Earnings Call Transcript - CNQ Q1 2022

Operator, Operator

Good morning. We would like to welcome everyone to the Canadian Natural Resources 2020 First Quarter Earnings Conference Call and Webcast. Please note that this call is being recorded today, May 5, 2022, at 8:00 a.m. Mountain Time. I would now like to turn the meeting over to your host for today's call, Lance Casson.

Lance Casson, Host

Thank you, operator. Good morning, everyone, and welcome to Canadian Natural's First Quarter 2022 Results Conference Call. To facilitate today's call, you'll find a copy of our presentation slides on our website, and note that slides are user-defined on the webcast. Before we begin, I'd like to remind you of our forward-looking statements, and it should be noted that in our reporting disclosures, everything is in Canadian dollars unless otherwise stated, and we report our reserves and production before royalties. Additionally, I would suggest you review our comments on non-GAAP disclosures in our financial statements. With me this morning is Tim McKay, our President; and Mark Stainthorpe, our Chief Financial Officer. Tim will first provide an update with a few slides on why Canadian Natural warrants a premium multiple. The slides will be followed by a corporate overview of the quarter, including specifics on our world-class assets and operations. Mark will then provide an update on our strong financial position, substantial free cash flow generation, and shareholder returns. Tim will then provide an update on our summary prior to opening up the line for questions. With that, I'll turn it over to you, Tim.

Timothy McKay, President

Thank you, Lance. Good morning, everyone. Recently, there have been industry events and a few related articles on Canadian Natural, and we felt at our earnings call we should take the time to reinforce why we are unique relative to our peers. So moving to Slide 2. Canadian Natural's strategy includes a flexible, effective, efficient allocation and our ability to be nimble to capture opportunities. Our strategy is simply to optimize capital allocation to maximize value for our shareholders while ensuring we are maintaining a strong balance sheet. We have a defined growth value enhancement plan for every product and basin we operate in. This is driven by our effective and efficient operations, our area knowledge, ownership, and operatorship of infrastructure. We have a history of capital discipline, operational excellence, and we have robust long-life, low-decline assets and low maintenance capital relative to most of our peers, allowing us to grow production, all of which results in more long-term value for our shareholders. Opportunistic acquisitions have always been a part of our strategy. However, we have no gaps in our portfolio, and acquisitions need to make sense and add long-term value. We have a culture of continuous improvement, leveraging technological innovation throughout the company, which gives us leading environmental, social, and governance results. Moving to Slide 3, Canadian Natural has a long history of successfully balancing our four pillars of capital allocation with a focus on maximizing shareholder value. Our four pillars are balance sheet strength, return to shareholders, resource value growth, and opportunistic acquisitions. Our ability to generate significant and sustainable free cash flow ensures strengthening balance sheet and sustainable, growing returns to shareholders. We are prudent and disciplined in our allocation to resource development while maintaining flexibility to adjust when necessary. We have a strong track record of effective and efficient operations and low maintenance capital. Finally, opportunistic acquisitions have always been a part of our strategy; however, we have no gaps in our portfolio, and as a result, any acquisition must add value to our shareholders. Balancing these four pillars with a focus on value creation maximizes long-term shareholder value. Slide 4 presents some of the reasons we believe Canadian Natural should have a premium value. First, Canadian Natural has a unique and diverse asset base, which includes long-life, low-decline assets that are large, low-risk, high-value reserves with low maintenance capital. Secondly, we have a top-tier cost structure and a balance of commodity diversification, which is maximized as prices change. Finally, our effective capital allocation is focused on return of capital, strength of our balance sheet, and our teams are continuously improving our operations and ESG performance. These are all competitive advantages that justify a premium valuation. Slide 5, as can be seen here in this chart, we have one of the lowest maintenance capital, giving us an advantage over many of our peers. Slide 6 shows that Canadian Natural's 1P reserves are the highest among Canadian peers, showcasing the strength and depth of our assets with an approximately 30-year reserve life index, of which 60% represents long-life no-decline SCO reserves that carry significantly lower risk and no differential risk, distinctly different from our Canadian peers. Slide 7 illustrates that when you compare our total proved reserves to our global peers of greater than 5 billion barrels, Canadian Natural is the only Canadian company, clearly showing the depth and magnitude of our reserves, which can only be fully appreciated on this platform. Slide 8 indicates that since 2012, Canadian Natural has shown significant reserves per share growth compared to our Canadian peers. Slide 9 shows that since 2012, Canadian Natural has also demonstrated significant reserves per share growth when compared to our global peers, continuing our impressive track record. Slide 10 covers strategic growth capital acquisition opportunities completed in the company's free cash flow allocation that does not impact our current year’s cash returns to shareholders. Slide 11 shows our free cash flow allocation policy. Since achieving net debt levels in 2021 below $15 billion, Q1 2022 ended at approximately $13.8 billion. In 2022, we aim to allocate 50% of the cash flow to share repurchases and 50% to balance sheet enhancement, less strategic growth capital acquisitions, all defined in our free cash flow policy allocation. Mark will discuss this further as we have enhanced our policy. On Slide 12, we would like to highlight two of our recent strategic acquisitions. The first is at Pike, where we acquired the remaining 50% interest in those lands. By having the facilities and area knowledge, we can leverage this to improve timing and cost-effectively develop these lands, adding significant long-term value to our shareholders. On Slide 13, the second acquisition was in the Wembley Area in the liquids-rich Montney natural gas fairway. Once again, we have the expertise, infrastructure, and legacy lands to enable us to develop these lands cost-effectively and create more long-term value for our shareholders. Slide 14 summarizes that Canadian Natural has a proven effective strategy, and we are delivering in today's environment and will continue in the future. Our ability to generate significant free cash flow is driven by our effective and efficient operations, high-quality assets that require low maintenance capital at approximately $3.5 billion and boast significant reserves. Our culture of continuous improvement is unique among our peers as our teams focus on delivering operational excellence across our asset base. We will continue to leverage technology and innovation to reduce our environmental footprint. Few, if any, of our peers can withstand cycles, show economic growth, maintain a sustainable growing dividend for 22 years, or increase returns to shareholders alongside debt reduction; Canadian Natural is truly robust throughout all cycles. That concludes our slides. I will now discuss the first quarter. Canadian Natural delivered strong operational results in the first quarter of 2022 as we achieved quarterly production of approximately 1.28 million BOEs per day, which includes record natural gas production of over 2 Bcf a day. Liquids production was also strong at approximately 946,000 barrels a day, primarily due to our robust, long-life, low-decline assets and operational excellence throughout the company. This combined with our capital discipline generated significant free cash flow as we continue to balance free cash flow to our four pillars of capital allocation, maximizing value for our shareholders. We returned approximately $1.8 billion to our shareholders through dividends and share repurchases in the first quarter of this year, maintained depth, maintained capital discipline, and executed on opportunistic acquisitions, which will add significant long-term value. As we move forward, we will continue to outline our pathway to lower carbon emissions across the asset base and our journey to achieve our goal of Net Zero GHG emissions in the Oil Sands. Canadian Natural continues to leverage technology and innovation to reduce its environmental footprint while ensuring safe, reliable, effective, and efficient operations. Canadian Natural has multiple pathways to achieve Net Zero with actions identified in the near, mid, and long term. The strength of Canadian Natural's Oil Sands mining asset is that, with its long-life, no decline operations, it can present one of the clearest paths, if not the clearest path, to Net Zero among global assets. I'll now provide a brief overview of our assets, starting with natural gas. Overall, in Q1 '22, natural gas production was just over 2 Bcf per day, which was a record for the company, representing a 26% increase over Q1 2021. For North American operations, Q1 2022 natural gas production was 1.988 Bcf per day versus approximately 1.6 Bcf per day for Q1 '21, significantly up, primarily as a result of the company's strategic decision to invest in our drill-to-fill strategy, adding low-cost, high-value, liquid-rich natural gas production volumes as well as opportunistic acquisitions. Our Q1 2022 natural gas operating costs were $1.28 per Mcf, up 3% compared to Q1 2021, which were $1.24 per Mcf. Overall, good operating performance as our teams continue to focus on operational excellence. A couple of area highlights include Northeast BC, where production from 7.5 net wells that recently came on stream had strong production levels contributing approximately 59 million cubic feet per day of natural gas and 4,200 barrels a day of liquids, which exceeded our budgeted levels and showcased excellent capital efficiencies of approximately $3,100 per BOEd. Within our Deep Basin core area, 6 net wells came on stream with strong production levels totaling approximately 78 million cubic feet of natural gas and 2,700 barrels a day of liquids, exceeding our budgeted levels resulting in top-tier capital efficiency of $2,800 per BOEd. Looking forward on an annual strip basis, AECO prices for 2022 were very strong at approximately $5.60 per GJ, an increase of approximately 67% over 2021 levels, improving the economics of our low-cost, drill-to-fill rich natural gas projects. For North American light oil and NGL Q1 '22 production was 107,478 barrels per day, up 16% from Q1 2021, primarily due to our strong drilling results and previous acquisitions. Q1 2022 operating costs were robust at $15.24 a barrel compared to Q1 2021 operating costs of $16.07 per barrel, primarily due to increased volumes. In the Gold Creek area, two net wells on a light oil crude pad in the Montney came on stream with strong production levels totaling approximately 1,750 barrels a day of liquids, exceeding our budgeted volumes by approximately 750 barrels a day for the period. Our international assets in Q1 '22 had oil production of 31,703 barrels, which is comparable to Q1 '21 levels. Offshore Africa first quarter production was 15,742 barrels a day versus Q1 '21 of 11,854 barrels a day with operating costs of $13.38 per barrel versus Q1 '21 of $16.57 per barrel. In the North Sea, production in Q1 averaged 15,961 barrels a day compared to Q1 '21 of 19,959 with operating costs of $64.24 per barrel. Our international assets continue to generate free cash flow and value for the company. Moving to heavy oil, production was approximately 63,000 barrels a day in Q1 '22, comparable to Q1 2021, primarily due to strong drilling results and increased development activities in 2022. Operating costs in Q1 2022 were higher at $22 per barrel versus Q1 operating costs of $18.89 per barrel, primarily a result of higher energy-related costs. At Smith, 7 net wells of multilateral Clearwater wells were completed on time in the quarter with early production rates totaling approximately 2,100 barrels per day, resulting in a capital efficiency of approximately $7,600 per BOEd, which aligned with our budget. For Smith, the 2022 capital budget remains on track, targeting 11 wells per quarter for the remainder of the year, structured to minimize costs, targeting 41 net horizontal wells to be drilled and placed into production during the year. A key component of our long-life, low-decline assets is our world-class Pelican Lake pool, where our leading-edge polymer flood continues to deliver significant value. Q1 2022 production was 51,991 barrels a day versus Q1 2021 production averaging 55,498 barrels a day, reflecting a low decline rate of 6%. The team performed exceptionally well, achieving strong Q1 2022 operating costs of $7.48 a barrel, a slight increase from our Q1 2021 operating costs of $7.38 per barrel. With our low decline and very low operating costs, Pelican Lake continues to provide excellent netbacks. We had another strong quarter in thermal in situ operations in 2022 as we continue to leverage our continuous improvement culture to deliver effective and efficient operations. In Q1 2022, production was 261,743 barrels a day, slightly down from Q1 2021 production of 267,530 barrels a day. In Q1, the operating costs were $14.35 per barrel, compared to Q1 2021 operating costs of $11.40, primarily due to rising energy-related costs. At Kirby South, drilling has commenced on the first of three SAGD pads, targeted to come on stream in mid-2023 with a targeted capital efficiency of approximately $8,000 per BOEd. At Primrose, drilling has also commenced on the first of two CSS pads, also aiming for mid-2023 startup with an average targeted capital efficiency of approximately $10,000 per BOEd. Finally, Canadian Natural is proceeding with the engineering and design of the commercial-scale solvent SAGD pad development at Kirby North, which targets to commence solvent injections in early 2024. In the company's world-class Oil Sands Mining and Upgrading assets, we had Q1 2022 production averaging 429,826 barrels a day of SCO, down from Q1 of 2021, primarily due to Scotford facility restrictions and the commencement of planned major turnaround at the site in the quarter. Our team had Q1 2022 operating costs that remain industry-leading, averaging $24.60 per barrel of SCO versus the Q1 2021 operating cost of $19.82 per barrel. The increase was driven primarily by decreased production volumes and higher energy-related costs. The planned turnaround at the non-operated Scotford Upgrader began March 15 and trends to be 5 to 10 days longer than the original target of 65 days. At Horizon, the planned turnaround is targeted to commence May 17 for a full plant outage for approximately 32 days. At Horizon, the reliability enhancement project is progressing as planned with high-end activities targeted during the turnaround, including the installation of additional VDU furnace. Overall, the 2022 annual production target remains unchanged.

Mark Stainthorpe, CFO

Thanks, Tim. At Canadian Natural, our continuous improvement has fostered a sense of ownership and enabled our teams to create value for our shareholders. Our effective and nimble capital allocation to our four pillars—returns to shareholders, balance sheet strength, resource value growth, and opportunistic acquisitions—continues to deliver robust financial results. In Q1 '22, net earnings and adjusted funds flow were both strong at approximately $3.1 billion and approximately $5 billion, respectively, with significant direct returns to shareholders of approximately $1.8 billion through dividends and share repurchases, all while our financial position continues to strengthen. Our asset base consists of top-tier, long-life, low-decline assets, underpinned by a strong balance sheet and effective operations driving an industry-leading U.S. dollar WTI breakeven in the mid-30s per barrel, covering our base maintenance capital requirements and dividend commitment, which maximizes value for our shareholders. This advantage supports significant and sustainable free cash flow, and regarding our previously disclosed free cash flow allocation policy, we plan to allocate 50% of targeted free cash flow to share repurchases and 50% to strengthening the balance sheet. This aims to deliver significant increases in shareholder returns and continued financial strength. In addition, the company's Board of Directors has decided to further enhance the company's free cash flow allocation policy by stating that when the company's net debt reaches $8 billion, which the Board sees as a base level of corporate debt, the company will allocate additional free cash flow as incremental returns to shareholders. Our dividend is growing and sustainable and is supported by our long-life, low-decline assets. On March 2, 2022, the Board of Directors approved a 28% increase to our quarterly dividend to $0.75 per share or $3 per share annually. This continues the company's leading track record of 22 consecutive years of dividend increases with a significant compound annual growth rate of 22% over that period. Net debt decreased to $13.8 billion in Q1 and is targeted to decline significantly throughout the year, following substantial net debt reductions of approximately $7.5 billion over the last five quarters. As part of our financial strength, we continue to maintain strong liquidity, including revolving bank facilities, cash, and short-term investments; liquidity at the end of Q1 was approximately $6.1 billion. Our commitment to a balanced free cash flow allocation continues post-Q1, with approximately $3.1 billion returned to shareholders via approximately $1.6 billion in dividends and $1.5 billion from the repurchase and cancellation of 21.5 million common shares year-to-date, up until May 4. In the first quarter, the Board of Directors approved the renewal and increase of the company's normal course issuer bid. The approval states that during the 12-month period commencing March 11, 2022, and ending March 10, 2023, the company can repurchase for cancellation up to 10% of the public float. When you combine our leading financial results with our top-tier asset base, this provides unique competitive advantages in terms of capital efficiency, flexibility, and sustainability, all of which drive material free cash flow generation and return of capital. Before I hand it back to Tim for closing comments, I wanted to take a minute to thank Jason Popko, who spent 10 years in our Investor Relations group, who many of you on the call know well. Jason has transitioned to another group at Canadian Natural, and we look forward to continuing to work closely with him. Lance Casson, who has been part of the IR group for the last six years and is known by many of you, will take on Jason's IR responsibilities managing the Investor Relations group.

Timothy McKay, President

Thanks, Mark. Canadian Natural's advantage lies in our ability to effectively allocate cash flow to our four pillars. We have a well-balanced, diverse, large asset base, a significant portion of which consists of long-life, low-decline assets requiring less capital to maintain volumes. We balanced our commodities in 2022, with approximately 46% of our BOEs being light crude oil and SCO, 28% heavy, and 26% natural gas, which minimizes our exposure to volatility in any one commodity as we progress through 2022. We will continue to allocate cash flow to our four pillars in a disciplined manner to maximize value for our shareholders, driven by effective capital allocation, effective and efficient operations, and our teams dedicated to delivering top-tier results. We have a robust and sustainable free cash flow. Through our free cash flow allocation policy, returns to shareholders are significant. For the first quarter of 2022, we distributed $0.7 billion in dividends and $1.1 billion in share repurchases, totaling approximately $1.8 billion. Our dividend was increased by 28% for the 22nd consecutive year in March, yielding a compound annual growth rate of approximately 22% over that time. In summary, we will continue to focus on safe, reliable operations, enhancing our top-tier operations, and we will drive our environmental performance. We are in a very strong position, and being nimble enhances our capacity to create value for our shareholders. Canadian Natural is delivering top-tier free cash flow generation, which is unique, sustainable, and robust, and clearly demonstrates our ability to economically grow the business and deliver returns to shareholders by balancing our four pillars.

Operator, Operator

Your first question is from Greg Pardy from RBC Capital Markets.

Greg Pardy, Analyst

I think maybe just one question, and it's really for Mark. In terms of the $8 billion figure, what is that girded by? I'm assuming that's probably a multiple of cash flow or EBITDA? And then I guess the follow-up is in terms of incremental shareholder returns, you guys have been at the forefront of defining things in the past. Would this open the door to variable dividends or specials? How should we think about this whole framework now?

Mark Stainthorpe, CFO

Great. Thanks, Greg. For the first question on the $8 billion, it's a very conservative net debt balance. As you know, the nature of our assets being long-life, low decline provides that sustainable free cash flow and low break-evens. History has shown that this asset base can certainly support a higher debt balance. However, we generate significant free cash flow and have a flexible free cash flow allocation policy, which allows for substantial returns to shareholders, debt repayment, and the potential for economic growth. Therefore, in our and the Board's view, a balanced approach in this environment makes sense, and the $8 billion of net debt provides us significant flexibility and opportunities for further shareholder returns. In terms of enhancements to shareholder returns, this allows for flexibility and the consideration of various avenues, such as further base dividend increases, share repurchases, and there could be opportunities to look at things like variable dividends once we reach those net debt targets. So there’s a lot of flexibility and transparency built into the policy.

Operator, Operator

Your next question is from Phil Gresh from JPMorgan.

Phil Gresh, Analyst

Yes. I guess just a follow-up, Mark. How do you think about the timing of when you might be able to get to the $8 billion based on the strip? It sounds like you commented that you expect significant net debt reduction this year.

Mark Stainthorpe, CFO

Yes, sure. Thanks, Phil. It obviously depends on forecasts for pricing and multiple factors influencing the ability to pay down the debt, but we are looking at significant free cash flow this year. Based on the current strip, I would suggest we might reach that target late this year or early next year. However, that does depend on several factors.

Phil Gresh, Analyst

Right. Okay. That makes sense. You've mentioned in the past the $15 billion target. With the reduction to the $8 billion, does this imply there's no major M&A candidates out there? You've been doing some bolt-on opportunities, but should we expect a focus more towards debt reduction at this point?

Mark Stainthorpe, CFO

Well, the beauty of the free cash flow allocation policy is that we're below that $15 billion in debt. The policy allows for those strategic opportunities, whether they be growth opportunities or acquisition opportunities, without impacting shareholder returns, similar to what Tim discussed in the slide deck regarding our ability to execute on a couple of opportunities in the quarter. The free cash flow is substantial, so we do anticipate increases in returns to shareholders as well as further debt reduction throughout the year.

Phil Gresh, Analyst

Got it. Last one, just on the Oil Sands royalty rate in the first quarter, looking at the MD&A, it seems you hadn't reached post-payout for Horizon; is that correct? And now as you step up to that in April, what would be the right rate?

Mark Stainthorpe, CFO

Yes, that's right. We initially anticipated a March or April payout timing, and Horizon is now paying out as of April.

Phil Gresh, Analyst

And what's the appropriate rate to consider?

Mark Stainthorpe, CFO

There are a couple of ways to think about it; of course, you're paying the royalties on a sliding scale based on bitumen value. Sometimes an easier way to conceptualize it is based on your gross revenue. The royalties will begin ramping up to around 25% of gross royalties. Investor Relations can assist further with modeling, but generally, we will be at the top end of the sliding scale at this price deck. A middle-20s percentage based on gross revenue would be a good starting point.

Operator, Operator

Your next question is from Dennis Fong from CIBC World Markets.

Dennis Fong, Analyst

The first one is shifting gears a little bit towards IPEP. It looks like some of the initial engineering designs are expected to be completed in Q3. Given your current debt levels and free cash flow generation, I know you've outlined strategic capital helping debottleneck production in both thermal and Oil Sands Mining, but I'm curious about your long-term view of the IPEP project.

Timothy McKay, President

Sure. So Dennis, it's Tim McKay here. Thank you for your question. The IPEP project really focuses on how our teams are assessing unique and efficient ways to add production at low costs. You see this in the reliability project. The transport mission with IPEP looks to align with the Paraffinic project we talked about in the past. Our teams are exploring options to increase production at Horizon using the IPEP process, which decreases our carbon footprint and lowers trucking costs. The teams are currently working through these details, and once we have better clarity on the economics and costs, we can share more. But our teams are doing an excellent job of creating additional value at Horizon, whether through SCO increases or potentially leveraging IPEP.

Dennis Fong, Analyst

Great. I appreciate the clarity. Switching gears to Pike, now that you've consolidated interest in that region, in terms of potentially building out those assets as extensions to Jackfish, how should we consider the potential royalty implications? Does the project boundary extend to Pike or is that a separate project? And how does this weigh on your project ranking in terms of economics?

Timothy McKay, President

That's a very good question. Currently, what we're considering is leveraging both Jackfish and Kirby South to facilitate development of the property. We're considering essentially pad additions, which will incur very low costs. Most of the development costs stand around $8,000 per BOEd. We'll develop those projects toward both Jackfish and Kirby. In terms of royalty implications, I don't foresee any changes; rather, our development should come at a lower cost, accelerating the timing, and that's the real opportunity with Pike.

Operator, Operator

Your next question is from Neil Mehta from Goldman Sachs.

Carly Davenport, Analyst

This is Carly on for Neil. First, any insights you can provide on your recent M&A activity? How are those assets performing thus far? Additionally, more broadly, how do you view the current environment regarding larger scale transactions given the current commodity prices?

Timothy McKay, President

Absolutely. The M&A activity we completed in the first quarter was largely initiated before the end of 2021. The Pike acquisition focused on purchasing the working interest in undeveloped opportunities in the thermal area—a significant resource, as shown in our slides. This acquisition will create substantial long-term value in thermal for our company. The other transaction in the Montney involves smaller volumes currently, but due to the proximity of the lands and our infrastructure, we see considerable value in cost-effective development over the long term, particularly in that liquid-rich Montney area.

Carly Davenport, Analyst

Great, I appreciate that context. As a follow-up, can you update us on the Pathways initiative? We noticed the update from the government about tax credits; how is the project progressing? And when should we expect to see anticipated spending reflected in CapEx over time?

Timothy McKay, President

Sure. At the end of April, our teams submitted our application for floor space to the Alberta government. We must coordinate with the Alberta government to secure the floor space promptly and understand how they will support the Pathways project moving forward. It's still early in the process. The crucial first step is to secure that floor space in a timely manner, and we can begin compiling a cost profile. Our teams have done preliminary estimates for timing, but there’s a pressing need for the Alberta government to allocate that floor space efficiently.

Operator, Operator

Your next question is from Doug Leggate from Bank of America.

David Fernandez, Analyst

This is David Fernandez for Doug Leggate. I wanted to ask, yesterday, Cheniere signed a 15-year agreement with a gas producer out of Canada, and they will be receiving JKM pricing or LNG index pricing. Given your sizable gas portfolio, how do the opportunities appear? What capacity might you have on the transport side, and what are the key export markets? Any insight into potentially getting some of that gas production into those end markets for LNG would be interesting.

Timothy McKay, President

That's an excellent question. Our teams continually evaluate various opportunities, and as one of the largest natural gas producers in Western Canada, we are engaged in discussions with various parties. Generally, the market changes quickly, and diversification is necessary. Therefore, we always seek to broaden and recognize that, at times, we can either be in or out of specific markets. Our teams are actively communicating with multiple parties to explore opportunities for diversifying our sales portfolio.

David Fernandez, Analyst

I appreciate that. Lastly, concerning the gas side, could you provide an update on the current regulatory environment in British Columbia regarding permits?

Timothy McKay, President

Sure. Currently, in Northeast BC, we're dealing with what would be classified as none or very low-impact activities, for which we've been getting some permits. For instance, if we have an existing well and are performing facility changes or drilling additional wells on a pad, these are considered low-impact actions, and the permits have been gradually moving through the system. We anticipate that as the BC OGC becomes more comfortable with the activity levels, more permit wells will continue to flow through. It's taking slightly longer than many would prefer, but it is not hindering our operations in Northeast BC.

Operator, Operator

Your next question is from Manav Gupta from Credit Suisse.

Manav Gupta, Analyst

I want to congratulate Lance for the new responsibilities over the years. You have been very helpful. So glad to see you getting more responsibilities at the firm; congrats, Lance. My question here is that we've seen in the past few years that the Syncrude suite traditionally trades in line with WTI, maybe $1 lower or higher. Currently, we're seeing the Syncrude suite trading almost $6.75 over WTI. Can you provide some context on whether it's due to industry downtime or better quality crude?

Timothy McKay, President

That's a great question. As you indicated, SCO generally trades at parity with WTI. Recently, in the first quarter, maintenance activities have affected SCO availability, primarily due to the Scotford Upgrader undergoing turnaround and several other operators conducting similar maintenance, impacting the SCO supply. This shortage has resulted in the short-term premium you’re observing, likely around $5 to $6. As turnarounds finish this spring, we expect the SCO market pressures to ease.

Manav Gupta, Analyst

Quick clarification: your organic capital expenditure was $844 million, and total capital expenditure, including acquisitions, was $1.455 billion. I'm assuming it's Wembley and Pike? Could you help us bridge that gap?

Timothy McKay, President

We typically refrain from disclosing specifics about individual property prices. However, what I can say is that we pursued several bolt-on cleanup acquisitions in the quarter, highlighting just two of them. They presented very good opportunities for the company.

Operator, Operator

Your next question is from Patrick O'Rourke from ATB Capital Markets. In terms of clarification, your organic capital expenditure was $844 million, while the total capital expenditure, including acquisitions, reached $1.455 billion. I assume this involves Wembley and Pike? Could you help us understand this discrepancy? Timothy McKay, President, responded that they generally do not disclose specific property prices. However, he mentioned that they pursued several bolt-on cleanup acquisitions during the quarter, pointing out two that offered excellent opportunities for the company.

Patrick O'Rourke, Analyst

Sorry, I thought I dropped out of the queue; all my questions have been answered, and you've done a very thorough job on that.

Mark Stainthorpe, CFO

Thank you.

Timothy McKay, President

Thank you, Patrick.

Operator, Operator

All right. I'm showing no further questions at this time. I would now like to turn the call back to the presenters for any additional or closing comments.

Timothy McKay, President

Thank you, operator, and thank you to those who joined us this morning. If you have any follow-up questions, please don't hesitate to reach out. Thanks, and have a great day.

Operator, Operator

Ladies and gentlemen, this does conclude today's conference call and webcast. Thank you for participating, and have a great day.