Q2 2019 Earnings Call
Second quarter 2019 financial results call.
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Later, we will conduct a question and answer session and instructions to participate will follow at that time.
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I would now like to introduce your host for today's conference Mr., Trevor Bell Vice President of Investor Relations, Sir you may begin.
Thank you operator, and good morning, welcome to Suncor second quarter earnings call with me. This morning are Mark Little President and Chief Executive Officer, and Alister Cowan Chief Financial Officer. Please note that today's comments contain forward looking information actual results may differ materially from the expected results because of various risk factors and assumptions that are described in our second quarter earnings release as well as our current annual information form both of these are available on SEDAR, Edgar and our website Suncor Dot com.
Certain financial measures referred to in these comments are not prescribed by Canadian gap for a description of these financial measures. Please see our second quarter earnings release, following formal remarks, well open the call to questions now I'll hand, it over to Mark little for his comments.
Good morning, and thank you for joining us.
The record $3 billion of funds from operations that we generated in the second quarter, which included some turnaround activity and major planned maintenance continues to reinforce the value of our integrated model and our ability to generate substantial cash flow and value for shareholders in almost all market environments.
We continue to operate our assets safely and reliably through ongoing mandatory production curtailment environments.
Because of our regional footprint and asset flexibility, we were able to transfer production quotas among our oil sands assets.
We also purchased 24000 barrels per day of net additional bitumen production volumes from other operators during the period of industry wide planned maintenance.
We set a total upstream production record for the quarter and lowered our cash cost per barrel across all our oil sands assets compared to Q1.
Total upstream production exceeded 800000 barrels per day with nearly 700000 barrels per day generated by our oil sands assets.
This second quarter production record is a very positive result, given the impact of major planned maintenance completed at many of our oil sands assets and mandatory production curtailments during the quarter.
Production from Suncor is offshore assets in the second quarter was approximately 110000 barrels per day.
This included the ongoing ramp up of Hebron and a full quarter of production from OTA project in Norway.
We also officially sanctioned that Terra Nova asset life extension during the quarter, which is expected to capture approximately 80 million barrels a day of oil from the field.
And extend the asset light by approximately a decade.
This is another example of our ongoing commitment to invest in high return low risk projects that create value for our shareholders.
In the downstream, we completed planned maintenance at each of our refineries, resulting in utilization of 86%, which drove refinery opex per barrel slightly higher than Q1.
With 29 team refinery.
Major planned maintenance now complete we're set up for a strong operational performance for the rest of the year and were expecting demand to be robust during this period.
As you can see we remain laser focused on our 2019 operational performance.
At the same time, we continue to advance projects and investments to incrementally and sustainably grow our cash flow by $2 billion a year by 2023.
As a result, we have mentioned.
And as we've mentioned before we are doing this by focusing on operating costs and sustaining capital reductions margin improvements and debottlenecking opportunities.
Using the learnings of our major project execution playbook, we created a dedicated senior team led by a member of our executive leadership team to Steward This initiative, including advancing and executing on several key projects related to the $2 billion of sustainable incremental cash flow and we're making good progress on executing a number of these projects, including continued implementation of a hot autonomous haul trucks at Fort Hills mine after more than a year of successfully operating north steep bank mine with autonomous trucks.
And execution of our past tailings management plan at base plant, which allowed us to treat a 165% of the mature pine tails, we produced in 2018.
And advance.
Advancing engineering procurement and early stage construction on the Suncor Syncrude interconnecting pipeline.
In addition, we are nearing a sanction sanction decision on replacing the coal fired boilers at base plan with the cogeneration unit.
We expect these four projects to deliver approximately one half of the $2 billion of structural annual cash flow improvements once fully implemented.
The remaining $1 billion of incremental cash flow is expected to come from projects such as de bottlenecking opportunities at Fort Hills, and our in situ assets as well as advancing numerous initiatives in adopting digital technology across the company.
I think people recognize that technology and innovation have always been an important part of southern course history, and we fully expect that to remain that way with the additional of digital technology going forward.
We will continue to update you on our progress in these areas, including their contributions to our overall goals financial goals.
Just last week, we continue to build on 25 years, the sustainability reporting by releasing our 2018 annual report on sustainability and our third climb report.
Sustainable energy development has long been a part of Suncor strategy with a focus on generating economic value enhancing social value and continually improving our environmental performance.
Contained within the report our numerous examples of our continued progress in 2018.
Including.
10% reduction in greenhouse gas emissions intensity since 2014 and in fact part of this progress is attributed to the production from our Fort Hills mine.
Which has essentially the same full lifecycle greenhouse gas emissions intensity as the average barrel refined in North America and this is done by extracting carbon from the barrel before we ship it to market.
The.
A $635 million invested in technology development and deployment such as the next generation in situ technologies that have the potential to dramatically reduce production greenhouse gas emissions by up to 70%.
And a spend of over $700 million with 83 indigenous businesses across Canada in 2018, including 24, new suppliers and a focus on the East tank Farm development partnership where first nations acquired a 49% equity position in the facility at a value of $500 million. This is the largest first nations business investment to date in Canada and helps ensure indigenous people can share in the benefits and opportunities of resource development.
We believe this model.
Can be and should be duplicated.
There is many more examples in our sustainability and climate report, which can be found on our website.
With that I'll pass it on to health care to provide some color on our second quarter financial results.
Thanks, Mark as you previously highlighted.
Suncor generated $3 billion of funds from operations in the quarter once again, demonstrating the strength of our integrated model in all market conditions.
So the business environment strengthen during the second quarter compared to Q1.
Because we operated both upstream and downstream off this reliably we were able to come to that value, which will then return to our shareholders in the form of $650 million and dividends.
552 million builds and stock buybacks.
Well, that's a total of $1.2 billion or 40% of cash flow being returned to shareholders in the second quarter, and that's $2.4 billion or 43%.
Year to date.
We also strengthened the balance sheet during the quarter not a necessity, but does demonstrate capital discipline and commitment to maintain a strong financial position.
This was accomplished through net repayments of more than $700 million than the strategic timing of the issuance of $750 million.
Okay ones that come to the low refinancing for a 10 year term.
As we expected capital spend in the second quarter was $1.3 billion, which is an increase of approximately $450 million compared to Q1 and reflects the seasonality, including the impact of plan movements.
Looking forward to the second half of 2019, we've made a couple of changes to a corporate guidance.
We have increased the syncrude cash operating costs per barrel guidance range by $3 to reflect increased maintenance and investments being made to drive reliability improvements and you've seen the results over the past few quarters.
At the same time, we will reduce the top end of our capital guidance range to $5.4 billion down from $5.6 billion, which demonstrates our focus on capital discipline and as well as our focus on executing projects efficiently on investing to drive shareholder value.
Recall that our 2019 production and cash cost per BOE guidance was issued assuming lower curtailment than as icily unfolded studies.
Namely the Alberta market will be curtailed the 30% over the initial curtailment level for the final three quarters of 2018 and that was based on the Alberta government statements of the time.
Well, we are not changing our guidance ranges other than what I. Previously stated it is fair to say that we now expect to be in the lower half of the rooms, where oil sands and Fort Hills production.
Therefore in the upper half of the reduced associated costs cost per barrel.
Unless that are significant interventions, maybe about a government monetary production curtailment now appears to be with us for the remainder of 2019.
And with that I'll pass it back to Trevor.
Thank you Alister and Mark I will turn the call back to the operator to take questions first from the analyst community and then if time permits from the media.
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Our first question in the queue, because some Neil Mehta with Goldman Sachs. Your line is now open.
Hey, guys. Thanks, Thanks for taking the question congrats on a good quarter here.
So the opening question for me is is.
It is around the $2 billion of cash flow and it's something that we are getting increasingly asked about and thats a big driver of the long term cash flow per gram.
Story for the company.
How should we think about the timing of when we're going to get more granularity and any incremental details you can provide to help us get conviction about the chief ability if that number.
Yes, Neil Thanks for your question. It. It's one of the reasons that we tried to put a little bit more detail into our opening remarks here today about the $2 billion because I do think when we start getting into things like autonomous all tracks the Syncrude Suncor interconnecting pipeline.
Looking at the Cogen investments working on tailings management in such a lot of this is quite concrete.
Some of these are actually in execution one of the things were considering as having just really a focused session, where we talk specifically about the details behind the $2 billion.
So some of this right now as I as I talked about.
Some of the items that we talked about in here.
The c. So a bunch of these are in execution like that Cogen is a decision thats coming up that's quite eminent for us to make a decision on whether we're going to do that project or not.
And and then we have a number of other ones like Fort Hills de bottleneck were still doing analysis and stature curtailments made it a little more problematic in the sense that it's it's harder to run the.
The flight capacity and constraints to fully understand what the constraints are in all the temperatures and.
And ambient temperatures and such so so we're working through it.
We think that there's a billion dollars of this that's very defined which are really the items that I mentioned and and then there's other work that we're working on so but this is an area of focus and I really think probably by.
Early into next year Middle of next year, we'll have a lot more detail on this but.
There is information available on the projects that we've flagged and chatted about.
Thanks, a follow up question just around some of the guidance updates can you talk about some of the factors that drove the capital spend.
Guidance to get the top end of the range come down a little bit and then syncrude.
Yes cash costs.
Moved moved up here is that something that we should be carrying forward or do you think thats just timing of turnarounds.
Yes on the capital side.
Our focus has always been don't spend a dollar unless it's absolutely going to drive value and be very disciplined on the execution and those spend as little as much as you can to drive as much value as possible.
So the decrease in the range is really just reflecting the discipline that's coming into the execution of every project that we're doing and and so our view is there is no way that we're going to end up spending $5.6 billion. This year. So we've just moved down that range.
On on the Syncrude side are.
Focus on this is when you look at the operation overall.
Syncrude Ted excellent performance over the last three quarters, we in Q4 of last year, our utilization was over a 100% in Q1. It was 89 in Q2 as 92 those those numbers in the last in the first half of this year actually quite remarkable considering that this isn't a curtailed environment, where we can run the machine to its full capacity that being said I think it's obvious that we prioritize the curtailment and moved as much capacity.
To syncrude as possible to try and and maximize the value of the synthetic barrel because we're not just curtailing production were curtailing conversion capacity in the province at Syncrude in particular.
So so it's had a really good progress now.
The increase in cash cost is really reflecting the fact that we are going into turnaround and so this unit. We're taking one of the cokers offline and we're doing that coming up here at the end of August So for September and some of October that unit will be down and so production's declining.
Still even with all of that said in a curtailed market, we're going to end up delivering.
One of the lowest unit operating costs in the last decade at Syncrude is what we're expecting and.
We're making good progress on the reliability. So we don't view or were fully committed to our 30 dollar.
Barrel operating costs, and our 90% utilization, we won't average that in 2020, but we think that all the conditions will be in place at the end of 2022 achieved that going forward.
And that's in crude interconnecting pipeline is another one of those critical pieces thats required and that'll be in place.
Towards the end of 2020.
And then lastly.
Always value your views Mark on on the E address issues and where we stand what is the near term fix it sounds like there there could be a deal in hand.
To increase production reduce curtailments in exchange for incremental rail where do we stand as it relates to that and then something thats been bubbling up to the surfaced in the last couple of weeks is around line five and risk around disruption around that pipeline, which adds another wrinkle.
To the egress question, So I'd love for you to kind of frame. This all out for us and how we should think about this playing out.
Yeah, maybe just to take those in reverse order with with line five we think the probability of line five getting shut in as is.
Very low.
This is a critical piece of infrastructure, not just to Ontario, refining and cut back refining, but it also is to Michigan and their supply.
And so one thing is can.
If they end up shutting in line five that will have an impact not just on us but on on the state of Michigan and their product prices and such and that after this issue in Philadelphia, where refining capacity on the east coast is already taken off and starting to put some.
Pressure on on clean products and stuff on the East coast.
The U.S. so.
We think that this is a low probability we think that the pipeline operator actually has a really good plan in place to be able to execute they want to do it in a disciplined way, which we fully support and so shutting down the line in our view doesn't make a whole lot of sense, but with all that said our focus we're spending time looking through and trying to understand how we would manage that and we think that there are ways that we can.
Mitigate the risk associated with it and so thats an area that we spent a lot of time focusing on so we don't really view that as as that material.
When you when you turn your attention to whats the opportunity.
Now I've talked from time to time about.
The work that we've been doing across the industry with the Alberta government to try and set up this arrangement where you get.
You get production above year quota that is established during curtailment for incremental rail. So if you can bring incremental rail and bring it to market.
And then you can actually end up moving additional production. We think it makes sense I think it's just taking some time to work through it with the Alberta government. So we're still waiting to get some decisions out of the Alberta government on it but we think that's good for everybody and there's a there's a whole group of producers that quite frankly have been on both sides of the fence around curtailment, but we all think that this isn't the best interest of.
The province for royalties and for the people of Alberta to be able to move forward. So I'm, hoping that we'll get to a decision on that now we havent accounted for that in the comments Alistair made about the impact of curtailment on our production and operating cost. So we're reflecting that curtailment carries on but we think this is a good opportunity we are expecting and hope that we can get to a decision fairly quickly on it and then it's just the market forces about how fast we can bring additional rail to market I am expecting that between now and year end. If we can get that agreement in place we could bring somewhere in the neighborhood of 250 to 300000 barrels a day of incremental rail and so that would be substantial keeping in mind in August curtailment. The official curtailment number is that were constrained by a 150000 barrels a day.
As an industry.
All the industry players realize that constraint is actually much higher than that but I do believe that at 202 hundred to 250 or 250 300000 barrels of additional rail will be able to clear the market and we are hoping at that point.
Along with some other opportunities the industry's pursuing that we'll be able to get out of curtailment and and then people can start looking at what are their investment opportunities going forward.
And then lastly, really last question is there any timeline on when you expect.
Some resolution on.
On some sort of agreement with the with the producers and the government.
I don't know really business and the government's card I know, they're working at hard they've had a lot of balls compare in the couple of months that they've been in power and.
Last night, they just came out with the whole piece on the electrical markets. So they're working at very diligently, but so I am hoping that in the next month or so we can get some some action moving on this.
Fantastic.
Thanks Neil.
Thank you and our next question comes from Greg Pardy with RBC capital markets. Your line is now open.
Yes, thanks, good morning.
I guess first just on your capital guidance, a significant amount of your growth capital is allocated to your teary and be in PE business and could you provide an update me on those projects and specifically Hebron White rose and that OTA.
Yes, Thanks, Greg.
The we are actually spending a fair amount as you say in the in the NP side of the house right now he Brian's been going great. The operators done a very good job. It's ahead of our expectations. We just brought the six well on and.
And so it's it's going extremely well there Wes white rose.
I would say that project did not start well.
The.
Now the operator, I think has done a good job of bringing productivity back in line. After some of the issues at the start of the project.
So now the operators also.
Already announced essentially a one year delay from the start of 22 to the end of 2022 on the startup and such and so now we're deferring revenue increasing and paying for a project team that will be in place. Another year. So this this is actually I would say the impact on the project is outside of what we would expect that normal range for the uncertainty of project of this type but.
But the operator has done a good job of getting things under control getting productivity in line and moving things forward. So we're working with the operator now on a full review of the project and.
And we're expecting a project update here in the second half of 2019 I think in our annual report we said it would be in the first half.
It's been pushed to the second half of 2019, and then Oda owed has actually gone well, it's basically met expectations, it's online and producing this was the first full quarter of production.
So I think it's pretty much on track.
Okay, and then maybe just as a footnote.
Theres that small oil spill at Hibernia, I mean is it back up and I guess the question really is is there anything to worry about there.
Well I don't think so I mean this is a disappointment for all of the partners and involved although we have a.
Very high confidence and the operator and the discipline that they bring to moving this thing forward and so I think they are handling the situation well and and working with the authorities to deal with it.
Okay terrific, thanks, very much mark.
Thanks, Greg.
Thank you and our next question comes from Dennis Fong with Canaccord Genuity. Your line is now open.
Hi, good morning, and thanks for taking my question.
So just as we continue to see you guys you lever with essentially allocating your excess free cash flow and Alister I know you already mentioned, how comfortable you guys feel about the balance sheet right now.
I guess I guess is a good problem to have but at what levels. Do you guys feel that you no longer need to allocate excess free cash flow to the balance sheet. We are kind of some of the maybe the debt metrics in terms of where you feel comfortable around the balance sheet and where you can maybe think about allocating that free cash flow elsewhere, whether it be too.
Incremental share buybacks or anything along those lines. Thanks.
Thanks Dennis.
I would say that.
Consistent with my comments and.
But we are very comfortable where we are with the balance sheet to do we do that over to through a disciplined approach through we.
Through to cash flow.
We'll be ready to system or the matrix that we leave though the Rudolf acute.
Free cash flow you did see is.
So it will ramp up the buyback in the quarter. So we are on pace to exceed the 2 billion goes.
Yes.
Excuse me I believe.
To you as soon as I do that.
I think as we look forward to the remainder of the year, we clearly pricing is.
Is down a bit from the first half so we will remain cautious.
A room, where we allocate to the free cash flow.
But as Weve demonstrated in the past you so as to last year.
We are generating more.
Free cash flow you can expect to see us take a balanced approach to reveal the costs will go between.
Further students, who loans, either and potentially increasing so bye bye.
Okay perfect. Thank you.
Thank you and our next question comes from Prashant Rao with Citigroup. Your line is now open.
Hi, Good morning, Joel on for Shaun. Thank you for taking my questions.
First well balance today in terms of integration.
Two next year and beyond how do you think about the optimal time to growth the upstream production base, where we saw last quarter and in this context, how are you thinking about organic versus inorganic growth.
Yes, great question. Thank you be.
So I think we're on the record, saying that this band of having like 65% to 80% integration between our upstream and downstream as an ideal range. We're in the low seventys right now and so we would like to maintain that we do think we could get a few phases of replication on without integration and but we continue to work the integrated model and look for opportunities like de bottlenecking, our investments in those and the assets and stuff that we have now on the M&A side, we're really always looking at make versus buy so if we if we can buy it and drive more value by buying it then making at that makes a lot of sense to us.
But trying to find the fit.
I think if you go back and look at our M&A record, you'll find out we're quite disciplined buyers we tend to be opportunistic because we're really looking to ensure that with the expected.
Potential volatility of the market and such we really want to ensure that whatever we do we're driving real value for the shareholder and often that comes with some synergy associated with our business either through integration or our ability to influence and such to get kind of a disproportionate value. So our expectation is we constantly are looking and trying to understand the opportunities in the marketplace.
But.
I guess, we should be judged on our disciplined disciplines, probably more defined about what we don't do them, what we do and so we're wanting to ensure that that were really challenging ourselves to ensure that whatever we do we're going to drive value with it.
Got it.
Second could you give us a status update on gold bi directional pipeline connecting.
Mine and the changes to the expected on high cost and benefits.
Also could you give us a sense on how much offset to pailin incremental cash flow from the.
Pipeline and how much of the two plants like from the Cogen project that you mentioned.
Yes, so vic.
Let me just start with the Cogen first so the Cogen is about $250 million a year. It's the great thing about the Cogen as we stop burning petroleum coke to be able to make steam and so because of that we improve both the reliability, we drive down our maintenance cost and we've reduced our greenhouse gas emissions for making steam and base plant and then we put.
The most efficient power generation from the energy efficiency perspective, as well as greenhouse gas emissions from a hydrocarbon source, we put that electricity out onto the grid, which is helping the province shut down their 5000 megawatts of coal based power generation. So we think thats have that's a good opportunity for us.
On the interconnecting pipeline are interconnecting pipeline is expected to be in place for the back half of 2020.
It it will generate about $200 million a year of cash flow. The overall cost is really hasn't changed on that project and right now we're in the process of doing detailed engineering and and some pre site work and stuff getting ready for construction coming up as we get into the fall and into the winter.
Okay. Thank you.
You're welcome.
Thank you and our next question comes from my seat Sen with Bank of America Merrill Lynch. Your line is now open.
Thanks, Good morning, I have two follow up questions to the earlier question. So first.
Mark on.
On the target savings cash flow you talked about I believe a billion dollar in debottlenecking and and digital strategies could you perhaps talk about.
Digital technology adoption, how's that coming along any any update that you can share in specific wins and kind of your broader vision.
Yes, yes, thanks, so much for that.
So we really are calling this next chapter of the company is Suncor 4.0, and Suncor 4.0. If this is a chapter in our book.
We're bringing into at capital discipline operational excellence, the integrated model and and.
And returning cash to shareholders and such do that so this there's some big pillars that are coming from the from for Sir that third chapter as some of these go back some period of time, but and and now what we're trying to do is like technology and innovation has always been in the DNA of the company, but now we are trying to add digital to it and so and we we are actually big use of digital technology and process control and and managing and opening valves and controlling chemical processes and those sorts of things. So thats thats a significant part of who we are but we are trying to figure out how do we take this technology.
Innovation and all of the opportunities that are out there and leverage it to drive value. So like one of the examples that we have as we've been using artificial intelligence to be able to help us in predicting what's happening within our oil sands assets and ensuring that we manage it to drive up reliability drive down our costs minimize upset conditions and such really interesting.
A piece of work, we're just getting through the pilot stage, but the pilot stage would say that we have been conservative on the assumptions associated with that.
Or you could take things like bots, where we've been able to apply them to administrative kind of manual processes to significantly reduce the.
Work effort thats required to be able to perform some function the beauty of it is.
Probably any company can sit and give you a two or three examples I call. This kind of the cool initiative phase, but were working really hard as a leadership team to be able to leverage this technology as a strategy of the company. So that literally five years from now people would add to things like operational excellence and capital discipline, leveraging digital technology would just be one of those pillars that you think of it as suncor.
Honestly I don't think theres going to be any too many companies around that if you don't make that a strength of your company five to 10 years from now it's going to be hard to compete in literally any industry.
So that's an area that we're spending a lot of time on and we're seeing a lot of interesting opportunities, but we're just not at the point, where we can articulate it and quite frankly for the next 12 to 18 months, we've really see ourselves dealing with some of the foundational issues around our data and data management and some of the historical issues that a company of implementing some of these systems before we kind of launch into some of these more.
Exciting opportunities about leveraging some of the end user pieces to it but we have a lot of good opportunities coming up and we're working on a number of those it will just take a bit of time.
Thanks, Mark on my follow up unrelated question is on crude by rail what would.
Wood Suncor have any interest in crude by rail contracts with the government wants to get rid off and what would it take for you guys to be interested.
Well as we said we've said previously is we had all the pipeline space to move all of our volumes.
Prior to curtailment showing up the catch 22 is but the government curtailed the production and we understood why they did that so now the proposal that's on the table that the that the companies that are curtailed have supported.
Or I should say some of the significant companies that are curtailed have supported is really about look if we can bring incremental rail can we produce incremental volumes.
Because the government nor do the companies want to see the whole market.
Go in the ditch from upsetting the supply demand balance and kind of oversupply and the supply logistics. So right. Now there is I would say no incentive to go and get incremental rail and one of the reasons that there isn't is that even if you do you can't produce an incremental barrel. So I think thats fairly straightforward, but in the in the system that I just mentioned incremental production for incremental rail we would be incentive to go and figure out rail because if we can bring incremental rail we'd be able to move more oil to market and so that's an area that.
We spend time looking at the integrated players are in the railing of hydrocarbons, 100% of the time, because we move clean product across the country. All the time and we have for decades. So it's a little different for us because and that that the market's ongoing but so the incentive for producers to sign up for for rail and take the government, which we support is being able to open up the door to give us an incentive to use that if I. If I have to by rail and then I can't use that what's the point. So so we see that there is a potential opportunity there and then depending on what happens with the.
With the bottlenecks and stuff it could be that there is a circumstance that for a period of time.
If the de bottleneck is actually really cost effective.
Could we could get our minds around using.
Inefficient logistics and shipping crude by rail.
If it turned out that it would allow us to be able to capture a super economic project on the de bottleneck side. So we just need to wait and see what the debottleneck looks like.
Thanks for the color Mark.
Thank you and our next question comes from Mike Dunn with GMP Firstenergy. Your line is now open.
Hi, Thanks, good morning, everyone.
This question is probably for Mark Mark I'm, just wondering with.
The new government in place in Alberta and the.
And their proposal I guess are there what they want to do with.
Tax in greenhouse gas emissions and the recent.
I guess platform or proposal that the federal Conservatives have announced.
I am just wondering but between I guess the old NDP system.
The current federal system for GHG emissions tax and what is proposed in Alberta, and what's proposed federally by the Conservatives.
Are there any of those proposals that would.
Make or break the.
The Cogen project that you have planned.
No. We don't we don't think so that.
Maybe just to step back from this so so we believe that.
That hydrocarbons and and as human kind are actually having an impact on the climate and so because of that we've literally had policies in place and the company for two decades and I've mentioned today. This is the.
For 25 years, we've been publishing a sustainability report because we believe that this is a critical area one of the things we've literally had in place for two decades as a supporting a price on carbon because we think markets are efficient and and we believe that by creating a market. The market finds the most efficient way to be able to deal with this that said the first government in North America to introduce a carbon price on and kind of the industrial complex was in Alberta in 2007, and since that period of time, although the price has changed since that period of time, we've paid a carbon price as a producer and we've done that.
It's over a decade now that we've been paying it and we expect that to pay it before the last government was elected repaid at journeys in Alaska, and we're going to pay at with this government in place so from our perspective it's.
It's almost.
There's really no material change around the pricing and market mechanisms that we're seeing on our side there is a little bit around some of the power generation pieces around the federal government.
Where there were there.
Incenting certain types of energy sources, and such to stay in the market or whatever it may be but generally we would say is that from us looking at the cogen.
This is almost immaterial to the discussion and we fully expect that this is what we're seeing and literally have been seeing for over a decade is is a very consistent application really the debate is much more on the consumer side, where whether you're pushing it into the consumer side and rebating it to them or whether you're just saving the hassle of taxing them and rebating that.
Now we believe the consumer side is important because 80% of the admissions that come from there but.
But nevertheless.
None of the policies that have been talked about on the consumer side aligned with kind of our broader principles around how we would see.
A broader carbon price be put on so for the Cogen, we do not view that this is.
A material piece to moving forward.
Thanks, Mark and second.
Question on different topic, if I may.
I know in the past regarding potential.
M&A.
Your messaging has been quite consistent.
Look for center synergies and consistent with your existing operations.
What would it take for you guys to get interested in.
I guess.
Oil sands assets that are not obviously.
Hugely physically synergistic with your existing.
Footprint.
Well I think centered this synergy piece associated with that just allows us to make sure that we are getting the financial returns so.
So if it was just an oil sands asset its just a debate about price versus the market and so if we can integrate the barrels and such it just needs to set a price and so you've seen over a period of time the price of transactions for pure bitumen barrels has declined and.
And I'd say quite significantly over a period of time. So so if we ended up buying just a pure bitumen asset. It would just be the price would have to fully reflect the uncertainty that exists within the market.
Thanks, Mark makes sense Thats all from me.
Thank you.
Thank you and I'm showing no further questions in the queue at this time I'd like to turn the call back to Trevor for any closing remarks.
Great. Thank you operator, thanks, everyone for attending today I know, it's a busy earnings day. So appreciate it our team will be around all day, if there's any follow up questions. Please reach out and thank you again for attending Goodbye.
Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program and you may all disconnect everyone have a great day.