Canadian Pure Sources Restricted (NYSE:) has reported a powerful end to 2023 with document annual manufacturing and a dedication to sustainable operations. The corporate’s earnings name highlighted their achievement in rising reserves organically, strengthening their stability sheet, and supporting Canada’s local weather targets.

Canadian Pure Sources has introduced a disciplined capital finances for 2024, specializing in thermal improvement and progress. Financially, they generated important free money movement and elevated shareholder returns, with an essential web debt milestone reached. The corporate plans to return 100% of its free money movement to shareholders in 2024 by way of dividends and share buybacks.

Key Takeaways

• Canadian Pure Sources achieved document annual manufacturing and reserves progress in 2023.
• The corporate generated $4.4 billion in adjusted funds movement and $2.5 billion in adjusted web earnings in This fall 2023.
• A disciplined capital finances of roughly $5.4 billion is ready for 2024.
• The corporate plans to return 100% of free money movement to shareholders by way of dividends and share buybacks.
• The bottom quarterly dividend has elevated by 5% to $1.05 per widespread share.
• The corporate’s debt-to-EBITDA ratio is at 0.6x, with liquidity of roughly $6.9 billion at year-end.
• Debottlenecking tasks are nearing completion, promising manufacturing progress and operational effectivity.

Firm Outlook

• Canadian Pure Sources maintains a concentrate on secure operations, asset enhancement, and driving environmental efficiency.
• The corporate’s capital finances for 2024 is geared in direction of long-cycle thermal improvement within the first half and short-cycle progress within the second half.

Bearish Highlights

• The corporate is conscious of the inflationary outlook and expects labor value will increase of three% to five% in 2024.
• Debt ranges could fluctuate round $10 billion quarterly, however the firm is dedicated to managing outcomes successfully.

Bullish Highlights

• Canadian Pure Sources has elevated complete proved reserves by 2% to 13.9 billion BOE and complete proved plus possible reserves by 3% to 18.5 billion BOE.
• The reserve life index stands at 32 years for proved reserves and 43 years for proved plus possible reserves.
• The corporate’s share break up proposal on a 2-for-1 foundation has been accredited.

Misses

• There have been no particular misses talked about within the earnings name abstract.

Q&A Highlights

• The corporate mentioned its debottlenecking tasks, the timing of the TMX mission, and the anticipated manufacturing progress charge of 4% in 2025.
• They addressed the potential of major heavy oil property and the flexibleness in capital allocation.
• Canadian Pure Sources is monitoring drill situations and water reservoirs for his or her Montney property.
• The solvent mission at Kirby (NYSE:), if profitable, might result in extra pad improvement within the Jackfish and Kirby areas.

Canadian Pure Sources’ earnings name emphasised a powerful 12 months with important achievements in manufacturing, reserves progress, and monetary efficiency. The corporate’s forward-looking methods embody a disciplined capital finances for 2024, a dedication to shareholder returns, and ongoing tasks that promise to boost operational effectivity and manufacturing capability. With a sturdy stability sheet and a transparent concentrate on worth progress, Canadian Pure Sources is poised to proceed its trajectory of sustainable and worthwhile operations.

InvestingPro Insights

Canadian Pure Sources Restricted (CNQ) has demonstrated a sturdy monetary efficiency, and the InvestingPro information supplies additional insights into the corporate’s market standing. With a market capitalization of roughly $74.63 billion, CNQ showcases important scale within the power sector. The corporate’s P/E ratio, adjusted for the final twelve months as of Q3 2023, stands at a aggressive 13.79, reflecting investor confidence in its earnings potential. Furthermore, the income progress, regardless of displaying a decline of 13.67% throughout the identical interval, is supported by a considerable gross revenue margin of 49.35%, indicating robust operational effectivity.

InvestingPro Suggestions for CNQ reveal a mixture of stability and progress potential. Analysts have revised their earnings upwards for the upcoming interval, signaling optimism concerning the firm’s future efficiency. Moreover, CNQ has a commendable observe document of sustaining dividend funds for 23 consecutive years, reinforcing its dedication to shareholder returns—a key level highlighted within the firm’s earnings name.

These insights counsel that Canadian Pure Sources is just not solely managing its present operations successfully however can be positioned for sustained profitability. Buyers seeking to delve deeper into CNQ’s prospects can discover extra InvestingPro Suggestions by visiting https://www.investing.com/professional/CNQ. There are a complete of 10 extra InvestingPro Suggestions obtainable, which could be accessed with an unique 10% low cost on a yearly or biyearly Professional and Professional+ subscription utilizing the coupon code PRONEWS24.

Full transcript – Canadian Pure Sources Ltd (CNQ) This fall 2023:

Operator: Good morning. We want to welcome everybody to the Canadian Pure Sources 2023 Fourth Quarter and Yr-Finish Earnings Convention Name and Webcast. After the presentation, we are going to conduct a question-and-answer session. Directions can be given at the moment. Please notice that this name is being recorded right this moment, February 29, 2024 at 09:00 AM Mountain Time. I might now like to show the assembly over to your host for right this moment’s name, Lance Casson, Supervisor of Investor Relations. Please go forward.

Lance Casson: Thanks, operator. Good morning, everybody, and thanks for becoming a member of Canadian Pure’s fourth quarter and annual 2023 earnings convention name. As all the time, earlier than we start, I’d prefer to remind you of our forward-looking statements and it ought to be famous that in our reporting disclosures, the whole lot is in Canadian {dollars}, until in any other case acknowledged, and we report our reserves and manufacturing earlier than royalties. Moreover, I might counsel you evaluate our feedback on non-GAAP disclosures in our monetary statements. Talking on right this moment’s name with me right this moment are Tim McKay, Vice Chairman; Scott Stauth, President; Robin Zabek, Chief Working Officer, Standard E&P; and Mark Stainthorpe, our Chief Monetary Officer. Tim will first converse to how our technique and execution has resulted in robust company outcomes. Scott will ship specifics on our document manufacturing and extra particulars on our secure, dependable and world class operations. Subsequent, Robin will present highlights of our rising excessive worth reserves. After which Mark will summarize our robust monetary outcomes together with growing shareholder returns as we reached an essential web debt milestone. To shut, Scott will summarize previous to open up the road for questions. With that, I’ll flip it over to you, Tim.

Tim McKay: Thanks, Lance. Good morning, everybody. Canadian Pure has a confirmed efficient technique and in consequence in 2023, we delivered on our capital allocation technique. We strengthened our stability sheet, we offered important returns to shareholders, as properly, we have been strategic in growing our property, reaching document annual manufacturing in addition to rising our reserves organically on a each complete confirmed and complete confirmed plus possible foundation with reserve alternative ratios of 166% and 194%, respectively. The robust execution in ’23 units us as much as proceed to ship on our capital allocation technique by way of our disciplined ’24 capital finances of roughly $5.4 Billion. This finances is strategically weighted to longer cycle thermal improvement within the first half of 2024 and shorter progress within the second half of the 12 months, concentrating on robust exit manufacturing ranges. As properly it supplies us with the flexibleness to regulate to altering market egress and evolving market situations, guaranteeing we’re allocating capital successfully and maximizing worth for our shareholders. Canadian Pure is dedicated to supporting Canada’s and Alberta’s local weather targets and we proceed to scale back our environmental footprint with our sturdy environmental targets, together with web zero GHG emissions within the oil sands by 2050. We’re uniquely positioned with a various, lengthy life low decline property that are perfect to use applied sciences, to scale back GHG emissions and supply business main environmental efficiency. We imagine, it’s essential to proceed to work along with the Canadian and the Alberta governments to make the Pathways Alliance a transformative business collaboration and obtain significant GHG reductions in Canada. We imagine Canadian power is without doubt one of the most responsibly produced sources of power on this planet and ought to be the popular power selection. I’ll now flip it over to Scott for an in depth evaluate.

Scott Stauth: Thanks, Tim, and good morning, everybody. 2023 was a stable 12 months for us with robust execution in our operations and document manufacturing ranges throughout our numerous product combine generated important free money movement leading to robust shareholder returns by way of our sustainable and rising dividend and important share repurchases. We achieved document annual manufacturing of roughly 1.33 million BOEs per day, which included each document liquids manufacturing of 973,500 barrels per day and document complete manufacturing of roughly 2.15 Bcf per day because of efficient and environment friendly operations throughout all property. Robust manufacturing within the second half of the 12 months mitigated the affect of wildfires and unplanned pipeline outage and pure subject declines as annual manufacturing is up 4% from 2022 ranges or up 7% on a manufacturing per share foundation. I’ll now run by way of our asset highlights, beginning with our sturdy pure gasoline property. We had robust execution, together with reaching document North American pure gasoline manufacturing averaging roughly 2.14 Bcf in 2023. And whereas that is up 3% on an annual foundation from 2022, the rise on a This fall-to-This fall foundation is over 100 million Mcf per day. Working prices in our pure gasoline averaged $1.27 per Mcf in 2023, which is up 7% from 2022, primarily because of larger service prices. We proceed to concentrate on value management and efficient and environment friendly operations to offset value pressures. North American mild oil and NGL manufacturing averaged over 109,000 barrels per day in 2023 similar to 2022 ranges. Working prices on our North American and NGLs operations averaged $16.28 per barrel in 2023, a rise of two% over 2022 ranges reflecting larger service prices. Our mild oil, NGL and pure gasoline manufacturing was impacted by wildfires and a third-party pipeline outage within the early a part of the 12 months, which partially offset the expansion from our capital-efficient drill-to-fill technique on our liquids-rich Montney and Deep Basin property. Major heavy oil manufacturing of roughly 77,700 barrels per day in 2023, which is up 15% from 2022, reflecting robust outcomes from our multilateral heavy oil wells in each the Mannville and Clearwater fairways. Major heavy oil working prices averaged $19.85 a barrel in 2023, which is down 9% from 2022 ranges, primarily reflecting decrease power prices. Our Pelican Lake manufacturing averaged simply over 46,000 barrels per day in 2023, which is down 5% from 2022, reflecting the long-life, low-decline nature of this world-class polymer flood asset. Our working value at Pelican Lake remained robust, averaging $8.58 per barrel in 2023. In our thermal operations, we achieved document thermal in situ manufacturing in 2023, averaging 262,000 barrels per day, a rise of 4% from 2022. Thermal manufacturing additionally completed the 12 months robust, averaging roughly 278,000 barrels per day in This fall. The expansion in our thermal manufacturing was pushed by robust execution on our thermal improvement plan, together with capital accretion pad additions in Primrose and Kirby that got here on manufacturing in 2023, partially offset by pure subject declines. 2023 working value averaged $13.17 per barrel, which is down 20% in comparison with 2022, totally on decrease power prices. At Primrose, we’re drilling two cyclic steam pads this 12 months, that are focused to come back on in manufacturing in Q2 2025. We’re additionally drilling a SAGD pad at Wolf Lake, which is focused to come back on manufacturing in Q1 of 2025. At Kirby, two of the 4 beforehand drilled SAGD pads have now reached their full manufacturing capacities with the 2 remaining pads focused to ramp up the total manufacturing capability in mid-2024. At Jackfish, two SAGD pads that have been drilled in 2023 are focused to ramp as much as their full manufacturing capacities in Q3 and This fall of this 12 months, supporting continued excessive utilization charges on the Jackfish services. We’re concentrating on to drill an extra SAGD pad in Jackfish within the second half of this 12 months with manufacturing from this pad focused to come back on manufacturing in Q3 of 2025. We even have a business scale solvent SAGD pad improvement in Kirby North, which is roughly 80% full now, and we’re concentrating on to start stable injection mid-2024. We proceed to make use of solvent enhanced oil restoration pilot within the steam flood space at Primos to optimize solvent effectivity and to additional consider the business improvement alternative. We’ve deliberate turnarounds in Jackfish and Kirby within the second quarter, that are focused to affect Q2 2024 manufacturing by roughly 17,100 barrels per day, which is included in our manufacturing steering disclosed with our 2024 capital finances. In our Oil Sands mining operations, we achieved robust leads to 2023 at a world-class oil sands mining and upgrading property, getting new manufacturing, annual document manufacturing ranges with SCO manufacturing averaging roughly 451,000 barrels per day in 2023 and simply over 500,000 barrels per day in This fall. We’ve been capable of obtain these robust document manufacturing ranges as we concentrate on steady enchancment and improve general reliability by way of secure, dependable and efficient and environment friendly operations. Working prices in oil sands mining and upgrading property are high tier and averaged $24.32 in 2023, which is down 7% from 2022, primarily reflecting larger manufacturing volumes and decrease power prices. As beforehand famous in our 2024 finances, at Horizon, we’ve a turnaround deliberate in Q2 2024 with a full plant outage focused for roughly 30 days. The estimated affect to Q2 quarterly common manufacturing is roughly 89,000 barrels per day and stays unchanged from finances. We can be finishing the rest of the tie-ins on reliability enhancement mission in the course of the deliberate turnaround at Horizon in Q2 of this 12 months. This mission will enable us to skip a turnaround in 2025, as we shift the downtime associated to the upkeep actions as soon as each two years as a substitute of as soon as yearly. So in 2025, we’re concentrating on elevated capability by roughly 28,000 barrels per day or roughly 14,000 barrels per day on a 2-year common foundation of incremental high-value SCO manufacturing. At AOSP, we’ve two turnarounds this 12 months on the non-operated Scotford upgrader. The upgrader will function at diminished charges. The primary turnaround was initially focused for 10 days in April 2024, but it surely has now been moved into March. Some extra scope has been added which is able to lengthen the period of this upkeep interval to 17 days, however there’s no change to the estimated manufacturing affect of roughly 10,000 barrels per day as manufacturing charges are focused to run larger with the addition — the scope additions in comparison with the unique focused 10-day manufacturing charge. This modification will now shift the manufacturing affect into Q1 ’24 as a substitute of Q2. The second turnaround on the Scotford Upgrader is focused to start in September 2024 and progress for a period of 49 days, no change from what was beforehand introduced with our finances. Complete mixed annual affect from manufacturing from the turnarounds at Scotford and AOSP will stay unchanged within the finances at roughly 12,400 barrels per day. We even have a debottlenecking mission on the Scotford Upgrader, which is deliberate to be accomplished in the course of the This fall 2024 turnaround and is focused so as to add incremental capability of roughly 5,600 barrels per day web to Canadian Pure. Past this, as beforehand introduced with our 2024 finances, we’ve the Naphtha restoration unit tailings therapy mission, which is focused so as to add roughly 6,300 barrels per day of SCO in late 2027. This mission additionally supplies environmental advantages, together with a 6% discount in Horizon’s Scope 1 emissions and decrease reclamation prices over the lifetime of the Horizon mission. Now, I’ll flip it over to Robin to talk to our year-end reserves.

Robin Zabek: Thanks, Scott, and good morning, everybody. As in earlier years, 100% of Canadian Pure reserves are externally evaluated and reviewed by unbiased, certified reserve evaluators. Our 2023 reserves disclosure is offered in accordance with Canadian reporting necessities, utilizing forecast costs and escalated prices on a earlier than royalties firm working curiosity foundation. As you simply heard from Scott, Canadian Pure had one other robust 12 months, which can be demonstrated by the corporate’s reserves. For 2023, complete proved reserves elevated by 2% to 13.9 billion BOE, of which 8.8 billion BOE are proved developed producing reserves. Complete proved plus possible reserves elevated by 3% to 18.5 billion BOE. The energy and depth of Canadian Pure’s property are a aggressive benefit which is evidenced by our reserve’s life. Notably, roughly 75% of complete proved reserves are from lengthy life, low decline property with roughly 50% of complete proved reserves consisting of high-value artificial crude oil with a zero decline and a reserve late index of 44 years. On account of Canadian Pure’s distinctive world-class property, our company complete proved reserve life index is 32 years, and our complete proved plus possible reserve life index is 43 years. In 2023, the energy of Canadian Pure’s property and outcomes additionally proceed to be mirrored in the important thing indicators of discovering and improvement prices and reserve alternative. Company discovering, improvement and acquisition prices, together with modifications in future improvement prices are $9.25 per BOE for complete proved reserves and $8.28 per BOE for complete proved plus possible reserves. Moreover, as Tim famous, in 2023, Canadian Pure changed manufacturing by 166% on a complete proved foundation and 194% on a complete proved plus possible foundation. The online current worth of future web income earlier than earnings tax utilizing a ten% low cost charge and together with the total firm asset retirement obligation is roughly $154 billion for complete crude reserves and roughly $186 billion for complete proved plus possible reserves. In abstract, our 2023 reserves replicate the energy and depth of Canadian Pure’s property, the worth of the corporate’s lengthy life low decline reserves and our confirmed means to execute. I’ll now hand over to Mark for the monetary highlights.

Mark Stainthorpe: Thanks, Robin, and good morning, everybody. The fourth quarter of 2023 was a powerful monetary quarter as we generated adjusted funds movement of $4.4 billion and adjusted web earnings of operations of $2.5 billion. The fourth quarter contributed to what was a really robust 12 months in 2023 with spectacular outcomes as we achieved document manufacturing, disciplined capital allocation and sturdy monetary outcomes. For instance, in 2023, we grew our manufacturing by 7% per share, grew our 2P reserves by 7% per share, paid slightly below 5% in dividend yield, bought $3.3 billion in shares beneath our NCIB program and reached $10 billion in web debt sooner than initially focused. This shifts our free money movement allocation to now goal 100% of free money movement in 2024 being returned to shareholders within the type of dividends and share buybacks. These outcomes are pushed by secure, efficient and environment friendly operations and a novel asset base to ship important free money movement. Subsequent to quarter finish, the Board of Administrators has accredited a 5% improve to our base quarterly dividend to $1.05 per widespread share, demonstrating the arrogance the Board has within the sustainability of our enterprise mannequin, our robust stability sheet, and the energy of our numerous long-life, low-decline reserves and asset base. We’ve elevated our dividend for twenty-four consecutive years, with a compound annual progress charge of 21% over that point. Moreover, the Board has accredited, topic to shareholder and regulatory approval at our Could annual assembly, a proposal to separate the corporate’s shares on a 2-for-1 foundation. Our monetary place may be very robust with debt-to-EBITDA at 0.6x on the finish of 2023, and we proceed to keep up robust liquidity. Together with revolving financial institution services, money and short-term investments, liquidity on the finish of 2023 was roughly $6.9 billion. With our disciplined 2024 capital finances, low upkeep capital necessities and a long-life, low-decline asset base, we goal to ship robust returns on capital with sturdy free money movement whereas persevering with to supply important returns to shareholders in 2024. With that, I’ll flip it over to you, Scott, for some remaining feedback.

Scott Stauth: Thanks, Mark. In closing, 2023 was a powerful 12 months for Canadian Pure, each operationally and financially, offering important returns to our shareholders. We are going to proceed to concentrate on secure, dependable operations in addition to enhancing our top-tier operations, and we are going to proceed to drive top-tier environmental efficiency. I might additionally prefer to say a particular thanks to Tim McKay for all his excellent service and management at Canadian Pure, and in his new function as Vice Chairman, Tim will proceed to assist the administration crew. As you all know, Canadian Pure has a historical past of a well-established management succession plan that ensures we’re sustaining our tradition and delivering top-tier efficiency. With that, I’ll flip it over for questions.

Operator: [Operator Instructions] Your first query is from Doug Leggate from Financial institution of America.

Doug Leggate: Spectacular by any measure, however I ponder if I might simply poke a bit bit on the capital finances. So $5.4 billion for the 12 months. Clearly, that comes with progress, not just for this 12 months but in addition for 2025. If I needed to try to strip that again to progress versus sustaining capital, what would that appear to be?

Mark Stainthorpe: Doug, it’s Mark right here. On a base capital or upkeep capital to progress capital, we’re in all probability operating within the neighborhood of that $1 billion of progress capital. Nevertheless it varies due to the character of the asset base, proper? As a result of what you’re doing is, for instance, in 2024, we’re drilling a few of the longer life asset earlier within the 12 months, so we’re doing the thermal manufacturing right here, and we’re doing the traditional kind decrease capital publicity alternatives later within the 12 months, and that’s actually to match up with that egress alternative. So year-over-year, it’s going to alter what you consider or the way you classify, I assume, progress capital on that foundation as a result of we’re doing progress capital in thermal, for instance, however you don’t see a few of that manufacturing till subsequent 12 months.

Doug Leggate: That’s very clear, Mark. I assume my follow-up is type of a associated query, and it actually goes to that concern of egress. I imply there’s lots of issues clearly happening in Canada. TMX is maybe entrance of thoughts. However there’s additionally Canada LNG down the highway, and also you’ve bought 7% exit progress this 12 months on gasoline in your plan. So my query is, is there any — I imply, would you anticipate any flex within the progress plan, particularly because it pertains to gasoline within the second half of the 12 months, given the place AECO is buying and selling? I’m simply curious if there’s a threat of the CapEx finances finally ends up being lighter with decrease gasoline manufacturing progress for 2024.

Scott Stauth: Sure, it’s a superb query. I feel that’s the good half concerning the sturdy nature of our property. And so for us, we’re capable of — as we transfer ahead right here all year long, proceed to observe the pricing and naturally, we are going to allocate our capital to these areas which can be going to supply us one of the best returns. So we’ve our heavy oil properties, sure, we’ve our gasoline properties, however we’re simply going to proceed to need the costs as we go ahead, and we’ll react accordingly. However to your level, the LNG Canada mission ought to carry some aid to the AECO system, and that’s what we’re considering of as properly.

Operator: Your subsequent query is from Greg Pardy from RBC Capital Markets.

Greg Pardy: Sure. And I assume a giant congrats to Tim, and thanks a lot for the assist over time. So wanting ahead to your function as Vice Chairman. There will not be lots of inquiries to ask, I feel, with outcomes like this, however one that may come up is simply along with your working efficiency hasn’t seemed like up to now within the first quarter and there have been one or two questions by way of that chilly snap we had, I feel, again in January as as to whether there was any affect on the enterprise or by and enormous issues are as anticipated?

Scott Stauth: Thanks, Greg. It’s Scott right here. So sure, you’re proper. In no excessive chilly climate stretches like what we noticed in January. There’s all the time short-term challenges in our standard and oil sands mining property. Usually, on this case, they’re short-lived, and the groups did a terrific job of managing by way of them. So no materials affect.

Greg Pardy: Okay. Nice. That was the query — that was the reply I used to be in search of. And perhaps a query for Mark. With respect to the shareholder returns or the framework you’ve got now, given that you simply successfully flipped over Jan first, and I imagine I feel you talked about your buybacks are circa $350 million or so up till about now, hopefully, I’ve bought that quantity proper. Can we kind of anticipate a catch up in March? And to what extent may variable dividends type of come into the combination? And since sometimes, you guys aren’t tremendous — you don’t — you adhere to your plan, however you’re not tremendous inflexible. So I’m simply making an attempt to higher perceive that.

Mark Stainthorpe: Sure, Greg, good query. Let me try to clarify how we’re desirous about this. So once we have a look at the place we’re right this moment, after all, we’re now on the web debt of $10 billion, which suggests 100% of free money movement to shareholders by way of dividends and share buybacks. So we’ve our base dividend that was simply elevated by the Board this quarter right here. However what we’re doing right here is we’re taking a look at this on an annual forward-looking foundation. It’s not going to be a quarter-to-quarter foundation. The explanation for that’s to be sure you’re managing working capital on these issues. So what’s going to occur is debt could fluctuate across the $10 billion on a quarter-to-quarter foundation, however we’re taking a look at this on a forward-looking annual foundation to verify we’re managing these outcomes correctly. So you will notice, such as you noticed in 2023, modifications in how a lot buyback is going on at every quarter, however the plan is to handle that forward-looking on what that free money movement seems like. After which on the particular dividend, I imply, I feel right this moment, the lever is the buyback program. We see a number of worth there nonetheless. And after the present base dividend, that’s at present the plan. After which go ahead, we’ll all the time have a look at different alternatives with the Board going ahead on returns to shareholders.

Operator: Your subsequent query is from Neil Mehta from Goldman Sachs.

Neil Mehta: Congrats, Tim, and congrats, Scott, on new obligations. My first query is on Horizon. You bought fairly respectable debottlenecking plan by 2025 after which additionally some at AOSP. So simply would love your perspective on how that’s monitoring and remind us what you’re seeking to get out of each of these tasks.

Scott Stauth: Certain. So it’s Scott right here. And as you talked about, the Horizon debottleneck mission is nearing its finish. We’ve another set up to do tie-in within the — in the course of the turnaround in Q2, and that may basically wrap up that mission. Outcomes from that may enable us to go in direction of a non-turnaround 12 months in 2025 after which a turnaround 12 months in 2026. And so year-after-year, that how to have a look at turnaround each second 12 months. I additionally talked earlier concerning the naphtha tailings mission. In order that had 6,300 barrels a day of SCO after 2027. And that’s within the early levels. And also you guys will hear extra from that as we go on and get in direction of close to completion of that mission. At Scotford, talked concerning the debottleneck mission that may happen throughout — it’ll end in the course of the turnaround afterward this 12 months at Scotford. And in order that can be including 5,600 barrels per day web to Canadian Pure. And so these are the property, and that’s the main points on that manufacturing.

Neil Mehta: That’s useful, Scott. After which only a follow-up, I simply love your perspective on the macro. We’ve seen lots of volatility in Syncrude costs and WCS costs, hopefully, issues begin to get higher seasonally and likewise when TMX comes on-line. So perhaps you possibly can speak about your ideas on the timing of TMX and the way you consider each mild and heavy crude diffs as we work our manner by way of the 12 months?

Scott Stauth: Sure, you guess. And in order we go ahead right here with TMX, we perceive the timing of completion of the mission and begin up in Q2 of this 12 months. And so you will notice that provide help to alleviate the differentials on WCS additionally helped that see the SCO premium goes in direction of — again in direction of extra of a premium than it’s been up to now few months. So each these merchandise will profit from TMX coming on-line.

Operator: Your subsequent query is from Menno Hulshof from TD Cowen.

Menno Hulshof: I’ll begin with a query in your thermal drilling program, which you talked about being front-end loaded. And simply taking a look at your newest steering, you level to most of these pads coming on-line within the first three quarters of 2025. Are you able to give us a way of what the manufacturing ramp might appear to be for the center of 2025? And perhaps extra particularly, might you give us a way of what the manufacturing progress charge might appear to be on an exit 2025 over exit 2024 foundation?

Scott Stauth: Sure, good query. I don’t have the precise profile of no matter will appear to be in 2025 on the thermal pads, however we had based mostly on our discussions on the 2024 finances, we had checked out 2025 over 2024 at about 4%.

Menno Hulshof: Terrific. After which perhaps I’ll simply observe up with a kind of a refresher query on the inflationary outlook. I feel it appears to me like the whole lot is basically moderated. However are you seeing something noteworthy as you look throughout the assorted line gadgets inside the associated fee construction? And do you continue to suppose that one thing within the vary of three% to five% remains to be an inexpensive expectation for this 12 months?

Scott Stauth: Sure. I feel largely the will increase that we noticed up to now have stabilized on a go-forward foundation. And I imagine we stated this on the final name that we might anticipate 2024 to resemble largely labor will increase wanting like in that 3% to five% vary. So that you’re bang on.

Operator: Your subsequent query is from Patrick O’Rourke from ATB Capital Markets.

Patrick O’Rourke: I assume you’ve coated lots of floor right here. However my first query is basically with respect to the first heavy oil outcomes, which have been very, very spectacular up to now. And simply questioning in the event you can converse to the potential scope of these property and the place it might go to? After which I ponder about potential with gasoline costs, you talked a bit bit about flexibility right here. However is that this a particular asset the place if gasoline costs stay low, you do have the flexibleness to kind of improve the capital allocation?

Scott Stauth: Good query, Patrick. And sure, you’re bang on. It’s an space the place we are able to focus our capital allocation on. As you recognize and have seen, multilateral drilling packages have confirmed to be very efficient. We’ve a really massive land base in our major heavy oil lands and a number of zones as properly. So we’re capable of actually have a look at including potential drilling in these areas, once more, if gasoline costs will not be favorable, as we initially deliberate, I might see us growing probably our multilateral major heavy oil drilling program.

Patrick O’Rourke: Okay. And only a follow-up and kind of on the opposite aspect on the gasoline aspect of the equation as a result of drills has turn into very topical. It’s been on plenty of your friends’ convention calls not too long ago. Simply questioning as a result of I might suspect that drill situations would primarily affect the potential to function in your Montney property, how issues sit right this moment and kind of what the scope of your water reservoirs are relative to your ’24 program?

Scott Stauth: Sure. Good query. I feel we’re in a reasonably good condition general right here. We proceed to observe river ranges, draw ranges and all our entry to water. Our groups are regularly monitoring that and being ready. However because it stands at present, our program not affected at this level. We’ll simply proceed to observe it because it goes alongside all year long right here.

Operator: Your subsequent query is from John Royall from JPMorgan.

John Royall: So my first query is a bit hypothetical, and forgive me for that. However I’m simply making an attempt to grasp how ought to we take into consideration the framework on return of capital and the goalposts round capital returns going ahead now that you simply’d hit the 100% degree. And so let’s simply say you probably did an acquisition and your web debt went above $10 billion in consequence. Would you dial again to the 50% tier and hold your framework in place? Or was the framework kind of the factor of the previous and also you’re at 100% and it was simply type of a method to getting you there? Simply making an attempt to grasp if this framework is extra long-term or simply type of how you bought to that 100%?

Mark Stainthorpe: Sure. I imply, properly, wanting again, we bought to the 100%. After we seemed on the web debt degree of $10 billion was fairly conservative when you consider the scale of our firm, the character of the property, the long-life reserves, the low-decline, low upkeep capital. So to us, it’s fairly a conservative debt degree. However popping out of 2020 and people years, it was prudent to verify we had a powerful, robust stability sheet. In order that’s the place we’ve bought to now and the 100% is sensible to us. After all, we’ve had the bottom dividend growing, and that’s a part of that returns to shareholders, and we’ve had three will increase over the past 12 months, over 20% returns there or extra returns there. So that offers us that chance. And again to your query, if one thing extra materials is to occur, I don’t like speculating on these issues. However when you’ve got an acquisition that comes with money movement and it comes with all these various things, we’d have to judge that. However for right this moment, we’ve hit our $10 billion. We’re targeted on the 100% returns to shareholders by way of dividends and share repurchases. And it’s a reasonably large milestone, and it’s been — the rationale for it has been a really robust, secure, dependable operations over the past couple of years.

John Royall: Bought it. After which my follow-up is simply on OpEx in mining. 4Q was the bottom degree, I feel, in two years in each per barrel phrases but in addition in greenback thousands and thousands. Are you able to discuss concerning the OpEx aspect? Are gasoline costs an element? Or is there another type of sustainability to those decrease numbers? I do know you’re doing lots of work to increase the turnaround cycle and that’s the final focus, however I’m simply making an attempt to grasp if there are type of structural OpEx {dollars} which have come on the market.

Scott Stauth: Sure. As you recognize, on oil sands mining, the prices are largely fastened. The variables can be in pure gasoline and diesel pricing. However they’re largely fastened. In order you’ve got, clearly, as you’ve got larger manufacturing ranges, the associated fee stays about the identical. So your value per greenback can be decrease as you’ve got the upper volumes.

John Royall: Sure. The query was on absolutely the greenback thousands and thousands went down, however I feel you answered it on the gasoline and diesel.

Operator: Your subsequent query is from Mike Dunn from Stifel.

Michael Dunn: Only one query from me guys on Trans Mountain. You’ve bought 94,000 barrels a day dedicated capability as soon as that begins up. Can you use some and even all that capability for mild crudes? I do know the belief has been that you’d use it for heavy crudes, however I’m simply questioning about your flexibility with that capability.

Scott Stauth: Sure. You guess, Mike. So actually with TMX, we’ll be seeking to maximize the worth of these dedicated barrels. So whether or not that’s by way of a few of our mild volumes or heavy volumes, we’re simply wanting on the alternatives to maximise — give us one of the best worth again there. So it may very well be a mix of each. And I wouldn’t lean for it to be all by some means manner. So we’re simply going to have a look at — our groups are reviewing what one of the best alternatives are and planning from there.

Operator: [Operator Instructions] Your subsequent query is from Dennis Fong from CIBC.

Dennis Fong: My first one right here is simply associated to the buybacks. I simply wished to hopefully perceive a bit bit higher by way of the way you decide the return of shopping for again share of inventory versus that of type of investing in your individual asset base? I perceive the will to stay strategic and disciplined on capital deployment. And I do know you simply up to date or offered type of 1P web asset worth from a third-party evaluated at $139.07 a share. So how do you stability the return of — or the allocation of capital between buybacks and reinvestment within the asset base?

Mark Stainthorpe: Dennis, it’s Mark. After we have a look at reinvesting in our asset base versus the returns to shareholders, it’s type of what you stated. It’s a bit little bit of wanting on the stability. We wish to ensure we’ve a prudent capital program that may ship progress in a prudent stage, however we additionally wish to present that on a per share foundation. And we’ve traditionally, been very — in my opinion, superb at that capital allocation and being prudent and ensuring it’s delivering worth, not simply manufacturing progress. So we’re actually taking a look at worth progress. So it’s a matter of balancing what’s environment friendly in anybody 12 months from a capital program perspective. What the benefit for Canadian Pure, after all, is the variety of the asset base. In order Scott talked a bit bit about, we’ve bought lots of alternative, no gaps within the portfolio. So it’s all proper there to allocate. It’s only a matter of driving one of the best worth in that 12 months. And given the place we’re right this moment, that’s going to go away lots of free money movement within the 12 months. And we’ve now the power to stability that between our dividend that’s been ever growing and now share buyback program the place we see lots of worth nonetheless for a few of the causes you talked about.

Dennis Fong: Nice. I respect that context. Switching gears for my second query is basically specializing in Kirby and the continuation of the solvent mission there. Are you able to talk about a bit bit concerning the applicability to a few of your different in situ property within the area? And perhaps how you consider it with respect to, I do know type of early stage, however the improvement of Pike as properly?

Scott Stauth: Sure, you guess you, Dennis. So from solvent alternative perspective, basically what you’re doing is lowering your steam necessities by about half. In order you look and we undergo this mission, and we see the outcomes that we’re anticipating. And once more, we’re going to observe that, and it’s simply going to be beginning up by way of the solvent injection in Q2 right here. However we’ll monitor as we go ahead. Nevertheless it offers us, if it’s profitable, like we imagine will probably be, then it offers us success in — or offers us the chance within the Jackfish and Kirby areas to proceed with extra pad improvement and never essentially having to extend the capital to construct extra steam services. So the benefit there may be decrease general capital and higher capital effectivity for drilled fill alternatives.

Dennis Fong: Nice. So perhaps the thought course of behind that then is that may very well be leveraged to showcase extra progress or redeploy this crew to different areas inside that mission or these particular tasks?

Scott Stauth: That’s proper, sure.

Operator: Thanks. There are not any additional questions right now. I’ll now hand the decision again to Lance Casson for the closing remarks.

Lance Casson: Thanks, operator, and thanks, everybody, for becoming a member of us this morning. You probably have any follow-up questions, please give us a name. Thanks, and have a terrific day.

Operator: Thanks. Girls and gents, the convention has ended. Thanks all for becoming a member of. You could all disconnect.

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