Cenovus Energy Inc. Q1 FY2024 Earnings Call

Good day, ladies and gentlemen, and thank you for standing by. Welcome to Cenovus Energy's First Quarter Results. As a reminder, today's call is being recorded. Please be advised that this conference call may not be recorded or rebroadcast without the express consent of Cenovus Energy.

Thank you, operator. Good morning, everyone, and welcome to Cenovus' 2024 First Quarter Results Conference Call. On the call this morning, our CEO, John McKenzie, will take you through our results. Then we'll open the line for John and members of Cenovus' management team to take your questions. Before getting started, I refer you to our advisories located at the end of today's news release. These describe the forward-looking information, non-GAAP measures and oil and gas terms referred to today. They also outline the risk factors and assumptions relevant to this discussion. Additional information is available in Cenovus' annual MD&A and our most recent AIF and Form 40-F. All figures are presented in Canadian dollars and before royalties unless otherwise stated. You can view our results on our website at cenovus.com.

Great. Thank you very much, Jason, and good morning, everyone. Safety is central to everything we do at Cenovus, and I want to take a moment to recognize a significant achievement in the first quarter. In our Atlantic region, we safely and successfully removed the SeaRose FPSO from its station, an activity that occurs once every 10 years or so, and it was a job well done by everyone involved. At our Investor Day, we laid out our strategic goals, focusing on low-cost organic growth opportunities with our high-quality assets and how we will utilize our integrated value chain. We also discussed our disciplined financial framework that aims to enhance shareholder returns. Our first quarter results reflect our structured approach to managing the business. We are pleased with the performance of our upstream division while making targeted improvements in downstream operations and increasing margin capture, achieving the highest throughput to date for the quarter. Our upstream sector delivered robust operating results in line with the previous quarter, producing around 800,000 barrels equivalent per day. This was slightly less than Q4 due to planned maintenance that began at the SeaRose FPSO. I want to emphasize that the Lloydminster thermals produced over 114,000 barrels per day, the highest quarterly average in the asset's history, indicating improved operational efficiency and better downhole pump reliability. Our oil sands and thermal assets continue to show outstanding results. We are on track to achieve future production growth from Narrows Lake tieback to Christina Lake. The pipeline is now 67% complete, with hydro testing underway, expected to finish by year-end. Also, our Foster Creek optimization project is on schedule for a targeted start-up in 2026. Later this year, we will commence two additional well pads at Sunrise, supporting base production and initiating production growth in 2025. We are also optimizing our turnaround schedule, moving some work planned for the Q3 turnaround at Christina Lake into Q2. The effect of our planned outages can be seen in the maintenance table in the news release. We are looking forward to an important industry milestone with the upcoming startup of the TMX pipeline. With this key infrastructure now complete, we expect light-heavy differentials to remain narrow for years due to excess egress capacity. In our conventional gas sector, production volumes stayed steady at around 121,000 BOE per day. As a reminder, we assess all opportunities at the bottom of the pricing cycle and continue to advance our capital program with a focus on safe execution and cost efficiency. First quarter production in our offshore business remained stable at approximately 65,000 BOE per day, with the Asia Pacific assets reliably generating about $263 million in operating margin. The Atlantic region saw a return to production, contributing about 7,200 barrels per day in the first quarter. The SeaRose FPSO is currently in dry dock with regulatory maintenance work proceeding as planned in anticipation of the West White Rose project startup in 2026. As we communicated earlier, we expect the SeaRose to resume production late in Q3 2024. The White Rose project is progressing as intended and is now about 80% complete. Overall, our capital expenditure remains on track for this project. In the first quarter, the company spent just over $1 billion on capital and we expect to stay well within our guidance for total capital spending this year. It has been another strong quarter for our upstream business and we anticipate continuing to implement our plans as the year goes on. Now turning to our downstream segment. In our Canadian refining business, average utilization for the first quarter was around 94%. Our refining and upgrading assets performed exceptionally well with high reliability. However, the contribution from the Canadian refining segment was affected by a drop in synthetic crude prices during the quarter and narrow heavy oil differentials in March. In the upcoming weeks, we will conduct a large-scale turnaround at the Lloydminster upgrader, which is expected to reduce Q2 throughput by about 45,000 barrels per day for the quarter. This has already been considered in our corporate guidance for the year. In the U.S. refining sector, combined crude utilization across the assets was 87%, marking an increase from the previous quarter. This was mainly driven by lower planned maintenance at our non-operated refineries and improved performance across our refining portfolio. The weak Chicago crack environment in Q4 2023 posed a challenge for our U.S. business, which persisted into January 2024. As product inventories in the PADD II market have rebalanced, we have seen a strong recovery in the Chicago crack spread, which we took advantage of with all our refineries operationally available and running well. This led to a significant improvement in our U.S. refining margins by the end of the first quarter. We expect the Chicago crack environment to remain relatively strong due to ongoing heavy industry turnarounds and strengthening seasonal demand. Overall, we achieved the highest quarterly throughput for our downstream operations since acquiring our operated refining assets in 2021, illustrating our ongoing progress in enhancing reliability, profitability, and utilization of the business. Now regarding our corporate and financial performance, Cenovus generated $3.2 billion in operating margin in the first quarter, approximately $2.2 billion in adjusted funds flow, and $1.2 billion in free funds flow, benefiting from higher refining benchmark prices and a $195 million FIFO gain in the U.S. refining segment, which was offset by about $250 million in share-based compensation incurred in the first quarter. Through our base dividend, we returned $262 million to shareholders, and the Board of Directors approved a 29% increase to the quarterly base dividend, raising it to $0.72 per share annually, consistent with our commitment to growing shareholder returns. In line with our shareholder returns strategy, we returned $165 million to shareholders through our share buyback program in Q1 and declared a variable dividend of $251 million, meeting our commitment to return 50% of excess free funds flow to shareholders. Following the end of the quarter, from April 1 to April 26, the company repurchased approximately $250 million worth of shares through our NCIB, totaling about 8.6 million shares. At the end of the first quarter, the company's net debt was roughly $4.8 billion, a decrease of $233 million from year-end, which included a $370 million increase in noncash working capital. This was primarily due to benchmark pricing improvements and stable operations across our value chains. Since we established our 2024 budget in December, commodity prices have outperformed our expectations. Based on the current pricing environment and our operational plan, we anticipate reaching our net debt target during the summer of 2024. As detailed in the first quarter news release, we are implementing some minor adjustments to our shareholder returns framework. Once we achieve our net debt threshold, we will aim to allocate 100% of each subsequent quarter’s excess free funds flow to shareholder returns. This plan remains unchanged from our current strategy. If net debt exceeds $4 billion at the end of any given quarter, we will reduce the 100% target allocation of excess free funds flow by the amount that net debt surpasses $4 billion. To manage working capital and cash efficiently, allocations of excess free funds flow to shareholder returns may be accelerated, deferred, or reallocated between quarters while maintaining our overall target to allocate 100% of excess free funds flow over time to shareholder returns and sustaining net debt at $4 billion. This new framework will take effect once we reach the $4 billion net debt target. Until then, there will be no change to the current target allocation of 50% of excess free funds flow to shareholder returns and 50% to deleveraging the balance sheet. Ultimately, the aim of the revised framework is to enhance flexibility while continuing to pursue full shareholder returns over time and maintaining net debt at $4 billion. Lastly, I am pleased to announce that during the first quarter of 2024, the company was upgraded to a BBB credit rating by S&P Global, with a stable outlook. With this target achieved, we have received mid-BBB ratings from all rating agencies. As mentioned at our Investor Day, we are committed to reaching our $4 billion net debt target, advancing our high-return growth projects in the upstream sector, and reliably, profitably, and safely managing our downstream business, showing improvements each quarter. With that, we are ready to address your questions.

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

So let's start maybe just with the share price range you guys have talked about in the past. I believe the upper bound was around 30%, where variables became more attractive and buybacks were less attractive. Could you revisit that? I'm just curious maybe what that range looks like? And then presumably, that upper bound number is going to rise with time.

Kam clarified that the number mentioned was merely an illustrative point to explain their framework, not a limit. He noted that the company repurchased $250 million worth of shares in the past month, indicating there are still plenty of attractive returns available for share buybacks. The principles of their framework remain unchanged, and there is ample room to pursue the plan. He explained that the variable payment made in Q1 was a result of their structured approach to the framework, meaning if they underallocated, they would pay out the difference through a variable mechanism. This does not imply a limit on the share price but reflects their commitment to the framework. Moving forward, they will maintain flexibility, considering either share buybacks or a variable dividend if they underallocate again, but there are still many opportunities for share repurchases.

Yes, Greg, I would like to emphasize that the presence of a variable dividend should not be interpreted as a reflection of our internal assessment of the stock's intrinsic value. Each quarter, we must allocate any excess free cash flow to returns for shareholders as it becomes available. You'll notice that in the recent quarter, the markets in Chicago faced significant downturns, with gasoline prices even hitting negative numbers in January. However, things changed positively in February and March, and during this period, we need to estimate the excess free cash flow we can expect in a highly unpredictable commodity market. In the fourth quarter of 2023, we either underestimated or overestimated our excess free cash flow. This quarter, we are likely on the opposite side of that estimation. Nonetheless, this should not be viewed as indicative of our perception of the shares’ intrinsic value.

Okay. That's actually really helpful to clarify. So I'm going to completely shift gears maybe on the TMX. Just curious, could you bring us up to speed maybe with where you stand in the marketing process. So have you fulfilled your line fill, have you got tankers kind of set to go do you expect to make sales or record sales in the second quarter?

Greg, it's Drew. Simple answer is yes to all your questions. So this is a really good day for Canada. TMX came out this morning, and they are officially on commencement. So I think this has been a long way to get here for everybody. So we're pretty excited on behalf of the industry and Canada to have another great asset available to us. So to your question, we have been preparing for this for quite some time. Our last component of the very small volume of final line fill is going here now this month, and it's about 1.3 million barrels of our share, and so over the last quarter and then finishing this quarter, that full fill from our share is going to be in place. Our teams have been working with buyers. There's a pretty vast market out there, which is exciting. And yes, we are preparing to start to ship, and we expect the operation to commence here in May. And as we've talked about the last few quarters, we are expecting it to be a bit bumpy as things get up to a good stable state, so we are anticipating a little bit of bumpiness, but the teams are taking that into account. But it's a great day to start using the asset.

And your next question comes from the line of Dennis Fong from CIBC.

Maybe the first one here is just related to Superior. Can we get maybe an update in terms of the ramp-up of the facility as well as how you guys are thinking about the cadence of the deinventory event at Superior as well?

Things are progressing as planned. Last quarter, we discussed taking the first half of the year to reduce inventory from the fluctuations we experienced in 2023, along with the inventory we've built up. All of our equipment is operating well, and we are on track with our inventory plan. Around midyear, the last remaining element to restart will be the HF Alky at Superior, which is set to begin in early Q3. By then, we expect to have all assets operational. Before that, we should see our crude rate through that facility rise to nearly full capacity. Overall, everything is moving forward as expected. The market is favorable for reducing inventory and, at this time, the refinery is running all units except for the HF Alky.

Great. I appreciate that color and context. Maybe staying with the downstream and maybe a little bit of a follow-on to the entire TMX situation. Obviously, the narrowing of some of the feedstock costs to increase with respect to the refining operations. Can you talk towards some of the initiatives that you touched on a little bit at the Investor Day and maybe where that could go looking forward in terms of improving realizations on refined product and strengthening margin just again, now that you're operating all three of those refineries?

Sure. To begin with, there are three main factors that influence refining economics. The first and most significant is securing the best and most cost-effective feedstock for our refineries, which predominantly process heavy oil. The narrowing of heavy oil differentials tends to negatively affect refineries overall. However, we can offset this through our upstream operations, which allows us to capture value. For instance, during the scheduled turnaround of our upgrader this quarter, we are doing so when differentials are low, resulting in a minimal economic impact since we can market most of our diluted bitumen. Another important area we're focusing on is product placement, particularly in the eastern section of PADD II, which we believe has great potential. Additionally, we are actively exploring ways to transport product into PADD I and Canada over time. The third area involves cost management, where we aim to minimize both capital and operating costs in our refineries. While ensuring reliability is our top priority right now, we also continually assess how to optimize our operating costs. As we move forward, you can expect to see enhanced reliability across our refining fleet, leading to improved profitability as we fine-tune the commercial aspects. Ultimately, reliability is critical for achieving commercial optimization, and we view Q1 as the beginning of a strong upward trend that we anticipate will continue.

And your next question comes from the line of Menno Hulshof from TD Cowen.

I'll start with a follow-up question to Greg's question on TMX. Where do things stand in terms of ongoing toll discussions? And what is your best guess in terms of when all of this gets resolved and potential outcomes?

Thanks for that question. Yes, it's an ongoing conversation. I think it will continue throughout the rest of this year and probably into the first quarter. It will take some time. I believe everyone is pleased to see the asset made available to all, and this work will ultimately lead us to the final commercial structure. I expect this process to extend through the remainder of this year and possibly into the first quarter or even the first half of next year before we reach a resolution.

Terrific. I have a follow-up question that I believe I know the answer to, but I would like confirmation. Regarding the competitive position of the current asset portfolio, my understanding is that the portfolio is largely solid. Is there any possibility of smaller divestitures in the coming quarters, or is that still not a priority for now?

Yes. I think, Menno, we've been really clear that we are really focused on our base business over the next while. You're quite right. We quite like the asset base that we've got. And we are focused on the improvements we're making in the downstream together with the growth in the upstream with the projects that we laid out at Investor Day. So we've got our plates full over the next few months, and we're just looking forward to executing on what we think is a pretty robust suite of activities.

And your next question comes from the line of John Royall from JPMorgan.

So you gave some color on Superior. But in terms of your other two operated refineries, can you talk about utilization? I think you're a bit below your target ranges for the year at both Toledo and Lima. And I know there's a little maintenance in the quarter, but anything to call out there in general, just in terms of getting to those targets near term?

John, Keith here. It was a really interesting quarter, as John talked about in his opening remarks, the low crack spread persisted into January. And so we actually reduced run rates at the start of the quarter. And then obviously, as the market balanced in February 1, we were really happy with the performance of the refineries as they ramped up to max capacity and captured that crack spread. So I wouldn't read too much into it in the first quarter. We do have some maintenance coming in the back end of the year at Lima. But overall, we're pretty happy with the performance in the assets. And as John indicated on a previous question, our sole focus is on continuing the reliability and the margin capture and the profitability of these assets and running them safely and reliably. And we're seeing quarter-over-quarter improvement there, manifesting itself in the best throughput the company has had since kind of the merger back in 2021 and Q1 2024. So pretty happy with the progress, starting to see the progress, and we should expect that, that will just continue quarter-over-quarter.

Great. And then on the base dividend, this is a pretty chunky hike you took today and well ahead of the pace that I think you would need to hit that high 20s per quarter level that you show in your slides by 2028. Was the idea to kind of front-load the bigger increases and slow it to kind of a low double-digit annual rate from here? Just trying to think about how you're thinking about the base dividend from here?

John, it's Kam. So I think the principles around what we discussed at Investor Day haven't changed. We've got, obviously, high confidence in achieving our debt target in the foreseeable future. I think we laid out our 5-year business plan at Investor Day that has a substantial amount of growth starting in 2025 in earnest and moving up towards 2020. But the way you should think about the base dividend is, number one, it is absolutely anchored to low commodity prices in that sort of $45 WTI range. It's a level of dividend we view as a commitment, and I'd say we've left ourselves lots of room to continue to grow that dividend, I'd say, comfortably in double digits going into the future here. So the increase this year is I think it's a reflection of the confidence in our plan. It's a reflection of where the balance sheet is and continue to anchor to the bottom of the cycle.

And your next question comes from the line of Patrick O'Rourke from ATB Capital Markets.

Just for sort of on the oil sands unit, I think you touched on shifting some of the maintenance into Q2 for Christina Lake there. When I look at the schedule, looks like a little shifted into Q4. Maybe if you could sort of unpack the changes in the maintenance schedule for the oil sands, give us a little bit of color on that here.

Yes, Patrick, it's Keith here. There is no significant change in the annual impact from the outage. We have decided to divide the outage into two separate phases. This means we will experience a slight slowdown in Q2 at Christina Lake and complete the turnaround in Q3. Some of this turnaround will extend into the early part of Q4. Essentially, the timing is slightly different from what we initially anticipated, but the overall impacts remain consistent with our earlier guidance. Additionally, we have minor outages at Lloyd Thermal, but generally, the rest of the oil sands operations will run at full capacity for the remainder of the year.

Okay. And I know you sort of had a lot of questions on the return of capital framework thinking on the dividend, et cetera, here. You put sort of the slide in the deck on the change that you've made here. In Scenario 2, where the net debt is below $4 billion, you still return the $900 million, just using the scenario here. Just wondering what would drive this? Because I think working capital build and release kind of equals zero over time, would there be a scenario where you would have to actually return excess free funds, the target return in excess of that to kind of level set to $4 billion?

Yes, that's a great question, Patrick. First, I want to emphasize that we are committed to safeguarding the balance sheet at the $4 billion mark. The variations you observe from quarter to quarter around that amount will primarily be affected by working capital, foreign exchange, and some other minor factors. As we've indicated, if we are above $4 billion, we will retain the surplus and reinvest it back into the balance sheet. If we're below $4 billion, we will distribute 100% of the funds. Looking ahead, depending on the fluctuations in working capital, we have the flexibility to make adjustments. This could mean occasionally exceeding 100% or falling short. The important distinction for us now is that we have more rigidity in our current return structure. This new approach allows us to better manage our debt, and I wouldn’t completely dismiss the possibility of going just over 100%, although a minimum return of 100% would generally apply unless we drop below $4 billion.

Your next question comes from the line of Manav Gupta from UBS.

So if you look at last year, you were off to a slightly tougher start on the upstream and that resulted in your coming slightly below the midpoint of the guidance in the upstream segment. And knowing you guys, you always try for midpoint or above the midpoint, in fact, towards the top end. So this year, you are off to a much stronger start. So should we assume that for 2024, at this point, things are looking where you could actually go and hit the top end of your guidance in Upstream?

Yes. I'm not sure we're going to pinpoint where we are within the range that we've already given you for guidance. But we feel very comfortable in the guidance that we've given you, Manav. And you're quite right, the upstream has operated really, really well over the last 3 or 4 quarters. The downtick that you saw in Q1 of 2023 was really due to the pacing and staging of our capital program. But we won't see that kind of gap this year. So Keith mentioned, we've got a turnaround of Christina scheduled for the third quarter, and we need to do a good job of that. We are very pleased with the production that we've seen from the upstream. It's been very strong. And as everybody knows, that's really the backbone of this company. So having it perform at those levels is something that we're very pleased with. But I'm not sure we're ready to tighten that guidance quite yet. I think it's still pretty early days, but we're very pleased with where we are.

Perfect. My quick follow-up on the downstream is your per unit operating cost in the U.S. is now trending down. It's like almost $12, and I'm trying to wonder, as you start pushing towards 90% plus utilization, right? How much lower can you bring this? Can you push this towards closer to $10 or $11 on a per unit basis, the operating cost?

Manav, I think we talked a little bit about our focus on reliability. And with improved reliability, you do see 2 things. Obviously, your denominator increases with higher throughput, but also your unplanned, unscheduled, and reactive maintenance goes down. So those 2 things we do think will help us start moving to the range that you've alluded to. We made big steps between 2023 and 2024 to get there. We do have to do some of this maintenance activity in the turnaround cycles in order to drive that further improvement in reliability, but that is our focus that, coupled with improving margin capture and the commercial profitability of the asset. So we are focused on that. We have plans, and the plans are underway and starting to show fruition. So pretty excited.

Your next question comes from the line of Nicolette Slusser from Goldman Sachs.

This is Nicolette Slusser on for Neil Mehta. So just the first question on the Upstream. I wanted to ask about some of the growth and optimization projects in the business. Can you just talk about the factors underway this year for Christina Lake. And then as well the Foster Creek optimization and factors over the next few years, we should be on the lookout for ahead of that fully arranged production by the end of 2027.

Thanks for the question. Maybe I'll just step back to our Investor Day where we laid out plans for upstream growth of about 150,000 barrels a day over the next 3 to 4 years. So narrowing in specifically on Christina Lake, the 20,000 to 25,000 barrels a day comes from tying in our Narrows Lake resource back into the Christina Lake asset. And to do that, we're going to be putting in new pads, which are well underway and putting in a pipeline that ties that resource back. And that pipeline is nearing mechanical completion by the end of this year; we should be hydro-testing the line and putting it into service early next year, which will allow us to bring steam up to that resource and start steaming those pads for the production that will come on in the back end of 2025. So things are progressing as expected, on plan and on schedule. With regards to Foster Creek, it's a little later in time in the fact that both projects, the Foster Creek debottleneck, which will add steam capacity to Foster is scheduled to come on in the mid-2026 time frame. In addition, we're also adding a naming close unit to that asset, which will help drive down our unit OpEx almost $0.75 a barrel. So those projects are progressing well. They're underway. A lot of activity will happen through this year in 2025 for startup in 2026. Sunrise is another growth opportunity for us. We have our first new pad since 2020 online and producing. We have a couple of additional pads coming on stream at the back end of the year. That really sustains our production. And then we have new pads coming on in 2025 as well that allows us to start growing production. The steam capacity is there. It's a matter of fully utilizing our capacity to generate that incremental 20,000 barrels a day of production. And then on the East Coast, we have our West White Rose project. So the SeaRose is off station going through its asset life extension, expect that back in the July time period, and the West White Rose project, we finished our last pour on the gravity-based structure in the first quarter. So that part of the project is complete. We're working towards mechanical completion and commissioning on the top side. All that gets made up in 2025, and we commence drilling and start seeing production in '26, ramping to peak production of 45,000 barrels a day in 2028. So all those projects are progressing well. And then I guess the last one I would talk about is our conventional heavy oil, where we've ramped up our rig activity and our drilling incremental wells and are starting to see the fruits of that labor with production growing from a current base of around 20,000 barrels a day up to 40,000 barrels a day over the next 2 to 3 years.

Okay. Great. Very helpful context. And then a quick follow-up is just on offshore. So I understand from the release that production from White Rose and the Terranova fields is stored at a terminal prior to shipment which can then result in a timing difference between production and sales. So just wondering if there's any additional commentary on this phenomenon and how we should expect the phasing of the sales timing impacts as White Rose and Terra Nova production in flex?

Yes. There's nothing particularly unusual about what happens when production levels are low, like we experienced in the first quarter with the SeaRose being off-station and production at Terra Nova averaging about 7,000 barrels a day. The main factor is the timing of when the oil is produced and transported to the terminal before it is sold. It’s important to generate enough volume for a cargo, and once that cargo is sold, you receive the funds. So, it's really just a timing issue, nothing unique. However, as we increase production on the East Coast with the West White Rose project coming online, we should see more consistency over time. But fundamentally, it remains a timing difference, and there isn’t much more to it.

And your next question comes from the line of Dennis Fong from CIBC.

Sorry, apologies for getting back in the question queue. Keep us answering the previous question there at Sunrise. I was just hoping for a little bit more clarification there. With the 2025 well, is that enough to fully utilize the 50,000 to 60,000 barrels a day of excess steam capacity at the facility? Or are there other kind of optimizations that you can do to improve production potentially beyond the 20,000 barrels a day?

Dennis, yes, thanks for the question. Right now, we're focused on kind of fully utilizing the steam capacity, and installed capacity is around 210,000 barrels a day of steam capacity, and we're currently using kind of 160,000. So that's where that incremental production comes from. But we are actually using the new Cenovus techniques as we put in these wells, and we will evaluate kind of the SOR performance on utilizing that technique over time. And there is a potential that we could start seeing even more improved SOR relative to historical performance. And if that happens, then there might be some upside potential. But at this point, what's built into our numbers is really just fully utilizing the installed capacity and using that on the new wells that we're putting into place.

Yes. I'm not going to write a check on Keith's behalf. He's looking at me. What I would tell you is this, Lloyd is a different reservoir than what we have at Foster and Christina. And over the last 3 years, we've learned a lot about producing at Lloydminster. And we continue to find opportunities to grow production at Lloyd. So I think we've taken a relatively conservative view, sort of a P50 view if you will, is that where we think that production is going to be. It's currently producing at a rate that would be higher than where we would have budgeted this year, but it's been there for some period of time. And the subsurface people, together with the operating people just continue to find opportunities to debottleneck, to drill wells differently, to operate the reservoirs differently, and it continues just kind of to surprise to the upside. So I wouldn't want to be in a position where I'd be telling you this is going to outperform the way it has over the course of the last few quarters. But what I would say is we just continue to find opportunities here that provide that kind of upside for us.

And our last question comes from the line of Chris Varcoe from Calgary Herald.

A question for John. John, just talking about Trans Mountain. Given that it took 13 years to get that project from its inception to completion, what does that tell you about Canada's ability to get major energy projects built like the pathways development?

What I would say, Chris, first of all, is that I think Drew mentioned this, and I wouldn't want to taint today with a discussion about the difficulty of getting projects built because this is a great day for Canada to get this pipeline up and running, get it producing, and the people of Canada are going to see the benefit for a long period of time in terms of increased taxes and royalties and the like. I think as a nation we suffer, and I don't think I'm saying anything that people don't already know from lower and decreasing productivity, and we need to find ways to get major projects built to get infrastructure built to the benefit of all Canadians. And I think we would all realize that 13 years is far too long for a project of this national importance to get built. And I think that's something that everybody understands.

Given your company's growth expectations and other estimates from the Western Canadian Basin, do you foresee a need for additional pipeline capacity in Western Canada? When might that occur, and considering the challenges you've mentioned, do you believe this will be the final major export pipeline constructed?

Yes. I think as an industry, we have a history of filling up excess egress, and I think that will happen through time. I've seen various estimates of when that's going to happen. Some suggest within 2 years, others within 5. I think we would be closer to the upper range of that in terms of our thinking. It is increasingly difficult to build pipelines in this country, and it wouldn't surprise me if this was the last pipeline. But the reality is we have a tremendous resource here in Canada and we produce our oil in my view, more sustainably than probably anywhere else in the world. And if we were in a position where as a nation, we decided to take that to market, we should be building more pipelines.

That concludes our question-and-answer session. I'd like to turn the conference back to Mr. John McKenzie for closing remarks.

Yes. Listen, thank you very much for your interest in the company today on behalf of the management team, the Board of Directors, and the staff here at Cenovus. We really appreciate your interest and support in the company. So have a terrific day, and thank you again.

Thank you. That concludes our conference for today. Thank you all for participating. You may all disconnect.