Q2 2025 Imperial Oil Ltd Earnings Call

Good day and welcome to the Imperial oil. Second quarter 2025 earnings call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Peter Shaw, vice president of investor relations. Please go ahead.

Good morning everyone and Welcome to our second quarter earnings conference call. I am joined this morning by Imperial senior management team including John whan, chairman president and CEO, Dan Lions, senior vice president, finance and administration.

Cheryl golden Smith, Senior vice president of the upstream and Scott Maloney, vice president of the downstream.

Today's comments include reference to non-gaap financial measures, the definitions and reconciliations of these measures can be found in attachment 6 of our most recent, press release and are available on our website with a link to this conference call.

Today's comments, may contain forward-looking information, any 4 looking information. Is not a guarantee of future performance and actual future performance. And operating results can vary materially depending on the number of factors and assumptions.

Forward looking information in the risk factors and assumptions that are described in further detail on our second quarter earnings release that we issued this morning as well as our most recent form 10K. All these documents are available on Cedar plus Edgar and our website. So I'd ask you to reference those

John is going to start with some opening comments and then hand it over to Dan who's going to provide a financial update and then John will provide an operations update. And once that's done we will follow with Q&A session. So with that, I will turn it over to John for his opening remarks.

Thank you, Peter, good morning everybody and welcome to our second quarter earnings call. I hope everyone is doing well.

I'm really pleased to kick off my first earnings call with strong results for the second quarter.

We generated cash flow from operations of nearly 1.5 billion dollars and end at the quarter with approximately 2.4 billion dollars of cash on hand.

And we achieved these results while successfully completing significant plant turnaround activity across our integrated portfolio.

At the macro level, our Upstream price realizations. Continue to benefit from improved egress in western Canada,

while in the downstream margins were supported by higher crack spreads. Since the last quarter

Our resilient business model and strong financial position have allowed us to remain focused on delivering safe, reliable operations while executing on our business plans and strategy, despite significant market volatility.

I also want to highlight some major project. Milestones we achieved in the quarter.

At Curl, we completed work that doubles the turnaround interval at one of our two trains.

The next turnaround of the K2, train is now scheduled for 2029.

At Cole Lake, we finished construction of the new sagd Redevelopment project at lemming and initiated steaming in the final days of the quarter. Setting us up for first production late this year.

At Strathcona construction of the renewable diesel facility was completed and I'm very pleased to share that first production of renewable. Diesel began in July.

When I think broadly about the outlook for the future of investments.

I'm very encouraged by the constructive dialogue and level of Engagement with the federal government and the work that is now ongoing to potentially support industry and major projects in Canada.

It's still early but initial conversations have been encouraging.

Share repurchases through our ncib once again and plan to complete the program by year. End.

And on that note, I'll turn over to Dan to discuss our financial results in more detail.

Thanks, John. Starting with financial results for the second quarter, we reported net income of 949 million down 184 million from the second quarter of 2024, primarily driven by lower Upstream realizations, partly offset by higher production volumes. When comparing sequentially second quarter. Net income is down, 339 million from the first quarter of 2025 primarily driven by lower upstream realizations, and downstream margin capture.

Now, shifting our attention to each business line and looking sequentially Upstream earnings of 664 million are down, 67 million dollars from the first quarter, primarily due to lower realizations. Partially offset by higher volumes, Downstream earnings of 322 million are down 262 million. From first quarter, mainly reflecting lower margin capture our chemical business generated earnings of 21 million down 10 million dollars from the first quarter.

Moving on to cash flow in the second quarter. We generated 1,465 million in cash flows from operating activities excluding favorable working Capital, Tax of 52 million cash flows from operating activities from the second quarter of 1 billion. 413 million down 95 million from the second quarter of 2024 in line with earnings.

As John mentioned, we ended the quarter in a strong position.

With about $2.4 billion of cash on hand.

shifting to capex Capital expenditures total 473 million in the second quarter, 11 million higher than the second quarter of 2024, primarily due to project timing,

In the Upstream, second quarter spending of 353. Million focused on sustaining Capital occurring in Cold Lake in the downstream. Second quarter spending related primarily to our renewable diesel project at Strathcona.

Now, in terms of shareholder distributions, we paid 367 million dollars of dividends in the second quarter of 2025 on June 23rd, we announced the renewal of our normal course, issuer bid, which allows us to purchase up to 5% of our outstanding common shares over the next 12 months. We started purchasing racially in July and as John noted, we

We plan to accelerate our purchases and complete the program prior to year-end, in line with our long-standing practice of returning surplus cash to shareholders. Lastly, this morning we announced the third quarter dividend of $0.72 per share, consistent with our second quarter dividend. Now I'll turn it back to John to discuss our operational performance. Thanks, Dan.

Now, let's take the next few minutes to share the key highlights from our operating results, Upstream production for the quarter averaged 427,000 oil equivalent barrels per day up, 9,000 barrels, per day versus the first quarter and up 23,000 barrels per day versus the second quarter of 2024.

This marks, the highest second quarter production in over 30 years.

I'm extremely pleased to see our asset teams deliver such strong results in the quarter, which include a turnaround activity at both Curl and Cold Lake.

For the first half of the year, we achieved the highest ever production from our heavy oil assets,

And are well positioned for a strong second half of the year.

Now, moving to curl.

Curls set a record: a second quarter production record, averaging 275,000 barrels per day growth.

Up 19,000, barrels per day versus the first quarter.

And we beat our previous second quarter record by 20,000 barrels per day, gross.

This year's curl plant turnaround on the K2, train was a major success. The turnaround was completed safely and successfully in under 19 days.

The team. Also completed work to enable a doubling of of the turnaround interval.

As we outlined at our Investor Day.

Turnaround optimization is 1 of the key components of our plan to increase production to 300,000 barrels per day.

Turning to costs curls unit cash costs to the quarter Were $18.86 Us per barrel.

The expense of our plan turnaround.

When compared to the second quarter last year, we achieved a decrease of over 3 dollars per barrel.

the second quarter's performance, contributed to our year-to-date unit, cash costs of $19.70 cents us per barrel, nearly $2 per barrel, lower versus the first half of 2024,

With the turnaround behind us and our outlook for higher volumes. In the second half of the year. We expect to make further programs on unit cash cost reductions.

Moving to Cold Lake.

Cold Lake production. Averaged 145,000 barrels per day including 23,000 barrels per day from Grand Rapids. Now, this is down 9,000 barrels per day versus the first quarter of 2025 primarily driven by planned, turnaround at McKees, which was completed safely and well, ahead of schedule.

another highlight is reaching a key Milestone at our Lemmings sag D Redevelopment project, the project started steam injection in June with first oil expected, late this year and ramping up in 2026

The lemming sag d project is an excellent example of how we are maximizing value from our existing assets. This is a niche opportunity for us to develop additional resource at the original Cold Lake pilot location with 9,000 barrels per day at Peak production.

I also want to take a moment to provide provide a brief update on the Ebert pilot project at our Aspen lease, which utilizes transformative new solvent technology. That's designed to unlock low cost low emissions volume growth from our significant high quality undeveloped insitu opportunities.

We completed several Key Construction Milestones, this quarter and remain on track for an early 2027 startup.

And next, I want to quickly cover sink food Imperial. Sheriff sink crew production for the quarter average, 77,000, barrels per day, which was up. 4,000 barrels per day versus the first quarter and up 11,000 barrels per day versus the second quarter of 2024.

sink crew continued to utilize the interconnect pipeline to import bmen and gas oil to ensure High upgrader utilization and this enabled an additional 8,000 barrels per day, our share of SRT sweet, premium production,

In early September, I'll note that syncrude will begin at 50-day cocer turnaround with a forecasted annual impact of 6,000 barrels per day, Imperial shear.

And now moving to the downstream.

We refined an average of 376,000 barrels per day, reflecting a utilization of 87%.

this compares to 387,000 barrels per day a year ago and 397,000 barrels per day in the first quarter lower, throughput, reflects higher, unplanned, downtime, and the impacts from planned turnarounds at Strathcona and nantou compared to our first quarter of 2025

During the quarter we completed construction and commissioning of the renewable diesel facility located at the Strathcona. Refinery

And I'm very excited to announce the successful startup and first production in July.

as we've said, before, we now plan to optimize production, around supplier capabilities,

This project at its peak generated close to 600 jobs and was completed safely while achieving industry-leading costs and scheduled performance.

The project provider offers a new lower emissions solution for Canada's transportation sector. This aligns with our long-term strategy of advancing responsible energy solutions while delivering strong returns.

This project combines many of our competitive advantages, including integration of proprietary technology, scale advantage, logistics, and proximity to feedstocks and markets.

And when you couple these advantages with the growing demand for renewable diesel in Canada driven by layered provincial and federal regulations and increasing demand from customers to meet their own emissions reduction goals. We are confident in robust margin, uplift as we ramp up and line with third-party hydrogen supplies.

I would just like to thank our planning project and operations teams that have worked extremely hard to get this project across the finish line.

And I'd also like to thank the governments of Alberta and British Columbia, as well as Strathcona County, for all of their support.

35,000 barrels per day versus the first quarter of 2025 and up 10,000 barrels per day. Versus the second quarter of 2024 enabled by the Trans Mountain pipeline expansion.

Turning to chemicals, earnings in the second quarter were $21 million, down $10 million versus the first quarter.

And compared to the second quarter of 2024 earnings were down 44 million driven primarily by Soft polyethylene margins. And the aromatics reporting shift to our Downstream segment, which occurred in the third quarter of 2024.

Now, while we're at the bottom of the cycle, we we see bottom of cycle conditions and those that have persisted, the business continues, to contribute, positively given strong operational performance, and the integration with the Sony, a refinery

So, to wrap up, I'm very pleased with the quarter. We generated about $1.5 billion of cash from operating activities while successfully executing on significant planned maintenance.

And we set a new second quarter production record in our Upstream.

Since my return to Imperial has been wonderful to reconnect with the organization and the initiatives, across the business that will drive continued, momentum and growth.

Specifically, the discipline, development, and employment of technology to support the execution of our strategy.

Maximizing value from our existing assets and supporting our growth investment opportunities.

This quarter was a great example of the team finding ways to win.

And winning starts with taking full advantage of our unique competitive. Advantages, advantages others, do not have.

During the quarter, it was fantastic to achieve a significant milestone in our Downstream with the completion of the renewable diesel facility. And first production just a couple of weeks ago

and a co lake we completed. As I mentioned, the Lemmings sag d project, they've begun steaming the reservoir.

I'm looking forward to first oil late this year.

It was great to great to meet many of you uh at our investor day in mid April and I really enjoyed connecting with more of you in recent meetings and conferences and I'm very excited about the path, forward for Imperial and I'm looking forward to further engagement with you in the coming months.

As I look ahead to the second quarter of the year, we've got momentum. It's significant turnaround work behind us.

And we'll continue to focus on safe and reliable operating performance while progressing our growth initiatives.

As we announced this morning, we plan on accelerating share repurchases under the normal course issuer bid.

I'm pleased to say that our strategy of responsibly increasing cash flow and delivering unmatched shareholder returns remains alive and well.

To wrap up. I'm extremely proud of what our team has delivered. And I want to recognize and thank them.

And, as always, I'd like to thank you for your continued interest and support.

And with that, now, I will move. We'll move to the QA session. I'll pass it back to Peter.

Thank you John. As always, we'd appreciate it, if you could limit yourself to 1 question plus a follow-up, so that we can get to as many questions as possible. So with that, operator, could you please open up the lines for questions?

Thank you. If you would like to signal with questions, please press *1 on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is *1. If you would like to signal with questions,

And our first question comes from manav Gupta with UBS.

Um, good morning. Uh, my first question is, is it relates to is the decision to accelerate the ncib? Okay? Can you help us understand? Um, why this decision was taken and in terms of cash balances, how confident are you that? You can complete this entire ncib uh without Levering up but before year end thank you.

$15 billion of that has been shared by banks, and this is very consistent with us. We're extremely confident we're going to do this from free cash flow.

Perfect. My my follow-up is a little bit.

Of a tricky question, but I'm going to ask it anyways. When we look at year to date relative outperformance, you have strongly outperformed your peers, you're an absolute, and a relative winner and what that does is sometimes people just want to come after you because they believe this cannot continue. I'm just trying to understand from in your opinion, why this is the Management Field. The setup is still very strong for our investment case, for Imperial where it could continue to work on an absolute and a relative basis. As we move along, despite the very strong year to date outperformance.

I think I think um, you know, I mean, it comes back to our strategy to win and our competitive advantages. And, you know, our strategy is all about responsibly increasing cash flow and delivering on matched industry-leading shareholder returns and we think we have a very strong basis to do that. Um, and we've, we believe we've demonstrated that in our past performance, you know? So continuing to focus on maximizing the value of our existing assets. We talked about the improvements, we're making a curl and Cold Lake uh, investing selectively in growth opportunities at at those existing assets, curl co lake transformation, stress Conor renewable Diesel and then progressing future strategic growth. So if you think about

Our Uber pilot and the growth opportunities that we have in our portfolio. You know, we are very bullish about what that technology is going to deliver in the future and the asset base we have in terms of our heavy oil in situ portfolio. So I think, I think our strategy to win is strong. We've continued to focus on that. I believe we have competitive advantages that, you know, when matched up against those assets that we have, you know, take our unique competitive advantages around scale and integration technology execution and the best team in the business. When we take those competitive advantages against the advantaged assets, that leads to Value Creation in the future and that's what comes back to us continuing to deliver unmatched industry-leading. Shareholder returns

Um so we we are very confident that you know, the performance we've had is on the basis of that strategy and the teams and the technologies that are competitive advantages and we're going to continue to deliver that going forward.

Thank you for the detailed response and just for the record we completely agree with you. We believe the setup is very strong for your stock to continue to work. Thank you.

Thank you, Manov. Thanks for the questions and your confidence in us.

And the next question comes from Dennis Fong with CIBC Road markets.

Hi, good morning. Uh, thank you for taking my questions and congratulations on a strong, uh, operational quarter despite uh, plan maintenance.

Um, my first question goes a little bit into the the technology side. Uh, you've been operating a, a um, autonomous Fleet now for a little while and I was hoping to dive into some of the insights that you might have gained from, uh, running an in deploying, the technology. Can you outline some of maybe the surprising benefits? You've observed thus far with AHS deployment, um, on on your existing asset base.

Morning data and thank thanks. Thank you for your question. Um you know I think we think about it when I think about the autonomous Hall system and which has been a huge success and very proud of what the team has done there. But it is, it's part of a

A broader technology approach that we have and I talked about our competitive advantages and technology is the first 1 on the list um that I mentioned. So you know for us technology is the core to what we do. I mean we're more than an oil and gas company we're more than an energy company, we're really a technology company that's managing molecules and um so this autonomous Hall system for a successful as that's been it's part of a broader approach around technology and

Anything, I think it's worked well and and, uh, and I think we see actually even further optimization of that because now we're going to look at ways to, you know, further optimize the fleet, we think we're still tuning the vehicles uh in a in an autonomous way and then we have other autonomous opportunities around robotic fueling of the trucks uh robotic inspection of the vehicles. And we're considering, you know, other other equipment in our Fleet that we could automate. So I think if you think about the upside is we stepped into it with heavy all trucks and there's more to go.

Great, thanks. Uh, John, I really appreciate that caller. Um, my second question, uh, stays on on curl and, uh, focuses a little bit on, I guess unlocking, uh, the full potential of the equipment that you're using at sight. And I wanted to kind of dive a little bit into Hydro transport lines, and what you guys are doing there to improve, um, again runtime and maybe space between turnarounds and and if you wouldn't mind also touching on, uh, what also drives a confidence in moving towards a 4-year interval rather than the 2-year interval

Yeah, no, thanks for that question. Dennis. I think you know, it's uh, if you think about where we're trying to get to with curl and moving it now you know we went up we're we're at 280 and now we're going to look at getting it to 300 and further lowering our unit cost to 18 dollars a barrel. Now there's 3 legs to that stool that we're focused on right now. There's others that got us there in the past but the ones we're focused on now is enhancing the recovery, improving the productivity and the reliability gains uh leveraging technology again and then turn around if you know, turn around efficiency. Uh, so those are the 3 areas and enhancing recovery is enhancing the recovery in the mine and enhancing the recovery. In the plant to get more bmen out of the oil. Sands basically improving the productivity is looking at every piece of kit. Uh, that we have, our trucks are shovels, our dozers, our Hydro transport lines, and improving the productivity and reliability of those. And we talked about the turnaround efficiency, um, the specifically on the hydro

Transport lines in some of the things we've done with that. Is, we've interconnected our Crushers to allow for flexibility. We have enhanced the Metallurgy of the lines to improve the life and the wear, uh, that we're seeing on the lines and then we've upsized them as well, so we can get more product through and that allows us when we do have, uh, downtime on 1 part of our equipment, we can run more through the or how, to transport lines. So, it's a question of configuration, and interconnection of our

Quit our equipment. It's the metallurgy we're using in the lines, and then it's the size of the lines and working on all of those three things that, you know, specifically what we've worked around on hydro transport lines.

In terms of our confidence, you know, you may have heard me talk about before, you know, our goal is to be the most responsible operator. You know, if not, not just a responsible operator, but the most responsible operator and that involves safety and environment, it involves, um, the liability and our cost structure, all of those things. So, when we think about what we're doing on the turnarounds, and the extension that we've had over time, reducing the duration, extending the intervals.

That's 1 of the best examples. I can point out to you about being the most responsible operator. Because we're we do that in a way that will not in any way compromise, safety Integrity, or reliability. And we're getting those benefits through, you know, plowing our learnings back into our turnarounds, continuous Improvement and learning, it's not only from our operations, but from our major shareholders operations, it's applying technology. Um, it's applying, um, new equipment and managing the wear of our assets and building in redundancy. Uh, and then executing, you know, at with higher efficiency and um using things like absorbers versus scaffolding. And so on. So we're doing all that and and in no way compromising safety Integrity of our assets,

Alright. Thanks, John. I really appreciate that. Um, detailed answer. I'll turn it back. Thanks.

Thanks, Dennis.

And we'll take a question from Greg party with RBC Capital markets.

Yeah, thanks. Good morning, John. I was hoping maybe to dig into some of your, um,

Opening remarks. I'm going to try and, uh, shoehorn three questions in here with, uh, Peter not noticing. But, um, just with renewable diesel, I know you were talking about, um,

Just optimization in terms of supplier. So does that mean then that you will be likely producing more?

How you'd be running that, that new unit?

Yeah, thanks, Greg. I I'll start and then I might ask Scott to to chime in as well. But, you know, if a step back from it it didn't really, it wasn't getting to seasonal aspects. Really, um, what we were, what, you know? First, let me say extremely pleased with

Starting up this uh this project and um and you know obviously the team is going through optimizing production right now but the way we've looked at this project is 3 kind of Key Parts to this. It's 1 is you know at its core is the manufacturing facility that we built at the stress Corner. Refinery. That's complete. It's up and it's running. We're very pleased that the, the ramp up and how that's gone. It's it's um, I would say, exceeding expectations, if anything the other big component is, you know, the kind of vegetable and agriculture oil feed stock that needs to come in to, uh, to feed the feed the project. And then the other part is the supply of hydrogen. So that when we talked about that optimizing the inputs, it's around optimizing. The feed stock that comes in and the supply of hydrogen to run the facility and I would tell you on the on the first 1, you know, around the the vegetable um and agricultural oil stocks, all those ra arrangements are in place and the supply is in place and we're very comfortable with that. And then on the hydrogen we you know, we have sufficient gray hydrogen to

Start up and operate the the the facility, but the availability of further, hydrogen supplies and blue, hydrogen will impact the speed and the, and the ramp up of the acid. So, what we were really referring to there, is the ramp up as the hydrogen supplies, the availability of hydrogen supplies and how's that comes into the market. That's kind of what we were referring to, okay? Uh, and I, I'll just I'll just flip over to Scott if you have anything further to add on that Scott. Yeah, yeah. Thanks John. Just 1 additional point for you. Greg. Um, your your comment around when we'd like to operate the facility.

Will be operating this facility year round. And in fact, we'll, we'll especially, like to be operating in the winter months. As we take advantage of the proprietary Catalyst technology that we have. As part of this project, that enables, um, a lower poor lower Cloud product that can be run in operational year round. So we'll be blending this product into, uh, diesel products that we sell into the market year round and that's 1 of the advantages. We have as part of this project

Okay, terrific, to 2 other, maybe just more or less. Footnotes, John, did you say there was a little more unplanned downtime just in refining in into, I'm just curious if there's any color around that and then are you still producing 4 or 5 thousand barrels a day of solvent at uh at your new uh uh solvent at project at a call. Like that's it for me. Thanks.

Uh, yeah. I think you're you're right. We did say that we had a little higher unplanned and planned downtime in the downstream in the second quarter um that the planned the the shutdown work went extremely well you know basically ahead of schedule and uh and lower on costs. So we're very pleased with that. We did have a little uptick in unplanned downtime in the quarter not nothing, significant nothing that concerns me. It's actually behind us now. So it's really nothing specific there and then the question on the solvent so was that? Can you can you repeat that 1? Yeah, I know. Are you still producing more or less 5 to is sort of the circuit? I think you mentioned. Uh, it's sort of circuit 23,000 right coming under the Grand Rapids.

Is $4,000 to $5,000 of that still?

solvent basically, you're injecting

No, that that 23,000 is BM. That's not a bummer basis. So we're producing 23,000 barrels today of bumin, uh, from from that project.

Okay, understood. Thanks very much.

Thanks Greg.

And we'll take a question from Menno hulshoff with TD securities.

Types and good morning everyone. I, I just have 1 question on the, on the capex side of things you were quite a bit lower in the quarter than we were modeling, uh, what drove that and, and given that your trending below last year in the quarterly, run rate implied in your full year, guidance, what should we expect the Cadence of spending to look like in Q3 and Q4? And finally is it possible that we see Imperial test the lower end of the guidance range of 1.9 to to 2.1 billion dollars?

You're seeing in 25. It is just it's just the timing Milestone payments and things like that and the time which they hit. But right now we, we're still, um, you know, consistent with our guidance. Any anything else? Yeah. No, that's exactly right. It really is just timing or we're comfortable with our guidance. So we'll have a little bit more spend over the back half of the year.

Terrific, thank you. And I, I just thought of another 1, just on the ebrt side of things, um, just to dig a Little Deeper.

What is the status of the 3, horizontal? Well, pairs that you recently drilled? Are they already in the early stages of activation? And if not what is the uh the timeline that you're targeting?

Yeah, no, they're not yet mental that they say, we've drilled them. That's, you know, part of the work we've been doing at site to get the site ready. So we we we've got the wells in place but we still have the facilities, the surface facilities to build to allow us to be injecting you know the solvent. Um so that the startup of that is planned for early 2027 and that's when we'll start to, you know, solve you know, inject solvent and you know, a little bit of steam into those well so we'll be at that time.

Terrific. Thank you.

Thanks mano.

And our next question will come from Patrick Oor with ATB Capital Markets.

Oh, hey guys. Good morning, and thank you for taking my question. I guess the first question you talked about, um, refined products sales going up to 480,000 a day, here being enabled by the Trans Mountain expansion. If you could maybe unpack that a little bit more, and then I'd be curious to know sort of, um, from a margin perspective, what the impact here would be on the margins at the refinery level from that.

Yeah, I'll start. Thank you for your question, Patrick. I'll kick off and again probably ask Scott to chime in a little bit. Um, and so if you look at that, what we were referring to there, I mean...

You know, we're always working to enhance our Downstream Market position and uh and our ability to officially Supply customers. Um we did pick up some additional refined products Supply flexibility with Trans Mountain and we did take advantage of that in the second quarter. Um so overall our you know our sales so our dictated by demand and we've seen steady demand in Canada year-over-year on all the products basically that we are supplying. Um so that you know, we're seeing that steady demand. We picked up a little extra space on Trans Mountain, which we took advantage of in the quarter.

And that was a mix of local sales and profitable export opportunities. So, it's all about efficient logistics and having the flexibility in the market expertise to take advantage of the demand when it's there. And that's exactly what we did in the corner.

And then I'll assess Scotty wants to chime in no more sure. Yeah, I just add to that that um, our primary route to Market is the manufactured products that are refineries moved through our proprietary um Midstream Logistics systems to supply, you know, primarily domestic demand across the Canadian Marketplace. And so the comment there was just reflecting the fact that as we see opportunities with some spots space available on that Trans Mountain, um, expansion pipeline, we always consider, you know, utilizing Logistics that are out there to move product to different markets to take advantage of demand um and uplift potential. And so that that's really what that that um comment referred to.

And, sorry, back to the second part. Is there a margin enhancement there, or is it just purely volumetric?

Yeah. So all of our, all of our movements are are meant to, um, to generate margins. So all, that's a positive return for us. Um, but as I mentioned before, we're we're primarily placing our sales and the domestic Market um and that's where we see the higher uplift.

Okay and then just going you, you know, you touched on curl a little bit here. I think that the the results there were a bit ahead of where we had it modeled in the quarter and based on what I can tell from consensus, I think it was about ahead of most of my peers.

Um, so if you, I know you guys like to talk about days with production above 300,000, um, if you were to break down sort of the outperformance relative to last year in the quarter, and you were to take a look at it and say, okay, this is, you know what, we could attribute to better turnaround efficiency. And this is what we can attribute to today's above 300 or high output days. Um, how would you break that down? And then, what does that sort of imply for the back half of the year and the 285, midpoint of guidance?

We've had uh better just general better reliability and uh and Recovery that we've seen in the asset in the second quarter which is encouraging. I mean we're still sticking to our guidance. We're not looking to change that right now. Um but you know we had yeah, a little lower on planned uh, downtime than we put into our Outlook in the second quarter a little better recovery. The turnaround was a little better as well. The combination of those things did end up with a a little better second quarter which we're very pleased uh, to see obviously and but but generally our guidance remains uh, unchanged

But maybe you want to add a little extra color about Cheryl. Sure. And that and I'll, I'll jump in here. So, uh, as John mentioned, we had an exceptional performance in May and July May through June, uh, some of our strongest production months and maybe, what I'll share is, we did see improved or grade during that time frame and increased material movement that was enabled by our AHS truck productivity. And then during the turnaround we did upsize or deep bottleneck or Hydro transport lines, which is giving us additional a throughput. And then as John mentioned that, the shorter duration turnarounds

Now, specific to your question about the days above 300 year to date. We're tracking about where we were last year.

So you know, we're you know, we're halfway through the the game a half time here so still quite a bit of work to be done for the rest of the year, but we've seen you from that first half really good progress with the turnaround behind us. Um, you know, continuing to look forward to a strong third quarter and fourth quarter.

Okay, thank you very much.

And the next question.

And the next question will come from Doug Leggett with Wolfe Research.

Hey, good morning, everyone. Thanks for taking my questions.

John, I I I wonder if early in the call. Um, I think you were asked about the investment case and, you know, the accelerated ncib and all that good stuff. Um, I wanted to ask you the question a little differently, but in a selfish way, if you like and what we think drives Market recognition of value for your stock, which is dividend growth.

So my my question is that you have the lowest dividend break even still in the the industry not just in um in Canada.

Uh, but your dividend growth, you know, could go a lot higher if you like, or a lot—uh, your absolute dividend could go a lot higher without having to rely on the buybacks.

To manage the burden because you'd Break Even is so low. So my question is, why not? That's my first 1. My follow-up is related. It's probably for Dan. Is there a a Target or an ideal level of Leverage for the capital search for the balance sheet that you would think of as a normal level of Leverage as opposed to 1? That's benefited from several years of windfall oil prices. I'll leave you there. Thanks.

Thank you. Doug. Um,

Well, I think if I step back a little bit from this, and then Dan can chime in as well. Um,

As you know, you know, well, we, we take a very disciplined approach to Capital allocation, there's no change in that philosophy. And to your point we do prior, prioritize, the reliable and growing dividend, that is our first priority in terms of returning cash to our shareholders. Um, and and and and of course, in doing that, you know, we have, you know, over that 5 year period that I talked about in the 20 billion, we've returned, 5 billion of that is dividends. And we had, we've had a reliable and growing dividend for over 30 years now and we had a 23% annual growth rate over the last 5 years. So it is still our first priority. Um, in terms of, you know, returning cash to shareholders, but we're also comfortable with the mix here in terms of, you know, the dividends versus share BuyBacks. And as we've talked to investors, um, you know, the the approach we've taken on share BuyBacks continues to get very positive feedback.

Um so but but obviously, but number 1 on that list after, you know, our free cash flow, we take care of our investments. It it Remains the dividend.

Yet it will it will vary obviously we grow you know when we're not doing BuyBacks, we're out of the ncib market because we've exhausted it. You'll tend to see the cash go up and so net debt goes down. But then you know, we kick into the ncib, you know, the cash comes back down so we're not really focused on the net debt. That's sort of a little bit of noise in the system. You know, we like our overall debt level and as John said, you know, you know, reliable and growing dividend and, you know, Surplus cash, where, you know, we remain, our philosophy remains to return that to the shareholders, in a timely manner and, uh, you know, that's reflected in our certainly, our NCBS and the acceleration of the ncib and in the past, you know, um, depending on the market conditions, you know, sibs, as well.

Oh Jen. So I'll keep pending on the topic but I appreciate you taking my questions. Thanks.

Thank you, Doug.

And the next question will come from Lydia Gold with Goldman Sachs.

Hi team. Thanks so much for taking my question. I just wanted to dive more into the SAGD projects queued up at Cold Lake. Could you talk a bit more about these opportunities and remind us of the timing and the next steps to get these online? And maybe as a follow-up, talk about how this technology gives you a competitive advantage relative to peers.

Thank you. Uh, the idea I’ll start again. I'm a desk Cheryl to chime in on that, but um,

Well, number one, I think, I think.

You know, it does, give us a significant competitive Advantage, obviously, many are using sagd, but what we're generally applying a coal as we transform the asset with new technology is essay sagd, which is a solvent. Assisted sagd. That's what we're applying at Grand Rapids. And what we're, you know, seeing great success with at Grand Rapids and we have other solvent related technologies that we had planned to apply at Coe Lake in the future. We talked about the lemming 1. That is sagdi, that's not solvent. Assisted, that's kind of a very unique Niche opportunity. We saw it means quite amazing. This is the pilot location at Cole Lake that started in 1975. So 50 years ago, we're going back to that pilot location where applying sag D, which is a technology that Imperial and invented and uh, but others are using today, um, and we're applying that there to, you know, produce the remaining resource in that location. So we have essay sag D at Grand Rapids today producing Beyond.

Be above our expectations. And that I think both well for the future, we have future pads, uh, to develop in that space. And then the next up for us is Macon essay, sagd, which we're planning to start up in 2029 with a peak rate of 30,000, barrels a day and the key, with all of this is, you know, we're transforming the technology and the recovery at uh, that we're using at Cold Lake, which we've been doing for 50 years. Um, and we continue to do that.

And it's lowering the cost structure and lowering the emissions of the production. And, you know, the beauty of Cold Lake is, as I mentioned, we've been at this for 50 years. We have decades of remaining inventory at Cold Lake in front of us.

So really exciting what we're doing there and I do think it gives, it is absolutely a competitive advantage and I'll ask Cheryl if she wants to add anything more to that. Yeah, maybe just a little bit more. In terms of timing is John mentioned. We're pleased with the results from the Grand. Rapids, Phase 1. Our next 3 pads are currently in development and we're going to be leveraging, our existing plant capacity and that'll make that will offer significant inventory to sustain production at lower capital, and then John mentioned as well, the Macon, uh essay, which unique about that is that will be our first commercial, Clearwater fasd development and that 1. We're expecting about 2029 startups, um, at the end of the day, we're expecting about 30,000, uh, Peak from that, clear water. So we're on track to about 50,000, uh, from our essay.

50,000 barrels per day of SAGD production by that 2030 time frame.

Thanks so much. I'll turn it back over.

Thank you, Lydia.

Thank you. And this concludes the question and answer session.

I'll now turn the call back over to Peter Shaw for closing remarks.

Great. Thank you. And so, on behalf of the management team, I'd like to thank you everyone for joining this morning. If there's any further questions, please reach out to the IR team and we'll be happy to answer your questions with that. Thanks very much. And for those in Canada, enjoy the long weekend.

Thank you. This concludes today's conference. Thank you for your participation. You may now disconnect.