Q1 2025 Cenovus Energy Inc Earnings Call

Operator: Good morning, ladies and gentlemen. Thank you for standing by and welcome to Cenovus Energy's first quarter 2025 results conference call. At this time, all participants are on a listen-only mode.

Okay.

Speaker Change: Good morning, ladies and gentlemen, thank you for standing by.

Speaker Change: Annapolis and achieved first quarter 'twenty 25 results conference call.

Speaker Change: At this time all participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. As a reminder, this call is being recorded.

Speaker Change: After the Speakers' presentation, there'll be a question and answer session.

Speaker Change: I ask a question during the session you will need to press star one one on your telephone.

Speaker Change: This call is being recorded.

Patrick Reed: I would now like to turn the meeting over to Mr. Patrick Reed, Vice President, Vestal Relations and Internal Audit. Thank you, operator. Good morning, everyone, and welcome to Cenovus's 2025 First Quarter Results Conference Call. On the call this morning, our CEO, John McKenzie, and CFO, Kam Sandhar, will take you through our results. Then we'll open the line for John, Kam, and other members of the Cenovus management team to take your questions.

Speaker Change: I would now like to turn the meeting over to Mr. Patrick Reed, Vice President Investor Relations and internal audit.

Speaker Change: Go ahead, Mr. Reid.

Speaker Change: Thank you operator.

Speaker Change: Good morning, everyone and welcome to Synovus is 2025 first quarter results conference call.

Speaker Change: On the call. This morning are CEO, Jon Mckenzie and CFO Cam Sundar will take you through our results.

Speaker Change: Then we'll open the line for John Kamm, and other members of the Synovus management team to take your questions.

Patrick Reed: Before getting started, I'll refer you to our advisories located at the end of today's news. These describe the forward-looking information, non-GAP measures, and oil and gas terms referred to today. They also outline the risk factors and assumptions relevant to this discussion. Additional information is available in Cenovus' annual MD&A and our most recent AIF and Form 40F. And as a reminder, all figures we referenced on the call today will be in Canadian dollars unless otherwise noted.

Speaker Change: Before getting started I'd refer you to our advisories located at the end of today's news release.

Speaker Change: These describe the forward looking information non-GAAP measures and oil and gas terms referred to today.

Speaker Change: They also outline the risk factors and assumptions relevant to this discussion.

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

Speaker Change: And as a reminder, all figures we referenced on the call today will be in Canadian dollars unless otherwise noted.

Operator: You can view our results at cenovus.com.

Speaker Change: You can view our results at Synovus dotcom.

Patrick Reed: For question and answer portion of the call, please keep to one question with a maximum of one follow up. You're welcome to rejoin the queue for any other follow-up questions you may have. We also ask that you hold off on any detailed modeling questions. You can follow up on those directly with our investor relations team after the call.

Speaker Change: For question and answer portion of the call. Please keep to one question with a maximum of one follow up.

Speaker Change: Youre welcome to rejoin the queue for any other follow up questions you may have.

Speaker Change: We also ask that you hold off on any detailed modeling questions. You can follow up on those directly with our Investor relations team after the call.

John Mckenzie: I will now turn the call over to John. John, please go ahead. Good morning, everybody.

Speaker Change: I will now turn the call over to John John. Please go ahead.

John Kamm: Thank you Patrick good morning, everybody.

John Mckenzie: Just before we get started on our first quarter performance, I'd like to take a moment to recognize some of our great people who have accomplished great things, while also ensuring we do it the right way, protecting our people and our assets. For example, on West White Rose, we have now worked over 27 million hours with a total recordable incident frequency of 0.18. This is exceptional performance by any measure, and a clear example of how we'll continue to ensure that all of our workers return home safely each and every day.

John Kamm: Just before we get started on our first quarter performance I'd like to take a moment to recognize some of them are great people.

John Kamm: <unk> great things, while also ensuring we do it the right way protecting our people <unk>.

John Kamm: For example on West White Rose, we have now worked over 27 million hours with a total recordable incident frequency of 0.18. This is exceptional performance by any measure and a clear example of how we will continue to ensure that all of our workers return home safely each and every day.

John Mckenzie: As another example of our safety programs at work, we've instituted a program on drop top object prevention across our company. This program focuses on planning, hard barriers, and work controls to reduce the risk of dropped objects. We have seen the impacts of this program and how our work is performed, mitigating risks across our business through the commitment and dedication of our people in the field.

John Kamm: As another example of our safety programs and work we've instituted a program on dropped off object prevention across our company.

John Kamm: Our program focuses on planning hard barriers and work controls to reduce the risk of dropped objects.

John Kamm: We have seen the impacts of this program and how our work is performed mitigating risks across our business through the commitment and dedication of our people in the field.

John Mckenzie: At Cenovus, occupational and process safety is ingrained in our culture and our values.

John Kamm: At Synovus occupational and process safety is ingrained in our culture and our values.

John Mckenzie: So now turning to our results. Our focus in 2025 is on flawlessly operating the base business, building momentum in the downstream. Delivering on our growth projects and maintaining our focus on cost structure. Upstream production in the quarter was 819,000 BOE per day, highlighted by yet another impressive result from our oil sands business. At Christina Lake, production was 238,000 barrels per day, and we have completed the Narrows Lake project, which connects to the Christina Lake plant and are now running steam through a tieback pipeline and injecting steam into the first two well pads. First oil from Narrows Lake is expected early in the third quarter as planned.

John Kamm: So now turning to our results.

John Kamm: Our focus in 2025 is on flawlessly operating the base business building momentum in the downstream.

John Kamm: Delivering on our growth projects and maintaining our focus on cost structure.

John Kamm: Upstream production in the quarter was 819000 Boe per day highlighted by yet another impressive result from our oil sands business.

John Kamm: At Christina Lake production was 238000 barrels per day, and we have completed the narrows Lake project, which connects to the Christina Lake plant.

John Kamm: And are now running stands for a tieback pipeline and injecting steam into the first two well pads.

John Kamm: First oil from Narrows Lake is expected early in the third quarter as planned.

John Mckenzie: With first production on the way, let me take a moment to talk about what makes this project so special and unique. What we've done at Narrows Lake is a real feat of engineering, and I'm incredibly proud of the technical and operational staff who have made this possible. At 17 kilometers long, the Mares Lake tieback is the longest steam line ever started up in the oil sands industry. It allows us to access some of the best reservoir in the basin at a fraction of the cost of building a new plant. Over their producing lives, these first well pads at Narrows are expected to have cumulative steam well ratios well below two, and the best wells are expected to produce at peak rates of over 3,000 barrels per day.

John Kamm: With first production on the way, let me take a moment to talk about what makes this project so special and unique.

John Kamm: What we've done at Narrows Lake is a real feat of engineering and I'm incredibly proud of the technical and operational staff, who have made this possible.

John Kamm: At 17 kilometers long the narrows Lake tie back is the longest steam line ever started up in the oil sands industry. It allows us to access some of the best reservoir in the basin at a fraction of the cost of building a new plant.

John Kamm: Over there producing lives. These first well pads at narrows or expected to have cumulative steam oil ratios well below two and the best wells are expected to produce at peak rates of over 3000 barrels per day.

John Mckenzie: These are some of the longest and most productive wells in our industry, showcasing our technical and operating capability. We have now drilled the first five well pads at Narrows Lake. After bringing the first two well pads on, we'll begin steaming the third later this year with two more to follow in 2026. At Christina Lake, we already have the lowest steam-oil ratio in the industry today, and with the tying of Narrows Lake, this will decrease further. By using steam more efficiently, we'll drive the SOR down and increase production by about 20,000 barrels per day.

John Kamm: These are some of the longest and most productive wells in our industry showcasing our technical and operating capability.

John Kamm: We have now drilled the first five well pads at Narrows Lake after.

John Kamm: After bringing the first two well pads on will begin steaming. The third later this year with two more to follow in 2026.

John Kamm: At Christina Lake, we already have the lowest steam oil ratio in the industry today, and where the narrows time, whereas the tying of narrows Lake This will decrease further.

John Kamm: By using stay more efficiently will drive the S word down and increase production by about 20000 barrels per day.

John Mckenzie: This is the first of our major growth projects that we'll be bringing on over the coming year, marking an important milestone for the company. Outside of Christina Lake, performance at Foster Creek continues to be exceptional with production of 203,000 barrels a day over the quarter. This was the result of new well pads drilled into very high quality reservoir, coupled with a successful redevelopment and optimized program. Foster Creek is now undergoing a turnaround that began in mid-April, and we're making excellent progress on the turnaround. We're already bringing back production to around 170,000 barrels a day, with the remainder of the volumes expected to be back before the end of May.

John Kamm: This is the first of our major growth projects.

John Kamm: We will be bringing on over the coming year, marking an important milestone for the company.

John Kamm: Outside of Christina Lake performance at Foster Creek continues to be exceptional with production of 203000 barrels a day over the quarter.

John Kamm: This was a result of new well pads drilled into very high quality reservoir, coupled with a successful redevelopment and optimize program.

John Kamm: Foster Creek is now undergoing a turnaround that began in mid April and we're making excellent progress on the turnaround.

John Kamm: Bringing back production to around 170000 barrels a day with the remainder of the volume is expected to be back before the end of May.

John Mckenzie: During the turnaround, we're completing some of the tie-ins as part of the optimization project that will add four new steam generators and around 80,000 barrels a day of steam capacity. This will be the first new steam capacity added at Foster Creek since 2016, enabling us to bring forward high quality resource that will add 30,000 barrels a day of production. The project is now 75% complete and on track for first oil in early 2026. At sunrise, production averaged about 52,000 barrels a day in the quarter. In April, we brought on the fourth and final well pad from our first well package since acquiring this asset.

John Kamm: During the turnaround we are completing some of the tie ins as part of the optimization project that will add four new steam generators and <unk>.

John Kamm: 80000 barrels a day of steam capacity.

John Kamm: This will be the first new steam capacity added at Foster Creek since 2016, enabling us to bring forward high quality resource that will add 30000 barrels a day of production.

John Kamm: Project is now 75% complete and on track for first oil in early 2026.

John Kamm: At Sunrise production averaged about 52000 barrels a day in the quarter in April we brought on the fourth and final well pad from our first well package since acquiring this asset.

John Mckenzie: And we've now completed the first phase of our growth program, which was focused on the central development area. Now, starting in May, we'll be commencing on the first of two turnarounds at sunrise this year in preparation for bringing on the next phase of well pads from the east development area. This will move us into some of the highest quality reservoir in the portfolio and will allow us to fully optimize the steam capacity, leveraging new Cenovus well and completion designs. That means lower SORs and higher production as we bring those well pads on starting in early 2026.

John Kamm: And we've now completed the first phase of our growth program, which was focused on the central development area.

John Kamm: So starting in May we will we will be commencing on the first of two turnarounds at Sunrise. This year in preparation for bringing on the next phase of well pads.

John Kamm: From the East development area.

John Kamm: Chris will move us into some of the highest quality reservoir in the portfolio.

John Kamm: Allow us to fully optimize the steam capacity, leveraging new synovus, well and completion designs that means lower <unk> and higher production as we bring those well pads on starting in early 2026.

John Mckenzie: In the offshore segment, Atlantic volumes were higher quarter over quarter as we saw increased rates from Terra Nova and the White Rose Field returned to production in March. Now, most importantly, the West White Rose Project continues to make great progress. The gravity or concrete gravity structure is ready to leave the graving dock and will begin tow to Arnold's Cove in the next few days. That is where the dry ballasting will be completed before we move the structure to the White Rose Field location in June. The top sides are also being prepared for sail out to the field with the transportation vessel now on site in Ingleside.

John Kamm: In the offshore segment Atlantic volumes were higher quarter over quarter as we saw increased rates from turnover in the west or sorry, the white rose field returned to production in March.

John Kamm: Now most importantly, the west White Rose project continues to make great progress the gravity or concrete gravity structure is ready to leave the graving dock and will begin tullow to earnings calls over the next few days that is where the dry balanced and will be completed before we move the structure to.

John Kamm: The white rose field location in June.

John Kamm: The top sides are also being prepared for sale out to the field with transportation vessel, where the transportation vessel now on site and Ingleside.

John Mckenzie: We'll bring these two major components together for installation this summer, which will position us to commence drilling from the platform before the end of the year and achieve first oil in the second quarter of 2026.

We will bring these two major components together for installation this summer, which will position us to commence drilling from the platform before the end of the year and achieve first oil in the second quarter of 2026.

John Mckenzie: In the downstream, Canadian refining performance was exceptionally strong with record quarterly throughput and utilization rate of 104%. We're certainly seeing the benefit of improvements we've made during the upgrader turnaround last year, and we expect that business to continue to perform well despite narrow light heavy differential. In the U.S., we're continuing to build momentum in our operating performance, highlighted by strong throughput, lower costs, and better process unit reliability in our operated assets. Our Toledo refinery is currently undergoing major turnaround, including maintenance on eight units within the refinery, eight major units within the refinery, including the smaller of the two crude units.

John Kamm: Okay.

John Kamm: In the downstream Canadian refining performance was exceptionally strong with record quarterly throughput and utilization rate of 104%.

John Kamm: We're certainly seeing the benefit of improvements we've made during the upgrader turnaround last year, and we expect that business to continue to perform well despite narrow light heavy differentials.

John Kamm: In the U S. We're continuing to build momentum in our operating performance highlighted by strong throughput lower cost and better process unit reliability in our operated assets.

John Kamm: Our Toledo refinery is currently undergoing major turnaround, including maintenance on eight units within the refinery major units within the refinery, including the smaller of the two crude units. This work will help to drive a step change in performance going forward.

John Mckenzie: This work will help to drive a step change in performance going forward. Turnarounds at both our non-operated refineries, which began in the first quarter, are also now complete. With crack spreads improving and our Toledo turnaround wrapping up this quarter, we expect to see a clear runway for our U.S. refining business to deliver higher performance through the second half of this year.

John Kamm: Turnarounds are both are operated and.

John Kamm: Non operated refineries, which began in the first quarter are also now complete.

John Kamm: With crack spreads improving in our Toledo turnaround wrapping up this quarter, we expect to see a clear runway for our U S refining business to deliver higher performance through the second half of this year I'll now turn it over to Kam to walk through the financial results.

Kam Sandhar: And I'll turn it over to Kam to walk through the financial results. Thanks, John. Good morning, everyone. In the first quarter, we generated $2.8 billion of operating margin and approximately $2.2 billion of adjusted funds flow. Operating margin in the upstream was around $3 billion, an increase of approximately $380 million from the fourth quarter, driven by our strong operating performance and higher sales. Our business continues to significantly benefit from narrow heavy oil differentials since the TMX pipeline came into service last year. Oil sands non fuel operating costs were $8.92 per barrel in the first quarter, as we continue to deliver some of the lowest cost production in the basin.

Kam: Thanks, John Good morning, everyone.

Kam: In the first quarter, we generated 2.2 dollars 8 billion of operating margin at approximately $2 2 billion of adjusted funds flow.

Kam: Operating margin in the upstream was around $3 billion, an increase of approximately $380 million from the fourth quarter, driven by our strong operating performance and higher sales volumes.

Kam: Our business continues to significantly benefit from narrow heavy oil differentials since the <unk> pipeline came into service last year.

Kam: Oil sands non fuel operating costs were $8 92 per barrel in the first quarter as we continue to deliver some of the lowest cost production in the basin.

Kam Sandhar: In the downstream, an operating margin shortfall of approximately $240 million reflected seasonally low Chicago crack spreads as well as the tighter heavy oil difference. Our downstream operating margin also included $26 million of inventory losses and $81 million of turnaround expenses in the quarter. In a Canadian refining, our operating margin was $68 million, up $21 million from the prior quarter despite a nearly $4 per barrel decrease in the upgrading differential. Operating costs in the Canadian refining business were $10.81 per barrel also down around 12% relative to Q4 excluding turnaround costs. We are also pleased with the progress we made in the first quarter in the U.S.

Kam: In the downstream and operating margin shortfall of approximately $240 million reflected seasonally low Chicago crack spreads as well as the tighter heavy oil differentials.

Kam: Our downstream operating margin also included $26 million of inventory losses, and $81 million of turnaround expenses in the quarter.

Kam: And the Canadian refining or.

Kam: Our operating margin was $68 million up $21 million from the prior quarter. Despite a nearly $4 per barrel decrease in the upgrading differential.

Kam: Operating costs in the Canadian refining business were $2 81 per barrel also down around 12% relative to Q4, excluding turnaround costs.

Kam: We're also pleased with the progress we've made in the first quarter in the U S refining business, our adjusted market capture of 62%, which excludes inventory holding gains and losses, our FIFO impacts was approximately 10% higher than the fourth quarter.

Kam Sandhar: refining business. Our adjusted market capture of 62%, which excludes inventory holding gains and losses or FIFO impacts, was approximately 10% higher than the fourth quarter. This reflects higher reliability and resulted in an increase in adjusted refining margin of more than $2 per barrel. Excluding turnaround costs, our operating costs in the US for finding business were $12.15 per barrel. Importantly, we saw a continued decrease quarter over quarter in controllable costs in our operating assets and we expect those costs to continue to trend downward over time. Capital investment of $1.2 billion was driven by sustaining activity across the business, as well as growth capital in both the oil sands and Atlantic region, where we're advancing our major project.

Kam: This reflects higher reliability and resulted in an increase in adjusted refining margin of more than $2 per barrel.

Kam: Excluding turnaround costs, our operating costs in the U S refining business were $12 15 per barrel.

Kam: Importantly, we saw continued decrease quarter over quarter in controllable costs in our operated assets and we expect those costs to continue to trend downward over time.

Kam: Capital investment of $1 2 billion was driven by sustaining activity across the business as well as growth capital in both the oil sands at Atlantic region, where we're advancing our major projects.

Kam Sandhar: Free funds flow is approximately $1 billion in the quarter. And consistent with our commitment to grow shareholder returns, our Board of Directors has approved an 11% increase to the annual base dividend to $0.80 per share. This increased dividend and the sustaining capital required to maintain our business is fully supported in a $45 per barrel WTI oil price. This dividend increases an outcome of the continued growth we see in our business, and as we deliver our growth projects and build momentum in our downstream business, we're confident in our ability to continue to grow our dividend consistently over time.

Kam: Free funds flow was approximately $1 billion in the quarter.

Kam: And consistent with our commitment to grow shareholder returns our board of directors has approved an 11% increase to the annual base dividend to <unk> 80 per share.

Kam: This increased dividend and our sustaining capital required to maintain our business is fully supported and a $45 per barrel <unk> oil price.

Kam: This dividend increase is an outcome of the continued growth we see in our business and as we deliver our growth projects and build momentum in our downstream business. We're confident in our ability to continue to grow our dividend dividend consistently over time.

Kam Sandhar: Our net debt was approximately $5.1 billion at the end of the first quarter. This includes the redemption of the preferred shares, an increase in non-cash working capital largely related to tax installments and payments of annual incentives, as well as normal course reductions in accounts payable. While our net debt remains elevated above our $4 billion target, we are prioritizing the balance sheet with our excess refunds flow, while continuing to remain active with our NCIB given the current valuation of our shares. In total, during the quarter, we returned $595 million to shareholders through dividends, share buybacks, and the redemption of the preferred shares.

Kam: Our net debt was approximately $5 1 billion at the end of the first quarter.

Kam: This includes the redemption of the preferred shares and increase in noncash working capital largely related to tax installments and payments of annual incentives as well as normal course reductions in accounts payable.

Kam: While our net debt remains elevated above our 4 billion target we are prioritizing the balance sheet with our excess free funds flow while continue to remain active with our N CIB given the current valuation of our shares.

Kam: In total during the quarter, we returned $595 million to shareholders through dividends share buybacks and the redemption of the preferred shares.

Kam Sandhar: Subsequent to the end of the quarter, the company repurchased $178 million worth of shares through our NCIB from May 5th through to May 5th, or about 11 million shares. With the value we see in our shares today and with the capital investment decreasing as we complete our major projects, we see a significant opportunity to increase our returns to shareholders through buybacks going forward and continuing to ensure our balance sheet remains strong.

Kam: Subsequent to the end of the quarter the company repurchased $178 million worth of shares through our in CIB from May five.

Kam: Through to May five or about 11 million shares.

Kam: With the value, we see in our shares today and with the capital investment decreasing as we complete our major projects. We have six we see a significant opportunity to increase our.

Kam: Returns to shareholders through buybacks going forward and continuing to ensure our balance sheet remains strong.

John Mckenzie: I'll now turn the call back to John for some closing remarks. Great, and thank you, Kam. We accomplished a lot in the first quarter and looking forward we've had a great start to the second quarter and we have a lot more to do over the next six weeks. By the end of Q2 the vast majority of our 2025 turnaround activity in both the upstream and the downstream will be behind us. Narrows Lake will be ready to begin production and both the concrete gravity structure and the topsides for West White Rose will be preparing for installation offshore.

John Kamm: I'll now turn the call back to John for some closing remarks, great. Thank you Cam.

Speaker Change: We accomplished a lot in the first quarter and looking forward, we've had a great start to the second quarter.

John Kamm: A lot more to do over the next six weeks.

John Kamm: By the end of Q2, the vast majority of our 2025 turnaround activity in both the upstream and the downstream will be behind us Narrows Lake will be ready to begin production in both the concrete gravity structure and the top sides for west White rose will be preparing for installation offshore.

John Mckenzie: With major maintenance activities behind us and production beginning to ramp up, we're positioned for a very clear runway of strong operating performance in the second half of the year and into 2026.

John Kamm: With major maintenance activities behind us in production beginning to ramp up we're positioned for a very clear runway of strong operating performance in the second half of the year and into 2026.

John Mckenzie: Now, with the recent volatility in the market, or sorry, the recent volatility in the market has been a good reminder of why we put our strategic priorities and financial framework in place. We continue to progress our growth plans with minimal impact to the business. This financial discipline, coupled with our focus on reducing costs, makes Cenovus resilient and durable for the long time and well-positioned in any reasonable commodity price scenario.

John Kamm: Now with the recent volatility.

John Kamm: In the market or sorry, the recent volatility in the market has been a good reminder of why we put our strategic priorities and financial framework in place we continue to progress our growth plans with minimal impact to the business.

John Kamm: This financial discipline, coupled with our focus on reducing costs makes synovus resilient and durable for the long time and well positioned in any reasonable commodity price scenario.

Operator: And with that, we're happy to take your questions. If you have a question at this time, please press star 11 on your touchtone telephone. We ask that you please limit yourself to one question and one follow-up. One moment for questions.

John Kamm: And with that we are.

John Kamm: Happy to take your questions.

John Kamm: Thank you.

John Kamm: Have a question at this time, please press star one on your Touchtone telephone.

John Kamm: Thank you please limit yourself to one question and one follow up.

John Kamm: One moment for our questions.

Greg Pardy: The first question is from the line of Greg Pardy from RBC Capital Markets. Your line is now open. Yeah, thanks. Good morning and appreciate the rundown.

Speaker Change: The first question.

Speaker Change: Is from the line of Greg Pardy from RBC capital markets. Your line is now open.

Speaker Change: Yes, thanks, good morning, and I appreciate the rundown John can you dig into the maybe just the scope of the work you've got going on at Toledo I.

John Mckenzie: John, can you dig into the maybe just the scope of the work you've got going on at Toledo? I guess that you're wrapping up but also maybe what the objectives are in terms of the stepwise improvement performance that you referred Yeah, sure. Good morning, Greg. So at Toledo, we're currently in turnaround in the smaller part of the plant. I think it's the west side of the plant. I often get Lima and Toledo mixed up and we'll call one north, one west, but I think it's the west side of the plant. But we're into eight major vessels.

Speaker Change: I guess the year wrapping up but also maybe what the objectives are in terms of stepwise improvement performance that you referred to.

Greg: Yes, sure good morning, Greg So.

Speaker Change: Absolutely.

Speaker Change: Currently.

Speaker Change: <unk> turnaround and a smaller part of the plant. So I think it's the west side of the plant asking yet.

Speaker Change: Wyman Toledo mixed up in what's called one north Onewest, but I think it's the west side of the plant, but we're into.

John Mckenzie: So this would include the small crude unit, the cokers, the reformer, the tail gas unit, and the like. But the real intention here... is just to continue on this journey of improvement in the reliability of our assets. So we've got a very tight scope on this. We're now through, I think, the riskiest part of the turnaround, and we've been through all our major inspections, and we're continuing forward. As I mentioned in my call, You know, we see this is kind of wrapping up at, you know, in the second quarter in sort of the mid June timeframe.

Speaker Change: Eight major vessels. So this would include the.

Speaker Change: Small crude unit the Cougars.

Speaker Change: The reformer the tail gas unit and the like but the real intention here.

Greg: Greg is just to continue on this journey.

Greg: Improvements in the reliability of our assets. So we've got a very tight scope on this one.

Greg: Now through I think the riskiest part of the turnaround and we've been through all our major inspections and where.

Greg: Continuing forward as I mentioned in my call.

Greg: We see this as kind of wrapping up.

Greg: In the second quarter and sort of the mid June timeframe, but it really marks a progression of improvement that we've been making through our assets over the past, while so youll remember in Q2 last year.

John Mckenzie: But it really marks a progression of improvement that we've been making through our assets over the past while. So you'll remember in Q2 last year, We took down the Lloyd Upgrader for a major, major turnaround. That asset operated incredibly well coming out of that turnaround as we were able to get after a lot of the major issues that were haunting us there. And similarly in Q3, Q4, we took down Lima. And that asset has operated really well coming out of turnaround, operating at or close to full capacity through Q1 and that continues through Q2. So we expect to see the same kind of step change performance in Toledo coming out of this and looking forward to, you know, an unencumbered run through Q3 and Q4 where we don't have any major outages in our downstream business.

Greg: We took down the the Lloyd upgrader for a major major turnaround.

Greg: That asset operated incredibly well coming out of that turnaround as we were able to get after a lot of the major issues that we're launching is there.

Greg: Similarly in Q3, Q4, we took down Lima.

Greg: And that asset has operated really well coming out of turnaround operating at or close to full capacity through Q1 and that continues through Q2. So we expect to see the same kind of step change performance in Toledo coming out of this and looking forward to.

Greg: Unencumbered run through Q3, and Q4, where we don't have any major outages in our downstream business.

Speaker Change: Okay got it got it thanks for that maybe just shifting gears onto the marketing side.

Speaker Change: At times the realization is on Foster Creek can be just a little all over the place at least by by our yard stick, but I'm just curious how do you decide.

Speaker Change: On Christina or Foster Creek in terms of moving those barrels through <unk> into Asia, or California, or moving them down into the lower 48.

Geoff Murray: Sure, so I've got Geoff Murray on the line with me. So Geoff, that's a good question for you. Greg, it is a it's a great question. And when you look at the assets on an asset by asset basis, I think you're going to continue to see that movement around. When you take a look at oil sands as a whole, you'll find that the value of the assets we own for moving product around sort of consistently resolve themselves at the oil sands level. The reason for that is, you know, we make a decision every month, taking a look not only at locational differentials between, you know, Alberta and the West Coast, Alberta and the Gulf Coast, but we also take the grade differential into account.

Speaker Change: Sure. So I've got Jeff Murray on the line with May suggest that's a good question for you.

Speaker Change: Greg It is it's a great question and when you look at the assets on an asset by asset basis, I think youre going to continue to see that movement around.

Speaker Change: When you take a look at oil sands as a whole youll find that the value of the assets, we own for moving product around sort of consistently resolve themselves at the oil sands level. The reason for that is we make a decision every month, taking a look not only at locational differentials.

Speaker Change: Between Alberta, and the West Coast, Alberta in the Gulf Coast, but we also take the great differential into account. So there are slight differences in quality between the high Tan and low Tan and we do find that that moves around a notably in the U S. Rather than so much on the west coast.

Geoff Murray: So there are slight differences in quality between the high TAN and low TAN. And we do find that that moves around, notably in the US, rather than so much on the West Coast. But we will move to find an extra $0.25, $0.50, $0.75 on grade choices, and that is to optimize the value of pipeline contracts like Trans Mountain, Keystone, and Flannagan South. So I think you'll continue to see that movement, but within the oil sands segment, you should see it resolve itself based on those larger market indicators.

Speaker Change: But we will move to find an extra 25, 50 75 cents on great choices and that is to optimize the value of pipeline contracts like Trans mountain Keystone and Flanagan South So I think youll continue to see that movement, but within the oil sands segment.

Speaker Change: Should see it resolved itself based on those larger market indicators.

Unknown Executive: Thank you.

Dennis Fong: The next question is from the lineup. Dennis Fong from CIBC. Yolanda Snow. Hi, good morning. And thanks for taking my questions, as well as congratulations on a really strong quarter. Yeah, good morning. Um, my first one is just on the downstream side and a bit of a follow on to Greg's question. As we've kind of gone through the, as you just highlighted the major part of the turnaround at Toledo, like, are there any parts of the facility that you found can be further optimized? And further, how are you thinking about products, marketing and so forth, once you've kind of ramped that that asset back Yeah, you know, one of the things we're always looking to do, Dennis is, you know, improve the, the ability of our refineries to operate more efficiently capture more margin.

Speaker Change: Thank you. The next question is from the line of Dennis Fong of <unk>.

Speaker Change: Your line is now open.

Dennis Fong: Hi, good morning, and thanks for taking my questions as well congratulations on a really strong quarter, yes. Good morning.

Speaker Change: My first one is just on the downstream side and a bit of a follow on to Greg's question as Youre, having gone through that.

Speaker Change: As you just highlighted the major part of the turnaround at Toledo.

Speaker Change: Are there any parts of the affiliate that you've found can be further optimized and further how are you thinking about.

Speaker Change: Products marketing and so forth once you kind of ramps that asset back up.

Dennis Fong: Yes, one of the things we're always looking at new Dennis is.

Speaker Change: Improve the.

Dennis Fong: The ability.

Dennis Fong: The ability of our refineries to operate more efficiently capture more margin.

Dennis Fong: can take costs out of the system. And those things are all kind of tied together.

Dennis Fong: And take costs out of the system and those things are all kind of tied together one of the longer term or medium term objectives.

John Mckenzie: One of the longer term or medium term objectives that we've got is to really start to run Lima and Toledo as an integrated operating unit. Those refineries were meant to be run together. They were designed that way. And ultimately that's the direction we're going. So, you know, in light of where we've been over the last six months and dealing with some fundamental reliability issues and getting that behind us. You probably haven't noticed that we are also working on, you know, a number of things to get products to market in a different way that captures more and more margin for us.

Dennis Fong: Objectives that we've got.

Dennis Fong: Is to really start to run alignment Toledo as an integrated operating unit those refineries were meant to be run together they were designed that way.

Dennis Fong: Ultimately that's the direction, we're going so in light of where we've been over the last six months and dealing with some fundamental reliability issues and getting that behind us.

Dennis Fong: You probably have noticed that we are also working on.

Dennis Fong: Things to get products to market.

Dennis Fong: In a different way that captures more and more margin for us. So some of the things that I would point to is opening the dock at Toledo, and moving more and more product off the dock getting those products into higher realization markets.

Dennis Fong: So, you know, some of the things that I would point to is opening the dock at Toledo and moving more and more product off the dock, getting those products into higher realization markets. We're looking at all options of egress from from really rail to marine to pipe. And we've got some, you know, some interesting, interesting things happening on the pipe side as well. But as we kind of progress this and increase the competitiveness of these refineries, we're really tackling this on all fronts. Great. Appreciate that color on the downstream side.

Dennis Fong: We're looking at.

Dennis Fong: All options of egress from from really rail too.

Dennis Fong: Marine to pipe and we've got some some interesting interesting things happening on the pipe side as well.

Dennis Fong: But as we kind of progress this increase.

Dennis Fong: Increase the competitiveness of these.

Dennis Fong: Refineries were really tackling this on all fronts.

Dennis Fong: Yeah.

Dennis Fong: Great.

Dennis Fong: Appreciate that color on the downstream side.

Dennis Fong: Shifting gears towards upstream, I wanted to kind of ask a question on Sunrise here. Obviously, you've been making a lot of progress on that particular asset with kind of the new WellPAD ads and a view of increasing production over the next couple of years. As you further optimize that, how are you thinking about where it could eventually trend towards and kind of what's the upside in terms of this asset, maybe in terms of applying, again, Cenovus best practices? in terms of underlying operations. You know, what we've talked about publicly, Dennis, is taking that asset to about 75,000 barrels a day.

Dennis Fong: Shifting gears towards the upstream I wanted to kind of ask a question on Sunrise here.

Dennis Fong: Obviously, you've been making a lot of progress on that particular asset.

Dennis Fong: With the new new well pad adds.

Dennis Fong: In view of increasing production over the next couple of years as you further optimize that how are you thinking about where opex and SLR could eventually trend towards.

Dennis Fong: And kind of whats the upside in terms of it that that maybe in terms of applying again synovus best practices.

Dennis Fong: In terms of underlying operation.

Dennis Fong: What we've talked about publicly Dennis is taking that asset to about 75000 barrels a day.

John Mckenzie: And that would tell you that the SOR is coming down from its design basis of about three and a half to something close to three and potentially below that. And one of the things that's really exciting for us on that asset is, and I mentioned this on the call, is we're actually moving to the eastern side of Sunrise, which is, you know, some of the best resource that we have inside our portfolio. So as we kind of move into what we call the V-pads, which would be V1, V2, and then you'll get V4 and V5 and V3 later on.

Dennis Fong: And that would tell you that the SLR is coming down.

Dennis Fong: From its design basis of both streaming apps something close to three and potentially below that.

Dennis Fong: And one of the things that's really exciting for us on that asset is and I mentioned this on the call is we're actually moving to the eastern side of Sunrise switches.

Dennis Fong: Some of the best resource that we have inside our portfolio.

Dennis Fong: So as we kind of move into what we call the V pads, which would be the.

Dennis Fong: One two and then you'll get 4% five three later on.

John Mckenzie: These are some of the best reservoirs that we have in the portfolio when we'll be drilling sort of the longer wells with the steam separators to really give us the ability to use steam differently. And ultimately, you know, the recovery on these wells is enormous as well. Some of the best wells, you know, that we have in the VPADS. you know, are going to recover north of 4 million barrels over their life. So, you know, we're really excited about, you know, the strength of that reservoir and the quality of that reservoir. And as we move more and more into that, you know, you'll see this SOR come down and you'll see the production come up to that 75,000 barrels a day that we talked about.

Dennis Fong: These are some of the best reservoir that we have in the portfolio and we will be drilling sort of a longer wells with the steams operators and really give us the ability to use steam differently.

Dennis Fong: And ultimately the recovery on these wells is enormous as well some of the best wells.

Dennis Fong: What we have in the end of the pads.

Dennis Fong: We're going to recover north of 4 million barrels over their life. So we're really excited about.

Dennis Fong: The strength of that reservoir and the quality of that reservoir and as we move more and more into it youll see the SaaS or come down and Youll see that production come up to that 75000 barrels a day that we talked about.

Dennis Fong: Sure.

Menno Hulshof: The next question is coming from the line of Menno Hulshof from TD Securities. Your line is now open. Thanks and good morning, everyone.

Dennis Fong: Thank you.

Speaker Change: The next question is coming from the line of Mono Hossa TD Securities. Your line is now open.

Dennis Fong: Yes.

Speaker Change: Thanks, and good morning, everyone.

Menno Hulshof: I'll start with a question on the CapEx profile in your slide deck that points to a fairly large drop in 2026 on spending into the pull at $4 billion range. So my question is, what is your confidence level in that estimate? And what are the factors that could nudge the 2026 budget a bit higher or lower as the year progresses? Yeah, good. Thanks for the question, Mano.

Speaker Change: I'll start with a question on the Capex profile in your slide deck that points to a fairly large drop in 2026 on spending into the call. It $4 billion range. So my question is what is your confidence level in that estimate and what are the factors that could nudge the 2026 budget a bit high.

Speaker Change: Lower as the as the year progresses.

Speaker Change: Yes.

John Mckenzie: You know, I'll start by preferencing this and then I'll turn it over to Kim. But, you know, the capital spend actually starts to come down in the fourth quarter this year as some of our projects, you know, move from the project phase to commissioning and startup. But we have we have high confidence that, you know, we are going to be decreasing our capital budget from the $5 billion that we've been running at to a lower number in 2026. But maybe you want to take that on, Kim? Sure. Menno, I think at the end of the day, maybe where I'd start is, this is really a function of the fact that we've spent the last three years focusing on the growth plan that we've gotten.

Speaker Change: Thanks for the question Matt.

Speaker Change: I'll start by preference Cigna, and then I'll turn it turn it over to Cam, but the capital spend actually starts to come down in the fourth quarter. This year as some of our projects move from the project phase two commissioning and startup.

Speaker Change: But we have we have high confidence that we.

Speaker Change: We are going to be decreasing our capital budget from the $5 billion that we've been running at to a lower number in 2026, but maybe you want to take that on.

Speaker Change: Sure.

Speaker Change: So I think at the end of the day, maybe where it start as you know this is really a function of.

Speaker Change: And the fact that we spent the last three years focusing on the growth plan that we've gotten as you know this year. We've got about one four to $1 8 billion of growth spend and that growth really in earnest starts to show up this year and going through into 2027. So I think the big benefit. We've got is we've got a fairly robust trajectory of volume.

Kam Sandhar: As you know, this year, we've got about $1.4Bn to $1.8Bn of growth spend, and that growth really in earnest starts to show up this year and going through into 2027. I think the big benefit we've got is we've got a fairly robust trajectory of volume growth over the next few years, and coupled that with, I'd say, a desire to have lower spending, I think at the end of the day, we are really focused on driving what's the best value for our shareholders. I think, given other capital allocation priorities we have, particularly around shareholder returns, I think we've got pretty high confidence that you're going to see the capital come down.

Speaker Change: Growth.

Speaker Change: Over the next few years and couple that with I would say <unk>.

Speaker Change: Higher to have lower spending I think at the end of the day, we are really focused on driving what's the best value for our shareholders. So I think.

Speaker Change: Even other capital allocation priorities, we have particularly around shareholder returns I think we've got pretty high confidence that youre going to see the capital come down in and just to give you a bit of a frame of reference you one of the biggest changes you're going to see year over year is as west White Rose gets completed that probably singularly will be the one of the largest decreases were going to see.

Kam Sandhar: Just to give you a bit of a frame of reference, one of the biggest changes you're going to see year over year is as West White Rose gets completed, that probably singularly will be one of the largest decreases we're going to see in capital profile going into 2026, given that project will be largely completed by the end of this year and the drilling of the wells starting up late Q4 and into Q1. I'd say from a confidence level, I think at the end of the day, we're pretty confident that we're going to see a drop.

Speaker Change: And capital profile going into 2026, given that project will be largely completed by the end of this year and the drilling of the wells starting up kind of late Q4 and into Q1. So.

Speaker Change: See from a confidence level I think at the end of the day, we're pretty confident that we're going to see.

Kam Sandhar: I'd say for now, somewhere in that low $4Bn range is a good starting point for you guys to think about for 2026.

Speaker Change: Drop in and say, let's say for now I think somewhere in that low $4 billion range is a good starting point for you guys to think about for 2026.

Menno Hulshof: Great, thanks for that.

Menno Hulshof: And then my second question is on Narrows Lake and how it ultimately gets reported. My understanding is that it simply gets layered into Christina Lake, reporting right out of the gate, but maybe you can confirm that.

Speaker Change: Great. Thanks for that and then my second question is on Narrows Lake and how it ultimately gets reported my understanding is that it simply gets layered into Christina Lake reporting right out of the gate, but maybe you can confirm that and then second you touched on that and you did touch on this in your opening remarks, John but.

John Mckenzie: And then second, you touched on that and you did touch on this in your opening remarks, John, but what sort of an impact are you expecting Narrows Lake to have on overall Christina Lake blend quality and netbacks? Thank you. Yeah, so you're absolutely right, Menno. This is going to just be part of the Christina Lake reporting. It's all one complex now. And in terms of quality of production, it's very similar to what we see at Christina Lake.

Speaker Change: What sort of an impact are you expecting narrows lake to have on overall Christina Lake blend quality.

Speaker Change: Thanks, Thank you.

Speaker Change: Yes, so youre absolutely right. This is going to just be part of the Christina Lake reporting its all one complex now and in terms of quality of production, it's very similar to what we see at Christina Lake now.

John Mckenzie: Now, the interesting thing, though, and I touched on this in my in my opening comments, is building that pipeline of 17 kilometers and getting that operating well and, you know, seeing the startup as flawlessly as we have seen it. also gives us a lot of confidence to think about resource development going forward. And places like Kirby West, which is to the south of Christina Lake seem accessible with the technology that we've got today. So it really does open up a lot of things for us at Christina Lake. But you know, in the short term, what you'll see is narrows just come into Christina, it'll be reported as one complex.

Speaker Change: Now the interesting thing, though and I touched on this in my in my opening comments is building that pipeline of 17 kilometers and getting that operating well.

Speaker Change: Seeing the startup as flawlessly as we have seen it.

Speaker Change: It also gives us a lot of confidence to think about resource development going forward in places like Kirby West, which is to the south of Christina Lake Siem accessible with the technology that we've got today. So it really does open up a lot of things for us.

Speaker Change: At Christina Lake in the short term what you'll see is narrows just come into Christina it'll be reported as one complex and the point that I was making earlier is that the quality of crude is very similar.

John Mckenzie: And the point that I was making earlier is that the quality of crude is very similar.

Neil Mehta: The next question is coming from the line of Neil Mehta from Goldman Sachs. Your line is now open. Hey, good morning, John's team. Hey, good morning, Geoff. I want your perspective on West White Rose. We're getting close to that inflection. I know there's some really big milestones ahead here. the six months. So we want to just see how that's tracked. Thank you for your time. Thank you.

Speaker Change: Thank you next.

Speaker Change: The next question is coming from the line of Neil Mehta from Goldman Sachs. Your line is now open.

Neil Mehta: Good morning, John and team.

Speaker Change: Hey, good morning, one of your perspective on West White Rose, we're getting close to that inflection I know there are some really big milestones ahead here over the next.

Speaker Change: Six months. So we wanted to just see how thats tracking and what Youre spending time thinking about.

John Mckenzie: Yeah, you know, we use the word inflection a lot inside this company. And it kind of describes where where we think we are as a company as well. But as I mentioned in my notes, and I'll just kind of give you a rundown of how we see this project unfolding over the next six, eight months, but we are we are literally days away from towing out the gravity based structure from Argentia, and we'll take it to a place called Arnold's Cove. we'll do the dry ballasting. That could happen as early as tomorrow, but it's going to happen over the next few days.

Speaker Change: Yes, we used the word inflection a lot inside this company and it kind of describes where we think we are as a company as well.

Speaker Change: But as I mentioned in my notes and I was just kind of give you a rundown of how we see this project unfolding over the next six to eight months.

Speaker Change: But we are we are literally days away from tolling out the gravity based structure.

Speaker Change: From our Jensen will take it to a place called Arnold's Cove.

Speaker Change: We will do the dry balancing.

Speaker Change: That could happen as early as tomorrow, but it's it's it's going to happen over the next few days. Similarly, we have Costco vessel now an angle side.

John Mckenzie: Similarly, we have the Costco vessel now in Ingleside. And it's preparing for the load out of the top sides. That will happen at the end of the month, early June, and we'll be bringing the top sides up to Newfoundland. to Bullarm. In June, we will tow the gravity-based structure out to the field and we will put it or place it on the seabed. And then in July, we'll bring the topsides from Bullarm and we'll mate them up with the gravity-based structure. From there, there's a few months to do of commissioning and startup work. And then in Q4, we'll start drilling.

Speaker Change: And is preparing for the load out of the top sides that will happen at the end of the month early June.

Speaker Change: We'll be bringing the top sides up to Newfoundland.

Speaker Change: Two to Bull arm.

Speaker Change: In June we will tow the gravity based structure out to the field and we will put it replace it on the seabed.

Speaker Change: And then in July we will bring the top sides from Bull arm, and we will make them up with the.

Speaker Change: Gravity based structure from there there is a few months to do of commissioning and startup work and then in Q4, we will start drilling.

John Mckenzie: with first production, as I mentioned, expected in the second quarter of 2026. But it's a pretty exciting time, and this is becoming very real very, very quickly.

Speaker Change: With first production as I mentioned expected in the second quarter of 2026.

Speaker Change: But it's a pretty exciting time and this is this is becoming very real very very quickly.

John Mckenzie: Yeah, and as you think about de-risking those items, what is the most important of them and how much confidence do you have that you have? Well, we have great confidence in where we are today. We actually floated the gravity-based structure last night. So we just continue to kind of de-risk this project and get to important milestones in a very methodical way. So there's nothing that we're doing here, Neil, that is unique and out of sequence with what others have done in this basin. It's just big pieces of equipment happening in very short periods of time right now.

Speaker Change: Yes, and if you think about de risking those items.

Speaker Change: What is the most important of them and how much confidence do you have that you have that.

Speaker Change: Mitigating those risks.

Speaker Change: We have great confidence in.

Speaker Change: Where we are today, we actually floated the gravity based structure last night.

Speaker Change: So we just continue to kind of Derisk This project and get too.

Important milestones in a very methodical way. So there's nothing that we're doing here Neil that is unique in and out of sequence with what others have done in this basin.

Speaker Change: Big pieces of equipment happening in very short periods of time right now.

Neil Mehta: Thanks, John. Thanks now.

Ken: Thanks, Ken.

Neil Mehta: Thanks Neil.

Speaker Change: Thank you.

John Rowe: The next question is coming from the line of John Rowe from J.P. Morgan. Your line is now open. Hi, good morning, thanks for taking my question. I was disconnected for a chunk of the call. So I'm hoping that none of this was addressed.

Speaker Change: The next question is coming from the line of John <unk> from Jpmorgan. Your line is now open.

Speaker Change: Hi, good morning, Thanks for taking my question.

Speaker Change: I was disconnected for a chunk of the call. So I'm, hoping that none of this was addressed.

John Rowe: But I wanted to start on capture rates in refining. And you had a, you know, a nice improvement this quarter, despite a tight diff. You mentioned some impact from improvements you made at Lima. Should we expect that, given you'll be back in turnaround this quarter with Toledo, that 2Q should come off a little bit on the capture rate? And then, you know, you talked about 70% plus being a range that's kind of a near term target. Is that achievable in the second half? Or should we need some more help from diffs to get there? Yeah, you kind of touched on the three things that impact capture rate.

Speaker Change: But I wanted to start on capture rates and refining.

Speaker Change: You had a nice improvement this quarter despite a tight.

Speaker Change: You mentioned some impact from improvements you've made it why should.

Speaker Change: Should we expect that given you'll be back in turnaround this quarter with Toledo.

Speaker Change: <unk> <unk> should come off a little bit on the capture rate and then you talked about 70% plus being a range. So that's kind of a near term target is that achievable in the second half.

Speaker Change: Where we need some more help from disk to get there.

Speaker Change: You kind of touched on the three things that impact capture and one is the definite that has certainly been tight although it's good for the company if it does impact our capture rates in our ability to drive profitability in the downstream and we expect that to stay tight through the second quarter.

Kam Sandhar: One is the diff, and that has certainly been tight. And although it's good for the company, it does impact our capture rate and our ability to drive profitability in the downstream. And we expect that to stay tight through the second quarter. You know, the second thing is reliability, and are you producing the products that you expect to produce? And I would say that is happening as per plan. And I think we're in good shape there. And then that allows you to place those products effectively into the market. And that's the third thing. So as we kind of work through the turnaround in Toledo, that obviously affects Q2.

Speaker Change: Thing is reliability and are you producing the products that you expect to produce and I would say that.

Speaker Change: Sure.

Speaker Change: It's happening as per plan and I think we're in good shape. There and then that allows you to place those products effectively into the market and that's the third thing.

Speaker Change: So as we can.

Speaker Change: Kind of work through the turnaround in Toledo that obviously affects Q2, but coming out of that we expect to be well above the 62% that we were in Q1.

Kam Sandhar: But coming out of that, we expect to be well above the 62% that we were in Q1.

John Rowe: Great, thank you.

Speaker Change: Okay.

Kam Sandhar: And then my second question is on the pacing around the buyback. In one queue, you had some pref purchases, as well as the big working capital build. And the buyback was a little lighter, but you came out of the gate pretty strong quarter to date, despite going into a big turnaround period and also prices down a bit. So you could just talk about the cadence on the buyback side and how you think of how that interacts with the different moving pieces on cash flows. That'll be helpful. Hey, John, it's Kam. A couple things I would just say on the buyback program, I think, you know, obviously, we're, we're always continuing to monitor cash flows, inflows, outflows, quarter by quarter, obviously, in Q2 here, we're going to have a fairly heavy period for turnarounds and turnaround costs as it relates to Toledo and Foster.

Speaker Change: Great. Thank you and then my second question is on the pacing around the buyback.

And <unk> you had some prep purchase as well as the big working capital build and the buy.

Speaker Change: APAC was a little lighter, but you came out of the gate pretty strong quarter to date, despite going into a big turnaround period and also prices down a bit. So if you could just talk about the cadence on the buyback side and.

How you think of how that interacts with the different moving pieces on cash flows that'll be helpful.

Ken: Hey, John its Ken.

Ken: A couple of things I would just say on the buyback program I think obviously, we're always continuing to monitor cash flows inflows outflows quarter by quarter. Obviously in Q2 here, we're going to have a fairly heavy peer.

Ken: Period for turnarounds and turnaround costs as it relates to Toledo and foster.

Kam Sandhar: But you know, what I would say is, you know, just step back a little bit and just describe our buyback is going to be very flexible, it'll be, you may not necessarily see it rateable over time, but we're going to be flexible and we'll be value focused on that buyback. So obviously, we stepped it up a little bit, as we talked about on the call here in April, repurchasing just under 11 million shares. So I think we'll be, we'll be thoughtful about when we do it when we use that capital. But I would say at the same time, the reason we've got that flexibility is our balance sheet is strong, you know, although we're not right at that $4 billion floor that we talked about for debt, I don't think that's necessarily going to stop us from being value and flexible around where we see opportunity.

Ken: But what I would say as you know.

Ken: Step back a little bit and just describe our buyback is going to be very flexible it will be.

Ken: You may not see it ratable over time, but we're going to be we'll be flexible and will be value focused on that buyback. So obviously, we stair stepped.

Ken: Stepped it up a little bit as we talked about on the call here in April Reaper.

Ken: Repurchasing just under 11 million shares. So I think we'll be we'll be thoughtful about when we do it when we use that capital, but I would say at the same time.

Ken: The reason, we've got that flexibility in our balance sheet is strong although we're not right at that $4 billion floor that we talk about for that I don't think thats necessarily going to stop us from being value and flexible around where we see opportunity. So yes, I wouldn't necessarily hold us to some ratable form of a buyback, but I think where we can use our balance sheet and.

John Mckenzie: So yeah, I wouldn't necessarily hold us to some rateable form of a buyback. But I think where we can use our balance sheet and where we see value, we'll continue to assess it. But I think what I would tell you is over the long term, obviously, we want to target getting to 100% returns, but that's not necessarily what you're going to see on a quarter by quarter. Yeah, John, I just add to that, you know, one of the things that I say is, you know, we are never going to put this balance sheet at risk.

Ken: Where we see value, we'll continue to assess it but I think what I would tell you is over the long term, obviously, we want to target getting to a 100% returns, but that's not necessarily what youre going to see on a quarter by quarter basis.

Ken: Yes, John I'd, just add to that one of the things that I say is we are never going to put this balance sheet at risk and we have a $4 billion leverage target for a reason.

John Mckenzie: And we have a $4 billion, you know, leverage target for a reason. But there is a fine line between discipline and dogma. And when you have opportunities like we have with the share price being where it is, you know, I think it's incumbent on us to take a look at that, you know, understanding that we have, you know, one of the best balance sheets in the business.

Ken: But there is a fine line between discipline and dogma and when you have opportunities like we have with the share price being where it is.

Ken: It's incumbent on us to take a look at that understanding that we have one of the best balance sheets in the business.

Ken: Thank you.

Ken: Thank you.

Patrick O'rourke: The next question is coming from the line of Patrick O'Rourke from ATB Capital Markets. Your line is now open. Morning, Patrick. Good morning, and thank you for taking my question.

Speaker Change: The next question is coming from the line of Patrick O'rourke from ATV capital markets. Your line is now open.

Speaker Change: Good morning, Patrick.

Speaker Change: Good morning, and thank you for taking my question I guess, maybe just to build a little bit upon the discussion of just having with John just curious in terms of where you see the most attractive sort of application of shareholder returns right now <unk> been aggressive with the buyback in May but you also raised the dividend and then of course, we've got another.

Kam Sandhar: I guess maybe just to build a little bit upon the discussion we're just having with John, just curious in terms of where you see the most attractive Unknown Executive, Menno Hulshof, Jonathan McKenzie, Kam Sandhar, Keith Chiasson, Unknown Hey John, or Patrick, it's Kam. Maybe a couple things I would highlight. I think first off, maybe I'll start with the base dividend. I think, you know, we've been very clear, we've got different components to our shareholder return strategy. And I would describe the base dividend as being more a commitment versus say, more discretionary returns, which is what the buyback and a variable dividend could be over time.

Speaker Change: Tranche of the preferreds that are coming up is redeemable here and how you think about that allocation and of course.

Speaker Change: I guess theres the interplay you talked on the balance sheet.

Speaker Change: How working capital releases through the balance of the year.

Speaker Change: Hey, John It's Patrick it's Cam maybe a couple of things I would highlight I think first off maybe I'll start with the base dividend I think.

Speaker Change: We've been very clear, we've got different components to our shareholder return strategy and I would describe the base dividend as being more a commitment versus say more discretionary returns, which is what the buyback any and a variable dividend could be over time, but when you look at the base dividend, it's really about.

Kam Sandhar: But when you look at the base dividend, it's really about creating a business plan and a strategy, that continues to allow us to predictably, relatively grow our dividend over time. And that's all underpinned, I would say, by our five-year plan that we outlined last year. So, you know, obviously, I think the dividend growth that we've given this year was 11%. It's, I think, very tied to our business growth that we see, not just this year, but going into 26 and 27. And so what I would say is, when you look at our growth plan over the next few years, and you look at our ability to grow that dividend, I'd say we were very comfortable and confident we're going to see consistent growth over time.

Speaker Change: Creating a business plan and a strategy that continues to allow us to predictably ratably grow our dividend over time, and that's all underpinned I would say by our five year plan that we outlined last year. So obviously I think the dividend growth that we've given this year, but 11%.

Speaker Change: It's I think very tied to our business growth that we see not just this year, but going into 2006 and 27 and so what I would say is when you look at our growth plan over the next few years and you look at our.

Speaker Change: Ability to grow that dividend I'd say, we were very comfortable and confident we're going to see consistent growth over time and.

Kam Sandhar: And this increase we've given, and it's always typically in April, May, is just consistent with that long-term strategy. Last thing I would just say on the dividend is it is, keep in mind, it's always going to be anchored to a ability to sustain that dividend in a $45 WTI price. And I think as that business plan continues to deliver, we're going to have more capacity to grow that over time. When you think about the kind of interplay between other capital allocation priorities, particularly around buybacks, and even perhaps, I would say, you know, market conditions are continuing to move around, they're volatile.

Speaker Change: This increase we've given and it's always typically in April may.

Speaker Change: Is just consistent with that long term strategy.

Speaker Change: The last thing I would just say on the dividend as it is keep in mind, it's always going to be anchored to a ability to sustain that dividend and a $45 <unk> price and I think as that business plan.

Speaker Change: To use to deliver we're going to have more capacity to grow that over time.

When you think about the kind of interplay between other.

Speaker Change: Capital allocation priorities, particularly around buybacks and even perhaps I would say market conditions, our <unk> move around their volatile and I would say, we are going to be flexible and thoughtful about where we see the most value.

Kam Sandhar: And I would say we are going to be flexible and thoughtful about where we see the most value. You know, obviously, we took out the pref shares Series 5 back in March, at the end of March, which was $200 million. We've got another Series due here at the end of June, another $150 million, and then about $300 million next year. And, you know, I'd say long term, I would say, look, the pref shares had a time and a place in our capital structure, you know, years back when Husky put them in place, I would say those Those drivers are probably not the same today.

Speaker Change: Obviously, we took out the pressures series five back in.

Speaker Change: March at the end of March which was $200 million, we've got to another.

Speaker Change: Series do here at the end of June and another 150, and then about $300 million next year and I would say long term I would say look the pressures had a had a time and a place in our capital structure.

Speaker Change: Years back when husky put them in place I would say those.

Speaker Change: Those drivers are probably not the same today, but at the same time I think if we see better opportunities to deploy cash.

Kam Sandhar: But at the same time, I think if we see better opportunities to deploy cash, like a buyback, well, we may choose to do that. And that's a decision we'll make as these press get to their rate reset.

Speaker Change: Like a buyback, we'll we may choose to do that and that's a decision. We'll make is these perhaps get to their rate reset dates.

Kam Sandhar: Okay, great.

Geoff Murray: And then, you know, I know it's small in terms of cash flow generation here, but one thing that stood out to me in the quarter was the margin that was created in the conventional business. I think it was substantially above the highest estimate on the street. Look at the netbacks, big jump in sort of price realization there. Is that just a function of better gas pricing in the basin? And what's the, you know, sort of appetite to continue to grow that particular business as we see ACO basis improve here? So Geoff, why don't you take the first half of that, and I'll take the second.

Speaker Change: Okay, Great and then.

Speaker Change: I know, it's small in terms of cash flow generation here, but one thing that stood out to me in the quarter was the.

Speaker Change: The margin that was created in the conventional business I think it was above substantially above the highest estimate on the street look at the net backs big jump in sort of price realization. There is that just a function of better gas pricing in the basin and what.

Speaker Change: What's the sort of appetite to continue to grow that particular business as we see eco basis improve here.

Speaker Change: So Jeff why don't you take the first half of that and I'll take the second.

Geoff Murray: Great, thanks, Patrick. Two parts to that. One obviously is, you know, we've seen gas prices do what gas prices have done. I wouldn't say that, you know, quarter one to quarter one comparison, it's meaningfully different. But when you look at Q4 to Q1, ACO price, all in was better. However, the part that you need to make sure you add is that we do have some pretty valuable and significant pipeline space that moves natural gas out of the basin. I would point you to last year is the easy way for you to kind of think about it over time, where that added in the order of about a dollar US per MMBTU to our realizations.

Jeff Murray: Great. Thanks, Patrick.

Speaker Change: Two parts to that one obviously is we've seen gas prices do what gas prices have done I wouldn't say that.

Speaker Change: <unk> one to quarter, one comparison, it's meaningfully different but when you look at Q4 to Q1 eco price all in was better. However, the part that you need to make sure you add is that we do have some pretty valuable and significant pipeline space that moves natural gas out of the basin.

Speaker Change: I would point you to last year is easy way for you to kind of think about it over time, where that added in the order of about $1.

Speaker Change: $1 U S per annum btu to our realization and so I think thats, probably the first thing you should anchor on there and I'll turn it to John for the balance sure just on the second piece as I mentioned Patrick in my opening remarks, we're really focused on four things right now for the balance.

John Mckenzie: And so I think that's probably the first thing you should anchor on there. And I'll turn it to John for the balance. Sure. Just on the second piece, you know, as I mentioned, Patrick, in my opening remarks, we're really focused on on four things right now for the balance. You know, 2025 and going into 2026, we are focused on our base business, we're focused on delivering growth, we're focused on the competitiveness of our downstream, and we're focused on our cost structure. So while we really like our conventional business, we believe that we've got some really interesting opportunities.

Speaker Change: 2025, and going into 2026, we are focused on our base business. We're focused on delivering growth. We're focused on the competitiveness of our downstream and we're focused on our cost structure.

Speaker Change: Well, we really like our conventional business. We believe we've got some really interesting opportunities its not really a story for this quarter of this year.

John Mckenzie: It's not really a story for this quarter this year.

John Mckenzie: But at some point in the future, we'll come back and we'll talk about the conventional business more comprehensively. But right now we are we are, you know, focused on the four things that I mentioned.

Speaker Change: But at some point in the future, we'll come back and we'll talk about.

Speaker Change: The conventional business.

Speaker Change: More comprehensively, but right now we are we are.

Speaker Change: Focus on the four things that I mentioned.

Speaker Change: Okay. Thank you very much.

Manav Gupta: The next question is coming from the line of Manav Gupta from UBS, Yelena Snow. Hey, good morning. I think you discussed a number of growth projects, including Christina Lake and others.

Speaker Change: Thank you.

Speaker Change: Next question is coming from the line of Manav Gupta from UBS. Your line is now open.

Hey, Good morning, I think you discussed a number of growth projects.

John Mckenzie: Just wanted to touch on the Foster Creek. I think you're looking to grow volumes there about 30,000. So can you help us understand what's the progress on the volume growth and Foster Creek and when should we expect it to be online? Yeah, so, you know, Foster Creek is really the only project we've got where we're adding steam capacity. As I mentioned, we're adding about 80,000 barrels a day. of incremental steam. And we've got some good reservoir in front of us both to the west and to the north. And what you'll see from us through the rest of the year is we'll finish the installation of steam that'll happen this summer.

Speaker Change: Christina Lake and others I'm just wondering if that's on the Foster Creek I think youre looking to grow volumes at about 30000. So can you help us understand what's the progress on the volume growth and Foster Creek, and then should we expect it to be online.

Speaker Change: Yes so.

Speaker Change: Foster Creek, because really the only project, we've got where we're adding steam capacity as I mentioned, we're adding about 80000 barrels a day.

Speaker Change: Of incremental stream and we've got some good reservoir in front of US both to the west and to the north and what Youll see from us through the rest of the years will finish the installation of the steam that'll happen. This summer and then we'll finish the oil and water handling by the end of the year.

John Mckenzie: And then we'll finish the oil and water handling by the end of the year to make that a live project going into 2026. So early on in 2026, you'll see the growth coming out of Foster Creek as well.

Speaker Change: To make that a live project going into 2026. So early on in 2026, you'll see the growth coming out of Foster Creek as well.

John Mckenzie: Perfect, and you do have a lot of turnaround in this quarter, upstream and downstream, so help us understand some of the risk planning around this to make sure these conclude on budget and on time. Thank you. Yeah, you know, Manav, I would describe, we've been in a heavy turnaround period for the last year and we're really coming to the end of it. Most of this ends within the next six weeks. So, as I mentioned in my opening remarks, we're now complete the turnaround work at WRB, both Borger and Wood River are running online. We are largely complete the turnaround at Foster Creek, and we're about in the middle of the turnaround at Toledo.

Speaker Change: Okay.

Speaker Change: You do have a lot of turnaround in this quarter, our upstream and downstream so help us understand some of the risk planning around this to make sure. These conclude on budget and on time. Thank you.

Speaker Change: Manav I would describe we've been in a heavy turnaround period for the last year and we're really coming to the end of it most of this ends within the next six weeks.

Speaker Change: So as I mentioned in my opening remarks, we are now complete the turnaround work at WR, Babel, Borger and Wood River are running online.

Speaker Change: We are largely complete the turnaround at Foster Creek and we're about in the middle of the turnaround at Toledo on the 15th of May we will start our turnaround at Sunrise.

John Mckenzie: On the 15th of May, we'll start our turnaround at Sunrise. You know, that's a fairly low risk event, but coming out of Q2, you know, the vast majority of our turnaround major maintenance work is done. I think we got one more turnaround in this fall at sunrise, but outside of that. We're emerging from a period of heavy maintenance into a period where we don't have anywhere near the same magnitude of major maintenance going forward, so we're really looking forward to that. But if I were to tell you where we are in terms of the risk profile, the vast majority of this has now been de-risked, and we're looking to kind of wind up these turnarounds and get everything back to full production.

Speaker Change: That's a fairly low risk event, but coming out of Q2.

Speaker Change: The vast majority of our turnaround major maintenance work is done I think we've got one more turnaround in this fall.

Speaker Change: At Sunrise, but outside of that.

Speaker Change: We are emerging from a period of heavy maintenance into a period, where we don't have anywhere near the same magnitude of major maintenance going forward. So we're really looking forward to that.

Speaker Change: But if I were to tell you where we are in terms of the risk profile of the vast majority of this has now been derisked and we're looking to kind of wind up.

Speaker Change: These turnarounds and get everything back to full production.

Menno Hulshof: Next question coming from the line of Menno Hulshof from TD Securities. Your line is now open. Hi, thanks for letting me back on. Hi. Hi, again.

Speaker Change: Thank you next.

Speaker Change: Our next question coming from the line of Mono Hoffman from TD Securities. Your line is now open.

Mono Hoffman: Hi, Thanks amount of letting me back on.

Kam Sandhar: Um, the Yeah, and I'm only asking this question, because I'm getting the question. It's on related to your definition of market capture, which was adjusted with the quarter, I did read the footnote, it looks my understanding here is that the inventory effect gets smoothed out and that the average market capture doesn't change over time, when compared to the original definition, but maybe you could just walk us through the mechanics and the rationale for the change. Thank you.

Speaker Change: Hi, again.

Speaker Change: Yes, and I'm only asking this question because I'm, taking the question and solid related to your definition of market capture which was adjusted for the quarter I did read the footnote it looks.

Speaker Change: Understanding here is that the inventory if that gets smoothed out and that the average market capture doesn't change overtime when compared to the original definition, but maybe you could just walk us through the mechanics on the rationale for the other change. Thank you.

Kam Sandhar: Hey, Menno, it's Kam. So, you know, maybe I'll, if you want tons of detail, I'll say, talk to our team offline, but just to give you a highlight. So what we've done there is The way we calculate the market captures, it takes the two key benchmarks that drive the profitability of our U.S. downstream business, including Group 3 in Chicago. And so that percentage you see there is a percentage of a blended crack of those two benchmarks. And this quarter, what we've done is we've now adjusted it for what we describe as inventory holding gains and losses, or FIFO impact, so that you can actually see what the underlying business performance is, absent of some of those inventory movements that you typically see because of FIFO accounting.

Speaker Change: Hey, Matt it's Kevin So maybe.

Matt: If you want tons of detail I would say.

Matt: <unk> team offline, but just to give you a highlight so what we've done there is.

Matt: The the way we calculate the market captures it takes the two key benchmarks that drive the profitability of our.

Matt: U S downstream business, including group three in Chicago, and so that that percentage you see there is as a percentage of a blended crack of those two benchmarks.

Matt: And this quarter, what we've done is we've now adjusted it for what we describe as inventory holding gains and losses, our FIFO impacts so that you can actually see.

Matt: What the underlying business performance is absent some of those inventory movements that you typically see because of the.

Kam Sandhar: When you look at our supplemental information, you can see that we've adjusted it going backwards, so you can see what the impact of that is normalized for FIFO. The intent there is just to make it more comparable with what you see with U.S. refiners in those regions. Thank you.

Matt: FIFO accounting so.

Matt: And when you look at our supplemental information you can see there we've adjusted it going backwards. So you can see what the impact of that is normalized for FIFO.

Matt: So the intent there is just to make it more comparable with what you see with the U S refiners in those regions.

Menno Hulshof: I know that was a borderline modeling question, so I appreciate your taking the time to answer it. All right, thanks, Menno. Thank you.

Matt: Thank you I know that was a borderline modeling questions I appreciate your taking the time to assets okay.

Matt: Okay.

Matt: Sure.

Matt: Alright, Thanks Menno.

Operator: At this time, we have no questions in the queue, so we will wait a minute to give you the chance to connect with us. If you do have a question, I would like to remind you that if you are on the phone and wish to ask a question, please press star 11 on your touchtone telephone.

Matt: Thank you.

Matt: At this time, we have no questions in the queue. So we will wait a minute to give you the chance to connect with US. If you do have a question I would like to remind you that if you are on the phone and wish to ask a question. Please press star one on your Touchtone telephone.

Matt: Okay.

Chris Barker: The next question is from the line of Chris Barker from Calgary Herald, the UN is now Hi, John, thanks for taking the question. With the federal election now over, what is the status of talks between the Pathway Alliance and the federal and provincial governments? And I guess how far apart or how close are the three sides?

Speaker Change: The next question is from the line of Chris <unk> from Calgary Herald. Your line is now open.

Chris: Hi, John Thanks for taking the question with the federal election now over what is the status of talks between the pathway Alliance and the federal and provincial governments and I guess, how far apart or how close are the three sites.

John Mckenzie: You know, Chris, we're kind of in a bit of a holding pattern right now. The election has only just happened and, you know, what we've always maintained is, you know, pathways and the projects underneath that are a priority for us. And we need those two levels of government to come together and create a path forward for us where those projects can get done and the industry can remain competitive. So, you know, there's not much. in the way of new news on that, but it's something that we maintain as a priority and we're hopeful we can get back talking with both levels of government fairly quickly.

Chris: Chris we're kind of in a bit of a holding pattern right now the election has only just happened.

Chris: And what we've always maintained is pathways in the <unk>.

Chris: Project certain projects underneath that are a priority for us.

Chris: And we need those two levels of government to come together.

Chris: Create a path forward for us where those projects can get done in the industry can remain competitive so there's not much.

Chris: <unk>.

Chris: In the way of new news on that but it's something that we maintain as a priority and we're hopeful we can get back talking with both levels of government fairly quickly.

John Mckenzie: Do you expect the ability to be able to order pipe for the project in calendar 2025? Oh, I mean, Chris, that really all depends on where we get to with those two levels of government. What we've been really clear about is that we need a path forward in a financial framework that keeps us competitive and allows us to move forward with that.

Chris: Do you expect the ability to be able to order pipe for the project in calendar 2025.

Chris: Chris I really all depends on where we get to with.

Chris: With those two levels of government and we've been really clear about is that we need a path forward and our financial framework that keeps us competitive and allows us to move forward with them.

Chris: Thank you.

Alex Bill: The next question is from the line of... Alex Bill from all new Len Labor. Yolanda Smalls. Good morning. Hi there.

Chris: The next question is from the line up.

Speaker Change: Alex spill from all of you learn labor program.

Speaker Change: Your line is now open.

Speaker Change: Good morning.

John Mckenzie: Yeah, I'm following up on reports of layoffs at Cenovus, announced recently to staff. And I'm asking how much of that is captured in Newfoundland and whether that has to do with sort of transition of West White Rose, or broader economic principles. You know, one of the things we haven't done, Alex, is talk about numbers or talk about locations where we've seen You know, job loss. And we do that out of respect for the families and respect for the employees. This is a very private matter and we want to be or treat people with dignity and respect.

Speaker Change: Following up on Hi, there, yes, I am following up on the reports of layoffs at this.

Speaker Change: Recently, <unk> staff and Im asking how much of that is captured in Newfoundland and whether that has to do with sort of transition of west white rose or broader economic principles.

Speaker Change: Okay.

Speaker Change: One of the things, we Havent done Alex has talked about numbers or talked about locations, where we have seen.

Speaker Change: Sure.

Speaker Change: And job loss and we do that out of respect for the families and respect for the employees. This is a very private matter and we wanted to be or treat people with dignity and respect.

John Mckenzie: What I would tell you is, you know, as a company, we are getting to the end of an investment cycle in this business and our capital spending is decreasing and consistent with that. You know, the amount of work that we have to do is decreasing, and that means we've got, you know, to readjust our labor force to make it fit for purpose. you know, and ensure that we are, you know, competitive as an industry. So I don't have an exact number for you, nor would I probably give it to you if I had it top of mind, just to be respectful of the people that are involved in this.

Speaker Change: Well, what I would tell you is as a company we are getting to the end of an investment cycle in this business and our capital spending is decreasing and consistent with that.

Speaker Change: The amount of work that we have to do is decreasing and that means we've got.

Speaker Change: To readjust, our labor force to make it fit for purpose.

Speaker Change: And ensure that we are competitive as an industry. So I don't have an exact number for you in Norton or what I'd, probably give it to you if I had to top of mind, just just to be respectful of the people that are involved in this.

Operator: Thank you.

Operator: And there are no further questions registered at this time.

Speaker Change: Thank you.

Speaker Change: And there are no further questions registered at this time I would now like to turn the meeting back over to Mr. John Mckenzie.

John Mckenzie: I would now like to turn the meeting back over to Mr. John McKenzie. Great, and thank you, Operator.

Speaker Change: Great and thank you operator.

Operator: So this concludes the conference call. You know, thank you for joining us today. We really appreciate your interest in the company and have a great day, everybody. Thank you.

Speaker Change: So this concludes the conference call. Thank you for joining US today, we really appreciate your interest in the company and have a great day everybody. Thank you.

Operator: This concludes today's program. You may all disconnect. Thank you for participating in today's conference, and have a great day.

Speaker Change: This concludes today's program you may all disconnect.

Speaker Change: Thank you for participating in today's conference and have a great day.

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