the startup.
Speaker Change: Either as much data as possible.
Speaker Change: And then optimize future plans accordingly, so more to come but but it's encouraging.
Operator: Thanks, Brad. Maybe just a very quick follow up there. I think in the past, you've talked about an incremental 50 to 50. I think 50 to 50.
Speaker Change: Yeah. Thanks, Brian maybe just a very quick follow up there I think in the past you've talked about an incremental $50 to 50, I think $50 to 55000 of potential growth there or is that still the right.
Operator: You've talked about an incremental 50 to 50; I think 50 to 55,000 of potential growth there. Is that still the right sort of range?
Speaker Change: Sort of range.
Speaker Change:
Bradley Corson: I don't remember those comments explicitly. We've definitely talked about continued growth at Cold Lake that comes both from Grand Rapids, this this phase, future phases, lemming, redevelopment, and other, if you will, transformations of that portfolio from existing technologies to new solvent-based technologies. I don't recall the 50,000 number explicitly, but we do see continued growth, and I'll have to take that away and compare that to some of our long-term plans we've shared in the past.
Speaker Change: I don't remember those comments explicitly we definitely talked about continued growth at cold Lake.
Operator: Okay, and yeah, I'm just going to assume that the second question is a part of the first, but the second question is quite important.
Speaker Change: That comes both from Grand Rapids.
Speaker Change: This phase future phases.
Speaker Change: <unk> lead development and other if you will transformations of that portfolio.
Speaker Change: Existing technologies to new solvent based technologies.
Speaker Change: I don't recall, the 50000 number explicitly but we do see continued growth and I'll have to take that away and compare that to.
Some of our long term plans, we've shared in the past.
Speaker Change: Okay.
Speaker Change: Yes, Im just going to assume that second question was a part of the first but the second question is quite.
Operator: The second question is quite quick. Just on the Strathcona Renewable Diesel Facility, it sounds like, based on your prepared comments, it's all on schedule, but what is your best guess on the first volumes from that facility? Yeah, thanks for the comment. It's again another exciting growth project for us. The construction at the refinery is going extremely well, and we would anticipate completing that construction by, you know, sometime in the spring of next year.
Speaker Change: Just on the renewable stress on our renewable diesel facility. It sounds like based on your prepared comments, that's all on schedule, but.
Speaker Change: What is your best guess on first volumes from that facility.
Speaker Change: Yes, thanks for the comments.
Speaker Change: Again, another exciting growth project for us.
Speaker Change: The construction at the refinery is going extremely well and we would anticipate completing that construction.
Speaker Change: By sometime in the spring.
Operator: And then that will allow us to move into commissioning, you know, sometime, later in the second quarter or around mid-year. But equally important to keep in mind, you know, this is a complex project. And what we're focused on is the construction of the facilities at our site. We're also sourcing the feedstock. We're also working with the hydrogen supplier on the timing for their facilities and availability. So we're working to bring all that together, you know, which again, we're encouraged by the project, the progress we're making, and we'll continue to coordinate with them on their timing. And we're excited to bring that product to market as soon as possible.
Speaker Change: Next year, and then that will allow us to move into commissioning.
Speaker Change: Some time.
Speaker Change: Later in the second quarter around mid year.
Speaker Change: <unk>.
Speaker Change: But equally important to keep in mind. This is.
Speaker Change: And what we're focused on is the.
Speaker Change: On the timing for their facilities and availability. So we're working to bring all of that together.
Speaker Change: Which again.
Speaker Change: We're encouraged by the project the progress we're making.
Bradley Corson: Appreciate the thoughts, Brad. I'll turn it back.
Speaker Change: Okay. Thank you.
Operator: Thank you. Your next question comes from the line of Patrick O'Rourke with ATB Capital Markets.
Speaker Change: Thank you. Your next question comes from the line of Patrick O'rourke with <unk> capital markets.
Operator: Hey guys, good morning. And thank you for taking my question.
Patrick O'rourke: Hey, guys. Good morning, and thank you for taking my question I guess my first question.
Speaker Change: With respect to apparel and going back to the 2023 Investor day, the plan to sort of get to 300000 and then.
Operator: I guess my first question is with respect to Curl and going back to 2023 Investor Day, the plan to sort of get to 300,000. And then, you know, alluding to potentially beyond that, with the strong performance you've had year to date here, how does that sort of place you in achieving these targets? And what are the timeframes moving forward around that?
Speaker Change: Moving to potentially beyond that with the strong performance you've had year to date here how does.
That sort of place in achieving these targets and what are the timeframes moving forward around that.
Bradley Corson: Yeah, thanks for the question. I'm always excited to talk about CURL because it's such a positive story and a great, you know, testimony to kind of the hard work and commitment, and really the creativity of our operations organization. You know, the key milestone that we laid out at Investor Day was to achieve 280,000 barrels a day by this year. And you know, we've represented that in guidance of 275 to 285. We feel extremely confident in our ability to achieve that based on, you know, the performance I just reported for the first half of the year, including some records I commented on, the record second half of last year.
Speaker Change: Yes, thanks for the question I'm always.
Speaker Change: Excited to talk about <unk>, because it's such a positive story.
Speaker Change: Great.
Speaker Change: Testimony to the hard work and commitment.
Speaker Change: And really creativity.
Speaker Change: Our operations organization.
Speaker Change: <unk>.
Speaker Change: The key milestones that we laid out at Investor day was to achieve 280000 barrels a day by this year.
Speaker Change: We've represented that in guidance of $2 75 to $2 85.
Speaker Change: We feel extremely confident in our ability to achieve that based on.
Speaker Change: The performance just reported for the first.
Speaker Change: Half of the year.
Speaker Change: Including some records I commented on the record second half of last year. So.
Bradley Corson: So, you know, what we need to deliver, and I have confidence we will, is a second half of this year that is generally in line with the second half of last year. And if we do that, and I believe we will, that will put us at the upper end of that guidance and very much achieve that 280,000 barrels a day. So that's, you know, the clear milestone we put out there. And then what we talked about at Investor Day was looking beyond 280 to what's next.
Speaker Change: We didn't know what we need to deliver and I have confidence we will.
Speaker Change: The second half of this year that is generally in line with the second half of last year.
Speaker Change: If we do that and I believe we will that will put us at the upper end of that guidance then.
Speaker Change: Very much achieving that 280000 barrels a day so that's.
Speaker Change: That's clear.
Speaker Change: Milestone, we put out there than what we talked about at Investor Day was.
Bradley Corson: And we've identified several opportunities that would allow us to achieve 300,000 barrels a day. The technical and operations teams are currently working to define those individual projects and the individual timing that would go with those. We haven't put a specific timeline out to the market yet for achieving 300 or anything beyond that. But rest assured, you know, it's in our sights and we're working on those details, and our plans are to share more of those details with you at our next Investor Day. So more to come there, but everything we're achieving now not only gives us confidence in 280 but gives us confidence in higher volumes for the future.
Speaker Change: Looking beyond $2 8 million to what's next and we've identified.
Speaker Change: Several opportunities that would allow us to achieve 300000 barrels a day.
Speaker Change: So.
Speaker Change: The technical and operations teams are currently working to define those individual projects and.
Speaker Change: The individual timing that would go with those we haven't put a specific timeline out to the market yet.
Speaker Change: For achieving 300 or anything beyond that but rest assured it's.
Speaker Change: It's in our sites and we're working on those details and our plans are to share more of those details with you at at our next Investor Day.
Speaker Change: So more to come there, but everything we're achieving now not only gives us confidence to lady but gives us confidence in the higher volumes for the future.
Operator: Okay, thank you. And my second question here is just with respect to the downstream unit. There's obviously been, you know, a lot of moving parts in the cracks market. You guys have shown some flexibility in the past in order to capture those moving parts or moving cracks across the product slate. If you could maybe speak to what you're seeing in the, you know, product demand market right now and, you know, what the best opportunities are for you.
Speaker Change: Okay. Thank you and my second.
Speaker Change: Question here is just with respect to the downstream unit Theres, obviously been.
Speaker Change: A lot of moving parts in the <unk> market.
Speaker Change: You guys have shown some flexibility in the past in order.
Speaker Change: To capture those moving parts are moving cracks across our product slate, if you could maybe speak to what youre seeing.
Speaker Change: Product demand market right now and what the best opportunities are for you.
Bradley Corson: Yeah, thanks for the question. And, you know, as I mentioned, we're feeling quite good about our downstream business, both in terms of, you know, the successful execution of our turnaround and also our ability to capture an advantaged market. We're seeing, I would say, stable demand across the individual product streams, and whereas in the second quarter we saw some softening of some cracks in the treads, what we've seen more recently now as we get into the third quarter is some strengthening, you know, driven by continued low inventory levels and products, but also several refinery outages in the US, both planned and unplanned.
Speaker Change: Yes, thanks for the question.
Speaker Change: As I mentioned.
Speaker Change: We're feeling quite good about our downstream business.
Speaker Change: Both in terms of.
Speaker Change: The successful execution of our turnarounds, but also our ability to capture an advantaged market.
Speaker Change: I would say stable demand across the individual product streams.
Speaker Change: And whereas in the second quarter, we saw some softening of some crack spreads.
Speaker Change:
Speaker Change: Driven by.
Speaker Change: <unk>.
Low inventory levels in products, but also several.
Speaker Change: In the U S. Both.
Bradley Corson: And so that is impacting inventories and supply going forward. So when you put all that together, you know, we feel quite good about our position as we move into the third quarter. And obviously, there are a lot of variables, as you mentioned, but for us, things are lining up in a good place for us.
Speaker Change: Planned and unplanned.
Speaker Change: So that is impacting inventories of supply going forward. So when you put all that together.
Speaker Change: We feel.
Speaker Change: Our position as we move into the third quarter.
And obviously there are a lot of variables as you mentioned, but for us.
Speaker Change: They are lining up in a good place for us.
Speaker Change: Okay. Thank you very much.
Operator: Your next question comes from the line of Manav Gupta with UBS.
Speaker Change: The next question comes from the line of Manav Gupta with UBS.
Operator: Thank you, guys. My first question is, you reiterated your guidance for 2024. Is it safe to assume that the threat of those wildfires has come in even from where it was a week ago, and at this point, you don't expect them to have a direct impact on your operations, which is what is allowing you to reiterate your guidance for the year?
Pete.
Manav Gupta: Thank you guys. My first question is.
Manav Gupta: You reiterated your guidance for 2024 is it safe to assume that correct of those wildfires has come in even from where it was a week ago and at this point.
Speaker Change: We expect them to have a direct impact on your operations because what is allowing you to reiterate your guidance for the year.
Bradley Corson: Yeah, Manav, um... Thanks for the comment or the question.
Manav Gupta: Yeah Manav.
Manav Gupta: Thanks for the comment or question.
Manav Gupta: Yeah.
Bradley Corson: You know, where we sit today, we feel good about the situation in terms of no impact on our production, and certainly, we hope that will continue through the rest of the summer season. What I can't predict is whether there will be future wildfires, you know, and where those will occur or when those will occur and what risk they would present to our operation. But in terms of, you know, what we've seen so far, thanks to the great work by the emergency response services, they have done a really good job in helping manage that risk for our operations. And so we would certainly hope that would continue.
Manav Gupta: Where we sit today.
Manav Gupta: We feel good about.
Manav Gupta: The situation in terms of no impact to our production.
Manav Gupta: And certainly we hope that will continue.
Manav Gupta: Now through the rest of the summer season.
Manav Gupta: What I can't predict is whether there will be future wildfires.
Manav Gupta: And where those will occur or when those will occur and what risks there.
Manav Gupta: They would present to our operation.
Manav Gupta: But in terms of what we've seen so far.
Speaker Change: Thanks to the great work by.
Speaker Change: The emergency response services.
They have done a really good job in helping manage that risk for our operations.
Speaker Change: And so we would certainly hope that would continue.
Operator: Perfect. My quick follow-up here is that obviously you return a lot of cash to shareholders.
Speaker Change: Perfect. My quick follow up here is obviously you would have done a lot of cash to shareholders. Sometimes it gets a little bulked up like loss in 2020 to see a lot of it in.
Speaker Change: In the second half so if you do complete this.
Operator: Sometimes it gets a little bulked up, like in 2023, a lot of it is in the second half. So if you do complete this NCIB in the next six months, does that leave the door open for a possible SIB somewhere earlier next year? Generally, you put in SIBs in the latter half of the year, but if you could spread it out, of course, it will depend on the crude prices and cracks, but does it leave the room open for a possible SIB early next year?
Speaker Change: CIB.
Speaker Change: In the next six months does that leave the door open for a possible.
Speaker Change: Some of the earlier next year generally you will put it in Suvs in the later half of the year, but if you could spread it out.
Speaker Change: Of course, it really depend on the crude prices and cracks, but does it leave the room opened for a possible.
Speaker Change: Early next year.
Bradley Corson: Yeah, thanks. Thanks for the question.
Speaker Change: Yeah. Thanks, Thanks for the question.
Daniel Lyons: I'll give you my view on it. Dan may want to add some other comments at the end, but, you know, as you rightly pointed out, our ultimate decision is very much dependent on our surplus cash levels. And that is a function of both our operations, which are going extremely well, but also the external price commodity market, which is outside our control. We all have different views, maybe on what the second half will look like right now. But it looks quite supportive. So those are important factors.
Dan: I'll give you my view on it Dan May want to add some other comments at the end but.
Dan May: As you rightly pointed out.
Dan May: Our ultimate decision is very much dependent on our surplus cash levels and those are a function of both our operations, which are going extremely well, but also the external.
Rice commodity market.
Dan May: <unk> is outside of our control we all have different views maybe on what the second half will look like right now it looks quite supportive.
Dan May: So those are important factors. The other consideration is and we've talked about this in the past.
Daniel Lyons: The other consideration is, and we've talked about this in the past, is that the regulatory processes restrict us from undertaking an NCIB and an SID at the same time. And so one of the reasons that we want to accelerate the NCIB is that it gives us flexibility for future decisions around an SIB. And so, you know, by completing this, some time in the second half of the year, you know, then that gives us flexibility for a future SIB.
Dan May: Is the.
Dan May: The regulatory processes.
Dan May: Restrict us from undertaking and CIB and and at the same time.
Dan May: So one of the reasons that we want to accelerate the CIB.
Dan May: So that gives us flexibility for future decisions around and S. IP.
Dan May: And so.
Dan May: By completing this sometime in the second half of the year P&L then.
Dan May: And then that gives us flexibility.
Dan May: For a future <unk>. The other reason we do it is it allows us to return more surplus cash.
Daniel Lyons: The other reason we do it is it allows us to return more surplus cash, you know, between now and the end of the year versus extending that NCIP into next year. So we will have the flexibility to do an SIB in the first half of the year. We could even have the flexibility to do an SIB before this year is over. But step one is that we have to complete the NCIP first, and that's what we're doing. Dan, anything to add? Thank you. No, no, well...
Dan May: Between now and the year versus extending that and CIP into into next year. So we will have the flexibility.
Dan May: To do an <unk> in the first half of the year, we could even have the flexibility to do an SUV.
Dan May: For this year is over but step one is we have to complete the CIB first and Thats what were doing.
Daniel Lyons: Well said, Brad. And look, you know, we try and the NCIB is simple and efficient. So our practice has been we kind of do that as our first tool. But our overall overarching goal is to return surplus cash in a timely manner. So once we exhaust that tool, we've gone to the SIB historically, and that's exactly where we are today. So we'll see what the commodity markets give us. And, you know, rest assured, our philosophy of returning surplus cash in a relatively timely manner is unchanged. And so we'll accelerate the NCIB. And, as Brad pointed out, that just gives us more flexibility to do an SIB if our cash balances warrant that.
Dan.
Dan May: No well said Brian.
Look.
Speaker Change: We try.
Speaker Change: In CIB is simple efficient so our practice has been we kind of we do that as our first tool.
Speaker Change: But our overall our overarching goal is to return surplus cash in a timely manner. So once we exhaust that tool we've gone to the SIV historically and Thats exactly where we are today. So we'll see what the commodity markets give us.
Speaker Change: Rest assured our philosophy of returning surplus cash.
Speaker Change: In a relatively timely manner is unchanged and so will we accelerated the NCI b and as Bob pointed out that just gives us more flexibility.
Speaker Change: To do an SUV.
Speaker Change: Our cash balances more at that.
Speaker Change: Thank you so much.
Operator: Thank you. Your next question comes from the line of Dennis Fong with CIBC World Markets.
Speaker Change: Thank you your next.
Speaker Change: Next question comes from the line of Dennis Fong with CIBC World markets.
Operator: Hi, good morning, and thanks for taking my questions. The first one, I wouldn't mind digging a little bit more.
Dennis Fong: Hi, good morning, and thanks for taking my questions.
The first one I wouldn't mind digging a little bit more.
Dennis Fong: On the Lemming Redevelopment Program, frankly, it's great to hear you're starting to move forward with the module construction at the facility. I was just hoping to understand how maybe your teams are looking at some of the other projects in the region, Meskwa, Mekisis, and Mohican. Do similar opportunities to redevelop those regions exist? Obviously, I understand Lemming is your first and oldest facility at Cold Lake.
Matt Mckee: On the redevelopment program frankly, it's great to hear you are starting to move forward with the module construction at the facility I was just hoping to understand how maybe your teams are looking at some of the other projects in the region, Matt Mckee.
Speaker Change: <unk> and Mickey can do similar opportunities to redevelop those regions exist, obviously understanding let me answer your first and oldest facility at Cold Lake.
Bradley Corson: Yeah, thanks for the question. I mean, there's lots of considerations, you know, as we progress. These sort of redevelopments, you know, it's a function of, kind of the status of the reservoir, what we see as future potential or remaining potential, what's the best technology to recover that remaining potential, is it economic to transition to a new technology today or do we continue with the existing, but the reality is, you know, we've been producing at Cold Lake for over 40 years now, but there is still a significant resource left to develop and so, you know, our teams are looking at the entire resource base at Cold Lake, looking at what's the most efficient way to recover that resource and that's going to precipitate, you know, future redevelopment opportunities like Lemon and as well as, you know, new opportunities like Grand Rapids and that's what the reservoir team focuses on and, you know, we'll be driven by the economics of those individual, you know, opportunities, so much more to come there, but we do see future opportunities without a doubt.
Speaker Change: Yes, thanks for the question.
Speaker Change: I mean, there's lots of considerations as we progress.
Speaker Change: These sort of redevelopment some it's a function of.
Speaker Change: Kind of the status of the reservoir, what we see as future potential.
Speaker Change: Our remaining potential watts.
Speaker Change: The best Tech.
Speaker Change: Technology to recover that remaining potential is it economic to.
Speaker Change: The transition to a new technology today or do we continue with the existing but.
Speaker Change: The reality is we have been producing.
Speaker Change: At Cold Lake for over 40 years now, but there is still a significant resource left to develop and so.
Speaker Change: Our teams are looking at the entire resource base of Cold Lake looking at what's the most efficient way to recover that resource and thats going to precipitate.
Speaker Change: Now future redevelopment opportunities like lemon and as well as new opportunities like Grand Rapids.
Speaker Change: That's what the reservoir team focuses on.
Speaker Change: And we'll be driven by the economics.
Speaker Change: Of those individual.
Speaker Change: <unk> opportunity.
Opportunity so so much more to come there, but we do see.
Speaker Change: Future opportunities without a doubt.
Dennis Fong: Great. I appreciate that call over here, Brad.
Speaker Change: My second question is a bit of a follow up to <unk> question there.
Dennis Fong: My second question is a bit of a follow-up to Manav's question there and is just around cash positions and cash levels. Obviously, understanding last year, at the end of last year, there were specific reasons that you drove towards, we'll call it, a lower cash position at the end of 2023. Can you talk about some of your comfort levels around holding certain levels of cash now that some of the, we'll call them, major projects, whether it be the completion of Grand Rapids Phase 1, or kind of some of the ramp down and spending on a renewable diesel facility, and in conjunction with the stronger operational performance that you're seeing across your assets? How does that maybe speak to your comfort levels with holding cash in aggregate, and at what levels do you feel most comfortable just looking forward?
Speaker Change: Is just around.
Speaker Change: <unk> cash position and cash levels, obviously understanding last year at the end of last year. There were specific reasons that neutral towards we'll call. It a lower cash position at the end of 2023 can you talk towards some of your comfort levels around holding certain levels of cash.
Speaker Change: Now that some of the we'll call it major projects, whether it be the completion of Grand Rapids phase, one or kind of some of the ramp down in spending on the renewable diesel facility and in conjunction to the stronger operational performance that you're seeing across your assets, how does that maybe speak towards your comfort levels on holding cash in aggregate and at what levels.
Speaker Change: You feel most comfortable just looking forward.
Daniel Lyons: Yeah, you're right. We had a relatively lower cash balance at the end of the year than we had in some prior years. And we felt comfortable with that balance. You know, we don't have an explicit cash target, you know, so it really is. So, you know, we have borrowing capacity if we ever need it. We have plenty of operating cash flow. So, you know, we're not looking to carry a whole lot of cash on our balance sheet. We figure investors want that back. And that's really our philosophy. And that's unchanged.
Speaker Change: Yes.
Speaker Change: Youre right, we had relatively lower cash balance at the end of the year.
Speaker Change: We've had some prior years and we felt comfortable with that balance sheet and we don't have an explicit cash target.
Speaker Change: So.
Speaker Change: It really.
Speaker Change: So we have borrowing capacity, if we ever needed. It we have plenty of operating cash flow. So we're not looking to carry a whole lot of cash in our balance sheet, we figure investors want that back and that's really our philosophy and that's unchanged. So theres.
Daniel Lyons: So, you know, there's no magic number. You can do the math. We have X. We have X on our balance sheet. So we're going to do an SIV. But, you know, our goal is to do SIVs when we have surplus cash and we've exhausted the NCIB to do those at a reasonable size and a reasonable time frame. So that'll be a call we make, you know, as our cash balances progress, as the year progresses, as we get into next year. Sorry, I can't give you a number, but we don't really have one, but we felt comfortable with last year's balance. So maybe that's a good marker for you. Great.
Speaker Change: There is no magic number where you can do the math, we have excellent we have Exxon our balance sheet and return so we're going to do in house IP, but.
Speaker Change: Our goal is to use <unk> when we have when we have surplus cash we exhausted the NCI to do that.
Speaker Change: Those at a reasonable size in a reasonable timeframe, so that'll be a call we make as our cash balances progress as the year progresses as we get into next year, sorry, I can't give you a number but we don't really have one but we felt comfortable of last year's balance. So maybe that's a marker for you.
Dennis Fong: Great, I appreciate that there, Dan. I'll turn it back.
Speaker Change: Okay.
Operator: Thank you. Your next question comes from the line of Neal Mehta with Goldman Sachs.
Speaker Change: Thank you. Your next question comes from the line of Neil Mehta with Goldman Sachs.
Operator: Good morning, team, and thank you for taking my questions. This is Adam Wajiah speaking on behalf of Neil Mehta.
Adam <unk>: Good morning team and thank you for taking my questions. This is Adam <unk> on for Neil Mehta I wanted to start on <unk>. It looks like a pretty good update there with the main reactor installed and understand that first volumes from the asset or maybe a little bit more longer dated from where we are today, but more broadly the rd margin environment looks to be a bit tougher I wanted to give the teams.
Operator: I wanted to start on Strathcona. It looks like a pretty good update there with the main reactor installed. I understand that the first volumes from the asset are maybe a little bit more longer-dated from where we are today, but more broadly, the RD margin environment looks to be a bit tougher. So I wanted to get the team's thoughts on current margins and what it's going to take to see an inflection in margins.
Speaker Change: <unk> current margins, what's going to take to see an inflection in margins and then maybe where youre seeing the greatest signs of demand strength as you kind of look over the next 12 to 18 months.
Bradley Corson: Yeah, thanks for the question. I think it is important to distinguish, you know, the market that we see and the economic drivers for us relative to maybe what you are seeing in other places like the US. You know, for us, first of all, we continue to see this as a highly economic project, and it's underpinned by some very unique strategic synergistic kind of elements that we have available to us.
Speaker Change: Yes. Thanks for the question I think it is.
Speaker Change: Important to <unk>.
Speaker Change: Distinguish.
Speaker Change: The market that we see in the economic drivers for us relative to maybe what you are seeing in other regions like in the U S.
Speaker Change: For for US first of all we continue to see this as a highly economic project.
Speaker Change: And it's underpinned by some very unique.
Speaker Change: Strategic synergistic.
Speaker Change: Kind of elements.
Speaker Change: We have available to us.
Bradley Corson: You know, we're building this renewable diesel facility integral to our Strathcona refinery, which brings significant economies of scale for us as we can leverage the infrastructure, the operation that already exists today. Secondly, we've designed this facility to process agricultural feedstocks, oils that are available. In the general area, we're sourcing from, you know, crops and farms that are relatively close. So there are not significant transportation costs. And we'll be producing a product that has some other technical advantages, such as being a drop in fuel that has properties that allow it to be used across a wide range of temperature conditions.
Speaker Change: Significant economies of scale for us as we can leverage the infrastructure the operation that already exists today.
Speaker Change: Secondly, we've designed this facility.
Speaker Change: <unk> process.
Speaker Change: <unk>.
Speaker Change: In the general area, we're sourcing from.
Speaker Change: <unk>.
<unk> and farms that are relatively close so theres not significant transportation.
Speaker Change: Costs.
Speaker Change: And we will be producing a product.
Speaker Change: That has some other technical advantages that it can be a drop in fuel that.
Speaker Change: That has.
Speaker Change: Properties that allow it to to be used across a wide range of.
Speaker Change: Temperature conditions, and so it can be blended up to a very high rate or even a 100% drop and all that brings advantages to the product and the value of that product and then on top of that.
Bradley Corson: And so it can be blended up to a very high rate or even 100% drop. All that brings advantages to the product and the value of that product. And then on top of that, you know, what is also unique versus what you see in the US is the regulatory environment that we have here, the clean fuels regulation, and the economic support that that provides. Also, in British Columbia, there are some additional regulatory incentives. So all of those things together put us in a different but similar
Speaker Change: What is also unique versus what you've seen in the U S.
Speaker Change: Is the <unk>.
Speaker Change: Regulatory environment that we have here.
Speaker Change: The clean fuels regulation.
The economic support that that provides also in British Columbia, there was some additional.
Speaker Change: Regulatory incentives so all of those things together.
Speaker Change: US in a different but much better place than what you might see in.
Speaker Change: In the U S. So again, we feel quite good about it.
Operator: Got it, that's super helpful. And maybe just shifting gears over to chemicals for a moment and the margin environment, what are you seeing in your own system from a demand standpoint, specifically on margins? And then how do you think about the supply-demand landscape evolving over the next couple of years with some global supply as expected? Thank you.
Got it that's super helpful and maybe just shifting gears over to chemicals for a moment and the margin environment. What are you seeing in your own system from a demand standpoint, specifically on margins and then how do you think about the supply demand landscape evolving over the next call. It couple of years with some global supply as expected. Thank you.
Bradley Corson: Yeah, you know, we're seeing Obviously some strong performance out of our chemicals business, generally flat with what we saw a year ago, but still quite material to us. We've seen continued strength and demand, some strengthening of polyethylene realizations, you know, which have been at somewhat depressed levels for a while, driven by global supply and demand fundamentals. You know, we are seeing that strengthening as we come out of this cycle.
Speaker Change: Yes.
Speaker Change: We are seeing.
Speaker Change: Obviously, some some strong performance out of our chemicals business.
Speaker Change: Generally.
Speaker Change: But still quite material to us.
Speaker Change: Yes.
Speaker Change: We've seen.
Speaker Change: Continued strength in demand some strengthening.
Speaker Change: <unk>.
Speaker Change: Of.
Speaker Change: Polyethylene realizations, which have been.
Speaker Change: Somewhat.
Speaker Change: Depressed levels for a while driven by global supply demand fundamentals.
Speaker Change: We are seeing that strengthening as we come out of this cycle.
Speaker Change: Probably equally importantly are the strategic advantages, we have of our chemicals business.
Bradley Corson: But probably equally important are the strategic advantages we have in our chemicals business, recognizing that it is integral to our Sarnia refinery, which may be somewhat analogous to what I just talked about with renewable diesel at Strathcona. You know, the chemical plant is integral. We benefit from economies of scale with Sarnia access to off gas from the refinery. We have an available ethylene supply to us in the region. And we produce a premium product with a unique customer base in close proximity.
Speaker Change: <unk>, it's integral to our Sarnia refinery, which maybe somewhat analogous to what I just talked about with renewable diesel that stress Kona.
Speaker Change: Chemical plant is integral we benefit from.
Speaker Change: Economies of scale with Sarnia access too.
Speaker Change: The off gas from the refinery.
Speaker Change: We have available ethylene supply to us in the region and we produce a premium product.
Speaker Change: With our unique customer base in close proximity. So we don't have significant transportation logistics to get to our customers. So again all of that leads to a strong.
Bradley Corson: So, you know, we don't have significant transportation logistics to get to our customers. So, again, all that leads to a strong chemicals business for us, which has demonstrated its resilience over, you know, kind of the full cycle that we see globally.
Speaker Change: Chemicals business for us.
Which has demonstrated its resilience over.
Speaker Change: Kind of the full cycle that we see globally.
Speaker Change: Got it thanks, so much.
Operator: Your next question comes from the line of Doug Leggat with Wolf Research.
Speaker Change: Your next question comes from the line of Doug Leggate with Wolfe Research.
Speaker Change: Okay.
Operator: Hey, good morning guys. Thanks for having me on.
Doug Leggate: Hey, good morning, guys. Thanks for thanks for having me on how are you doing Brian.
Operator: I'm doing well, John. Welcome back. Thank you.
Brian: Well welcome back.
Operator: I'd love to say that garden leave is a thing. It turns out it's a nightmare, but we talk about that some of the time. Anyway, two quick questions, if I may. I wanted to ask you, I know Carol has been kind of beaten to death for a while, but you guys have been knocking it out of the park for several years. I want to understand the maintenance scheduling, what role that plays in the potential, I don't want to call it de-bottlenecking, but the ability to enhance long-term production capacity.
Brian: Thank you.
Speaker Change: I'd Love to say that garden leave is a thing it turns out it's a nightmare, but talk a bit about some of the time.
Speaker Change: Anyway, two quick questions. If I may I wanted to ask you your bag and <unk>.
Speaker Change: <unk> has been kind of beaten to death for a while but you guys have been knocking at the park.
Speaker Change: Several years.
Speaker Change: I wanted to understand what the maintenance scheduling.
Speaker Change: Rollout please.
Speaker Change: Potential I don't want to call it debottlenecking, but to enhance the long term production capacity, we've seen obviously youre.
Operator: We've seen that one of your competitors obviously changed their maintenance scheduling to instead of once every year, once every couple of years. What have you guys been doing there, and what role is that playing in changing production capacity? My follow-up is a quick one for Dan. I just wonder, with everything that's going on today coming out of maintenance, Dan, where would you say your dividend break-even is today? And those are my two questions for you today.
Speaker Change: On your one of your competitors, obviously changed their maintenance drilling instead of once every year when it could be a couple of years. What have you guys been doing there and what role is up playing changing the production capacity. My follow up is a quick one for Dan I, just wonder with everything Thats going on today coming out of maintenance Danbury reduce where would you say your dividend breakeven.
Speaker Change: As today and those are my two questions. Please go ahead.
Bradley Corson: All right. Thanks. Thanks, Doug.
Speaker Change: Alright, thanks, Thanks, Doug.
Speaker Change: I'm inferring that your question around kind of turnarounds.
Bradley Corson: And I'm inferring that your question around the kind of turnarounds is mainly applicable to curl. Yeah. And but if not, let me know.
Speaker Change: Is mainly applicable to hurdle.
Ann: Yes Ann.
Ann: But if not let.
Bradley Corson: Okay. So for CURL, this has been a significant focus of ours. And I think an area where we are a leader in this space. If you go back to 2021 at CURL, and prior to that, we were typically having two turnarounds per year, which would be one on each train. And they were roughly an average of 35 days each, so about 70 days of turnaround activity. Subsequent to that, in the 2021-2022 timeframe, we.., um, we were able to demonstrate to ourselves that we could shift from two turnarounds a year to one turnaround a year. And that obviously allowed us to reduce our volume impacts of turnarounds by half and also significantly reduce our cost structure at Curl.
Ann: Let me now okay. So for apparel.
This has been a significant focus of ours and I think an area that.
Ann: We are a leader in this space if you go back.
Speaker Change: So 2021 at curdle and prior to that we were typically having two turnarounds per year, which would be one on each train and they were roughly an average of 35 days each so about 70.
Speaker Change: Days of turnaround activities.
Speaker Change: Subsequent to that in the 'twenty, one 'twenty two time frame.
Speaker Change: We're able to demonstrate to ourselves that we could shift from two turnarounds a year to one turnaround per year.
Speaker Change: <unk>.
Speaker Change: And that obviously allowed us to reduce our volume impacts of turnarounds.
Speaker Change: In half.
Speaker Change: And also significantly reduce our cost structure at Kearl that now that we have a few years of run time on that has proven very successful for us.
Bradley Corson: Now that we have a few years of runtime on it, it has proven very successful for us. And every time we do one of those turnarounds on an extended basis, it further validates the decision we took and our ability to maintain the full integrity and reliability of the system, but with less downtime.
Speaker Change: And every time, we do one of those.
Speaker Change: Turnarounds on an extended interval.
Speaker Change: It further validates.
Speaker Change: <unk>.
Speaker Change: The decision we took in our ability to maintain the full integrity reliability of the system, but with less downtime.
Bradley Corson: And we further now have employed more technology, you know, more opportunities, to take that one turnaround per year and now shorten it to less than 20 days. And that's what I was referring to in my earlier comments about how we've now achieved essentially a 19 day turnaround, which is our only turnaround for the year. And you compare that to a few years ago when we had 70 days per year. So 70 to 19, a huge improvement in our overall production capability, and a huge improvement in our cost structure. And I would just say we're not done yet.
Speaker Change: And we further now have employee or technology.
Speaker Change: More opportunities to take that one turnaround per year and now shorten it to less than 20 days.
Speaker Change: And Thats, what I was referring to in my earlier comments about we've now achieved essentially a 19 day turnaround.
Speaker Change: Which is our only turnaround for the year and you compare that to a few years ago. When we had 70 days per year. So 70 to 90 <unk> huge.
Speaker Change: And our overall product production capability huge improvement in our cost structure and I would just say we're not done yet we are now the team is actively working on further opportunities to reduce the duration of our turnarounds.
Bradley Corson: You know, the team is actively working on further opportunities to reduce the duration of our turnarounds, and so I'm quite encouraged by that. And all that, of course, then translates to more production from Curl. It's part of our roadmap that's got us to 280 for this year, and we expect to reach 300 in future years. It's allowing us to reduce our cost structure from the high 20s U.S. dollars per barrel down to a target of 20 dollars this year.
Speaker Change: And so I'm quite encouraged by that and all of that of course, then translates to more production from Carl It's part of our roadmap that's got us to $2 80.
Speaker Change: For this year and we expect to 300.
Speaker Change: In future years, it's allowing us to reduce our cost structure from the high Twenty's U S dollar per barrel.
Speaker Change: To a target of $20. This year and we believe there is an opportunity to go even lower.
Bradley Corson: And we believe there's an opportunity to go even lower than 20 dollars. So, huge value at Curl. And I think that's a great lead in to Dan to talk about, you know, what that means about break evens and dividends and all that sort of stuff.
Speaker Change: Then $20 so.
Speaker Change: Huge value at Kearl.
Speaker Change: And I think that's a great lead in to Dan to talk about what does that mean about breakeven dividends and all that sort of thing.
Daniel Lyons: Yeah, so Doug, I heard you say dividend. What was your specific question about the dividend?
Dan May: Yes, so Doug just I heard you say dividend what was your specific question about the dividend.
Douglas Leggate: Yeah, basically, I don't know if you've got a chance to look at our reinstatement materials, but there's an extraordinary correlation or market recognition of value with long-term sustainable dividend growth on a per share basis. And you guys have, you've led, I don't want to make the pitch here, but you've led the whole industry, not just your Canadian peers but the global majors. However, the big difference is you've still got a relatively low yield, and we think you have a lot of firepower to sustain that dividend growth relative to peers that maybe don't have it, right?
Dan May: Yes, so basically.
Speaker Change #100: I don't know if <unk> got a chance to look at our reinstatement materials, but those extraordinary correlation or market recognition of value with long term sustainable dividend growth on a per share basis.
Speaker Change #101: You guys have you have led I don't want to make the pitch here, but you've led the whole industry not just your Canadian peers, but the global majors.
Speaker Change #102: However, the big differences, you've still got a relatively low yield we think a lot of firepower to sustain that dividend growth relative to peers that maybe don't hop right. So what I'm trying to figure out is where do you see your dividend breakeven today. So that we can kind of put a hand get a handle on what the sustain.
Douglas Leggate: So, what I'm trying to figure out is where you see your dividend break even today, so that we can kind of get a handle on what the sustainable growth capacity continues to be for Imperial, because ultimately, that's what we think drives your share price. So I hope that's a clear enough articulation of the question.
Peter Shah: <unk> growth capacity continues to be from Peter because ultimately that's what we think drives your share price.
Speaker Change #102: All of that is accrued enough.
Speaker Change #103: Articulation of the question yes.
Daniel Lyons: You know, as we've said before, our breakeven with sustaining capital and dividend, you know, for our last investor day, was about $35 US WTI. And you know, as you well stated, our philosophy is to have a reliable and growing dividend. And, you know, both of those are important. We really want to continue to grow it strongly as we have in the past. You know, when I got here, I think the dividend was $0.16 a share; now it's $0.60.
Peter Shah: Yes.
Speaker Change #104: There as we've said before our breakeven with sustaining capital and dividend.
Speaker Change #104: For our last Investor day about 35 of our U S. W. Ti.
Speaker Change #104: No.
As you well stated.
Speaker Change #105: R R.
Speaker Change #104: Philosophy is to have reliable and growing dividend.
Speaker Change #104: And.
Speaker Change #104: Both of those are important we will we want to.
Speaker Change #106: <unk> to grow as strongly as we had in the past.
Speaker Change #106: Here I think the dividend was <unk> 16, a share now at 60, So we've had some strong growth.
Daniel Lyons: So we've had some strong growth, but it's important that that growth be sustainable. And, you know, we look at breakeven closely, we look at various scenarios. But I think, you know, and certainly we believe we have room for continued strong growth. And it goes to, really, what Brad was saying, how do we do that?
Speaker Change #106: But it's important that that growth be sustainable and we look at the breakeven closely we look at various scenarios, but I think.
Brad Corson: And certainly we believe we have room for continued strong growth and it goes to really what Brad was saying how do we do that well, it's supported by stronger structural free cash flow in and that comes from volume growth and that comes from lower unit Opex right and we're working both of those hard.
Daniel Lyons: Well, it's supported by stronger structural free cash flow, and that comes from volume growth. And that comes from lower unit op-eds, right, and we're working both of those hard. And as our plans come to fruition, that just supports further dividend growth in the future. So, you know, we had a significant increase earlier this year. And as we go through time, we can continue to look at that in the context of our business and hope to show continued growth and, very importantly, sustainable growth.
And as our plans come to fruition that just supports further dividend growth in the future. So.
Speaker Change #107: We had a significant increase.
Speaker Change #107: Earlier this year.
Speaker Change #108: And as we go through time, we will continue to look at that in the context of our business and.
Speaker Change #108: And hope to show continued growth and very importantly, sustainable growth.
Douglas Leggate: So right around $35 is the answer, Dan, for the current level.
So right around 35 <unk> for the current level.
Daniel Lyons: Yeah, well, that's the most recently disclosed level in our investor day, you know. When we do our next investor day, we'll, you know, put out the most current number, but but, you know, that's, that's a good ballpark number to work with, certainly. Tremendous.
Speaker Change #108: Yes, well that's that's.
Speaker Change #108: Most recently disclosed level in our Investor day, when we do our next Investor Day, we'll put out the most current number but that's that's that's a good ballpark number to work with certainly.
Douglas Leggate: Tremendous. Thanks very much indeed, guys. I appreciate you taking the time to answer my questions.
Speaker Change #109: Tremendous thanks, very much indeed, guys I appreciate you taking my questions.
Peter Shaw: This does conclude today's question and answer session. I would now like to turn the call back to Peter Shaw for any additional or closing remarks.
Speaker Change #109: This does conclude today's question and answer session I would now like to turn the call back to Peter Shah for any additional or closing remarks.
Peter Shaw: Thank you. On behalf of the management team, I would like to thank everyone for joining us this morning. As always, if anyone has further questions, please don't hesitate to reach out to the investor relations team, and we'd be happy to answer those questions. And with that, we thank you very much, and we hope you enjoy the rest of your day and the weekend.
Thank you on behalf of the management team I would like to thank everyone for joining us this morning.
Peter Shah: As always if anyone has further questions. Please don't hesitate to reach out to the Investor relations team and wed be happy to answer those questions and with that we thank you very much and we hope you enjoy the rest of your day and the weekend. Thank you.
Operator: This does conclude today's call. Thank you for your participation. You may now disconnect.
Peter Shah: This does conclude today's call.
Speaker Change #110: Thank you for your participation you may now disconnect.
Speaker Change #110: Yeah.
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